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Everything Dental Blog – April 2014

In this issue: The Fifty Year Young Dentist – A perspective on Gloves – Cancer Awareness

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If you are five years north or south of Fifty Five years old and own a practice that produces $800,000.00 plus a year in collections or more, than you are a hot commodity. Many of you in this age and success bracket have a unique opportunity to develop a strategy that can potentially yield you 30, 40, 50% more than you ever imagined when you finally implement your exit plans.

If you had access to the funds to build a second office with the help of experts who’d design and equip the space for you would you be tempted? What if this dream office came complete with the latest offering in practice management, digital technology [radiology/digital impressioning or CadCam] and a friendly, professional administrative and clinical staff (including an associate) – would that spark some interest?

Mature dentists that possess leadership and management skills are in high demand today. Their talent, clinical expertise, leadership, charisma and desire to improve their exit strategy make them very desirable/vulnerable to groups and DSO’s. Truth be told, doctors who operate offices of this caliber, would grow their exit payout and tax avoidance significantly (30% – 100%) by using their skills to build a second or third office for themselves.

Most doctors (if they can sell their practice) are lucky to get 60% of the last three years of collection when they sell their practice. Let’s assume the practice consistently produced a solid $800K – that’s a selling price of approximately $480k (about a year and two thirds pay). This assumes the Dr. ran his practice with approximately a 65% overhead, which suggests that he/she had earned approximately $280K plus a year and also got to write off business and investment expenses.

Here are several strategies that my 50+ clients are considering.

Most Drs. in this age group have come to realize, if not now than when?

This is when they plan out their next 5, 7 and 10 year strategy.

  • Bring in a partner (make some cash for the shares they purchased) and grow the practice for the final exit pay-out. The associate will help grow the practice which will then be appraised at a higher selling price minus any previous agreements.
  • Maintain the practice while the market consolidates. This will lead to a decline in revenue but may be in sync with working less hours and having more free time. This exit strategy will diminish or eliminate any significant resale opportunity.
  • Move your practice into another facility. The result is a reduction in overhead and payroll. This strategy allows you to slow down and increase revenue in the short term. You then eventually sell the patient list/practice to the office you are renting space from. Many older doctors who have failed to maintain their facility and have not invested in technology can embrace this strategy and maximize their payout.
  • The traditional exit strategy? Sell the practice to an associate or another clinician. You stop working unless other agreements are made and you lose all the benefits and deductions of practice ownership. One big concern is that most acquiring doctors seek 5-7 operatories. They want to grow the practice with two doctors, two hygienist (with swing rooms) and an extra op for multi-specialty dentistry all operating simultaneously. Unfortunately, many older facilities only have two and three ops and will not suffice.
  • You can join a national DSO (sell your practice to them) and use your leadership and expertise to manage your old office for them. You will eventually have more personnel and a longer list of services. The question you must ask yourself is; how will I feel when I have limited autonomy when selecting my lab, dental supplier and the products that I use clinically? Additionally, you will no longer determine the financial or standard of care policy for the office? Lastly, the benefits of practice ownership and tax write offs will go away.
  • Go Group – this strategy can be incredibly rewarding and will provide you with a built-in exit strategy. The common challenges in developing a dental group practice are adequate facilities, leadership (vision and mission) and management (operational) expertise. Does the facility you built twenty years ago have the space to accommodate swing rooms for multiple producers and administrative staff (5-7 ops)? Do you have the management and leadership skills to create business systems and standard of care models that drive revenue for multiple doctors? Are you willing to make an investment and work with others clinicians and specialists? Can your team elevate their skills and embrace these changes? Are you able to share or relinquish decisions making responsibilities and accommodate partners?
  • The most rewarding and satisfying option may be to use your skills to improve your autonomy, earnings and exit strategy? Historically, Drs. who build or buy a second office will grow that office at an accelerated pace. With the right business plan and a good dental team, most start up second offices can operate in the black (pay its monthly obligations and make a little profit) in less than five months of operation. In many cases, the staff from the original practice helps select and mentor their counterparts for the new office. The second office can be very rewarding if the culture, dentistry and operational systems are similar.

What took you twenty years to build can be duplicated in just 3-7 years in most cases. Why sell an $800,000.00 practice for $480K and work for 35% commission when you can sell two practices for significantly more. In addition, you will have several windfalls. You will have secured your exit strategy with no need or the expense of a broker (built in buyers) and you’ll make significant profits from both practices until you unload them. You can also unload them at different intervals reducing your tax burden accordingly. Lastly, some of the costs associated with building and branding the new office will give you a tremendous tax advantage limiting your overall liability.

GLOVE_AUDIT

Do You Need A Glove Audit?

The Glove segment has changed over the last few decades. In the nineties and early 2000’s most doctors used powdered latex gloves with beaded cuffs. It was common to see Drs. with powder stains all over their cloths and hands back then. We saw a movement towards powder free gloves and now we are moving away from latex entirely. While latex maintained the gold standard for years (still 50% of the market), many nitrile, synthetic and vinyl gloves entered the market because there was a need for latex free environments, dermatologically friendlier materials and improved tactile feel and touch.

