Build The Practice With Cash

Sherry and her husband want to buy their own dental practice. They could pay off their home or save for their own practice. Dave thinks they should pay cash for a practice.

QUESTION: Sherry in Tri-Cities and her husband just paid off $92,000 in student loans. He has a year left on a contract, and then they want to buy their own dental practice. Their home is worth about $200,000, and they could pay it off in the next three years or save for their own practice. Dave thinks they should pay cash for a practice.

ANSWER: You just paid off $92,000 in a year and a half. So do it again and pay cash for the practice.

The dental world—we work with a lot of docs of varying colors and kinds, so to speak—has turnover as you know. Sometimes, these practices are overvalued. Sometimes, a young dentist gets all excited about owning his own deal and will overpay. In other words, I think if you’re standing there with cash and offering $250,000 for what someone is selling for $500,000, you write them a check on the spot and be done with it. That’s going to take you a few years. You might have to do one more contract. But that’s what I would do. I would not go into debt for a practice, because there are so many unknowns when you take over someone else’s business. It is not a guaranteed deal. Before I overpaid for one or got into debt for one, I’d start from scratch.

Build your equipment as you profit. You don’t have to have all the equipment to open the door. You just have to have enough to open the door. Then every two or three months, buy another piece. You don’t have to have everything the first day. You can limit your practice until you build it. Let the cash from the practice organically grow your business.

I’m paying cash, and you guys have proven to yourselves that you can do that. It’s a matter of just holding back a little bit, and pay as you go. Five years from now, it’s going to put you so far ahead that it’s going to just blow you away.

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