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?

August 27, 2018

5 Essential Pre-Retirement Steps for Dental Practice Owners

Any business owner will tell you retirement doesn’t happen overnight. A well-planned retirement from your dental practice can start as early as five years out. Here are some suggestions to help grease the wheels in the meantime.

Valuation

You don’t need to wait until you’re ready to sell to start the valuation process. Valuating your dental practice before retirement is on the horizon will give you an idea of how much it’s worth and what you need to increase (production, collections or otherwise) to pay off your loan, if you have one.

Scale back

If you’re looking to cut back leading up to retirement but can’t stop collecting or increasing services for financial reasons, consider hiring a dentist to moonlight or even taking on a partner, depending on the size and value of your practice (above or below the $1.2 million mark).

DSO affiliation

To get more flexibility by releasing the office management and human resources of your practice, consider affiliating with a dental service organization (DSO) at the peak of your production. While this isn’t an option for everyone since each DSO has its own practice profile or practice requirements (including collections, earnings before interest, taxes, depreciation and amortization (EBITDA), number of ops, location, and type of dentistry), you’ll get a higher valuation and be able to completely retire in a couple of years when the time comes.

Resale

Not every dentist will make money when looking to retire from the business. Smaller practices might benefit from reselling equipment and charts separately rather than as a whole entity. Selling patient records is often recommended when a dentist wants to increase production in a short amount of time.

Improvements

Hiring a real estate professional through Professional Transition Strategies (PTS) will help you evaluate the time remaining on your lease to renegotiate lease terms or sale of the building and advise on any upgrades or other improvements that would add to the value of the practice.

Equipment

It may seem counterintuitive to replace equipment when thinking about selling your practice, but upgrading or overhauling large equipment if you’re more than five years out from retirement will help get your money’s worth out of it. Similarly, equipment with technology (X-ray, intraoral cameras, etcetera) can be upgraded within three to five years before it becomes obsolete.

What’s next?

Start thinking more about retirement with the e-book “Strategies for Transition,” then contact the experts at PTS to begin the valuation process.

August 24, 2018

7 Changes to Make After a Dental Practice Transition

No two dental practice transitions are alike, but there is one hard-fast rule that buyers should follow across the board: Don’t make any changes after acquiring a practice for at least six months, no matter how smooth the transition, if you want to keep patients and staff happy. What’s more, it is to your benefit to get a feel for the practice and how (and why) the previous dentist operated before making any changes. Once everyone feels settled, here’s how to proceed.

Go digital

When it comes to radiography, intraoral and any recordkeeping for that matter, transitioning over to electronic software will only pay for itself in the long run. Not to mention, all successful dental service organizations (DSOs) also wait at least six months before changing practice management software.

Equipment and supplies

It may be tempting to update equipment and supplies when first taking over a dental practice, but waiting will not only allow you to become familiar with the equipment but also give you time to price out other dental suppliers.

Procedure types

Branching out to include additional procedure types or eventually become a multispecialist dental practice is a well-laid plan over time, as long as patient care and need are at the top of your consideration list.

Marketing strategy

Your new practice will need a marketing strategy that is specific to its staff and client demographics rather than carrying over a plan from the previous owner. That said, any good marketing strategy takes time to plan in terms of reach and return on investment.

Staff

What worked for the previous owner might not for your new practice, especially if bringing on your own staff. Consider hygiene and operative schedules, as well as a different payroll strategy for staff, including benefits, dates and pay rate.

Insurances

Once the dust has settled, it’s a great time to start shopping other insurance companies to make sure you’re offering the best coverage for your patient base, while also opening the door to new patients.

Facility improvements

One of the easiest and least expensive changes to make is giving the facility a facelift by changing the paint color or cabinets and countertops. While you may want to make these changes right away to make the practice your own, it will be to your advantage to get to know the space first, while also not making too many visual changes upfront that may turn off existing patients.

What’s next?

Read about more changes to consider on our Insights blog, then contact the experts at Professional Transition Strategies to help facilitate the process.

June 27, 2018

6 Critical Elements That Determine Dental Practice Value

The process of valuating a dental practice before selling is not only necessary for the banks and buyer, but also valuable for assembling a prospectus. A proper valuation will include an appraisal, which will help the seller determine which transition option is best. Here is what you can expect to provide during that process.

Upgrades

Should you upgrade before selling your dental practice? Yes, if selling within five years; no, if selling within a shorter amount of time. Upgrades can be as small as getting rid of clutter and giving the space a facelift as you’re not going to get out what you put in when prepping to sell.

New equipment

While purchasing new equipment before selling your dental practice will add to the value of a prospectus, you won’t get a return on your investment dollar for dollar. When it comes to hard assets, consider what you could get it insured for and the resell value, among other financial factors. When valuating, Professional Transition Strategies (PTS) will conduct a physical observation of the office with photos of the equipment.

