Whether you’re selling a car, a house, or your dental practice the ultimate question that everyone wants to know is…. How much do I get? After all the years of blood, sweat, and tears you have put into your practice and you come to the point of retirement, or just selling to take a break from ownership, you want to know, after all the fees and expenses, how much money will you be putting in your pocket. Or, hopefully, bank account. Of course, the answer varies from sale to sale, but there are some general expenses and fees that you can be sure will be part of your transaction.
The Newby, The Young Gun, The Rockstar & The Legend…Which One Are You?
By Jon Rutty, Practice Transition Specialist
Have you ever wondered what it will be like to transition your practice? No doubt you have heard stories from mentors or colleagues about the process and perhaps that is the reason you haven’t even thought about it or had the thought “I’ll cross that bridge when I get there.” But here’s a question, what if you’re on the bridge right now and you don’t even know it?
For over a decade I have helped doctors across the nation improve their practices. I have traveled to 41 states and met doctors with all sorts of ambitions, but in my humble opinion, the majority of them fell into one of two buckets.
- The doctors who waited too long to start thinking about their practice transition and who are now desperately trying to make something happen before they get too tired to continue, or worse lose their health; or
- The doctors who have not even begun to think about their practice transition but soon begin to realize, “If I don’t sell when I’m at a high, I may not be able to make the return on my investment like I want to”.
So how do you know when you should start to look. Here are some key factors that assisted my most successful clients in transitioning well.
- They started the process of inviting another provider in before they even thought of a transition. And because they did, they got to find the right person for the job. They weren’t desperate for someone to take over quickly or to fit a specific mold. They had agility because they had time on their side.
- They saved for their retirement early. While many of the doctors I worked with were running out of steam and low on money to support their retirement, the wisest doctors had been saving for years and were working with a professional to assure that they would not be solely dependent on their practice sale to fund their dreams.
- They had a clear vision for what they wanted. Some doctors I know don’t have a vision for their next steps and because of this they wait too long to begin the process of finding a suitable doctor to join them in transitioning. But when you have a vision behind your eyes, you can see how the work you put in now to make the practice desirable to potential buyers will pay off and you operate with clarity and on purpose instead of “one day.”
So where do you stand? Where are you on your transition timeline?
The Newby – I just bought a practice. I’m beginning to dream about my career and will dedicate time to building out my ideal retirement throughout the process.
The Young Gun – I’ve been practicing for 5-10 years now and have a nice sized practice. It may be time to start inviting another doctor in to have flexibility and perhaps find a future business partner.
The Rockstar – I’m at what could be the peak of my career. My use-before date is closer than my born-on date. I have thought a lot about when and how, but I’ve never taken any steps to discover more.
The Legend – I was booming just a few years ago, but I’m seeing some decline in my office and I’m tired of trying to find new ways to market myself. Add to that, a lot of my colleagues are retiring. It’s just a matter of time now.
No matter who you are in this scenario I can tell you that as a business owner, if you don’t seek out a highly skilled transition consultant, then you are either spending too much time trying to figure out what works, or you are likely depending on the experience of staff to help you grow your business. Omni has a long history of helping doctors with successful practice transitions. Newby, don’t wait too long to find one. Young Guns, same to you, but you are likely in a place where you need to start looking for a doctor to join your practice. Rockstars and Legends, it’s past time to talk with someone about your transition. Even if you are still 5-8 years away from taking the plunge, you owe it to yourself to talk with an experienced transition expert to discover the best options for you moving forward.
At Omni, we specialize in helping owners transition their practices into the hands of capable and competent private owners. We can arm you with a practice valuation so that you can see what your next step could be and for those of you reading this newsletter, we are happy to do that absolutely FREE. That’s a cost savings to you of about $3,500. Click the link below for more information on how to begin the process.
Read More
The Newby, The Young Gun, The Rockstar & The Legend…Which One Are You?
By Jon Rutty, Practice Transition Specialist
Have you ever wondered what it will be like to transition your practice? No doubt you have heard stories from mentors or colleagues about the process and perhaps that is the reason you haven’t even thought about it or had the thought “I’ll cross that bridge when I get there.” But here’s a question, what if you’re on the bridge right now and you don’t even know it?
For over a decade I have helped doctors across the nation improve their practices. I have traveled to 41 states and met doctors with all sorts of ambitions, but in my humble opinion, the majority of them fell into one of two buckets.
