Author: omniadmin

By Megan Urban
Broker/Production/Collection Consultant, Omni Practice Group
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If you are considering selling in a few years, contact a broker now that has lots of dental experience and can assist you to prepare. You may want to continue the way you have until you sell, but if you have any interest in doing a few things to secure a higher price and have a desirable practice to buyers, continue to read.

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.

With so few practices on the market, I often get the question “Should I just start a new veterinary practice?”  Since I am a commercial real estate broker specializing in helping veterinarians find new locations, as well as being a Veterinary practice broker, I can give you an educated answer.  That answer is “it depends”.

Here are 10 questions to ask yourself to see if you are a candidate to do a scratch start practice:

1. Do the demographics support another veterinarian in the area?  (1,500 people per 1 veterinarian)
2. Do you have the patience to do a startup?  (It may take up to 24 to 36 months to break even.)
3. Do you have another income, or 12 months cash reserves, to support yourself while you get your new practice going?
4. Are you good at project management – managing contractors, designers, vendors, etc. – to get things going?
5. Have you hired staff before?
6. Are you good at self-promoting and marketing? You may need to go door-to-door to get recognition and to get patients coming in.
7. Have you set up insurances, bank accounts, patient financing, etc., before?
8. Do you have good credit and some cash reserves in the bank to obtain a loan?
9. Do you have enough experience (minimum of 2 years) to jump in and get things going?
10. Do you have the fortitude to succeed? There will be down times when you want to throw in the towel. You need to fight through those down times to achieve success.

I have helped many Veterinary practices get started in their new practices, from finding locations to consulting on the entire set up. Each practice has achieved break-even in less than 18 months.  If you are on the fence on whether to do a startup, give me a call and I can help with analyzing your situation.

By Rod Johnston, MBA, CMA & Jim Vander Mey, CPA, ABI
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Everything has a cost.  If I hit the snooze button on the alarm one time, my cost could be that I potentially get to work late.  If I get up early and don’t hit the snooze button, the cost is not being able to sleep an additional 10 or 15 minutes. I’ve been around the block long enough to know timing is everything.  If I would have bought $10,000 worth of Microsoft stock in 1985, I would have stock worth $3,000,000 today.  On the flip side, how many near-death experiences can I account for where if I would have stepped off the curb a split second earlier, I would have ended up in the hospital?

And what is the cost of holding onto your practice for a few more years and not selling?  You get the opportunity to work more and make more money, right?

Right now, practice values are at an all-time high.  Corporate buyers are paying up to 10 times your earnings before interest, taxes, and depreciation (EBITDA).  The historical figure is 1.5 to 2 times EBITDA.  They have been lowering their threshold on annual revenue requirements and have been looking at practices with values as low as $650,000.  But, we have recently seen a small shift in their tone.  The corporate buyers have been scrutinizing practices a bit more.  Their offers on practices have been a bit less than they have in the past.  Few groups are looking at smaller practices.  It seems their buying frenzy has slowed just a little bit. What does this matter to you if you’re holding onto your practice?  Well, if you currently have an EBITDA of $300,000, your offer today may be 8x EBITDA, or $2.4 million.  If the trend continues and corporates lower their offers, your offer may go down to 5X EBITDA, or $1.5 million.  You just cost yourself $900,000 by waiting a few more years.  Sure, you made $400,000 in income over those few years, but you could have still made an income had you sold the practice and continued to work for the corporate acquirer.Granted, we don’t have a crystal ball.  We don’t know how quickly the corporates are going to reduce their offers and by how much.  However, we do have economic history, a bit of analysis, and common sense.  Corporates want the bigger practices making over $1 million.  Approximately 33% of practices collect over $1 million per year.  The corporates and small groups already own a large portion of the practices that are high-producing practices.  They make the highest margins on these types of practices.  As they use up capital and run out of large practices to buy, their focus will then be on making their practices as profitable as possible, thus, lowering their offers on practices as this happens.

So, just like choosing to hit your snooze button versus continuing to sleep in, there is a cost in holding onto your practice.  The smart thing to do would be to sit down with your trusted advisor.  Whether it be your accountant, financial planner, or your friendly neighborhood broker, someone can help you analyze how much it may cost you to hold onto your practice.  We can always be reached, at no charge at info@omnipg-vet.com.

Whether your practice is collecting $100,000 per year or $10 million per year, you can always use a little more money.  Whether putting it away for your retirement or paying for your kids’ college education, some extra dough always comes in handy.  The best way to get more money in your practice is to grow your practice.  But how do you do that?  Here are a few suggestions:

1. PPOs – Unless you’re a fee-for-service practice collecting $5 million per year without any PPOs, or you’re the only dentist within 30 miles of your office, you should consider taking PPOs.  I know everyone wants to be a fee-for-service practice, but in this day in age, it’s quite difficult.  Many large employers provide some form of dental insurance.  Being a Preferred Provider for those insurance companies whom the employers subscribe to will give you another source of new patients.
2. Additional Services – Do you refer out endo, ortho or oral surgery? If you add those services, you can get approximately a 5% increase in practice production.  There are many courses available where you can learn and hone those skills.  There have also been advances in endo equipment which makes it much easier to perform endo procedures.  Placing implants is another procedure you can add to your repertoire.  Go back and look at how many endo, ortho, oral surgery, and implant cases you referred out.  Those procedures and the corresponding money from those procedures can be yours.
3. Marketing – Having more new patients coming to your practice is a great way to increase your production.  If you’re doing very little marketing, or not doing any, you should consider getting in the game.  The type of marketing depends on the type of practice you have, where you’re located and what kind of patients you want in your practice.  You can consult with a dental marketing expert to get a good idea on which type of marketing is best for you.
4. Where’s the Hygiene? Your hygiene production as a percentage of overall production should be approximately 30%.  That can vary by the type of practice. Emergency clinics or cosmetic practices, for example, will not have much hygiene.  Most general practices should target 30% of total production as hygiene.  You can increase your number by making appointments chairside, incenting your staff to fill the hygiene column and educating yourself with all the information on the internet on how to improve your hygiene numbers.
5. Turn “No” to “Yes” – We’re talking case acceptance.  Your case acceptance should be a fairly high number – 70% to 100% is a good range.  If you’re below that, your treatment diagnosed is walking out the door.  Build rapport with your patients so they trust you.  Work with your team, assistants, hygienists and front desk, to improve case acceptance.  Use the common phrase, “If you were one of my family members, I would suggest you get this procedure done.”  There are several good sources out there on improving case acceptance – books, YouTube videos, consultants, etc.

There are even more ways to improve your bottom line to make your practice more profitable, but if you implement just one of the above 5 items, you can increase your production by 10% or more within a month.  Best of luck in your practice.  As always, we are here to provide free advice or consultation.  Call us anytime – 877-866-6053.