Are you considering the sale of your dental practice within the next 1-5 years? Do you want to know what kinds of questions a savvy buyer will ask? Or, do you simply want to have a better practice that is more productive, more efficient, and more profitable? If the answer to any of these questions is “yes,” then a Practice Tune-Up is a great option that will provide you with specific action items that will allow your practice to shine in an increasingly competitive market.
Working with data supplied by hundreds of Schwartz and Schwartz, PC, dentist clients, OPT, LLC, can show you how you compare with your colleagues in the Greater Boston Area and around New England. We begin with the financials, showing you what your “adjusted net income” is and how it compares with like-sized practices. In a similar analysis, we can show you what your “EBITDA” is and what your “adjusted EBITDA” might be. Bottom line, how does your profitability compare? This analysis includes an in-depth review of your expenses and highlights certain expenses that you need to be mindful of. For instance, are you paying a higher percentage of your income in rent than comparable practices pay? Or more in staff wages? Lab fees? Dental supplies? Marketing? These are all expense items in your practice that you need to understand when thinking about your practice overhead.
We turn next to an in-depth review of your practice production and productivity. How much of your production is generated by the dentist? By the hygienist? Is there a healthy ratio? Is there potential to increase dentist or hygienist production? How many “active patients” does your practice truly have? Are you as productive as your peer practices with your per patient revenue? How does your recall efficiency stack up? Are you as productive during your hours worked as your peers? What portion of production is being “written off” as insurance adjustments? Do you want to consider adding or deleting certain patient insurance plans? How do your fees compare to the fees of similar practices? What procedures do you refer out, or, put another way, are there procedures you could add, or that a potential buyer could add, to increase production?
There are some other miscellaneous, but very important, items that come up in a practice transition that it is better to address ahead of time if possible.
For instance, within the financial sector, does your accounts receivable report show a very large amount in the “90+ days” category? If so, it is probably best to write-off most of those “uncollectible” accounts. Likewise, do you have a large “patient credits” balance? If so, please understand that you will have to reimburse those patients or the buyer in a practice transition situation. Are you going to be paying off practice debt at the time of sale?
Under the employee category, do you need to review pay rates, hours, benefits? Do you have an employee handbook, and, if so, is it up to date?
In the production sector, are you working on certain long-term cases, like orthodontic/clear aligner cases? If the buyer does not do those types of cases – or sometimes even if he/she does – you may need to finish these cases post-closing in a transition.
Within the facility category, are you leasing space, and, if so, what is the status of your lease? Are there years left on it so that you can assign it? If so, what are the parameters of assigning the lease? Or, will there have to be a new lease? Do you own the real estate? If so, are there repairs or updates that you need to make? Do you have a sense of the value of the real estate if you are contemplating selling it? What is the state of your dental equipment? While we do not typically recommend buying “new” equipment immediately prior to a transition, you will need to make sure that what you do have is in working order.
As you can see, there are a lot of factors to consider when readying your practice for transition or simply wanting to improve the productive / efficiency / profitability of your practice. Feel free to schedule a no cost, no obligation initial consultation call. Take advantage of a Practice Tune-Up today!
Benjamin C. Larkin, MA, JD