- The doctors who waited too long to start thinking about their practice transition and who are now desperately trying to make something happen before they get too tired to continue, or worse lose their health; or
- The doctors who have not even begun to think about their practice transition but soon begin to realize, “If I don’t sell when I’m at a high, I may not be able to make the return on my investment like I want to”.
So how do you know when you should start to look. Here are some key factors that assisted my most successful clients in transitioning well.
- They started the process of inviting another provider in before they even thought of a transition. And because they did, they got to find the right person for the job. They weren’t desperate for someone to take over quickly or to fit a specific mold. They had agility because they had time on their side.
- They saved for their retirement early. While many of the doctors I worked with were running out of steam and low on money to support their retirement, the wisest doctors had been saving for years and were working with a professional to assure that they would not be solely dependent on their practice sale to fund their dreams.
- They had a clear vision for what they wanted. Some doctors I know don’t have a vision for their next steps and because of this they wait too long to begin the process of finding a suitable doctor to join them in transitioning. But when you have a vision behind your eyes, you can see how the work you put in now to make the practice desirable to potential buyers will pay off and you operate with clarity and on purpose instead of “one day.”
So where do you stand? Where are you on your transition timeline?
The Newby – I just bought a practice. I’m beginning to dream about my career and will dedicate time to building out my ideal retirement throughout the process.
The Young Gun – I’ve been practicing for 5-10 years now and have a nice sized practice. It may be time to start inviting another doctor in to have flexibility and perhaps find a future business partner.
The Rockstar – I’m at what could be the peak of my career. My use-before date is closer than my born-on date. I have thought a lot about when and how, but I’ve never taken any steps to discover more.
The Legend – I was booming just a few years ago, but I’m seeing some decline in my office and I’m tired of trying to find new ways to market myself. Add to that, a lot of my colleagues are retiring. It’s just a matter of time now.
No matter who you are in this scenario I can tell you that as a business owner, if you don’t seek out a highly skilled transition consultant, then you are either spending too much time trying to figure out what works, or you are likely depending on the experience of staff to help you grow your business. Omni has a long history of helping doctors with successful practice transitions. Newby, don’t wait too long to find one. Young Guns, same to you, but you are likely in a place where you need to start looking for a doctor to join your practice. Rockstars and Legends, it’s past time to talk with someone about your transition. Even if you are still 5-8 years away from taking the plunge, you owe it to yourself to talk with an experienced transition expert to discover the best options for you moving forward.
At Omni, we specialize in helping owners transition their practices into the hands of capable and competent private owners. We can arm you with a practice valuation so that you can see what your next step could be and for those of you reading this newsletter, we are happy to do that absolutely FREE. That’s a cost savings to you of about $3,500. Click the link below for more information on how to begin the process.
Read More
The Fastest Cure for Cancellations and No Shows
By Jon Rutty, Practice Transition Specialist
This has got to be one of my favorite topics. While I also love goal setting and making a good plan, I love to see major problems turn around with a good strategy. Many times, Cancellations and No Shows seem to be some sort of blue whale that is swallowing you up, but it doesn’t have to be that way, and following this simple plan will help you to regain control of your schedule and accommodate the people who actually show up to their appointments.
If you are like most offices, you have a 20% or higher Cancellation and No Show rate. That means in an office that sees 40 patients a day, on average 8 people are moving their appointments or abandoning them for one reason or another. Sound shocking? What’s worse is that what many offices are doing is not only failing to keep people on the schedule, it is frustrating some of their best patients so much that they want to leave.
Blink if you do one of these things.
1) When someone cancels or no-shows you charge a small fee to their account. You tell patients about this hoping this will deter them from being absent, but you likely hear something like, “Well if that’s what you have to do, I guess you have to do it,” as they roll their eyes on the other side of the phone. Fast forward 6 months to a year, and they have the same balance on their account and you are thinking to yourself, “They are never going to pay this.” Then at some point when you are cleaning up your AR you decide, “let’s just write off all of the no-show balances and put a note in their account that they have to pay it to reschedule,” or worse, you decide to send them the dreaded dismissal letter. How’s that working for you?
2) You schedule patients three columns across because you have such a bad problem in your office, you just don’t know when someone is going to show up. So by having three people scheduled you hedge your bets and salvage the day. That is until all three decide to show up at the same time and someone has to wait because there is not enough space to see them all, or if there is, a 30- minute appointment now takes an hour because you can’t be in three places at once, therefore putting the rest of your patients behind. How am I doing?
The reality is that I’ve seen no shortage of ways that aren’t working for practices. Would you like to know how to fix this problem for good? Good! I’m going to give you some specific action steps that, when used will work to keep good people in your schedule and weed out those who are just not able to show up to their appointments.
