How to Add $1,000,000 to Your Earnings While Working Less and Enjoying Your Practice More!
Now Is a Great Time to Be a Dentist!
With tremendous opportunities emerging now and waiting down the road, the future is bright for dentists. Research suggests that 30 million Americans are missing all their teeth in at least one arch, and that 60 million are missing posterior teeth. Current forecasts also suggest that there will be more than one billion adult teeth to treat in the U.S. over the next 25 years. Add to that the recent boom of cosmetic dental industry, the increasing lifespan of Americans and the fact that people are retaining more of their teeth into their senior years, and everything points to more patients who will need to be making regular visits to the dentist for prevention, maintenance, restorations, the treatment of gum disease, and discretionary services. Add this all up and you have powerful potential to grow your practice, add to your wealth, and provide the caring service you enjoy. But the secret to tapping into these opportunities is having the right plan in place.
Allies for Success
When dentists view each other as allies, new and established dentists can take full advantage of the emerging opportunities by working together. There are approximately 155,000 dentists practicing in the United States today. Of these, about a third are between 45 and 54 years of age. In effect, 33% of practicing dentists are contemplating retirement or gearing up for it. Or you could say, at least 33% of practicing dentists may be ready to bring on an ally for success. For a new dentist, it’s a tremendously challenging task to start a practice from scratch. Few have the start-up capital to even consider it. Even if they did, it would be tough going in today’s highly competitive market. It’s much better for the new dentist to establish himself or herself as an associate at a practice where there’s a potential to buy in down the road. For the established dentist, this arrangement also makes sense. Bringing someone on board before retirement should facilitate a smooth ownership transition, and allow the dentist to negotiate a fair price for the practice (or the portion of it up for sale) in advance. What many new and established dentists often don’t recognize is one simple fact: that a practice transition brings together the best ally they have in facing their mutual challenges – each other!
Creating the Win-Win
If facilitated well, a practice transition can truly be a win-win for both the owner dentist and the new dentist. It can certainly offer both parties a viable solution for the financial realities of retirement for the established dentist and graduation debt for the new dentist. By joining forces, established dentists and recent grads can optimize their individual bottom line and maintain the continued success of a practice.
Instead of trying to “go it alone” for the length of their career, transitions allow new dentists to join up with established practices on terms that make sense for both and maximize the value of the practice for each dentist.
The advice and guidance of professional advisors should be utilized throughout the transition process. Their role is to support both parties in developing a smart, well-thought-out plan for the transition that will mean success for everyone involved.
Practice transitions offer incredible opportunities for financial growth and practice success, as well as provide mentorship to associates and a flexible pathway to retirement for senior dentists. Both dentists have the time and resources to do the very best dentistry they can while ensuring the continued success of an established practice.
Consider these facts. With a well-managed transition mediated by an objective outside advisor who represents the transition, not the individuals, in as few as five years a practice can:
• Bring in an associate
• Create a partnership
• Almost double in value
• Create an economic windfall for the senior dentist of $1,000,000 or more
• Create the opportunity for lifestyle and professional enhancement
• Allow a new dentist to start their career in a successful, established practice in an affordable way with the mentoring and support of an experienced practitioner
• Provide continuity for the team
This is not just win-win – this is unbelievably win-win-win!
Capturing the Full Value
Doctors on the leading edge are using transitions to accelerate growth and uncover opportunities in their practices. These doctors understand the integral role a transition can and should play in their strategic planning process, and they know that a properly timed transition carried out with careful planning can result in huge economic and professional benefits for both owner doctors and new dentists.
Transitions are based on successful, established senior doctors integrating an associate into the practice and gradually transferring full or partial ownership over time.
Through this approach, excess value that would have gone unnoticed is often uncovered and leveraged, patient needs are met at the highest level, and both doctors reap the economic advantages of dramatically growing the practice.
In most cases, senior doctors can realize an economic windfall significantly higher than what they would have received from the traditional brokered approach, and associates can end up owning a practice worth almost double what they paid for it at the beginning of the buy-in process.
In some cases a brokered sale is the right option, but when appropriate, a win-win transition enables the responsible transfer of ownership and creates accountability for both parties.
Dentistry is a caring profession, but make no mistake – it is also a business that needs strategies implemented at the right time to remain healthy so doctors can continue to provide optimal care to their patients.
