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| Psychology of Change |
Can you imagine how it must feel to stop being a dentist after 30 – 40 years? Many dentists ask " Will I be happy after I sell? What will it be like? Should I associate? How will I feel when I can‘t treat my own family"
A lot of what they are asking is of course unanswerable, but much of it has to do with not being a dentist anymore. Many professionals have their identity tied up in the artificial construct, "dentist". This is especially true for those who have been practicing for many years. They wonder whether they will get the same respect, will people be as friendly, what will be their place in society.
If you are a young dentist, make sure you enjoy hobbies and family. Don’t make dentistry everything to you. There is life after dentistry. I was always involved in my community and spent lots of time "recreating", so when it came time for me to make a change, I didn’t have much "exit apprehension" with respect to identity. I’ve always thought of myself, as John Wilson who happens to practice dentistry, not the dentist who is named John Wilson.
However many professionals contemplating change should seek out " business psychologists" who are experts in facilitating transitions. They are hard to find, so if you have any names, please refer them to us.
Don’t be reluctant to ask for their advice. This is going to be the greatest change in your life and therefore requires that you address it with the importance it deserves.
"one of the greatest changes in your life"
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Cost – Sharing Agreements
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Many practices are in a cost-sharing arrangement. How many have a detailed written cost – sharing agreement ? Ask any lawyer or broker in the business of dental practice sales and they will lament the fact that so few have one in place. When asked, the dentists invariably answer, "What for ? We’ve had a great relationship for 10 – 20 years and get along fine. It’s all on a handshake."
Now I must confess I was in such an arrangement for 15 years, all on a handshake. It worked well, but that is not the norm. Many disagreements can escalate into all out war. This is unlikely to happen if a solid, comprehensive written cost – sharing agreement is in place. Expect to spend several days of your time ironing out all the details, even down to how to pay for the toilet paper. Part of this agreement will include life insurance policies on each other with a binding agreement for the surviving dentist to buy the practice from the estate. What about when it comes time to sell the practice? Do you know what scares a new purchaser ? A cost – sharing practice. Without a good written agreement in place, beforehand, a prospective purchaser will often walk away Prevention is the key. Get it in writing!
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Tips in Selecting a Banker
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by Willie Chan, MBA
If you are dissatisfied with your present banker or this is the first time you are looking for a banker for your business needs, here are some pointers:
- Experience: How long has she been relationship managing health care professionals ? How many does he have in his portfolio now?
- Stability: How long has she been with this bank ? How many times has he been transferred in the last 5 years ?
- Training: What is her educational background and professional credentials?
- Don’t waste time: If you have a sense that it is taking too long to explain the nature of your business, move on. If he does not have a thorough understanding of your business, it will be a tough sell for her to get you a loan approval.
- Do it right the first time: After the initial interview and the usual request for necessary information, if he continues to request an inordinate amount of more information and supporting documents, she may be having trouble selling your loan application to his superiors.
- What you see is what you get: Make sure the interviewing banker is the one who will be personally relationship managing your account. You don’t need an excellent salesperson who will get your business and pass you on to some rookie two months down the road. You deserve the expert!
Willie Chan is a senior account manager with the CIBC, at the Kerrisdale Banking Centre . He specializes in lending money to professionals. He can be reached at 604-257-8080
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| Risks Associated With Wrongful Termination? |
When purchasing or selling a dental practice, your lawyer will undoubtedly point out the possible serious liabilities of long term employees. They will paint a disastrous picture of "ex" employees suing you for wrongful dismissal.
Are these the facts? What are you liable for if this happens?
Well, your lawyer is doing her job in pointing out some of the possible consequences associated with purchasing and running a dental practice. But let us put this in perspective. Does this happen often? Every good lawyer will be able to cite an example but is it -clinically significant"? We all know from our extensive dental untoward effects from many of the materials and procedures we use and perform but are not "clinically significant" and therefore we continue to use them with the full support of dental research and the dental community.
