December 28, 2018

associateship Archives – Page 3 of 4 – Professional Transition Strategies

While dentistry will most certainly be a lucrative career in the long run if you play your cards right, the harsh reality is that the average dental school debt is approximately $260K. Add to that an average of $220K in lost earnings plus interest, and a graduate can count on expending $570K toward dental school. Don’t be discouraged that dentistry is the number one job in America for debt; your investment is typically paid back within eight years of practice. Here are some points to consider along the way.

Buy a practice

Rather than starting as an associate or even working for a dental service organization (DSO), after graduating with a negative net worth, the fastest way to make dentistry worth it is through practice ownership, most notably in an area where there is demand. Though counterintuitive, taking on more debt will pay off.

Grow your practice

Consider the population-to-dentist ratio in your practice area, then hire consultants to grow your practice and stand out above the rest. Working with intelligent financial planners and certified public accountants (CPAs) throughout the process will keep you headed in the right direction.

Shop insurance providers

The leading cause of a lower income is the lower fees associated with PPO insurance plans. Shopping insurance providers will be financially beneficial not only as a business owner, but also to your patients.

Ask the right questions

What are my debt repayment options? Can I pay down my student debt? Can I limit my student debt? Should I repay my debt? And perhaps most importantly, will practicing dentistry make me happy?

What’s next?

Read up on other options in the e-book “Recent Graduates,” then contact the experts at Professional Transition Strategies to help guide you on the right path.

December 4, 2018

How to Manage Multiple Dental Practice Locations

You’ve been bitten by the entrepreneurship bug and have started to wonder if purchasing additional dental practices is your next move. But first, you’ll need to understand what’s involved in owning multiple locations. Here’s how to get your gears moving.

Ask the right questions

Start thinking: Do you have an admin who will oversee and manage the business aspects of each location? Will you work at both locations? If so, how will your time be split up? Are you going to bring on an associate or partner (understanding that associateships are only successful 20% of the time, while partnerships see a 60% success rate)? What are the costs associated with improvements to keep both locations upgraded?

Crunch the numbers

The first consideration that should be made is the amount of operating capital you would need and to make sure you have a good banking partner. From there, you’ll need to clarify options about keeping the two practices completely separate versus centralizing the front office functions, including billing, accounting and scheduling. Determine how you will increase effective cash flow, by focusing on new patients, efficient equipment, better technology and software, and minimize outflow. Additionally, don’t forget the additional cost of advertising and having an online presence.

Assess the location

The success of a second location hinges on just that: its location. Assess the area growth and population, as well as the competition around you. By placing an additional location in a separate socioeconomic area other than that of your primary practice, you may see that while one practice is slow, the other is booming.

Staff accordingly

Simply put, you can’t run two or more offices by yourself, even if you plan to practice at multiple locations. The staff can travel with you, but depending on your growth plan, it may make more sense to have certain staff members exclusively at the different locations, such as admin personnel, other dentists, hygienists and dental assistants.

Count your inventory

Creating an inventory system that keeps all office supplies in one location and extra medical supplies in another will only make everyone’s lives easier. What’s more, investing in technology at the same time will ensure you can manage multiple locations from a central location or database. Consider automating your billing and digital staff scheduling systems at the same time so everyone is on the same page.

Consider all options

Starting from scratch isn’t the only way to grow your practice. Consider strategies that involve either an acquisition or de novo startup, both of which have their perks, but understanding the consequences of either will ensure more pros than cons. Alternatively, consider merging your practice with an existing practice to get an influx of patients without the overhead of another office.

What’s next?

Ready to take the next steps? Contact the experts at Professional Transition Strategies to figure out which path is right for you.

November 6, 2018

Dental Practice Transitions, by the Numbers

You’ve kept up with the “Insights” blog; you’ve taken the dental practice transition quiz. Now it’s time to learn even more about the process by way of a cheat sheet broken down by the numbers.

