Archive for the ‘Overhead’ Category

Lease or Buy…(continued)

Friday, May 15th, 2015

In the last article, the many benefits of owning your practice were explained. Here, I will highlight the second and third steps in weighing the pros and cons of whether to own or lease your commercial real estate space.

Second Step: Learn About Today’s CRE Market

Since the recent real estate downturn, individuals and businesses are more cautious about real estate investments. Prudent investors are taking steps to learn about their current market climate, ensuring the best investment for the long term.

Traditionally, real estate decisions have hinged on desirable locations. In today’s CRE market, decisions should also include timing as a key ingredient. If you can secure your mortgage at historic low rates, you pay less in interest. You can search for local CRE properties online, but you should realize that not all available properties will appear. The best choice is to work with a local commercial broker who knows your area.

Third Step: Assemble the Team

⋅Navigating the labyrinth of loan options and finding the perfect building or location can be overwhelming. No matter, whether to lease or buy, is the best  choice for your practice; plan to surround yourself with experts who can assist in making the right decision. The following is a list of experts who  specialize in these decisions:

⋅Demographic consultant: Invest in this resource to learn the composition of the area: How many dental practices exist locally? Who is your competition?  Who are your potential customers? Once armed with this information, you can embark on your search for the perfect property location.

⋅ Accountant: A certified public accountant can help determine what your practice can afford and familiarize you with tax benefits.

⋅ Commercial broker: This team member helps you locate potential properties. Find your local realtor board at www.realtor.org to choose professionals    with area expertise.

⋅ Attorney: Engage your attorney if you need help with property negotiations.

⋅ Commercial lender: This team member guides you through financing options. Your best bet is to choose a lender that specializes in dental practice    financing. A dental practice financing specialist will understand your specific needs and can dive deeper into your balance sheet to help find the best  terms. With this type of specialty lender, you might even qualify for 100% financing, which goes a long way toward making your dream a reality.

The decision to buy or lease is one of the most vital you will make as a business owner. Arm yourself with details and expert opinions to make an informed decision and get your business off to a great start.

Screenshot 2015-04-24 14.15.33

JP Blevins joined the Live Oak Bank team in early 2011 and initially spent much of his time educating young professionals about financing and how to best maintain and grow their business. Assisting healthcare professionals in achieving the “American Dream” of ownership, JP is a Loan Officer and General Manager working exclusively with the dental and medical community nationwide.

JP can be reached by phone at 910.796.1674, or email jp.blevins@liveoakbank.com

 

Make an Informed Decision Whether to Lease or Buy

Thursday, April 30th, 2015

Whether establishing a new dental practice or taking steps to expand your practice, as a business owner, you face difficult choices. One crucial decision is whether to invest in commercial real estate (CRE) or to lease space. Before you decide, weigh the pros and cons of a lease vs. buy, take steps to learn the current CRE climate, and surround yourself with experts who can smooth your path.

First Step: To Lease or Buy?

A lease might appeal to you if future space requirements are uncertain, or you require cash for equipment and marketing. The upside of leasing is that it typically doesn’t require a large down payment, leaving you with cash available to focus on running your practice. Plus, you don’t have property ownership and maintenance responsibilities.

Lease arrangements have one major drawback: You aren’t investing in your future. As property values increase, your landlord — not you — benefits from the property’s investment. The landlord also might limit improvements you can make to the space. Retrofitting existing space for a dental practice could cost $150,000 or more. And, once you invest in improvements, consider that this is the space that you don’t own. If you outgrow the space, you will start over in a new location, losing your initial investment in the process.

If your goals are longer term, and you wish to use your property as an asset toward future retirement, consider buying. Purchasing property sometimes requires an up-front investment, but can often be mitigated by a lender who specializes in dental financing.

For new construction or purchased CRE, your loan can be amortized over 25 years, in some cases resulting in monthly payments similar to a 10-year lease agreement. Owning your property and building gives you a blank slate. You can develop and modify space as your office changes and grows. Or, you can allocate space to lease to other tenants, which generates a new revenue stream. Another benefit is that owning CRE property comes with multiple tax benefits.

Steps two and three will be highlighted in a follow up article.

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Screenshot 2015-04-24 14.15.33

JP Blevins joined the Live Oak Bank team in early 2011 and initially spent much of his time educating young professionals about financing and how to best maintain and grow their business. Assisting healthcare professionals in achieving the “American Dream” of ownership, JP is a Loan Officer and General Manager working exclusively with the dental and medical community nationwide.

