Ask me anything about practice ownership

[laundry]

Good thing I check this from time to time....in the future, if you're doing to resurrect a months old thread, quote the OP so that they get a notification, otherwise it will fall on deaf ears.

Laundry, what are your thoughts on how this pandemic will change dentistry? COVID-19 will eventually be under control, but maybe this will take multiple shelter-in-place orders as it comes and goes in the next couple of years. I also think it's inevitable that other viruses like these will arise. It seems likely we are going to have to change PPE protocols and perhaps even outfit our offices with various filtration devices. Will patients worry about transmission of aerosols in the dental office and be less likely to visit the dentist?

If you look historically, these events crash the party every 100 years or so. Dentistry will evolve, as will the rest of humanity.

My thoughts are shared by many of my colleagues. Sure, it will set a precedent for update in PPE and OSHA guidelines. Same thing happened in the 80s after HIV crashed the party of wet finger dentistry. I think the new guidelines will fall somewhere between OR and ID protocols - better suction and disinfection standards and improvement on PPE.

---

Members don't see this ad.

 

[P7898]

Good thing I check this from time to time....in the future, if you're doing to resurrect a months old thread, quote the OP so that they get a notification, otherwise it will fall on deaf ears.



If you look historically, these events crash the party every 100 years or so. Dentistry will evolve, as will the rest of humanity.

My thoughts are shared by many of my colleagues. Sure, it will set a precedent for update in PPE and OSHA guidelines. Same thing happened in the 80s after HIV crashed the party of wet finger dentistry. I think the new guidelines will fall somewhere between OR and ID protocols - better suction and disinfection standards and improvement on PPE.

Which I think as a student was needed regardless. Correct me if you disagree. We can always improve that. But I hope it doesn't put a burden on small businesses financially. I hope it is more a one time thing and get everyone accommodated.

 

[laundry]

Which I think as a student was needed regardless. Correct me if you disagree. We can always improve that. But I hope it doesn't put a burden on small businesses financially. I hope it is more a one time thing and get everyone accommodated.

It is what it is. If we need negative pressure/UV/N-95/full OR gown up for procedures, so be it. We'll just raise our fees to absorb that. I doubt it will be that extreme, though.

 

[Cold Front]

It is what it is. If we need negative pressure/UV/N-95/full OR gown up for procedures, so be it. We'll just raise our fees to absorb that. I doubt it will be that extreme, though.

If you raise fees during a recession - fewer treatments for you. Think beyond masks and fees, millions of people will be unemployed (many of them your existing patients who would also lose their insurances). Patients will shop for cheaper treatments more than ever for next year or 2 if this economic recovery turns out to be a U-shaped recovery - which it will be. FFS offices will have no choice but to start accepting insurances again.


Sent from my iPhone using Tapatalk

 

[P7898]

We can all try and predict things. I think the best approach is to just keep on doing what you were doing prior and just adjust accordingly based on your own financial and patient analytics when the time comes and tweak what needs to be done.

 

[Cold Front]

We can all try and predict things. I think the best approach is to just keep on doing what you were doing prior and just adjust accordingly based on your own financial and patient analytics when the time comes and tweak what needs to be done.

Past performance is best indicator of future performance/results. There is a lot of data from last recession (2008) and how it effected dental offices.


Sent from my iPhone using Tapatalk

 

[P7898]

I agree and strategically we've always used past history and look at how we handled things then to how we handle things now. Just trying to be optimistic. We are all well and capable.

 

[deleted936472]

When you start a new practice is it a good idea to accept a bunch of different insurance companies to just get some patients through the door or should you be selective with the insurance you’ll accept from the beginning? I figured that in the beginning it might be a good idea to pretty much accept all types of insurance and once you get more FFS patients you can start to drop some of the crap insurance companies. Is this pretty accurate to what many dentist do? You’d most likely have some disgruntled patients that would write some bad reviews and leave your practice, so in the end you might end up losing more patients than you gain (but you might still be in the green in terms of revenue).

 

[laundry]

When you start a new practice is it a good idea to accept a bunch of different insurance companies to just get some patients through the door or should you be selective with the insurance you’ll accept from the beginning? I figured that in the beginning it might be a good idea to pretty much accept all types of insurance and once you get more FFS patients you can start to drop some of the crap insurance companies. Is this pretty accurate to what many dentist do? You’d most likely have some disgruntled patients that would write some bad reviews and leave your practice, so in the end you might end up losing more patients than you gain (but you might still be in the green in terms of revenue).

