Author: marketing
Employment Contracts: Savvy Buyers
How to Work Less and Make More
We have just returned from the 2011 Yankee Dental Congress in Boston Massachusetts. All the various practice management experts were talking about this one very important statistic: over 50% of north America’s dentists are now over 50 years of age.
This equates to over 125,000 dentists that can now be classified as middle-aged and they have reached a very distinct precipice in their career—namely that they all wish to increase their earnings—while reducing their working hours. This phenomenon is a direct result of the ageing “baby boomer” population and our mentality to live a more active life outside of our career. The need to work fewer hours as we age is a natural process that most self-employed professionals experience. We believe that more professional advisors should be encouraging a reduced workweek if only to prolong both our life and career span.
Evidence of this trend among dentists is found in the discussions we have with hundreds of clients each year. In fact, the first quarter of 2011 is revealing the largest increase in retirement planning clients that our firms have ever served.
Many report that they have too many stressors (staff, patients, landlords, suppliers, labs, etc.) and that their practice is ‘taxing’ them on an ever-increasing basis. Most openly admit they love the work (most of the time), and the financial rewards, but that the bad days are occurring more often while the good days are fewer. They also say that they lack the abundance of energy they once enjoyed and, given that their patients are also ageing, the need to address the increasing demands of those patients is causing a backlog of work and a feeling of inadequacy.
Effectively, they have too many patient demands, yet they want to reduce their hours. So what do they do?
What should you do when this happens to you? Relax. This is a very common symptom of the maturation of your practice. Having too many patients is a luxury and an opportunity to modify both your dental practice and your practice philosophy.
Let’s consider the basic economic principle of supply and demand for a moment. It states that supply has an impact upon demand and vice-versa. It also proves that price changes with a rise or fall in either variable. Now, let’s consider the dental practice that has too many patients. This suggests a greater demand than supply. The result should be a higher price. Another result could be a limiting of the supply, which would support the increased price while allowing for less work without affecting the bottom line.
Essentially, this is the work less/make more objective that most professionals strive towards as they age and perfect their skill set. The limiting of the supply of your dental service can also be related to the principle of scarcity. Scarcity suggests that when the service is in very short supply, it may demand a very high price. Specialists are a good example.
Can general dentists implement scarcity in practice? Yes. We believe that general dentists, at various stages of their careers, can test this theory. Test it for yourself. Schedule a month or two of limited hours within your practice. You must plan it purposely and resist the temptation to open up more than 20 chair-side hours each week in your schedule. After the test period is over, return to your regular schedule for a few months then repeat the process again. Then judge the results for yourself, both personally and financially.
You should discover that your scarcity (limited supply) immediately supports the increase in demand for your service. At first this appears to be an obvious effect due to your reduced hours. However, the unique side effect, which is often overlooked, is that you will be able to increase your fees. Some patients will have difficulty adapting to the new fees and your limited hours, and others will seek out a new dentist, thus creating a net patient loss for your practice.
This may seem bizarre to some of you, but we know of dentists who are planning for a monthly net patient loss, and not for the more typical net patient increase figure. The result they are seeking is that they will be able to increase their fees and decrease their hours.
Most professionals can take advantage of this phenomenon, assuming they are fully booked. This test is not advisable to those who are servicing large debts or family obligations. And furthermore, there are individual circumstances to consider.
The principle of supply and demand is at the core of most every capitalistic venture. If, after trying this experiment you have not found relief, you may want to consider your other options, such as contracting a permanent, part-time Locum dentist to assist with your patient load.
Whatever your patient load is today, it can be modified to suit your personal needs. If you have too many patients and desire to work less and make more, this test may prove to be one of the greatest you have undertaken.
Co-authored by Sarak K. Lynch
Just for Canadian Dentists – March 2011
Go Remote: What are the Options for Owners of Remote Practices?
One sunny day, while I was sitting on the shore of a beautiful lake in a northern city several years back I contemplated why don’t more dentists want to live and work in the northern environments?
In the regular course of appraising practices, brokers meet with some of the happiest dentists in Canada, who emote about their love and appreciation for the northern sensibilities. They talk about how their families love the outdoors and how they’ve prospered from their community oriented practices.
