CTC Associates Dental Practice Brokers CO ID NV UT WY

Dental Practice Transition: “Increasers” vs “ Decreasers”

By Larry Chatterley and Randon Jenson, CTC Associates

Doctors are natural born achievers. Pursuing goals gives meaning to their lives. As a goal-oriented person, you probably spend much of your life focusing on professional goals. Early in your career, the responsibilities tied to these goals seem secondary. Once the essential goals have been reached, the responsibility to maintain them becomes the heavier focus, and as goals are achieved, more responsibilities are incurred.

That shift, when goals become responsibilities, indicates an important transition in your career. That maintenance stage lasts a different length of time for each doctor. Some doctors decide to grow their practice further and set larger professional goals. Others end up feeling like their practice runs their lives. It often starts with the Sunday night blues. Unrecognized, they begin to feel trapped by professional responsibilities; what they need is a light at the end of the tunnel.

If you can’t wait to get back to the office Monday morning, if you continue to enjoy managing and motivating staff, or if you are constantly looking for ways to expand your practice and see more patients, you are probably an “increaser.” However, if you find your body is at the practice while your mind is on the golf course, if you regularly entertain thoughts of cutting back your time at the office, or if you are bored with the practice and are just marking time, you may be a “decreaser.” Both are natural stages in a career, but you need to know which way you are heading in order to be satisfied.

Growing the dental practice is not likely to help decreasers find satisfaction, when what they really want is to cut back. When decreasers start looking for ways of keeping the practice going while taking some of the pressure off, the most common route is to hire an associate. This may help the symptoms, but doesn’t always address the true problem. We sometimes refer to such arrangements as “ambiguity-ships” because they have either no contract or a one-sided contract. Typically, these have no financial commitment from the associate and offer little incentive from in return. However, hiring an associate can be a viable option for a decreaser, as long as it is handled correctly and both the host and associate define their expectations in an equitable arrangement.

So how can a decreaser enhance his or her quality of life? On the other side, what opportunities can an increaser utilize to achieve his or her professional goals? There are viable, time-tested solutions to each challenge and different dental practice transition options. If structured properly, these options can give you more time and freedom without sacrificing your income needs.

Structuring the right dental practice transition to meet the goals of each professional can enhance the quality of life for both. A practice merger transition is one option that can meet the needs of both an increaser and a decreaser. For example, Doctor A, a decreaser, merged his practice with a younger dentist, Doctor B, an increaser. Doctor A sold his practice to Doctor B for $400,000 and put the proceeds from the sale in his pension, while working back for Doctor B for three 6-hour days. Doctor A was now able to give up administrative and management responsibilities. Due to lower stress, his production jumped from $250 to $350 per hour and he was able to take home $3,000 per week. He was also able to take longer vacations without worrying about the drop in production or overhead expenses. Before the merger, Doctor B was doing $400,000 in his own practice and taking home $160,000 a year. After the merger, Doctor B takes home $225,000 (after all overhead expenses and debt service of the practice purchase) and still has the same work load as before the merger. Other options could include basic office sharing arrangements, earned-equity buy-ins, associateships with deferred buy-outs, and more, with each dental practice transition customized to meet the needs of both parties.

Decreasers rarely become increasers, no matter how hard they try to talk themselves into it. The longer they wait, the worse it will become. However, once the burdens of ownership are taken off their backs, we have seen many decreasers really begin to enjoy dentistry again, and the more they enjoy it, the more relaxed and productive they become.


NAPB | National Association of Practice BrokersDENTAL PRACTICE BROKERS

Dental Practice Transitions Selling a Dental Practice
Dental Practice Valuation Dental Practices For Sale

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McLerran & Associates Dental Practice Brokers Texas Austin Houston

Maximizing the Selling Price of Your Dental Practice

By Patrick Johnston of McLerran & Associates

How quickly can I sell my dental practice?

What price should I list the practice at?

What will I walk away with at closing?

These are some of the questions that we hear when we meet with potential clients. While there are no “magic” answers, there are common features of valuable practices that will help to provide the answers to those questions. These desired features can be used as a basis for implementing strategies that will maximize the sale price at closing.

Increasing Revenues

One of the first attributes of a dental practice that buyers and lenders look at is whether the practice revenue is increasing or decreasing. We have been told repeatedly by industry lenders that decreasing revenues immediately raises red flags for them. Buyers become instantly wary as well, asking themselves “What in the world is wrong with this practice?”

Conversely, a practice that is experiencing increasing revenues generates excitement on the part of the buyer and the lender. It increases the perception of the value of the practice for the buyer, and allows the lender to fund the transaction at a higher level.

Flat or slightly decreasing revenues, common in our industry today, can be seen as positive given current economic conditions. Reasonable pricing of these practices is important to ensure that buyers are not immediately turned off and that the deal can be taken to closing in a timely manner.

Updated Equipment and Facility

Through pictures or actually visiting the dental practice, the next attribute noticed by buyers is the look and condition of the facility and the equipment. Imagine that you are a buyer who has found a dental practice that has increasing revenues, and is in a desirable location. You walk in to the practice and are struck by the comfortable and modern look, then you walk in to the operatories and it is like a picture from the trade magazine you were looking at this morning. Closing can be a few short weeks away in this scenario.

If your facility has not been updated in the last 15 to 20 years, and you have not purchased new equipment in that time, you can expect buyers to not perceive as much value in the practice.

Stable and Competent Staff

One area often overlooked in the perceived value of a dental practice is the stability and expertise of the staff. Providing the buyer with a trained and effective staff at closing can help that buyer to “hit the ground running” and will go a long way to ensure a high patient retention rate. Stable and effective staff are a key ingredient to a successful dental practice that has a strong new patient flow and increasing revenues.

This is usually easier said than done, unfortunately. Staff management is one of those areas that some dentists can really struggle with. Staff turnover, or even the absence of staff, i.e. “I do all my own hygiene because I can’t afford to pay a hygienist,” do not bode well for potential buyers. This may not kill the deal, but it can cause a buyer to make a “lowball” offer.

What to Do

How do you achieve increasing revenues, an updated facility, and a stable and competent staff? No easy answers here, but the list below will get the process going:

  • Focus on maximizing your recall system.
  • Consistently ask for referrals from your existing patients.
  • Formulate and implement a plan to update your facility and equipment.
  • Analyze and implement industry “best practices” for training and retaining staff members.

These strategies will take time to implement, and may require the assistance of consultants and coaches. Let us know how our NAPB dental practice transition consultants can help!


NAPB | National Association of Practice BrokersDENTAL PRACTICE BROKERS

Dental Practice Transitions Selling a Dental Practice
Dental Practice Valuation Dental Practices For Sale

> MORE