Innovative practices understand that a transition is a business strategy that has at its center the protection, enhancement and full realization of the practice’s value as a business. Best practices around transitions are about knowing when the time is right to leverage this value for maximized success.
A transition puts the practice in a state of evolution and flux – it affects the team, patients, ownership, practice image and value. Because of this significant impact, every transition has risks associated with it that are unique to each situation, and each must be carefully planned in advance so these risks are clearly understood and mitigated. That being said, there are certain fundamental conditions and reasons for a transition that make taking on these risks worthwhile. The following four catalysts are recognized by best practices as opportunities for a transition.
If your practice value is too high you may have to sell low.
Many of us have been led to believe that when we’re ready to leave the profession, we won’t have any trouble finding a young dentist who wants to buy our practice. But is this really the case?
Young dentists are coming out of school with considerable debt levels – over $150,000 in many cases. If they were to purchase a practice worth $400,000 or more, they would add to this debt monthly loan payments of at least $4,800 over 10 years or $6,200 over 7 years (at 8% interest). Over a 5-year term the monthly payment would be $8,100. And this doesn’t take into account taxes.
Very few young doctors are capable of taking on the heavy financial burden … making the outright sale of an established practice very difficult, if not risky, for both seller and buyer.
Additionally, new dentists don’t work as quickly as established ones and need time to develop their clinical and case presentation skills. On average, an associate fresh out of school will produce less in his or her first year than two well-appointed hygienists. This isn’t enough to afford a high-value practice.
Owner dentists with high practice values must recognize this reality. If your practice has or is approaching revenues of more than $650,000 per year, then you need to seriously consider a value transition because you will likely have a difficult time finding a buyer who can afford it. Your practice is worth more than what you could realistically sell it for at the end of your career. Without a transition, you could end up “giving away” hundreds of thousands of dollars in value.
2 You want more out of your time.
Near the end of their careers, many senior doctors want to be able to make more choices about the amount of time they spend in their practice and the type of dentistry they do. They want to spend less time in the practice and they want to focus on doing the dentistry that gives them the greatest economic and professional fulfillment, whether that be particular case types like implants, or particular treatment approaches, such as esthetics or comprehensive care.
But spending less time in the practice near retirement can have an extremely detrimental effect. The value of the practice diminishes just at the point when the senior doctor wants to sell it. And what happens to the patients who require everyday dentistry?
Reducing time and limiting focus to certain case types or approaches poses a challenge for the practice. How can you limit your time in the practice and focus on the dentistry you love without compromising patient access to care? How can you create the freedom for these choices and ensure that the value of your practice is maintained and all patients are still being cared for at the right level?
By adding an associate, a senior doctor gains more flexibility to work when they want and how they want. The practice now has the capability to take care of the needs of patients who require everyday dentistry, and the senior doctor is free to concentrate on the cases they want to work on. When this occurs, the senior doctor’s value of time increases because they get to focus on higher-value cases, and this in turn enables even greater choices about time in the practice.
3 Saturated, overwhelmed and burned out.
There comes a time in many doctors’ careers when they start to feel a little overwhelmed – their schedule is booked out weeks in advance, they’re rushing from chair to chair trying to fit everyone in, and they are receiving a steady flow of new patients. In short, they’re saturated.
Just as there is an upper limit to the practice a new dentist can afford, similarly, there is an upper limit to the number of patients one doctor can handle. A typical GP reaches saturation with a patient base of 1,500 to 2,000, based on the number of patients who can be supported by two full-time hygienists. However, many can become easily saturated with just one hygienist.
Once you are beyond this point, the practice becomes a revolving door. Even though you feel extremely busy, there is no substantial growth because new patients are simply taking the place of old ones the practice is unable to retain. Again, this means a loss of value. Patients are beating down your door, but limited time means limited production.
But what’s worse than missing out on the wealth those patients would generate is that when doctors become saturated, their ability to care for each and every patient in a timely and thorough way becomes compromised. There is no doubt that we all want to provide the best possible care for our patients when they need us, but we have to ask ourselves a difficult question: can we when we’re too busy just trying to survive another hectic day?
Saturated doctors have a choice to make. They either stop accepting new patients or they go through a transition. It’s that simple. Why stop accepting patients when you can bring an associate on board to handle the excess that you can’t? Adding an associate enables true growth because it increases the practice’s capability to take care of patient needs at the highest level. Existing patients will receive the best care possible and therefore be less likely to leave your practice, and new patients will have a place to go.