Don't do a start-up. Not a good idea, unless you are in an area in a severe need of a dentist. When choosing a practice to buy, go with the one that is closest to the FFS model (1-2 major insurance players in network, rest out of network or cash).

 

[deleted936472]

Don't do a start-up. Not a good idea, unless you are in an area in a severe need of a dentist. When choosing a practice to buy, go with the one that is closest to the FFS model (1-2 major insurance players in network, rest out of network or cash).

Awesome advice, I never liked the idea of starting one from the ground up when you could buy an already established practice. Thanks!

 

[Cold Front]

Awesome advice, I never liked the idea of starting one from the ground up when you could buy an already established practice. Thanks!

I did start-ups on all my offices in a big city. It’s not for everyone, but it can be done and successful.


Sent from my iPhone using Tapatalk

 

[deleted936472]

I did start-ups on all my offices in a big city. It’s not for everyone, but it can be done and successful.


Sent from my iPhone using Tapatalk

When you started your practices did you do what I described above in my first post (accept a variety of insurance providers before dropping some of them as you got more FFS patients)? I’m mainly just curious about this, I’d much rather buy out an existing practice rather than start one from the ground up.

With another recession looming I started to think about a few things. I was wondering what dentists can do to help mitigate their loss of business? I was thinking that you could do what I described above (accepting more insurance providers) then as the economy gets better you can drop them again. Sound about right?

 

[Cold Front]

When you started your practices did you do what I described above in my first post (accept a variety of insurance providers before dropping some of them as you got more FFS patients)? I’m mainly just curious about this, I’d much rather buy out an existing practice rather than start one from the ground up.

With another recession looming I started to think about a few things. I was wondering what dentists can do to help mitigate their loss of business? I was thinking that you could do what I described above (accepting more insurance providers) then as the economy gets better you can drop them again. Sound about right?

Yes, I accepted pretty much all insurances.

The best time to do a startup is during an economic downturn or a recession - like this year or next:

1. Landlords will give you better TI allowance for construction and a very competitive lease. Compared to buying an existing practice that is already in a long term lease terms and very difficult to renegotiate.

2. Material and labor to build a new office is typically cheaper during a recession. You design your office to your liking and there are a lot of incentives, tax breaks and depreciations available through the government - for building a new office versus buying an existing one.

3. You hire cheap labor (employees) during a high unemployment market. Employees will compete over positions - a bargain deal for the dentist > lower payroll. Compared to existing practice with existing high payroll and very difficult to lower that payroll unless you replace most employees - which could hurt the practice flow.

4. More freedom to choose the right location - this means you have a good chance of growing fast. Particularly in a retail building - where foot traffic and high visibility will be a big bonus and save you a lot of money on marketing. Buying an existing office could come with high marketing expenses, which could be a significant cost to your overhead.

5. If you are young (20s and 30s), a start-up is ideal. You can take that risk if you approach it well. You can recover from mistakes or bad decisions you made in the process - and the risk is relatively low cost wise, compared to buying an existing office at a premium and inheriting an office molded to the seller’s vision.

Choose wisely.


Sent from my iPhone using Tapatalk

 

[laundry]

Yes, I accepted pretty much all insurances.

The best time to do a startup is during an economic downturn or a recession - like this year or next:

1. Landlords will give you better TI allowance for construction and a very competitive lease. Compared to buying an existing practice that is already in a long term lease terms and very difficult to renegotiate.

2. Material and labor to build a new office is typically cheaper during a recession. You design your office to your liking and there are a lot of incentives, tax breaks and depreciations available through the government - for building a new office versus buying an existing one.

3. You hire cheap labor (employees) during a high unemployment market. Employees will compete over positions - a bargain deal for the dentist > lower payroll. Compared to existing practice with existing high payroll and very difficult to lower that payroll unless you replace most employees - which could hurt the practice flow.

4. More freedom to choose the right location - this means you have a good chance of growing fast. Particularly in a retail building - where foot traffic and high visibility will be a big bonus and save you a lot of money on marketing. Buying an existing office could come with high marketing expenses, which could be a significant cost to your overhead.