Step 1 – You Don’t Have “Cancellations”
We don’t say the “C” word, especially in the company of patients. I can’t tell you how many times I have heard a professional tell a patient, “Oh we have cancellations all the time. If we can move you up we will.” THUD! That’s the sound of me falling over and dying in the background. Why don’t you just tell them that they are free to cancel anytime because we always have a backup plan. Stop it! What you say to patients will forge the type of relationship you want to have with them. They don’t need to know we have cancellations all the time. Just tell them, “If we can make time for you sooner, we will.” So what do we do instead? It’s not uncommon that offices tell patients that they need to call 24 hours ahead of time if they can’t make the appointment. However, the reason why patients aren’t good at this is because you are telling them, and they often forget what you say, don’t they? Instead, ask them, “Ms. Jones, will you please call me 24 hours ahead of time if you can’t make this appointment?” And then wait for a response. By doing this, you engage their brain. They have to say “yes” and people don’t like to be liars. They will remember, “Shoot, I told the office manager that if I couldn’t make it to the appointment I would call 24 hours ahead of time.” And then they will call. If they call with notice, then reschedule them like normal.
Step 2 – How to Respond to Someone Wanting to Cancel Same-Day
There is only so much we can do in the way of giving someone a consequence for not showing up to their appointment, but can we agree that what we do needs to accomplish two things: 1) the patient either stays on the schedule or never cancels again, and 2) make sure we don’t create more unnecessary work for us on the backend (i.e. culling through AR reports for small balances that need to be written off, or collected). What I am about to show you has helped hundreds of offices all over the nation for the past 30 years to reduce their cancellations and no-shows to an average of 10% or less.
When a person calls to cancel, ask them this question. “Ms. Jones, I’m sorry to hear you’re having trouble today, what can I do to help you keep this appointment?” And then stop talking. Don’t talk. They are thinking. What you have told them without telling them is, “Ms. Jones this isn’t okay. How can we fix this?” You will be surprised how many people come up with a creative solution to their own problem. You might be asking, “What in the world can we do to help them keep their appointment?” That’s a great question. They may ask you the same thing. If you have time to move them up or down on the schedule for that day, then do that. Ultimately, you want to discover what is going on. Can they come late? Can they come for some of it, but not all of it? What can they do? As much as you can, use the time that you already have scheduled to do something productive with them. If they have multiple quads of work, perhaps just do one quad. If they have a cleaning and an exam, maybe do one or the other. Holes in your schedule are never a good option, especially last minute, so work with them as much as you can to keep them on the schedule without running anyone else behind.
Step 3 – What If They Say They Can’t Make It After All?
Great question. Tell the patient, “I’m sorry you can’t make it to your reserved appointment time today. I don’t have another appointment time for three weeks. I know the doctor would hate for you to wait that long for your appointment. Are you sure there is nothing you we can do to keep this appointment?” This is crucial. Telling a patient they have to wait three weeks could be the reason they cancel their other plans instead. You want to make it inconvenient for a patient to call without notice and get right back onto the schedule. “But what if I have an open day tomorrow,” you ask. Move them out three weeks. At the very least, this amount of inconvenience could be the reason they never do it again. But if it isn’t, the next step is sure to be.
Step 4 – When They Definitely Can’t Show Up
If you have exhausted steps 1, 2, and 3 and they are still going MIA, then tell them this. “Ms. Jones, I’m sorry you can’t make it today. I have rescheduled you for (three weeks out). I know this will never happen, but in the unlikely event that it does, I just need to let you know that you will have to prepay for all of your future appointments.” This is GOLD! What are we doing here? We are telling the patient that this is not okay, but we are not slapping them in the face with a no-show fee. We are setting boundaries for our office, but we are not insulting the character of our patients, nor are we excusing it like it’s okay. If it happens again, collect the patients fee upfront before scheduling. In our offices, anyone who prepays, and I mean anyone, gets a 5% discount and I would extend it to them as well. If you do this, you will see your Cancellations and No Shows drop dramatically, because people who pay upfront, show up.
As with anything, fixing your schedule is a process. It takes time and practice. When using this strategy, you want to use your brain too. You’re a smart person. If someone is calling late notice because of a death in the family, it is obviously not the time to go down this road, but that is the exception, not the rule. I promise if you begin to use this strategy today, you will begin to see more patients showing up to appointments and experience less disturbance in your production in the weeks and months to come.
