Entrepreneurial Energy
By Corey Young, DDS, MBA, Practice Transition Specialist
What defines entrepreneurial energy? According to David Lyons, PhD:
“Entrepreneurial energy is the force that sustains the momentum and velocity of progression in the venture. Energy can rise through excitation/agitation and fall through decay of the energy as a result of predicaments or failures.
Entrepreneurial energy is an endogenous force that fuels motivation and sustains entrepreneurial action and momentum. Encapsulating hope, optimism and obsessiveness, the nature and experience of the entrepreneurial energy provides meaning to the entrepreneurial pursuit and venture. Entrepreneurial energy is a motivational construct characterized by positive intense feeling, emotional arousal and internal drive and engagement in the pursuit that is salient to the self-identify of the entrepreneur. The positive affective state also generates positivity in the cognitive state fostering creativity and recognition of new patterns of information critical to opportunity recognition and exploitation in the external environment.
Entrepreneurship, after all, is a science of turbulence and change, not continuity. Turbulence is caused by certain force. Such is the force in entrepreneurship, like the wind is felt but not seen; or seen through the ruffle of the leaves but not the wind itself.”
Most of you reading this article can relate to those attributes, especially early in your career. Remember talking to your friends in dental school and making plans for your practice? Remember the excitement of updating your new practice? Remember the hours put in behind the scenes to get the practice where you wanted it?
Do you still have that energy in you? If you do, this is a great time to be a dentist entrepreneur. Consolidation is happening and it will favor the big and the bold.
What if you don’t? That is okay also, but the time to consider harvesting your practice asset is now.
In my exit-planning training, coaching our clients to either grow or sell their businesses was absolutely paramount. Stasis really is an illusion. Equipment gets older. Technology becomes dated. Marketing plans become obsolete. Business values decline.
So ask yourself, grow or sell?
Read MorePitfalls to Avoid in Buying a Building
By Steve Kikikis, Vice President, Commercial Real Estate Broker
Money Pit or Cash Cow?
On occasion when a doctor purchases a practice there is also an option to purchase the real estate. Historically, real estate has been a good investment over time, but owning a commercial building has its own nuances.
There are a lot of similarities between owning a commercial building and a residential house. As the building owner or homeowner, you are responsible for paying the insurance, maintenance, and property taxes. Be sure to understand what your out-of-pocket costs are before you take on the responsibility of purchasing a property. Investing in a building or home inspection conducted by a reputable building inspector is always worth it.
Before you purchase a commercial building, know your demographics, and do your research. If a building is a steal, make sure you do some research to find out why. A commercial real estate broker that specializes in your industry can assist you in looking at the demographic information to fully understand the value of the real estate.
After you’ve purchased the practice, you are now the king of your castle and if you are business savvy, you can make a profit from owning your building. Having some knowledge of what to expect and what the pitfalls are of owning a building can save a lot of headaches down the road. For this article, we will consider that you are the owner and sole tenant of your building.
Maintenance – You’re now responsible for everything from the leaky roof, sweeping the parking lot, HVAC systems, lighting, ADA compliance, security systems, plumbing, and possibly the water and sewer mains underneath the property. The best advice is to adhere to a schedule with regular and preventive maintenance. Don’t skimp on issues that may seem small but that can turn into a bigger safety issue (both expensive and potential lawsuit if hazardous) in the long run.
A lot of potential challenges are dependent on the age of the building and how the previous owner took care of the property. You can hire a property manager to be the point of contact so you’re not distracted and can concentrate on your work. Some owners like to be involved in every decision, while others don’t want the hassle of being contacted for leaky pipes, clogged toilets, etc.
Insurance – a commercial building policy will differ from a residential homeowner’s policy on your home. A commercial policy will also have coverage for the business operations, its products, and operations liability. Much like homeowner’s insurance, the age and construction type of the commercial property will determine the premiums. Commercial insurance is also based on the neighborhood where the building is located.
