I guess I did not make my point very very well....AS USUAL
From: billgreenberg101@gmail.com
Date: Sun, 1 Sep 2013 10:59:20 -0400
Subject: Re: [ACEsthetics] What's a practice worth?
To: jchdmd@msn.com
CC: billgoldner@gmail.com; acesthetics@googlegroups.com
I know of a practice that the over head is 80% and the dentist is about to go out of his mind........writing off insurance, paying too much for lab work, over paying staff, rent too high, and tremendous frustration.
I know of a practice........Take home is amazing at 75%.....how is it possible........One staff member, very load overhead, but not a great quality of life.
I take home over 60% of what I produce, but my model is a little a the normal because hygiene is so large.
The models by which dentistry was constructed is totally flawed. The CEO, is the main producer,.....only lawyers that are solo, and barber shops compare.
The reason, we are so confused, is that we do not fit the usual business model.
ALL the people that buy practices, all of them, will tell you, that you ROI that you believe you make is wrong. We all look at the end of the year money taken and money left. We generally do not fund depreciation, we generally do not look at our own production as the net number, We put everything in..........our pocket.
OK.......who wants to start a real thread about the Business of Dentistry?
What are you doing for overhead control, do your departments have budgets, or you funding depreciation of equipment, or funding internal and external marketing, or you planning in the beginning your exit strategy, do you have a 1 year, 3 year, 5 year plan and are you comparing and testing your internal plans.....WELL ARE YOU?
Oh, you want to take care of patient, good great dentistry, and be left alone......YOU ARE IN THE WRONG PLACE........go work for someone and see how happy you are.
You can produce the most beautiful, amazing, talented dentistry in the world.......and who will know......you will and maybe a staff member. THE PATIENT, not usually........do not disagree with me until your look at all the dentistry that comes into your office. Someone did that and some of it is 40 years old. DO not be so quick to say how terrible it is. I am starting to see my 38 year old dentistry.
Dam, that gold crown in Oxy P is still there :))
I am now going to cook hotdogs.....if you are near Woodbridge, CT.....COME ON OVER
Jeffrey C Hoos DMD FAGD
Balancing: the Art, Science & Business of Dentistry
www.bettersmile.com
www.dentalexplorations.com
www.idixray.com
203 397 9139 home
203 378 9500 office
203 494 8544 cell
"Giraffe Society" For people willing to stick their necks out
From: billgreenberg101@gmail.com
Date: Sun, 1 Sep 2013 10:59:20 -0400
Subject: Re: [ACEsthetics] What's a practice worth?
To: jchdmd@msn.com
CC: billgoldner@gmail.com; acesthetics@googlegroups.com
Jeffrey,
The point of differentiation I'm trying to make is that our take-home is really in 2 parts. There's the value of the dentistry we do, which can be duplicated by any equally competent dentist, and the return on our investment in the practice, called "profit". My contention is that the value of the practice is determined by the profit, not by the earning related to the dentistry alone. If a dentist can make the same money as an associate as if he/she bought the practice, how much would they be willing to pay? Not much. I know there are many other factors that fine tune the final value, but the over-riding factor has to be the profitability of the practice.
As in your example, if the practice produces $1M and the take home is $200,000, but the dentist only works half a day and his contribution to that 1M production is small, then it's a pretty profitable practice.
I know I need professional help. ;-)
At this point I'm just trying to get an idea in my planning for the future.
Thanks,
Bill
On Sun, Sep 1, 2013 at 10:41 AM, Jeffrey Hoos DMD <jchdmd@msn.com> wrote:
What is so interesting........while some say practice values are going down.....OTHERS say it is going up....I have a 1986 991 cab........"I would like to buy your car:" OK..... 50,000 "it is only worth 25,000" You are the one who wants to buy itThe practice is worth what someone will pay you for it.ARE you staying onAre you fee for serviceyou produce 1 million and take home 750,000 or produce 1 million and take home 200.000There are very specific formulars for the value...The weighted average of the net over 3 years.....value of equipment.......consumables.......staffASK a professional, THAT WORKS FOR YOU, not the buyer
Jeffrey C Hoos DMD FAGD
Balancing: the Art, Science & Business of Dentistry
www.bettersmile.com
www.dentalexplorations.com
www.idixray.com203 397 9139 home
203 378 9500 office
203 494 8544 cell
"Giraffe Society" For people willing to stick their necks out
From: billgreenberg101@gmail.com
Date: Sun, 1 Sep 2013 10:21:16 -0400To: billgoldner@gmail.com
Subject: Re: [ACEsthetics] What's a practice worth?
