Effectively Managing and Maximizing the Value of your Practice
By Kevin Brady, OMNI Practice Group
Dental Practice owners know, there’s a lot more to running the business than treating patients.
Owners are responsible for hiring and managing staff, billing patients and insurance companies, handling accounts payable and receivable, and becoming proficient on dental software to operate the practice.
All these duties have a negative impact on both the time dentists are available to their patients and the profitability of the practice.
Practice Demands
It’s no secret that dentists face increasing constraints on their time. This means providing high-quality care for their patients, which entails creating treatment plans and participating in continuing education to keep abreast of the latest innovations in dentistry.
At the same time, the dentist needs to be CEOs of their practice. In this capacity, they are tasked with:
-Hiring, training, firing, and managing staff
-Marketing the practice
-Understanding insurance changes and HIPAA regulations
-Managing the billing, collections, and account payables/receivable processes
-Ensuring the office is running smoothly
-Maintaining and enhancing office technology
-Dealing with economic conditions affecting the bottom line of the practice
A lot of dentists come out of school dreaming about doing dentistry and they become disillusioned after a short time learning that not only do they perform dentistry, they have to run a business. When a dentist is overwhelmed with the business aspects of their practice, it is time to seek help.
Outsourcing
Employing third parties to help with the daily business aspects can allow dentists to focus more on their core competencies to enrich patient care. Dentists have many choices when seeking advice and outsourcing partners. Most major software companies have additional services to help with outsourcing patient billing and insurance billing, which allows the office to go paperless. Enhancing the Billing/Collections and freeing up doctor and staff time allows the practice to be more productive and profitable.
Marketing
Developing a Marketing plan is important in building a sustainable practice over time. The ADA says a good rule of thumb when budgeting for marketing expenses is to allow 3-6% of a new practice’s expenses; 2-3% for mature practices; and about 4% for practices that are in the middle. A start-up practice should plan to spend about $40,000 on marketing during the first year, with those costs incorporated into the overall practice financing.
Internal marketing is the least expensive way to build and maintain existing patients and generate new patients. Practices that successfully connect with patients have the best marketing vehicle available – positive word of mouth that current patients share with families, friends, and coworkers that generate new patients for little or no cost.
Having a website that connects the practice with your ideal patient is critical to keeping existing patients and generating new patients. Once you have a branded site, make sure you continue to enhance it with Search Engine Optimization – (SEO). Keeping up with SEO will increase the quality and increase the visibility of the website to internet search engines.
Making sure you have the right branding and marketing strategies designed to endure the current market conditions and changes are critical for the practice to compete with larger corporate dentistry groups.
Practice Transitions – Buying or Selling a Practice
Just as dentistry is a profession that is highly trained and practiced, so are the professional services recommended for selling and buying a practice. A dentist that is looking to sell or buy a practice should seek professional help. Selling or buying a practice can have very complex processes and numerous legal, financial, and tax implications.
OMNI Practice Group is one of the experts in the industry helping dentists with developing plans for adding associates, developing transitions plans, and selling or buying a dental practice and real estate.
Omni provides:
-Practice Appraisals
-Web Practice Listing Services
-Marketing and Listing services
-Practice Real Estate and Lease services
-Banking Referral Options
Being a Dentist/CEO can present a lot of challenges with operating a dental practice in today’s market. Using the right partners can help improve efficiencies, generate new patients, and increase the value of the practice.
Contact us today for a no-obligation consultation with one of our expert Practice Transition Advisors.
Click here to connect with Kevin on LinkedIn!
Read MorePurchasing a Practice Post COVID-19
OMNI Practice Group
A lot of “experts” have been giving their own predictions on the Covid-19 Pandemic. The truth of the matter is, no one has a crystal ball and knows what tomorrow will bring. So far, most experts have been off on their predictions. What we do know is that there will be a “post-Covid” and life will get back to some form of normal in the relatively near future.