Although chances are slim, some policies cover loss of income in the event of a fire or other loss of the building. These are usually additional policies that can provide peace of mind.
City ordinances – Although you may own the building, ownership doesn’t necessarily mean you can do anything you want. An example is a new building owner who wanted to utilize a specific size of a sign for his business, but the city ordinances stated a sign can be no bigger than 30 square feet. Be sure to reach out to the city before you decide to change or update the signage on your building and also verify if there are any restrictions for the exterior of your building such as signage, color, material, etc.
Taxes – There are two points on the taxes. First, for the building taxes, make sure your ownership is properly transferred to you during the purchase, and make sure that you keep up-to-date on your taxes. Set up an account directly within the municipality you are located or make sure your loan program is paying it directly. For your business taxes, owning your own commercial real estate has many tax advantages. Connect with your CPA, make sure you’re paying your real estate entity as a business expense, and more.
Money Pit or Cash Cow? There will be costs to owning your own commercial real estate, but taking the proper steps and working with an experienced commercial real estate broker that specializes in medical/dental purchases will save you time and a lot of money. Just think, if you are leasing a space, after 10 years you will be signing up for paying the landlord another 5 years of income. If you own, after 10 years, you will be working towards paying that building off and have the equity in the building.
Read MoreAre You Ready to Sell?
Are You Ready to Sell
By Megan Urban, Practice Transition Advisor
Are you ready to sell your dental practice? This is always a difficult question to answer for most dentists. You may still love doing dentistry but want less stress. How is your body holding up? Do you have enough money to retire? How much is your practice worth?
Contact your transition consultant/broker and have a heart-to-heart about your practice, goals, and options. We have lots of experience to share that may be beneficial to you. We can do a complimentary quick look to give you an idea of what your practice may be worth and of course a full valuation will need to be done to determine the final value.
Once you have an idea of what you may be paid for your practice and associated real estate, you can talk with your CPA and financial planner to know what retirement looks like for you, as well as plan what to do with your sales proceeds. You may have practice or real estate debt to pay off at closing, or you may have a retirement plan you can utilize to save on taxes.
Many dentists don’t know if they want to sell their real estate with the practice. In our experience, the best person to own the space is the dentist working in it. If you happen to have a lot of rentals and enjoy that, maybe this is an option for you, but if your buyer leaves, empty dental spaces can be difficult to sell.
Sometimes dentists believe their practice is worth more than our valuation and want to stay on to increase collections that may have waned a bit due to slowing down. You can certainly do that but know that banks look at the last three years of tax returns so if you want to increase collections to increase practice value, you will need to increase and work another three years.
If you still love doing dentistry and want to sell and stay on part-time, you need to start thinking about how much you want to work and how you will build a practice that can maintain a schedule for more than one dentist. This can be done, but you need to have a plan and your transition consultant can assist with this.
Are you ready to sell? Give it some serious thought after talking with your advisors and make the decision with confidence. Contact us today!
Read MoreWhere to Own a Dental Practice?
The question we often get from potential practice buyers is “Where is a good spot to own a dental practice?” There are a lot of factors that contribute to answering that question. But first, let’s discuss the reasons why you want to own a dental practice.
If you are in it because you love dentistry and love helping patients and you are not necessarily in it to make the big bucks, you can really own a dental practice almost anywhere. A lot of buyers seem to want the downtown metropolitan practice thinking it’s a great place to practice since there are so many potential patients and you can live the urban lifestyle. I’ve helped doctors who absolutely wanted to be in a metropolitan area, even though the demographics made no sense whatsoever, who then started a practice and did quite well. One doctor that I helped always dreamed of owning a practice in a particular city. He went for it and is successful. And I have seen others want a practice in a certain area, and although the numbers didn’t make sense, they did it anyway and were successful.
