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Southeast TransitionsPassing dentistry to the next generation
through practice sales
Southeast TransitionsExpertise 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
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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 investorsEasy bank financing
Inflated pricesAbundance of buyers
THE “PRACTICE BUBBLE”
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DENTAL MARKET ≈ HOUSING BUBBLEI. Influx of Investors
Market consolidationCorporate buyersTemporary Sellers’ market
II. Easy Bank FinancingBanks competing for dental loansLoans up to 110% Driving prices higher
III. Inflated PricesInstitutional investors Artificial scarcity of practicesCompetitive bids up to 80-100%
IV. An Abundance of BuyersInstitutional buyersBaby-boomers holding on to practicesDental demographics shift
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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
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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
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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?
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HOW IS THE SHIFT IN DENTAL DEMOGRAPHICS IMPACTING
THE PRACTICE SALES MARKET…
NOW AND IN THE FUTURE?
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ADEA ESTIMATES DEFICIT
DemographicsIncrease in Female dentists
-2000
-1500
-1000
-500
0
500
1000
DE
NT
IST
S
1998 2007 2012 2016 2023 2030 2038YEAR
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 2,3772,517 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
Firs
t-Yea
r Enr
ollm
ent
Academic Year
Male Female
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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
250,000,000260,000,000270,000,000280,000,000290,000,000300,000,000310,000,000320,000,000330,000,000
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
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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
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DETERMINE WHERE YOUARE IN YOUR PRACTICE
LIFE CYCLE
Revenue
Maturity
Years as a Practice Owner
Typical Business Life CycleWhere 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 4Revenue Net Proceeds Investment Growth Opportunity Cost
OPPORTUNITY COST TYPICAL SCENARIO
Typical Scenario Current yr. Year 1 Year 2 Year 3Revenue 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 3Grow 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
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Current yr. Year 1 Year 2 Year 3Gross $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 180 198 217.8 239.58Additional Days Worked 0 18 37.8 59.58
10% GROSS INCREASE/YEAR
Current yr. Year 1 Year 2 Year 3Gross $1,000,000 $1,100,000 $1,210,000 $1,331,000 Revenue per Day $5,555.56 $6,111.11 $6,722.22 $7,394.44Revenue Increase per Day $0 $555.55 $1,166.66 $1,838.88 Number of Days Worked 180 180 180 180Additional 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 sharingLocation
Lack of curb appealAssociateshipsSelling too late
Disability
Death
DECISIONS THAT IMPACT PRACTICE VALUE
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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 unexpectedlyDr 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
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Thank You for Your Time!
678-482-7305info@southeasttransitions
www.southeasttransitions.com
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