A few posts ago,  I discussed strategies on how to successfully purchase a dental practice from a retiring doctor where the buyer was essentially going to be the “replacement”. The new doctor in that role would retain the staff and occupy the existing facility. But purchasing a dental practice from a retiring doctor can also be a great way to exponentially grow and add to your existing dental practice. I did this three separate times in my clinical career, and the return on investment was always more than 100% in the very first year! I wish I could say the same for my returns in the stock market. I believe the reason that the return on investment was so positive was for the following reasons.

1. Associate dentist — when I acquired these practices, I had my associate actually work in and maintain the purchased location for 12 to 18 months. That way the patients were comfortable returning to familiar surroundings with staff members they knew and trusted. Nothing had changed for them except the doctor providing dental treatment. They did not have to immediately travel to a new location. They were gradually  transitioned over to our office.

2. Geography — the acquired practices were within 3 to 4 miles of my office. It would not be realistic to expect the same level of patient retention if the acquired doctors practice was not close by.

3. The size of my office — because I had enough treatment rooms, it was easy to absorb all of these new patients as they were gradually transferred. In my experience, the biggest impediment to success or growth is the lack of a proper facility. So you have to be prepared to handle the increased patient flow.

4. Economies of scale — once the old facility was closed down, it greatly reduced the overhead. One location instead of two, and eventual consolidation of staff. Patient relationships had now been established and strengthened over the 12 to 18 months by my associate, and thus patient retention was excellent even with the move to our main office.

I often see situations where a doctor wants to bring on an associate as part of a long term  exit strategy, but there are not enough patients in the practice to keep the associate busy more than one or two days per week. The type of acquisition that I describe above eliminates that problem and gets the associate very busy very quickly.

Next post — another twist for acquiring an existing dental practice.

Selling your dental practice is a complex business event with many emotional and economic issues coming into play. The truth is that hopefully you are only going to do this once – so you better do it right in order to get maximum value. Probably the hardest part is to make the actual decision to sell. But once you are ready, it is essential to conceptualize a detailed plan of action, and that plan may extend for 18 to 24 months.

Don’t start telling patients that you are thinking about retiring. You don’t want to give any patient a reason to leave prematurely. If asked, your answer should be “I love what I do and have no plans at the moment to stop.”

Don’t discuss your retirement plans with staff. There is no way to control what comes out of their mouths, and they could unwittingly be undermining you.

Don’t slow down. Keep to the same weekly work schedule. You should be able to suck it up and work hard knowing that the end is in sight. The value of a practice is time weighted using collections from the past three years. The performance data from the current year is weighted three times more than what happened two years ago. So if you slow down and work less, you are going to be severely penalized. Value is based on the present and not on a glorious history.

Give the office a facelift. Paint, paper, carpet, ceiling tiles – maybe some new reception room furniture. This is relatively inexpensive. You certainly don’t want your practice to look tired and dated when you go to sell.

A big factor in valuation is the size of the patient base. How many patients do you have will be one of the first questions asked. My definition of an active patient is someone who has a scheduled appointment. So make a concerted effort to re-activate every patient that has been seen in the past 24 months and get them an appointment for continuing care. In every practice that I have ever coached, there is a large practice “within your practice” with whom you have lost contact. It is a lot of work –  but will be time well spent.

Don’t go crazy with updating software and technology in anticipation of a sale. These are expensive purchases, and since you will need to sell your practice debt free, you will not have enough time of recoup the value. And there is no guarantee that the buyer would be happy with your choices. Instead of a positive, it could turn out to be a negative.

If you adhere to these suggestions, I am comfortable – especially in this current seller favored environment – you will get maximum value for your practice.

After a brief interruption to comment on Google patient reviews, I want to get back to dental practice transitions. My last blog post on this topic discussed a number of pitfalls to avoid when purchasing an existing dental practice from a retiring doctor. Let me share some specific details based on my experience.

The retiring doctor should leave on the day of the closing=when money changes hands. It is a common misconception that there is value to the buyer when the seller stays on for a short period of time to make introductions to patients. Not true! It is OK for the doctor to leave the practice and have the practice continue on successfully. But you may be playing with fire if you don’t retain the existing staff. The “introduction” and endorsement of the new doctor is made by the retiring doctor in a warm and sincere letter to the patient base. This letter must include a number of vital points.

