Thursday, August 25, 2011

Assessing the Dental Offer

Our friend Carl Guthrie of ETS Dental has kindly allowed us to share these valuable tips for dental associates/specialists in assesing their offer. If you are looking for a dental practice to join, your first call or email should be to Carl.

You’ve had the interview and the practice makes an offer.

Now what do you do? Is it a good offer, great offer, or a time bomb ready to blow up in your face?

Maybe you are trying to choose between more than one offer. Perhaps you are trying to determine whether you should take the first job you’ve been offered. We are here to help. Even if your offer is not from one of our clients, we would be happy to give you an assessment of how it stacks up.

Before you accept an offer, you need to be able to answer the following questions:

Will you be paid a percentage of collections or production?

What is included in these numbers?

Would most of your patients be Fee-for-Service, PPO, Traditional Insurance, Medicaid, HMO?

Will you have a full schedule from day one or will there be a ramp-up period?

Is there a guarantee? (Hourly, Daily, Weekly, Monthly)

What is the restrictive covenant? What is a reasonable distance?

How much notice needs to be given if things don’t work out?

Is there a clear documented path to practice partnership or ownership?

What are the practices fees?

Is it better to get 25% of production, with a full schedule in a fee-for-service, high-end practice or 40% of collections in a discounted fee-schedule, insurance-driven practice?

Is it better to make less during the first year in a practice that you could own in two years or make more in a practice where you will always be an employee?

Would it be smarter to accept an offer near my friends and my Dental school making a salary of $8,000 a month or move 50 minutes away and make between $150,000 and $200,000 my first year?

These are difficult and often life-changing decisions. We will be happy to talk you through the pros and cons of an offer. We will give you a candid assessment and helpful feedback. If the offer is from one of our client practices, we will be happy to intercede with reasonable questions or suggestions about how to structure the contract in a fashion that would provide more of a win-win arrangement.

Send your questions to Tim Lott, CPA, CVA at

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Wednesday, August 17, 2011

Interview Tips for Dental Associates and Specialists

Our friend Carl Guthrie of ETS Dental has kindly allowed us to share these valuable interview tips for dental associates/specialists. If you are looking for a dental practice to join, your first call or email should be to Carl.

Be open to a variety of opportunities. Go to every interview you can. It never hurts to talk, and an opportunity may turn out to be more than you expected. You can learn from each interview even if it doesn’t lead to a position.

Be open to other locations. The Law of Supply and Demand applies to career and practice opportunities. Typically, the farther you get away from a Dental School, the better the opportunities. Many of the best opportunities are located in great communities just forty-five minutes to three hours away from major Dental School cities. Typically you can increase your earning potential from 10% to 100% by settling in a city or community that is underserved.

Get your references ready. They can be former employers, co-workers, or teachers. Contact them to let them know to expect some calls. Have all their contact information in one place.

Have your production numbers ready. If you do not have production numbers, then have something that will give the hiring doctor a good idea of your skill set, speed, and experience. If you are just getting out of dental school or a residency, your procedure log may be a good substitute.

Consider preparing a "Proof Book" containing:
  • A current CV/Resume
  • Case presentations
  • Before and After photos
  • Production numbers or equivalent
  • Accomplishments
  • Treatment plans
  • Letters of Recommendation
  • References
  • Blank paper for notes
  • Questions for the practice
  • Blank Thank you notes

You may never have to open it, but it demonstrates preparedness and professionalism; this will set you apart from other candidates the practice may be considering.

The Interview

Because you are looking for a long-term position, it is as important for you to interview the prospective employer as it is for them to interview you. It is good to have some questions prepared. This will show interest and give you information you need, as well as take some pressure off the interviewer.

Questions for your interviewer:

Note: Do not lead off with questions about compensation.
  • What are your treatment philosophies?
  • What would be expected of me as an employee; what role would I be expected to fill; would I be limited to certain types of cases, such as endo or pedo, etc.?
  • Tell me about your patient base: families, geriatric, pediatric, etc.
  • What demographic changes have occurred with your practice in the last ten years? What changes are on the horizon?
  • Do you actively market or depend on referrals?
  • What kind of equipment do you use?
  • What about your practice are you the most proud of?
  • Where do you see the practice in five or ten years?
  • What are your personal and professional goals?
  • What are your goals for the practice?
  • Are you referring a lot of certain type of case out of the practice?
  • What specific things are you looking for the new Associate to bring to the practice?

