Author: omniadmin

​By Rod Johnston, MBA, CMA

A few years ago, I decided to sell my house in Kirkland, WA.  I wasn’t planning on moving anywhere.  I still planned on living for quite a while longer.  I didn’t have any health issues, nor was I downsizing from my 1,100 square foot house to a smaller house.  I purchased the house almost 20 years prior and it was nearly paid off, so I had quite a bit of equity built up into it.  I had just decided it was time to harvest the equity I had built up in the house and use part of the equity to buy something else, part of it to put towards retirement, and part of it to have as a safety cushion for a rainy day.  I’m glad I sold the house as it was over 1/3 of an acre and had a lot of flower beds and landscaping.  It was also getting older and required quite a bit of maintenance.
I’m telling you this story because you can do the same thing with your practice.  You have put in many years of hard work in your practice.  It may need maintenance every year that you may be tired of taking care of.  After 20 years of staff issues, they may be getting to you.  Maybe you just had a new corporate move in down the street, and you’re worried about competing against them.  It could be that you just want to be a veterinarian and just want to see patients – not manage staff, clean the office, pay the bills, deal with the leaking roof, post to the office Facebook or Twitter pages, come up with new ads to get clients in the door or any of the other 100 items that are required of a veterinary practice owner.  I know, as I’m also a business owner – and who do you think cleans our toilets on the weekends?
No laws say you must own a practice to be a veterinarian.  You can Harvest your Equity from your practice and continue to be a veterinarian.  Imagine getting hundreds of thousands, if not millions, out of your practice, continue to work in your own practice, or go to work in a different practice if you choose and no longer have to manage a practice.  You can put the money you receive to work for you in a retirement or investment account.   You can free up some of your time to enjoy your family.  You can buy a vacation home that you’ve always dreamed of, or just simply put the money away for a rainy day and continue to work.
So, what are the steps to Harvesting Your Practice Equity?

1. Set up a free consultation with one of our advisors.
2. Have a practice valuation done on your practice.
3. Meet with your financial advisor to discuss your plan and the valuation.
4. Meet again with an Omni Advisor to discuss possible options in selling your practice and the feasibility of working back in the practice.
5. Let Omni take over the selling process and find a buyer that matches your needs.  The “your” is vitally important as we are matchmakers and want to find a buyer who will be a near-perfect fit for you, your practice staff, clients, and the community.
6. Close on the sale of your practice and plan your new, less stressful life.

That’s all there is to it to take back control of your life.  Of course, there will be some work between steps such as running reports, meeting with a potential buyer(s), and discussing options with your advisors.  But if you rely on Omni and other experts, the process can be simple.

We have helped numerous veterinarians who sold their practice and are working back in their practice or are working for someone else and appreciating their newfound joy again being a veterinarian and helping animals get better.  The first step is the easiest.  Just give us a call at 360-941-2341.

​People love benchmarks.  They want to know how many glasses of water we should drink each day.  How much we should work out every week.  Or, how many miles per gallon our cars can achieve.

There are also benchmarks to look at when you are buying a practice.  They may not necessarily be deal-breakers, but they help determine what you will need to do to get to your target.  Here are some of the benchmarks you should look at and calculate when buying a practice:

• Staff overhead as a percentage of collections – 20% to 25%.  If it’s higher, the practice is overpaying staff, underperforming collections, or too many staff.
• Facilities Expense – 7% to 9% of collections – Too high and the practice is either paying high rent, space is underutilized or production is too low.
• Supplies – 5% to 7% of collections – If this is too high, it could be that the practice is using high-end supplies, or the supplies inventory (or vendor) is not managed properly.
• Marketing expense – 3% to 5% depending on the growth stage.  A practice that is looking to grow will have a high percentage.  A static practice may not spend much on marketing at all.
• Collection Rate – Minimum of 98% for a well-run practice.  A low rate means the front desk is not keeping up or managing the accounts receivables very well.
• Total Overhead (all expenses less owner and associate pay) – Ideally should be less than 85%.

These are just a few benchmarks to analyze when looking at a practice.  Remember, if the practice you are analyzing does not meet or exceed these benchmarks, it does not mean it’s a bad practice, it simply means you have work to do in those specific areas.

Contact me if you would like more information – jim@omnipg-vet.com.

There are usually a few easy ways to increase collections which gives you more money now and in the future at sales time. No, you don’t want to do an expensive remodel and purchase all the new equipment and technology available, but you do want to have up-to-date flooring and paint, and good curb appeal. You can determine your new equipment options with your favorite rep if yours is really old and not functioning properly. A new buyer needs to be able to come in and start producing immediately without shag carpet and 1970s decor.

When did you last update your PPO and UCR fees? The last thing a bank wants their new buyer to do is to raise fees immediately and risk losing patients. Confidently set your fees now based upon your skill level and overhead. Patients expect to pay for quality care and by simply adjusting your fees you could add tens of thousands of dollars.

What is your patient retention? If you’re not looking at this and providing tools to your team to be successful, you could be losing patients without even trying! One easy way to calculate this is to determine if about 2 times 85% of your active patient count equals the number of adult and child prophys and perio-maintenances in the last 12 months. So, if you have 2,000 active patients, you should have completed around 3,400 of codes 1110, 1120, and 4910 in the year. How full are your hygiene schedules in 4 months, 5 months? Ensuring every patient has their next hygiene appointment can increase collections by tens of thousands of dollars and it means you are providing ideal care.

