Volume 2: Patients and Profits are the Keys

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What makes up the bulk of the value of your practice.

  1. PATIENTS: the number of patients, economic level of the patients, the relative location of the patients to the practice, the frequency of treatment , the dental I.Q. of the patients, age distribution of the patients, number of new patients.
  2. EXCESS PROFIT which I will address in my next article

PATIENTS: The number of patients in a practice relative to the billings is extremely important in understanding the practice. A practice billing $600,000 with 1,000 active patients is a very different practice from one which has 2,000 active patients and is billing $600,000. Knowing the difference is important to the purchaser. Typically the former practice is well tuned and the patients are well educated relative to their requirements for dentistry. Generally speaking they would require a more experienced purchaser to follow the vendor practitioner. Whereas the latter situation could be followed by most practitioners although a more recent graduate (which make up most purchasers) would require the vendor to stay on for an extended transition period in order to continue to treat that number of patients.

To relate to a practice with 1,000 active patients billing $300,000 the recent graduate dentist would be able to cope with that number of patients with only a limited transition period. In fact there would not be enough patients for the vendor to stay on for a longer transition period if the purchaser wished to work full time at the newly acquired practice. There would probably be disappointment if the vendor thought there was room for him in the long run. This is where you hear of vendors being terminated by the purchaser after closing. Not a happy event!

Many purchasers like to purchase a practice in a solid middle class, middle economic community or higher. Seldom do I get requests for poorer communities even though there are great practices in lower economic communities.

Typically the more senior dentists have their patients spread farther afield than newer practices and the patients tend to be older on the average. This has advantages and disadvantages – the more mature patient base would require more crown and bridge whereas newer practices tend to have more young patients. Know what you are looking for!

The frequency of treatment (3-4 months for periodontal treatment, 6, 9, or 12 month recall) is important to understand how the practice is relating to the patients and the response the patients have to the recommendations of the dentist and the dental team. Practices which focus on education of the patients and the team including the dentist are generally the practices which tend to be the most successful.

Lastly, I would like to draw out the unimportance of the new patient count per month. If the vendor practitioner is older, a purchaser should not expect the new patient count to be very high maybe as low as 3-4 per month. Referrals from current patients tend to slow when the dentist “looks like” he or she may be retiring soon. This should not be of concern as the new patient count should improve if there is an effort on the part of the younger dentist to attract the new patients and the facility is attractive.

The Professional Advisory

  1. One Year Later

  2. Dealing with Unsolicited Offers

  3. Covid-19 Practice Sales Update

  4. When is the Right Time to Sell Your Practice and Why?

  5. Partnership Pitfalls

  6. The Real Cost of a Dental Practice Set-up

  7. Smaller Practice Realities

  8. Dental Market Update - 2019

  9. Creating Your Own Most Valuable Practice (MVP)

  10. Small Practice Economics

  11. The Market is Very Efficient

  12. How Can Dental Practice Values be Rising and Declining?

  13. Hygiene as a Value Driver

  14. The Value of a Good Team

  15. Is it Time to Move?

  16. Staging A Dental Practice

  17. The High Cost of Dying

  18. Deal-Busters

  19. Patients - Attract and Retain

  20. Should I Stay or Should I Go?

  21. Is There a Buyer for Every Practice?

  22. Good, Better, Best - The Market has Spoken

  23. Smooth-Sale-ing

  24. Buying Time

  25. Patients, Patience, Patients

  26. A Real Patient

  27. Why Do a Practice Valuation? I'm not Selling

  28. Irrational Exuberance or The New Normal?

  29. Do dental equipment and dental technology affect a practice value?

  30. Finding and Being a Mentor

  31. Bigger is Better

  32. Dave's Top Ten List for Buyers (Vendors should read this too!)

  33. How Well Do You Know Your Practice?

  34. Dave's Top Ten List for Vendors

  35. What will happen to dental practice Values in the next 10 years?

  36. Your Premises Lease is an Important Asset

  37. What are Associates Thinking?

  38. There is Life Outside the GTA

  39. When Is the Right Time to Sell My Dental Practice?

  40. Mergers are a Viable Option

  41. Is Your Associate an Asset or a Liability?

  42. Has your Practice Facility Kept Up With Your Billings?

  43. The 100 per cent of Gross Myth

  44. The Past, The Present and The Future

  45. Caveat Emptor

  46. Overpaid Long Term Staff

  47. Selling your Practice in Stages

  48. A Potential Pitfall of Selling Shares

  49. Value in Your Practice Through Balance

  50. Only Trusted Staff Can Defraud You

  51. To Own or Not to Own Practice Real Estate? That is the Question.

  52. Coping With A Large Patient Base

  53. Successful Dental Practice Transitions

  54. Taking Care of Business

  55. The Investing Dentist Phenomenon

  56. Two areas to focus upon that could negatively impact the value of your practice

  57. Organize your Debt in Order to Sell your Practice

  58. Having a Better Team

  59. How Do I Prepare My Practice For Sale

  60. How Do I Prepare My Practice For Sale? Part 3

  61. How Do I Prepare My Practice For Sale? Part 2

  62. How Do I Prepare My Practice For Sale? Part 1

  63. Advice to My Son or Daughter Graduating from Dental School

  64. Transition - What to Expect

  65. Discussion on Digital X-Rays

  66. Partnerships and Shotguns

  67. Strategic Planning - How to Get Started

  68. Calling All Vendors - Practices have Gone Up in Value

  69. Purchasers: Expect to Pay More for a Practice because of Lower Professional Corporation Tax Rates

  70. Matrimonial Practice Valuations

  71. Purchaser's Guide to Affording a Practice

  72. Location Improvements Throughout Your Career

  73. Small Practice Valuations

  74. Partnerships – The Best and The Worst

  75. Changing Location When the Opportunity Comes Along

  76. Visual Presentation of Your Practice

  77. Presentation of Charts

  78. Your Premises Lease Can Be Your Worst Enemy

  79. How to Select an Appraiser for Your Practice

  80. How Are Your Billing Ratios?

  81. It Pays to Invest in Your Tangible Assets

  82. The Importance of Separate Financial Statements

  83. Five Time Frame Levels to Sell a Practice

  84. 12 Suggestions to Safeguard Computer Data

  85. How to Buy a Visible Practice

  86. Why is there a shortage of good practices today?

  87. The Importance of Equipment in the Purchase of a Practice

  88. The Balanced Practice

  89. Will My Practice Be Saleable in The Future?

  90. Buyer Be Aware

  91. Excess Profit - The Second Key

  92. Patients and Profits are the Keys

  93. Plan Ahead