Many of today's dental graduates may be finding less associate buy-in opportunities in the suburban and urban areas due to the economy and growth of DSOs within these markets. Many dentists are also simply extending their careers by deterring their retirement plans for several more years due to the economy. The opportunity to purchase your own practice may have diminished, leading to the frustration among associates who seek to own their own practice. Yet, there is a unique and highly profitable business model that some young dentists are beginning to recognize - and embrace!
RARE GEMS AND PRACTICE OPPORTUNITIES
In a small town or rural environment there are amazing opportunities for young dentists that allow them to either purchase a practice with a lower buy-in price or work as an Associate with as you pay off your debt then move into ownership within a few years. We find that in many small towns and rural areas, practices are selling below a more urban practice yet the revenue potential is high. So, you buy an extremely successful dental practice for a relatively low price.
ENORMOUS LIFESTYLE BENEFITS
We've talked with so many dentists in urban areas who are simply tired of the constant time (and money) required to remain competitive in a saturated market - especially during a tough economy. They just want to simplify their lives. So, for an individual who wishes a change of pace, wants to spend more time simply serving their patient's needs while remaining busy during the day with strong income, an urban or small town practice may be ideal for you. Not only are you reducing workday stress, by relocating to a small town or rural area you'll likely be under an hour's drive (many just 30 minutes away) to a great Virginia urban city. We know many dentists who purchase a small town practice and live in a nearby city and couldn't be happier. Not to mention, there are many dentists who are realizing how great it is to both live AND work in a small town environment.
LOAN FORGIVENESS OPPORTUNITIES
Did you know that in certain states where there are dental shortages, the states are offering loan forgiveness programs based on the number of years a doctor practices in a shortage area. You can actually accelerate your ability to fully or partially eliminate your student loans by working in these locales. Between your ability to purchase a practice at a lower rate, and your ability to repay your loans, you’ll be in a far better position for your ROI than you would, buying a similar practice in a more rural, competitive city or locale.
A BETTER QUALITY OF LIFE
For those dentists who are ready and open-minded about seeing the high quality of life provided by small town living and/or working - there are fantastic opportunities out there. They may not look like what you might have originally envisioned, but they may be even better than you ever imagined. They often come with the kind of family lifestyle, healthier environment, and higher quality of living that more closely matches your personal values.
Leadership by Design works with and helps dentists throughout every stage of their career. We believe it is critical to match both your vision and values with whatever transitions you are going through or emerging in your practice. From buying and selling, dental recruitment, leadership development/growth, or marketing and business growth, we're here to help. How can we help you? To view our current dental practice opportunities, click here.
Recently, we received a phone call from a dental colleague who had two DSO’s open within a mile of his practice. There was considerable anxiety in his voice as he shared his fears regarding the future of his practice. Like others, he was experiencing a decline in reimbursements due to over participation in insurance programs, and a P&L showing a trend in decline in profitability over the past three years.
Let’s face it, in today’s world choices have become more complicated yet critical in our professional journey. Information overload, technology, complex staffing dilemmas and new players influencing the systems of delivering dental care, require doctors to be informed and seek counsel outside their area of expertise.
"Help! All I want to do is my dentistry! How will I survive, let alone thrive?"
Working with hundreds of practice owners throughout our Commonwealth, we encounter practices that range from a healthy state of growing and thriving, to a steady state of decline. What we’ve noticed most over the years is that there are clear differences that separate the “growing and thriving” practices from the barely “surviving” ones. Below are a few of these differences:
1) THRIVING PRACTICE OWNERS SEEK KNOWLEDGE
Owners of thriving practices tend to realize that what they believed to be true as recently as 5 years ago, no longer applies today. Staying informed and engaged in what’s happening (not only in their individual practices but also within the industry) is clearly evident in this group.
2) LEADERS ARE COMMITTED TO GROWTH AND DEVELOPMENT
Leadership teams of growing practices recognize that the skills they started with (following graduation) must be continually developed to a higher level of competency. Example: One client 4 years out of school has placed over 50 implants. Another is 6 years out and has never removed a tooth or written a prescription. One moves forward with opportunity while the other is paralyzed, plagued by dental school “feardontics”.