“Goodwill”

There’s more to a prospectus than hard assets, which are easy to quantify. However, the majority of a practice’s value comes from its ability to generate a long-term income stream for the buyer, which includes the doctor’s status within the community, practice name, location, staff loyalty and longevity, and brand awareness and marketing, all of which mean you pay fewer taxes at closing.

Finances

The financials that are involved in a sale include top and bottom line numbers, most recent tax returns, a three-year weighted average of collections and production broken down by provider and procedure type, past three years of profit-and-loss statements, investments, list of insurance plans, current balance sheet, accounts receivable aging report, and a copy of the current lease.

Specifics

Other factors that will be included in the analysis will be whether the practice is digital (and the cost to make it digital, if it’s not); the desirability of its location; if the practice refers out all its work; the total active patients and new patients per month for the past 12 months; employee roster with hire dates, hourly wages and benefits; a bio of the selling doctor; and office hours.

Buyer

Your practice will value differently if you’re selling to a dental service organization (DSO). A DSO won’t take hard assets into account but rather will focus on collections and other finances. DSOs also have private equity money, which is favorable to a bank over an individual buyer when it comes to securing a loan.

What’s next?

Read up on the process of valuating your dental practice in our e-book “Strategies for Transition,” then contact the experts at Professional Transition Strategies to begin calculating how much your practice is worth.

June 12, 2018

Essential Buyer Interview: 20+ Key Questions for Practice Sellers

After so many years of owning a private dental practice, you’ve become invested both financially and emotionally. Once you’ve decided it’s time to sell, it is to your advantage to concern yourself with the buyer‘s intentions to ensure a successful transition for all parties involved. Here is a comprehensive list of questions to ask potential buyers to get one step closer to the completion of the sale.

Professional background

What is your dental philosophy?

What type of dentistry have you done in the past? What do you like to practice and prefer not to, such as restoring versus replacing implants?

Is there a type of dentistry that you would like to get into, such as orthodontics, endodontics, etcetera?

What do you like and dislike about your current situation, including specialties that are done in-house versus outsourced?

Are you certified or plan to be certified in Invisalign?

Finances

How many lenders have you talked with?

Are you prequalified? If so, for how much?

Do you have enough credit and cash in your bank?

Have you ever been delinquent on payments, filed for bankruptcy or been sued by a patient?

Are you able to prepare a balance statement and show the past two years of tax returns?

Real estate

Do you plan to keep the current location of the practice?

Do you want to lease or buy a space?

Do you have a preference on a five- or 10-year lease?

Updates

Do you plan to make any updates or improvements to the practice, its equipment or software?

Are you willing to pay for any upgrades out of pocket after the sale, or do you prefer upgrades to be made before the sale?

Do you plan to keep the existing staff or bring in your own?

Corporate buyer

How do you plan to grow practice profitability?

What are the company’s overall economic goals compared to earnings expectations and financial statements and tax returns?

Do you have references from dentists who previously sold their practices to your company? Were these dentists’ commitments fulfilled in the transaction?

Does the company have a track record of successfully purchasing practices and selling off the new combined entity?

Future plans

What are your goals for the practice after the sale?

Do you plan to bring on any specialists?

Would you ever sell to a dental service organization (DSO) or another corporate buyer?

How can we be sure to protect ourselves and our interests to ensure a smooth transition for patients and staff?

What’s next?

Start the process of selling your practice or look for practices for sale, then contact the experts at Professional Transition Strategies to take the next steps.

May 30, 2018

6 Considerations when Starting a Multispecialist Dental Practice

One of the most efficient and profitable ways to grow your general practice is to bring on a specialist or multiple specialists. But before you call every periodontist, orthodontist and pediatric dentist in the phone book, you’ll want to consider the following.

Patient care

With every decision a general practitioner makes, patient care should always be at the top of the list. After all, it’s the reason you got into dentistry and how your business continues to thrive. As the industry continues to move away from solo private-practice specialty providers toward collaborative multispecialist practices, ask yourself: Does this one-stop shop model benefit my patients as much as my staff in terms of need and affordability? While the ability for a patient to get a referral and set up an appointment is certainly convenient, there’s no one-size-fits-all answer.

Patient need

Before merging with a specialist full time, make sure the need is there first in terms of patient load. If not, there are other options. Consider bringing on a specialist a few days a week or month, one who has his or her own practice location or multiple similar arrangements, using your practice as a satellite office while splitting time between multiple practices.

Office space

Does your current practice offer the space necessary to house a specialist and the accompanying equipment, or will expanding warrant a move? Each new specialist has the potential to come with their own assistant and staff, not to mention the need for space to accommodate different equipment and setup. If a move is in the plans for expansion, consider an area that makes geographic sense for all the dentists under the same roof.

Compatibility

As with any partnership, it’s important to seek out specialists who have the same practice philosophy so as to not recommend competing procedures that could potentially confuse the patient. Additionally, you’ll want to ensure there’s no overlap between specialists, perhaps between an oral surgeon and periodontist. It benefits the team when the general practitioner is versed in the different specialties being offered but does not take control of the procedures and recommendations. For example, while most general dentists are knowledgeable in endodontics, taking on an endodontist will allow the primary dentist to focus on general dentistry.

