Closing Costs: Selling A Practice to Supplement Retirement

Are you counting on your practice sale to fund your retirement?

If so, you may need a backup plan. Typically, after taxes and closing expenses, the profit from selling your practice is roughly equivalent to what you would take home from the practice after working an additional 1.5 – 2 years. As a result, many dentists fail to plan their finances for retirement.If you are considering retirement in the next ten to fifteen years, now is the time to start planning.

To start, ask yourself: How much will it cost to live once I retire? If you can’t answer that question, it is time to start calculating. Use your credit card statements and check register. You will need to include taxes, health insurance, medications, mortgage, travel, gas, insurance, repairs, maintenance, phone, clothes, gifts, entertainment, hobbies, food, utilities, and cable. Then, determine a monthly and annual cost of living.

Now is the time to get totally out of debt. Banks place liens on your practice when you borrow money or open a business line of credit. If you have borrowed money, the debt will have to be paid off before, or at the sale of your practice.

What investments and other assets do you own? Do you own stocks, bonds, fixed assets, cash, or money market accounts? How much income will these assets provide after retirement — and is it enough? Currently, social security is still viable, but will likely only fund a small portion of your retirement needs.

Determine whether your future total income from investments, social security, disability insurance, and any other sources will be enough to cover your future budget. If not, then you will either need to reduce your current and future standard of living, or lengthen your timeline for retirement.

The most common solution dentists see as the answer to retirement income is to sell their practice. If that’s your plan, you should probably be looking at other options to supplement your retirement.

If you haven’t started planning yet, now is the time.

• Jennifer Furey, CPA

The Five P’s: Have You Reviewed Your Key Success Factors Recently?

According to IBISWorld, a leading provider of industry-based research, the top key success factors for dentists are:

I. Pricing – Ensuring pricing policy is appropriate. Dentists must price services in accordance with clients’ ability to pay, industry norms, and time requirements per service. Your fee structure is a major driver of practice value. Have a methodical and systematic way to raise fees, regularly/annually. See our recent blog, “In Or Out of Network, That is the Question” for further details on pricing and prices accepted for services

II. Patient relationships -The development of good patient relations is essential to create a loyal customer base and referrals. Word-of-mouth is a very effective form of marketing. Positive experiences, excellent doctor-patient communication, and professional and outwardly helpful staff lead to impressive repeat and new patient levels.

III. Practice location – Easy access. Location has proven to be extremely important in generating new patient referrals and encouraging patients to return. When looking for the best location keep in mind these factors:

• population statistics / demographics
• traffic patterns
• visibility & accessibility of the building and your sign
• convenient parking
• competition (the location is not overpopulated with dentists)

IV. Processes – Well developed internal processes result in productivity and profitability. To know how well-oiled your practice runs, evaluate the following list of systems within your practice:

• Scheduling
• Overhead expense control
• Accounts Receivable – See our blog post  “Smarter Account Receivable Management”
• Charting
• Staff (a well-trained and established team)
• Recall in the hygiene department
• New patient levels
• Marketing (image, brand, reputation, internal & external marketing plans, website)

V. Product offerings – Ability to quickly adopt new technology: Technological advances improve productivity, allowing dentists to complete more procedures in a given day and maintain higher profit with less time and labor cost. The introduction of new technology assists the practice to increase the range of services provided and improve productivity, lowering your costs.

Breaking the Cycle of Broken Appointments

Awkward. That’s likely the word that comes to mind when you or members of your staff think about confronting patients who have a habit of arriving late – or not at all. Discussing a patient’s penchant for no-shows takes a bit of fancy footwork at the very least. Mishandle the situation and you may lose a loyal patient.

But, if you’re tempted to look the other way, consider the economic impact. Missed appointments not only disrupt the flow of your office, they can affect your bottom line. Wasted time is lost revenue that’s a luxury most practices cannot afford.

One of your best lines of defense may be to not only establish and implement a general office policy for broken appointments, but to ensure your staff members are well versed in it. The same goes for your patients. They should be fully aware of your policy.

Many practices send patients out the door with an appointment card that’s intended to be dual purpose — reminding them of their next appointment as well as informing them of your office’s policy. An example of common verbiage is: “If for any reason you cannot keep this appointment, please call our office at least 24 hours in advance. There will be a fee for missed appointments.”

It’s a great start, but it may not be enough. Consider making your patients much more active participants by either adding your practice’s policy to your office’s financial agreement form or, if you don’t have such a form, creating one geared specifically to your missed appointment policy. Then, be sure that your patients not only read, but sign, the policy. You’re likely to get better results if you can pull out a form which details your missed appointment policy — acknowledged with the patient’s signature.

But a written policy is only your first line of defense. Here are a half-dozen more tips to help encourage your patients to keep their appointments.

1. Train your staff. All staff members – including your business team, hygienists and assistants – need to work together to help make sure patients are aware of your office policy. Consider scripting and practicing a few standard replies in case staff members find themselves tongue-tied when they’re in the moment.

2. Educate your patients. There’s a good chance the latecomer isn’t even aware of the havoc a few minutes can wreak as your staff scurries to make up for lost time – or the costs associated with a no-show. A simple reminder that missed appointments cost the practice money and consequently cause fees to be raised can be very effective.

3. Confirm appointments. While it’s true that answering machines and voicemail have eased the burden of appointment confirmations, it also may be time to consider a new twist on an old idea. Perhaps your patients would prefer (and respond better to) an e-mail confirmation of their appointment, or would prefer that you use their cell or office phone number over their home phone. Consider surveying your patients to find out which method of delivery they would find most convenient and effective.

4. Emphasize the potential consequences of a missed appointment. Be specific and forthcoming. Let your patient know, for example, that he or she risks losing a tooth as a result of delayed treatment. Patients are much more likely to respond if they are aware of the possible negative impact a missed appointment could have on their health as well as their pocketbook.

5. Offer incentives. Even the smallest rewards can reap big results. Incentives for keeping a series of appointments can range from a treasure chest of small toys from which young children can choose a prize to a free movie pass for the grown-ups.

6. Visibly display your policy. Your missed appointment fee policy should not only be clearly stated in your office’s welcome letter or brochure, but also on signs posted on the wall or desk near the reception and checkout areas as well as on your practice’s Web site. You should also train your staff members to routinely remind patients of your office policy at the time the appointment is scheduled as well as when it’s confirmed.

If you have a patient who, despite all of your efforts and warnings, continues to be a habitual offender, it’s time to follow through by tacking your missed appointment fee onto his or her bill. Sure, you risk the possibility of upsetting – or even losing — a patient. But, if that patient’s unwillingness to follow your office policy is costing your practice time and money, it may be a necessary step.