One of the most important lessons I want the attendees from my Practice Ownership seminars to learn is the ability to find opportunities which others may overlook. We have real-world examples of two potential dental practices for sale. We give attendees the information that they will likely receive from the broker and/or vendor and go through the steps that we would use to analyze practices ourselves. It is amazing to see the difference between the analysis of the first practice and debrief compared to that of the second practice – attendees start to focus on the things that matter and ignore the things that don’t.
Perhaps one of the most important and easy to capitalize on opportunities is purchasing a practice that is underworked. That is, a practice that may not be treatment planning ideally or treatment planning to a standard that would be expected of a dentist by the majority of their peers. As a generalization, these practices are typically owned by a single owner operator dentist approaching retirement age. These vendors generally limit the procedures they undertake and may lean towards patch-up dentistry as opposed to ideal dentistry. There may be scope to grow the practice just by offering additional clinical procedures where appropriate.
So how do we know if the practice is underworked? This is where the items fee report is important. This is a report that explains the amount of each item number being performed over a certain period of time. Often people ask what happens if the practice has manual records and no software? Obviously, it is difficult in these scenarios. However, I typically suggest to collate a 2-week period of items being performed and use this as the basis of the report. We compare this items fee report against the demographics of the area to see if there is a procedure/s not being performed. As dentists we’re well placed to read these reports. For example, in a mid to high SES area we would expect a certain level of fixed prosthodontics being done and a low number of 6XX codes may indicate an opportunity. Similarly, a low number of 4XX codes may indicate endodontic procedures are being referred out. This thought process can be applied to other item numbers as well. This is not to suggest one needs to over treat but more so not to under treat and start to offer the best options. This needs to be done in a way so as not to offend the existing patient base when you take over. There is also a skill in communicating treatment needs without disparaging the previous dentist whom many of the patient base would have built great trust with.
The other opportunity we regularly see being overlooked by prospective buyers is practices with an apparent lack of profit. For example, a practice with a loss of 100K on a profit and loss statement may be immediately disregarded by many buyers. However, the practice may be immensely profitable once personal, funding, capital and non-ordinary expenses are removed (‘add backs’). We have an accountant with extensive dental knowledge present at our seminar. He teaches attendees how to read a profit and loss and calculate the true profit of the business. There are times the vendors own accountant overlooks these ‘add backs’ and inadvertently leaves $ on the table for their client – this is great for a buyer who can evaluate profit correctly.
Other opportunities include expanding clinical hours and/or days. This is an easy win and can lead to an immediate uplift in billings/profitability. A practice that only operates 9-5 and does no weekends in a working-class population presents an excellent opportunity for an astute buyer. Similarly, a low or non-existent marketing spend can also present another opportunity. Increasing the marketing spend, if done appropriately, can significantly increase patient flow.
These are a few examples of finding opportunity – there are many others! We firmly believe that great profits can be made at the time of purchase. If you are able to see opportunity that other potential buyers are unable to or that the vendor themselves may not have already capitalized on, then this can lead to incredible growth when you become the owner.
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Our next practice ownership seminar is coming up in Sydney on the 4th and 5th of March 2023. This seminar has sold out in previous years – please register ASAP to avoid missing out.
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