How to Start Your Own Practice as a Dentist Timothy Kosinski, DDS Material in this seminar is for reference purposes only. This seminar is sold with the understanding that neither any of the authors nor the publisher are engaged in rendering legal, accounting, investment, or any other professional service directly through. this seminar. Neither the publisher nor the authors assume any liability for any errors or omissions, or for how this seminar or its contents are used or interpreted, or for any consequences resulting directly or indirectly from the use of this seminar. For legal, financial, strategic or any other type of advice, please personally consult the appropriate professional
Transcript
How to Start Your Own
Practice as a Dentist
Timothy Kosinski, DDSMaterial in this seminar is for reference purposes only. This seminar is sold with the understanding that neither any of the authors nor the publisher are engaged in rendering legal, accounting, investment, or any other professional service directly through. this seminar. Neither the publisher nor the authors assume any liability for any errors or omissions, or for how this seminar or its contents are used or interpreted, or for any consequences resulting directly or indirectly from the use of this seminar. For legal, financial, strategic or any other type of advice, please personally consult the appropriate professional
Material in this seminar is for reference purposes only. This seminar is sold with the understanding that neither any of the authors nor the publisher are engaged in rendering legal, accounting, investment, or any other professional service directly through. this seminar. Neither the publisher nor the authors assume any liability for any errors or omissions, or for how this seminar or its contents are used or interpreted, or for any consequences resulting directly or indirectly from the use of this seminar. For legal, financial, strategic or any other type of advice, please personally consult the appropriate professional
About the Webinar Speaker
How to Start Your Own Practice as a DentistTimothy Kosinski, DDS
• Timothy Kosinski, DDS, MAGD• Adjunct Assistant Professor University of Detroit Mercy School of Dentistry
• Private practice Bingham Farms, Michigan for past 26 years. Insuranceless general dentistry practice focusing of dental implant surgery and prosthetics, cosmetic reconstruction.
• Diplomate American Board of Oral Implantology/Implant Dentistry, the International Congress of Oral Implantologists and the American Society of Osseointegration. Fellow of the American Academy of Implant Dentistry, Mastership in the AGD, Lifelong Learning and Service Recognition from the AGD, OKU, Piere Fauchard Academy. Master’s Degree in Biochemistry. Board member for Reality, the Information Source for Esthetic Dentistry. Editor and Vice President of the Michigan AGD
• Published over 75 articles, including chapters in two textbooks on various aspects of dental practice.
• National speaker on various topics concerning dentistry.
Slide 2
Overview• Starting your own dental practice can be an overwhelming dream and
project. Controlling your own future may be important. This includes working where and when you please, making an appropriate income for your lifestyle, making a difference and becoming an integral and respected person in your community, and creating a quality of life.
• Deciding to buy a practice from a retiring dentist, a past employer vs. starting a practice from scratch needs to be carefully investigated.
• Realizing the cost analysis of purchasing an existing practice with a lump sum payment to the seller or payments over time vs. the probable lower initial cost to starting a practice from scratch with new equipment but no real patient base needs to be understood. Regardless of how you start your practice, there needs to be enough of an income stream to make the appropriate payments.
Slide 3
How to Start Your Own Practice as a DentistTimothy Kosinski, DDS
What to Know• Initial patient base with purchasing an existing practice. With existing patients
comes an immediate revenue source to help in paying off your debt. It is important to maximize the return on your investment.
• Financing the purchase of an existing practice may be easier with the banks knowing the financial status of the existing practice and the financial potential for the new dentist. Smaller communities also want a dentist close by and may be willing to work with the new owner.
• You must visualize the type of practice you want to create over the next few years. Pick the location and community you wish to live in, i.e. big city, small town, rural areas; demographics of the dentist to population ration. Quality of life has definite value and dentistry is much too difficult of a profession unless you appreciate the lifestyle you create.
• Look at the potential for growth; new housing in the area, more traffic, your area of expertise, what other dentists in the area have created. Consult with the local Chamber of Commerce.
