Buying a dental lab

[Joon Hong]

I am considering buying a dental laboratory.
How would you guys consider price of lab?
The lab I am considering is my uncle's lab.
It has about 7-10 accounts.
I am going to ask for tax return, statements, account receivable, and account payable, etc..
He also wants to work until he retires.
He is good ceramist I can trust.
I also have to come up with his salary.
He recently purchased scanner, mill, and sintering.
They are on financing, so I wouldn't put that as value since I have to take the loan over.
Any suggestion or idea would be appreciated!!

 

[CatamountRob]

Have you been working for your uncle in the lab business? How long?

Used lab equipment generally sells for 30-50% of new. Much of it is sold on eBay so it's easy to check.
Consumables like porcelain, probably more like 25%.

The accounts only have value if you are likely to keep them. If you've been there a number of years and they already know who you are and what you can do, it improves your chances of keeping them. That your uncle wants to stay on is also helpful, the smoother the transition the better.

 

[Contraluz]

This:
☟

The accounts only have value if you are likely to keep them

 

[Joon Hong]

Have you been working for your uncle in the lab business? How long?

Used lab equipment generally sells for 30-50% of new. Much of it is sold on eBay so it's easy to check.
Consumables like porcelain, probably more like 25%.

The accounts only have value if you are likely to keep them. If you've been there a number of years and they already know who you are and what you can do, it improves your chances of keeping them. That your uncle wants to stay on is also helpful, the smoother the transition the better.

thanks for the comment
helps me a lot

 

[Bumfrey]

Instead of a solid price tell him you will give a percentage of the takings for a set amount on months, plus an amount for equipment up front. Then if you lose an account its not so bad.
Just an idea i've heard work before for a small lab.

 

[eyeloveteeth]

what is your experience? it's very easy to think you can own a lab, it's very different to run one.

 

[user name]

Step #1...Forget hes a relative. This may wind up being the biggest problem for you. EVERYTHING must be in writing. NO GOOD WILL. No 'I thought you meant', No 'but I need'...

You cannot guarantee him a job. He sells to you, he gets lazy, what do you do? Hes selling. Period. There are no guarantees of employment. If you give him that deal, you will fail. He has tto earn his way. If you can hire someone else to do better work at a price that benefits you more, hes got to go. Anything other than him competing for his job will be a boat anchor tied to your neck.

 

[lcmlabforum]

Tricky situation starting a business with family members.
As a new owner of practice when I took over from previous owner, the goodwill
he had went along way to keep me going. As such, having a good relationship
will always help to ease the transition.
Usually, there is a process to hand over the practice and introducing you to the
existing referral pools so they continue to send work over. However, if they are
so used to the old owner and like him so much, they may insist work goes to him
unless you show them you can do as well, and faster, if not at least as well as he
does.
Most practice acquisition comes with a whole set of agreement, lease transfer, etc.
Will the warranty on major equipment be transferred as well?
Good luck,
LCM

 

[CoolHandLuke]

great question.

what is the value of a lab in dollars and sense.

i will point form my perspective to keep it easy to read and understand.

1. the value of the accounts

2. the value of the state of production

3. the lab history of precious metals

4. the value of its equipment

5. its debt

6. its growth

7. its human potential.

from a strictly financial standing you'll be evaluating the value of the lab based on the red line and the black line. but a more educated person would consider the lab as a whole instead of a lab as a function of its books. what is it capable of producing (even if they arent making money at it),what kind of capital has been sunk into new equipment (and how much remains to be paid),how many new clients have they seen in recent months (as a function of new technology, personnel or external influence such as other labs closing)

as above, evaluate this purely absent of the knowledge of family.

as mr burns would say, "Family, religion, friendship. these are the 3 demons you must slay in order to be successful in business."

 

[Affinity]

This could be the best decision youll ever make, or it could be the best and set you up financially for the rest of your life. Youll never know unless you make the leap, and no one will throw you in prison if you fail. Life is all about the choices we make, and you may never get another one like this.

 

[CatamountRob]

great question.

what is the value of a lab in dollars and sense.

i will point form my perspective to keep it easy to read and understand.

1. the value of the accounts

2. the value of the state of production

3. the lab history of precious metals

4. the value of its equipment

5. its debt

6. its growth

7. its human potential.

from a strictly financial standing you'll be evaluating the value of the lab based on the red line and the black line. but a more educated person would consider the lab as a whole instead of a lab as a function of its books. what is it capable of producing (even if they arent making money at it),what kind of capital has been sunk into new equipment (and how much remains to be paid),how many new clients have they seen in recent months (as a function of new technology, personnel or external influence such as other labs closing)

as above, evaluate this purely absent of the knowledge of family.

as mr burns would say, "Family, religion, friendship. these are the 3 demons you must slay in order to be successful in business."