Collaboration

There’s much more to share than square footage in a collaborative practice model. Think shared teams, facility overhead and peer collaboration that all help improve efficiency and productivity. An increase in production and decrease in overhead will result in optimal profitability and better clinical outcomes for all parties involved. A common collaboration is for a recent graduate to become an in-practice specialist at a dental service organization (DSO) where there’s already a full patient load and the ability to work from the ground up. Additionally, choose partners who complement the work currently being offered, like a general practice with a periodontist or an orthodontist with a pediatric practice.

Creativity

The decision to go into a multispecialist practice doesn’t have to be cut and dry. The specialist can bring his or her own equipment, buy new or even consider a contractual arrangement in which equipment is shared in exchange for services. The owner dentist could supply all bookkeeping, charting materials and reception scheduling, while the specialist could cover the cost of any treatment incidentals, supplies such as instruments, lab procedures and even cotton balls.

What’s next?

No matter the situation you arrive at, you’ll need to inform your malpractice insurance company of the addition of any specialists, consult state regulations on how to categorize a specialist and make sure all arrangements — including a non-compete agreement, percentage of payment based on collections rather than production and what the specialist is expected to provide — are contractually agreed upon. Let the experts at Professional Transition Strategies help guide you.

May 25, 2018

3 Reasons Your Dental Practice Values for More in the Pacific Northwest

The old real estate adage of “location, location, location” carries over to dental practices, too. And in the Pacific Northwest, you’ll find a number of reasons why your dental practice assesses for a higher value than other areas of the country. Here, we list a few reasons why now is a great time to sell.

Desirable location

Sticking with the real estate analogy, the more desirable an area is, the higher property values tend to be, whether the housing market or business property. These days, thanks to the tech boom, the Pacific Northwest is proving to be a seller’s market with the influx of business and overseas investments moving to the area. When assessing the value of a practice, the seller comes out on the higher end of the deal in an area where people want to live and work.

High concentration of DSOs

Along with big business comes dental service organizations (DSOs) that contract with individual dental practices to manage the non-clinical operations, leaving you the option to stay on with a lighter workload to release the managerial responsibilities. In a growing market like the Pacific Northwest, DSOs are willing to pay a higher price to expand their services while also leaving you the option to earn a salary after the sale.

Higher insurance reimbursements

Simply put, your dental practice gets a higher percentage back from the insurance companies than other areas of the country, making the potential to earn more of an attractive quality to buyers. The higher concentration of business in the Pacific Northwest means insurance companies are able to offer a bigger cut, which translates into more money in your pocket both before and after a sale.

What’s next?

Ready to sell your dental practice? Learn how else you can increase the value of your practice before you sell, then contact the experts at Professional Transition Strategies to start the next steps.

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.

April 20, 2018

The Strategic Advantages of Selling Your Practice to a DSO

Dental service organizations (DSO) have gotten a negative reputation because of their seeming corporate interest. Most dentists open their own practices to focus on the clinical side and patient care, which is why, in fact, a DSO might be a good fit. Here, we break down why this might be the case and who might benefit from selling to a DSO.

What is a DSO?

A dental service organization is an independent business support center that contracts with individual dental practices to manage non-clinical operations. Simply put, that means you get to focus on your patients and the clinical side of your practice with professional office management to handle the human resources, billing, staffing and all the other aspects that come along with owning a business.

Types of DSOs

DSOs can acquire as few as five practices in their group or as many as 45. So, depending on the burdens of the practice you are willing to let go of, there’s a DSO that will pick up those tasks. Say you still want full control of all clinical decisions related to your practice of dentistry but don’t want to deal with payroll — there’s a DSO for that.

Who should sell to a DSO?

DSOs fit the dentist who craves a work-life balance. Working 32 clinical hours instead of six days a week with early mornings is appealing to both the younger and older generation. Plus, the money made doesn’t go toward various expenses like when owning your own business. In fact, with multiple practices under one roof, equipment and supplies are usually sold for a better deal. For those looking to ease into retirement, working for a DSO can offer an abbreviated schedule rather than the added stress of a transition to another dentist.

Valuation of a DSO

Typically, a DSO’s valuation of a practice comes out higher than an individual’s. Not only will your practice value for more if selling to a DSO, but you also have the option to stay on and earn a salary, unlike with a straight buy-out. Not to mention, DSOs already have financial backing versus the unknown of the underwriting process when an individual buyer is being financed through a bank.

The future of DSOs

Currently, the American Dental Association estimates that 7.8% of dentists now belong to a DSO. DSOs have gained momentum over the last decade thanks to a new generation of dentists, and it is believed that DSO penetration can reach 30% of the dental market by 2021.

What’s next?

Contact the experts at Professional Transition Strategies to learn more about the different transition options for your dental practice.