We as a society have historically been through pandemics such as the Spanish Flu, HIV/Aids, Hong Kong Flu, and others. Pandemics are definitely game changers and force us to look at how we live, work, educate, etc., This pandemic will be no different. Some states are beginning to open up as I write this article. Some veterinary clinics and hospitals have already made some changes. Dropping off animals outside the office, taking patients directly into exam rooms, using telemedicine, etc. are just a few examples of changes made in some practices. Some of those changes will be short lived but some will be permanent. But the truth is there will be changes.
One thing that I promise you will not change is that animals will continue to exist and people will still have pets. I’m 100% certain of that. As such, animals will continue to need care. Unless plumbers start doing veterinary work, that means they will need to see a veterinarian in a veterinary hospital! It will just be a matter of how the new game of veterinary practice will play out with new rules in place. In sports, rules change all the time. Players and coaches just adapt to those rules and adjust to playing under those new rules.
Another rule that may change is valuations on practices in the near term. I have heard a gamut of theories from brokers, bankers, veterinarians and the grocery store clerk. But they are just that… theories. My advice would be to stop listening to your friends, relatives and others who don’t have any more knowledge than you do about the future of practice valuation. Here’s what I know for sure, good practices with good margins pre-Covid will be good practices with good margins post-Covid. They will sell for a normal value, even post-Covid. I also know patients will come back to the veterinary hospitals. This will be true for most all offices. I’ve spoken to several veterinarians who have told me they have full schedules already in the immediate future. For those practices that are below average to average practices, there may be some adjustments to values in the near term. Banks have told us that they may adjust their valuations as well. I don’t expect huge discounts, but perhaps a discount to account for some of the new expenses or reduction in production.
As a potential buyer of a veterinary practice, you should look at the practice as if it was pre-Covid. In the long-run, that practice will get back to “normal”. If you find a practice that has been what you’re looking for, you need to do your due diligence and be confident that normal will happen again. Those who do will be ahead of the game.
Buy a Practice Now?
What a crazy time we are in. At least to me, this is a sober reminder that major disrupters are almost impossible to predict. I am reassured that our nation seems to be taking the situation seriously and I do firmly believe we can weather this storm. Most of you reading this have had your professional world rocked. You’ve probably had your hours cut, maybe by 100%. Unemployment is likely a new reality. Fortunately, there is a strong support system in this industry ready to help. Don’t hesitate to reach out. I think you will find all of us willing to go the extra mile right now to help you keep your ship afloat.
Most of you have thought about buying a practice at some point, some of you have been seriously pursuing ownership. There is going to be a lot of advice out there right now saying that it is far too risky to buy a practice and it is better to get/keep a nice safe, secure job. I am going to give you four reasons why you should do exactly the opposite.
One, financing. Interest rates are at an all-time low. Most banks are willing to defer principal payments or even the entire payment for months. Some have even said a year. I’m not going out on much of a limb to say these are the best lending conditions you will see in your career. Historically, there have been periods of higher interest rates. When I was a kid in the early eighties, they were fourteen percent. There have been many times when banks weren’t as generous on the amounts they would lend. One hundred percent financing is not a given.
Two, taxes. The government is going to spend a fortune to deal with this crisis, we have an aging population, new social safety nets will probably be put in place, etc… It is hard to imagine a scenario where taxes don’t go up, maybe way up. Nobody gets hit in a tax hike as hard as a non-business owning high wage earner who makes between $150,000 and $300,000 per year. That $200,000 salary doesn’t look as good when half of it is taken out for taxes.
Three, working for a corporation in a down economy. Corporations aren’t inherently bad entities. Many are fabulous. That said, unless they are a non-profit, they aren’t set up to be a charity. The shareholders and private equity backers are going to demand performance once this crisis is over. If patients hold off on elective treatment, keeping revenue up will require a high volume, much like a Medicaid clinic. You could be expected to see many more patients, in less time, than you currently do. It happened to physicians, it happened to pharmacists, it could happen to you.
Four, time. Odds are you have more free time than normal. No one, especially the bank, is going to expect you to complete a practice purchase before this crisis is over. That said, doing the work now could put you in a position to complete the purchase when the restrictions are lifted and capitalize on the built-up demand, which inevitably will occur.
In the words of Rahm Emanuel, “Never let a serious crisis go to waste. And what I mean by that it’s an opportunity to do things you think you could not do before.”