1.The search – “after a long and careful search I have found a wonderful, talented, compassionate doctor who I know will continue to provide the same care and attention you have come to expect”. List the professional accomplishments – education, training, and experience.

2. The communication – “I have spent countless hours discussing the treatment plans for every patient in the practice.”

3. The continuity – “I am pleased that all of the staff that you have come to love and depend on over these years will be staying on.”  All scheduled appointments will be honored.

4. The thank-you and the pass off– “Thank-you so much for your friendship and continued confidence over these many years.  I am leaving you in good hands, and I know that you will be impressed when you meet Dr. ______. I hope that you will give him/her the same level of support that you gave to me.”

The staff then need to be able to reinforce and expand on these sentiments when discussing the new doctor. The endorsement of the staff is incredibly essential., both on the telephone and in the office. “You are going to love her- she is terrific – and everyone has been so impressed.”

Now all the pieces are in place. The letter was mailed, the staff  enthusiastically supports the new doctor, and the patient shows up for the appointment. But now the buyer has to step up to the plate and hit a home run. A similar analogy is getting a job interview. Someone of influence can set the table and make the introduction and get you in the door. But now you are on your own. It is up to you to sell yourself and close the deal. That is why you need to slow down your operative schedule and make adequate time to do a comprehensive hygiene exam. Every patient you see will be a new patient for you. You are being very carefully scrutinized and judged. Be interested and engaging. You want these patients coming back – that is what you paid for. If these rules are followed, retention rates should be in the 90% range.

Next time – how to prepare to sell your practice for maximum value.

“We interrupt this broadcast for the following breaking news.” That is how I feel about interrupting my series of posts on dental practice transitions in order to comment on Google’s recent policy change regarding patient reviews. In my opinion, this was done because Google wants to grow their review base, while at the same time guaranteeing consistency and compliance with how their search engine optimization programs work with rankings.

In a format change to the local Google Business Map display, patient reviews from companies like Demand Force and others have been moved to a much less prominent position below the name of the office. They have been replaced – to the right of the practice name – by the word “reviews” and “Place page.” When you click those words, a screen opens where you are prompted to write a Google review. As you add Google reviews, all other reviews from Demand Force or Bing or Yahoo are pushed lower and lower down on the page.

I am still a big advocate of the Demand Force review protocol. Their reviews should still continue to be collected because they remain extremely important. And even with this new arrangement, Demand Force’s special relationship with Google means that Demand Force is a relevant and an important player. But accumulating Google reviews now becomes  an absolute priority.

I am suggesting that someone at your practice – while the patient is still at the office – helps the satisfied patient to write a review from the office computer. Asking a patient to do this from home is an exercise in futility. It is too complicated except for the most computer literate.

I have developed a flow chart for how to do this easily. I suggest that you immediately make the process of obtaining reviews in the fashion I describe a number one action item in order for your dental practice to maintain high visibility and positioning on the local Google business map. As always, I welcome your comments and feedback.

The easiest practice transition is an outright sale. The legal documentation is way simpler than a partnership. It is basically a purchase and sale and a covenant not to compete. The success is predicated on the ability of the seller to transfer the goodwill to the buyer. Here are ten common pitfalls to avoid.

1.Arguing about the price – it is not really that difficult to calculate a fair price. As long as the price is reasonable, I never advise my clients to try to beat up the seller on price. I want the seller to be happy so that he/she can enthusiastically transfer the goodwill.

2.Not understanding the allocation of goodwill for tax purposes- this has to be agreed on before the pricing. Typically 75-80% of the sale price is attributed to goodwill. This is favorable to the seller who pays a capital gains tax which is currently 15%. The balance of the sale price is taxed as ordinary income.

3. Failure to retain key staff members. It is OK to change doctors – it is not OK to change staff.

4. Failure to review obligations and commitments. The practice has to be transferred debt free.

5. Misjudging the size of the practice – it is critical to know how many patients are in this practice. My definition of an active patient is someone with an appointment. Unfortunately, many times I get called in as a consultant after the fact – when the buyer is very unhappy – because the patient base they thought they were purchasing is nowhere to be seen.