We do not expect to have a problem and act accordingly.
How many employees work in dental offices across Canada? 50,000?
How many of these stick around when they are not wanted? How many are fired? How many of those fired, sue for wrongful dismissal? I would think that it is an extremely small percentage.
How many of these cases are dismissed? How often did the dentist handle the situation poorly?
Therefore , when selling or purchasing a practice, put it into perspective, the same way you do when making clinical decisions. Don’t let this fear, override your better judgement or keep you from making the right decision.
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ROI Corporation Seminars, Canaden and Internet Sites
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See Timothy Brown, President of ROI Corporation at the C.D.A. Convention
Friday, August 6, 1999, 9:00 A.M. – Noon, Halifax, Nova Scotia
Thanks to Dr. Jim Brass who organized a great seminar at Comox on April 10th. Jim has a wealth of common sense information which he shared with about 100 people. Tim Brown and myself from ROI Corporation also talked about practice demographics , sales and appraisals.
Previously we have spoken to C.I.B.C. in Vancouver & Surrey and to the students at U.B.C. twice. If any study club or component society wishes to see the presentation , please call. I am willing to travel to all areas of the province The presentation includes information on demographics , selling your practice, associateships, appraisal concepts and misconceptions, actual open market sales figures, transition strategies , cost sharing, and patient count methodology.
Thinking of selling your practice?
ROI Corporation wants your listings. There are a multitude of ready & willing buyers out there. Your practice will now be posted on our website immediately enabling us to more effectively market your practice by our team of professionals across Canada.
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| Purchasing a Practice? |
Where do you want to live? I can’t stress enough the positive aspects of living near your office. A one hour commute, seemingly nothing the first few years, can become excruciatingly painful as time goes on. Inevitably you’ll resent the time away from family and recreation. Think about all of B.C. There are some fantastic opportunities in the more rural areas of our beautiful province and elsewhere in Canada with spectacular recreational opportunities and a safer and cleaner environment in which to raise a family. Practices in these locations are discounted compared to the lower mainland. How about buying your dream home for less than $200,000?
Be careful about associating where you want to practice and live unless you’re buying in, as a restrictive covenant in your associate agreement can prevent it.
Learning the business – " If senior dental students were given a practical course in the economics of dental practice, they would be much better prepared to meet the problems of selecting a location, the equipment of an office, the development of clientele, the selling of service, the establishment of fees fair to the patients and themselves, etc………"
Profitable Practice – Dr. George Wood Clapp DDS , 1916
Make every opportunity, during your associateships to learn the business. I know, it’s hard enough to improve your confidence and competence in the clinical aspects, but this is also very important. Don’t learn it the hard way like I did!
Financing – Contact a financial lending institution before you start looking for a practice. Based on your current monthly billings and your personal liabilities, they will give you an idea of financing available for practice acquisition.
Choosing a practice – If it was a buyer’s market you could afford to be more selective than in the current seller’s market. But more important, your practice philosophies being similar, will go a long way towards an uneventful practice transition. You’re going to be there a long time so be sure. Don’t be rushed into a decision. That doesn’t preclude you from moving quickly if you are prepared.
Make sure there is an appraisal done by a qualified company. Your accountant will tell you if it is acceptable - if not, request one. If the practice is listed with a broker, expect good service. The broker should answer all of your questions. Full disclosure is mandatory. This person should be willing to spend a lot of time with you, going over all the ins and outs of buying and running a practice.
Accountants & Lawyers – Build a good relationship with an accountant, experienced with the business of dentistry before you go looking.
After you have selected a practice take the appraisal to the accountant who will analyze it and your own personal financial situation. When you decide to make an offer consult with the broker. They can provide you with a draft of an offer and explain the clauses. Make sure you want this practice. Don’t go and spend all this money unless you know this practice is for you. Now that you have decided, see a good lawyer, experienced in dental practice sales. It may seem expensive but absolutely necessary to protect you and prevent a possible disaster.
