Author: marketing

An Unusual Case; Being an associate in rural and remote Canada

Date Posted: 2013/12/16

Running a rural practice can yield some unusual experiences…as with this story about a client. He’s a dentist who owns a practice in rural Canada, and he called me this past October, very upset and frustrated.

A recent graduate joined his practice in June of 2012. Due to a number of mitigating factors, there was a substantial backlog of dentistry to be done, and this recent graduate, who was very young, ambitious and capable, stepped in and produced extremely high production figures in a short period of time.

Essentially, this dentist, in a four-month period from June through September, produced $600,000 in gross income. This did not include the income generated by the hygienist. If we do the math, it’s simple. Based on $600,000 in fees with a commission rate of 50%, this new graduate earned approximately $300,000 in a four-month period.

Now, the story gets really interesting. In October, in more remote, rural Canadian settings, winter is fast approaching. The first snowfall is imminent. The nights are longer and days shorter. Sometimes a dark foreboding of what is to come sets into the minds of those not accustomed to northern climes.

At this time, this recent graduate approached the dentist owner and asked for a raise, from 50% to 60% commission. The owner refused to do so on the basis that they had only been working together for four months. As a result, the associate tendered his/her resignation.

This type of resignation is an extremely rare occurrence. I don’t know of any new graduates in the last three to five years who have generated $600,000 in four months of work because of a backlog of patients needing care—and then resigned.

There was no mistreatment here, no over-treatment—just much work to be done because of the remote location of the practice. The circumstances are clear: good insurance, good people, good industry, no other dentist there for some time, and my client who could not fully attend to the practice.

The result? An associate who basically stepped into a very lucrative work situation. Then, after tapping out four months of work, the associate wanted a raise. When the wner denied it, the associate tendered his/her resignation. Their agreement called for 60-days’ notice; instead, he/she gave two weeks’ notice and left.

My questions are:

• What does this tell us about today’s generation and today’s dental graduates?

• What does this tell us about their ability to enjoy the rural and remote sensibilities of Canada?

• How do we recruit these people?

• How do we retain these people?

Clearly, there was enough financial reward for the associate. There was enough work and the book is still full of many more months of procedures. My client is in a desperate situation; he needs to suddenly recruit again and he’s asked our firm to assist. It’s not an easy task. We anticipate weeks or months where there is no dentist in the office. We’re looking for locum dentists to cover in the interim, but patients will once again go unserved. Staff will go unpaid as no procedures will be performed. Staff will be sent home and the cycle will repeat itself.

To sum up, a new graduate makes $300,000 in 120 days and quits. Given that, how are we going to serve the future needs of the Canadian population if money is not enough of an incentive? I have concerns about the dental profession’s ability to manage the needs of rural and remote Canadians when money is clearly not enough. It’s a serious quandary and yet I seem to have no viable solutions. Do you?

John Caise

Date Posted: 2013/04/24

ROI Corporation Would Like to Remember
John Caise.

At the age of 70, peacefully passed away on April 17, 2013 after a short battle with cancer. John, beloved husband of Marilyn (Kemp) of 44 years. Loving father of Elizabeth (Stephen) and Graham (Kelley). Cherished grampa/papa of Aislynn, Gareth and Jack. Dear brother of Carol and brother in law to Brenda, Anne and Stephen. John will also be missed by his many nieces, nephews, dear friends and colleagues. He had just celebrated 50 years of working in the dental industry. He was a Blue Jays fanatic, having watched or listened to every game but most importantly loved spending time with his family. Lifelong friend to Dave Bradley and Bill Jukes. He will be missed by all who knew him.

Break-up Value: Can a practice be worth more in part than in whole?

Date Posted: 2013/03/04

On occasion, a purchased dental practice must be relocated as a condition of the sale. This can occur when the lease is expiring and the building is being torn down or when the real estate owned by the retiring dentist is more valuable when vacant than when occupied by a dental office — something that is common with many older, converted residential homes/dental offices in highly desirable neighbourhoods.

The Value of Goodwill
When the typical dental practice is sold “as is, where is,” the purchaseris responsible for the assumption of the rent, the staff, the existing equipment and other practice commitments. When the goodwill of a dental practice (i.e. charts, patientlists, etc.) is the only item sold, professional appraisers know that for certain dental practices, the valuation method for goodwill will yield a different result for the owner when compared with the traditional valuation methods. Central to this valuation is the ease with which the vendor’s patients can be relocated within the buyer’s practice, partly because of the vendor’s recommendation to do so and partly because the buyer’s location is close to the vendor’s practice location.

In special circumstances,the goodwill value may exceed the total practice value if certain conditions are met, for instance when some key staff members are willing to relocate or when the purchaser’s economies of scale can be dramatically enhanced due to the merger. This may simply mean that the purchaser’s practice is underutilized at present and
the increased patient flow from the vendor’s practice may result in increased profitability. The purchaser’s staff will also be more fully utilized and more productive.

Purchasers who have a large under-utilized facility near that of the selling dentist are quick to recognize the opportunity. The cost to attract a new patient to a dental office is increasing as advertising and promotion methods become more sophisticated. In short, the purchasers can add hundreds of new patients to their existing hygiene program, make more efficient use of the existing staff and facility, and obtain a direct endorsement from the selling/retiring dentist.

Optimize Your Sale
Prospective dental practice purchasers may be wise to consider the value of having the vendor dentist make a specific recommendation of the new dentist to his or her patients. For most sales, the purchaser dentist’s phone number and a letter of introduction are essential to encourage patient transfer. A reception orretirement party is also a nice touch to reinforce the transfer oftrustfrom one dentist to another.

Recent open-market sales of goodwill indicate that purchasers are willing to pay a substantial premium for goodwill if they can relocate the practice into their existing office immediately. In a recent sale,the goodwill sale price was well above the annual gross income ofthe practice and six offerswere made by local dentists. This sale consisted of about 500 active patients, and the final sale price was $250,000 — or $500 per patient file.

The vendor dentist may be able to donate the old equipment and obtain a tax credit to reduce income taxes; the property, if owned, may actually become more saleable in certain markets,thus yielding potentially higher real estate valuations as well.
The break-up scenario is applicable to those who are thinking of selling but are fully aware that their facility is a detriment to the sale. By timing the sale of your practice to coincide with vacating the premises, it may be possible to maximize the value and get the most out of your practice.

EDITOR’S NOTE: This article was originally published in Ontario Dentist in May 2005 and has been revised to include current market data, as per requests from several readers.

Timothy A. Brown is the CEO of ROI Corporation Brokerage, a company that specializes in professional practice appraisals, brokerage, consulting, locum placements, associateships and practice financing across Canada. Timothy can be reached at 
905-278 4145 or timothy@roicorp.com or via the ROI website at: www.roicorp.com.