6. Failure to educate on telephone technique – failure to review scripting for the front desk regarding the new doctor.

7. Aggressive dental treatment – I recommend that the buyer does not suggest treatment unless something is broken or decayed. Once that patient has come back a few times, they really become your patient and then it is fine to recommend more elective treatment.

8. Not slowing down – every patient that you see in this practice is a new patient for you. Take the time to slow down your schedule so that you have the opportunity to interact with these patients and start to build a relationship. Remember that you never get a second chance to make a great first impression.

9. Inadequate letter – a great letter – written by the buyer – which comes from the seller – is the principal way that goodwill is transferred.

10. Retaining the selling doctor for patient introductions. My feeling is that we do not want the seller there at all after the sale is consummated. There is no need for the seller to stay on for 4 to 6 months to introduce patients. It is virtually impossible to get patients to go see the new doctor if the old doctor is still there.

Next time – I will go into more detail on some of these common pitfalls.

In January 2011, I began my 15th year of management consulting and coaching to dental practices on a full-time basis.  So many positive experiences, countless situations and challenges, fortunately lots of success stories, but of course those instances where just when you thought you’d seen it all, something would come along and humble you.

A definite trend in my business is that I have become increasingly involved and spending much more of my time as a facilitator for dental practice transitions. In the Northeast part of the country where I do the majority of my work, I can tell you firsthand that very few dentists are brave enough to start a practice from scratch. The most severe economic downturn since the Great Depression has reinforced that rationale. Even strong well-established practices with marketing dollars to spend are fighting for their fair share of new patients. So for a dentist to secure an equity position in a practice, there are basically two choices: buy an existing practice from a retiring dentist, or buy into a partnership.

It will be my purpose in this series of blog posts to discuss the good, the bad, and the ugly of dental practice transitions. Done well–with incredible attention to every detail–a change of ownership can be profitable and successful. Done poorly–and I’ve seen this far more often than I ever would have imagined–you are talking nightmare. So please take good notes as I try over these next few months to help you avoid preventable, irreparable, costly mistakes that will dash your hopes and ruin your dreams.

Over the years, I have found this subject of practice transitions to be a big mystery to dentists. It would be my pleasure to share information with the dental community at large. As someone who reads my blogs, your endorsement would be most appreciated. Please forward this post to five of your most respected dental colleagues. They can click here and be sure to get some useful information.

Starting next week, I will be publishing an entire series of blog posts devoted exclusively to the topic of dental practice transitions. Whether you are buying a practice or selling a practice or hiring an associate or forming a partnership – these are critical decisions and not actions that you take every day. Over the years, I have found the business side of these kinds of transactions to be a big mystery to the average dentist.

It is my serious desire to share useful information on practice transitions with the dental community at large. As someone who reads my blogs, you could really help me out – and I would be most appreciative – if you would forward this message within your dental network – perhaps to four or five of your peers or colleagues. They can click here to receive ideas and strategies that based on my experience should help them avoid costly mistakes. Thanks for spreading the word.

Over the past three months, in a series of eight blog posts, I have been discussing my ideas and strategies on how to ultimately attract more new patients to your practice using the Internet. For most dentists, creating a website and utilizing social media to grow a practice is still a relatively new concept. No question about it –getting a new patient “the old-fashioned way”– as a referral from an existing patient–is still the gold standard. And we never want to abandon the relationship building that we do with our patients that  encourage those referrals to take place.

But to ignore the power of the Internet, and to not have the opportunity play in that space, is a huge and costly mistake. Every day, thousands and thousands of people do a Google search for a dentist. Every day, people are asking their friends on Facebook about recommendations for all sorts of professionals. Don’t you think that some of these people live in your neighborhood?

So as I close this series for now, I implore you to take action. Immediately! It won’t happen on its own. Hope is not a strategy. Re-read and print out this past series of blog posts. Then lay out and write down a detailed plan with a timeline. A goal without a plan is just a wish. Hire a company to help you build a great website, and then promise to keep adding interesting content. Take a course or two and learn about social media opportunities. Get your staff involved because you can’t possibly do this all by yourself.