The telephone interview

Return your phone messages and e-mails promptly. It speaks to your motivation, interest, and courtesy. Don’t let returning phone calls or e-mails become an issue or an obstacle to getting an interview. Even if you don’t think you will be interested in an opportunity, return the call. On more than one occasion we have seen a candidate get a call from Practice B when he was already talking with Practice A. The candidate puts off returning the call to Practice B. Two or three weeks later, the opportunity with Practice A does not work out and now Practice B will not consider the candidate because no calls have been returned.

Your main goal in a telephone interview is to get a face-to-face interview.

Ask for the interview. Take the initiative to set a time. Say something like, "From what you have told me, I would be very interested in meeting with you and coming to see your practice. When would be good for you?"

Smile--even on the phone. You really can hear when someone is smiling.

The face-to-face interview

Treat the staff with courtesy and respect. A practice owner often feels like his or her staff is like family and will listen to their opinion, especially if it is negative. On more than one occasion, we have seen excellent candidates not offered an opportunity because they treated a staff member poorly.

Smile and show some enthusiasm. More candidates are hired because of their personality and positive attitude than because of specific clinical skills. One high-end cosmetic practice told us they had interviewed six different dentists. They hired the candidate who smiled and appeared to truly enjoy being a Dentist, passing on some more experienced candidates with less personality and enthusiasm.

Show sincere interest in the hiring Dentist’s situation. Understand that the Dentist needs to solve a problem. Maybe the practice just lost a key Associate or Partner. Maybe the practice is growing and cannot keep up with patient demand. Maybe the Dentist needs someone to take over the practice when he or she retires. You need to get a clear understanding of the Dentist’s true motivation for adding an Associate. Once you truly understand the needs of the hiring Dentist, you can mutually determine if you are the solution.

Ask for the job! If you are interested, let the owner know you are interested. At the close of the interview say something like, "I just wanted to let you know that I am very interested in this opportunity and I am ready to take the next step, whatever that is. How should I proceed from here?" This doesn’t mean that you will accept the job with no further discussion. It simply shows you would be sincerely interested in discussing contract terms or meeting with other partners, consultants or staff members as needed.

After the interview

Thank you notes. Always send a Thank You note after an interview. Buy Thank You notes prior to going to the interview. Make sure you get a business card from everyone you speak with so you can verify the spelling of their name, their title and the correct address. Immediately after the interview, drive to the local post office or collection box, write a brief Thank You and mail it immediately. Do not put it off. If your timing is right, the practice will get the Thank You note the next day. Even if you don’t want the job, it is professional and impressive to thank your interviewer for his/her time.

Call the practice in two or three days. If you don’t hear anything from the practice after a few days, call them and let them know you are still interested. You will never loose out on an opportunity because you acted too interested.

Working Interview.

Offer to do a one- or two-day working interview.

Send your questions to Tim Lott, CPA, CVA at

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Monday, August 8, 2011

Should Dentist Upgrade Equipment Now, or Wait?

I recently did some cosmetic upgrades to my office, but my adec unties and J-chairs are functional, but 20+ years old. I have an older CEREC red unit and am considering an upgrade to the blue. I don't want to get stuck with super high interest rates if the economy tanks, so am considering the upgrading things now.

Well based upon our most recent experience wouldn't you agree that when the economy "tanked" the rates went down? Maybe it depends on what you mean by "tank".

My dilemma is whether to wait until things become so worn out that I have to replace them, or do I finance the upgrades now and tack on to my current loan, which I will have paid off in 3 years.

How long will the "upgrades" last and what's the cost of an upgrade compared to replacing?

I'm in a 3-chair office now, but have the opportunity in the next year or so to move to a larger 4-chair office, so was planning on waiting on upgrades until I can make that move. I just don't want to get stuck with 10+% loans down the road.

I certainly don't see those rates in 1, 2 or 3 years.

I was curious to see how long you guys are financing practice/equipment loans. Is 10 years standard on a $500k note or do most go longer.

These are two different loans. 10 years is a reasonable term on a practice loan (to buy a practice) and generally gets paid off in 5-7 years anyway. 5 year terms should be fine for equipment loans.

