Episode 28 – Deeper Dive: Creating Wealth in Your Dental Practice

“Being proactive about taxation upon sale can add thousands to your pocket when you are looking at final value of your practice.” ~Dr. Victoria Peterson

What is your practice really worth?

There are so many layers to building value in your practice! I get it. It can seem overwhelming at times.

During my conversation last episode with Eric Scannell that was the thing that really impressed me: being super proactive in your understanding so you protect and benefit from the value of your practice.

Selling your practice may seem like a long ways away. But now is exactly when you should start thinking about this, so you can make choices now that will add predictable value later. So, today I am unpacking that a bit more and digging deeper into:

  • What being proactive means on a practical scale
  • Balancing certainty vs. risk
  • Protecting the true value of your biggest financial asset

Want to know if you have an Investment Grade PracticeTM? Click here to use the completely free Investment Grade PracticeTM calculator: What’s my IgP Freedom Number?

Want to have a conversation about your Investment Grade PracticeTM? Contact Brent at brent@productivedentist.com.

Never miss an episode! Subscribe to Investment Grade PracticesTM Podcast on iTunes & Spotify.

EPISODE TRANSCRIPT

Are you proactive or reactive? That was my takeaway. As I interviewed Erin Scannell. He’s a Certified Financial Planner with heritage Wealth Advisors. And what that means is that a CFP is a fiduciary for you typically CFPs work on a flat rate fee, they don’t work on a percentage of buying or selling stocks. It’s a different model than working with a traditional broker.

So if you haven’t listened to that episode, please do go back, this will make a lot more sense it was it was just so jam packed with information for business owners from the viewpoint of tax planning, not something that you often talk about with your financial planner. But when you’re at a level of building an investment grade practice, it’s a way of up leveling the advisors that are around you. So you may have had a financial planner that has managed your 401 K has looked at your retirement and you’re on track with that.

But there are layers and layers to financial planning just as there are layers to building a business or working with a consultant. So that was my big takeaway was being proactive about taxation upon sale, and sales could be complete sale of your business, it could be a fractional sale of your business, it could be buying or selling real estate buying and selling stocks. All of them have strategies. That was the other piece I took away is that proactivity means I’ve got a strategy in place and I can predict where I’ll be there are certain milestones.

Now, I may come in plus or minus that milestone, but I know the general direction of where I’m going because I’m strategically planning to be there. And I think sometimes in life, we just we just take too long to discover when something’s happened, right? And then we scramble to get a plan together. And that plan is actually compromised because we didn’t give ourselves enough time. I think the greatest example in dentistry is happening right now.

Are you getting unsolicited offers in the mail? I talk to at least three dentists a week, which is up from zero, pre pandemic, that are getting unsolicited offers to purchase their practice. I just spoke with a gentleman last week, he’s doing 1.5 million works about 24 hours a week, which is terrific. So he’s under 80 hours, as an owner has an associate has an oral surgeon has an orthodontist in and all of that five operatories. He’s doing 1.5 million, he has an offer on the table for 1.5 million. So he’s saying, Wow, 100% of my collections, that’s amazing. They’ll do all the management for me. And I can move on to some of my other entrepreneurial endeavors. And I think that’s a great thing. I mean, if that’s what that’s what you want to do, right? That’s terrific. My investment grade practice hat comes on, though, and I quickly calculate on five operatories, with two doctors running the schedule, optimizing that bringing in ortho and and oral surgery to fill in while you’re away, that he’s actually sitting on a three to $5 million location, right. And so when someone is soliciting to purchase, I propose that nine out of 10 times doctors are leaving hundreds of 1000s, if not millions of dollars on the table.

Because you’re selling out of frustration, you’re selling out of exhaustion, you’re almost always selling pre optimization. Private equity is in our industry for a reason, because they know how to take your business to the next level with the efficiencies with improved profit margins, and just slow growth will get them there. What have you learned those strategies, and what Aaron pointed out is responding to an unsolicited offer, selling your practice when you weren’t planning on selling it within three to six months, could put you behind the tax eight ball costing you 30 to 50%. So that $1.5 million sale might net 800,000. And then you pay off the debt, maybe you’re down to five or 600,000. That’s probably what you’re taking home now. So being thoughtful, being proactive, having a strategic plan so that when the unsolicited offer comes, you’re prepared with better questions, you’re prepared to vet the offer.

