Upcoming Seminar – Roadmap to Retirement: Should you sell now or sell later?
Date: September 28, 2017
Welcome and Registration: 6:00 p.m. – 6:30 p.m.
Seminar: 6:30 p.m. – 8:30 p.m. (Dinner to be served)
Cost: Complimentary
Location: Pacific Grill Events, 1530 Pacific Avenue, Tacoma, Wa 98402
Welcome and Registration: 6:00 p.m. – 6:30 p.m.
Seminar: 6:30 p.m. – 8:30 p.m. (Dinner to be served)
Cost: Complimentary
Location: Pacific Grill Events, 1530 Pacific Avenue, Tacoma, Wa 98402
The American Animal Hospital Association cordially invites you to attend this valuable seminar about planning your future. We have assembled a panel of experts that will give you a solid foundation of what you’ll need to do to prepare your hospital for transition. Don’t miss this opportunity to start planning your future. Contact us today to reserve your spot!
RSVP by September 25 – email dg.seminar@bac.com or call 614-753-1603.
Are Solo Practice Owners Going the Way of the Golden Toad?
We occasionally hear that the future of solo dental practices is bleak. They will eventually be extinct like the Golden Toad (look it up). Corporate dentistry is growing and going to drive out the solo practitioners. My personal opinion is that I don’t think this is true. I believe there will always be a need and a demand for the solo/non-corporate practice.
When I talk about corporate practices, I’m primarily speaking of the non-dentist owned corporate practice. There are dentist owned practices where a licensed dentist owns 3, 5 or more practices. He or she has full and legal ownership of their practices. I call these small group practices. Corporate practices tip-toe down the legal sidelines of practice ownership by having a dentist own the clinical aspect of the practice, called Dental Services Organization (DSO) and the non-licensed dentist corporation owns the non-dental management aspects, called a Management Services Organization (MSO). Note that this structure can also occur in small groups, but in the small group, a licensed dentist owns both the MSO and DSO. The large corporates include Aspen, Gentle Dental, Pacific Dental Services and others. Both solo practices and corporate practices have their pros and cons from both a patient perspective and from a dentist perspective.
As a patient, I prefer to know who my dentist is going to be when I go into the office. I want to build a relationship with him or her and want my dentist to know the history of my dental care — and a little bit about me as well. In a corporation, you might get the same dentist the next time you go in, but there’s a good chance it will be a different dentist. Small groups lean more towards a solo practice and you will have a reasonably good chance to get the same dentist in the well run small groups.
From a dentist perspective, most dentists do not want to be told what treatment to focus on, what supplies to use, etc., The majority of dentists surveyed by the ADA still have a dream of owning their own practice, being their own boss, making their own decisions.
Recent court decisions in New Jersey, Allstate vs. Northfield, sided on the side of dentists. It may begin to set the tone to start scaring away the non-dentist corporate owners. Washington State has been trying to pass a bill to allow non-dentist owners and so far has been successful. If you’d like to read an article on the New Jersey case, you can read it here.
So, if you have been holding off on not buying a practice because corporates are going to drive solo practices away, think again. There will always be a need and demand for a solo practice. Court cases like Allstate vs. Northfield will help ensure non-dentist owned practices stay away. Join the practice ownership club today!
Read MoreWhen I talk about corporate practices, I’m primarily speaking of the non-dentist owned corporate practice. There are dentist owned practices where a licensed dentist owns 3, 5 or more practices. He or she has full and legal ownership of their practices. I call these small group practices. Corporate practices tip-toe down the legal sidelines of practice ownership by having a dentist own the clinical aspect of the practice, called Dental Services Organization (DSO) and the non-licensed dentist corporation owns the non-dental management aspects, called a Management Services Organization (MSO). Note that this structure can also occur in small groups, but in the small group, a licensed dentist owns both the MSO and DSO. The large corporates include Aspen, Gentle Dental, Pacific Dental Services and others. Both solo practices and corporate practices have their pros and cons from both a patient perspective and from a dentist perspective.
