December 7, 2020

What Is the Value of Your Dental Practice?

In an article for DentistryIQ, Professional Transition Strategies Founder and President Kyle Francis says “it’s surprising that many dentists don’t even know the value of their practices.” As your most valuable asset, your dental practice is worthy of the time and investment to seek an appraisal. Here’s what to consider.

Keep your options open

“Retirement and career planning are the two main reasons dentists need to know the value of their practices,” Francis says. This gives practice owners the opportunity to leverage the values they’ve created to get a bigger payday with enough time to work with current or future dental partners to make necessary improvements over the course of time. In the long term, they can build value in a number of other ways, including an equity relationship with a dental service organization (DSO), which can take up to seven years.

Factors affecting practice value

An appraisal is really the only way to assess the true value of your dental practice since they are performed on a case-by-case basis. Practice type, location, practice visibility within the community, regional growth, standalone building versus retail center and even signage all contribute to the overall value of your dental practice. Other factors include revenue trends and forecasts, the number of active patients, patient attrition and retention rates, and new patients in the last month and year, as well as value of the dental equipment and its resale rate.

Assessment and documentation

Getting a dental practice appraisal is no small task on the part of the owner but well worth it in the end. It will require three years of profit-and-loss statements and tax returns, current balance sheet, production broken down by provider and procedure type, active patient roster and list of employees (with wage or salary information), new patients during the past 12 months, accounts receivable aging report, copy of lease (if applicable), dentist biography, photo documentation of office and equipment, office hours, and insurance plans accepted. “The sooner you know how much your practice is worth, the earlier you can start enhancing its value,” Francis says.

What’s next?

Contact the experts at Professional Transition Strategies to start the process of appraising your dental practice, whether you plan to sell, retire or practice for 20 more years.

April 13, 2020

Practice Reopening Webinar: Strategic Dental Recovery Guide

Every so often, Professional Transition Strategies (PTS) hosts a webinar for dental practices. On April 6, PTS President Kyle Francis hosted a webinar addressing the current state of affairs during the COVID-19 pandemic and how to return to your dental practice. Here are the key takeaways.

Stick to the facts

It’s easy to get carried away with predictions and speculations, but in trying times, it’s important to focus on what we know and how these situations compare to what we’ve already been through, such as the 2008 financial crisis and even natural disasters, as well as stay on top of news related to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and your practice’s earnings before interest, taxes, depreciation and amortization (EBITDA).

Stay in the now

It’s impossible to predict what will happen in a month, never mind next week. Make changes to your office and staff that will impact your practice in its current state, whether that means laying off, furloughing or reducing staff hours, as well as “winterizing” your office with cerac, vacuum protocol and shocking your lines.

Communicate, communicate, communicate

Information is king right now, so be sure to keep your team, patients and referral networks all in constant open and honest communication, as much as weekly. Deadlines are a moving target at this point for all those involved, so just communicate with your group as you would want to be informed.

Be opportunistic and strategic

Above all, spend time thinking about what you want when this is over, come up with a plan and figure out what you can do at the moment to put the gears in motion, perhaps by ordering a prospectus. Also, think about if you are in the location that is best suited for your practice. Is an associate or partner in your future? Now might also be a good time to leverage debt for growth.

What’s next?

Learn more about the dental transition process in an upcoming webinar, then contact the experts at Professional Transition Strategies to learn about the next steps.

November 14, 2019

3 Reasons to Start Your Dental Practice Transition Early

Dental practice transitions don’t happen overnight. In fact, a well-laid plan can take as long as five years if done properly. Even if you aren’t ready to hang up the proverbial hat, it doesn’t hurt to take a few steps in the right direction. Here are some suggestions to make sure your dental practice lands in the right hands.

More transition options

Once upon a time, the only options for transitioning out of a dental practice were to sell to another dentist or close its doors. But today, the options are seemingly endless. You can choose to sell your practice in whole or a portion to a partner for a longer-term transition plan, sell your practice but continue to work as an associate, merge with another successful dental practice, or affiliate with a dental service organization (DSO), among others.

More offers

Your options aren’t limited to the type of transition but also the offers you receive. If you wait until the last minute to transition out of your practice, you may be stuck in a situation where you have to take the first offer you receive. By starting early, you can be more discerning on offers that come in and truly only move forward with the one with which you feel most comfortable.

Increase value

The necessary step of valuating your dental practice not only helps determine which type of transition would be best, but also tells you what upgrades need to be made before selling your business. If the value of your practice isn’t enough to clear your debts, you can decide if you need a few more years to build up the value of your practice before taking that next step.

What’s next?

Learn more about your transition options with the e-book “Strategies for Transition,” then contact the experts at Professional Transition Strategies to begin the process.

April 23, 2019

Webinar: “10 Ways to Prep Your Practice for Transition”

Every so often, Professional Transition Strategies (PTS) hosts a webinar for sellers to learn more about the transition process. In April 2019, a webinar geared toward sellers detailed the steps and options when considering buying a dental practice. Here are the key takeaways.

Think about your strategy

A seller should begin with the end in mind. Think about your long-term needs, how much time is needed to implement the plan and what your ideal strategy looks like, including a buy-out, partnership or associateship, as well as whether you would consider selling to a dental service organization (DSO), private equity for extensive growth, or merger with another local practice.

Start or keep growing your practice

The biggest failure of owners is letting the practice start to decline when thinking of selling. In turn, the value of the practice drops significantly and can cause a bank to decide not to finance the acquisition. What’s more, it lowers the total options that a broker can deploy. It is worthwhile to market your practice right up until the point of transition to ensure the value won’t decline over the course of time.