5. If you are young (20s and 30s), a start-up is ideal. You can take that risk if you approach it well. You can recover from mistakes or bad decisions you made in the process - and the risk is relatively low cost wise, compared to buying an existing office at a premium and inheriting an office molded to the seller’s vision.

Choose wisely.


Sent from my iPhone using Tapatalk

I'm sure startups can be very successful, but I still think existing is a cheaper option.

1) I always renegotiate the terms of the lease when I buy existing. It's a contingency in all of my buy/sell agreements. If I don't get leasehold improvements or a better lease rate I walk away from the deal.

2) The difference in depreciation of buying vs startup is simply the time frame - when buying existing, most of what you buy gets allocated to goodwill, which has a longer maturity time. With start up, especially as your first one, you will go over budget 100% of the time (you don't know what you are doing) and spend money on brand new equipment; whereas in existing office, you buy almost fully depreciated used equipment that is fully functional for pennies on the dollar.

3) Cheap labor is nice, but I quickly found out that you get what you pay for.

4) Choose an existing office for sale in a location you want. High foot traffic will only get you so far (Hi Howard Farran ). It's all about SEO these days.

5) Risks in both, sure!

 

[Caffeine Sweats]

I have been a member of this forum since college. I'd love to give some honest insight into the real world for anyone who has a question (remember, no such thing as a dumb question).

As a student who will be 450K in debt, I am looking to become a practice owner as soon as I am ready after I graduate. Do you recommend taking on a practice loan on top of the dental school debt I’ll have? I’m looking to continue to live and practice in the Midwest.

 

[cluelessdr]

is dental school still worth it with someone who is graduating with 400k in debt? im an incoming d1 so i can still back out now

 

[GoDental101]

is dental school still worth it with someone who is graduating with 400k in debt? im an incoming d1 so i can still back out now

You've asked this question already multiple times, if you are really have serious second doubts then follow your gut.

 

[laundry]

As a student who will be 450K in debt, I am looking to become a practice owner as soon as I am ready after I graduate. Do you recommend taking on a practice loan on top of the dental school debt I’ll have? I’m looking to continue to live and practice in the Midwest.

is dental school still worth it with someone who is graduating with 400k in debt? im an incoming d1 so i can still back out now

All other reasons aside, name me another career path that costs less and give you the potential to make 2-300K after 4 years of school and no earning ceiling after.

 

[cluelessdr]

All other reasons aside, name me another career path that costs less and give you the potential to make 2-300K after 4 years of school and no earning ceiling after.

real estate lol seems like thats the answer here

 

[2TH MVR]

2) The difference in depreciation of buying vs startup is simply the time frame - when buying existing, most of what you buy gets allocated to goodwill, which has a longer maturity time. With start up, especially as your first one, you will go over budget 100% of the time (you don't know what you are doing) and spend money on brand new equipment; whereas in existing office, you buy almost fully depreciated used equipment that is fully functional for pennies on the dollar.

Most sellers want goodwill (nontangible) allocation and buyers wants fixed assets (equipment, etc) for tax reasons. Higher goodwill and less fixed assets means less taxes for selling dr. but less initial tax write-off for the new buyer. When I sold my ortho practices .... my acct recommended that I have a local equipment company (Patterson) come in and do an audit on the fixed assets. This audit was the basis for the negotiations on how the practice was to be allocated (nontangible vs. tangible). Also .... if the IRS ever does an audit on the practice sale taxes re: these allocations ... well ... you're in the clear. Also banks would rather loan on fixed assets vs. goodwill .... so having that audit will help you with the loan.

Again. If you are a new dentist looking to buy a practice. Make sure you are represented by a qualified acct who can predict your future tax consequences. Most buyers want alot of fixed assets as part of the sale so they can get the larger 1st year tax write off. Sellers .... of course ... want goodwill to make up the largest portion.

 

[Grinz]

Adding on to this, how many years of tax returns do banks like to see prior to loaning for a practice purchase?

 

[laundry]

real estate lol seems like thats the answer here

See people say that, but ask them what they mean by real estate. Broker? Realtor? Investor? How many Realtors do you know that make 500K/yr?

 

[laundry]

Adding on to this, how many years of tax returns do banks like to see prior to loaning for a practice purchase?

