Should I Pay Down My Student Debt Before Purchasing a Practice?
By Nothing resonates more with recent college graduates than the talk of possibly wiping away student debt. Even though this might be a talking point of our current administration, it does bring up a question that newly graduated dentists worry about if they want to own their own dental practice. Should I pay down my student debt first? Or should I purchase a practice and then have two debts?
Your own gut reflex will say, “Uh, no way…more debt is crazy when I’m already so far underwater.” However, it is usually advantageous in the long run. If the dream of owning your own business is on your vision board, then it makes financial sense to move ahead with securing a business loan early in your career, even with a large amount of student debt.
Each person’s financial position will be unique. However, here are some items to consider:
Will it be harder to get a bank loan with a lot of student debt? Although not necessarily harder, the amount you can borrow will be determined by the amount of your student debt and your history of making regular and timely payments. Consistent payments and not skipping any repayments on your student loan will show the bank that you are reliable in your financial commitments. Although it’s tempting to splurge on extravagant items, keep your finances in check during this time and keep making regular payments. Banks like to see that you have a stable financial history and are not high-risk.
Which has the higher interest rate, the student loan or business loan? Whichever loan has the higher interest rate, is the loan you will want to pay down first. This might seem obvious but check with your lender for your student loan because they often don’t have harsh penalties if you lower your payment. Go back and recalculate what the minimum student loan payment is and take the difference you had been paying and use that towards your new business loan, hence paying the more expensive loan sooner.
Buying a turn-key practice or one that needs some work. Look for a dental practice that is undervalued, has potential, and is located in a good area. Most buyers want a turn-key solution when purchasing a practice. But there are a few diamonds in the ruff. The advantage is you will secure a loan for less money on an underperforming practice and with some work, you can turn it into a polished gem which is a great investment.
Building equity. You will earn equity in your business if you purchase a practice, rather than remaining an associate. As an owner, your earning potential is far greater, often outpacing the associate salary from the day you purchase a dental practice. If you purchase a practice where you own the real estate then you would also increase your bottom line when you are ready to retire and transition.
You haven’t missed the boat of owning your own dental practice when you have a large amount of student debt, but you will want to be business savvy on how you should proceed.
Read MoreThe Importance of Your CPA During a Transition
The Importance of Your CPA During a Transition. Megan Urban of Omni Practice Group talks about why a dental-specific Certified Public Accountant is critical during your practice transition. Regardless if you are a buyer or seller, you should have a CPA who specializes in dental transitions. If you are a seller, your CPA will help guide you through the complexities of taxes and what you may owe before the sale of your dental practice, so you’re not caught off-guard at closing. They can also advise on the health of your retirement accounts.
As each State has different tax regulations, your CPA can help you navigate these issues with you. If you aren’t currently working with a Certified Public Accountant and would like a recommendation of a dental-specific CPA in your home State, please reach out and we can provide you with details. You can also contact us today for a complimentary snapshot valuation to find out what your practice is valued at. Either email info@omni-pg.com, or call us at 877-866-6053.
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Patient Record Audit: Suggestions for Buyers
By Megan Urban
– Randomly select patient records and review for complete documentation, full mouth diagnosis, necessary x-rays, and regular maintenance.
– Review the most recent three to five new patient records for charted existing and diagnosed “ideal” treatment, perio charting, appropriate x-rays, and confirm if the patients have their next scheduled appointments.
-Review the three most recent endodontic patient records to confirm if buildups and crowns were treatment planned and scheduled, or if treatment has already been completed.
-Review the three most recent prophy and SRP patient records to confirm the accuracy of treatment is captured in hygiene notes, proper documentation, and x-rays.
-Review the schedule for the upcoming weeks/months for all providers including hygiene. See how far out the hygiene scheduled is booked. In a strong hygiene program with a good recall and scheduling system in place, hygiene should be booked out five to six months.
-Review the schedule for the previous week to verify how many no-show or late-cancel appointments occurred. How were the no-show and late-cancel appointments documented? How are they tracked? Were the patients charged a fee?
-Run the Active Patient Count Report to confirm the number of active patients.
-Print the Detailed Treatment Plans Report (or Unscheduled Treatment Plans Report) and research several accounts to verify if treatment is truly needed, or if it was done and the treatment on the report is actually a second or third option. Is there sufficient dentistry left for you to do?
