Author: omniadmin

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.

Some dental practice owners own the building where their practice is located.  The longer the doctor has owned the practice, the more equity they may have in the building.  They also are paying themselves a high rent for tax planning purposes.  One of the questions we get asked when a dentist is considering selling their practice is, “Should I also sell my building?” 

One thing to consider when selling your practice regarding the real estate is do you want to be a landlord?  We have years of experience being a landlord and there are pros and cons.   The pros are that you retain the building and get a monthly rental payment.  Hopefully, that rental payment covers the mortgage, taxes, maintenance, insurance, and any replacement of major capital items.  That includes when the HVAC system or roof fail and they need replacing.  The other pro may be an appreciation of the real estate.  Currently, we are in a high real estate market.  Real estate markets are cyclical.  They go up and they go down.  There is timing involved in a sale.   You time it right and you can reap your rewards of all the years you have owned the building.  Time it wrong, and you feel a little pain from not selling at the height of the market.

The cons are like the pros.  Being a landlord requires you to be on call 24 hours per day and 7 days per week.  If a heavy storm occurs and the snow collapses the roof, the wind blows a tree onto the building, or the parking lot floods into the building, guess who gets the phone call?  That’s correct, you!  We have been on the receiving end on calls that happen at 2:00 in the morning when the building started to flood. 

Another con is when the lease is up and the tenant decides they want to own their own building.  They didn’t tell you that they purchased the building next door and you now no longer have a tenant!  The odds of getting another dentist to start up a practice in your building is very low.  It will also be difficult to get another tenant quickly.  There are three dental buildings within five miles of our office that have been vacant for several years due to this exact thing happening.

The third con is timing the market.   We’re currently in an up-cycle market.  With interest rates and building inventory low and demand high, building values and prices are on the high end.  Holding onto the building so you can get some cash flow and then sell the building later could cause you to lose hundreds of thousands of dollars.  Also, a building has more value to an owner/user than it does to an investor.  That means when you sell your practice, a buyer may be willing to pay 100% of market value, or slightly higher than market value, in order to acquire the building.  Whereas, an investor will try to negotiate and get the best possible price they can get.

In summary, owning your own building while you are in practice is the smart thing to do.  You build equity, pay yourself rent and can do anything you want to the building.  But after you sell your practice, it may be a different story.  Consult with your transition broker, who should also have commercial real estate experience, and get sound advice to help you make the right decision. ​