Most practice loans don't have personal guarantee. They want to see what your production ability (production reports from at least a year of work).
Post-COVID, though, this may change.

 

[Khompressor]

How much is your malpractice premium and who do you use? Medpro want's 6k a year in Cali which I feel is really high.

 

[Adam_W]

I have never seen a practice loan without a personal guarantee. Maybe it depends on the area?

 

[2TH MVR]

I have never seen a practice loan without a personal guarantee. Maybe it depends on the area?

I agree.

 

[ID341]

Is it hard to become a dental professor without a PhD? How much do most of these academia jobs compensate? Is it doable to run a practice and teach at the same time?

Most states are required to publish state employee salaries. If you know of a school you want to work at see if you can find the doc that lists your school of interest's salaries.

 

[Laradd]

After graduating college, how many practices/trainings you'd been through before having your own patients and clinic?

 

[Mike885]

You might have already explain it but I could not see it. What is the rule of thumb when buying an existing office in terms of collections, procedures done in office and patient pool? Some people say don’t buy practices with less than 800k production. Or look at the overhead!? What can be a fair price for a practice? Is it based on net income? Thanks

 

[Adam_W]

You might have already explain it but I could not see it. What is the rule of thumb when buying an existing office in terms of collections, procedures done in office and patient pool? Some people say don’t buy practices with less than 800k production. Or look at the overhead!? What can be a fair price for a practice? Is it based on net income? Thanks

There is so much up in the air right now with COVID, and it depends completely on what you want to do. I wouldn't put a hard number on it (over 800k), but if you are in an urban area vs rural that might be more necessary.

I would rather take over a 600k bread-and-butter office than an 800k office that is doing 3rds and implants in house.

 

[Mike885]

Thanks. If I buy a practice which had 65% overhead and the doctor net income was $250K last year, how much should I expect to earn this year?

 

[Adam_W]

Thanks. If I buy a practice which had 65% overhead and the doctor net income was $250K last year, how much should I expect to earn this year?

Based on your numbers, the practice should gross about $715K. Say you pay $465 for the practice, a ten year note at 4% would be about 56K per year, so that is added into the overhead. You would take home *about* $195K until your loan is paid off, or you increase revenue.

Those are really rough numbers, and the 65% overhead can really vary a ton depending on what the seller/broker is calling "overhead". Typically, they try to make the overhead number look as low as possible to make the practice more desirable. You would want to go over the numbers specifically with an accountant that knows the industry. That is also dependent on you maintaining the current revenue so you have to consider how your personality, work ethic and skill set match with that practice.

 

[Adam_W]

I agree.

The only thing I can guess is that if you have multiple practices, there might be enough business collateral to borrow more money without a personal guarantee. Everyone I know that has bought a single doctor practice to work in has had to personally guarantee the note.

 

[monkeykey]

The only thing I can guess is that if you have multiple practices, there might be enough business collateral to borrow more money without a personal guarantee. Everyone I know that has bought a single doctor practice to work in has had to personally guarantee the note.

I thought it was fairly easy to get a bank note for these dental practices? What kind of interest rates are do these banks typically charge for practices?

PS: Nice Youtube channel! Very informative!

 

[2TH MVR]

The only thing I can guess is that if you have multiple practices, there might be enough business collateral to borrow more money without a personal guarantee. Everyone I know that has bought a single doctor practice to work in has had to personally guarantee the note.

Usually a landlord will also ask for a personal guarantee. Not sure what the point is of setting up these shell LLCs when a creditor can still go after your personal assets. My Acct referenced that setting up a LLC is for tax purposes and liability protection.

 

[Adam_W]

I thought it was fairly easy to get a bank note for these dental practices? What kind of interest rates are do these banks typically charge for practices?

PS: Nice Youtube channel! Very informative!

Thanks so much, that really means a lot!! I have wanted to do the channel for a while and when we couldn't work, I really took the last couple months to dive into YouTube headfirst.

Banks will loan based on the practice you are buying, as long as it looks like you can handle the production numbers and your credit is good. You don't need enough personal collateral to cover the loan, they just want everything they can possibly get as collateral, so you have incentive to make it work and not just walk away.

I have a 12 year loan from 2015 at 5.15%. I think the rates are better now, and am hoping to refi soon if that is possible.