1,500

Number of active patients considered full capacity for a single dentist. Any more, and it may be time to consider taking on an associate or partner.

680

Credit score that is favorable to getting a better business loan.

80

Percent of goodwill that contributes toward the overall value of your practice.

150

Hours it takes to sell a dental practice, which is one of many reasons to hire a professional broker.

15

Minimum number of days patients and staff should be notified about the sale of a dental practice.

30

Percent of dental practices that will belong to a dental service organization (DSO) by 2021, as predicted by the American Dental Association.

5

Years out you should start thinking about a retirement plan.

20

Pages that make up a prospectus, broken down into different categories of interest to the buyer identifying the areas that potentially need attention.

99

Percent success rate of a buy-out, versus 60 percent for a partnership and 20 percent for an associateship.

What’s next?

Read the e-book “Strategies for Transition” to learn more about the different dental practice transition options, then contact the experts at Professional Transition Strategies to learn more.

October 30, 2018

Associateship versus Partnership: Which Is Right For You?

Bringing on an associate or partner to your dental practice should be done when the patient demand warrants it. But which is right for your dental practice? Here’s how to figure that out.

Know your numbers

The number of active patients who visit the practice at least every 18 months is a clear indicator it’s time to take on an associate. While 1,500 active patients is considered full capacity for a single dentist, if the practice has more than 2,500 active patients, then the practice should be able to accommodate a full-time associate. The math goes: Every 200 to 250 active patients should be able to support one associate day per week. Along the same lines, if you are booked 80% of the time with a six-month advance, it may be time to bring on another doctor or look at your schedule.

Establish your practice

No matter which route you choose to go, taking on an associate or partner shouldn’t be done to build up your practice. Rather, there needs to be enough work for them from day one to make the deal worthwhile. If deciding on a partnership, the practice will need to be big enough both in terms of active patients and also collections and physical size. In general practices, that means collecting at least $1.2 million and $1.4 million to $1.6 million in specialty practices.

Assess your situation

The biggest consideration to note is associateships are only successful 20% of the time, while partnerships see a 60% success rate. Associates typically only last two years at most because of unset expectations in regard to patient assignment, salary, and timeframe for branching out and buy-in related to value, purchase price, and buy-in/buy-out terms.

What’s next?

Learn more about the different options for expanding your practice on the “Insights” blog and in the e-book “Strategies for Transition,” then contact the experts at Professional Transition Strategies to get the ball rolling.

September 25, 2018

Proven Methods to Maximize Your Dental Practice Investment ROI

Purchasing a dental practice is no easy task, but it’s only the beginning of the hard work you’ll need to do to see a return on your investment (ROI). Whether the practice is new or existing, opportunity cost should drive all your post-buying decisions. Here’s how you can ensure ROI is top of mind.

Time value

At the top of your considerations list should be the theory that a dollar in the bank today is worth more than the expectation of receiving a dollar in the future. In other words, spending and earning wisely now will only pay off in the long run.

Loan payment

Like taxes on your mortgage, interest on your loan payment can be written off as a deduction. Consider taking out a longer-term loan with lower payments to increase the cash flow of the practice, similar to taking out an insurance policy.

Tax advantages

Along the same lines, maximizing tax advantages with every decision will only pay off every year. For example: While all assets depreciate in value over time, Section 179’s Depreciation Schedule allows you to depreciate all assets up to a certain amount in the first year so that no taxes will be paid, in most cases. (Note: Associates don’t receive the same type of tax advantages as the practice owner.)

Cash flow

When purchasing an existing dental practice, cash flow should be analyzed by the income stream of the practice, the compensation necessary for the purchasing dentist, and any obligations incurred, no matter if you are looking at the loan for the actual purchase of the practice or any other working capital needed for equipment, supplies or anything else to get the practice ready for operation.

Sole proprietorship

Rather than taking the safer route of working as an associate or for a dental service organization (DSO) that will only provide a commission for the work you do, owning your own practice will only maximize the investment of your dental degree because you’ll not only receive a commission but also a profit component.