While meeting with one such practitioner on this particular sunny day we discussed his future plans and what plan of action he would take to sell his practice. The appraisal of his practice was much lower compared to a similar practice in a major suburb or city—simply due to lack of demand from today’s buyers. So, he wondered why he should even consider selling his practice, and what were his alternatives?
I’ve studied the situation relating to medical doctors over the past decade and, as we all know, there’s a very serious shortage of MDs in most rural and remote regions of Canada—especially in the far north. The same trend is now developing in the dental market and brokers are finding that a shortage of dentists, primarily in the
northern regions, will become a serious issue in the near future.
During the appraisal process, my client asked me three questions:
1. What is the profile of the typical Canadian dental graduate?
2. Will they consider leaving the greater metropolitan areas?
3. Will I (a late-career dentist) be able to transition my thriving practice to a successor?
My replies:
1. Today’s dental graduates are about 60% female and, if gender is not considered, about 40 to 60% are from 1st- 2nd- or even 3rd-generation families that are not common in northern regions;
2. Most admit they have no intentions of leaving the “big city”;
3. His chances of selling his practice are 50% or less.
My client then asked me to propose some options. My (very candid) suggestions:
1. Authorize me (as his broker) to advertise and seek out a buyer for his practice at the appraised value or less, then retire. We agreed this may take up to 3 years to accomplish;
2. Work another 2 – 4 years on a gradually reduced schedule and then shut the clinic down. The issue of patient abandonment is raised here and the various dental regulators provide guidelines that you must be aware of;
3. Attempt to identify an Associate (known as the Associate-to-Own program) who will learn to appreciate the lifestyle in this area with the plan that they may purchase the practice.
Each of these options has benefits, yet there are also risks associated with each:
1. Selling was the practice owner’s first choice because the patients will be cared for and the staff would continue to have a job. Concurrently, the dentist would immediately cease to earn an income. He may be able to retain a part-time position with the new owner to assist in the transition but within 3 to 6 months the new owner would be fully integrated into the office and likely no longer require his services. Essentially his income is drastically reduced and then stops. If the practice is sold for the asking price (roughly $250,000) the proceeds would be quickly diminished by sales commission (10%) and other costs of disposition. The resulting profit from the sale would be about $150,000. At a 3% savings rate (and after deducting income tax on the investment proceeds) he would earn about $350 per month. This is compared to his current income of about $15,000 per month. He only works 44 weeks per year, 26 to 30 hours per week.
2. Another option is to slowly cut back on hours, reduce staff hours (and their wages) and close the door after 2 – 4 years. This would result in continued income over the period, yet pride may prevent the owner from doing this to the community, staff and patients. It may be a more economically sound decision, yet it’s not the “honourable” thing to do, and patient abandonment is a serious issue.
3. Hiring an Associate is a great idea, yet they are hard to find and they would expect a significant discount to the purchase price due to their “contribution” to the practice during their tenure. Price is usually reduced when the Associate has more or less kept the practice going as the owner cuts back.
The options are not that attractive, and the ultimate decision is a difficult one to make.
My suggestion for those who own and operate such practices is to think many years ahead and plan accordingly. It can take up to 5 years for the transition of this type of practice to a new practitioner. This is due to a lack of understanding of the many benefits offered by a career in remote towns. I’m amazed that more young dentists don’t see this as an option, with lower-than average overheads, high regard or standing in the community, busyness beyond their dreams, and time for family and hobbies in an unmatched environment. Additionally, building a financial base is much faster than is possible in areas with higher densities of dentists (competition!).
Anyone discouraged by life in the big city should seriously consider the opportunities of a remote practice. And owners practising today should begin their exit-strategy planning years ahead. Between the two, there’s a mutually beneficial resolution here for both new and retiring dentists.
Just for Canadian Dentists – January/February 2011
The Booming Market
Dental practice sales volumes for the first quarter of 2010 will be higher than in the first quarter of 2009. As the market matures, in terms of the average age of a practising dentist, the number (supply) of practices for sale will increase and the demand will eventually decrease. Any change in these two critical variables will impact price.
While this topic has been documented by many experts for almost 10 years, since the early days of the Boom, Bust and Echo phenomenon, the real increase in supply has yet to materialize. Thus demand remains very strong. in the unique marketplace of dental practice sales, the cycles are somewhat predictable yet have proven to be resistant to outside economic forces. When compared to the units of measure for the traditional economy such as the stock market, currency fluctuations, oil prices and real estate, dentistry, as a profession, remains very stable.