One thing to consider, depending on the amount you're going to spend, is to refi the existing 3 yr loan and adding on the equipment costs and go with a 5 year loan. If you continue to do well and have sufficient cash flow you might still pay everything off in 3 years anyway.

This first appeared on Dentaltown.
Send your questions to Tim Lott, CPA, CVA at

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Monday, August 1, 2011

2010 Dental Overhead Benchmark - Our Observations - What has Changed?

We’ve started the process of compiling our dental practice benchmark statistics based upon 2010 data and the initial results compared to five years ago are a little surprising to us. Since 2005 the US economy has gone through a downturn, a recession by most standards, and we were curious to see how that may have impacted the benchmark statistics for dental practices. We know that over the past five years there’s even more technology that practitioners are buying and using (i.e. new dental equipment and computers.) We’ve summarized some of our preliminary findings and provided commentary as to why we believe these changes have occurred. You can take the dental overhead benchmark survey here.

1. Revenue:

So far the mix of dentistry to hygiene production has increased in favor of the doctor, which means 76% of production is dentistry while 24% is hygiene. Five years ago it was 75%-25%. The surprising statistic though is the adjustments or write-offs. Five years ago the “average” practice was writing off 13% of their gross production and it’s increased to 17%. The main reason for our surprise is that during these last five years we’ve seen an increase in practices attempting to reduce or eliminate their PPO participation. That said, certainly the recession may have “forced” some of those practices back into PPO participation and we’re also seeing practices providing more incentives or discounts for cash paying patients.

2. Labor:

This area provided another eye opener. As a percentage of gross production (same denominator we’ve always used in our surveys), total labor expense (wages, payroll taxes, benefits including their education and training) dropped from 26.7% down to 22.7%. Assistants, hygienists and front desk combined showed a decrease while administrative showed an increase, possibly due to the treatment plan coordinator position and other types of positions. Both payroll taxes and benefits have also shown decreases. Another reason is that with the additional “higher end” procedures like Invisalign, implants and full mouth cases, the dentistry production per hour may be higher with the same or lower labor rates. We also know many practices stopped raises at some point over the past three years if not for all three years because of the recessionary trend.

3. Facility Expenses:

Total facility expense actually increased from 4.8% to 6.4%. Rent jumped by nearly 1% and the other costs like repairs, security and utilities all increased as well. We can only surmise that many had their rent agreements already in place as of 2008 and 2009 when the recession hit and we know landlords had no obligation to re-negotiate leases therefore, rent increases continued while procedure fees and revenues either revenues either flattened or declined (revenues). Generally utility costs have been going up following a trend by utility providers to raise their rates.

4. Lab and Dental Supply expenses:

Both lab and dental supplies have dropped by nearly 1% to 5.4%. Five years ago lab was 6.3% and supplies were 6.1%. we suspect lab has decreased in part due to the use of Cerec type machines since we’ve heard time and time again that labs had been increasing their prices. Dental supplies are harder to explain so we won’t even try.

5. Other Costs:

In total they went from 12.7% five years ago to 8.8% for 2010, nearly a 4% point drop. While a few categories increased like collections expenses (CareCredit) and advertising and promotion (practices simply doing more advertising) most of the other categories have dropped. Some of the categories that dropped are insurance, office supplies and postage (more electronic mail), professional services (more owners doing their own bookkeeping and payroll processing), telephone (more cell phones, less answering services, better technology and more competition).

Overall, total overhead went from 55.6% five years ago to 48.8% in 2010 based on gross production. That’s a rather significant decrease that was unexpected.

As we mentioned above, the dentistry to hygiene production ratio increased from 3.2:1 to 3.3:1 and even the hygiene production to their wages increased from 2.6:1 to 3.2:1. Hygiene wages have either held flat or come down in most areas of the country due to the economy and the cost of their procedures have gone up over the last five years. Many practices have used consultants to increase their hygiene department production and to boost assisted hygiene.

While many practices have been hurting over the past couple of years, they have done an excellent job on controlling their overhead. These practices have added higher end procedures and increased profitability within their practices. That’s a great sign for the industry and one of the main reasons we’re seeing more activity from the larger dental corporations buying up practices.

Send your questions to Tim Lott, CPA, CVA at

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