JP can be reached by phone at 910.796.1674, or email jp.blevins@liveoakbank.com

4 Reasons Patients No Show

Wednesday, April 22nd, 2015

Broken appointments cost you thousands of dollars in lost revenue every year. While you’re never going to completely eliminate cancellations and no-shows in your practice, you can significantly reduce them. How? First you have to understand why patients don’t show up.  Here are four reasons patients don’t make dental appointments a priority, and what you can do to change that at your practice:

1. They Don’t See the Value of Dentistry – When patients don’t understand the importance of maintaining their oral health, they’re much more likely to skip out on their appointment times. That’s why education is so important, and should be part of every patient interaction.

 

2. You Don’t Create a Sense of Urgency – When you recommend treatment to patients, you have to stress the importance of going forward with that treatment. Make sure patients understand the possible consequences of ignoring the problem, and the benefits of maintaining their oral health. Never leave them with the impression that there’s no hurry to pursue the treatment you’re recommending. After all, if you aren’t worried about it, why should they be?

 

3. You Don’t Always Confirm Appointments – Your patients are busy people with many responsibilities, so they might not remember making an appointment with your office. This is especially true if they made that appointment six months ago. That’s why you have to make sure your Scheduling Coordinator and/or your patient communication system confirms every appointment with every patient two days in advance (via their preferred method of contact).

 

4. You Don’t Have a Cancellation Policy –  When you have a cancellation policy and communicate that policy with patients, it helps them to see the importance of showing up for their appointment. If you don’t have a cancellation policy, develop one now and make sure you let both new and current patients know it exists. Remind patients about the policy when they schedule their appointments. Ask them to give your office at least two days’ notice if they can’t make their appointment so another patient can see the doctor.

 

Broken appointments wreak havoc on your day and cost you time and money. If you follow these tips, you’ll see a huge reduction in the number of cancellations and no-shows your practice has to deal with each week, and that, doctor, will do wonders for reducing stress levels while also growing your productivity numbers and your bottom line.

To read this article in it’s entirety CLICK HERE

The Profitable Associate

Wednesday, October 1st, 2014

Can an associate generate a profit? The answer is in the size of your patient base. If you have a saturated practice with an abundance of patients, you can keep your associate busy and generate a 30-35% profit margin.

The first step after accurately measuring the size of your patient base is to perform a cost benefit analysis to determine the likelihood of profitability, as well as to gauge the non-monetary benefits such as improved quality of life, which may be equally important. The following steps will help you analyze the economic sense of hiring an associate, and will help you set realistic expectations about the return on investment you are likely to attain.

Step 1: Determine Production Goals

Step 2: Assign Direct Expenses to the Associate

Step 3: Apply the Formula and Get the Answer

Associate Profit Analysis Summary

Daily Collection – $950
(Assume 95% Collection/Production Ratio on Daily Production Goal of $1000)
# Days Worked Per Year X 196
Projected Annual Revenue $186,200

(Assume 34% Collections) Associate Compensation – $63,608
(6% Dental Supplies) Associate Payroll Taxes – $4,843
(8% Lab Expenses) Associate Lab Expense – $14,896
Associate Supplies – $11,172
Assistant Salary (inc P/R tax) – $21,620
Uniforms – $200
CDE Allowance + $1,100
TOTAL EXPENSES – $117,439

Projected Annual Revenue: $186,200
Less TOTAL EXPENSES – $117,439
Associate Profit: $68,761

PROFIT MARGIN: 37%
($68,761 PROFIT / $186,200 ANNUAL REVENUE)

Once you’ve assured yourself that the economics make sense for your associate, proper planning is key. Most importantly, if this associate is a candidate for your long term transition plans, make sure that you properly think about your exit strategy so that once you begin interviewing candidates, you clearly spell your vision for a successful relationship.

To read the original article in its entirety please visit: The Dentist’s Network Newsletter #100
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Dr. Thomas L. Snyder, Director, Practice Transitions for The Snyder Group, a division of Henry Schein Professional Practice Transitions.

Fee Increase? Know Where Yours Stand First

Thursday, April 10th, 2014

The price of gas is going up again with $4.30/gallon in some parts of the country. Perhaps It feels like the latest volley in the seemingly never-ending match between economic recovery and continued uncertainty. The good news – it doesn’t appear that the upsurge is having a detrimental impact on overall inflation.
 
For dental practices that are seeing improvements in new patient numbers, patient retention, and treatment acceptance, there can be a general sense that the time is right for an increase in their own fees. Certainly, many practices have made a concerted effort to keep the cost of treatment in check the last few years. And as a result, some practice owners may feel it’s time for an economic adjustment.
 