Proof of such resilience is the continuing supply of financing from all the major lenders in Canada. All five major lenders continue to pursue the dental market assertively with financing offers to dentists that remain very attractive—typically financing 100% of the purchase price! This lending invariably stimulates the demand for practice acquisitions, expansions and in some areas, a steady stream of brand new start-ups.
One would expect a marginal withdrawal from the current generous lending practices of the banks when studying the drastic changes to the global financial markets in late 2008. The major stock markets dropped dramatically and the US entered a long and serious “recession.”
Yet the average Canadian dental practice proved to be stronger than ever, and most completed the year 2009 at previous or higher levels of income than in 2008, indicating that dental practices are very resilient to some recessionary pressures.
With a steady supply of new buyers entering the Canadian market each year (about 525 new dentists will graduate in May of 2010) and combined with a continuing short supply of practices for sale in the highest demand areas, prices should continue to increase in the most desirable regions, namely those surrounding the major cites like Vancouver.
One might ask: “How is this possible?”
1. Dentistry has educated the public for many years, cementing itself as an essential service, and educated patients continue to appoint regardless of negative economic data. This has kept the income of most dental practices stable or rising;
2. Dentists and dental practice teams are steadily becoming much more “business savvy” and better at addressing consumer demand for elective dental treatments. This is in contrast to the more traditional practice of treating immediate needs only, which to a large extent was influenced by insurance benefits in past generations;
3. Our ageing population needs more health care and it’s expected that the ageing population will consume an even greater volume of dental care each year. This will be the likely pattern for at least another 10 to 20 years;
4. The Canadian economy at large remains very stable, and is growing in many regions. Consumer confidence remains solid. This confidence will always stimulate elective spending on many items, including health care (cosmetics) and other “luxuries.”
in short, this continues to be one of the greatest growth periods for dentistry. What a fabulous time to be a dentist, to own a practice or enter into ownership! Even with the climbing sale prices of dental practices in the major markets, the cash flow and the return on investment remains one of the best purchases a dentist can possibly make.
Ontario Dentist – June 2010
How the Harmonized Sales Tax (HST) Impacts the Sale of a Dental Practice
In the most recent Ontario budget, it was announced that Ontario will be harmonizing its sales tax system with the GST effective July 1, 2010. Instead of a five percent federal GST and an eight percent Ontario PST, there will be a single 13 percent Harmonized Sales Tax (HST) in Ontario. This same system has been in place in three Maritime Provinces since 1997. We predict that other provinces will follow this trend as the temptation to tax more services is irresistible to both the Federal and Provincial governments, especially given that the federal deficit is likely to be about $50 Billion for 2009!
The Ontario HST will be administered by the Canada Revenue Agency. To ease the administrative burdens on the system, the basic rules concerning the HST will be substantially the same as the GST.
Will this have an impact on Ontario dentists?
Yes; there will be a significant net cost for operating practices and, in many situations, there will be an increase in the overall taxes payable when a sale of a practice takes place.
The PST is currently limited to the sale of “tangible personal property.” This definition excludes the purchase of services (for example, the fees paid to practice consultants, lawyers, accountants and technicians for equipment maintenance are not subject to PST) and also excludes the cost of rent. Also, if a dentist wishes to purchase a building or commercial condominium for the practice, PST does not apply (although land transfer tax is payable). ALL of these items are subject to GST — and as of July 1, 2010, the rate of tax will almost triple!
Since the supply of dental services is almost always an exempt supply (meaning that the dentist does not charge GST but also cannot claim input tax credits for any purchases the dentist makes), there will be a shift of tax burden which will, on balance, increase costs for Ontario dentists.
Historically, purchases and sales of dental practices were structured as the purchase/sale of assets (when dentists were not permitted to incorporate professional corporations). For the purchaser of assets, the purchaser is required to pay eight percent PST on the purchase price allocated in the purchase agreement to furniture and equipment (unless the furniture and equipment is affixed to the premises) and five percent GST on the purchase price allocated to the leasehold improvements. When the shares of a professional corporation are purchased, there is no tax (PST or GST) payable. Still, there are many situations where the parties agree that an asset purchase/sale is preferable. Also, in many situations a vendor is carrying on his/her practice personally but wishes to transfer the assets of the practice to a corporation in order to be eligible for the $750,000 capital gains exemption on the sale of shares. Since this requires the transfer of the practice assets to the corporation prior to the sale, the same PST and GST rules generally apply as if it were a sale of assets to a third party.