So if you’re sitting there with an offer today, just reach out Victoria productive dennis.com, I’ll get you connected to my team, we’ll do a complimentary review of that give you an hour of coaching time to kind of look and see. Is it in my best interest today? Have I really set my financial house in order to be able to say yes to that offer? Is it in my best interest? Or should I wait a year or two years to do this, and I promise you that the markets not gonna go away, the private equity market is not going to go away the scalability of your practice, to either a private buyer or an institutional buyer, that’s not gonna go away. What’s going to change is how savvy a seller you might be, or how savvy a buyer you might become. So imagine that another another scenario was real estate, we worked with a client that had an offer and took the offer was great offer. But within that the purchaser wanted control of the real estate that the seller owned.

And so the contract essentially said, we recognize that you own the building, we’re going to bind you up we have first right of refusal of purchasing the practice, our rent will be this it will not go up beyond that each year. And our purchase price will be this for the for the business. And I think that for selling doctors, this sounds so appealing, because it provides certainty. And certainty is a deep human emotion. It is one of the human emotions that we cannot live without, if you weren’t certain that the roof over your head wasn’t going to collapse, you would be freaking out all the time. So tapping into certainty as they construct contracts is a great tactic. So knowing that I have a buyer in place, knowing that the purchase price is set, knowing that I can go to my planner and say this is how much I’ll get for my building that taps into the emotion of certainty.

However, too much certainty and not taking a risk can leave a lot of money on the table. So let’s say that in the contract, they said that rents will go up one and a half percent a year and you go cool, my rents gonna go up every year, but what if the actual cost of living went up 4% or 8%, and you missed out over that, what if the purchase price which typically real estate grows 4% a year, what if you’re in a hot market like we are today where real estate’s grow in 2020 to 28 36%, you would have locked yourself into a contract. To gain certainty, when there really was no risk, there’s really no risk in saying now I own this asset, it’s mine, I’ll dictate the terms and I will share when and how it’s going to be sold, there’s no risk.

So that’s what I encourage you to do is to make sure that you’re up leveling your advisors, so that you’re looking at any of these decisions, years in advance two years, three years, five years, eight years, 10 years, you would be amazed at what could happen in 10 years.

Whenever I think about investment grade practices, and being an investment grade owner, you’re really building something beyond your patient flow. That’s, that’s your practice. And we want to optimize the practice, real estate we touched on a bit, that’s a second asset that you can develop. Third asset you could develop would be the patient financial portfolio using comprehensive finance or some other in house financial approval system where you carry the paper. Think about that if you get a down payment that covers your hard cost, then what you’re financing is time. Again, doctors will defer that out to banks and others leaving millions of dollars on the table in an treat on unscheduled treatment, because they don’t want to get out of their certainty comfort zone and extending credit. But when you know that what you’re giving credit on is your time not your overhead or hard cost, you really have decreased the risk there.

So for all the things that you’re building, the assets of patient base real estate patient financing, you can have an in house lab, there’s so many things that dental assisting school, so many ways that you can build streams of revenue around your dental practice. And that is what I find so compelling about being an entrepreneur in today’s environment. It really is golden. If you understand a couple of things and surround yourself with financial advisors, business advisors, investment advisors, that are pro entrepreneur, so hear me well, I am not anti DSO, I’m not anti private equity. I think that’s what sparked this time of entrepreneurship.

I am pro entrepreneur, I am pro dentist and surrounding you with support is our goal here. So here’s your three takeaways for today. Erin got into some really deep strategies about setting up trust, doing tax harvesting, preparing in different ways, booking losses on your tax return so that you could offset gains in the future. That’s really too complex for my podcast and monologue. But I want you to take away these three things. Number one, knowing your financial freedom number, knowing what it would take for your money to last for 30 years. And you can go on our website, there’s a great article that I did on dental town, I’ll put the link in the show notes here that has a table, it can help you do the quick math on that. That’s my target. So set your target beyond what my daily goal is for production. Set your target into this is what it takes for my life to work, and then start working backwards to get a two year strategic plan. It really is a fun game to play to say I could be at financial freedom in five years, I might be 40 years old, I might be 50 years old. Now I’m working at choice, because I know that aspect of my life is taken care of.

