Transcript Buy or Start, Which is Right For Me? Buying

Associate, Buy, or Start,
Which is Right For Me?
Wendy Pesavento
Owner, Chicago Practice Sales
www.ChicagoPracticeSales.com
Managing Partner, Cutting Edge Practice
www.CuttingEdgePractice.com
773-502-6000
[email protected]
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Overview
• Associateship
• Buying Your First Practice
• Starting A New Practice
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Associateship Options
• Employment Arrangement
• Independent Contractor
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Independent Contractor
Agreement Provisions
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Parties
Term
Conditions
Use of your name
for marketing
• Compensation
• Covenant Not to
Compete
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Termination
Assignment
Rework
Notice
Enforcement
Severability
Right to Counsel
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Parties
Who are the parties who are bound by
the agreement?
Personal or Corporate?
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Term
• Usually 12 months
• Renewal Options
• Employment at Will
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Conditions
What The Owner
Provides
• Office Space
• Dental Equipment &
Supplies
• Utilities & Maintenance
• Salaries, Taxes, and Benefits
for Support Employees
• Marketing
• ½ of Lab Costs
What You Provide
• Your Payroll Taxes
• Malpractice Insurance
• Current Dental and DEA
License
• Continuing Education
• Professional Dues
• Health Insurance
• ½ of Lab Costs
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Use of Your Professional
Name
• Website
• Social Media
• Other Marketing
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Compensation
ADD + Gross collections for services rendered by CONTRACTOR
$10,000
MINUS - Amounts of any returned checks or refunds
($200)
MINUS - Any outside collection expenses for CONTRACTOR'S account
($100)
($1,000)
MINUS - CONTRACTOR incurred laboratory expense paid by OWNER
=$8,700
EQUALS = CONTRACTOR net collections
X 35%
TIMES X thirty-five (35%) percent
=$3,045
EQUALS = Net compensation due CONTRACTOR
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Covenant Not To Compete
• Distance
– One location
– Multiple Locations
– Varies from Urban to Suburban to Rural
• Years
• Violations or Unprofessional Conduct
• Damages
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Buying Your First Practice
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Key Points
• Who are the professionals who will
support me in buying a practice?
• Where do I find practices for sale?
• How will I know if a practice is a good
fit?
• What is the process to buy a practice?
• Is it better to buy or start?
Wendy Pesavento and Sharon Bogetz, Managing Partners
www.CuttingEdgePractice.com
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Who Will I Need To Help Me Buy A
Practice?
• Attorney
– Incorporation, sales documents, lien search,
lease negotiations, real estate purchase,
closing
• Lender
– Financing approval letter and loan
• Appraiser familiar with dental valuation
• Accountant to assist in asset allocations
• Building inspector
• Transition consultant
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Where do I find practices for
sale?
ILLINOIS PRACTICES FOR SALE
• Dental Society
Journals
• Business
Brokers
• Internet
Business
Brokerages
• Grapevine
Bartlett
SOLD! Congratulations to Dr. Mark Prosniewski!
Chicago
6 ops. Beautiful build. FFS and PPO. Collections $565k. Owner retiring.
Gold Coast
Collections $850k. Seller will associate upon request. 100% FFS.
Cicero
SOLD! Congratulations to Dr. Monil Shah!
Elgin
4 ops in a spa setting. Newer build. 100% FFS. Financial data pending.
Mt. Prospect SOLD! Congratulations to Dr. Bindu Gulati!
Lansing
4 ops at streetlevel. Building available for purchase. FFS and PPO.
Oak Lawn
4 ops in a busy strip mall. Collections $900k. FFS and PPO.
Peru area
Coming soon! Data pending.
Palatine
3 brand new ops in a highly visible strip mall on a busy corner. $250k
collections. FFS, PPO and kids first.
WISCONSIN PRACTICES FOR SALE
Milwaukee 4 ops at streetlevel. Building available. Collections $600k.
INDIANA PRACTICES FOR SALE
Dyer
Coming soon!
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How Do I Know If A Practice Is A
Good Fit?