For vendors of a dental practice, five percent GST is currently payable on appraisal and brokerage fees. Under the new HST, this will increase to 13 percent! This may be an ideal time to sell, if only to avoid costly sales taxes!
Co-authored by Martin Houser, LLB
Dental Practice Management – Summer 2009
Making the Transition
Freedom From Ownership (FFO) is on the minds of an ever increasing number of healthcare professionals. Over 50% of Canadian dentists are between the ages of 50 and 65.
The years 2009 to 2012 are destined to reveal the Baby-Boomer-Business Owner (BBBO™) exit phenomenon — in ever-increasing numbers.
Are you ready to relinquish your CEO “hat” for the FFO lifestyle? Not everyone can make the transition easily. Many of our clients openly admit that they have not developed a life plan (second career, hobbies, family, travel) to keep busy after many years of routine, highly scheduled, full-time work. One can’t golf everyday and no one wants to sit around and do puzzles all day or ‘surf’ the internet endlessly — so what will you do?
Some of my clients state that they plan to keep active in dentistry, part time or in administrative roles, but I find that most choose to let their license expire much sooner than they had first planned — I believe this is due to the fact that baby boomers simply don’t feel it’s necessary to work beyond 55 or 60 years of age, unlike the previous generations of senior dentists who worked full time, well into their seventies!
Other boomer clients remain passionate about the profession, enjoy good health and say they want to practice indefinitely, perhaps into their seventies or eighties! They comment that they have never had a better staff in place, love coming to work every day, and dentistry is easy compared to when they started out many years earlier. The reward of giving a patient their dignity back by improving their smile, fuels their passion to work even more.
We are frequently asked “how do I know when it’s time to stop?” The simple answer is ‘when you are no longer attached to the experience of practicing dentistry.’ This then leads to a dignified and practical approach to the practice sale and transition to FFO.
The actuaries have proven that the odds are stacked against you due to the very high rates of disability claims for dentists — especially as each year over 50 passes by. Are you ready to let go under the pressure of looming or obvious disability? It’s not fun to let go against your wishes or to succumb to the pain while your practice suffers from your inability to keep it vibrant and saleable.
‘Plan ahead’ and ‘be prepared’ is the oldest advice in the book — following it is our advice!
Co-authored by Sarah Lynch
Dental Practice Management – April 2009
Practice Management
This column was first published in June 2005 in Ontario Dentist magazine, vol. 82, # 5. As with all predictions, some were accurate – others have proven to be incorrect.
As of late spring 2005, the market has proven to be the most active I have ever witnessed. Many of you have heard that before, but this is truly the busiest our company has ever been. Based on the volume of appraisals we perform, I can usually predict the volume of practices that will be put on the market within the next one or two years. Now I have made predictions about the number of practices coming for sale in the past, and some did not come to bear for various reasons. This time I am going to go out on a limb again, and bearing any unforeseen market forces, such as “nine-eleven”; this time I think we are on the right track.
1. The number of baby boomer dentists who want to sell their dental practice in the next one to five years is growing rapidly. These are the ‘freedom fifty-five’ dentists who have been planning and preparing for this for almost a generation. While many in today’s more mature dental market (those who are 65 or older) do not understand this generation’s mind-set, I can assure you there are hundreds, if not thousands, of dentists in Canada who want to exit ownership soon. The same trend has emerged with medical doctors, yet they do not enjoy the luxury of a saleable practice – too bad.
I was wrong! Baby Boomer dentists have yet to flood the market with listings and we have a huge over-supply of ready and willing buyers as of January 2009. With the recent ‘meltdown’ in savings (due to the stock market) I predict the supply of practices will decrease in 2009 leaving even more buyers frustrated and wanting.
2. The number of willing, ready and bank-approved buyers is likely to grow in the major centres (like the GTA). Unfortunately, the number of buyers will continue to decline for practices in the outlying, rural and remote regions on Ontario. The profile of today’s buyers dictates that the large majority will desire to practice in the one-hour range of the GTA and a few select other cities such as Ottawa. For the purpose of this prediction, the GTA is considered a one-hour commute from Yonge St. and Highway 401.
