Editor's Note: This is the second in a series of four articles. The first article appeared in the July issue of DE.
Are you looking to expand your practice? You're in good company. The solo practitioner model is dying as dentists think creatively to get ahead in an industry where corporate organizations are becoming the norm. I was one of those solo practitioners scrambling to get ahead when I started out in 2000. But over the years I've been able to build on my successes to expand BDG Dental Services to 23 locations (and still growing).
I understand that pushing past one or two offices can be a very hard phase as you're figuring out everything for the first time. Don't be like I was at that stage and think you know all the answers! It was only after I realized that I didn't know everything and opened up to learn from others' advice and experience that I found my practice growth could be truly unlimited.
Are you willing to consider some different ideas so you can grow your business? Let's look at four motivators for growth and some questions you'll need to answer before pursuing expansion.
1) You want to build dental offices and sell them as real estate.
If you're looking for a real estate investment, buying and selling dental offices is one way to generate revenue. But before you go down this path, think about these questions:
• How long will it take to build up an existing office and sell it for a profit? Your time has financial value.
• Who do you plan on selling to? Research the options so you know your potential buyers.
• Do you understand the business valuation EBITDA (earnings before interest, taxes, depreciation, and amortization) and how it works? Determine if you'll be selling the practice for a percentage of your gross revenue or multiples of EBITDA. It's critical to understand your financials before progressing with this option.
• Do you know your true "opportunity cost" for building up new offices? Keep in mind that your revenue will be lower during the time it takes to grow a new office. You might actually make more if you focus on building up the business in your existing office.
2) You've hit a plateau economically.
Have you maxed out your existing office? Before opening a second location, think through all of the potential obstacles to economic growth. Look at Table 1 for questions to ask yourself and possible solutions to these obstacles.
3) You want to build and sell to private equity.
Like a real estate investment, this is another way to augment your salary with a lump sum payment at the end. Some dentists think it will be easy to bulk up their practice, purchasing a handful of offices from retiring dentists, and selling the larger practice to dental private equity for higher multiples. But let's look at this idea more closely.
If you sell a single office to other solo practitioners, it may be valued by a broker at, say, 70% of its gross yearly intake. However, the valuation for group practices will be different, as we discussed here, since it's usually determined by multiples of EBITDA. It's a numbers game. Do your research and understand all of the ramifications so you don't get burned.
Along with understanding the valuation, you need to realize that there will be culture issues unique to each office you buy. You will find that the biggest struggle is trying to establish consistency. Practice buyers become absentee owners, working from afar to simultaneously put out fires in several offices. This "easy investment" has the potential to be time-consuming, expensive, and a difficult way to earn that lump sum you're seeking.
4) You want the personal satisfaction of knowing you can expand your practice.
This isn't necessarily a financial reason, but it's still a real motivation for some of us, including me. When I established my first office in Las Vegas, it was a satisfying challenge for me to grow my practice. Things have changed since then, both in the industry as well as how we run our business.
Our mission at BDG Dental Services has evolved from being expansion-minded for the sake of growth, to building a world-class dental group with the intention of nurturing people. What we've learned is that building the practice by building our people first has been the true secret to continuous growth.
If you're considering expanding your organization, think about the points I've discussed here so you can grow with confidence. If you're interested in more tips, you can read my last article, "Overcome Challenges to Create Your Dream Multilocation Practice," (http://bit.ly/2aADRC1) or my e-book, "Keys to a Successful Multiple Location Practice," (http://bit.ly/2aHdbBr).
David Ting, DMD, started practicing dentistry in Las Vegas in 2000, and established what is now BDG Dental Services in 2002. There are 23 BDG Dental Services locations in Nevada, California, and Arizona, with a team of 40 dentists and 250 employees. What drives Dr. Ting is "creating a better life for all," including patients, employees, and the community. Dr. Ting welcomes comments and questions and can be reached at [email protected].
Although Dr. David Ting uses Dentrix Enterprise software, he was not compensated for this article.