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 18, 2018

4 Steps to Selling Your Dental Practice

A successful dental practice transition doesn’t happen overnight. In fact, a well-laid plan to sell your dental practice should start as early as five years out, depending on whether you’re looking to retire or bring on a partner. Here are the steps you should take to sell your dental practice.

Hire a broker

A qualified broker will perform a complete appraisal on your practice, help you understand your options in terms of a timeframe for the sale, offer advice on how to increase the value of your practice, market your practice and reach out to potential buyers, and schedule showings of the practice, as well as ensure you are still concentrating on the health of your practice. While most brokers charge a fee, Professional Transition Strategies (PTS) can occasionally perform these services at no charge.

Vet potential buyers

A nondisclosure agreement (NDA) is signed by every potential buyer who inquires about your practice, after which time a prospectus is sent. A conversation between the potential buyer and broker then takes place to answer questions and gain a better understanding of the buyer’s intent. If the practice is deemed to be a good fit, a letter of intent is submitted, which typically takes 10 days.

Due diligence process

Once the seller and buyer agree to the terms, the due diligence process begins, which can take anywhere from 30 to 45 days. PTS can provide a checklist of the due diligence process for the seller that includes a breakdown of the practice corporation, personal funds and treatment of accounts receivable, in addition to real estate, insurance and licensing.

Notifying patients and staff

To preserve the relationship with your patients and staff, you’ll want to tread lightly when announcing the transition. Staff should be notified 15 to 30 days before the closing, whereas patients and referrals should only be notified after the closing date.

What’s next?

Read our e-book “Strategies for Transition,” then contact the experts at PTS to start the process of selling your dental practice.

September 11, 2018

10 Steps to Buying a Dental Practice

You’re ready to start the dental practice buying process. But how? Before getting the keys turned over to you, there are a few steps you’ll need to follow first. Here’s what you can expect from the transition process.

Get pre-qualified

Providing your net income, stress and how much debt you can handle to your bank will help gauge your debt-to-equity ratio, debt-to-income ratio and credit score.

Make an offer

While approval by the bank will be dependent upon the type of practice you are considering, getting pre-qualified before making an offer will give you a ballpark for what you can be backed for financially.

Perform a practice analysis

Allowing adequate time for a practice analysis — sometimes as long as a year — can lead to a better understanding of the type of fit for your qualifications, both personal and financial.

Work with a broker

A good broker should be a part of your transition dream team, making sure all the agreements are in place and identifying ahead of time any issues that may arise.

Present letter of intent

The official offer letter is not actually a legally binding document but rather expresses your intent to follow through with the transaction.

Negotiate

As with any private sale, price, terms and closing date are all on the table between the two parties.

Initiate due-diligence process

Getting all your advisers in one place to review the financials and various aspects of the transition will leave little room for error in the long run.

Outline asset purchase agreement

In a straight buy-out, it’s important to outline what assets are included in a practice — most notably, the equipment.

Assess operating agreement

In the case of a partnership or merger, it’s important to determine 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.

Complete practice loan

This is 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?

Read more about the steps of a transition in the e-book “Transitions: Your Next Adventure Awaits,” then contact the experts at Professional Transition Strategies to streamline the buying process.

August 27, 2018

5 Steps to a Pre-Retirement Plan

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.

July 17, 2018

6 Types of Dental Practice Agreements

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.

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 16, 2018

Partnerships versus Mergers: Which Is Right For You?

When looking to combine practices, the million-dollar question (literally) is whether to go with a partnership or merger. The answer lies in what you’re working toward: retirement or expansion. Here, we break down the two options.

Partnerships

While partnerships have a 60% success rate, it only makes financial sense if the practice is collecting $1.2 million annually. If the practice is collecting less, each doctor wouldn’t bring home enough at the end of the day to make a stable living. A partnership could eventually lead toward retirement, but a more lucrative option is to take on a partner who could expand the offerings of the practice, adding to its value and client base.

Mergers

Though not as common, combining two existing practices into one proves to be successful in terms of equality of responsibilities and income, especially when combining a general practice with a specialty partner. The next step when working toward retirement is to then sell after five years or so to a dental service organization (DSO). Though staying on to work a reduced schedule is an option, selling a merged practice to a DSO will yield higher profits. And ultimately, the process to sell is more seamless since DSOs already have financial backing.

What’s next?

Read up more on your options to sell in our e-book “Strategies for Transition,” then reach out to the experts at Professional Transition Strategies to get the ball rolling.

April 13, 2018

Associateship, Partnership or Buy-Out: Which Is Right for You?

There comes a time in the life of a dentist’s practice when a second set of hands would be helpful to grow or pass the torch to another professional. A natural first thought is to bring on an associate with plans to buy out at a later date, but the numbers prove otherwise. Here, we break down the nuances of an associateship, partnership and buy-out to help point you in the right direction.

Associateship

When selling to a partner with whom you’ve never worked with an arrangement to buy in at a later date, the results are predictable—a 20% success rate, in fact. Not to mention, after the cost of acquiring a practice and the overhead of running a business, taking on an associate is typically not an affordable option. If going this route, make sure there’s a contractual “out” should the match not be a good fit so no time or money is wasted.

Partnership

With a 60% success rate, a partnership offers flexibility in transitioning for a seller who is not ready to retire. Increasing costs of regulations and decreasing reimbursements from PPO plans make financial sense for taking on a partner. Planned well, and a partner could expand the offerings of your practice, adding to its value when the time comes to sell. For those working toward retirement, selling a fraction upfront could help to reduce hours and shift responsibility, eventually leading to a 100% buy-out. And with the growing number of dental graduates every year in an ever-stable industry, a compatible partner is likely easy to come by.

Buy-out

A full sale or purchase is the most common way to transition in or out of a practice, and for good reason—a 99% success rate is a good bet for both the buyer and the seller. The transition is quick, with one buyer and one transaction, so a good option for a retiree. However, most dentists struggle with the thought of quitting so abruptly and opt to ease the transition when given the choice. The emotional investment in the company is hard to deny, no matter your age.

What’s next?

Read more about associateships, partnerships and buy-outs in our e-book “Strategies for Transition,” then talk to the experts at Professional Transition Strategies to figure out which option is best for you.