On this topic the prediction was 100% correct! And the number of major city buyers is even larger than first predicted. The real opportunity is now in rural areas of Canada. Get out there young dentists – you are needed! Patient flow is more than ample, housing prices are lower; practice sale prices are lower still. Forget the big city for just five years – see what the financial returns are when you live and work where you are welcome and needed!
3. Prices for dental practices will peak in one or two years. With the continuing demand in the GTA, prices may increase another 5% to 10% but, the trend is likely to come to a head soon. There comes a point when the sale price does not justify the risks, and dentists will revert back to setting up from scratch or associating, while waiting for the market to decline. Although the purchase of an established practice remains the number one choice for most young dentists, the short supply of the last five years has forced some into setting up against their better judgment.
Once again, I was wrong. Prices continue to increase as proven by the most recent open market sales. In some areas, sale prices have increased 30 to 50% since 2005 – mostly in the GTA. And with the ever-increasing supply of buyers, prices will go even higher in 2009 – and in the midst of a recession none-the-less! This is a very rare phenomenon but given the dilemma many young dentists face, they may be forced into paying higher prices just to secure the investment they have made in their education and to enjoy a decent livelihood.
4. Financial institutions will begin to tighten their credit systems. We have witnessed a low interest rate environment for an extended term and when rates begin to climb, even slightly, banks may begin to withdraw from the market. It is inevitable that a few loans will go into default, and some losses will be realized, mostly new set-ups, and banks will tighten their policies. This is a long-standing trend in the financial industry – enter the market – compete with low rates and fast credit decisions then, once market share has increased, draw back.
Absolutely wrong – again! Lenders continue to be very supportive of the dental professional and in these uncertain times, they are going to great extents and are more interested in dental financing than ever! Lenders seek out premium opportunities in lean times and dentistry has proven to be a low-risk lending proposition for many years. Dentists can expect even lower interest, better lending terms and a very favorable borrowing environment during a recession.
5. More dentists will desire to exit ownership immediately, avoiding the many costly and unknown factors of the ‘transition’ thus freeing up more practices for today’s long list of buyers-in waiting. The associate buy-in models of the past are not as viable due to the dramatic variances in philosophy of the two generations of dentists who contemplate such plans. Most of the baby boomers I speak with are seeking freedom from ownership, without the burden of working with, or training their replacement.
On this topic my nationwide team of Associates is certain; Owners do not wish to seek the associate buy-in model as much as in the past. They have proven to be costly and have a very high rate of failure. It is an old-fashioned modality and will soon become the last resort to selling a practice – mostly for those whose practices reside in the ‘un-saleable’ markets.
My conclusion in the 2005 column read as follows:
As in any predictions, there can be unknowns. All things being equal, I submit that these five are highly probable. What’s your time line? Are you ready if these predictions materialize?
As of early 2009, it is truly amazing how much things change in such a short period of time….
Hope for the Rural Areas of Canada
It’s easy for many these days to characterize the younger generation of dentists as being unable to make decisions to go “on their own” and to practise away from the GTA or the larger cities of Canada. Certainly, a majority choose the city lifestyle as an associate and later on to establish their dental practices. Rarely do we find young dentists who plan to purchase a solo “country” clinic. This is evidenced by the disproportionate number of practices that brokers have for sale that are situated one hour or more from the GTA, when compared to the number of buyers seeking practices in the GTA. A review of the various websites and dental journal print ads – for both brokered and private sales – reveals a ratio of three to four practices for sale for every buyer interested in areas outside of the GTA. This ratio changes to roughly 10 or more buyers for each practice for sale within the GTA.
Across Canada, we are experiencing the same problems, as many dentists seem to be hesitant to venture out into the rural or small-town environment. Very few young dentists actually follow what was arguably the quintessential Canadian dream of the past century — to live and serve people in the small towns and rural places that abound in our wonderful country.
The reluctance is often explained by people saying “The demographics of the dental school classes have changed”. Certainly, there are more visible minorities and more women in the profession than ever before — and they seem very reluctant to practise in the smaller towns and cities.
