Study club Southeast Transitions

Southeast Transitions
Passing dentistry to the next generation
through practice sales
Southeast Transitions
Expertise for all the Transitions in the Life Cycle
of your Business

Agenda
1.Dental practice market trends and their
impact on You
2.How changing dental demographics will
impact YOU
3.Where are YOU in your practice life cycle
4.How to protect Your family and practice in the
event of a disability or death
www.southeasttransitions.com

4 REASONS WHY THE CURRENT DENTAL PRACTICE
SALES MARKET IS LIKE THE 2008 HOUSING BUBBLE
Like ALL market bubbles – This bubble is unsustainable
Influx of investors
Easy bank financing
Inflated prices
Abundance of buyers
THE “PRACTICE BUBBLE”

DENTAL MARKET ≈ HOUSING BUBBLE
I. Influx of Investors
Market consolidation
Corporate buyers
Temporary Sellers’ market
II. Easy Bank Financing
Banks competing for dental loans
Loans up to 110%
Driving prices higher
III. Inflated Prices
Institutional investors
Artificial scarcity of practices
Competitive bids up to 80-100%
IV. An Abundance of Buyers
Institutional buyers
Baby-boomers holding on to practices
Dental demographics shift

THIS SELLERS’ MARKET IS TEMPORARY AND WILL SHIFT TO A
BUYERS’ MARKET IN THE NEXT 12-24 MONTHS
PRACTICE SALE PRICES WILL PLUMMET
THERE WILL BE A SHORTAGE OF BUYERS
DENTISTS WHO WAIT TOO LONG TO RETIRE MAY NOT BE
ABLE TO SELL THEIR PRACTICE
THIS CREATES TREMENDOUS OPPORTUNITIES FOR DENTIST
WITH THE WILL TO ACT
CONCLUSION

Market Consolidation - What it means
to You
• The Old Model
– Poorly funded
– Lacked sophistication
– Low quality
– Low Cost alternative
– Poor market reach
• The New Model
– Well Funded
– Sophisticated operating
model
– Achieves quality & scale
– Maintains high margins
– Market reach is a
differentiator
The Rise of Corporate Dentistry

WHAT’S YOUR STRATEGY TO OFFSET THESE
COMPETITIVE ADVANTAGES WHEN THE
CORPORATE SHOP OPENS UP 1 MILE AWAY?
– NEW PATIENT ACQUISITION
– COST OF DOING BUSINESS
• SUPPLIES
• EQUIPMENT
• STAFF
– CORPORATE REVENUE
PRODUCTION NEVER STOPS
HOW DO YOU COMPETE?

HOW IS THE SHIFT IN DENTAL
DEMOGRAPHICS IMPACTING
THE PRACTICE SALES MARKET…
NOW AND IN THE FUTURE?

Demographics
Increase in Female dentists
-2000
-1500
-1000
-500
0
500
1000
DENTISTS
1998 2007 2012 2016 2023 2030 2038
YEAR
Female dentistsAll dentists
The shortage of dentists will mean a shortage of buyers for existing practices
The increase in female graduates further reduces the number of buyers in the
market
2,493 2,608 2,641 2,610 2,686 2,692 2,744 2,762 2,793 2,976 3,009
1,955 2,010 1,971 2,078 2,047 2,078 2,174 2,327 2,377
2,517 2,688
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
2010-
11
2011-
12
2012-
13
First-YearEnrollment
Academic Year
Male Female

18 states account for 95% of projected U.S. Growth:
California, Texas, Florida, Georgia, Arizona, Washington, North
Carolina, South
Carolina, Colorado, Virginia, Tennessee, Utah, Michigan, Oregon,
Nevada, Minnesota, Ohio, and Maryland
250,000,000
260,000,000
270,000,000
280,000,000
290,000,000
300,000,000
310,000,000
320,000,000
330,000,000
2000 2005 2010 2020
population
Increasing patient base
Shrinking
provider base
POPULATION GROWTH
There were 200 million patient visits in 1950 --- there will
be an estimated 600 million in 2020

There will not be enough buyers to purchase every practice
that is on the market for sale
More graduates today focus on work-life balance and are
less likely to be business owners
Shortage of Dentists combined with population growth
makes a “start up” more attractive
The value of a patient is greatly reduced
CONCLUSIONS