3) GROWING PRACTICES PRIORITIZE PATIENT NEEDS
Doctors of thriving practices understand that their purpose is to serve and meet the needs of the patient - NOT the insurance companies. Over the past 30 years, there has been a gradual takeover of insurance companies directing and approving standardized treatment, rather than individual treatment plans created by the doctor who knows best. This is a pathway our medical colleagues traveled many years ago. How did that impact our healthcare system today?
You are in the driver's seat. You have a choice!
From graduation to retirement, we are faced with decisions every day. These decisions often need to be made outside of our dental expertise; decisions that impact our professional journey and those of your entire team. DSO's have raised the bar on business management of our practices, on marketing, and the operational acumen required to effectively deliver our dental services
How will you respond to the wave of choices?
Where do I start?
Do something. If this is a new journey for you, it most likely will require a guide by your side who will help to prevent you from getting lost in the weeds. Set aside time on your calendar to focus on your business then seek out the expertise of individuals you trust who will guide you on what will likely be - an exciting journey that also results in "peace of mind".
Leadership by Design works with and helps dentists at all stages of their career. How can we help you?
By James R. Schroeder, DDS
One of the most overlooked aspects in the lifespan of a dentist's career is taking time to assess the various stages of his or her practice - then making strategic adjustments. For the purpose of today's article, let’s do an overview or “fly over” from graduation to retirement.
As a retired dentist and founder of a consulting firm that specializes in dental practice transitions, I’ve had the unique opportunity of seeing both the significant and subtle nuances that exist at each stage of a practice life cycle. The American Dental Association (ADA) compares the life cycle of a dentist’s career in private practice to that of a bell shaped curve. The “x” axis represents the years in practice from graduation to retirement, and the “Y” axis represents revenue produced. Nobody can escape the curve. Or, can they?
A modification of the curve does seem to exist by those with a sharp awareness of internal and external factors that impact the shape the curve. Through measurements and honest self-assessments it’s possible to discover more clearly where an individual dentist’s road map is trending. Depending on where he falls on the curve, it’s critical to ask important and sometimes difficult questions. According to a recent survey, the average dentist’s career tends to peak in the age range of 55, followed by a decline in earnings of approximately 5% per year.
Of course, please recognize there is a wide range of variables. But the real elephant in the room is the question about where we’re spending the majority of our time and energy. It’s easy to be driven by the tyranny of the urgent in dentistry. An average day is largely occupied by a focus on delivering exceptional patient care and clinical skills. Unless you have an appetite for business and leadership, those skills simply don’t get fully developed and the practice will never operate at maximum efficiency and productivity.
Dentistry is no longer about honing your technical skills alone. A generation ago that may have been acceptable - but today, the dental owner feels squeezed by corporate entities, large insurance companies, and government regulations - including very difficult HR regulations. Today, consult outside the dentists’ wheelhouse is often critical and saves a great deal stress and heartache.
As I look at our dental colleagues of all ages and stages of life, I see many different responses to our changing health care world. Many recent graduates have a degree in “fearodontics” which is an important discussion for another day. Further along in the dentist’s journey, many will acquire diversified skills and talents to make the necessary course corrections. Others will recognize a need to develop their business acumen and leadership skills. And others will remain in the comfortable circle – starting in graduation and holding steady for the next 40 years, unchanged yet very satisfied.
There is enormous diversity when it comes to the chosen path of our colleagues. But no matter where one is on that path, all can benefit from self-examination. Below are three areas of growth to consider reflecting on as you reach the various stages of the dental journey.