-Look at the Accounts Receivable Aging Report to determine if the amounts owing are from insurance or from the guarantor/responsible party. Are patients accustomed to paying their estimated portion at the time of service?
-Look at the Credit Balance Report (or Unassigned Credit Report). Credit balances can result from prepaid treatment, unposted treatment, incorrect insurance adjustments, or may be due to the patient or insurance company as refunds.
-Look at the Outstanding Claims Report for claims over thirty, sixty, and ninety days. Are the staff members responsible for the accounts receivable on top of outstanding claims? Look at the account notes for claims on the over ninety-day list to see why these claims haven’t been paid. Were they submitted with the correct codes, narratives, and necessary attachments?
-Look at the Month End/Day Sheet Reports for the past several months to see the production to collection ratio.
Read MoreOvercoming the Mental Hurdles of Owning your own Veterinary Practice
By Perhaps, you are a few years out of school with DVM credentials under your belt. Maybe you have been working as an Associate Vet and your confidence has grown to the point where you’re ready to take the next step with your career – owning your own practice. However, the mindset of this prospect can seem overwhelming and daunting. Most of your schooling has trained you for the practice of medicine, with the bare minimum of business course offerings. You spent more time focused on diagnosing parasites and animal dermatology than on economics classes and how to manage a business.
Perhaps you’ve heard through the grapevine that some of your fellow vets from school have taken the leap and purchased their own practices. Now you’re curious about purchasing your own practice and what your life would look like. But you’re not 100% sure that this is the right move for you. You are confident as a veterinarian, but not so much as a business owner.
Some of the questions that we field when working with potential buyers are the “what if” scenarios. What if the stock market crashes and I’m stuck owning a business that’s now underwater? How can I finance the purchase price of a practice while I still have student debt? What if I wait until I start a family and buy a house first before owning a business? On a good note, maybe the one positive part of living through the pandemic is that it has proven that being a veterinarian is not only an essential service but one that is resilient to major upheaval where other businesses have failed.
Undoubtedly, the financial aspect of owning a business is the biggest obstacle that every business owner faces. A good veterinary transition broker will help you understand the long-term potential of positioning yourself as an owner instead of staying in your current role as an Associate Veterinarian. Brokers are there to guide you through the complexity of purchasing your own practice. They can also act as a consultant on how to build your business and succeed. Our brokers at Omni Practice Group want you to be successful and that continues after the purchase of your practice with consulting services that we offer.
And yes, life will throw things your way that nobody is prepared to deal with. But having a plan in place gives you peace of mind to help you focus on building your business instead of worrying about what the future holds. Nobody wants to reminisce with classmates at a class reunion with regret about what your life could have been like. The should-have, would-have, could-have scenarios tease all of us with decisions that we wish we made earlier in our careers.
If you are ready to take the first step and start the learning process on how to begin your next journey, reach out to one of our experts and we can schedule a one-on-one meeting with you.
Read MoreGoodwill in Dental Practice Value
By As many of you know, in the purchase of dental practices, typically the biggest contributor in determining the purchase price is “Goodwill”. However, are you aware of the aspects that make up Goodwill? Of course, it includes the patients and the reputation of both the business and the selling dentist. But it’s also based on patient retention, which is the practice’s hygiene program or recall.
Savvy buyers and practice owners understand that the repeat or retained patients are critical to the ongoing success of the practice. It is also important to lenders that are working with buyers. If the selling dentist has a bulk of patients coming in for large cases and the collections are high, that is commendable; however, a new buyer will be concerned that the patients have completed all treatment leaving them nothing to do and eliminates the chance for the buyer to meet and retain the patients.
All dentists focus on getting enough new patients, as they should, but what happened to all the new patients that were treated over the years? As a buyer, recall is consistently an area of opportunity. Even if the practice’s recall isn’t where it has the potential to be, consider what can be done. Take a look at this example:
Let’s say that the practice averaged 15 new patients per month for 10 years and these patients were seen on an average of twice per year in hygiene or recall, you would need approximately 514 days of hygiene if an average of 7 patients per hygienist per day were seen. Some practices may see more patients in hygiene, but some may be scaling and root planing appointments after which these perio patients may be coming every 3 to 4 months. Dentists may work around 180 to 195 days per year so they would need approximately 2.75 hygienists. That means if the practice retains at least 85% of those patients, it will need more and more hygiene days each year. Is this happening in the practice that you are considering buying?
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!
Savvy buyers need to know that every practice has areas of opportunity and here is one for you to capture.
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