CC: acesthetics@googlegroups.comI'm actually just in the "planning for the future" stage, trying to get an idea what a reasonable formula might be to calculate the value in a few years. I agree with you - I'm not sure I'd be happy as the manager. That's the aspect I like the least. I am getting pretty tired of being the go-to guy for every little stinkin' thing. If I could just get the Facelift denture and sleep aspects of the practice moving along better, I could definitely do OK as a part time associate.Congrats to you BTW. My only hobby is whisky collecting (and drinking), and that doesn't get me out of the house much.Regards,BillOn Sun, Sep 1, 2013 at 9:22 AM, conchdoc kw <billgoldner@gmail.com> wrote:If you are considering making such a change, Bill, i think that using a professional, namely Roger Hill, would be well worth the investment. I am sure he has lots of experience in valuing a practice such as yours is operating now. He will also show your purchasers how they will pay for the practice and still make a decent profit themselves, based on practice history.At one time, i did something very similar to what you describe, with 3 gp associates plus, and practiced only 12 hours per week clinically. Although it was profitable, i did not much enjoy it, and soon thereafter sold my practice to my associates, in 1992.I am now practicing two days per week. An xray sensor failed this month, and so did a dr's manifold unit. Also, when a towel dispenser loosened off the wall this week and a staffer asked if i could fix it, i smiled and told her that is no longer my Sunday project, speak to the new owner. My point is that you should be comfortable remaining the practice manager and owner with all it entails, rather than perhaps just being an associate. I am definitely enjoying my new role.regards, bill g, (the one that plays the sax)On Sun, Sep 1, 2013 at 8:43 AM, Bill Greenberg <billgreenberg101@gmail.com> wrote:
Hey, Bill G. Nice to hear from you.With a couple associates, the percent of gross formulas would be crazy high. After overhead and their percent of collections, they contribute a small percent to the "profit". (small percent of a big number, so I'm not complaining)In my original example I defined "profit" as the money left over after all the bills and associates are paid (including me paid as an associate). If there was $100K profit, then that amount could finance the debt to buy the practice and thereby establish the value.Alternatively, I could hire another associate (or 2) to do the same amount of dentistry and I could sit back and collect the "profit"and become the office manger. If I did that for 5 years, I'd net the same amount of money and still own the practice. Just thinking out loud, here.BillOn Sun, Sep 1, 2013 at 8:16 AM, conchdoc kw <billgoldner@gmail.com> wrote:
Hey bill g,i was very pleased with Roger Hill's appraisal of my practice. As Guy said, they looked at it about 5 different ways, additionally Roger ran Pro-formas which show a believable forecast of what a buyer can expect in the following ten years. The appraisal was very thorough and explained well in person.btw, the practice value did indeed equal approximately 60% of gross. go figure...bill g(the other)e wm goldner, dds
On Sun, Sep 1, 2013 at 7:37 AM, Guy Moorman <gmoor@windstream.net> wrote:Peter, McGill and Hill have a formula that takes into account just about everything that could equal worth or liability. They use gross and net, ARs, amount of depreciation left on equipment, number of new patients and potential for new patients and on and on and on. It has come up with a pretty fair number both times for us. The first buy-in valued the practice at about 400k (half) plus the payback for the new equipment and increased supplies. When they came in I was running on an overhead of 25% and Roger said that was ridiculous and they would figure it on 40% going into a new building. He just about nailed it.
The second doc came in with all equipment paid for…no debt and his buy in was about the same at 400k (I actually took 40k off of 440k to make him comfortable and payback is still tough). I financed the first associate because he could not get a loan. The first associate paid about 550k due to the five rooms of brand new Adec equipment. The second was about 100k less due to equipment being depreciated. We are still running on about a 40% overhead.
Guy W. Moorman, Jr., D.D.S.
The Swamp
Douglas, GA 31533
912-384-7400
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From: acesthetics@googlegroups.com [mailto:acesthetics@googlegroups.com] On Behalf Of Peter D. Boulden, DMD
Sent: Saturday, August 31, 2013 5:50 PM
To: Bill Greenberg
Cc: acesthetics@googlegroups.com
Subject: Re: [ACEsthetics] What's a practice worth?
So you're using a 5x multiple based on net profit. Valuations in other industries vary from 3x to 7x. Sometimes even higher. I have never understood the valuation of a practice based on a % of gross. There ARE many factors that go in to it.
I know that most practices have an overhead of around 65%. So if a practice grossed 1,000,000 then there should be $350,000 net.
350,000 x 5 times net = $1,750,000. So that would mean the "Million Dollar practice" should have a value of 1.75M based on the 65% overhead.
This is NOT the case with most dental practice valuations done. They all seem to be a portion of GROSS. Seems like 90% of Gross is the highest sale price I've heard recently. So in this model, let's assume 90% of a 1M practice is purchased for 900K. This is only getting a 2.5x multiple.
Pretty crappy.This is why Private equity groups are coming in an buying dental practices now. THERE ARE SOME DEALS!!!!!!!!!!!!!!!!
--
On Sat, Aug 31, 2013 at 9:01 AM, Bill Greenberg <billgreenberg101@gmail.com> wrote:Please, tell me if this is reasonable:--The most important factor in the value of a practice is the amount of profit it generates.I know there are multiple other issue that tweek the value, but let's assume there are no pressing capitol investment needs and the location/community are stable and the future is likely to be consistent with the past.
Let's define profit this way: I pay myself as though I were an associate, which reflects the value of the dentistry I perform. Any money left over after all the bills are paid is profit.
The profit is used to fund the purchase. A 5 year loan seems to be most common. If, for example, there is $100,000 annual profit, then that equals a value of $500,000, $200,000 would = 1M, and so on.
Seems to me to be more practical than a percentage of gross, which doesn't take into consideration the overhead, or percentage of net which could be totally from the dentistry performed so a potential buyer might do just as well as an associate.
I am in a practice with a couple associates and a handful of hygienists.TIA for any opinions.Bill Greenberg
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--Peter Boulden, DMD, FACE, FAGD, FIADFE, FACDS
Member of Master8 Dental Group
Board Member of Academy of Comprehensive Esthetics
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e wm goldner, dds
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