It is all about making the commitment. With bacon and eggs, the chicken is just engaged – but the pig is truly committed. So doctors- don’t just dip your toe in the water on this – dive in head first!. The opportunities for significant growth are far too meaningful to ignore. Recognize that your commitment to Internet Marketing must be ongoing. Stay alert–be consistent–be creative – and start to reap the rewards.

P.S. – My next series of posts will be on the subject of dental practice transitions. Over the years, I have found this subject to be a big mystery to dentists. It would be my pleasure to share information with the dental community at large. As someone who reads my blogs, your endorsement would be most appreciated. Please forward this post to five of your most respected dental colleagues. They can click here and be sure to get some useful information.

I have been writing a series of posts on the positive measurable value of dentists publishing a blog two to three times a month. And in my last post,  I talked about building your audience by getting your patients to sign up to your Feedburner feed so that they can receive your information by email.

Another very relevant way to build your audience is by developing a social media presence on Facebook. Creating a professional Facebook Page for your dental practice is easy to do. You then can have your webmaster set up what is called the network blog application so that whenever you publish a blog, it is automatically sent to the Facebook page of every person who follows your practice (Likes).

After expending the energy to get all these people reading your thoughts, you now have taken on the responsibility of writing good material. It can’t be pablum. You want to develop a style that is easy and fun to read. I see too many examples of topics being treated as if they were articles for the JADA. I also hate material written in the third person. “Dr. Smith will do this or that.” I suggest that the material be written in the first person – right from you – right from the heart. It is helpful to be low key and conversational and even humorous. And you certainly don’t want to give the impression that you are selling something.

Very important – spend some time creating a catchy title. That is how you grab someone’s attention and draw them in to read your message.

Every day I read three blogs that have been influential in the development of my own writing style. Seth Godin – who is not a dentist-more often than not has something applicable to say about business and marketing strategy. Dr. Lorne Lavine writes an excellent blog about technology. And my good friends Rich and Dave Madow have an insightful and edgy style as they discuss information to help dentists grow their practices and perhaps more importantly, get more enjoyment out of their lives and work.

I also read two sources that come out monthly. Max Gotcher of Summit Practice Solutions publishes a monthly e-newsletter that is very thoughtful and filled with informative material on a host of practice management issues. Bill Rossi, the founder of Advanced Practice Management has a great sense of humor and supports his ideas on practice management with sound statistical analysis.

I would strongly encourage all of you to follow these experts – you will not be disappointed.

For my last few posts, I have been talking about the numerous benefits of blogging. I mentioned specifically the help you get with search engine optimization because you are adding new content to your website. And when you discuss and comment numerous times about a particular procedure, Google references this and drives potential buyers for those services to your site.

But probably the most important reason to blog is to easily and effortlessly and inexpensively disseminate important and useful information to your patient base. You can send your thoughts on clinical topics, new services that you may be offering, health care updates – the list is pretty long. In the old days, we used to do this by snail mail, perhaps by mailing a quarterly newsletter. Very costly and very time consuming.

My favorite way today is to use a Google company called Feedburner to send out your blogs – at no cost – to every patient’s email address. Since you are receiving this, you can see how the presentation is professional and distinctive – not like a normal email.  Of course, if you don’t have email addresses, you can’t send out your message. You could be writing the most eloquent and interesting blog posts, but if nobody is receiving them, it is like singing in the shower. Nobody is listening!

On your website, have your webmaster install the orange reader icon that says “subscribe to our blog by email”. When you click the icon, it opens to a page where you enter the email address and follow the simple security directions. Someone at the front desk needs to sign up every patient at the beginning or at the end of an office visit.  It takes literally thirty seconds, and very quickly you will have built your audience. One very important point – you need to tell that patient to check their email today and be sure to verify the request they will receive from Feedburner asking them if they want to receive the emails from your office. This is an anti-spam thing to protect us from getting junk email that we don’t want. Once a week you should access the Feedburner account in order to manage your subscriber list and be certain that the patients are verifying.

The ultimate challenge for writing the blogs is to be informative and useful and relevant – more on that next time.