"opportunities abound throughout Canada"
Offer – Once you and your lawyer have agreed on the wording of an offer have the broker present it to the seller. This offer can go back and forth several times, being frustrating to both parties. Keep this to a minimum by spendingthe time to present a fair offer to all.
Most sellers I have dealt with are very fair and want to help out the purchaser as much as possible. But remember, this practice is that dentist’s life and he/she is very proud of it. The patients and staff are like family, so a low ball offer is taken as a personal insult . Do you want this practice? If so , act accordingly and you will receive a lot more from the seller in return.
After Closing – You may have as one of your conditions that the vendor stay on as an associate. This works great as the previous owner can now introduce you to your patients and effect a smoother transition. Don’t worry about your "new associate" producing the big numbers, as it is more important for them to concentrate on the on the facilitation process. The previous owner can also introduce you to members of the local dental society, study club, specialists, referral sources, service clubs, and friends. Also while he is there, with so many years of experience, pick his brain. He will have a gazillion helpful suggestions and be more then happy to share them with you.
This is only a brief synopsis of a subject which I could write a book on, so please call if you have any questions.
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| Practice Financial Statement Review |
by Wendell Meeres C.A.
During the course of your practice acquisition due diligence process, it is important that you review the historical financial statements of the practice in detail. The financial statements will reveal a great deal about the prospects for the practice in the future.
To facilitate this financial statement review, you need to determine whether any adjustments are required to the financial statements for "discretionary expenditures". Discretionary expenditures are expenses which are not necessarily required for the smooth operation of the practice such as meals and entertainment or salaries to a spouse where the spouse is not providing services equal to the value of a salary. Obviously, these types of items would distort the net income of the practice and could distort the valuation of the practice.
Other adjustments are sometimes required where additional revenues are reported which will not be available to the new practitioner. In one instance, we encountered a situation where office overhead & disability insurance were being received because of the practitioner’s disability and these funds were added to the practice revenue and inappropriately inflated the value of the practice.
It is also important to determine early in the process whether the acquisition is proposed to be for shares or for assets. If it is a share acquisition you will not only acquire the assets you want, you may also acquire assets you do not want and liabilities which may or may not be disclosed on the financial statements.
Generally it will be necessary for you to engage an accountant who is familiar with the financial details related to the operations of dental practices so that they can engage an accountant who is familiar with the financial details related to the operations of dental practices so they can identify contentious issues. These issues will need to be considered in making an offer or in preparing the purchase and sale agreement.
Often, a broker will bring many of these adjustments to your attention; however, where you are not working with a practice broker and you do not have appropriate accounting representation, these matters could prove very costly.
Mr. Wendell Meeres, B. Comm., C.A., CFP is a tax practitioner and partner with Martin Meeres, Chartered Accountants, a firm specializing in providing tax and accounting services to dentists. Wendell can be reached at 604-683-3738
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| What if ? A Note to Spouses |
What if one day you get that terrible call? I’m very sorry to inform you that your spouse has passed away. What now? After the shock has passed and the funeral dealt with and the extreme pain has subsided somewhat, you remember the dental practice. With everyone protecting and insulating you, information is non-existent. Will the associate in the practice now buy as was his original intention? Should I think about selling it elsewhere? I wonder how much it is worth? Well, I regret to inform you but this happens all too often. You as the practicing dentist knows what to do, but do your spouse and children?
I know, you and your cost-sharing partner even had life insurance on each other in case something like this happened. Was there a written agreement that the proceeds of the policy be used to buy the dental practice from the estate? Did the associate have a similar arrangement? Is it written in the associate agreement about what is to happen under these circumstances?
What if the associate becomes uncooperative ? What about the cost-sharing partner? What if he/she doesn’t like the prospective purchaser?
Please have all of these items of contention well thought out beforehand and with the help of a lawyer, who understands dental practices, and have them in writing.
Please have your practice appraised and updated regularly.
Please keep all of these documents in a safe place.
Please make it well known what your intentions would be if something happens to you.
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