Transitions Newsletter - February 2023

EXPERIENCE, INFORMATION, CONSULTANTS YOU CAN TRUST

Fees & Strategy — Get Your Practice in Sync

In preparing a practice for an eventual sale, we often take a deep dive into financial evaluation, and during that process, find fees that are far below the area norm. While true this costs the practice annual revenue (on a compounding basis), it also further affects a purchaser who wants to bring fees in line with the local norms as quickly as possible. Unfortunately, the new practice owner is handicapped in the ability to normalize fees immediately following a sale for fear that it would cause patient reluctance.

Our recommendation is to select a fee schedule that accurately reflects the practice. All fees should be increased at the same rate across the board. Many doctors waste time and energy trying to adjust individual fees based on the perception of patient and insurance company reactions. If you find yourself in a position where you have not raised fees in recent years, we suggest obtaining an analysis from a qualified dental representative and consider an increase of at least five (5) percent for 2023 . If that seems drastic, note that year-to-date inflation as of November was over seven (7.1) percent. It’s important to note that that figure represents a broad metric, though, and doesn’t reflect the specific increases in your expenses that are not tied directly to inflation. Those costs could likely be much higher than that 7.1%, particularly given the significant impact of the increase in costs of goods and services related to most business expenses. The time to act is now. It is important to remember that it is usually not possible to catch up or make up for years when fees were not incrementally increased. Even a large fee increase in any one year cannot make up for years of lost revenues, yet

anything you do now, and then continue to do going forward, will be important for the continued success of your practice.

Doctors should consider that their primary business goal is to operate their office at optimal capacity doing the type of dentistry they want to do. In addition to conservative fee increases this year, extending more liberal credit terms to patients may be necessary to help increase treatment acceptance and build goodwill with patients.

Examine Communication Strategy

Take this new year to also examine your communications with existing patients. Studies have shown that it is easier and more cost effective to increase business from existing patients than to create new ones, although its clearly the case that marketing is becoming increasingly important as doctors constantly look for ways to get new patients. While many will spend virtually all their marketing efforts on new patients, its important to not forget, if not even specifically, to spend MORE time working on your existing patient base. It’s sound advice to plan to communicate with existing patients at least every six (6) months. A simple informational (news) letter about changes in the practice or new procedures can be delivered for free via email or for relatively minimal cost using regular mail. For example, discussing continued procedures relative to COVID-19 pandemic safeguards will help instill comfort in patients who may still be reluctant to return to the office. There are also continuous advances in dental care that can be highlighted as well as reminders about using benefits or just time-driven messaging to help even out or

fill less busy times of the year. Take this as an opportune time to reconnect, talk about the upcoming year and, at least, remind patients that insurance benefits have been reset as of January 1.

Get to Know Your New Patients

Also consider your strategy concerning new patients. What do they want? Why have they come? Ask them! Traditionally, we’ve all been taught to do a thorough clinical examination followed by a comprehensive full-mouth treatment plan for all new patients. Especially now, your new patients may have left another office. Take the time to talk and make them feel understood and comfortable.

As we all know, last year was not easy for anyone but we are looking with optimism at this upcoming year. Now is the time to comprehensively evaluate your practice and make plans for this New Year. A little time now will save stress, and dollars, throughout the year.

Have you evaluated your fees for the year? Contact us now to help with a fee or Henry Schein Practice Analysis today.

When is a “Valuation” not a Valuation? Why it’s Important—Know the Difference

Did you know that Henry Schein Dental Practice Transitions completes more practice valuations or appraisals per year than any other transition firm in the country? Due to that volume, it’s often that we are posed the question of “do I need an appraisal?” when working with clients, whether sellers, buyers, clients entering partnerships, mergers or litigation, bringing on an associate, or for estate planning.

Using a Rule of Thumb

A Rule of Thumb uses some information and then usually applies an arbitrary multiplier to that information to arrive at a value. The most common Rule of Thumb we hear is, “The practice is worth 80% of gross revenue,” or “The practice is worth one times net income.” Neither of these Rules of Thumb is an accurate representation of practice value.

A classic example: Two practices each collecting $1,000,000. One has an overhead of 50% and the other an overhead of 70%. Using the “80% of gross revenue” Rule of Thumb, each practice would be worth $800,000. In reality, the first practice is significantly more valuable than the second because of the larger profit; i.e., a buyer would pay more for a net profit of $500,000 compared to $300,000. Similarly, if one practice has state-ofthe-art equipment and technology and a second has 20-year-old, non-digital, out-of-date equipment, it is obvious the first practice is worth more (but how much more?) if all else is the same.