As a patient, I prefer to know who my dentist is going to be when I go into the office. I want to build a relationship with him or her and want my dentist to know the history of my dental care — and a little bit about me as well. In a corporation, you might get the same dentist the next time you go in, but there’s a good chance it will be a different dentist. Small groups lean more towards a solo practice and you will have a reasonably good chance to get the same dentist in the well run small groups.
From a dentist perspective, most dentists do not want to be told what treatment to focus on, what supplies to use, etc., The majority of dentists surveyed by the ADA still have a dream of owning their own practice, being their own boss, making their own decisions.
Recent court decisions in New Jersey, Allstate vs. Northfield, sided on the side of dentists. It may begin to set the tone to start scaring away the non-dentist corporate owners. Washington State has been trying to pass a bill to allow non-dentist owners and so far has been successful. If you’d like to read an article on the New Jersey case, you can read it here.
So, if you have been holding off on not buying a practice because corporates are going to drive solo practices away, think again. There will always be a need and demand for a solo practice. Court cases like Allstate vs. Northfield will help ensure non-dentist owned practices stay away. Join the practice ownership club today!
Economy Helping to Ramp Up Practice Sales
Over the past several months, the economy has been going quite well. The Dow Jones average is up over 21,000 and setting all-time highs. Employment levels are up while unemployment levels are down. Current unemployment levels in King, Snohomish and Pierce counties are at 3.3%. Amazing numbers for a strong economy.
The strong numbers have played a part in the increase in practice sales. Practice owners who are over 55, are seeing the strong numbers and returns in their portfolios and deciding now is the time to retire. Buyers are also watching the economy and realizing it’s a good time to buy a practice. Interest rates are still good at between 5.25% and 5.5%. Consumer’s discretionary income is up freeing funds for consumers to do elective and cosmetic dentistry. (I know you shouldn’t base your dentistry on discretionary income, but many do).
The result of all of this is that practice listings and sales are up. We typically carry an inventory of 10 to 15 practices and we’re now up to approximately 25 practices. We have spoken to other brokers and most are experiencing a similar increase in business. The interesting thing is that valuations are still staying true to normal formulas and historical numbers.
What this means to you is you can either be a participant in this booming market, or you can be a bystander and watch opportunity pass you by. If you would like to get any information on any of our practices, let us know. Consultations and phone calls are always free!
Read MoreThe strong numbers have played a part in the increase in practice sales. Practice owners who are over 55, are seeing the strong numbers and returns in their portfolios and deciding now is the time to retire. Buyers are also watching the economy and realizing it’s a good time to buy a practice. Interest rates are still good at between 5.25% and 5.5%. Consumer’s discretionary income is up freeing funds for consumers to do elective and cosmetic dentistry. (I know you shouldn’t base your dentistry on discretionary income, but many do).
The result of all of this is that practice listings and sales are up. We typically carry an inventory of 10 to 15 practices and we’re now up to approximately 25 practices. We have spoken to other brokers and most are experiencing a similar increase in business. The interesting thing is that valuations are still staying true to normal formulas and historical numbers.
What this means to you is you can either be a participant in this booming market, or you can be a bystander and watch opportunity pass you by. If you would like to get any information on any of our practices, let us know. Consultations and phone calls are always free!
Should you Consider a Low Production Practice to Purchase?
Practices come in all shapes and sizes. Some are collecting over $1 million per year with 50% overhead. Others are collecting $600,000 per year with 65% overhead. These both appear to be decent practices. Yet, there are other practices collecting $300,000 to $400,000 with 70% overhead. The first two practices are definitely practices to consider buying, but is the third practice one that you should disregard?
