Transition your current practice to the productive, low volume, insurance-independent, profitable practice you used to dream about in dental school.
GIG ENTREPRENEURIAL MASTERMIND SUMMIT
Inn at Eagle Mountain, Fountain Hills, Arizona
April 23-25- 2020
Please download the flyer for more information:
gig_-_mbf_flyer-brochure.pdf (53 downloads)
The first team member you need to bring on board is someone who can help evaluate a practice. That can be an accountant, consultant, or broker that specializes in dental practices. Those last four words of that sentence are critical. Specializes in dental practices. They have to know what they are doing and how to analyze and value a dental practice. I once was representing a seller who had a practice collecting $800,000 with a net income of $300,000. The buyer’s consultant put together an offer of $280,000 when we had it valued at $550,000. The consultant ruined the deal. The seller was so upset with the buyers low-ball offer that the seller refused to even work with that buyer even with a higher offer.
The second team member is the attorney. Again, use an attorney specializing in dental practice transitions. It’s critically important. Do not use your cousin, friend, neighbor etc., who are divorce, bankruptcy or personal injury attorneys who took a contract class in law school. I’ve seen “friends” charge the dentist $25,000 for a review of a contract where a dental attorney would charge around $5,000.
You also need a dental CPA to help you with the numbers. They can help with the valuation, analyze the payroll and tax returns, help with the purchase price allocation and set up your legal entity.
Fourth is your banker. There are a number of banks that finance practice acquisitions and startups, and they all have their pros and cons. It’s important you work with someone you trust who will give you a fair deal. Sure, banker B may have a slightly better rate, or a cool toaster give away for new accounts, but go with someone you like and can build a relationship with. They’ll be there in the good times and the bad times to help you out.
If you need some names of good team members, let us know. We work with a lot of CPA, attorneys, consultants, bankers and brokers. We have a good feel for who will be looking out for your best interest and will do a good job for you. Give us a call and we’ll help you build your team for your practice acquisition or startup.
When I talk about corporate practices, I’m primarily speaking of the non-dentist owned corporate practice. There are dentist owned practices where a licensed dentist owns 3, 5 or more practices. He or she has full and legal ownership of their practices. I call these small group practices. Corporate practices tip-toe down the legal sidelines of practice ownership by having a dentist own the clinical aspect of the practice, called Dental Services Organization (DSO) and the non-licensed dentist corporation owns the non-dental management aspects, called a Management Services Organization (MSO). Note that this structure can also occur in small groups, but in the small group, a licensed dentist owns both the MSO and DSO. The large corporates include Aspen, Gentle Dental, Pacific Dental Services and others. Both solo practices and corporate practices have their pros and cons from both a patient perspective and from a dentist perspective.
As a patient, I prefer to know who my dentist is going to be when I go into the office. I want to build a relationship with him or her and want my dentist to know the history of my dental care — and a little bit about me as well. In a corporation, you might get the same dentist the next time you go in, but there’s a good chance it will be a different dentist. Small groups lean more towards a solo practice and you will have a reasonably good chance to get the same dentist in the well run small groups.
From a dentist perspective, most dentists do not want to be told what treatment to focus on, what supplies to use, etc., The majority of dentists surveyed by the ADA still have a dream of owning their own practice, being their own boss, making their own decisions.
Recent court decisions in New Jersey, Allstate vs. Northfield, sided on the side of dentists. It may begin to set the tone to start scaring away the non-dentist corporate owners. Washington State has been trying to pass a bill to allow non-dentist owners and so far has been successful. If you’d like to read an article on the New Jersey case, you can read it here.
So, if you have been holding off on not buying a practice because corporates are going to drive solo practices away, think again. There will always be a need and demand for a solo practice. Court cases like Allstate vs. Northfield will help ensure non-dentist owned practices stay away. Join the practice ownership club today!
The strong numbers have played a part in the increase in practice sales. Practice owners who are over 55, are seeing the strong numbers and returns in their portfolios and deciding now is the time to retire. Buyers are also watching the economy and realizing it’s a good time to buy a practice. Interest rates are still good at between 5.25% and 5.5%. Consumer’s discretionary income is up freeing funds for consumers to do elective and cosmetic dentistry. (I know you shouldn’t base your dentistry on discretionary income, but many do).
The result of all of this is that practice listings and sales are up. We typically carry an inventory of 10 to 15 practices and we’re now up to approximately 25 practices. We have spoken to other brokers and most are experiencing a similar increase in business. The interesting thing is that valuations are still staying true to normal formulas and historical numbers.
What this means to you is you can either be a participant in this booming market, or you can be a bystander and watch opportunity pass you by. If you would like to get any information on any of our practices, let us know. Consultations and phone calls are always free!
We attempt to coach sellers to sell their practices when they are at their peak productivity and profitability. However, there are a number of doctors, over half, who decide to hold onto their practices while they slow down. They start getting tired, they refer out more procedures, stop marketing and refer more work out to specialists. I have seen practices collecting $350,000 with 600 to 700 active patients and hygiene production at 40% of total production. Analyzing these types of practices to see if they are worthwhile acquisitions or merger prospects requires looking at their procedures report, their production by provider report and profit and loss statement. Turning these practices around and making them more productive may be as simple as stop referring out endo and other procedures that you may be able to do, start marketing and start diagnosing treatment. If the location is good and the numbers look like they can be turned around, you should not disregard these practices for an acquisition or a merger.