Author: omniadmin

Brought to you by Omni Veterinary Practice Group, Bank of America Practice Solutions and Patterson Veterinary Practice Solutions

Topics Covered:

• What does today’s marketplace look like for selling your veterinary practice?
• Tax strategies for a successful transition of your practice into retirement
• What should you take to prepare for a proper transition of your practice?
• What legal issues should you be aware of in a transition?

9 am to 5 pm. Dinner will follow shortly afterward.

Attendance cost for you and your significant other: $300
Refreshments, lunch, and dinner included.
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If you’re thinking of buying another practice, here are some benchmarks to consider.  Note: there may be special exceptions, but this will give you a more stress-free acquisition.

1.  Your current practice should be producing between $80,000 and $100,000 per month.
2.  Your hygiene program should have production at 25% to 30% of total collections (for general dental practices).
3.  You should be getting a new patient flow of 20+ new patients per month.
4.  You should have a stable staff with little to no turnover and a good working team.
5.  Systems should be in place so your practice can run without you.    
6.  You have mastered dentistry where you can do most procedures and not refer much work out.
7.  Your finances are in good order.   You have paid your loans down and you have savings. (See Wikipedia for the definition of savings.)
8.  Your spouse or significant other is okay with you opening another location.  Realize that two locations = double the work, potential less spouse and family time.
9.  You know how to read financial statements.  With multiple locations, you now own a business and need to know how to run one.
10.  Your bank, financial planner, accountant and other advisors are in agreement that it would be a good idea to start or buy another location.

By following these guidelines, you will save yourself, your family, bankers, attorneys, lawyers and others a lot of grief should you jump into another location too soon.  We are always happy to help you assess your situation.  Call us anytime, for any reason at no charge- (877) 866-6053.

1.  Assess your equipment.  Upgraded practices sell faster.  If you are more than five years away from retirement, I recommend a few upgrades such as recover your chairs if needed and freshen up the paint.  If you want to sell in less than five years, stick to the paint and carpet because you will not get the tax benefit of major upgrades.
2. Clean up your accounts receivable.  Reimburse patient credits, collect old accounts and keep the A/R current.
3. If you have an associate, make sure you have an associate agreement with a non-compete.
4. If you have an employment agreement with your corporation and you are a C-Corporation, you may need to terminate yourself a few years before retiring.  Consult your tax accountant.
5. Consult your financial advisor and tax accountant.  How much do you need to retire?  How much do you have?  What are the tax consequences?
6. Get a practice valuation to see what proceeds you will get from the sale.
7. Be realistic in the time it takes to sell.  In remote areas, it can take a year or two.  Metro areas, much less.
8. Keep your production up as you near retirement.  I see veterinarians slow down all the time in their last few years.  Work the same number of days.
9. Assess your staff.  Do you have too many staff?  Do you have one that should have been let go seven years ago?
10. Have a practice assessment performed by a qualified consultant.  Many will do it for free or a small fee.  This may help show you some areas to improve over the next few years.

By focusing on these items in the coming years as you near retirement, you will avoid having your practice production and the price of your practice go down in your later years.  Call me for a free consultation.  I would be happy to take a look at your practice and give you my thoughts.  Or, if you are thinking about transition right now, I have a database of buyers looking in your area. 877-866-6053 ext. 2.

For those of you that have been around for a few years, you have probably noticed that the economy is cyclical.  Factors such as interest rates, employment levels, consumer spending and even retirement rates ebb and flow.  This flux creates optimal opportunities to buy and optimal opportunities to sell.
Currently, the market for a practice transition is a seller’s market.   This means there are more buyers looking to acquire a practice than there are sellers looking to sell a practice.  It has been this way for a number of years.  But there are a number of factors that make the current market a perfect storm.  These factors are as follows:

1. There are not a lot of practices on the market.  Low supply and high demand equate to higher practice values.
2. Interest rates are still relatively low.  This makes note payments more affordable, so buyers are looking to take advantage of lower rates by purchasing a practice.
3. The economy is strong.  Patients are getting their dentistry done.  They are employed and have insurance, or can afford to pay cash and get work done.
4. There are more buyers than sellers. Doctors have been holding on to their practices and delaying the sale of their practice in part because of the down market in 2008 to 2010.  The average retirement age for dentists was 62 in 2000 – it’s now closer to 67.