• Evaluate your practice philosophy; insurance vs. insuranceless practice, blue collar vs. professional, esthetic practice vs. general dentistry; PPOs, HMO, traditional insurance.
Slide 4
How to Start Your Own Practice as a DentistTimothy Kosinski, DDS
Action Plan• Determine location, philosophy, determine the building site or office site itself-is it
modern and esthetically pleasing or do you need to redecorate to update.; determine patient flow and your patient base. Determine your staff requirements with existing employees that may have higher salary/benefit expectations vs. hiring new staff. Look at the start up staff requirements vs. future needs and relationship of existing staff with existing patients.
• Find practices that may be for sale through practice broker, dental societies and journals, dental meetings, previous employers, consider associateships with option to buy in, dental supply companies, dental schools.
• Determine your budget and cost of practice; sale price, start up costs for brand new practice, cost to work with a broker who may be representing you. You will need to determine the financial information and practice profile for the past 3-5 years.
• Work with someone to get an expert opinion that has your interests at heart. Don’t rely exclusively on the seller’s representation. Contact and attorney and CPA.
Slide 5
How to Start Your Own Practice as a DentistTimothy Kosinski, DDS
Action Plan• Spend time at the office to evaluate the “fit” and to help with the transition from
previous owner to yourself. It is nice to be introduced by the seller to his/her patients.
• Be prepared for information the banks will require to seal a loan agreement; 3 years of federal tax returns and financial statements for the practice; 3 years production and collection numbers, 3 years totals for production per individual procedure; patient demographics; fee schedules; employee considerations including salaries/vacations/benefits; list of equipment that with transfer to new ownership, repair histories.
• Determine if the price is close to what you can afford or plan on spending. You need to be assured that the revenue allows you to make your loan payments AND live a life style you will be comfortable with.
Slide 6
How to Start Your Own Practice as a DentistTimothy Kosinski, DDS
What to DoYou must know where you want to practice, the type of community that appeals to you; large city, suburbs, rural areas. This not only affects possible earning potential but expense of running a business. Due diligence is important. Visit the practice at several different times and days. Evaluate patient records, look at patient flow. A more experienced dentist may work at a greatly different rate than a new practitioner. If you work at a slower pace initially you may need less staff. However, planning for the future is important.
The actual geographic location of your new practice is really your sole decision to make. It is important, however, to incorporate your ideas, concepts, techniques and philosophies to your newly established practice. If you start from scratch you can design your building to your dreams. Existing practices may need to be remodeled. Remember you will be the boss!
Slide 7
How to Start Your Own Practice as a DentistTimothy Kosinski, DDS
Starting a dental practice can be a challenge. You may be practicing with a dentist as an associate and may consider buying in to that practice over time. This has some advantages to the seller. He can continue to work for a time and know that his patients will be well taken care of by you in the future. You can look at a practice where the dentist recently died. You can start a practice from scratch by yourself or with other dentists
Slide 8
How to Start Your Own Practice as a DentistTimothy Kosinski, DDS
What to DoEither starting a practice from scratch or buying an existing practice will require a significant amount of money or a large loan. Starting a practice from scratch may mean initially treating family or friends and building a patient base may take years of struggle. Income must keep up with the financial responsibilities. It may take up to five years for a new practice to mature financially.
Purchasing an existing practice may have some distinct advantages including an immediate cash flow; equipment is already there, you will have patients to work on immediately and there is potential for growth as you incorporate more modern techniques and procedures. However, you must also be aware that some patients may leave the practice when their previous dentist leaves. There is something to be said about having the previous owner stay with the practice for a transition period to introduce you to his patients. Equipment may be outdated and need of replacement, the office itself may need to be remodeled, employees may leave or need to be replaced.
It is important to look at the financial status of the existing practice. Remember however, that the previous dentist may have used techniques or procedures that can be improved upon, so there may be an upside potential to purchasing a practice that may not be the most efficient or modern.
Slide 9
How to Start Your Own Practice as a DentistTimothy Kosinski, DDS
What to DoObtaining startup capital is done by acquiring a small business loan from a bank, finding investors willing to loan you money or working in the other’s dentist office while saving up your own money.