An honest transition specialist is going to tell you what the market value for your practice is and, by doing a valuation analysis, give you a realistic selling price that you can count on. The valuation does not have to be in the form of a written report, either Comprehensive or Limited, but the analysis that the transition specialist does comprises all the pertinent information that would go into a formal written report.

Why might you need a formal valuation at all?

You will certainly want the same information that the transition specialist or consultant has used to arrive at a sale price as a requirement for financing. In the case of partnerships, mergers, or estate planning, it is probable that a comprehensive written appraisal report would be required.

First, let’s define what a practice valuation is. A practice valuation or appraisal is a formal opinion of value based on all the pertinent information available about the subject– in our case, a dental practice. There are many factors that go into “all the pertinent information,” including gross income, net income, fee schedule, staff information, PPO, HMO, and Medicaid insurance participation, the total number of patients, number of new patients, specialties and procedures, demographics, market issues, etc. Valuations can be oral or written but must be based on all of the information, not selective pieces.

Some practice transition specialists and consultants often offer a “Free Appraisal” or “Free Valuation” of a practice when seeking to represent a seller. Unless specifically indicated, it is most likely that this will be an “Opinion of Value” based on a Rule of Thumb approach, not a “Valuation.” So, what’s the difference?

A Formal Appraisal

A Formal Appraisal includes all the relevant information and provides a formal written report. The report can be a Comprehensive Report or a Limited Report and although both have completed the same analysis, the amount of data and discussion can vary. Both formal reports should be signed and dated by the evaluator and should be able to be fully explained.

Transition Specialists Use Different Methods

Unfortunately, there are transition specialists, brokers, and consultants who will tell a seller what he or she wants to hear in order to engage a client. If the seller thinks the practice is worth $600,000 but an official valuation suggests it is really worth $450,000, the seller is going to be more inclined to engage the broker who tells him the practice is worth $600,000, even if the transition specialist knows the practice will end up selling for $450,000.

For doctors who are veterans in practice, since your practice is one of your most valuable assets, doesn’t it make sense that you would want to know its true value? We encourage all dentists to annually have their dental practice appraised as an element of their net worth, their exit strategy planning, and for estate planning purposes. Not only does it give the peace of mind to know what the practice is worth, but the process can also turn over rocks and open shades that could allow you to be more effective, efficient, and profitable, now and in the future.

For younger doctors, since purchasing a practice is a life-changing decision, doesn’t it make sense that you would want to know its real value? We can evaluate a practice you’re considering purchasing, particularly if we have not listed it. Knowing the difference between “appraisals,” though, and the information and terminology they use can make all the difference.

Are you wondering about the value of your practice? Inquire about a practice valuation today and we’ll be happy to discuss the different options in more detail so as to best fit your needs.

WHAT OUR CLIENTS ARE SAYING:

I want to thank Ben Sapir for his guidance and support through our most challenging transition. His experience and patience were truly appreciated. The new Doctor and I are working smoothly together to make our patients feel secure about their future dental care. Thanks again for all the help.

It is with great appreciation I am writing this testimonial for my experience with Henry Schein’s agent Michael Appalucci. We had a difficult sale of our dental practice at our Bronx location, needed after my partner was forced to retire due to health reasons. Mr. Appalucci was pleasant, persistent and professional in his efforts to find us a buyer and we are grateful for his help. I would highly recommend him and Henry Schein Dental Practice Transitions in the sale of your practice and realty.

I would highly recommend the Henry Schein Practice Transitions Group to handle your practice sale and transition. I initially tried to list my practice myself and then tried with an online service that utilizes electronic questionnaires as its sole method of identifying candidates. What I came to realize was that it is difficult to attract good candidates without an established broker and personalized service. The sale/transition process was much more complicated than I realized and just got more complicated the closer we got to closing. My broker agent, Alisa Shoaf, was able to orchestrate banks, three attorneys, and the buyer and seller to successfully bring this transaction to the table on time. I would say that it would have been extremely difficult if not impossible to navigate the legal issues and challenging to satisfy the sellers financial institution without professional brokerage guidance. Even though Alisa was located three hours away she would not hesitate to make the trip for a oneday meeting. She did so many times during the process in order to add the personalized service that a practice transition needs and deserves.

DIVE-IN & LEARN with On-Demand Content!

Now Available:

• Selling Your Practice in 2023? Are You Ready?

• Is Your Group Practice Ready for the Next Step?