4 Desiring freedom and flexibility before retirement.
Imagine this scenario: you’re working just one or two days a week in the practice, completing high-value cases on your favorite patients. Plus, you’re earning almost as much as you were when you were practicing full time, and doing it all with substantially decreased overhead and without the burden of practice ownership.
There is no rule that says you have to retire.
If you’re working the hours you want on the cases you love, why would you stop? With a transition, a senior doctor has the best of both worlds – they can continue to practice the dentistry that gives them professional fulfillment and they maintain a substantial income that will additionally fund their retirement and an incredible lifestyle.
But too often senior dentists don’t plan for a transition – instead, they slow down in the years before retirement, without adding an associate. This could mean a dangerous, dramatic decrease in practice wealth. But with a properly planned transition, you can keep your practice in a dynamic stage of growth.
You’re Ready, But Are You Ready?
Even after understanding what the four major catalysts are for a transition, it can be difficult to know if you’re ready for one. Each doctor’s situation is unique, and a transition isn’t a templated approach. To help you find out if you’re ready, take this quick test:
• Are my practice revenues above or approaching $650,000 per year?
• Does my number of current patients, multiplied by the hygiene time each patient requires for appropriate recare, exceed the schedule of two full-time hygienists? (Keep in mind also that many doctors reach saturation with one hygienist.)
• Is my schedule for major cases booked out more than 4 to 6 weeks in advance?
• Do I want a flexible end to my career without jeopardizing my practice value or continuity for my team and patients?
• Do I want to keep practicing the dentistry I love and/or spend less time in the practice?
If you answered yes to any of the questions above, you should seriously consider a transition.
Make the Most out of Your Practice Value
Your practice is the single most important asset you own – not for its “sale value” but as an economic engine. No other business in America gives the same levels of income and lifestyle to a single owner-operator. Yet, the magnitude of this asset is so undervalued it is almost laughable.
If you broker your practice today, what would it be worth?
a) 200% of annual revenues
b) 150% of annual revenues
c) 100% of annual revenues
d) 50% to 70% of annual revenues
The answer for most practices is d) – somewhere between 50 percent and 70 percent of annual revenues. This works out to be the equivalent of only two, or maybe three, hygiene appointment fees for each active patient you have.
The reason for the diminished value in dental practices is that we don’t look at the value the right way. The traditional definition of value is based on selling at the end of a career when we just want out. By that time, we have aged, our team has aged, and our patients have aged. Often we have cut back on our time in practice and slowed down. The bottom line is that the practice is producing well below capacity and sells at a discount.
This is not to say that there is no place for brokered practice sales. In some cases, this could well be the most appropriate approach for a retiring doctor. But a transition should always be investigated for potentially higher benefits.
Even for retiring doctors, a transition creates a structured approach to stepping down that has many advantages including team and patient continuity, and economic benefits that far outweigh the return from a brokered sale. Consider how much “unused” value was allowed to escape in the preceding years before retirement. The transitioning in of another dentist could have allowed the owner doctor to capture that value and stop it from slipping away.
What today’s most successful practices have mastered are two things: the idea that practice value can only be optimized if the intensity and focus are there to keep it moving forward, and that a transition is an ideal way to make this happen.
These doctors aren’t even thinking about retirement yet – they are doctors in their forties or thirties, and even some in their twenties. They’ve learned that a transition is right for the practice when the value is right, regardless of age, community, practice type or size.
Transitions are not “one size fits all” though; because every transition opportunity is unique and depends on a variety of considerations, there are clear signs that tell you when you have an opportunity to leverage value through a transition.
It cannot be overemphasized that transitions are a strategy for capturing value, increasing practice growth and practice development, not just an exit plan for retirement.
Done right, a transition can occur at any time in practice.
For dentists who want to capture the full value of their practice, a transition demands investigation. It is not about retirement. It’s about ensuring that the value of the practice is never so low that no one wants it and never so high that no one can afford it. It’s about keeping the practice in a dynamic phase of growth and success for your entire career!
Best of all, once your future is secure, the real pleasure of practicing dentistry becomes your daily experience. You don’t work because you have to; you work because you want to. And what can have higher value than that?
What Do You Do Next?
At this point, you may be asking yourself, “What’s next?” The following are suggestions for the steps you should take to start planning your transition:
1. Get educated. Preparing to eventually transition in another doctor is a complex business strategy with many nuances. Find a comprehensive provider to talk to, so you learn what you need to know.