Prospectus

When working with the experts at Professional Transition Strategies (PTS), an approximate ROI equation for the purchase of the practice is included in each prospectus, which adds up the compensation of the doctor, any adjustments made for non-business-related expenses and net income distributions. The remaining amount is an approximation of the cash flow or immediate ROI available to the purchasing doctor.

What’s next?

Read up on the buying process in the e-book “Transitions: Your Next Adventure Awaits,” then contact the experts at PTS to help guide you through the process.

September 12, 2018

How Well Do You Know the Dental Practice Transition Process?

You’ve kept up with our blog; now it’s time to put your dental practice transition knowledge to the test. We’ve put together a 10-question quiz that covers everything from the different types of transitions to the factors that contribute to the “goodwill” of your practice. The prize for a perfect score? Priceless information to help guide you through the dental practice transition process.

1.) Which of the following is a top reason to sell your dental practice?

a.) Retirement

b.) Maximize management responsibilities

c.) Marriage or divorce

d.) None of the above

2.) What is one way to increase the value of your practice before you sell?

a.) Limit services

b.) Sell equipment

c.) Lower expenses

d.) Increase expenses

3.) Who is buying dental practices?

a.) Dentists looking for an additional location

b.) Dental service organizations (DSOs)

c.) Associates

d.) All the above

4.) What is one consideration you should make when relocating your dental practice?

a.) Smaller square footage

b.) Proximity to competition

c.) Overhauling equipment and building

d.) Maximizing downtime

5.) When should you start thinking about a pre-retirement plan?

a.) 3–5 years

b.) 5–10 years

c.) 10–20 years

d.) Never

6.) How should you notify your patients of a dental practice transition?

a.) When they show up for their next appointment

b.) Joint letter to patients and newspaper announcement

c.) Changing the name of the practice

d.) None of the above

7.) What changes could you make after a dental practice transition?

a.) Discontinue supplies

b.) Bring more specialty work in-house

c.) Lay off employees

d.) Sell patient list

8.) What is one factor that does not contribute to the valuation of a dental practice?

a.) Office hours

b.) Return on investment

c.) Accounts payable

d.) Equipment

9.) What factors contribute to the “goodwill” of a dental practice?

a.) Community status

b.) Patient relationships

c.) Staff loyalty and longevity

d.) All the above

10.) Which of the following is NOT a type of dental practice transition?

a.) Buy-in

b.) Associateship

c.) Distribution

d.) Merger

Answer key:

(1.) A. Retirement; (2.) C. Lower expenses; (3.) D. All the above; (4.) B. Proximity to competition; (5.) A. 3–5 years; (6.) B. Joint letter to patients and newspaper announcement; (7.) B. Bring more specialty work in-house; (8.) A. Office hours; (9.) D. All the above; (10.) C. Distribution

To learn more about the transition process, check out a few of our previous blog posts:

Why should you sell to a dental service organization?

How can you lower your dental practice overhead?

What are the sections of a dental practice prospectus?

What types of dental practice agreements will you enter?

Who should you have on your team of advisors?

How should you choose a lender?

What questions should you be asking yourself before selling your dental practice?

What considerations should you make before starting a multispecialist dental practice?

What questions should you be asking your buyer?

How can you ensure a successful dental practice transition?

What options are available for dental school graduates?

July 17, 2018

Understanding the 6 Essential Dental Practice Agreement Types

A purchase agreement is just one of the many contracts you’ll enter when buying a dental practice. While the amount of paperwork may seem daunting, it’s important to make sure all aspects are covered so there are no surprises after signing on the dotted line. Here are six types of agreements (and their subsections) you can expect.

Purchase agreement

Asset purchase agreement

In a straight buy-out, it’s important to outline what assets are included in a practice — most notably, the equipment — just like you would when purchasing a house with or without the kitchen appliances.