Due Diligence
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Equipment
Financial
Systems
Patient Files
Data and Reports
Staff
Clinical Work
IDPR
Google
Social Media
SWOT
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SWOT – Objective Assessment
Strengths
What does this practice do best?
Weaknesses
What are the problems in this
practice?
Opportunities
What are the untapped opportunities?
Threats
Who are our competitors?
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How Do I Know If A Practice Is A
Good Fit?
• How much will I earn?
• Is there a credible practice
appraisal?
• Do the Seller and I have a
similar philosophy of care?
• Are there any procedures
that the seller is referring?
• Does the practice have a
predictable and emulatable
new patient flow?
• Are there opportunities for
practice growth?
• Are the equipment and
facility desirable?
• Does the practice have
modern office systems?
• Is the staff willing to support
a new doctor?
• Can this location draw walk
in patients?
• Does this office have a good
online reputation?
• Is the Buyer a reasonable
substitute for the seller?
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Cash Flow Opportunity
Practice A
Revenues
Expenses
Net Income
Loan
Pretax Salary
$800,000
($400,000)
$400,000
($80,000)
$320,000
Practice B
Revenues
Expenses
Net Income
Loan
Pretax Salary
$800,000
($600,000)
$200,000
($80,000)
$120,000
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PRACTICE INCOME
EXPECTED GROSS COLLECTIONS
HYGIENE COMPONENT
DENTIST COMPONENT
RETAINED SELLER
ASSOCIATE
PURCHASER
$492,228
$0
$492,228
$0
$0
$492,228
100.0%
0.0%
100.0%
0.0%
0.0%
100.0%
VARIABLE EXPENSES
WAGES, PAYROLL TAX, ETC.
LABORATORY
CLINICAL SUPPLIES
OTHER VARIABLE EXPENSE
TOTAL VARIABLE EXPENSE INCREASE
$135,363
$37,808
$33,073
$10,788
$217,031
27.5%
7.7%
6.7%
2.2%
44.1%
FIXED EXPENSES
RENT
PHONE, UTILITIES
LEGAL & ACCOUNTING
INSURANCE
OTHER FIXED EXPENSE
TOTAL FIXED EXPENSE INCREASE
$10,380
$7,396
$2,575
$3,605
$10,202
$34,159
2.1%
1.5%
0.5%
0.7%
2.1%
6.9%
DEBT SERVICE
INTEREST
PRINCIPAL
TOTAL DEBT SERVICE
$27,440
$22,498
$49,938
5.6%
4.6%
10.1%
SUMMARY
EXPECTED COLLECTIONS
EXPECTED EXPENSES
DEBT SERVICE
EXPECTED NET INCOME & PERCENT OF PERSONAL PRODUCTION
PURCHASER PRODUCED PRODUCTION
EQUITY INCREASE & PERCENT OF PERSONAL PRODUCTION
TAX SAVINGS FROM DEPRECIATION & PERCENT OF PERSONAL PRODUCTION
TOTAL ECONOMIC BENEFIT-CASH, TAX SAVINGS, EQUITY & % PERSONAL PROD.
$492,228
$251,190
$49,938
$191,099
$492,228
$22,498
$9,987
$223,585
100.0%
51.0%
10.1%
38.8%
100.0%
4.6%
2.0%
45.4%
THIS CASH FLOW EXAMPLE IS BASED ON THE FOLLOWING ASSUMPTIONS:
SALES PRICE & PERCENT OF GROSS
WORKING CAPITAL
TOTAL LOAN
LOAN INTEREST RATE
LOAN TERM IN MONTHS
$319,000
$24,000
$343,000
8.00%
120
67%
4.9%
69.7%
MONTHLY PAYMENT
ESTIMATED MONTHLY HYGIENE/ASSSOC PROFIT
$4,162
$0
10.1%
0.0%
Predictable and Emulatable
New Patient Flow
• How many new patients does this practice
receive each month?
• Where do these patients come from?
• How much does it cost to attract each
category (referral source) of patients? (ROI)
• Are any of these patient referral sources not
likely to continue under new ownership?
