What Do You Think Your Practice is Worth?
Megan Urban, Practice Transition Advisor at Omni Practice Group, explains why it is a good idea to get an understanding of what your practice is worth 2-3 years before you plan to sell.
Read MoreNew Year’s Resolution for Associate Veterinarians in 2022
By Happy New Year! We would like to wish you a new and improved year over 2020 and 2021. If you’re like most people, you have set some New Year’s resolutions. Perhaps one of them is going to the gym. Another may be eating healthier. A third popular one is spending more time with family and friends. Statistics show that on average, it takes 32 days before people give up on their resolutions. My thought is why wait? I’m having a hot fudge sundae for lunch and not going to the gym! But how about a resolution to further your career as a veterinarian?
One way to further your career may be getting out of your current dead-end associate job and finding a new one. As you know, there is a shortage of veterinarians who want to be associates. As such, corporates are offering bonuses to sign on with them. Some are quite generous. There may be some stipulations around how long you need to stay working with them, however. If you don’t want to work for a corporate-owned practice, there are a lot of individual practice owners looking for associates as well. You can check your state associate website for ads or give us a call and we may know of some openings.
Another idea might be expanding your role in your current associate position. Perhaps you want to do surgery or certain procedures that you like to do. You can start by talking with your practice owner and see what kind of opportunities he may be able to provide. You can also work part-time in another office which may be willing to give you the opportunity you’re looking for.
A third way of growing your career in 2022 is by purchasing a practice. Now, don’t stop reading yet. Practice owners make 15% to 20% more than associate veterinarians make. They also build equity in their practice typically paying off their entire loans in 10 years. If you purchased a $500,000 practice and simply sustain its production, you now have earned 15% to 20% more per year PLUS, you’ve earned $500,000 of equity in your practice. If you grew it 10% per year, you now have over $1 million in equity. I know many associate veterinarians are afraid of owning a practice. They think corporates are going to take over the world and corporates get better deals on supplies. First of all, corporates will not be taking over the world. There will always be room for individual practice owners. In fact, if I had a choice, I would take my dog to an individual owner before I would take it to a corporate owner. I think most pet owners would agree. Regarding better deals on supplies, I’ve had several supply reps tell me that they would give the same deal to an individual as they would to a corporate owner. Supplies as a percentage of gross revenues make up a small number. So, even if they did get better deals, it would not make that big of a difference. Don’t be afraid of owning a practice and competing against the corporate big guys. You can provide a much better and more personalized experience than they can.
These are just a few ideas for your New Year’s resolutions if you haven’t come up with your own. Now, go to the gym, grab a salad, and then, go improve your career!
Read MoreNew Year’s Resolution for Associate Dentists in 2022
By Happy New Year! We would like to wish you a new and improved year over 2020 and 2021. If you’re like most people, you have set some New Year’s resolutions. Perhaps one of them is going to the gym. Another may be eating healthier. A third popular one is spending more time with family and friends. Statistics show that on average, it takes 32 days before people give up on their resolutions. My thought is, why wait? I’m having a hot fudge sundae for lunch and not going to the gym! But how about a resolution to further your career as a dentist?
One way to further your career may be to learn a new procedure or two. As an associate or existing practice owner, you can improve your skills and your income by learning new procedures. A few suggestions would be to advance your endo skills. Maybe you know enough but just haven’t had any advanced training. There are a lot of courses to further advance your endo skills. You can also learn how to place implants. There are probably a lot of patients in your practice who want an implant, but don’t want to go to another office. If you’re a general dentist, you can also learn how to do some form of orthodontics with either Invisalign, ClearCorrect, or another company’s process. Learning a new procedure can make you more marketable as an associate and as a practice owner.
Another way to further your career may be to find a new associate position. If you’re frustrated in your current role because you’re not allowed to do anything more than hygiene checks and fillings, maybe it’s time to look elsewhere. The state associations list openings in their classified ads. If you’re not happy where you are, staying there will make you disgruntled with dentistry and cause you nothing but grief.
A third way of expanding your career in 2022 is by purchasing a practice. Practice owners make 15% to 20% more than associate dentists. They also build equity in their practice typically paying off their entire loans in 10 years. If you purchased a $500,000 practice and simply sustain its production, you now have earned 15% to 20% more per year PLUS you’ve earned $500,000 of equity in your practice. If you grew it 10% per year, you now have over $1 million in equity. I know many associate dentists are afraid of owning a practice. They think Dental Service Organizations (DSOs) are going to take over the world and they get better deals on supplies. First of all, DSOs will not be taking over the world. There will always be room for individual practice owners. In fact, if I had a choice, I would prefer to go to an individual owner before I would go to a DSO or group-owned practice. I think most people would agree. Regarding better deals on supplies, I’ve had several supply reps tell me that they would give the same deal to an individual as they would to a DSO. Supplies as a percentage of gross revenues make up a small number. So, even if they did get better deals, it would not make that big of a difference. Don’t be afraid of owning a practice and competing against the big guys. You can provide a much better and more personalized experience than they can.
These are just a few ideas for your New Year’s resolutions if you haven’t come up with your own. Now, go to the gym, grab a salad and then, go improve your career!