A prime example is the oversupply of dentists in the Toronto area. There are currently too many dentists in the GTA. This is a common thread among numerous industry experts who share a consensus that the number of ‘active patients’ is now less than 1,000 patients per full-time dentist. Invariably, this leads to enhanced competition and certainly has driven the price of an average dental practice “over the top,” while perfectly sound practices in areas offering a more relaxed lifestyle, go begging.
In fact, dentistry is not alone in the move away from the rural to the urban environs, as medicine, pharmacy and veterinarian practices also are experiencing the same dearth of professionals in rural areas.
Veterinary medicine schools are now seeing mainly students who only wish to look after small animals. Thus, the large animal practitioners who are the backbone of our cattle and other livestock industries are getting harder and harder to find. One of the interviewers for the first class of veterinary medicine students at the University of Calgary confided in us that he had not found one potential vet from his cadre of interviews who wanted to pursue a large animal practice – because they are usually found in rural locations.
It is essentially the same for medicine. If it weren’t for the foreign trained physicians there would be a host of smaller communities – from Manitoba to the Pacific coast – without a physician to provide medical care to the inhabitants. There are at least two medical training programs that are trying to break that trend and they are the Thunder Bay or Northern Ontario School of Medicine and the University of British Columbia School of Medicine in Prince George. This program has just graduated its first class. These programs need to be applauded. Across this country there are no undergraduate recruitment opportunities known (to us anyway), that are attempting to bring small-town or rural students into the dentistry training programs, with the hope that they might just return “home” to rural Canada to practise after graduation. Nevertheless, there is a heartening story that we heard recently. This is the first example, in our study of young dentists breaking the “mold” and opting for a lifestyle change to live in a small town. A young female dentist from a professional family has recently moved with her husband, one rabbit, two cats and a dog to serve a small community in western Alberta.
In this particular case, the move resulted from a childhood dream of the young dentist, as an eight-year-old child traveling through the Canadian Rockies with her family. She fell in love with the country and vowed to make it her home in the future. Twenty-plus years later and rural Alberta is now the better for that dream. Surely, with the boomers retiring in greater numbers every year, there is going to be plenty of opportunity for new dental graduates and others wishing to make a lifestyle change to take a second or third look at the wonderful opportunities found in the smaller towns and rural areas of Canada. Perhaps some of the dozens of Maritime dental graduates might take a second look at their native area to begin a reverse “East Coast” move. There are many small towns and rural areas in Alberta, as well, that are hoping that our young friend, now living her childhood dream is just the first of many more professionals to come.
Co-Authored by G. Wayne Raborn
Ontario Dentist – September 2008
Common Management Errors
Ten mistakes dentists make – and the solutions.
When appraising and eventually selling a dental practice, we frequently observe numerous deficiencies, errors and management oversights. Here are some key areas for improvement in practice operations:
1. Underachieving Employees
Loyalty is a highly regarded virtue but sometimes difficult decisions must be made. Staff members who are not effective or are destroying the team morale should be re-assigned or relieved of their duties — it’s good for business. Often the team member may be controlling and intimidate fellow staff members; others may be experts at looking busy, but fail to deliver. Never retain employees who are not doing an excellent job -nothing is more detrimental to the reputation of your practice.
2. Persistent No-Shows and Cancellations
Statistics suggest that the average patient no-show and cancellation rate is higher than most dentists should tolerate. There are reasons you have patients who miss appointments and there are solutions to eliminate this costly problem. Maintain a list of patients who are retired or self employed and live or work nearby. They are often very flexible and willing to appoint on short notice. Many times these patients will view your practice as providing outstanding service if you accommodate them on short notice. Stop making excuses such as “People are busy this time of year” or “It is always the same at this time of year because of the nice weather.” What are you saying to your patients when they do not appoint? Informing them of cancellation policies — and enforcing them — is a sign of a confident and mature practice. It is often what you say and how you say it.
3. Losing Money
Monitoring your expenses and measuring them against nationwide metrics is easy. The Ontario Dental Association has valuable data to help determine where you stand financially. Don’t be afraid to ask — it’s confidential and you may find you are performing brilliantly (expense wise) or poorly. There can also be lost revenue in the practice through lack of follow-up with treatment incomplete, treatment pending or low levels of case acceptance.