• Creating an Effective Partnership

To watch pre-recorded webinars that you may have missed, visit HenryScheinDPT.com/webinars

Webinars from Dental Practice Transitions are designed to provide tips, tools, and help you capitalize on the investments you’ve made throughout your dental career. Hear from nationally recognized speaker, author, and consultant who has been advising dentists for more than 30 years, Senior Director of Transition Services, Thomas Snyder, DMD, MBA, for an update on practice values, dental market trends, considerations for successfully transitioning your practice, and more.

Russell Coser, D.D.S. – Seller Torrance, CA

Stephen Molinaro, D.D.S. –Seller Bronx, NY

Dr. Mike Papadelias – Seller Pensacola, FL

CONGRATULATIONS

CENTRAL

Ricky L. Price, D.D.S. sold to Southern Family Dental Partners, LLC Wynne AR

John L. Nicolette, D.M.D. sold to Aaron Hayes, D.D.S. Englewood CO

Todd C. Martin, D.D.S. sold to Tabassum Zaidi, D.D.S. St. Charles IL

Brett E. Leucht, D.M.D. sold to Michael Hunt, D.M.D. Louisville KY

Paul C. Mansky, D.D.S. sold to John Hwang, D.D.S. Troy MI

Irwin A. Goodman, D.D.S. sold to E & N John R Practice, PLLC Hazel Park MI

Wissam Kamouni, D.D.S. sold to Lansing Ardent, PLLC East Lansing MI

Daniel T. Colgan, D.D.S. sold to Tinsley & Schultz, D.D.S., P.C. d/b/a Seaport Family Dentistry Liberty MO

Kurt Thomas, D.D.S. sold to Westlake Smile Center LLC Westlake OH

Rebecca J. Barnes, D.M.D. sold to Dr. Zaben D.M.D. LLC Richfield OH

John Terrence Green, D.D.S. sold to Platt Family Dentistry, LLC Dayton OH

Michael R. Peters, D.D.S. sold to Tumbleweed Dental, PLLC

Rob J. Smith, D.D.S. sold to Scott Wells, MBA

Jeremy Denman, D.D.S. sold to EMH Dental Associates, LLC

May W. Tape, D.D.S. sold to Ray Caruso

EAST

Jeffrey M. Pivor, D.D.S. sold to Seung yub Song, D.D.S.

Frederick S. Landy, D.M.D. sold to Aditya Kashyap, D.M.D.

Richard C. Ostberg, D.M.D. sold to Tatnuck Family Dental Care PLLC

John J. Higgins, D.D.S. sold to Wyngate Dental of Bethesda LLC.

James E. Smith, D.M.D. sold to Narender S. Dudee, D.D.S., PLLC

Dana R. Fallon, D.M.D. sold to AAK Dental LLC

Franklyn Ianno, D.D.S. sold to Scott Levitz, D.D.S. Amityville NY

Frank Reemer, D.D.S. sold to Zeal Dental, PC Bardonia NY

John C. Minye, D.D.S. sold to Michael S. Grossman D.D.S., PLLC Syracuse NY

John N. Cacchio, D.M.D. sold to Brilliant Smiles Dental Group — Jenkintown LLC

Brian Wilk, D.M.D. sold to Elkins Park Dental Innovations PC

Philadelphia PA

Jenkintown PA

Waynesboro VA FLORIDA

Lisa J. Tatum, D.D.S. sold to SEDP Waynesboro, LLC & Waynesboro Blue Ridge Dental, PLC

William Neale, D.D.S. sold to Morgan Marion Zwickel, D.M.D., M.S.

Cesar Garcia, D.M.D. sold to Michelle Bargfrede, D.M.D.

Fort Walton Beach

Lake Mary sold to Jose Alberto, D.D.S.

Pembroke Pines

Kelley Borders, D.M.D. sold to Joshua Ferraro, D.D.S. Plant City

Shana Francois, D.D.S. sold to Roger Phanord, D.M.D.

WEST

El Cajon General Dentistry Practice

Eugene, OR General Dentistry Practice

Orange County General Dentistry Practice

Orange General Dentistry Practice

Sonoma County General Dentistry Practice

Southern Oregon General Dentistry Practice

Walla Walla, WA General Dentistry Practice

Pompano Beach

PRACTICES FOR SALE

COLORADO

FLORIDA | CENTRAL

HOW

CALIFORNIA | NORTHERN/CENTRAL

CALIFORNIA | SOUTHERN

CALIFORNIA | SAN DIEGO

PRACTICES FOR SALE