DETERMINE WHERE YOU
ARE IN YOUR PRACTICE
LIFE CYCLE

Revenue
Maturity
Years as a Practice Owner
Typical Business Life Cycle
Where are YOU?
EXITPost-Maturity
EXITPost-MaturityThe ADA says if you are
50-54 years old

-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
1 2 3 4
Revenue Net Proceeds Investment Growth Opportunity Cost
OPPORTUNITY COST
TYPICAL SCENARIO
Typical Scenario Current yr. Year 1 Year 2 Year 3
Revenue 1,000,000 950,000 902,500 857,400
Net Proceeds 700,000 665,000 631,750 600,180
Investment
Growth 700,000 721,000 742,600 764,900
Opportunity Cost 0 56,000 110,850 164,720
Assumptions: Dr. Scales back production 5% per year for
quality of life

WORKING HARD:
10% INCREASE/YR.
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1 2 3 4
Grow Revenue 10%/Year Sales Price Net Proceeds if Sell Today Additional Proceeds
Best Case Scenario Current yr. Year 1 Year 2 Year 3
Grow Revenue 10%/Year 1,000,000 1,100,000 1,210,000 1,331,000
Sales Price 700,000 770,000 847,000 931,700
Net Proceeds if Sell
Today 700,000 721,000 742,600 764,900
Additional Proceeds - 49,000 104,400 166,800
Assumptions: Dr. hustles and grows production 10% per year

Current yr. Year 1 Year 2 Year 3
Gross $1,000,000 $1,100,000 $1,210,000 $1,331,000
Revenue per Day $5,555.56 $5,555.56 $5,555.56 $5,555.56
Revenue Increase per Day $0 $0 $0 $0
Number of Days Worked 180 198 217.8 239.58
Additional Days Worked 0 18 37.8 59.58
10% GROSS INCREASE/YEAR
Current yr. Year 1 Year 2 Year 3
Gross $1,000,000 $1,100,000 $1,210,000 $1,331,000
Revenue per Day $5,555.56 $6,111.11 $6,722.22 $7,394.44
Revenue Increase per Day $0 $555.55 $1,166.66 $1,838.88
Number of Days Worked 180 180 180 180
Additional Days Worked 0 0 0 0
Increase Daily Revenue
Increase Number of Working Days

20 years 10 years 5 years 3 years
• Build out hygiene program
• Purchase equipment
• Consult business advisor
(different than your CPA or
Attorney) about retirement
plan
• Fund retirement accordingly
TIMELINE TO RETIREMENT
• Hire a SET Transition Advisor
and determine your best
transition plan
• Make sure lease is assumable
• Only renew lease for the time
you plan on staying in the office
• If you own the
building, determine fair market
rent and begin to pay that
amount
• Upgrade to digital x-rays if you
haven’t already
• Get rid of credits on books and
clean up A/R
• Consult with SET Accelerated
Practice Advisor or Advisor
• Renew 5-year lease with a 5-
year option
• Leasehold personally pay for
unless landlord agrees not to
increase rent if you sell
• Peak hygiene collections
• Have or hire at least 1-2
young staff members
• Upgrade equipment: digital x-
rays
• Refurbish office:
carpet, décor, etc
• Upgrade to the best computer
software
• Make sure retirement plan is
on track and working
• Consult SET Accelerated
Practice Advisor
• Settle lease: two 5-year leases
NOT 10 year
• Upgrade equipment: digital x-
rays
• Refurbish office
• Upgrade to the best computer
software
• Make sure retirement plan is
on track
• CODICIL TO WILL WITH
DETAILS OF SELLING YOUR
PRACTICE
Your business strategy must start with the end in mind
If you Don’t know where you are going – any road will
get you there

Space sharing
Location
Lack of curb appeal
Associateships
Selling too late
Disability
Death
DECISIONS THAT IMPACT
PRACTICE VALUE

A CAUTIONARY TALE
• Solution – Create a Codicil to your will
• Who will sell your practice
• Who will work as temporary dentist until the practice
sells
• Establish a formal practice valuation prior to death or
disability
Dr A and Dr B both die unexpectedly
Dr A’s practice sold in a
couple of months for higher
than market value
Dr B’s practice sold over 1
year later at much lower than
market value

Thank You for Your Time!
678-482-7305
info@southeasttransitions

Study club Southeast Transitions

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