Stock purchase agreement

When entering into a partnership, all terms and conditions related to the purchase and sale of a company will need to be finalized to protect both the buyer and seller to determine what’s included and what’s not, such as the name of the practice.

Real estate agreement

Upfront purchase

Opening a new practice may mean purchasing a property from the beginning, for which the rights, obligations and liabilities are outlined by both the buyer and seller, including defining the property that is being purchased or sold.

First right of refusal

A real estate agreement upfront will give the first right of refusal to a partner when selling the practice should the doctor decide to sell the building so the buyer is not a tenant.

Lease agreement

If not purchasing the property, a lease agreement will outline the term and scope in regard to whether the buyer will get everything for a flat rate or have to pay for upgrades, such as cosmetic updates, like wood floors.

Employment

When not a straight buy-out, an employment agreement will outline the terms of an associateship before and after the transition, such as how long the seller stays on to work, the terms of payment (day rate, per diem or percentage of collection), and if the practice value is determined before or after the sale.

Operating

In the case of a partnership or merger, laying out how the practice will operate will help determine all the logistics, like who is going to pay for marketing, any staffing conflicts, and whether the doctors will be paid based on collections or a percentage of the practice.

Promissory note

Simply put, this is, in essence, an IOU to determine the terms of which a loan of a certain amount will be paid back, including how much and by when. A promissory note can be held by either or both the buyer and seller, depending on the type of agreement.

Closing statement

This is where both the buyer and seller will dot their I’s and cross their T’s, breaking down all the terms and conditions that need to happen for the purchase and sale to go through, including the timeframe of sale and final asking price.

What’s next?

Contact the experts at Professional Transition Strategies, who will help walk you through the paperwork process.

June 12, 2018

Building Your Dream Team for Successful Dental Transitions

Whether you’re looking to purchase an existing dental practice or start your own, assembling a team of advisors to help guide you through every step of the process will ensure the success of your business is established from the beginning. As with any team, you’re only as strong as your weakest link, so it’s important to choose advisors who have experience in the dental industry. Here, we break down your options.

Banks

Choosing whether to work with a local, regional/national, or dental-specific bank or the Small Business Administration, even if just applying for an equipment loan, is arguably the biggest decision when financing a dental practice, whether to acquire or grow a business, so take care in choosing the best fit for your needs.

CPA, CFA, attorney and insurance agent

To raise your rate of success, choose individuals who specialize in working with dentists, in addition to specialists from different firms within the industry as opposed to a one-stop shop. You’ll want someone who can write and review contracts, as well as someone who can run the numbers, not one firm that does both.

Headhunter

When looking for an associateship, a good headhunter — especially one who specializes in the dental industry — will present you with a variety of opportunities, including ones not yet on the open market, similar to working with a real estate agent.

Marketing agency

For your convenience, a full-service marketing agency will help you establish your practice once the sale has been made, from website development and social media management to advertising and brand development.

Equipment representative and supply company

This long-term relationship should start with interviews with potential companies and testimonials from current customers to hear about different product offerings.

Commercial real estate broker

When it comes to securing a location for a new or existing practice, Professional Transition Strategies (PTS) has a pulse on the country that puts your best interest at heart, including competitor locations and cultural or religious reasons that would affect the success of your business.

Contractor and architect

A successful startup begins with a smart office layout, and a contractor and architect who are familiar with the dental industry, in addition to local building codes and regulations, will ensure a smooth process from the ground up.

Practice consultant

A practice consultant who focuses on your specialty will be your extra set of eyes to advise you on how to increase profits quickly by establishing a timeline and budget with trackable results that work for all parties involved.

Technology advisor

Both established practices and startups need dental software to make the business run, so it’s important to work with a technology advisor who implements the software and services it on the back end once it’s in operation.

Transition broker

Hiring an experienced transition broker like PTS will help you market your abilities to the places you want to go so you can relax and focus on your day-to-day responsibilities of tending to patients and running your business.