Read MoreWhy Practices Don’t Sell
By Rod Johnston and Jim Vander Mey
Your practice has successfully worked for you for many years so why isn’t it selling? It could be the transition consultant (broker) you are using, or it could be your practice.
Working with an experienced transition consultant is important. We know where and how to advertise. It doesn’t work to simply advertise on a website. You will want marketing and advertising in schools across the country, veterinary journals, and county/state societies. An experienced consultant already has a list of potential buyers for your area or type and may have other creative grassroots ideas to find the right buyer.
The right consultant cares about you, your team, practice, and goals. It shouldn’t be just about the commission money. Your consultant should be responsive and professional to potential buyers and you.
A comprehensive valuation and prospectus are important. If you or your consultant price your practice too high, it can be offensive to potential buyers, and they won’t feel comfortable offering a lower price. Even if you find a buyer willing to overpay for your practice, the bank will not finance 100%, which means you have to become a bank for a specific amount of the purchase price.
Sometimes even when you have the right consultant your practice may have other reasons for not selling. Sometimes it’s simply not finding the right veterinarian at the right time. Often it is because your location is not desirable to new buyers and their families. Sometimes it’s the size of the practice. We all know practices with two exam rooms can be very efficient and profitable, but many buyers want 3 rooms or more.
Declining collections the last 3 years or simply low collections can be a deterrent to potential buyers and banks. They understand reasons such as more time off due to vacation or health issues.
Most buyers understand they may need to update style or equipment and technology, but if it’s a lot of cost and effort, they may keep looking for a better practice.
If your practice falls into any of these areas of concern, it will take more time than the average to sell. Lowering the price may help, but if there is no interest, it’s not the price that’s the problem. Don’t give up or get mad, just understand that while your practice may have been perfect for you, it can be a while to find the right buyer.
Read MoreHow Much Will I Get for The Sale of My Practice?
Valuation Fee – To calculate what your practice is worth, you will need a valuation. If you are using a broker, they will charge anywhere from $1,500 to $4,000. Many will waive the fee if you are going to list your practice for sale with them. Others will back the fee out of the commission when your practice is sold. If you do not use a broker, you will still want a valuation. I suggest using a broker that has some type of certification in valuing a business. Rule-of-thumb-valuations are back of the envelope estimates at best.
Attorney Fee – You will need an attorney to draft up the purchase and sale and other agreements necessary to close the sale of your practice. Be sure and use an attorney that specializes in, or has completed a lot of dental practice sales. Attorney fees can range from $4,000 up to $10,000 with the average being around $5,500. Of course, this depends on the complexity of the transaction, who is representing the buyer and how many changes are requested during the review phase.
Broker Fee – If you are using a broker, you pay between 6% and 12% of the sale of your practice. The range is typically due to the size of the practice. Smaller practices that are producing less than $400,000 per year are harder to sell, require a lot of money spent on marketing and require many more hours to get to the closing finish line; therefore, those are typically in the 10% to 12% range. Larger practices typically are in the 6% to 10% range depending on a number of other factors. You can decide to not use a broker if you choose. Bankers and attorneys estimate that 50% of the practices sold without a broker fall apart before the sale is closed. Buyers lose interest in the practice, another opportunity pops up, or a disagreement occurs – and without an intermediary, sellers and buyers clash and the sale falls apart. A typical transition from beginning to end can take 200 to 400 hours to complete. Be sure you have that extra time in your life if you decide to sell without a broker.
Taxes – Here’s the biggie. When you sell a practice, the purchase price is allocated between goodwill and tangible assets, such as equipment. Goodwill typically makes up 80% to 90% of the purchase price. It is taxed at the capital gains rate of from 18% to 24%. The tangible assets make up 10% to 15% of the purchase price. These are taxed at your ordinary income tax rate. Most dentists fall between 28% and 35% ordinary income tax rates. The average is 33%. So, you can see, you want as much allocated to goodwill as your accountant and the IRS will allow.
Equipment valuation – This is typically not required, but occasionally requested by a buyer. This is commonly around $400 for the equipment valuation.
Letter to Patients – This is the letter that is sent to your active patients to inform them you have sold your practice and to introduce them to the new doctor, who is a wonderful person. This is split between the seller and buyer. An average practice may have 1,000 or more active patients. You can typically get the letters printed and mailed for $1.50 to $2.00 including paper, postage, stuffing envelopes, etc.
When the dust has settled and the ink has dried on the agreements, you should walk away with approximately 70% of the proceeds in your bank account after all fees have been paid. As always, we advise you seek advice from your team experts before making the decision to sell your practice.