Best Reasons Why you Should own your own Dental Practice
- It’s the money stupid! The vast majority of dental practice owners have a greater netincome than dentists who work for someone else.
- You can build the practice of your dreams. Unlike working for someone else (in which you work under the conditions established by the owner), you can build the practice of your dreams. This means you can adopt the type of facility you want, practice philosophy and a schedule that is desirable for you.
- You are your own boss. When you own your own practice, you have the unique ability to control what happens in your practice.
- Ownership means wealth. Most independently wealthy people “own things”! If you own your own dental practice, you are building a business with value, all the while you are earning a significant income. If you are working for someone else, there is no equity and no wealth accumulation.
- The IRS is your “friend”. Unlike a “W-2 employee”, when you own your own business there are many expenses that are deductible or depreciable by you that would not be eligible as an employee (or subject to limitations). Some of these deductions can be pension plans, savings plans, dues, insurances, continuing education fees, car leases, promotional expenses, travel expenses, entertainment and meals. Hence you are able to pay for many things and have the government pick up a share of the cost.
- We’ve got the money, honey! Financing the purchase of your dental practice is easy. At times people are reluctant to own their own practice because they believe the financing is unavailable. We work with several financial institutions that understand dentistry and why buyers have little or no net worth; however they also understand that buying a dental practice is a tremendous investment. As a result, practice acquisition loans are readily available at very competitive interest rates. So even if you think you have little net worth, large indebtedness and a hefty monthly budget, don’t worry – we’ve got the money!
- If they were any cheaper, it would be a felony! When you buy a dental practice, you can get some incredible bargains. Today you can purchase a dental practice for an incredibly low price (particularly in non-suburban and rural areas). These amazingly low practice values greatly contribute to the attractiveness of owning your own practice and your bottom line!
- It’s the money, stupid! As was stated above, typically the owner of a dental practice makes more money than an associate dentist (in absolute terms), and makes significantly more as a percentage of the owner’s personal production. A dental practice owner should make between 50% and 60% on their own personal production (since hygienists and other associate dentists are producing some of the revenue for you). Thus, all things being equal, owners can make 2-3 times what associate dentists can make.
10 Essentials for a Successful Practice Buy-In
- A comprehensive practice appraisal within a reasonable time of the associate’s start date.
- A thorough plan regarding the buy-in, including the beginning, middle and end of the buy-in relationship.
- A wide spread associate search.
- A background investigation of associate candidates.
- A candid discussion between the parties regarding their respective expectations.
- A well drafted employment agreement, including buy-in specifications.
- A practice facility that can accommodate multiple dentists.
- An adequate patient flow that can accommodate multiple dentists.
- A well thought out post-buy-in exit strategy regarding a principal’s death, disability, retirement, dissolution and third party sale.
- A willingness for all parties to change.
Ten Tips to Preparing your Practice for Sale
1. PLAN AHEAD
In today’s market, selling a practice is “easier said than done”. Thus, it is incumbent upon you to plan well in advance for the sale of your practice. For example: six months to one year (for a metropolitan area), one to two years (for a medium sized city), and two to five years (for smaller cities).
2. CLEAN UP THE CLUTTER
Most practices have accumulated years and years of “clutter” (books, journals, old dental equipment, artifacts). All of this should be cleaned up and in some manner disposed of. Buyers will expect an office to be organized and sanitary.
3. SPRUCE UP THE DÉCOR
Like the appearance of your home when attempting to sell it, the practice should look neat and tidy. Some low cost items like carpeting, wallpaper and paint can do wonders for the appearance of an office, thus enhance its appeal.
4. GET YOUR FEES IN LINE
If your practice has been lacking in updating your fee schedule, do so in preparation of its sale. No buyer wants the first order of business to be raising fees! An average to above average fee schedule shows a patient acceptance of quality dentistry.
5. REINVIGORATE YOUR RECALL SYSTEM
Many aging practices evolve into a “voluntary recall system”. Re-instituting an “active recall system” will not only increase your production, but your active patients and patient flow.
6. TUNE UP YOUR DENTAL AND OFFICE EQUIPMENT
Although it is not advisable to make major equipment purchases immediately preceding the sale of your practice, it is advisable to get your equipment functioning well, and if necessary, replace or add certain items. For example, recovering a dental chair or replacing a cabinet facing are a few items that can enhance the practice’s appearance and productivity.
7. WEED OUT THE “BAD” ACCOUNTS RECEIVABLE
Most practices have accounts receivable that should have been turned over to collections or written off. This should be done on an ongoing basis, however it is imperative to handle these accounts before the practice is sold.
8. DON’T LET YOUR LEASE LAPSE
With some exceptions (e.g. records sale or inferior facility), it is important that the buyer have a facility in which to practice. Be sure that your lease is current and that a renewal options, assignments and/or new leases are available to a buyer.
9. MAINTAIN YOUR PRODUCTION
In anticipation of the sale of the practice, some doctors cut back significantly on their schedules, thus affecting the practice’s production, vitality and ultimately its value. It is critical that the practice’s production does not slide prior to sale.
10. CHECK WITH YOUR ADVISORS
Before you make what may be a “once in a lifetime” decision, you should check with the people you trust the most. Counsel from financial advisors (to check on the financial feasibility of retiring), accountants (to check on the tax ramifications), attorney (to check on any legalities or estate planning issues), and a competent experienced practice broker (to pull the whole thing together) is essential for a successful transition.