Volume 50: The Past, The Present and The Future
This issue of The Professional Advisory marks our 10th anniversary. All of the contributors have agreed that this is an opportune time to take a look back at what has changed since we began publishing the P.A. in May of 2001.
Ten years ago in Volume 2, Professional Practice Sales (PPS) indicated that Patients and Profit were two of the core value drivers in a dental practice. This is still true today. One change has taken place with respect to profit. Dentists can now incorporate. Thus, we use the 15.5 per cent tax rate as opposed to the personal tax rate of up to 46 per cent that applied ten years ago. The result is that there is more money left over after taxes which makes the practice more valuable. This means that the purchaser must incorporate to afford to purchase the practice regardless of purchasing assets or shares. The debate over lower corporate tax rates is raging right now as a contentious issue in the federal election. They are certainly at historical lows and have had a positive impact on practice value. It is not possible to predict what may happen on this front in the future. We are confident however that a strong patient base and good bottom line will continue to be core value drivers long into the future.
In Volume 5 PPS advised that Baby Boomers may well come on the market together but demand would be high and values would not be reduced. This has proven to be correct as Baby Boomers are selling today and the prices have never been higher. We still hear dentists with concerns about an oversupply of practices creating a glut on the market. Our position is still the same; run your practice as efficiently as you can and focus on your patient base and the value of the practice will take care of itself.
Creating value in your practice through balance was discussed in Volume 6. This central value driver was reiterated in Volume 45 last year. It has not changed in 10 years and is not predicted to change in the future.
10 years ago we did not sell practices to investing dentists. Now, this group of purchasers forms a large percentage of the sales that are made of larger practices. Most often the vendor is asked to stay on for a longer than usual transition such as 3 -5 years. This is an ideal way for someone who wants to transition out of the day to day responsibility of the practice but still wishes to practice dentistry, perhaps on a reduced schedule. This phenomenon was discussed in detail for the first time a couple of years ago in Issue 39.
Recently, some of the investing dentists we deal with have expressed interest in buying multiple smaller practices and merging them together to take advantage of the economies of scale. There is also interest from this group in purchasing practices that are out of the traditional “high-demand” areas around major metropolitan centres. This is evidence that the natural selection process is taking place and that there is resistance to some of the unrealistic prices some vendors are expecting in the big cities. We believe this trend will continue as buyers discover the strength of dental practices in smaller centres. The subject of “Dentistry outside the big City” will be the topic of an upcoming issue in The Professional Advisory.
Another noticeable change is the last 10 years is where dentists choose to set-up. You seldom see set-ups in low visibility professional or office buildings anymore. Most often, new set-ups are in high visibility strip malls, or other retail type locations. Those that do set up in low visibility locations either have a particular skill that will draw in patients or they have a community that they will serve that is not location dependant. Otherwise they will have a very tough time competing with the higher visibility locations. Does this mean that all of the dentists who are in professional buildings should relocate to strip malls? Categorically no! There is still demand from buyers for good practices located in professional buildings. In fact, many younger dentists relish the opportunity of working regular business hours. For those practices, it is very important to have a “patient-centred practice as it is your existing patients that will bring in your new patients.
We hope you have enjoyed the last 50 issues of The Professional Advisory, and we look forward to providing you with timely and relevant information for many years to come. All of the articles referred to here are available on our website noted below.
We also want to take this opportunity to thank our long standing editor and contributor, Dr. Ralph Crawford. In addition to making sure we write in proper form, Ralph manages to tie the thoughts of our group together in a way that humanizes our articles and underscores their relevance for dentists. Thanks Ralph!
Graham Tuck is the Broker of Record and David Lind is a Principal in Professional Practice Sales Ltd. (www.ppsales.com), which specializes in the valuation and sale of dental practices. They can be reached at (905) 472-6000 or 1-888-777-8825 or e-mail at: email@example.com and firstname.lastname@example.org
The Professional Advisory
- One Year Later
- Dealing with Unsolicited Offers
- Covid-19 Practice Sales Update
- When is the Right Time to Sell Your Practice and Why?
- Partnership Pitfalls
- The Real Cost of a Dental Practice Set-up
- Smaller Practice Realities
- Dental Market Update - 2019
- Creating Your Own Most Valuable Practice (MVP)
- Small Practice Economics
- The Market is Very Efficient
- How Can Dental Practice Values be Rising and Declining?
- Hygiene as a Value Driver
- The Value of a Good Team
- Is it Time to Move?
- Staging A Dental Practice
- The High Cost of Dying
- Patients - Attract and Retain
- Should I Stay or Should I Go?
- Is There a Buyer for Every Practice?
- Good, Better, Best - The Market has Spoken
- Buying Time
- Patients, Patience, Patients
- A Real Patient
- Why Do a Practice Valuation? I'm not Selling
- Irrational Exuberance or The New Normal?
- Do dental equipment and dental technology affect a practice value?
- Finding and Being a Mentor
- Bigger is Better
- Dave's Top Ten List for Buyers (Vendors should read this too!)
- How Well Do You Know Your Practice?
- Dave's Top Ten List for Vendors
- What will happen to dental practice Values in the next 10 years?
- Your Premises Lease is an Important Asset
- What are Associates Thinking?
- There is Life Outside the GTA
- When Is the Right Time to Sell My Dental Practice?
- Mergers are a Viable Option
- Is Your Associate an Asset or a Liability?
- Has your Practice Facility Kept Up With Your Billings?
- The 100 per cent of Gross Myth
- The Past, The Present and The Future
- Caveat Emptor
- Overpaid Long Term Staff
- Selling your Practice in Stages
- A Potential Pitfall of Selling Shares
- Value in Your Practice Through Balance
- Only Trusted Staff Can Defraud You
- To Own or Not to Own Practice Real Estate? That is the Question.
- Coping With A Large Patient Base
- Successful Dental Practice Transitions
- Taking Care of Business
- The Investing Dentist Phenomenon
- Two areas to focus upon that could negatively impact the value of your practice
- Organize your Debt in Order to Sell your Practice
- Having a Better Team
- How Do I Prepare My Practice For Sale
- How Do I Prepare My Practice For Sale? Part 3
- How Do I Prepare My Practice For Sale? Part 2
- How Do I Prepare My Practice For Sale? Part 1
- Advice to My Son or Daughter Graduating from Dental School
- Transition - What to Expect
- Discussion on Digital X-Rays
- Partnerships and Shotguns
- Strategic Planning - How to Get Started
- Calling All Vendors - Practices have Gone Up in Value
- Purchasers: Expect to Pay More for a Practice because of Lower Professional Corporation Tax Rates
- Matrimonial Practice Valuations
- Purchaser's Guide to Affording a Practice
- Location Improvements Throughout Your Career
- Small Practice Valuations
- Partnerships – The Best and The Worst
- Changing Location When the Opportunity Comes Along
- Visual Presentation of Your Practice
- Presentation of Charts
- Your Premises Lease Can Be Your Worst Enemy
- How to Select an Appraiser for Your Practice
- How Are Your Billing Ratios?
- It Pays to Invest in Your Tangible Assets
- The Importance of Separate Financial Statements
- Five Time Frame Levels to Sell a Practice
- 12 Suggestions to Safeguard Computer Data
- How to Buy a Visible Practice
- Why is there a shortage of good practices today?
- The Importance of Equipment in the Purchase of a Practice
- The Balanced Practice
- Will My Practice Be Saleable in The Future?
- Buyer Be Aware
- Excess Profit - The Second Key
- Patients and Profits are the Keys
- Plan Ahead