Determine a location that may have a shortage of dentists or in a growing area.
You can lease or rent space or own the building you prefer to be in.
You must register with the U.S. Department of Revenue and the IRS to get an employer identification number. You will need to pay unemployment insurance for your employees. Working with a good tax attorney and CPA will make this process easier.
Slide 10
How to Start Your Own Practice as a DentistTimothy Kosinski, DDS
What to DoSpending time in the office will help you determine the fit of personalities and treatment philosophies. Contact insurance companies you may wish to work with. The more insurance companies you work with, the more POTENTIAL customers you have. The insurance companies want your business and will help you get approved to work with them. However, understand the down side also. Insurance companies may try to dictate your fees charged for procedures and even attempt to dictate the type of treatment you can provide your patients.
Hire employees or keep those already employed including a hygienist, dental assistant and receptionists. Start with a small staff and work into more employees. Employees are expensive, but worth it when they are on your side and can help you generate revenue.
Promotion of your office will help attract new patients. Local publications, church papers or a simple sign on your office building for people to see can help.
Slide 11
How to Start Your Own Practice as a DentistTimothy Kosinski, DDS
What to DoCompare the monthly production and collection information you were given against the practice accounts receivable to validate the information provided to you and your team. Insure that all monthly calculations are accounted for and that any adjustments are properly accounted. Hard assets including dental equipment, chairs, radiographic units, handpieces, computers should be inspected professionally and any lease agreements evaluated. Now is a good time to renegotiate any lease agreements. Evaluate the practice’s billing and collection protocol and scheduling procedures. Look into the practice’s employee handbook.
Once you determine that a particular office is one in which you wish to make an offer, you will present the seller with a Letter on Intent. This is often confidential. Now is the time to use your experienced practice broker and /or attorney and CPA to uncover all important information including 3-5 years of tax returns for the practice and financial statements including production and collection reports, patient demographics, equipment valuations and employee considerations.
Slide 12
How to Start Your Own Practice as a DentistTimothy Kosinski, DDS
What to DoCompile your personal information for the lenders. Contact various lenders to determine the best deal possible. Some local banks are more eager to support a local business, especially a dental practice.
Terms of agreement and loan documents need to be clear and concise with no holes. Due diligence is important for you to determine any discrepancies and provide you a legal option to delay or stop the negotiations. Make sure all lease or building costs are calculated into your financials.
Make sure you and the seller are on the same page as far as cooperation in the transition.
Slide 13
How to Start Your Own Practice as a DentistTimothy Kosinski, DDS
What to DoDetermine the type of legal business entity you will operate under, which may impact your tax situation. The popularity of certain business entities like PCs., LLC change from time to time so discuss with an experience, competent CPA.
Determine what you will call your practice
Determine your marketing strategy for the transition.
Knowing what you will need to borrow to start up or purchase a practice is important. It is best to take into account at least one month’s average collection amount when borrowing for the purchase price. This will help support your initial cash flow and give you time to get on your feet.
Borrow the amount needed for any near future capital improvements including decorating and updated equipment needs. The bank can offer you a line of credit to help you during your first year of practice. Understand the terms of your loan, the interest rates, length of the loan and any early termination penalties. The bank will determine who will be the loan guarantor.
Slide 14
How to Start Your Own Practice as a DentistTimothy Kosinski, DDS
What to DoYou will need to determine proper allocation of assets and how they will be affected by local, state and federal taxes. Often what is best for the seller may not be in the best interest of the buyer. You may be able to deduct certain assets quicker than other assets, so specifying at the time of purchase can save you thousands of dollars.
You will then need to complete any agreements, sign leases, pay off broker costs and any taxes. Past accounts receivables have to be considered. Who will these belong to, the previous dentist or the new owner? How the staff compensation/benefits/vacation time etc also need to be considered carefully Now is the time to discuss all loose ends to eliminate the potential for anger or distrust.
Once you are an owner you should determine your suppliers, who you will bank with, which management software you will use, payroll companies, telephone/cable service, internet providers. You will need to investigate insurance policies for the practice including malpractice.
