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Bill Rossi: Advanced Practice Management
Bill Rossi: Advanced Practice Management
Bill Rossi
Bill Rossi and team are involved in the on-going management of over 260 practices and oversee more than $30 million of activity per month. Each year they do over 600 on-site consultations giving them perspective for giving practical, tactical advice.

WHY THE BIG GUYS WANT TO BUY YOUR PRACTICE

2/1/2016 11:26:02 AM   |   Comments: 0   |   Views: 176
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There are many different models of “Corporate Dentistry”.  Some, like Pacific Dental, are very active in starting practices from scratch.  The same for Aspen Dental, although their actual operations are very dissimilar to Pacific Dental. 

However, many of the larger groups are buying up practices or groups of practices.  Why are they doing this?  What are the economics of doing this?  See below.

 Example:

Practice/Collections/Mo.                                                          $ 100,000

Practice Operating Net/Mo. (at 36%)                                      $   36,000

Dr. Prod./Mo. (2/3 of $100,000)                                              $   66,000

Non-Owner Dr. Compensation

  (30% after lab and write offs: $66,000 x .30)                        $   19,800

Practice Sale Price* (36,000 x 12 x 1.75)                                $ 756,000

Debt Service/Mo. on Practice

  ($756,000 x 8 years x 8%)                                                    $   10,687

THE PAY OFF: 

Practice “Operating Net”/mo.                                                  $   36,000

Doctor Compensation                                                             $  -19,800

Debt Service                                                                           $  -10,687

Operating Profit/mo.                                                             $     5,513

ANNUALIZED:

Operating Profit                                                                       $  432,000

Non-Owner Doctor Compensation                                          $ -237,600

Debt Service                                                                            $ -128,244

Operating Profit Per Year                                                     $    66,156 

The Bottom Line: For an outlay of $128,000 a year in debt service, the owner(s) receives $194,000, a 50% Return on Investment. Where else can you get that kind of R.O.I?  So what seems to be on the surface, a sort of slim net of about 5%-6% on collections per month, when leveraged really adds up over the course of the year. Now add to that some solid management for practice profitability and growth and the numbers really pop.

DOCTORS, YOU ARE SITTING ON A GOLDMINE: 

If you can step outside yourself for a moment and look at your labor as a Doctor separately from your role as an owner, you can see what a desirable investment your dental office is. Later, “The Key Points of Increasing Profitability of a Practice.”

 

*For this example based on a simplified Rule of Thumb of 1.75 X’s Net Income for illustration purposes.

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