However, with such jolts to the wallet as $4 gas prices, dentists must continue to be cautious about fees and think carefully about how they can best compete in today’s marketplace. I recently had the opportunity to catch up with Tom Limoli, Jr. He is a noted expert on proper coding and administration of dental insurance benefit claims, and he serves as president of Limoli and Associates, which assists dental offices in establishing fee schedules and managing insurance reimbursement. Tom has watched the business of dentistry for many years. The common practice in the past for practices was to increase fees 3-5% annually. It was a widely accepted standard in the industry. Today’s dentists, however, are encouraged to take a different approach and base fees on true overhead. In other words, what it is costing them to actually deliver the dentistry.
 
In setting fees, Tom notes that dentists need to be very aware of where fees stand in the area that they are practicing. It would not be advisable for a dentist to set fees that are at or exceed the marketplace. “Don’t establish your fees based on the dentist down the hall or across the street. Your fees should be based on your overhead, expenses, patient base, your individual level of professional expertise, and debt,” notes Tom. In addition, dentists should be wary of creating a fee schedule that is too high or too low because it is based on third-party reimbursement rates. “You don’t want to trap yourself by attempting to establish your office fee schedule based on what some third-party payer reimburses at 65% of the 85th percentile,” he explains.
 
Additionally, dentists need to recognize where they are on the skill continuum. For example, newer dentists do not perform dentistry at the same speed as more experienced doctors. For these doctors, what they don’t have in speed they can make up in relationship building. Similarly, for dentists establishing new practices it can be particularly beneficial to hold off on hiring a hygienist right away. It allows the dentist to focus on building one-on-one relationships with patients and will help keep overhead down until production increases and it makes financial sense to add a hygienist to the payroll. As Tom emphasizes, when patients have a relationship with their dentist, they don’t question the fee. Building good relationships with patients has never been more important.
 
Dentists also need to be cautious about setting fees too low for some services and too high for others. In the past, it was not uncommon for dentists to keep hygiene fees unrealistically low, and then make it up with much higher fees for other procedures, such as crowns.
 
In many areas of the country we are seeing smaller treatment plans, and that is translating into steady production and financial success for some practices. Regardless of practice location, what is imperative for every dentist in today’s marketplace is paying close attention to what the patients want and why they are coming into the practice. Addressing the smaller issues and offering more conservative restoration options, provided they are in the patient’s best oral health interest, can be absolutely critical in some situations before recommending larger, more extensive alternatives.
 
One thing is true across the board – the doctors who are successful in today’s economy have a relationship with their patients. They are focused on providing the level of dentistry that achieves the greatest return for the patient. After all, patients are no different than the rest of us. They want to know they are getting the most value for every dollar they spend, be it at the gas pump or in the dental practice.
 

Budget for Technology

Tuesday, October 15th, 2013

Without a budget, the cash outlay for technology can quickly become overwhelming for the doctor and the practice. But how much is enough? The truth is that every practice and every practitioner has different needs and wants. While the numbers may vary, there are some guidelines that you should factor into the budget:

 

1. New computer hardware every 36 to 48 months.

2. Practice management software, regular updates, and unlimited support.

3. On-site professional technical hardware and network installation and maintenance, unless you are using a Cloud-based system.

4. A minimum of 16 hours of on-site software training annually.

 

On the clinical side, the typical annual budget would include expenses for both operations and clinical information management and purchases, such as the following:

 

1. New computer hardware every 36 to 48 months.

2. Practice management software, regular updates, and unlimited telephone support.

3. All clinical software upgrades to the practice management software.

4. Digital X-rays, digital imaging (camera), imaging software, periodontal probing, etc.

5. On-site professional technical hardware and network installation and maintenance.

6. A minimum of 32 hours of on-site training each year.

 

Next to dental school, practice technology is probably the biggest investment you will make in your career. And like virtually any other product on the market, you get what you pay for, so prepare and invest your dollars wisely. Develop a plan, establish a budget, and arrange to professionally train your team.

You’re Likely Underestimating Overhead

Thursday, August 1st, 2013

New Dentists are always surprised by the overhead benchmarks that are established for dentistry:

 

Dental supplies – 5%

 

Office supplies – 2%

 

Rent – 5%

 

Laboratory – 10%

 

Payroll – 20%

 

Payroll taxes and benefits -3%

 

Miscellaneous 10%.

 

They have to carefully manage their start-up monies and consider purchases thoroughly. Oftentimes new dentists get so caught up in all the sparkle and shine of all that new state-of-the-art equipment there’s no money left for other critical start-up expenditures, such as marketing.

