From the Curb

I just returned from a brief trip to southern Utah County and swung by six dental practices. Four of the six had brand new or nearly brand new offices. All six were in buildings that were well taken care of.

I was struck, though, by a few whose view from the curb was not as appealing as their entry way. Curb appeal matters. If your patients see only blacktop parking and a cement sidewalk, the perception your practice offers may be a bit bleak.

A couple of offices were surrounded or completely fronted by parking, with no room for the patients to walk by any grass. One office had a line of juniper-type bushes along the side of the building.

Now I grew up in a home with a row of junipers along side our long driveway, and I hated the thought of having to venture into the juniper bushes to retrieve a ball or other play thing. They were poky, sharp, and uninviting.

Perhaps not everyone has such a view of junipers, but replacing such bushes with some perennials or some flowering bushes would do much to soften the harshness of the cement.

Like someone considering how to raise the value of their home, spending money on your practice's curb appeal may be one of those few expenses that can produce a higher return than the investment.

We're Not Invincible Teenagers Anymore

I generally and thoroughly enjoy this career that I've chosen. However, there is one type of phone call or email that is understandably heartbreaking.

It usually begins with the individual introducing themselves as the son, daughter or spouse (or someone representing such individuals) or a dentist.

Next, they explain that their father or spouse had an unexpectedly injurery or illness that took their life.

Finally, they share that, having endured a week or two of numbness during which they have eulogized and buried someone they had hoped would be around forever with them, their thoughts have turned to their loved one's dental practice.

Often, a friend or a professional acquaintance will step in on a temporary basis to handle the appointments on the books.

But questions from the family members naturally come up:

• What am I supposed to do with the practice?
• So and so has expressed an interest in purchasing it, but what's a fair price?
• This was supposed to be part of our retirement plan, but how do I know what its value it now?

As we all know, it takes only a few days for a large percentage of the patient base to learn of their doctor's death. Their have their own questions, which often concern their future dental care. They wonder, as do the dentist's family members, what will happen to their dental office. Unfortunately, if their questions aren't answered in a timely manner, they assume that they will be left to find another dentist on their own. Consequently, a quickly dwindling patient base means that the dental practice value drops precipitously in a matter or a few days to a couple weeks.

I've appraised practices whose doctors have been deceased for less than a month, and the potential buyers know, not from any greed or ill will, that the actual value of the practice is at best half of what it used to be.

Such scenarios perhaps best illustrate the need to have your practice appraised now. Many appraisers, such as Assist to Practice, will update it every three years or so for no charge.

With an updated appraisal in place, your practice's value will be set and ready for any such eventuality. Dentists should also have in place an arrangement with a friend or other professional to not only step in and fill in during emergencies, but also seek financing for the purchase of the practice as a whole.

Think of the peace of mind such arrangements could provide you and your family. Contact a professional appraiser today. Explain your reasons for having a practice valuation done, and make sure to have it updated every few years.

I Ain't Selling, so Why Appraise?

It's a common assumption (and misconception) that a practice should only be appraised in advance of its sale.

Even without an upcoming practice transition, there are several compelling reasons dentists may have to get their practice appraised, including:

• Life Insurance Review and Planning
• Estate and Gift Tax Planning
• Division of Community Assets (Divorce)
• Future Buy-in/out Arrangement with an Associate
• Formation of Partnership or Group

Dental practice owners need to approach such events and projects with information about their practice value in order to make the best decisions to help them reach their short and long-term goals.

A good practice appraisal should include more than just the estimated fair market value of the practice. But that's a subject for another day.

Appraisals and Tax Returns

When it comes to appraising the value your practice, what matters to the potential buyer has got to be the potential income stream that it may generate for them in the near and long terms.

Yes, having the latest equipment is nice. A bright and freshly painted office space is important. But purchasing the practice is pointless if there's little possibility of procuring a projected and periodic pecuniary profit. Get the point?

When I've spoken with dentists about a given practice's appraised value, they often ask to see the tax returns. While I garner much information from the returns myself, I also ask the potential buyers and partners to consider the reckoning behind the numbers.

Practice owners and their accountants have every reason to minimize the practice's income they report to the IRS. Unfortunately, this can also give the impression that the practice's financial benefits to the doctor are less than they actually are.

Beware of any appraisal based soley (or even heavily) upon tax returns. An accountant's handiwork should be just one of many tools used to set the practice’s appraised value.
Practice value is, to a great extent, subjective. To the potential buyer, the practice value may involve the desirability of the office’s physical location, its image, the practice’s patient profile base, how well the practice's procedural profile fits the potential buyer's experience and professional goals, the practice's location relative to a metropolitan area, and, among many other things of course, the compatibility and longevity of the current staff.

Do Your Patients Know How Smart You Are?

There are numerous reasons for pursuing--and various benefits of completing--continuing education. One that I have seen very little of, though, relates to "marketing" it to patients.

When I sit in a waiting room (which is hopefully not very long), I have yet to see information on the continuing education that my dentists or their staffs are completing or pursuing. No plaques on the wall, no binder of photos or certificates, no log of class attendance...nothing.

Your clients may not know their perio from their endo, and frankly, they probably don't care. But I guarantee you that they do care that you and your staff know.

If you and/or your staff attend a dental conference, take a continuing education course, or go to a society meeting, bring back a certificate--or print one up--and display it somewhere in your waiting room. It will increase your patients' confidence in your care and, who knows, may even serve as conversation fodder.

Color Your World

When was the last time you painted the inside of your office? If it's been more than a few years, then the next time you step into your waiting room, try to see it as a new patient or visitor would.

Are the colors fresh and welcoming? Or, are they dated, stale, or worse yet, dark and foreboding?

• Consider a neutral background color;


• Add eye catching accents (a search for the right ones could start simply with Googling "popular colors";


• Avoid colors that some patients and visitors might consider too bold;


• If you use nontoxic, environmentally friendly paint, make sure to tell your patients (signs at the front desk, website, newsletter, etc.). You'll strengthen the loyalty to your practice of more than a few mothers and fathers of young children.

Once you've given your office a mini-makeover, your next step will be to make sure your marketing materials that have pictures of your office interior (brochures, your website, newsletter, appointment cards, Facebook pages) receive the same Tx.

Practice Appraisal Software Limitations

Like Rules of Thumb, software programs designed to simplify in-depth projects that involve complex reasoning and reduce them into simple and cost-effective, step-by-step processes can often provide unexpected results with unexplained outliers for answers.

Using a software package to create a practice appraisal will certainly be more affordable than employing a professional appraiser. However, since such programs have not years reached the point of human reasoning, they might appear to provide little better than the old Rule of Thumb appraisal technique of equating the practice value with 60% of the previous year's production. Compare two practices with equivalent production, one with a 95% collection rate and the other with a collection rate in the mid-70%, and you'll quickly see the limitations of this Rule of Thumb.

While appraisal software is (and should be) much more involved than this, it can never answer the question of what the real value of a practice is. And that answer is... whatever someone else is willing to pay for the practice. Plain and simple.

Current technology cannot gage a market nor engage potential buyers to determine the practice's true monetary value. Such vital questions can only be answered through human interaction.

By all means, take advantage of appraisal programs. They're affordable, interesting and, I dare say, fun! But be aware of their limitations. For important appraisal needs (sales, partnership formations, associate-to-partner opportunities), please call an experienced professional.