10 Tips to Help Make a Workback Successful
Bruce Johnson, DDS, Practice Transition Advisor at Omni Practice Group, has personally been involved with 3 practice sales and workback agreements. In this video, he provides you with 10 tips to help your workback transition be successful.
Read MoreBuying Another Location
By Megan Urban, Omni Practice Group
It’s very exciting to think about adding a location! Here are some issues to think about before making this big decision.
Why? If it’s to increase collections, maybe you can simply add more days or extended hours at your current location. Verify what your current patient retention is to determine if you need to mine from existing patients. Is there any area nearby that is underserved?
Where? Check your current zip code demographics and determine where most of your patients come from and if it makes sense to market that specific area. Do your due diligence regarding the number of dentists in the areas around you to make a good decision on where you may be more successful.
Will you have current patients going to a new location? You don’t want to add a location only to find that a large number of patients switch to the new location. Some cannibalism is fine, but remember the point is to increase patients/collections, not move them from one location to another.
How will you handle patients going to both offices? Contact your dental software company and have them set up the same system in the new location and set up provider numbers for each location so everyone can see past and diagnosed treatment, as well as health history, AR, etc.
How will you know if both locations are profitable? Work with your CPA to have books that show you numbers for each location as well as together, so that means you will need to post collections, payroll, dental supplies, lab, utilities, etc. per location. Monitor provider production in each location. Are some dentists and hygienists more productive in one location, and if so, why?
Who will work it? If you have a team that wants more hours, that is ideal since they already know the systems and processes you have set up. Be sure to have team members clock in hours to each location as applicable.
Need another dentist? Interviewing is critical to find the right fit. If the associate will be working alone in one of the locations, you will want to do a lot of training, so they understand their role, responsibility with the team, and simply set your expectations, then continue to monitor. Work with your dental attorney to create a job description, employment agreement, compensation, non-compete, etc.
How do I manage multiple locations? Consider hiring a manager that can oversee training, team schedules, and general practice management.
Work with your transition consultant (broker) to assist you! Contact us today.
Read MoreIt’s All in the Numbers
By As you close out this past year and reflect on the first full year without any shutdowns as 2020 brought us, it makes sense to step back and take a look at your numbers. This is the case whether you are in your first year of practice ownership, have owned your practice for ten years, or you are getting closer and closer to retirement. You should always be managing your practice to your numbers while keeping the number one goal of taking care of your patients to the best of your ability.
So that all sounds great, but how do you manage to your numbers? The first step is grabbing your Profit and Loss statement and a Production by Provider or Production by Procedure report for 2020. If you know Microsoft Excel, you can input the numbers into an Excel spreadsheet. If you don’t know Excel, you can grab your handy-dandy calculator.
Most numbers you manage to are calculated based on a percentage of your gross collections. That’s the top number on your profit and loss statement. You should take the number after returns or other credits to gross revenue. Some Profit and Loss statements may call this number Profit and others will call it Revenue.
The first number to look at is your staff expense as a percentage of revenue. Add your staff salaries, payroll tax for staff, and staff benefits. Divide that total by revenue. Your target should be about 25% of revenue. If you’re slightly above 25%, don’t worry, increasing collections while keeping staff salaries flat will help you improve this number. If you’re over 35% and you really don’t think you can improve collections, you should analyze your staff. Maybe you have too many, or maybe your staff that is overpaid. These days, it’s easy to overpay staff since they’re hard to come by. Time and time again, when we look at practice numbers, this is one of the biggest profitability killers.
The next number to look at is facilities expense as a percentage of collections. This includes your base rent plus any of the common areas that you pay for and other facilities expense – garbage, parking lot maintenance, etc. This expense should not be more than 7% to 9% of revenue. If you are significantly higher than this number, you are not maximizing your facility, overpaying on rent, or you have too big of space for what you need. You can either increase collections or decide to downsize your space, sublease space, or do something else that will help get your numbers down in the 7% to 9% range.