Have you spoken with your CPA and/or financial planner? It’s important to have a plan for the money you will get from the practice sale. There are retirement plans that allow you to put much of it in tax-free, but either way, you will want to get a tax plan together to try to ensure you pay off any debt in a way that makes sense, save as much in taxes as possible, and put your money in the right “place”.

Your CPA and/or financial planner will assist you to determine if you have the money needed to fully retire. If you decide for financial reasons or you’re having too much fun to quit completely, determine if your practice can provide enough patients/money for 2 dentists. The banks will want to know that the new buyer is making enough to pay off the practice debt and feed themselves and family. Do you want to do what it takes to increase new patients? Will you be dropping days? It’s also time to think about how you will truly feel “sharing” your practice. You will not be the owner and you will be living with a new roommate in the space and practice that you created and lead for years.
If you don’t want to make any changes as you practice for the next few years, that’s certainly your choice, but don’t expect your practice price to be higher than reality dictates. If your collections have decreased, banks will want to know why. If collections decrease, ensure spending decreases appropriately as well, such as team payroll and dental supplies. A good dental practice broker can assist you to transition out of your practice in a successful and smooth way. This is a very important time for you and your family.

By Megan Urban

Who can help me? 
This is a very important decision and time for you and your family, so it’s critical to build your team of trusted advisors, such as dental specific broker (with a real estate license), lender, CPA, attorney. These professionals have done many unique transitions, and often with each other, so they work well together and know how to provide you with a successful transition. You can use your relative or friend in these professions, but they can’t know the things dental specific advisors know. It’s the same as when you refer out complete bony extractions or dentures, etc. Experience and knowledge in a select niche are worth its weight in gold.

Can I afford a practice and associated real estate?
Dental-specific lenders understand dentistry and understand that you may have student loan debt, potentially as high as $500,000. If the practice cash flows and provides you with the money to pay your practice and student debt, plus living expenses, you may be good to go. If you are thinking about a start-up, you will most likely need to work part-time somewhere else as you grow your new practice. Your trusted advisors can provide you with ideas to assist with your startup as well as potentially referring to a dental specific marketing company. So, the answer is, typically, yes, you can afford a practice and associated real estate.
Sometimes, depending on the seller and your finances, you may rent a few years. The things to consider here are that if you rent, you may still have the seller “visiting” when they want and still act as though it’s their building and try to deter you from making your own decisions. It’s hard to make changes and you will someday understand this! If you rent, you will want your attorney to ensure there are solid details surrounding future purchase.
Some dentists prefer to own their own real estate and that can be beneficial for those with property ownership goals. Leasing in a commercial space or strip mall can be worth the potentially high rent if you have the opportunity to gain increased collections.

What do I need to know when looking at potential practices?
Where do you want to live and work? Once you determine the general location, look for a practice with a good and visible location and parking.
Work with your broker or buyer-representative to assist you to review the formal valuation or the following statistics.
Last 3 years financials to see collections and expenses. Some expenses may be backed out that would not pertain to the new dentist, such as “large” continuing education, cars, 401K, and family members on the payroll that may not have an active/necessary function in the practice.

• Accounts receivable. You will want to know the total and how much is over 90 days old that may not be collectible unless the practice accepts 3-4 months of in-house payment. Even if you don’t purchase the AR, you will want to know if patients are accustomed to paying at the time of service so you can slowly make changes as necessary. Any credit balances can be determined and addressed before closing.
• Procedure frequency. Confirm the services currently being done and if you are comfortable performing and what procedures you can potentially add. Check periodontal treatments and number of recare compared to active patient count.
• Patient demographics. This report will show patient age, zip code, and insurance participation. If the patient age isn’t what you enjoy, determine how you might acquire those patients. If many of the patients come from a zip code far from the office, be aware you may lose some of those patients. You may want to add or reduce insurance participation, but make sure you have a solid plan for this.

I want multiple offices.
Having multiple offices can be profitable if done correctly. Ensure you have solid processes in place that can be replicated. Consider doing a demographic study to determine where you want your locations. If patients may be going to more than 1 location, ensure your dental software is capable of being accessed by all locations.

What do I need to know/do before starting my first day in my new practice?
Work with your CPA to set up your entity, accounting system, payroll, and tax payments. Plan to have a confident first conversation with your new team. They will be anxious about the transition so you will want to put your arms around them and help them understand you want to continue the quality care and any small changes will only be for the better for patients and team. Be prepared for difficult questions such as asking for a wage increase, change in schedule, or complaints about other team members. Guide the team on how you want them to discuss you to the patients and how your goal is to retain patients.
Become familiar with your dental software. Most dentists and teams do not maximize the reports and statistics available to you. Remember, your dental software and accounting system are the 2 biggest tools you have to run your practice.

PURCHASING A PRACTICE, with your team of trusted advisors, should be a pleasant process that leads to a profitable and enjoyable career! For more information on our buyer’s program or for a free consultation, please contact megan@omni-pg.com.