one does not fit all - oklahoma dental association · pedo practices – profit margin of 46% or...
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Providing Direction For Your Financial Future
Providing Direction For Your Financial Future
One Does Not Fit AllPractice Transitions of all Shapes and Sizes
And finding the one that fits you.
Providing Direction For Your Financial Future
Shopping
“Whoever said money can’t buy happiness didn’t know where to go shopping.”
Providing Direction For Your Financial Future
Objectives
Your business = your retirement
You make the rules
Finding the right person
Partnership
Walk-away
Hybrid
Corporate Buy-out
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Providing Direction For Your Financial Future
Your Business, Your Retirement
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Your practice value will likely make up between 15% and 33% of your total retirement assets
How you transition can determine how you live in retirement
Tax structure is important
Providing Direction For Your Financial Future
Back of the envelope
Financial Plan
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Providing Direction For Your Financial Future
Your Business, Your Rules
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You determine the game plan
You don’t owe anyone anything
Giving up decision making power
Associates are replaceable
Practice value is typically not worth the ongoing
cash flow
Providing Direction For Your Financial Future
Finding the right person
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Expenses not deductibleBusiness expenses are
deductible
Providing Direction For Your Financial Future
Finding and keeping talent
New grads are facing higher debt than ever– The average dental school debt was $261,149 for the graduating class of
2016, according to the American Dental Education Association.– A borrower with the average dental school debt of $261,149, who
borrowed at the Grad PLUS rate of 6.31%, faces a monthly payment of $2,940.
– This same borrower would pay $91,664 in interest on this debt, for a total cost of $352,813.
– Only one in five 2016 dental school graduates had dental school debt under $100,000.
– Among dental school graduates with debt, 30 percent owed more than $300,000.
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Providing Direction For Your Financial Future
Finding and keeping talent
Practice valuations are higher than ever– This means that it is harder for new grads to purchase
a practice
Corporate dentistry knows this and is using this to their advantage
Offering lower pay, but guaranteesHealth insuranceSigning bonuses very commonStudent loan repayment programs
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Providing Direction For Your Financial Future
Should I join/create a partnership?
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ProsSplit of ownership dutiesSharing of fixed overheadSharing of ideas and best practices
ConsDisagreements are commonMarried to your partners financial decisionsLack of control
Providing Direction For Your Financial Future
Partnership
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PracticePartnership
All practice income All shared expenses
CorporationS-Corp
Personal Perks Retirement funding Wages to yourself
and family
Corporation S-Corp
Personal Perks Retirement funding Wages to yourself
and family
Providing Direction For Your Financial Future
Who owns what?
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An ideal partnership model ties ownership to production
“Eat what you kill”
This allows for partners to work when they want
Providing Direction For Your Financial Future
Partnership Pitfalls
Think about not only how you split money, but also how you split tax on the front end
How you exit is just as important as you enter
– Death– Disability
Will you allow non-practicing partner?
– Production minimums
Providing Direction For Your Financial Future
Walk-Away Sales
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High profit margin = higher valueAre costs being managed well?
Including staff!
Good location?
Are the numbers reliable?
Can the work be replicated?
Can work be easily replicated?
Can the referral sources be transferred?
Technology upgrades?
Providing Direction For Your Financial Future
What metrics make a good practice?
General Practices– Profit Margin of 40% or higher– Staff wages (non-doctor) at 23% or
lower– Dental Supplies at 6.5% or lower– Lab expenses at 6.5% or lower– Rent at 6% or lower– Hygiene at 30% or more
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Providing Direction For Your Financial Future
What metrics make a good practice?
Endo Practices– Profit Margin of 49% or higher– Staff wages (non-doctor) at 16%
or lower– Dental Supplies at 7% or lower
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Providing Direction For Your Financial Future
What metrics make a good practice?
Pedo Practices– Profit Margin of 46% or higher– Staff wages (non-doctor) at
21% or lower– Dental Supplies at 7% or lower– Hygiene of 45% or more
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Providing Direction For Your Financial Future
What metrics make a good practice?
Ortho Practices– Profit Margin of 50% or higher
Perio Practices– Profit Margin of 42% or higher
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Providing Direction For Your Financial Future
Hybrid
Make sure you are ready to go, when you decide to go.
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Providing Direction For Your Financial Future
Corporate Buy-out
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What the heck is EBITDA?Earnings Before
Interest
Taxes
Depreciation
Amortization
Providing Direction For Your Financial Future
What can be expected in a corporate sale?
Employment at a lower rate for at least 2 years Typically lack of control in that period Potential for change in practice philosophy
Higher sales price Potential for passive ownership Corporate tenant of real estate
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Providing Direction For Your Financial Future
What makes a good potential target?
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MULTI-LOCATION ASSOCIATE BASED PRODUCTION
FEE FOR SERVICE
STRONG NEW PATIENT NUMBERS
GROWING AREA/VISIBLE
LOCATION
STRONG HYGIENE
Providing Direction For Your Financial Future
Build a better mousetrap
“Innovation distinguishes between a leader and a follower.” – Steve Jobs
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Providing Direction For Your Financial Future
DSO Model
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Allows for non-operating dentists
Allows for “passive” profits
Scalability
Providing Direction For Your Financial Future
How it works?
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DSO
Practice 1 Practice 3Practice 2
Management Fees
Holding Company
Ownership
Providing Direction For Your Financial Future
The house that Jack built
What to do with the real estate when you sell?– Being a landlord can be a hassle but the
income in retirement is nice– Selling ensures that you get the cash
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Providing Direction For Your Financial Future
Paladini Financial Management
Wendy Kelly, CFP®
817.704.7788
2015 E. Lamar Blvd, Suite 200Arlington, TX 76012
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