 

[Adam_W]

Usually a landlord will also ask for a personal guarantee. Not sure what the point is of setting up these shell LLCs when a creditor can still go after your personal assets. My Acct referenced that setting up a LLC is for tax purposes and liability protection.

I'm with you, I have a PLLC and I honestly don't know what the big deal is. The guy before me was pretty financially savy and he did everything as a sole proprietor. The only thing I can think is business liability in a lawsuit or something.

 

[Not_A_Doc]

How does the math work where your practices generate 4-5M in revenue and you're only netting 650K-1M? Is your overhead really 80+ %?

 

[DMD12345]

How does the math work where your practices generate 4-5M in revenue and you're only netting 650K-1M? Is your overhead really 80+ %?

I'm guessing he's counting the total revenue for the practices of which he's just a partial owner

 

[Dent001]

I am 5 years out of school and almost 2 years into Ownership. I bought a failing office doing about 300k and turned into $1M the first year. This year, even with COVID, I will be about 1.3M maybe. I have done great at keeping my overhead low ranging from 45-55%. I work 4 days a week and have been investing my money heavily and keeping a relatively low cost of living.
my question: at what point should I buckle down and start expanding to multiple offices? I have gone through a hell of a experience with staff and business strategy. I get calls from other dentist all the time asking me for advice as well. I don’t want to offer actual consultant services unless I’ve got at least a few offices under my belt.
I do bread and butter plus heavy surgery. No Ortho, limited Endo and growing my implant skills.

 

[AONLINE]

I am 5 years out of school and almost 2 years into Ownership. I bought a failing office doing about 300k and turned into $1M the first year. This year, even with COVID, I will be about 1.3M maybe. I have done great at keeping my overhead low ranging from 45-55%. I work 4 days a week and have been investing my money heavily and keeping a relatively low cost of living.
my question: at what point should I buckle down and start expanding to multiple offices? I have gone through a hell of a experience with staff and business strategy. I get calls from other dentist all the time asking me for advice as well. I don’t want to offer actual consultant services unless I’ve got at least a few offices under my belt.
I do bread and butter plus heavy surgery. No Ortho, limited Endo and growing my implant skills.

Wow you’ve done very well for yourself, congratulations! Did you do a GPR/AEGD?

 

[Grinz]

I am 5 years out of school and almost 2 years into Ownership. I bought a failing office doing about 300k and turned into $1M the first year. This year, even with COVID, I will be about 1.3M maybe. I have done great at keeping my overhead low ranging from 45-55%. I work 4 days a week and have been investing my money heavily and keeping a relatively low cost of living.
my question: at what point should I buckle down and start expanding to multiple offices? I have gone through a hell of a experience with staff and business strategy. I get calls from other dentist all the time asking me for advice as well. I don’t want to offer actual consultant services unless I’ve got at least a few offices under my belt.
I do bread and butter plus heavy surgery. No Ortho, limited Endo and growing my implant skills.

Congrats. How many ops and hygiene days? What’s the secret to low overhead?

 

[Dent001]

Congrats. How many ops and hygiene days? What’s the secret to low overhead?

my hygiene sucks. I essentially did a modified startup And overpaid for it. Hygiene only makes up about 10% of revenue at my office currently. Started 3 hygiene days and now at 4. I have a lot of holes in hygiene, but i still pay my hygienist. 4.5 ops. For overhead, I buy everything in bulk and am completely digital.

 

[2TH MVR]

I am 5 years out of school and almost 2 years into Ownership. I bought a failing office doing about 300k and turned into $1M the first year. This year, even with COVID, I will be about 1.3M maybe. I have done great at keeping my overhead low ranging from 45-55%. I work 4 days a week and have been investing my money heavily and keeping a relatively low cost of living.
my question: at what point should I buckle down and start expanding to multiple offices? I have gone through a hell of a experience with staff and business strategy. I get calls from other dentist all the time asking me for advice as well. I don’t want to offer actual consultant services unless I’ve got at least a few offices under my belt.
I do bread and butter plus heavy surgery. No Ortho, limited Endo and growing my implant skills.

Awesome. Rural or Urban area?

 

[Dent001]

I have been a member of this forum since college. I'd love to give some honest insight into the real world for anyone who has a question (remember, no such thing as a dumb question).

