What Metrics Should You Focus on During Your Initial Review of a Practice Opportunity?

What metrics should you focus on during your initial review of a practice opportunity?By: Anthony Copple, JD
Transition Specialist

Reviewing an opportunity to purchase a practice outright or to buy into a practice as a partner can be an overwhelming task. You may have been presented with a mountain of data about the subject practice: tax returns, profit and loss statements, and operational reports. What does it all mean? What should you focus on? What data is important in determining a fair value for the practice?

Well…the long answer is that all of the data and information surrounding a practice is important in determining its value. After all, an orthodontic practice is a unique asset and no two are exactly alike. However, there are a few things you can focus on that will provide a reasonable snapshot of any practice. Three of the most consequential are explained further below:

Practice Overhead Rate
The overhead rate of a practice is one of the most important factors in determining a practice’s value and the benefits that practice will provide to a buyer. After all, the overhead rate ultimately determines the amount of cash the owner can reap from the business. Generally, the lower the overhead rate, the more valuable the practice. So, a practice at 55% overhead will be more valuable than a practice at 65% overhead, all else being equal. The average practice overhead rate for an orthodontic practice is 58% of collections. If operating expenses are below this level, it can drive the price of a practice up while expenses above this threshold will generally have the opposite effect.

Practice Production
Production acts as a bellwether for practice collections; it tells us where we’re headed. If the practice produces $1,500,000 this year, we can expect that the practice will collect something close to $1,500,000 next year. Knowing this, we can use practice production, practice collections and their relationship to one another to identify trends within the practice. If practice collections have grown over the past two years and production in each particular year exceeds our collections in the same year, we can be fairly confident that the practice will see continued collections growth in the following year. This can be vital to practice value because a growing practice has more potential, and less risk, than a declining practice.

Practice Contracts Receivable
The contracts receivable balance is the total amount remaining to be billed to the active patients of a practice. This can be distinguished from accounts receivable because accounts receivable have already been billed to the patient and are currently due. The contracts receivable balance gives us an indication of the stability of the expected future cash flow of the practice and an idea of the number of active patients that are paid-in-full.  We know that we can expect cash flow from the contracts receivable balance as we treat current patients of the practice regardless of the number of new starts we have. On average, a practice’s contracts receivable balance is approximately 50% of prior year production. Below that level, and the practice likely has more paid-in-full patients than the average orthodontic practice. This would add risk for a buyer expected to continue to treat those paid-in-full patients after the closing without collecting patient fees. This additional risk tends to drive the practice price down. Of course, if the contracts receivable balance is above this threshold, it can add value to the practice.

As I said above, there are dozens of factors that go into determining the value of a practice. No one point of data will tell you everything you need to know about a practice. However, analysis of the three metrics above should give you a pretty solid idea of the type of practice you are looking at and whether it is worth pursuing further.

Orthodontic Job Opportunity: Dallas, Texas

Dallas_BlogA unique new orthodontic model and practice group is expanding nationwide. This fast-growing group is seeking a motivated, entrepreneurial associate to join their team and manage a practice in Dallas, Texas. This practice is passionate about making orthodontic care exceptional and believes in putting the orthodontist at the center of its growth strategy.

Located in North Texas, the city of Dallas is the core of the largest metropolitan area in the Southern United States as well as a commercial and cultural hub of the region. Fun fact: The nation’s largest arts district is located in Dallas which consists of 19 blocks of museums, venues, and galleries. Offering both big-city excitement and quiet suburban living, residents enjoy living in Dallas. New developments have drawn in both families looking for a community with easy access to the city and millennials looking to advance their careers.

If you are looking for a new career with a competitive income package this opportunity is ideal for you. To learn more about this practice opportunity, please forward your CV and letter of interest to shannon@bentsoncopple.com.

Orthodontic Job Opportunity: Scottsdale, Arizona

Scottsdale_BlogA unique new orthodontic model and practice group is expanding nationwide. This fast-growing group is seeking a motivated, entrepreneurial associate to join their team and manage a practice in Scottsdale, Arizona. This practice is passionate about making orthodontic care exceptional and believes in putting the orthodontist at the center of its growth strategy.

This desert city is located east of Phoenix and is known for its spa resorts and golf courses, but that is not all Scottsdale has to offer! There are endless opportunities for outdoor adventure including hiking McDowell Sonoran Preserve, horseback riding, kayaking Salt River, or capturing breathtaking sunsets from a hot air balloon. Head over to Old Town Scottsdale for the Southwest’s largest shopping destination, the city’s entertainment district, award-winning craft breweries, and it’s very own Wine Trail!

If you are looking for a new career with a competitive income package this opportunity is ideal for you. To learn more about this practice opportunity, please forward your CV and letter of interest to shannon@bentsoncopple.com.

Orthodontic Job Opportunity: Washington, D.C.

Washington DC_BlogA unique new orthodontic model and practice group is expanding nationwide. This fast-growing group is seeking a motivated, entrepreneurial associate to join their team and manage a practice in Washington, D.C. This practice is passionate about making orthodontic care exceptional and believes in putting the orthodontist at the center of its growth strategy.

Washington D.C. is a compact city located on the Potomac River, bordering Maryland and Virginia. The nation’s capital is a place unlike any other filled with monuments, memorials, national museums, and eclectic neighborhoods with each having its own atmosphere. Public parks and cultural sites give the D.C. metro area the perks of a large urban area while neighborhood block parties and coffee shops create the feel of a much smaller community.

If you are looking for a new career with a competitive income package this opportunity is ideal for you. To learn more about this practice opportunity, please forward your CV and letter of interest to shannon@bentsoncopple.com.

Orthodontic Practice For Sale: Central Louisiana

Cental LA_BlogA unique, multi-location private orthodontic practice located in Central Louisiana is for sale.