I’ve got buckets of money. This is my vacation play entertainment bucket, this is my pay off the mortgage bucket, this is my invest in my practice and keep it growing bucket. That’s what happens when you set these long term strategic goals. And then start working backwards and saying if I buy sell hold right here. What are the tax strategies that need to be in place ahead of time? What are the contracting contracts that I need to get together and get organized? That really is the heart of being an investment great practice is organizing towards a strategy. So step one, go back if you haven’t done it already, I’ll say it probably on every episode, discover your financial freedom number. work backwards from there, start looking at your business critically through the eyes of a buyer and say where where am I messy. Where could I clean this up? Where could I tidy things up just a bit to prepare for and be ready when my time comes? Hey, once again, it is so wonderful to interview these compelling guests some within dentistry, some outside dentistry to bring you the information you need to make great decisions.

If you’ve got a topic or a question that you’d like me to cover, please reach out to Victoria at productive dentist.com I’ll be sure to get my team to book guests on here to go into the topics that are most interesting to you.


Thank you for tuning in to this episode of investment grade practices podcast. If you find value in this episode, help us spread the word by passing it along to a dental friend subscribe and give us a Like on iTunes or Spotify. Learn more about building your investment grade practice at productive dentist.com Today

Have a great experience with PDA recently?

Leave a Review

Menu
Need help?
Accessibility
Accessibility Options
Accessibility On Our Website

We are committed to continuously improving access to our goods and services by individuals with disabilities. If you are unable to use any aspect of this website because of a disability, please call (800) 757-6077 and we will provide you with prompt personalized assistance.

If you have trouble seeing web pages, the US Social Security Administration offers these tips for optimizing your computer and browser to improve your online experience.

If you are looking for mouse and keyboard alternatives, speech recognition software such as Dragon Naturally Speaking may help you navigate web pages and online services. This software allows the user to move focus around a web page or application screen through voice controls.

If you are deaf or hard of hearing, there are several accessibility features available to you.

Closed Captioning
Closed captioning provides a transcript for the audio track of a video presentation that is synchronized with the video and audio tracks. Captions are generally visually displayed over the video, which benefits people who are deaf and hard of hearing, and anyone who cannot hear the audio due to noisy environments. Most of our website’s video content includes automated captions. Learn how to turn captioning on and off in YouTube.

Volume Controls
Your computer, tablet, or mobile device has volume control features. Each video and audio service has its own additional volume controls. Try adjusting both your device’s volume controls and your media players’ volume controls to optimize your listening experience.

Read More About Accessibility and Why It Matters

Appointments
Need help?

Oops! We could not locate your form.

Do not include sensitive personal, financial, or other confidential information (Social Security, account number, login, passwords, etc.). This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Helpful Resources

Below are links you may find helpful when scheduling an appointment with us.

Notifications
Podcasts

Episode 213 – Requested Replay: The Waiting is the Hardest Part

“You’re not doing your patients any favors because their...

Episode 213 – Requested Replay: The Waiting is the Hardest Part (featured image)

Episode 239 – From Good to Great

“I’ve found ways to become free.” ~Dr. Chad Johnson Discover...

Episode 239 – From Good to Great (featured image)

Episode 116 – Requested Replay: Creating Patient Connections

In this episode of the Investment Grade Practices podcast, we invite...

Episode 116 – Requested Replay: Creating Patient Connections (featured image)
In the Press

I’ve Arrived: From $100 in the Bank to Generational Wealth in Less Than 3 Years.

from Dental Entrepreneur – Winter 2023 By Dr. Maggie Augustyn...

I’ve Arrived: From $100 in the Bank to Generational Wealth in Less Than 3 Years. (featured image)
From Our Blog

Free Case Study PDF: Results That Speak For Themselves

Dentistry is tough–you deserve support. But hiring a consultant can...

Free Case Study PDF: Results That Speak For Themselves (featured image)
Follow Us On Social Media

Facebook

Stay informed on updates and upcoming events from our office.

LinkedIn

Connect and learn more about Productive Dentist Academy.

YouTube

Subscribe to our YouTube channel.

Instagram

View fun photos and follow our team on Instagram.

Your Privacy
Privacy Policy

This privacy notice discloses our privacy practices and the use of Google Analytics 4(GA4), an analytic advertising feature. This privacy notice applies solely to information collected by this website and the GA4 platform. It will notify you of the following:

  1. What personally identifiable information is collected from you through the website and GA4 platform, how it is used, and with whom it may be shared.
  2. The choices available to you regarding the use of your data.
  3. The security procedures in place to protect the misuse of your information.
  4. How you can correct any inaccuracies in the information.

Information Collection, Use, and Sharing

We only have access to/collect information that you voluntarily give us via email or other direct contact from you. We will not sell or rent this information to anyone.