Get your personal economic plan in place. A transition cannot and should not be developed without context for both doctors’ economic goals and realities. If you don’t have a clear picture of your personal economics, including when you want to retire and your goal lifestyle, find the support you need to develop it.
Recognize that you will have concerns about the details, such as valuation, the size of your facility, legal agreements, and your team. To deal with this noise, keep in mind that a transition usually takes 4 to 7 years to implement, depending on how it is structured and on practice conditions. There will be many opportunities to deal with these issues in this timeframe. Also, when implemented properly at the right time, a transition can provide the practice with a considerable economic boom. When appropriate, a small amount of this economic growth can be easily directed to solving the above concerns.
4 Because a transition has many moving parts, it is important that you involve your lawyers, accountants, etc. through the process. To assist you, find advisors whose sole job it is to coordinate and drive the transition, and who are experienced and understand the nuances of the process. This is not the time to shortchange yourself – obtain quality support from professionals who have the ability to comprehensively deal with every aspect of the transition, such as tax planning, legal agreements, associate searches, marketing, and calendar planning.
The best practices are those that think about the value of their business in the right way and implement the strategies that leverage this value for maximum impact. A transition is one such strategy that protects and enhances the practice’s value as a business and creates the necessary continuity that ensures optimal patient care. And it can happen at any stage of your career – a transition is right when the conditions are right, no matter what your age. It isn’t about retirement, it’s about value, and it’s the best opportunity in dentistry today.
As a practice owner, you may feel your income and capacity to grow is limited by the number of hours you work. Luckily, with the right systems and a plan, there is a way to continue growing while working less and earning more. The secret is a well-organized two-part plan to: 1. Optimize your practice, and 2. Grow beyond yourself with the addition of an associate or partner dentist. In the dental profession, the addition of another dentist – either an employee or a partner – is called a transition, and when it is done well, the opportunities are incredible. In the report, you will learn how this two-pronged approach to practice optimization and the well-planned transition of another doctor into the practice can create incredible opportunities. Those opportunities include creating over an additional $1,000,000 of earnings, and freeing up your most precious commodity – your time – so you can enjoy your time doing what you love with the ones you love. If that isn’t enough, this two-part approach provides another benefit: the opportunity to do more of the dentistry you enjoy – even well beyond your retirement years if you choose. In this report we’ll focus on the second part of the two-part strategy – the transition – as we recognize that many practice owners already see the need and understand the opportunity that accompanies practice optimization. At Mercer Transitions, we’ve coached dentists for the past 25 years and year after year we’ve seen the astounding results … dentists regaining control of their time, enjoying their practice again and attaining financial freedom to choose the dentistry and lifestyle ideal for them. And ultimately, you too can succeed in building your ideal practice, by reading this report and then learning from established experts on how to perform a well-planned transition.
What Does a Transition Mean to You?
If you’re like most dentists, transitions means buying in when you’re young and selling out when you’re ready to retire. Times have changed, and as far as transitions are concerned, they’ve changed for the better. Today, the old concept of a practice transition has been expanded by leading practices to include mid-career transitions. While traditional transitions deal with transferring practice ownership, the new concept of transitions is all about accelerating and leveraging practice growth and opportunity.
The Dynamics of Saturation The most limiting factor to the growth of any practice is your time. After a certain point, you become too busy to keep up with the needs of all your patients.
Take a look at this example:
• No. of hygienists: 2
• No. of hours worked: Four 8-hour days/week
• Total available hygiene hours per year: 3,072
• No. of hygiene time required per patient: 1.5 hours per year (2 appointments/year at 45 minutes per appointment)
Limit to practice growth: 2,048 patients
If the maximum number of active patients your practice can handle is 2,048, then beyond that point, for every new patient you receive, one is walking out the back door because you can’t handle the volume!
Once you are saturated, every new/lost patient is a daily reminder that your practice’s opportunities for growth are being limited. In practices that choose to have fewer than two hygienists, saturation comes even sooner.
The solution? Add another provider to support the practice’s hygiene team and capture the value that is otherwise slipping away.
Mercer Transitions has over 20 years of experience in practice transition consulting and has advised over 1,500 clients on practice transitions. Working with our experts, you benefit from our deep knowledge and vast experience, helping to ensure the best outcome for you, your associate, and your practice.