Focus on core details

Other than financials, it’s important to take a wholesale look at your practice to assess what has made your practice successful. Do you provide certain treatments that set you apart? What niches do you work in? Do you serve a certain community very well? Are you engrained in the business sector? Is your management style unique in that it allows you to keep employees for a long time?

Run an equipment evaluation

Most practices are valued using a weighted system that takes into account how old the equipment is. If time allows, it may make sense to purchase upgraded equipment, use that equipment, depreciate it over five years, and achieve a much higher sales price, even though you won’t get a 100% return on your investment. Consider going digital if you haven’t already, then upgrade cone beam computed tomography, digital impressions, computer-aided design and manufacturing system, and new chairs and units.

Consider the real estate

If you don’t own the building, notify your landlord that a transition will happen. If possible, sign a new lease or an addendum that allows the lease to be assignable to a dentist who qualifies for bank financing. If you do own the building, which can be sold as an asset to help pay for retirement, start paying yourself market rent. Alternatively, consider relocating your practice to a more desirable location, which can raise your practice valuation by as much as 5%.

Clean up your books

In addition to charging yourself market rent if you own the building, if you employ your spouse, consider replacing them or at least start paying them what market value for the position would be. What’s more, don’t stop writing off items through your practice; keep track of personal travel, depreciation, etcetera.

Know your “why”

One of the biggest worries for a buyer is that they will have to compete with you over time so it’s important to be able to articulate a real and communicable reason to a buyer at least a broker so that they can tell the story for you.

Build an advisory team

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, such as a consultant, technology advisor, real estate broker, equipment and supply representatives, certified public accountant (CPA), and attorney.

Know your practice’s worth

Creating a practice prospectus that breaks down the profitability of the practice helps to understand the value of the practice and can help determine the best strategy to use, as well as give you a roadmap for what you need to do before the sale occurs, which could alter your expectations in terms of horizons. Factors such as revenue, net income, seller’s discretionary earnings and value of hard assets will all be taken into consideration.

Execute strategy

After determining which strategy to implement and how long it will take to get there, you can start getting the work done that needs to happen before the transition takes place. Now is the time to start working with an advisor to take the next steps toward implementing your strategy over the set period of time.

What’s next?

Learn more about the dental transition process in an upcoming webinar, then contact the experts at PTS to learn about the next steps.

January 16, 2019

5 Considerations when Sharing a Dental Office Space

Transitions aside, an often-overlooked option is to share an office space. Renting out under- or unutilized office space can come with its financial advantages if done correctly. In locations that are more densely populated and with greater competitive saturation, just by joining forces, consolidating operations, minimizing facility costs, bundling overall expenses and maximizing production, an additional 14% can be made on the bottom line. However, like with any leasing agreement, there are factors to consider to ensure you aren’t costing your dental practice money or goodwill. Here are some considerations to take into account before signing any agreements.

Share the load

A space may be underutilized if there are multiple unused operatories or the current doctor only works a few days a week, leaving the office closed for many days. Renting out space to another doctor will also provide emergency patient coverage while one doctor is away.

Save on costs

Taking on a tenant to help reduce overhead will only help increase income, not to mention the ability to upgrade equipment through a shared cost with the lessee, while also offering additional networking and business opportunities for both parties.

Provide a test-run

A lessee is afforded the opportunity to save on business expenses in terms of equipment and office space until they build up their own practice. Along the same lines, the leasing doctor is able to test out success rates in specific geographical areas before opening their own practice doors.

Draw the line

Just because you are sharing space, does not mean that you are also sharing patients. It is important to know the difference between a spaced share versus an associateship or partnership as it can be harder to sell your practice if you already have a space share in place.

Crunch the numbers

Have an attorney with health care law experience draw up a legal contract before the commitment is made, including duration of and terms of lease, termination and renewal terms, conflict resolution, insurances accepted, outline of equipment sharing and maintenance costs, any shared staff or office number, and schedule for the shared space.

What’s next?

Contact the experts at Professional Transition Strategies to learn more about different space-sharing opportunities to find out if this option makes sense for your dental practice.

December 20, 2018

The Kids Are in College; Now What?

Becoming an empty-nester is a natural time to start thinking about your next steps, as well. While there is still tuition to be paid, a well-laid dental practice transition takes years of planning, whether that means engaging in a partnership or preparing for retirement. Here are some steps to start taking now.

Contact a broker

It takes approximately 150 hours to transition a dental practice, which is one of the many reasons to hire a professional broker. To get the most out of your sale, both financially and personally, a professional broker will help you focus on the bottom line and create an accurate appraisal of your dental practice while vetting potential buyers and removing any emotion from the transaction.

Crunch the numbers

Determine how much you need for retirement, how much debt you have left and how much you need to get out of the practice when you ultimately decide to sell it. The most important point is to plan for your transition while production is still high to ensure you gain a higher valuation. Because the most recent years’ collections are weighed heavier than past years, you’ll want to go out on a high note if a sale will take place in the next two or three years.

Know your options

With all the transition options available, you’ll want to have an understanding of your ideal transition and discuss with a broker what is currently possible and what you need to do to get to your ideal transition plan. Planning early will allow you the option to affiliate with a dental service organization (DSO), bring on a partner who will eventually buy the remaining share of the practice when you are ready to retire, or simply understand where the practice needs to be financially and strategize how to increase the value of the practice if needed.

What’s next?

Read up on sellers’ options in the e-book “Strategies for Transition,” then contact the experts at Professional Transition Strategies to get the proverbial ball rolling.

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 Essential Steps to Successfully Sell 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.