We will use your information to respond to you, regarding the reason you contacted us. Unless you ask us not to, we may contact you via email in the future to tell you about specials, new products or services, or changes to this privacy policy.

While Productive Dentist Academy is the primary data controller, Google, in the context of providing Google Analytics service, acts as a data processor. We use Google Analytics 4, a widely recognized web analytics service provided by Google, Inc., to track user interactions and gather data for advertising purposes. As a third-party vendor, Google Analytics operates independently and maintains its own privacy policy, which can be found at https://policies.google.com/privacy. We carefully select our third-party vendors for their commitment to user privacy and adherence to data protection standards. As part of our ongoing commitment to your privacy, we implement measures to ensure that services like GA4 comply with our high standards of data protection.

GA4 collects certain personally identifiable information from you as you interact with our website. This information includes but is not limited to your device ID, IP address, and geographic location. The information collected through GA4 is used to analyze user behavior, optimize our website’s performance, and tailor our content to better serve your needs. This data is compiled and anonymized, ensuring that it cannot be linked back to individual users.

Please note that GA4 may share the information collected with Google and other third-party service providers to enable data processing and reporting on website usage. However, we will not sell, rent, or share your information, especially your personally identifiable information, with any third party outside of our organization.

Your Access to and Control Over Information

You have certain rights regarding the data collected by GA4. You have the right to do the following at any time by contacting us via the email address or phone number given on our website:

  • See what data we have about you, if any.
  • Have us delete any data we have about you.
  • Express any concern you have about our use of your data.

In addition to opting out of any future communications from us at any time, you may also opt out of the GA4 feature if you so choose. You can opt out of the GA4 Advertising Features we use through Ads Settings, Ad Settings for mobile apps, or through the NAI’s. This link points to Google Analytics’ currently available opt-outs for the web https://tools.google.com/dlpage/gaoptout/ 

Security

We take precautions to protect your information. When you submit sensitive information via the website, your information is protected both online and offline. GA4 also follows industry best practices to protect your data both online and offline.

To ensure data protection while we are using GA4, we are implementing additional security measures that include and are not limited to:

  • limiting data access, 
  • using secure protocols, 
  • managing data sharing with Google

Wherever we collect sensitive information (such as credit card data), that information is encrypted and transmitted to us in a secure way. You can verify this by looking for a lock icon in the address bar and looking for “https” at the beginning of the address of the Web page.

While we use encryption to protect sensitive information transmitted online, we also protect your information offline. Only employees who need the information to perform a specific job (for example, billing or customer service) are granted access to personally identifiable information. The computers/servers in which we store personally identifiable information are kept in a secure environment.

Contact Us

If you have any concerns about the use of GA4 or believe that we are not abiding by this privacy policy, please contact us immediately. We are committed to addressing any privacy-related issues promptly and transparently.

By using our website and consenting to the use of GA4, you acknowledge and agree to the data collection and processing practices described in this notice. For more information about GA4 and its privacy practices, please review Google’s Privacy Policy on this link https://policies.google.com/privacy.

If you feel that we are not abiding by this privacy policy, you should contact us immediately.

Read More About Our Privacy Policy and Why It Matters

Terms of Service
Terms of Service

Entering this site or the links accessible through this site, you agree to be bound by this agreement. The information and the resources contained on and accessible through this site are made available by Productive Dentist Academy and/or its suppliers and vendors, and are subject to your agreement to their terms and conditions.

All contents copyright (c) Productive Dentist Academy

All rights reserved, Productive Dentist Academy makes this website available to all users for the sole purpose of providing educational information on health-related issues.

The accuracy of website, information, and resources identified are not warranted or guaranteed, or intended to be a substitute for professional health advice, to contradict health advice given, or for health care of any kind.

Your use of this website indicates your agreement to be bound by the Terms of Use and you expressly agree to be bound to the foregoing terms and conditions.

All materials on this website, including the site’s design, layout, and organization, are owned and copyrighted by Productive Dentist Academy, or its suppliers or vendors, and are protected by U.S. and international copyrights.

Material on this site may be used for personal use only. Commercial use of any sort is strictly prohibited.

Use of Resources & Information
This site may not be used as a supplement or alternative for health care, and is not intended and does not warrant or guarantee the quality or quantity of any services of any of the advertisers identified; further, the information provided is merely for educational purposes, and its accuracy is not guaranteed. Do not use this site as a substitute for health care. Please consult with your doctor or other health care provider regarding any health questions you may have. This site may not be used for health diagnosis or treatment. Do not use this site to disregard any health advice, nor to delay seeking health advice, because of something you read or see in this site.