The area offers residents a true sense of community and is a wonderful place to call home.  The area has experienced unprecedented growth in recent years and received national recognition for one of “America’s Best Small Towns”.  Residents enjoy its one-of-a-kind community, modern conveniences with close proximity to larger cities. It is also a sportsman’s paradise with many outdoor activities like hiking, hunting, camping, and endless water-related fun. Residents enjoy a wonderful year-round climate, annual festivals, a low cost of living and state-of-the-art hospitals and health care facilities.

If you are looking for a wonderful practice opportunity, please email your CV and letter of interest to shannon@bentsoncopple.com.

Orthodontic Job Opportunity: Raleigh, North Carolina

Raleigh_BlogRaleigh, North Carolina is the place to be and we have a great opportunity for an orthodontic associate!

The streets in the heart of the city are lined with many oak trees making Raleigh known as “City of Oaks” which helps further the family-friendly atmosphere and welcoming community. This state capital is also known for its universities, including North Carolina State University and is part of the Research Triangle Park. This region is luring new residents every day with strong job growth and high quality of life. Many of the people who call this metro area home are young, friendly, diverse, and educated. U.S. News ranked Raleigh #10 in Best Places to Live and Money Magazine describes Raleigh as the ‘Best Big City in the Southeast’.

To learn more about this practice opportunity, please forward your CV and letter of interest to shannon@bentsoncopple.com.

Click here to view additional practice opportunities available from Bentson Copple & Associates.

Orthodontic Job Opportunity: Seattle, Washington

Seattle.BlogA unique new orthodontic model and practice group is expanding nationwide. This fast-growing group is seeking a motivated, entrepreneurial associate to join their team and manage a practice in downtown Seattle, Washington. This practice is passionate about making orthodontic care exceptional and believes in putting the orthodontist at the center of its growth strategy.

Seattle is Washington State’s largest city and is home to a large tech industry, with Microsoft and Amazon headquartered in its metropolitan area. The practice is located near the Seattle Center which has become a premier destination for arts, entertainment, and leisure activities. One of Seattle’s greatest assets is that it’s a large city that doesn’t require you to leave to find outdoor activity offering a wonderful lifestyle for both families and young professional adults!

If you are looking for a new career with a competitive income package this opportunity is ideal for you. To learn more about this practice opportunity, please forward your CV and letter of interest to shannon@bentsoncopple.com.

Click here to view additional practice opportunities available from Bentson Copple & Associates.

Orthodontic Job Opportunity: Chicago, Illinois

Copy of Blog TemplateA unique new orthodontic model and practice group is expanding nationwide. This fast-growing group is seeking a motivated, entrepreneurial associate to join their team and manage a practice in Chicago, Illinois. This practice is passionate about making orthodontic care exceptional and believes in putting the orthodontist at the center of its growth strategy.

Chicago is recognized all across the United States as a very passionate sports town but that is not all they have to offer. Chicago today embodies the values of America’s heartland – integrity, hard work, and community. As a multicultural city that thrives on the harmony and diversity of its 77 distinct neighborhoods, they have affordable housing in attractive and economically sound communities.

If you are looking for a new career with a competitive income package this opportunity is ideal for you. To learn more about this practice opportunity, please forward your CV and letter of interest to shannon@bentsoncopple.com.

Click here to view additional practice opportunities available from Bentson Copple & Associates.

Orthodontic Job Opportunity: Western South Dakota

South Dakota_BlogA private orthodontic practice in western South Dakota with multiple locations is looking for a motivated associate to join their team!

Located in a broad valley on the northern edge of the Black Hills, this community thrives as an outdoor recreational paradise along with a center for art and culture. Some of the best hiking trails are in the area, as well as majestic waterfalls and bubbling springs creating breathtaking scenery. Leisurely day trips to five National Parks and Monuments are within a two hour drive. The fast-growing, friendly community is home of one of the oldest educational institutions in the state making it an active college town with many young professionals residing there. This community was voted the #1 environment for entrepreneurs.

This opportunity offers a very competitive compensation package including a relocation bonus. If you are looking for an opportunity in a place that has a high quality of life, please forward your CV and letter of interest to shannon@bentsoncopple.com.

Click here to view additional practice opportunities available from Bentson Copple & Associates.

Orthodontic Job Opportunity: Bethlehem, Pennsylvania

Full-time.pa.BlogAn amazing private practice located in Bethlehem, PA is seeking a fun, dynamic, rock-star associate orthodontist to join their team. This practice likes to have fun while they work, and was recently voted one of the Best Places to Work in the region!

The practice is located in the Bethlehem community, which is part of the Lehigh Valley, the state’s third-largest metro region. So while it might seem like you live in a small community you are actually only 90 miles from New York City and 60 miles from Philadelphia. The valley is well known for its extensive award-winning parks and biking (including the Velodrome, an Olympic caliber biking track where you can see some of the world’s elite riders). The downtown historic district is rich with culture from early immigrants but is now home to art galleries, fun shops, and the famous “Restaurant Row”. The Southside district residents enjoy the first Friday of the month as the area comes alive with live music, entertainment, and food to promote the area merchants and a sense of community among its residents. As if this isn’t reason enough to consider this area, Bethlehem is also home to Marshmallow Peeps and Mike & Ike Candies!

This is an awesome opportunity for a new graduate to gain experience and knowledge working with an orthodontist who is an excellent clinician, has fun with his team and absolutely loves what he does! The ideal candidate is available by fall 2019 and eligible for Pennsylvania state licensure. To learn more about this opportunity, please forward your CV and letter of interest to shannon@bentsoncopple.com.

Click here to view additional practice opportunities available from Bentson Copple & Associates.