Sounds great but practically none of it is applicable to a small lab where the owners own hands are responsible for much of the production.

 

[CoolHandLuke]

Sounds great but practically none of it is applicable to a small lab where the owners own hands are responsible for much of the production.

unless its strictly a financial takeover, and the owner becomes the long term tech.

 

[rkm rdt]

short term tech,that's the whole point of selling.
3 -5 years max.

 

[slotboom.f]

Just get an expert to appraise they cost money but they also save you money this is regarding financial it also keeps the family relation neutral
Regarding the work it self: see if you are up for it this is mainly a self assessment. How old are clients?
Is there new competition?
Here we pay about a few times the net profit of the lab



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[Joon Hong]

Have you been working for your uncle in the lab business? How long?

Used lab equipment generally sells for 30-50% of new. Much of it is sold on eBay so it's easy to check.
Consumables like porcelain, probably more like 25%.

The accounts only have value if you are likely to keep them. If you've been there a number of years and they already know who you are and what you can do, it improves your chances of keeping them. That your uncle wants to stay on is also helpful, the smoother the transition the better.

what is your experience? it's very easy to think you can own a lab, it's very different to run one.

Step #1...Forget hes a relative. This may wind up being the biggest problem for you. EVERYTHING must be in writing. NO GOOD WILL. No 'I thought you meant', No 'but I need'...

You cannot guarantee him a job. He sells to you, he gets lazy, what do you do? Hes selling. Period. There are no guarantees of employment. If you give him that deal, you will fail. He has tto earn his way. If you can hire someone else to do better work at a price that benefits you more, hes got to go. Anything other than him competing for his job will be a boat anchor tied to your neck.

Tricky situation starting a business with family members.
As a new owner of practice when I took over from previous owner, the goodwill
he had went along way to keep me going. As such, having a good relationship
will always help to ease the transition.
Usually, there is a process to hand over the practice and introducing you to the
existing referral pools so they continue to send work over. However, if they are
so used to the old owner and like him so much, they may insist work goes to him
unless you show them you can do as well, and faster, if not at least as well as he
does.
Most practice acquisition comes with a whole set of agreement, lease transfer, etc.
Will the warranty on major equipment be transferred as well?
Good luck,
LCM

This could be the best decision youll ever make, or it could be the best and set you up financially for the rest of your life. Youll never know unless you make the leap, and no one will throw you in prison if you fail. Life is all about the choices we make, and you may never get another one like this.

Just get an expert to appraise they cost money but they also save you money this is regarding financial it also keeps the family relation neutral
Regarding the work it self: see if you are up for it this is mainly a self assessment. How old are clients?
Is there new competition?
Here we pay about a few times the net profit of the lab



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Thank you guys, these are great comments
Some I never thought about

Just because some of you asked
I have worked with my uncle almost 10 years before
I mainly did wax up, but I covered a lot of areas.
Then I left and went through 2 other labs for about 5 years.
For those years, I mainly did technical support, CAD/CAM, and implant restorations.
I can pretty much do all except Ceramist job. (I can, but not fast enough)
My uncle has been struggling since I left and the business went down from $60K to $20K in average or less per month.
He asked me if I can help him out if he purchase scanner.
I started part time, and he decided to invest even further and purchased mill and sintering last month.

I already know majority of his accounts since I worked before.
It's not huge benefit, but some accounts are pretty stable in terms of possibility of me keeping them.

 

[slotboom.f]

Find out why business is going down and if you can solve this , the price is right and you are willing to make this a succes put in a lot of hours and basicly be a gladiator in an arena where survivalrate is less than 50% after 10 years do it!
And still beeing there after time will make the reward tremendous


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[Affinity]

That's a big decline in business.. How many employees are or were there?

 

[Joon Hong]

That's a big decline in business.. How many employees are or were there?

was 9 mostly full time, now 5 all part time

 

[CatamountRob]

20K a month with 5 part time employees is not good. That's one man show money.

Where is this lab Joog?

 

[TheLabGuy]

20K spread amongst 5 employees?...I'd run. Even at 9 employees at 60K...i'd be shaking my head. Most one man bands can do 20K by themselves in a month (it's not fun, i can testify to that, but very doable). 60K you need a few employees (couple good techs and a front desk/billing/answer that dam phone or p/u cases). Granted the milling/scanner will push a couple folks out the door (especially if a lot of your cases is zirconia). Keep us posted but as others have stated, find out why they went from 60k to 20k...and there lies your biggest hurdle on day one.