You understand and agree that neither Productive Dentist Academy nor its suppliers or vendors or linked domain names are responsible or liable for any claim, loss, or damage of any kind, directly or indirectly resulting from your use of this site or the information or the resources contained on or accessible through it.

Productive Dentist Academy expressly disclaims any implied warranty or representation about the information or accuracy, relevance, completeness, timeliness or appropriateness for any particular purpose of any kind. Your use of this site is also subject to all additional disclaimers that may appear throughout the site.

Other Internet Sites Links
This site also includes links to other internet sites created and maintained by Productive Dentist Academy’s suppliers, vendors, affiliates, or subscribers. Be aware that Productive Dentist Academy does not control, makes no guarantees about, and disclaims any express or implied representations or warranties about the accuracy, relevance, completeness, timeliness or appropriateness for a particular purpose of the information or the resources contained on these or any other internet sites.

Further, the inclusion of these links is merely for your convenience and is not intended and does not reflect Productive Dentist Academy’s opinion on the accuracy or the importance of these other sites; further, Productive Dentist Academy does not endorse in any manner any of the views expressed in, or products or services offered by these other sites. All information in any site by Productive Dentist Academy, or associated or linked site, is extracted, read, used, or relied upon by you at your own risk.

Disclaimer of Warranty
Productive Dentist Academy and its suppliers and vendors disclaim all express or implied representations or warranties regarding the information, services, products, materials, and any other resources contained on or accessible through this site, including without limitation any implied warranties of merchantability or fitness for a particular purpose. All information provided by Productive Dentist Academy is made available “as is” and “as available” without warranty of any kind, or any express or implied promise, including, by way of example, its continuing availability.

Limitation of Liability
With respect to products, goods, or services purchased from any entity identified, listed, named or contacted through Productive Dentist Academy’s website, or any links to Productive Dentist Academy’s website, to the maximum extent permitted by applicable law, in no event shall Productive Dentist Academy or its suppliers or vendors be liable for any direct, indirect, special, punitive, incidental, exemplary, contractual, or consequential damages, or any damages whatsoever of any kind, resulting from any loss, which by way of example, includes loss of use, loss of data, loss of profits, business interruption, litigation, or any other pecuniary loss, whether based on breach of contract, tort (including negligence), product liability, or otherwise, arising out of or in any way connected with the use or performance of this site, with the delay or inability to use this site, or with the provision of or failure to make available any information, services, products, materials, or other resources contained on or accessible through this site, even if advised of the possibility of such damages.

You acknowledge and agree that the limitations set forth above are elements of this agreement, and that this site would not be provided to you absent such limitations.

Indemnification
You agree to indemnify, defend, and hold harmless Productive Dentist Academy and its suppliers and vendors from any liability, loss, claim, and expense (including reasonable attorneys’ fees) related to your violation of this agreement or use of this site in any manner. Your use of this site shall constitute your acceptance of the terms of this Agreement, as revised and modified, if any, each time you access this site. Productive Dentist Academy may modify this agreement at any time, and such modifications shall be effective immediately upon posting of the modified agreement.

Miscellaneous
Productive Dentist Academy’s failure to insist upon strict enforcement of any provision(s) of this agreement shall not be construed as a waiver of any provision or right.

This agreement and the resolution of any dispute related to this agreement or this site shall be governed by and construed in accordance with the laws of the State of Washington, without giving effect to any principles or conflicts of law. Any legal action or proceeding between Productive Dentist Academy or its links, suppliers or vendors and you related to this agreement or this site shall be brought exclusively in a state or federal court of competent jurisdiction sitting in Skagit County, Washington.

Copyright
All materials on this website, including the site’s design, layout, and organization, are owned and copyrighted by Productive Dentist Academy or its suppliers or vendors, and are protected by U.S. and international copyrights.

Links
This site contains links to other sites. Productive Dentist Academy is not responsible for the privacy practices of other sites that are linked to us.

Questions
Should you have any questions or concerns regarding Productive Dentist Academy’s Privacy Policy and Terms of Use, please contact us.

Read More About Our Terms of Service and Why It Matters

Search
Search the Website

Use keywords in the search box below to find what you're looking for.

Go to the Top of the Page