 

What’s more, it is common for new dentists to be treating family and friends when they open their practices, and many feel pressured to give freebies and discounts. Freebies and discounts will not pay for staff salaries, taxes, or supply and equipment purchases. But they will give you many sleepless nights worrying about how the bills will be paid. Nothing in the new practice should be given away for free. Fees must be set at a level that is appropriate for the area, and, most importantly, patients must be charged.

 

Additionally, now is the time to begin educating patients about the value of care that you are providing. Talk about what is involved in the procedure; explain the instruments on the tray, the many steps in the process. Very quickly the patient begins to realize that a so-called “simple” filling is a highly detailed procedure that requires numerous steps, a multitude of instruments, and a variety of materials that must be precisely applied. Too often dentists at every level – new and experienced – minimize the care that they deliver. Remember, dentistry requires a level education, training, and skill that most people simply don’t have.

 

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If you are wondering how your overhead compares, I am happy to look at yours. Feel free to take the FREE Overhead Assessment available on my website at http://www.mckenziemgmt.com/comp-overhead.php

Tax Saving Strategies Part II

Wednesday, March 6th, 2013

In continuation from our previous Tax Saving Strategies post, Dental CPA Ken Rubin has shared with the New Dentist™ some additional insights about business profitability maximization.

 

Ken says your CPA can also do the following for you:
• Select the best choice of business entity and retirement plan for you
• Advise you on whether to purchase or lease equipment and cars
• Claim tax credits for disabled access, crown manufacturing, employee health insurance, new hires, etc.
• Set up medical expenses reimbursement plans, HSAs, and cost segregation studies
• Train you and your staff on QuickBooks™
• Analyze various loan options available
• Monitor your practice’s key performance indicators, business metrics, and your profit and loss statements
• Update you on developments affecting the business side of dentistry and changes in tax law
• Keep you in compliance with the taxing authorities and give you advice to operate more profitably and efficiently

 

IRS auditors acknowledge that “it takes money to make money.” Basically, anytime you spend money in order to help your business, the expenditure is tax deductible. Sometimes the connection is not obvious.

 

Read more on Tax Strategies for The New Dentist at

http://www.thenewdentist.net/magazinelibrary/spring_2013.htm?startid=6

 

 

Ken Rubin & Company, Dental CPAs has been providing proactive tax, accounting, and business consulting services to dentists since 1984. Ken is the co-founder of the Academy of Dental CPAs (ADCPA). He is committed to improving the quality of his clients’ lives and can be reached at www.CaliforniaDentalCPAs.com or (619) 299-6161.

Tax-Saving Strategies

Tuesday, February 26th, 2013

Dental CPA Ken Rubin has shared with the New Dentist™ his tax saving insights.

 

Ken says that early in your career, you should spend time with your CPA learning the following basic items to prepare and save money for tax season:

 

• Proper record-keeping needed to survive an IRS audit
• Tax-deductible automobile business mileage
• Business car deduction – for your spouse
• Tax-deductible meals and how to handle the record-keeping
• Tax-Deductible Trips
• Lock in a home office deduction
• Maximum tax deductions for charitable contributions
• Legally put your kids on the company payroll

 

Read more on Tax Strategies for The New Dentist at

http://www.thenewdentist.net/magazinelibrary/spring_2013.htm?startid=6

 

 

Ken Rubin & Company, Dental CPAs has been providing proactive tax, accounting, and business consulting services to dentists since 1984. Ken is the co-founder of the Academy of Dental CPAs (ADCPA). He is committed to improving the quality of his clients’ lives and can be reached at www.CaliforniaDentalCPAs.com or (619) 299-6161.

Remember, It ALL Adds Up

Saturday, February 16th, 2013

What many newer dentists don’t consider is that those seemingly insignificant expenditures and special purchases here and there can quickly bury them in unnecessary debt, particularly during difficult economic times. Worse yet, it can set the stage for serious monetary struggles throughout their careers.

The key to avoiding financial troubles is to implement a strategy to control overhead from day one. New equipment purchases should not be made unless they will increase production and revenue flow immediately. Staff salaries cannot be increased unless the practice is on solid financial footing. Patients must be given financing options that encourage them to pursue treatment promptly. And specific budget targets must be established to help the office reach the overhead benchmark of 55% of collections in the coming year, specifically:

Dental supplies – 5%

Office supplies – 2%

Rent – 5%

Laboratory – 10%

Payroll – 20%

Payroll taxes and benefits – 3%

Miscellaneous – 10%

Unfortunately, setting the goal to achieve the budget targets is the easy part. Reaching it is the challenge, as many dentists struggle to develop the systems that will enable them to realize those benchmarks. Don’t go it alone, seek help.

For additional assistance please visit our New Dentist resources page under Practice Management at http://www.thenewdentist.net/resources.htm