We attempt to coach sellers to sell their practices when they are at their peak productivity and profitability. However, there are a number of doctors, over half, who decide to hold onto their practices while they slow down. They start getting tired, they refer out more procedures, stop marketing and refer more work out to specialists. I have seen practices collecting $350,000 with 600 to 700 active patients and hygiene production at 40% of total production. Analyzing these types of practices to see if they are worthwhile acquisitions or merger prospects requires looking at their procedures report, their production by provider report and profit and loss statement. Turning these practices around and making them more productive may be as simple as stop referring out endo and other procedures that you may be able to do, start marketing and start diagnosing treatment. If the location is good and the numbers look like they can be turned around, you should not disregard these practices for an acquisition or a merger.
Read MoreWe attempt to coach sellers to sell their practices when they are at their peak productivity and profitability. However, there are a number of doctors, over half, who decide to hold onto their practices while they slow down. They start getting tired, they refer out more procedures, stop marketing and refer more work out to specialists. I have seen practices collecting $350,000 with 600 to 700 active patients and hygiene production at 40% of total production. Analyzing these types of practices to see if they are worthwhile acquisitions or merger prospects requires looking at their procedures report, their production by provider report and profit and loss statement. Turning these practices around and making them more productive may be as simple as stop referring out endo and other procedures that you may be able to do, start marketing and start diagnosing treatment. If the location is good and the numbers look like they can be turned around, you should not disregard these practices for an acquisition or a merger.
Patients
Understanding how many patients, or what type of patients, are in a practice is an important part of evaluating a potential practice to purchase. What is one man’s trash is another man’s treasure.
When you are evaluating a practice, you may be told that there are a certain number of “active” patients in the practice. That term “active” is one of my least favorite terms when trying to evaluate or sell a practice. One person may define “active” as having been in the office once within the past 24 months. Another person may define it as the patient having been in the practice once in the last 12 months. And yet a third may say the patient is “active” because they came into the office at one point or another while the doctor was practicing. It doesn’t even matter to them how long ago it was, or if the patient is even alive. If I were in your shoes, I would throw out what anyone says and count the charts myself. If the practice is digital, I would look at the number of hygiene appointments seen in the past 12 months and divide by two to get the number of active patients seen that year. You can gross it up by 50% to account for walk-ins and other types of procedures, but that should give you a ballpark of the number of active patients. Another quick rule of thumb is to divide the annual collections by $1,000. A practice producing $500,000 per year, should have in the neighborhood of 500 patients ($500,000 divided by $1,000 per patient)Patient demographics is another thing to be aware of. Buyers often blow off a practice that has an aged patient demographic. Little do they know that a lot of elderly patients pay cash for their treatment and they still want their treatment. They also have more required work than patients that are in their 20’s, 30’s and 40’s. These patients are very profitable patients.
Read MoreWhen you are evaluating a practice, you may be told that there are a certain number of “active” patients in the practice. That term “active” is one of my least favorite terms when trying to evaluate or sell a practice. One person may define “active” as having been in the office once within the past 24 months. Another person may define it as the patient having been in the practice once in the last 12 months. And yet a third may say the patient is “active” because they came into the office at one point or another while the doctor was practicing. It doesn’t even matter to them how long ago it was, or if the patient is even alive. If I were in your shoes, I would throw out what anyone says and count the charts myself. If the practice is digital, I would look at the number of hygiene appointments seen in the past 12 months and divide by two to get the number of active patients seen that year. You can gross it up by 50% to account for walk-ins and other types of procedures, but that should give you a ballpark of the number of active patients. Another quick rule of thumb is to divide the annual collections by $1,000. A practice producing $500,000 per year, should have in the neighborhood of 500 patients ($500,000 divided by $1,000 per patient)Patient demographics is another thing to be aware of. Buyers often blow off a practice that has an aged patient demographic. Little do they know that a lot of elderly patients pay cash for their treatment and they still want their treatment. They also have more required work than patients that are in their 20’s, 30’s and 40’s. These patients are very profitable patients.
Hopefully looking at these two areas of patient demographics will help you make the right decision when evaluating a practice.