What’s next?

Read more about assembling your advisory team based on your specific transition situation in our e-book “Recent Graduate: I Just Graduated from Dental School, Now What?” Then, contact the experts at PTS for referrals and recommendations.

May 11, 2018

5 Strategic Career Options for New Dental School Graduates

You’ve studied for the past eight years and now finally have that much-coveted dental degree in hand. Now what? Even if your dreams are to own your own practice, there are other options to consider and a few steps you might want to take first.

Associateship

While taking on an associate is risky from an owner’s perspective, it makes sense for a fledgling dentist to get their feet on the ground. With this option, you are working for a person or a dental service organization (DSO) as an employee without an ownership benefit or management responsibility. This allows you to relocate or move among practices with ease and little stress since there is no real commitment on your end.

Military, school or government

Working for the military, a school or the government won’t give you the option of buying in to a practice. It will, however, earn you the notoriety to perhaps one day publish scientific work, if that’s what your goals include. This low-risk opportunity affords a relaxed schedule, long-term potential and the option to pursue a passion that the private sector might not offer.

Buy-in

The next best thing to owning your own practice, a buy-in grants you an ownership stake in the practice with the potential to become a partner. While not typically obtained right out of dental school, a buy-in is achievable within three to five years, making it a reasonable and beneficial long-term option, whether with a single practitioner, group practice or corporate environment.

Buy-out

With a buy-out, you gain 100% interest within an existing practice while having the sole freedom to practice exclusively. Not to mention, purchasing an existing practice outright holds a 99.7% success rate for the completion of the note. Compared with a startup, an existing practice comes with its own staff, location, equipment and patient base.

Startup

Rather than taking on an existing client base, you would start your own practice from the ground up. Although the ultimate dream for most, it’s worth mentioning that between dental school and bank loans, you have the potential to be $1 million in debt before seeing your first patient, which may not be an issue for you since the success rate for a dental practice is so high.

What’s next?

Read up on our e-book for dental graduates, then contact the experts at Professional Transition Strategies to start the conversation.

May 4, 2018

Understanding the 5 Dental Practice Buyer Profiles for Sellers

When looking to sell your practice, it’s helpful to know who your potential buyers are. In any case, Professional Transition Strategies (PTS) recommends buying an established practice rather than starting from the ground up due to a higher return on investment. Read on to figure out who would be a good fit for your practice.

Dental school graduate

Though highly unlikely since the average dental school graduate leaves with $500,000 in student loan debt, it is not unheard of for an aspiring professional to look to purchase their own practice straight out of school. In this case, it is more likely that a graduate would look to purchase an established practice rather than starting from scratch because of the existing staff and client base, not to mention the average $500,000 in startup costs.

Corporate dentist

More often than not, a dentist’s first job out of school will be working in a corporate environment, such as a dental service organization (DSO). These highly reputable establishments allow dentists to focus on patient care while contributing no ancillary costs toward the practice, therefore being able to save to buy their own practice in the future.

Dental service organization

A DSO is a likely buyer when the seller is looking to stay on with the practice but wants to release managerial responsibilities, such as in a retirement situation or anyone who is looking to maintain a work-life balance. Selling to a DSO allows you to focus on the clinical side and patient care without contributing time and money associated with running a business.

Associate

Who better to sell to than someone you’re already working with? Most dentists take on an associate in hopes of potentially selling the practice in the future, so keep that in mind when looking for an associateship, while also taking into account the cost of acquiring a practice and the overhead of running a business.

Previous practice owner

A buyer isn’t always necessarily going to be a first-time buyer. A dentist who once owned their own practice could have sold to change specialties and geographic regions or was simply looking for a new opportunity and a fresh start, making this new owner one who is already versed in running a business.

What’s next?

Read more about the different types of buyers and the buying process in the e-book “Transitions: Your Next Adventure Awaits,” then contact the experts at Professional Transition Strategies to start the conversation.