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Articles

The Professional Advisory

  1. Is it Time to Move?
  2. Staging A Dental Practice
  3. The High Cost of Dying
  4. Deal-Busters
  5. Patients - Attract and Retain
  6. Should I Stay or Should I Go?
  7. Is There a Buyer for Every Practice?
  8. Good, Better, Best - The Market has Spoken
  9. Smooth-Sale-ing
  10. Buying Time
  11. Patients, Patience, Patients
  12. A Real Patient
  13. Why Do a Practice Valuation? I'm not Selling
  14. Irrational Exuberance or The New Normal?
  15. Do dental equipment and dental technology affect a practice value?
  16. Finding and Being a Mentor
  17. Bigger is Better
  18. Daves Top Ten List for Buyers (Vendors should read this too!)
  19. How Well Do You Know Your Practice?
  20. Dave
  21. What will happen to dental practice Values in the next 10 years?
  22. Your Premises Lease is an Important Asset
  23. What are Associates Thinking?
  24. There is Life Outside the GTA
  25. When Is the Right Time to Sell My Dental Practice?
  26. Mergers are a Viable Option
  27. Is Your Associate an Asset or a Liability?
  28. Has your Practice Facility Kept Up With Your Billings?
  29. The 100 per cent of Gross Myth
  30. The Past, The Present and The Future
  31. Caveat Emptor
  32. Overpaid Long Term Staff
  33. Selling your Practice in Stages
  34. A Potential Pitfall of Selling Shares
  35. Value in Your Practice Through Balance
  36. Only Trusted Staff Can Defraud You
  37. To Own or Not to Own Practice Real Estate? That is the Question.
  38. Coping With A Large Patient Base
  39. Successful Dental Practice Transitions
  40. Taking Care of Business
  41. The Investing Dentist Phenomenon
  42. Two areas to focus upon that could negatively impact the value of your practice
  43. Organize your Debt in Order to Sell your Practice
  44. Having a Better Team
  45. How Do I Prepare My Practice For Sale
  46. How Do I Prepare My Practice For Sale? Part 3
  47. How Do I Prepare My Practice For Sale? Part 2
  48. How Do I Prepare My Practice For Sale? Part 1
  49. Advice to My Son or Daughter Graduating from Dental School
  50. Transition - What to Expect
  51. Discussion on Digital X-Rays
  52. Partnerships and Shotguns
  53. Strategic Planning - How to Get Started
  54. Calling All Vendors - Practices have Gone Up in Value
  55. Purchasers: Expect to Pay More for a Practice because of Lower Professional Corporation Tax Rates
  56. Matrimonial Practice Valuations
  57. Purchaser's Guide to Affording a Practice
  58. Location Improvements Throughout Your Career
  59. Small Practice Valuations
  60. Partnerships – The Best and The Worst
  61. Changing Location When the Opportunity Comes Along
  62. Visual Presentation of Your Practice
  63. Presentation of Charts
  64. Your Premises Lease Can Be Your Worst Enemy
  65. How to Select an Appraiser for Your Practice
  66. How Are Your Billing Ratios?
  67. It Pays to Invest in Your Tangible Assets
  68. The Importance of Separate Financial Statements
  69. Five Time Frame Levels to Sell a Practice
  70. 12 Suggestions to Safeguard Computer Data
  71. How to Buy a Visible Practice
  72. Why is there a shortage of good practices today?
  73. The Importance of Equipment in the Purchase of a Practice
  74. The Balanced Practice
  75. Will My Practice Be Saleable in The Future?
  76. Buyer Be Aware
  77. Excess Profit - The Second Key
  78. Patients and Profits are the Keys
  79. Plan Ahead

Volume 38: Two areas to focus upon that could negatively impact the value of your practice.

Download the PDF version now!

1) First, is there a risk of a hygiene practice soliciting your dental hygienist to join their practice with your patients?

I am writing this article, not to give you legal advice, but to draw your attention to the risk. We are in the process of our first sale agreement whereby the vendor is responsible for having his hygienists sign a reasonable restrictive covenant and / or non-competition regarding non-solicitation of his patients. Think of this as the “writing on the wall”.

Barry Spiegel LL.M. and David Rosenthal LL.B. have written excellent articles in the Professional Advisory in #28, #31, #32 and especially #33 regarding this issue. I suggest you read these articles and take whatever steps you see necessary. If you have not retained these booklets, e-mail me or David Rosenthal to send them to you.

2) Second, the impact of the slowing economy.

Depending on your community, your patients’ economic situation and the quality of your patient base, the economic downturn can have an impact on your practice value. If you have a good balanced practice, i.e., reasonable billings per patient and controlled costs, it is possible that the downturn will have little or no impact on the value of your practice.

 If you are anticipating that your billings and patient base are going to have a true downturn, e.g., an Oshawa practice, then you should expect a reduction in the value of your practice. Now is the time to try to resurrect some of the patients that fell off the wagon in the past three or four years, and for whatever reason, haven’t been in your practice. 
 

Most practices that are not in a vulnerable community should only experience a five per cent drop in billings. This is where a strong front desk or booking person comes into their own. You will recall that in Volume #36 I was talking about having a star on the front desk. Now is time you need a star to keep the billings up and your chairs filled.

The reality today is that patients and profits make value. If billings are down, can you reflect a similar reduction in costs? The worst impact is that billings go down and costs go up. Reality may be that if you are not experiencing increased billings maybe there is no wage increase for the staff.

If you are experiencing unfilled time slots in the hygiene department I would expect that a reduction in overall hygiene days would be a solution, as I see very few dental hygienists being paid on a percentage of their billings.

We are not yet seeing any reduction in value for practices being sold. At this time purchasers are still happy to pay a fair market value to get a practice. The risks involved in starting a practice from scratch are still greater than the possible reduction in production in the practice they purchase. We have been approached by a few dentists to put their practices on the market to solidify the equity in their practice and they would stay on for a longer than normal transition.

At this time I am not aware of any further reduction in the 16.5 per cent professional corporate tax rate. If there is a reduction in taxes this should increase the value of the practice to offset some of the reduction in profit, or at least modify the effect of any reduction in profit. We will include in future issues of The Professional Advisory any changes in the corporate tax rate. Practices that have emphasized strong relationships between the patients and the dental team should better weather any downturn in the economy. Practices with a high patient base relative to the production numbers will outperform those practices with a limited patient base that have high billings per patient. In fact now is the time to do some of those procedures that you never had time to do in the past.

Remember:

a) Good basic dentistry is the bread and butter of most practices. Cosmetic dentistry, implants, full mouth reconstructions are great skills to have but may be the first to be dropped in hard times.

b) A downturn in the economy will not impact all practices the same way. Be one of the winners.

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