You will need to be generating income rather than administrating details.
Slide 15
How to Start Your Own Practice as a DentistTimothy Kosinski, DDS
Do’s and Don’ts6. Do consider that you will need to budget 15-20% more than you think for just
about everything.
7. Don’t get overwhelmed and use the advice of trained, experienced professionals that are working for you.
8. Don’t accept the seller’s opinions and statements about his/her practice without investigating yourself thoroughly
9. Do hire people you like to work with. It makes for nice days!
10.Don’t forget to continue your education and involve your staff. The more you get competent doing, the more potential revenue for your practice. Never stop learning and growing. That’s why they call it “practice.”
Slide 17
How to Start Your Own Practice as a DentistTimothy Kosinski, DDS
Case Study #1• Doctor 1 finished his general practice residency and was hired into a
prominent general dentist practice as an employee. He was given a salary which seemed fair and reasonable. The young dentist worked alongside the established, experienced dentist learning many fine techniques. The equipment was modern and the staff experienced. Not only did the young dentist learn a lot, but also gained valuable business knowledge. After 5 years the young dentist decided to move the practice and go out on his own. The established mentor dentist was confident enough to allow his protégé to move on. The young dentist found a location in a building in the suburban area he wanted to practice. After consulting with a great CPA and attorney, he decided to sign a 10 year lease, purchase new equipment and do an entire build out on 2300 square feet of office space. A couple of the newer employees at the old office followed him. This practice essentially was started from scratch. The young dentist invested $150,000 of his own savings into the buildout and equipment and borrowed the remaining $400,000 from the bank, to be paid over 15 years. Indeed it took about 4 years for the practice to be profitable where the young dentist’s income was substantially greater than what he made as an associate, however, debt was reduced. The practice was entirely paid off in 7 years.
Slide 18
How to Start Your Own Practice as a DentistTimothy Kosinski, DDS
Case Study #2• Doctor 1 finished dental school and moved to the northern part of the state
in the small town he grew up in. Rather than associate with the established dentist, he immediately bought into the practice. He would become a 50% owner and pay for his percentage of ownership with a percentage of his revenue he generated in the practice. This worked fine for a couple of years as the two doctors split their practicing time evenly. A problem arose as the young dentist felt that he was simply paying too much for his 50% of the practice since his revenue was not increasing significantly. The older doctor felt that the agreement was fair if the young dentist simply worked harder and generated more income. The other issue that was a problem was that their agreement stated that the young dentist would purchase the other half of the practice from the older dentist when he decided to retire. The value would be determined by a pre-established revenue formula. The problem arose in that this agreement did not include the purchase of the building owned by the older dentist. Therefore when the older dentist retired not only would the younger dentist have to purchase the dentist’s half, but also would have to invest into a building or move to another location and accumulate that debt. The younger dentist felt cheated and the relationship quickly deteriorated, where the young dentist left and had to settle with the older dentist.
Slide 19
How to Start Your Own Practice as a DentistTimothy Kosinski, DDS
Case Study #3• Young dentist graduated from dental school and wanted to become an
associate in a dental practice. After discussing with part time faculty at the dental school, he found a practice that was looking for a young associate to treat patients so the owner dentist could take more time off. Taking the young dentist under his wing, he was paid a percentage of revenue minus laboratory expenses. After several years, the owner dentist decided to offer the young dentist an option to buy into the practice over a 5 year period. A certain amount of revenue would be withheld by the owner as payment for a percentage of the practice. The two worked in harmony and the practice flourished. After a time the two became equal partners. The older dentist decided to retire and the young dentist bought out the older dentist in full. The relationship reversed where the older dentist became the associate of the younger dentist while he transitioned into retirement. Both the older and younger dentist won in this relationship. The older dentist got fair value for the practice he established over time and found someone he felt confident in treating his patients. The young dentist was able to establish himself, develop tremendous skill and become an owner over time.
Slide 20
How to Start Your Own Practice as a DentistTimothy Kosinski, DDS