Read MoreIt’s All in the Numbers
As you close out this past year and reflect on the first full year without any shutdowns as 2020 brought us, it makes sense to step back and take a look at your numbers. This is the case whether you are in your first year of practice ownership, have owned your practice for ten years, or you are getting closer and closer to retirement. You should always be managing your practice to your numbers while keeping the number one goal of taking care of your patients to the best of your ability.
So that all sounds great, but how do you manage to your numbers? The first step is grabbing your Profit and Loss statement and a Production by Provider or Production by Procedure report for 2020. If you know Microsoft Excel, you can input the numbers into an Excel spreadsheet. If you don’t know Excel, you can grab your handy-dandy calculator.
Most numbers you manage to are calculated based on a percentage of your gross collections. That’s the top number on your profit and loss statement. You should take the number after returns or other credits to gross revenue. Some Profit and Loss statements may call this number Profit and others will call it Revenue.
The first number to look at is your staff expense as a percentage of revenue. Add your staff salaries, payroll tax for staff, and staff benefits. Divide that total by revenue. Your target should be about 25% of revenue. If you’re slightly above 25%, don’t worry, increasing collections while keeping staff salaries flat will help you improve this number. If you’re over 35% and you really don’t think you can improve collections, you should analyze your staff. Maybe you have too many, or maybe your staff that is overpaid. These days, it’s easy to overpay staff since they’re hard to come by. Time and time again, when we look at practice numbers, this is one of the biggest profitability killers.
The next number to look at is facilities expense as a percentage of collections. This includes your base rent plus any of the common areas that you pay for and other facilities expense – garbage, parking lot maintenance, etc. This expense should not be more than 7% to 9% of revenue. If you are significantly higher than this number, you are not maximizing your facility, overpaying on rent, or you have too big of space for what you need. You can either increase collections or decide to downsize your space, sublease space, or do something else that will help get your numbers down in the 7% to 9% range.
Dental Supplies expense is something else to look at. Divide Dental Supplies expense by revenue. The target is 6% of revenue. If you’re a few percentage points off, don’t worry about it. If you’re at 12% to 15% or higher, you may have supplies walking out the door, overstocking your supply cabinet, or you’re buying top-end products. This should be a quick fix if you have a meeting with your person that orders supplies and give them a budget.
Lab expense is similar to dental supplies. If you’re a basic crown and bridge practice, you should be at 7% to 9% of revenues if you don’t use a milling machine in-house or you don’t place a lot of implants. The latter two will skew the numbers. Negotiate with your lab if you are higher than 7% to 9%. If you’re with a high-end lab, you’re at 12% and love their work, don’t change labs. You’re only a few points off. You can make up the difference elsewhere.
The other quick measure is hygiene as a percentage of total collections. Take your Production by Provider report or Production by Procedure report and figure out how much of collections are coming out of hygiene as a percentage of total revenue. The target is to be above 30% of revenue coming from your hygiene program. If you’re in the low 20% or less and you have a general dental practice, you should take a look at your hygiene schedule and see how many patients they’re seeing per day. Maybe their schedule isn’t full, or maybe hygiene is booked out for several months and the hygienist can’t keep up. You will need to analyze this for yourself.
Looking at your numbers is something all business owners do to help them manage their practice. These are a few simple numbers that you can quickly measure a few times per year, make a few changes and you can get your overhead down below the national average of 65%. Best wishes on the New Year and may your overhead be under control.
Read MoreBuyer Trends in the Veterinary Industry
Happy Holidays and congratulations on making it through another year! And what a year it’s been. Covid is still rearing its ugly self in new forms. Wearing masks went away, then came back again. Some veterinary conventions were canceled, some held virtually and others allowed in-person attendance. Corporate veterinary practice buyers are still around. Individual buyers are also acquiring practices albeit hesitantly. Banks started financing practices again. So what’s going to happen in 2022?
We hope that we can get back to some form of normalcy. Wouldn’t it be great to go out to dinner and not have to get carded as if we’re a 21-year-old buying our first beer? Having to show your vaccine card and wear masks is getting to be a pain. Covid is probably going to be around in some form or another for a very long time and will be similar to the flu as time wears on.
Corporate buyers will also be around for a long time. I’ve heard that corporates currently hold between 12% and 22% of all veterinary practices. Depending on who you ask and how you calculate what constitutes a corporate buyer. I would guess the real number is probably around 17%. There has been some consolidation of corporate buyers that is occurring. Getting acquired by a larger corporate buyer is the goal of the smaller corporate buyers. As they get gobbled up, there will be fewer and fewer buyers to drive up the value of practices.
Individuals are still buying practices and will continue to do so forever. It’s our job as practice brokers as well as the job of others in the veterinary industry to educate and assure veterinarians that they can be successful owning a veterinary practice and do very well. Many buyers worry about competing against the corporate owners thinking that they cannot get the same pricing on supplies and services that the big guys receive. Most supply companies have told me that they will in fact give the same pricing on supplies that the corporate owners get.
We wanted to keep you informed and know what’s going on in the veterinary practice buyer world. We wish you a happy and healthy 2022!
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