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Purchase Process
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Preliminary financing approval
Practice data
Visit practice
Financial due diligence
Offer
Patient base and equipment due
diligence
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Purchase Process continued
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Loan
Sales contract
Lease or buy space
Close
Transition
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Is it better to buy or start?
Buy
Pros
• Immediate cash flow
• Loan easier
Cons
• Need to transition patents
and staff
• Sellers build, staff, patients,
and systems
• Seller quality of work
Start
Pros
• Usually better location
• Your build, equipment, staff,
and patients
Cons
• Slower cash flow
• Takes longer to build
• Learning curve is steep
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How To Start-Up
A Dental Practice
Sharon Kantor Bogetz, MBA, MEd
Owner, Midwest Dental Solutions
www.MidwestDentalSolutions.com
Managing Partner, Cutting Edge Practice
www.CuttingEdgePractice.com
847-370-9131
[email protected]
@ASDAnet
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Develop The Master Plan
Strategic Business Plan
1. Financial Plan
2. Construction Plan
3. Dental Equipment Plan
4. Technology Plan
5. Staffing Plan
6. Marketing/Internet Plan
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How Is That Accomplished?
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Knowledge
Support
Financing
Location
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Assemble The Team
Architect &
Construction Team
Start – up
Consultants
Lender
Attorney
Accountant
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Business Planning
Marketing & Advertising
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1. Financial Plan
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Incorporation
Quickbooks
Pre-Construction Budget
Business Plan
Loan Acquisition
Construction Budget
Operational Budget
Forecast
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2. Construction Plan
Once the site is selected and
the architect completes the
drawings:
• Interview Contractors
• Interview Cabinet Makers
• Solicit Bids
• Compare Costs
• Check References
• Review the details
• Select Vendors
• Review Contracts
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3. Dental Equipment Plan
• Interview Equip Reps
• Interview Factory Reps
• Make Equipment
Selections
• Entertain Bids
• Compare Costs
• Review the details
• Select Vendors
• Review Contracts
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4. Technology Plan
Make the Decisions
• Digital X-rays
• Digital Pan – Cone
Beam
• Practice Mgmt Software
• Paperless
• Wireless Reception
• Cable/Phone System
• Wiring
• # Screens in Operatory
•Interview Contractors
•Entertain Bids
•Compare Costs
•Check References
•Review the details
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5. Staffing & Systems Plan
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• Customer Service Training
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Productive Scheduling
Cash Flow Management
Dental Insurance
Recall System
Huddle
Budget For Staff
Salary & Benefits
Work Schedule
Job Descriptions
Office Manual
OSHA/HIPAA
Employee Forms
Recruitment
Interviewing / Selection
Reference Checks
Training / Scripting
Staff Evaluation Forms
Standard Operating Procedures
Payroll Management
Uniforms
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6. Marketing & Internet Plan
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Website Design
Social Networking
Internet Campaign
SEO & PPC
Practice Name Selection
Practice Marketing Niche
Target Population
Logo Design
Domain Name Selection
Stationery Design
Brochure
Signage
Direct Mail Campaign
Print Ad Campaign
Internal Referral Program
Employee Discount Program
Personal Networking
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Start Marketing
During Site Selection
• Consider signage opportunities
when selecting a site
• Consider walk-in opportunities
• Consider window views/street
visibility
• Review the demographics
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Selecting A Location
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Complete a
Competitive Analysis
• Who are your top 3 competitors?
• How do you find out about the
competition?
• Who gets the most patients? Why?
• What are they doing?
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2 Most Cost Effective Ways
To Market
1.Website
2.Outside
Signage
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Differentiate Yourself
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Which office would you
call?
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Integrated Marketing
Theme
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Manage Your On-Line Image
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Thank You
Sharon Kantor Bogetz, MBA, MEd
Midwest Dental Solutions
847-370-9131
Wendy Pesavento
Chicago Practice Sales
773-502-6000
Partners, Cutting Edge Practice, Inc
www.MidwestDentalSolutions.com
ChicagoPracticeSales.com
www.CuttingEdgePractice.com
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