Dental Supplies expense is something else to look at. Divide Dental Supplies expense by revenue. The target is 6% of revenue. If you’re a few percentage points off, don’t worry about it. If you’re at 12% to 15% or higher, you may have supplies walking out the door, overstocking your supply cabinet, or you’re buying top-end products. This should be a quick fix if you have a meeting with your person that orders supplies and give them a budget.
Lab expense is similar to dental supplies. If you’re a basic crown and bridge practice, you should be at 7% to 9% of revenues if you don’t use a milling machine in-house or you don’t place a lot of implants. The latter two will skew the numbers. Negotiate with your lab if you are higher than 7% to 9%. If you’re with a high-end lab, you’re at 12% and love their work, don’t change labs. You’re only a few points off. You can make up the difference elsewhere.
The other quick measure is hygiene as a percentage of total collections. Take your Production by Provider report or Production by Procedure report and figure out how much of collections are coming out of hygiene as a percentage of total revenue. The target is to be above 30% of revenue coming from your hygiene program. If you’re in the low 20% or less and you have a general dental practice, you should take a look at your hygiene schedule and see how many patients they’re seeing per day. Maybe their schedule isn’t full, or maybe hygiene is booked out for several months and the hygienist can’t keep up. You will need to analyze this for yourself.
Looking at your numbers is something all business owners do to help them manage their practice. These are a few simple numbers that you can quickly measure a few times per year, make a few changes and you can get your overhead down below the national average of 65%. Best wishes on the New Year and may your overhead be under control.
Read MoreWhat is My Practice Worth?
By Megan Urban, Practice Transition Consultant
Have you ever said something like this? “In the 90’s I was producing over $1.5M. Five years ago I was producing $900,000. My practice must be worth at least $1.0M and this area has huge potential.” Value is not based on “long ago past” numbers nor “potential” numbers. Buyers don’t pay for what you did over 3 years ago nor potential. They have to put in the work for the “potential”, so they don’t pay you for that and most banks and appraisers look at the last 3 years.
First of all, production is not nearly as important as collections. In some offices, the two numbers might be pretty similar, but in many, there is a huge variance due to large insurance write-offs, any in-office discount plan, and uncollected production. Next, how much of your collections are you taking home?
Let’s talk about what your practice may be worth, potential action items, and who should assist you to value and sell your practice. It is one of the most important decisions in your life that impacts your income.
Gather your team of trusted advisors. Now is not the time to listen to friends and family that aren’t familiar with the dental industry and do not have many years of experience. You will want a reputable transition consultant (broker) and dental-specific CPA and attorney. Your transition consultant will have a list of dental-specific CPAs and attorneys that do much of the work in your area. The CPA will help you to maximize any retirement plan you have, reduce taxes, and pay off the debt in a way that makes sense for your specific situation. The attorney will ensure all sale agreements, non-compete, and re-do treatment is correct, as well as any work back or carry back documents.
To help with a simple and successful transition, ensure your financials or books are clean. Work with your CPA to ensure personal expenses are not being run through the practice. Know what your actual take-home is out of your collections. If collections are high but all expenses are high too, the value won’t be as high as you’d like.
Take a look at your AR and try to collect as much as possible and do any necessary write-offs. AR can be purchased by the buyer and the over 60 or 90 days old is not worth much unless you can show the patients are keeping up with monthly payment plans.
Most dentists don’t think they have many credit balances, but there are sometimes surprises here. Some credit balances may be correct and you need to do your due diligence to refund the money or better yet, finish treatment. Check that the credits are not an error. EOBs are difficult to read and an insurance adjustment may need to be modified or corrected. Credit balances are often adjusted directly off the purchase price.
So, how much is your practice worth? Your transition consultant will complete a full valuation and prospectus and then together you can set the price. If collections and/or income have been declining, that’s fine if you’re happy, just understand that buyers don’t pay for “old days numbers” and “potential”.
Read MoreSelling Real Estate with Your Dental Practice
Megan Urban, Transition Advisor at Omni Practice Group, gives some advice for anyone who is unsure if they should sell their real estate along with their dental practice.
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