RE: [ACEsthetics] What's a practice worth?

Arun, who said we collected 100%.  These kids are doing Medicaid and we are accepting three plans that cover teachers, Wal-Mart, and the city and county employees.   I only tell you what our accountant tells us and that number does move between 40-45% overhead.  I collect about 98% of what I charge because of my patient base and no Medicaid to speak of.  They don’t.  I still collect more than either partner but the senior partner caught me on production.  Much of his is charges rather than treatment.  When Roger came in on the first buy in and I was in the old office, my overhead was around 30% of collections.  He did not believe that until he got the books but he and I both knew that moving into a new 3600 sq ft building with five new Adec ops was going to knock a hole in that 35%.  Ironically it only took us to 40% overhead.  You might as well believe it because we have a pretty good accountant and we met with him three weeks ago.

 

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 Arunnayyardmd
Sent: Sunday, September 01, 2013 11:00 AM
To: jchdmd@msn.com
Cc: billgreenberg101@gmail.com; conchdoc kw; acesthetics@googlegroups.com
Subject: Re: [ACEsthetics] What's a practice worth?

 

We are in the market to partner with successful practices and take over the administration and operations,   Let the dentist come thru the back door,do the work and leave

,   

We also invest in the practice in $$. With every intent to buyout the dentist over a period of time on their terms. ie theDentist selects the exit schedule. 

 There are several happy individuals we have partnered with and each has their own personalities and agenda

 

The business of dentistry is in conflict with  the practice of dentistry.  Professional  do a better job, make more money for the owners and are unemotional in making decisions that are good for the practice

 

Good partnerships do not require rebranding.  the owner identity is preserved and there is goodwill value In it.  Look at Law firms ...  They have dozens of partners Each person is rewarded on services and all the other part is handled bya management group.   Why not in dentistry.  

 

Guy. 40% overhead.   = 100 collected. Uptake home 60.    Just does not add up.  ?  Just my own observations from over access to many offices in small and large cities

 

Arun

Sent from my iPad

On 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 it

 

The practice is worth what someone will pay you for it.

 

ARE you staying on

Are you fee for service

you produce 1 million and take home 750,000 or produce 1 million and take home 200.000

 

There are very specific formulars for the value...

 

The weighted average of the net over 3 years.....value of equipment.......consumables.......staff

 

ASK 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.com

203 397 9139 home

203 378 9500 office

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"Giraffe Society" For people willing to stick their necks out

 

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From: billgreenberg101@gmail.com
Date: Sun, 1 Sep 2013 10:21:16 -0400
Subject: Re: [ACEsthetics] What's a practice worth?
To: billgoldner@gmail.com
CC: acesthetics@googlegroups.com

I'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,

Bill

 

On 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.

Bill

 

On 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)

 

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

 

 

 

This email message and any attached files are confidential and are intended solely for the use of the addressee(s) named above.  This communication may contain material protected by patient rights, work product, or other privileges.  If you are not an intended recipient, you have received this communication in error and any review, use, dissemination, forwarding, printing, copying, or other distribution of this email message and any attached files is strictly prohibited.  If you have received the confidential message in error, please notify the sender immediately by reply email message and permanently delete the original message. 

 

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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