4. Controlling Accounts Receivable
One person in charge of accounts receivable is a distinct opportunity for employee theft and fraud. Avoid giving one staff member control of all the computer passwords, bank deposits, insurance claims processing, etc. There should be a rule that no one can write off an account without the doctor’s permission. More than one person needs to know how to close day-end and balance, to schedule an audit check, to make sure all insurance claims have been processed and to balance the bank deposit.
5. False Information
When the office manager or receptionist claims the accounts receivable are excellent, you should ask: Compared to what? How do you know? There are at least 10 questions we ask before determining if the office has an acceptable level of receivables. For ex-ample, Is this an assignment office? If so, how many patients are given assignment privileges, 20 percent or 80 percent or somewhere in between? Are there large cases in progress that have been entered into the computer but for which payment has not been received – this can explain large unpaid accounts that are not bad accounts. How many are over 90 days and have those accounts been treated recently? The list goes on, every practice is unique and so are receivables. Often the dentist is told by the staff that the accounts are under control and that they have done what they can to collect accounts over 30 days. The dentist often assumes that is normal when in fact, the staff are not willing to assert themselves and discuss the ever sensitive topic of money with patients. All extensive treatment plans need to have a signed commitment to pay, policies on payment should be implemented and payment expected.
6. Understanding Computer Print-Outs
Data can be confusing at the best of times. Pages and pages of reports can bore the most adept business owner. Clear and concise (and random) re-porting is the key to the prudent business owner’s success. Your weekly routine should include a brief audit of varying reports, selected for monitoring on random days of the week. These reports can tell you a lot about your practice, more than just production and collections. Computers are usually underutilized and often inaccurate or incomplete information is entered. The reports are only as good as the information entered and having someone understand the reports and supply solutions to problems is essential. Don’t allow them to neglect themselves — in the end it is the dentist who is blamed for poor oral health. The “baby boomers” are interested in looking good, so offer them the best esthetic options. We believe that more dentistry walks “out the door” than is actually performed in most dental practices. ROI Corporation’s annual office survey, now totaling over 1,000 replies, indicates that most practices experience 10 to 20 percent growth in the very first year after a sale — proving that the majority of practices have a substantial backlog of much-needed treatments.
Patients genuinely want to keep their teeth so it is the responsibility of the dental office to educated and motivate these individuals. Don’t all them to neglect themselves – in the end it is the dentist who is blamed for poor oral health.
8. Monitoring Case Acceptance
In many offices the only person dis-cussing treatment plans and dentistry is the dentist. Any business that provides a client with a quotation for services has a followup system. Dental office staff may be unaware of the large volume of treatments outstanding, only because they assume the patient will call upon receipt of a predetermination. NEVER assume they will remember to followup with your patients. A treatment coordinator is the ideal person to review the treatment and fees with the patients and follow up to make sure all patients leave the office well-informed and with all their questions answered.
9. No Financial Goals
The greatest mistake an owner can make is the failure to plan. It is sim-ple and needs regular review — and the process of setting goals is not difficult. What is difficult is to maintain your objectives and focus on what you want your business to be — it’s a daily routine. Thinking that 80 per-cent overhead is acceptable is absurd! Overheads are typically between fifty and seventy percent of total income. Many offices fail to “adjust” for non-re-occurring or non-essential expenses when calculating the overhead ratio. What you declare for income tax purposes is distinctly NOT your overhead. Speak with your accountant or a practice expert.
10. Learning the Password
Dentists who do not know how to access and operate their dental software are leaving themselves open to theft and fraud. Recent reports from William Hiltz, a consultant who studies fraud in dental offices, suggest that the purposeful (or accidental) misuse of insurance claims and cash receipts is prevalent in over 10 percent of all Canadian dental offices. There are dentists who want to check their ac-counts or schedule appointments on a weekend and have no idea how to access their own computer.
Timothy A. Brown is the President & C.E.O. of ROI Corporation & ROI Capital, companies that specialize in dental practice appraisals, brokerage, consulting, locum placements, associate-ships and practice financing across Canada. Timothy can be reached at 905-278-4145 or timothy@roicorp.com.
Anita Jupp is a dental speaker and practice coach and is the founder of the Advanced Dental Education Institute. She can be reached at 1-888-239-9908 or at anita@anitajupp.com.