Just as perfect storms at some point break, so will the perfect storm for a transition.  Interest rates are already starting to increase.  Over 50% of doctors are now over the age of 55 and getting older.  They are beginning to sell either to retire or, unfortunately, because of health reasons.  Seller’s markets are flipping to buyers markets in other parts of the country with older populations.  It will eventually happen where you are as well.  If you are thinking about a transition within the next few years, we would be happy to meet with you and answer your questions and put help formulate your transition plan.  Just give us a call at 877.866.6053 or send us an email at info@omni-pg.com.

1. Collections – Most buyers want a good base amount of collections.  The average practice produces around $500,000 per year.  If you’re below this amount, expect your practice to take longer to sell as there are few dentists who want a small practice that they can grow.  Most want to buy it, move in and get cash flow from the very start.
2. Cash Flow – Buyers want to be able to pay the debt service on the practice and also pay themselves a decent paycheck.  If you have an average size practice, your overhead should be at or below the national average of 65%.  This is after the “add-backs” that are done on your tax returns which “add-back” those expenses you are running through your practice which are really not operational to the practice.
3. Hygiene Recall – A solid recall program should be in place.  Approximately 30% of the collections in the practice should be from hygiene for a stable practice.  A little less is okay, but the lower you get, the closer you are to running an emergency clinic than a stable dental practice.  Not that there is anything wrong with that, you just reduce your pool of buyers if you have lower hygiene production.  At the same time, if you have really high hygiene – 40% or higher, that either means your hygienists are awesome and so is your patient retention, or, you’re not doing much in the way of procedures and doing a lot of “watches”, fillings instead of crowns, etc.,
4. Digital Technology – While this isn’t a must, most buyers want to see digital x-rays at a minimum.  You can still sell your practice without digital x-rays, but expect the price to be slightly lower.  Panoramic x-rays are great as the machines are less and less expensive.  Digital charts are also nice to have.
5. Decent Lease – With the commercial real estate market going crazy, you never know what you’re going to get.  It’s good to have a lease term of at least 5 years out with a 3-year option on top.  Problematic leases with tear down clauses, little parking, or those with short-term leases and the landlord not willing to extend the lease will cause a formidable problem in the sale of the practice.
6. Updated equipment and décor – If you have older chairs, be sure and at least have the coverings in good shape.   Older chairs are fine, but torn dental chair covers are not.  Dental chair covers are inexpensive.  Get new ones if yours are not in good shape.  Old carpet, paint and outdated countertops are also a turn-off.  A bit of new carpet, paint, and countertops go a long way in making a practice feel fresh and new for not very much money.
7. Poor Bookkeeping and Accounting – Have I got stories in this area!  However, I’ve been sworn to secrecy.  If you’re running your Porsche lease, spouses’ dermatologist appointments, vacations to Italy, or doing anything remotely grey in the accounting world through your practice, STOP!  We have had practices we could not sell due to too much funny business going on in the books.  Bank credit departments look at the numbers and ask a lot of questions which leads to buyers getting very scared and running away.  I’m sure if you have a good accountant, they are following generally accepted accounting principles for your practice and there will not be a problem.

These are just some of the hot items that can quickly turn off a buyer and will give you the best chance of selling your practice.  Not being able to check off the box for each of these items does not mean you cannot sell your practice, it just means your buyer pool will be smaller and it will take longer to sell.  If you’re two to three years away from selling you can use this as a guideline to prepare your practice to sell over the next couple of years.