GROWING YOUR DENTAL SKILLS
General dentists have enormous opportunities to expand their skill base - from surgery to cosmetics to sleep apnea. Excellent resources are available, but require planning, energy and time commitment, followed by staff development. What were your top procedure codes 5 years ago? Is it time to challenge yourself and increase your technical skill base? Check with your colleagues who’ve developed new skills. I encourage a thorough engagement as opposed to a weekend course to learn these often complex procedures. There also has to be a commitment to skill application shortly after you return from your training. This can serve as an exciting addition to your day and boost your income by meeting an unmet need or demand in your market. It’s exciting to know that you’re meeting the needs of your patients and improving their health!
DEVELOPING YOUR BUSINESS SKILLS
My encouragement is to evaluate your relationship with your accountant. Many colleagues do not track expenses and revenue in a methodical manner. There are industry standards that provide you with a compass, allowing you to better discover if you are “off course”. Recently, a client told us that his staff salaries were at 48%, wondering why he had so little take home. Was he under producing or was he over paying? Another young client was producing $900,000 and collecting $500,000 due to the many insurance contracts that were taking away enormous revenue from his collections. Basic understanding of the numbers is important to know, but the more difficult road to take is developing the business skills to execute the changes necessary. Knowledge without application is useless.
I am sure I’m not telling you anything that you cannot find on the internet. The challenge is with the execution of the changes necessary to take within your office and with your staff. As a consultant, a common issue is resistance to change. This can be resolved in a positive manner by including the team in the plan. If significant changes are necessary, I strongly encourage a well laid out plan with outside guidance. Pain is often necessary before the doctor will seek outside consul, but it can be a game changer!
This is an absolute must to execute growth, change and enjoyment in today's world of health care. I encourage you to develop a continuous growth plan for yourself followed by learning skills to develop your diversified team. Most of us have discovered that simply “informing a team member” about a necessary behavior change that’s needed is not always the best strategy. The number one complaint that I hear from practice owners as they age is, "I am tired of people management!" The number one complaint I hear from the team members is, "I wish the doctor expressed a little more appreciation each day".
The truth of the matter is that if you are interested in business ownership, leadership is part of the package. You can’t expect to delegate everything without oversight.
In summary, consider taking time to check where you are in your journey. For those of you who fall in the beginning of the bell shaped curve, school provided you with a start. It is up to you develop your road map. For those of you who fall on the end of the bell shape curve, take the time to plan and look at your choices. There is an exciting next chapter that you can shape. Don't wait for a crisis. We have a great profession so enjoy the ride!
Are you in the process of evaluating a practice to purchase or sell? A thorough valuation (or financial analysis) is a critical step for both a seller or a buyer. Most often, the valuation provides a good starting point for the initial start discussions and the negotiations that will follow. If you are a seller, you want your team to search for a potential buyer who meets the criteria of your practice valuation.
Assigning a market value to your practice is based on the consideration of numerous variable that include, but are not limited to the following:
A final valuation of a practice should include an explanation of the history of the practice and key facts, an explanation of the how the valuation was determined. The final valuation of your practice is provided in both hard copy and electronic report format, which can be shared with potential buyers and their team. In addition, the report includes as exhibits, a practice profile completed by the seller, and a pro forma financial analysis showing the net cash flow to the potential buyer on a historical basis.
How do assets they impact a valuation?
While cash flow is critical, the value and condition of dental equipment can influence the value of a practice. If your practice has invested $300,000 in updating equipment, this may value higher than a practice. However, while new equipment does impact the value, it’s critical to understand that on the valuation, it will not be a dollar for dollar increase. In a practice valuation, the assets of your business are typically evaluated in relationship to how the specific equipment will help you generate profitability and therefore it may be a few years before the return on investment is seen.
How does overhead impact the value?
Overhead includes the operating expenses and the profitability of the practice, which are is key to the valuation. Typically, the overhead will be the total expense of the practice minus any of the following expenses:
Once these adjustments are made, whatever expenses remain are divided by the collections of the practice and result in the overhead rate of the practice. The overhead rate will typically fall between 30-50% in dentistry. The lower the overhead, the higher the resulting valuation (all things equal).
Interested in learning more? We're always happy to have a conversation with you. Fill out our contact form to schedule a confidential conversation with a team member.