Sorry forgot to quote. can you look at my post above #140. Thank you

 

[Dent001]

Awesome. Rural or Urban area?

urban af. I associated rural for few years and commuted from the city 1-1.5 hrs each way. It ****ing sucked

 

[Dent001]

Wow you’ve done very well for yourself, congratulations! Did you do a GPR/AEGD?

None. Just hustled in predoc and took ce

 

[Cold Front]

urban af. I associated rural for few years and commuted from the city 1-1.5 hrs each way. It ****ing sucked

Congrats. Reminds me my first 5 yrs. Don’t burn yourself out. You probably are already to some degree, due to your 4 days schedule.

 

[laundry]

I am 5 years out of school and almost 2 years into Ownership. I bought a failing office doing about 300k and turned into $1M the first year. This year, even with COVID, I will be about 1.3M maybe. I have done great at keeping my overhead low ranging from 45-55%. I work 4 days a week and have been investing my money heavily and keeping a relatively low cost of living.
my question: at what point should I buckle down and start expanding to multiple offices? I have gone through a hell of a experience with staff and business strategy. I get calls from other dentist all the time asking me for advice as well. I don’t want to offer actual consultant services unless I’ve got at least a few offices under my belt.
I do bread and butter plus heavy surgery. No Ortho, limited Endo and growing my implant skills.

Congrats on your success!
1) When to start scaling - I started expanding to multiple offices after 3 years of ownership of my first practice. Going from 300K to 1-1.5 mil in 12 months means you have lots of room to expand within your office. Before expanding, make sure your own practice is running at full capacity. Add hours, bring on an associate (see many reasons below), etc. It's a lot more profitable to expand within your own office before scaling to others. Bring in ortho, endo, expand hours and hygiene days, etc.

Operating one practice by yourself and operating an associate-driven practice are completely different animals. I did my expansion with partners who have ownership - to my mind, the only solid way of scaling. So, if you can find a partner, then go for it! If you are thinking about an associate-based practice, then test this out on your own office by bringing on an associate a few days a week.

2) Consulting - give it a few more years Advice to friends/colleagues here and there is fine. I did not start consulting after I owned multiple offices, was doing 400K/month, and had good connections/leverage within the industry.

Incidentally, I'm doing my free monthly webinar on this on the 22nd. Here's the link: Welcome! You are invited to join a webinar: Scaling Dental Ventures - a Webinar. After registering, you will receive a confirmation email about joining the webinar.

 

[Dent001]

Congrats on your success!
1) When to start scaling - I started expanding to multiple offices after 3 years of ownership of my first practice. Going from 300K to 1-1.5 mil in 12 months means you have lots of room to expand within your office. Before expanding, make sure your own practice is running at full capacity. Add hours, bring on an associate (see many reasons below), etc. It's a lot more profitable to expand within your own office before scaling to others. Bring in ortho, endo, expand hours and hygiene days, etc.

Operating one practice by yourself and operating an associate-driven practice are completely different animals. I did my expansion with partners who have ownership - to my mind, the only solid way of scaling. So, if you can find a partner, then go for it! If you are thinking about an associate-based practice, then test this out on your own office by bringing on an associate a few days a week.

2) Consulting - give it a few more years Advice to friends/colleagues here and there is fine. I did not start consulting after I owned multiple offices, was doing 400K/month, and had good connections/leverage within the industry.

Incidentally, I'm doing my free monthly webinar on this on the 22nd. Here's the link: Welcome! You are invited to join a webinar: Scaling Dental Ventures - a Webinar. After registering, you will receive a confirmation email about joining the webinar.

thank you for reaffirming what i was already thinking. I plan to maximize my main office before I consider expanding to different locations. I own my building and property, which is about .5 acres. Once my hygiene grows and I am ready for another hygienist I am going to partially renovate my building to add 2 more ops. I am currently growing my implant skills and doing all my surgeries guided. So far I do all my digital planning, but pretty soon (in like 6 months) I will incorporate 3d printing in office for guides, immediate prosthetics, aligners, etc. I think once i get these different workflows down I will increase my collections dramatically while minimizing overhead. My minimal goal is to collect $2M with 50% overhead working 4 days. Once i reach that goal I will consider expanding hours, hiring more staff, bringing in an associate. Will see how it goes! I might check out your webinar as it sounds like we have similar mindsets.