As you explore the possibility of ownership, this book is probably the single best resource available for dentists interested in purchasing a practice. Buying a business is a complicated transaction and doing it by yourself is ill-advised.
This book highlights the importance of assembling a competent team to assist in the acquisition. Regarding your team, you’ll learn why the only advisors in your corner are the one’s you pay directly, and you’ll learn why those earn their living from the sale are often incentivized by the deal closing.
It’s common knowledge that everyone wants to feel like they got a good deal. However, when it comes to buying a practice Brian explains why negotiating aggressively to try and gets. Practice for the lowest possible price may be detrimental to the transfer of goodwill. The big picture (who you are, where you want to be, how well you and your spouse like the area, etc) matters just as much as the purchase price. With the big picture in mind, squandering an opportunity in your ideal location may not be worth offending the seller over a 20 or 30 year career as a practice owner.
At the end of the day, dental school does little to prepare students for the business side of dentistry, but this book offers more value than most courses cold offer for a fraction of the price.
Good luck on your journey to practice ownership!
I get asked this question frequently.
“What is the difference between production, adjusted production, and collections?”
Associates are typically paid on either adjusted production or collections.
Adjusted production is production minus any insurance write-offs or discounts. To understand adjusted production, you need to know what “production” means. Production is how much dentistry a dentist completes measured in dollar amounts using a Usual and Customary Fee schedule (UCF). The UCF fee schedule is usually established by the office and adjusted each calendar year. Adjusted production is how much dentistry a dentist completes using the UCF fee schedule minus any insurance adjustments or discounts.
Collections refer to how much money the office actually receives for the completed treatment. Therefore, collections is equal to adjusted production minus any additional discounts, denied claims, and unpaid bills by patients (failed collections). It’s debated if financing fees should also be deducted from the adjusted production when calculating collections.
Collections do not involve a lab bill. If a lab bill is subtracted from an associate’s compensation, a formula would be used to determine the associate’s compensation. For example, an associate may be paid:
Adjusted production – lab fees
Collections – lab fees
The lab component of the formula should be itemized and broke out as a separate line item so the associate can review the charges during each pay period.
The COVID crisis effects on student loans continues. This pandemic has highlighted a complete lack of communication between the Department of Education and the loan servicers. You may have noticed that your federal student loans were automatically placed into forbearance last week.
My loans are held with FedLoan and they automatically placed my account into an emergency forbearance in 2017 while I was living in an evacuation zone due to a California wildfire. During this wildfire, FedLoan automatically placed my loans into forbearance without my consent. Undoing the automatic forbearance was not possible during this event. I contacted them and asked that I opt out of any future emergency forbearance and they confirmed that my loans would never again enter forbearance without my request.
Fast forward to 2020. I contact FedLoan by email to confirm that my loans would not enter forbearance on March 27th. No reply. Last week, I noted all of my loans were in forbearance.
It is not clear if any outstanding interest will be capitalized when a borrower exits emergency forbearance due to COVID. I have contacted FedLoan requesting clarification, but have received no response. This entire system to handle direct student loans is beyond broken and needs a reboot.
The last two weeks have brought many changes to student loans. I have delayed publishing any information regarding these changes because the details of a policy was yet to be defined. COVID-19 has interrupted our lives and the dental profession has many unanswered questions regarding how we will move forward during and after this crisis. Many readers are aware that student loans held by the government have had their interest rates temporarily reduced to zero and there is an option to enter emergency forbearance for 60 days.
Readers should be aware that exiting forbearance is one of the eight events that trigger capitalization of outstanding interest.
However, it appears that outstanding interest will not be capitalized when a borrower exits emergency forbearance during COVID-19 (according to FedLoan). FedLoan has changed its stance regarding outstanding interest and is now stating that any outstanding interest prior to March 13th, 2020 “may” be capitalized at the expiration of forbearance. You can learn more here: FedLoan has provided some clarification and outstanding interest will not be capitalized if the borrower enters and then exits emergency forbearance. You can learn more here: https://myfedloan.org/borrowers/covid
Borrowers who have seen a reduction in income and are pursuing PSLF or taxable forgiveness may want to consider requesting that their IDR payment be re-calculated instead of entering forbearance.
You should contact your servicer and request more information before taking any action.
Current students and new graduates, due to the current circumstances, the student loan course I created is now free for the rest of the year: https://embrasurespace.com/product/understanding-managing-and-repaying-student-loans-for-dentists/
This discrepancy highlights how important it is to contact your servicer prior to taking any action.
I believe blogs are powerful tools, and we would all benefit from writing one. I began writing at OneLooseTooth.com in 2013, and it has resulted in several opportunities that I would not have had a chance to pursue otherwise. Before One Loose Tooth, I was writing as the Engaging Dentist (a site I deleted while in dental school). In 2014, 2015, and 2016, I compiled a list of the best dental blogs I could find around the web.
Since graduating from dental school in 2015, life has been much busier, and I did not publish a list of the best dental blogs in 2017 or 2018. I’d like to get back to publishing annual lists for my readers, and I think that Practice Pirate is the perfect platform to do so.