Some of you are buying a practice because you want to make a lot of money, in which case, further analysis and discussion are needed. The failure rate for dentists is infinitesimal – somewhere around .0125%. If you’re buying an existing practice and you have identified that the practice already has good cash flow, you can purchase the practice and have success almost no matter where it is. If it’s a poor performing practice, you would need to examine if the poor performance is because of the location, the management, or something else. If you want to buy an existing practice and are looking for an opportunity to grow and have lower overhead, I would suggest looking outside of the metropolitan areas. Practices outside of metropolitan areas have less competition, wages and rents are lower, and it’s easier to grow those practices. And if you are considering doing a startup practice, the same rules apply. Look for a location with good demographics outside of metropolitan areas. Of course, if you absolutely want to be in a metropolitan area, don’t be afraid to go for it. Just look closely at the numbers and hire a good dental practice or real estate broker to help you out.
I do recommend that you do a bit of demographic analysis on the locale. See how many dentists are currently practicing in the area. A good ratio is 2,000 daytime population for each doctor. There is a difference between the daytime population and the regular population. The daytime population includes the workforce. For example, if you look at the population of South Lake Union during the day vs. the nighttime population, you would see a big difference. Another demographic to pay attention to is the age of the population. For a general practice, a good mix of young and old is best. If you want a high cosmetic practice, but the average age is 28, you might need to consider another area. Homeownership is another good indicator of practice success. You want to have more homeowners than apartment renters. You can obtain detailed demographics either through a company that will charge a fee and provides data such as the average annual dollar amount spent on dentistry per person within a zip code and other more granular items. Or, Omni has information that we can provide.
One of the advantages of working with Omni is that we have both dental practice brokers and real estate brokers to help you traverse the ownership trail in any way we can. Just give us a call at 877-866-6053 or email us at info@omni-pg.com and we’ll be happy to help get you started. Contact us today!
Read MoreWhat To Do with Your Practice If You Are Sick Or Dying?
Most of us have a vague notion of what retirement might look like but that’s where our planning usually stops. Getting sick or receiving a terminal diagnosis isn’t something that is easy to think about and is even more difficult to talk about. Nobody wants to contemplate their last moments in this world.
Sadly, we have all witnessed peers who have been thrown a curve ball and had an illness or untimely death. The aftermath of these events places a huge strain on our families. However, these stresses can be lessened with some discussion and at the very least, taking the steps now to get the right people in place when you need them.
An unexpected sickness can occur at the height of our professional careers. Depending on the prognosis, it’s critical to get our affairs in order as quickly as possible. Staff might suspect that something is amiss, and you can ask them to keep health issues confidential.
If you haven’t assembled a team already, start searching for a reputable estate-planning attorney and CPA. Also include the often-overlooked professional; a practice transition broker who can assist with the transition of your practice and can begin the process with you as soon as possible. Most widows/widowers are not thinking that the responsibility of selling the practice will fall on their shoulders. We recommend starting these delicate conversations with your spouse now, so they are not left to deal with this in addition to emotional stress.
If you are still able to work at your practice, we can begin to market the practice heavily but discretely so we can find a buyer as quickly as possible. The best medicine for you is to heal and take care of your family. Selling might seem short-sighted if you expect to make a full recovery, but there are many other options available if you still want to continue to work after you heal.
However, for those doctors who pass unexpectantly, word of mouth tends to get ahead of any marketing and the reality is that your practice will be marketed without a doctor and thus the practice value can decrease substantially. Some of the most difficult challenges that we have encountered are in serving spouses who are left to deal with quickly selling a practice when the doctor is sick or has passed away. The value of the practice drops sharply and is often valued at 30-40% less even after just one month without a doctor.
Prepare for the unexpected. Assemble your professional team and get your estate planning documents in order. Most importantly, make this information accessible and communicate your wishes with your spouse.
Life is short, spend your days doing what you enjoy and take care of your health.
Contact us today for a free consultation.
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