Read MoreBuy a Practice Now?
What a crazy time we are in. At least to me, this is a sober reminder that major disruptors are almost impossible to predict. I am reassured that our nation seems to be taking the situation seriously and I do firmly believe we can weather this storm. Most of you reading this have had your professional world rocked. You’ve probably had your hours cut. Some of you may even have been laid off. Fortunately, there is a strong support system in this industry ready to help. Don’t hesitate to reach out. I think you will find all of us willing to go the extra mile right now to help you keep your ship afloat.
Most of you have thought about buying a practice at some point, some of you have been seriously pursuing ownership. There is going to be a lot of advice out there right now saying that it is far too risky to buy a practice and it is better to get/keep a nice safe, secure job. I am going to give you four reasons why you should do exactly the opposite.
One, financing. Interest rates are at an all-time low. Most banks are willing to defer principal payments or even the entire payment for months. Some have even said a year. I’m not going out on much of a limb to say these are the best lending conditions you will see in your career. Historically, there have been periods of higher interest rates. When I was a kid in the early eighties, they were fourteen percent. There have been many times when banks weren’t as generous on the amounts they would lend. One hundred percent financing is not a given.
Two, taxes. The government is going to spend a fortune to deal with this crisis, we have an aging population, new social safety nets will probably be put in place, etc… It is hard to imagine a scenario where taxes don’t go up, maybe way up. Nobody gets hit in a tax hike as hard as a non-business owning high wage earner. As a professional, this is you.
Three, working for a corporation in a down economy. Corporations aren’t inherently bad entities. Many are fabulous. That said, unless they are a non-profit, they aren’t set up to be a charity. The shareholders and private equity backers are going to demand performance once this crisis is over. If clients hold off on elective treatment, keeping revenue up will require a high volume. You could be expected to see many more patients, in less time, than you currently do. It happened to physicians, it happened to pharmacists, it could happen to you.
Four, time. Odds are you have more free time than normal. No one, especially the bank, is going to expect you to complete a practice purchase before this crisis is over. That said, doing the work now could put you in a position to complete the purchase when the restrictions are lifted and capitalize on the built-up demand, which inevitably will occur.
In the words of Rahm Emanuel, “Never let a serious crisis go to waste. And what I mean by that it’s an opportunity to do things you think you could not do before.”
Goodwill in Dental Practice Value – For Buyers
By Megan Urban, OMNI Practice Group
As many of you know, in the sale of dental practices, typically the biggest contributor in determining the purchase price is “Goodwill”. Are you aware of the aspects that make up goodwill? Of course, it includes your patients and business reputation, but it’s also based on patient retention, which is your hygiene program or Recare.
Savvy buyers understand that the repeat or retained patients are critical to on-going success. It is also important to lenders working with buyers. If you have a bulk of your patients coming in for large cases and your collections are high, that is commendable, however, a new buyer will be concerned that your patients have completed all treatment leaving them nothing to do and eliminates the chance for the buyer to meet and keep your patients.
All dentists focus on getting enough New Patients, as they should, but what happened to all the New Patients you treated over the years? As a buyer, Recare is consistently an area of opportunity. Even if Recare isn’t where you’d like it, consider what can be done. Take a look at this example:
Let’s say you averaged 15 NPs per month for 10 years and you saw each on an average of twice per year in hygiene or Recare, you would need approximately 514 days of hygiene if you see an average of 7 per day. Some of you may see more patients in hygiene, but some may be SRP and perio patients may be coming every 3-4 months. You may work around 180-195 days per year so you would need approximately 2.75 hygienists. So that means if you retain at least 85% of those patients, you will need more and more hygiene days each year. Is this happening in your practice?
I have analyzed hundreds of practices and found that the average potential for increased collections from goodwill or patient retention is $30,000 to $150,000, depending on the size of the practice. I know it’s usually a high priority in any practice but needs a little tweaking that can bring big increases. And this doesn’t include potential increased collections from diagnosed treatment from all those periodic exams!
Every practice has areas of opportunity and here is one for you to capture.
Read More