A lot has changed over the last three years, and dental podcasts have garnered much more attention than traditional blogs. But content within podcasts is still not easily searchable, and blogs are still an important tool in the distribution of great content. In 2019, there are several blogs worth reading and they are:
The Practice Whisperer with Dr. Travis Campbell (Dr. Campbell is a dentist in Plano Texas who focuses on helping dentists understand dental insurance): https://practicewhisper.com/articles/
Practice Biopsy (a new dentists journey into practice ownership and financial success): https://www.practicebiopsy.com/
Brian Hank’s blog (Brian is a CPA and CFP focused on helping dentists buy the right practice): https://brianhanks.com/blog/
Dental Nachos with Dr. Paul Goodman (Dr. Goodman offers a fun and refreshing take on the stresses of being a dentist): https://dentalnachos.com/blog/
There are very few books published by practicing dentists about dental practice management. In 2019, Dr. Travis Campbell published his first book titled The Practice Whisperer. His goal in “writing this book was to help others avoid similar mistakes and learn ways to grow professionally”.
Dr. Campbell graduated from Baylor College of Dentistry in 2009, and opened a dental practice in Plano, Texas from scratch in October. While his practice is currently thriving, a startup comes with many challenges. This book describes what went wrong, and how other dentists can avoid the mistakes the author made.
One of my favorite pearls from the book is that “when you notice the patient needs periodontal treatment, focus just on the perio. You can put a preliminary plan together and do an extremely quick review for the patient of their overall oral health, but focus on the perio only so that you can use that time for same-day treatment. You are going to want to see that patient back in four to six weeks anyway, which is the perfect time to discuss the rest of their treatment needs.” This tip alone is worth the price of the book in my opinion, but it is filled with several others.
It is typically recommended to delay home ownership until after a practice purchase because the practice generates income, while the home does not. Furthermore, ownership of a person’s primary residency is often more of an emotional transaction (it is a lifestyle decision) as opposed to a financial one. With this in mind, it is often wiser to purchase a practice before purchasing a home for two reasons:
1) Your debt to income ratio when you go to purchase a practice will likely be higher if you have a mortgage. Depending on the size of your mortgage, the practice you have identified to purchase may not have enough cash flow to support all of your monthly obligations.
2) More importantly, when you own a home, the radius that you are interested in buying a practice is often limited and it is easier to find a home near your practice than to find a practice near your home. Once you own a home, you are often emotionally invested in the community – you build relationships and develop habits that are difficult to leave behind regardless of how good the opportunity may be.
Art Widerman is a CPA in Tustin, CA who focuses on dentists. He has a podcast called the Art of Dental Finance and the episode linked below explores home ownership and practice purchases.
Deciding to become an orthodontist is an expensive commitment. We have already learned about Mike Meru (the first orthodontist to be highlighted for his outrageous student loan burden by the Wall Street Journal). Some interesting conclusions have been drawn from Mike’s student loans and Business Insider does a good job of explaining why dentists, doctors, and lawyers are no longer that rich in comparison to their tech or business counterparts. You can read the Business Insider article here.
Recently, another orthodontist called Dave Ramsey to talk about the cost of his education. You can watch the video by clicking on this link or clicking play below.
Dave Ramsey doesn’t offer good advice here. While he offers reasonable advice for most Americans, his reluctance to use one of the income-driven repayment plans to optimize this student’s cashflow is unfortunate. An orthodontist with a seven-figure student loan balance would benefit from Revised Pay as You Earn (REPAYE). Ignoring that REPAYE exists, and the benefit that the interest subsidy will have for this borrower is negligent.
This borrower is not necessarily doomed because orthodontists have excellent earning potential if they acquire or build a great practice. A reasonable strategy for this borrower would be to:
- Do not consolidate student loans (assuming all loans are direct).
- Enter REPAYE and take advantage of the interest subsidy.
- Spouse improves her income by pursuing a more lucrative position.
- Begin associating at multiple practices part-time, creating a flexible full-time schedule
- After 12-24 months of working full-time and building cash reserves, start searching for an ortho practice to acquire.
- After acquiring the practice, analyze cash flow and decide if it makes financial sense to begin paying down the student loan balance or if the most appropriate strategy is to pursue taxable forgiveness after 25 years.
Audio is embded into this post that may not be displayed in our emails. Click on the title to view the webpage.
A lot of questions surround the Public Service Loan Forgiveness (PSLF) program since 99% of first-time applicants were denied forgiveness in late 2017 and early 2018. Since then, the program has been temporarily expanded and still has problems. You can learn more on NPR here.
The rules about who qualifies and what loans qualify for tax-free forgiveness after ten years of on-time payments are specific, and if you are working for an organization that allows you to pursue PSLF as a dentist, you should be very familiar with the nuances of the program. This week Travis Hornsby at Student Loan Planner, interviewed a married couple who successfully saw a large portion of their loans forgiven under the PSLF program. The episode is worth listening to if PSLF is an option for you. You can find the episode below:
While the program is far from perfect, and borrowers are still confused about its requirements, some people are receiving forgiveness – proof that the program is real and will likely work if you follow the rules.
Many students will be matriculating from dental schools and residencies over the next 2 months, and student loans will be on their minds. Developing a strategy to repay (or at least manage) your loans early is extremely important. If you want to calculated what your monthly payment will be under PAYE or REPAYE, follow the steps outlined in the post.