Glove purchases can become an acquisition, storage and inventory control nightmare if you do not manage them professionally. We have many colors, textures and scented gloves today. Various marketers use different powders or proprietary coating processes to improve comfort, fit, function and feel. While it seems like there are hundreds and hundreds of brands and names to choose from, the truth is that only a handful of glove manufacturing companies monopolize the healthcare glove business. Consider this; one style of glove former/mold can be used in manufacturing all types of material, different colors, scents, and coatings as well as non-sterile and sterile packaging.

To demonstrate the proliferation of glove brands and names, now imagine what happens when the manufacturer sells that glove (all variations of that glove) to the private label market. The end result is Henry Schein, Ansell, Microflex, Supermax and Glove Club market the same glove under different names so that one glove former/mold may be responsible for multiple brands worldwide. Imagine what happens when you put size into the equation.

There can be many significant characteristics and differences in the examination glove market. There are premium and low end dental/medical examination gloves marketed by legitimate healthcare companies and some unauthorized vendors. Personal preference and sizing are critical components to selecting the correct glove for you. Finger length, web size, texture, tactile sensitivity, grip, comfort, economy and glove type (Latex, Nitrile, Vinyl, Synthetic) are the top criteria for most healthcare professionals. Healthcare professionals must always use high quality Medical grade exam gloves and follow CDC guidelines regarding infection control.

The Right Way to Buy Gloves

Commit your business exclusively to one supplier and work on your procurement cost (glove cost, freight cost and quantities). Vendors will work with you when you are loyal to them and they get the lion’s share of your dental supply business. Try to get the entire team on one glove brand or at least have all the same size gloves in the same brand. I know this is difficult but keep multiple glove brands or sizes to a minimum if possible. When you visit a hospital emergency room, the clinical staff has to use the gloves in the dispenser so why do we get carried away with multiple brands in one office? Take advantage of monthly billing from your full service dental distributor and only buy the inflection control and disposable items that you need to get you through the month. Of course, occasional volume deals and free good offers may be prudent but buying only what you need lowers your monthly payableJ. Let the dental dealer be your warehouse!

The Wrong Way to Buy Gloves

Some practices buy big – try to get the best possible price and bulk up for an entire year. This is truly not efficient and also costs more money over time. The price may have been excellent but the cost was actually high. Inventory sitting on a shelf or in a basement is very expensive. Your money should not be tied into overstock inventory but should be invested in activities that enhance your facility/operation and produce revenue. Negotiate a fair price for a case or whatever your monthly requirements are and let your dealer be your warehouse. Avoid working with vendors that charge your credit card instantly (at the time of the order). Why pay for the years supply now?

Some offices fail to manage the glove component of their inventory control supply regimen. These offices wind up inventorying several brands and sizes to accommodate personnel. This behavior will increase glove acquisition costs because you have more merchandise sitting on the shelf or in the supply room.

Other offices buy two to five boxes of each glove (sometimes several brands and sizes) every week which is a poor use of time, personnel and cash flow. Sometimes you have no choice but to offer a few different gloves (allergy, size, material etc…) but it is best to keep this to a minimum. Glove purchases, should follow your dealers monthly billing cycle. Think about it, if you are billed monthly from Henry Schein then it is best to order your bulk materials monthly and let your inventory work for you. Simply find out when your dealer runs your monthly statement and buy your supplies a day or two after that. This will allow you to use the gloves/supplies (perform dentistry) and make your profit before you pay for them. This goes for all your dental supplies (clinical and otherwise). It’s almost like having consignment!

If you really want to maximize your savings on gloves and your dental supplies, pay your dealer monthly statement with a credit card that has perks. You can earn cash back or reward points. Also make sure your credit card billing cycle compliments this strategy. That will yield you a few more weeks before having to submit payment for the sundries/gloves!

Today we see a major movement towards Nitrile powder free gloves and the latest trend in the glove business is the movement towards bigger boxes. Many popular dental exam gloves are now available in boxes of 200, 250 and 300 counts, providing significant savings to you!

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April is Oral Cancer Awareness Month

MOUTHMany common cancers are on the decline and mortality rates for cancer survivors are rising because of education, early detection and technological advancement. But oral cancer is on the rise. It is our responsibility (dental community) to reverse these alarming statistics through education and assisted cancer screening. What you can’t see, can hurt you and your patients.

The deep penetrating power of Idenatfi’s multiple wave lengths is designed to enhance diagnosis as an adjunctive tool for early detection. The Identafi system uses the Identafi Multi –Spectral Florescence and Reflectance technology to enhance visualization of mucosal abnormalities such as oral cancer or premalignant dysplasia that may not be apparent to the naked eye.

Join the revolution. Get a demonstration of Identafi and join your peers by becoming involved in this war against oral cancer. Also, join OCC (Oral Cancer Cause) and show your philanthropy while receiving a great marketing package and a pathway to implementing assisted screening in your office.

OCC  www.oralcancercause.org

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