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 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 Practice For Sale: North Carolina/Virginia

NC:VA.BlogA well-established orthodontic practice located on the Virginia/North Carolina border is for sale.

With a heavy military presence, this area hosts a robust and thriving economy while giving you a small-town atmosphere. Residents enjoy the areas inherent diversity, close proximity to multiple top beach destinations and fresh local cuisine. Activities are endless with the local beaches, waterways, parks, and major historical sites. The waterfront views are the perfect setting for a “date-night” or family bike ride as you take in the beauty that surrounds you. There is an affordable cost of living making this area a great place for families and young professionals to reside.

This is an amazing opportunity for a doctor seeking to own a practice with much to offer. To learn more about this practice opportunity please send your CV and letter of interest to shannon@bentsoncopple.com.

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

Equity-Minded Orthodontic Associate Opportunity: Hawaii

Hawaii_BlogAloha! A private orthodontic practice is seeking an equity-minded partner in the beautiful state of Hawaii.

This is an amazing opportunity for a candidate seeking an ideal work-life balance. When you get to live where most people vacation, your days off are extra special. The state is ranked as one in one of the healthiest lifestyles available for both body and mind as most islanders say living here is less stressful than living on the mainland. Islanders enjoy breathtaking beaches, unique cultures, history and an abundance of outdoor opportunities including; hiking, surfing, kayaking, kiting, fishing, and wildlife exploring.

If you are interested in learning more about this amazing 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.

As an Orthodontic Resident, When Should I Begin Searching for a Practice Opportunity?

As an orthodontic resident, when should I begin searching for a practice opportunity?By: Mandy King
Client Support Associate

As a liaison for residents seeking orthodontic opportunities, my job is to provide you with support during the recruitment process with our placement services. In doing so, I am able to share insight about crafting an “About Me” letter, preparing a curriculum vitae, and answer any questions you might have, including ‘when should I start looking for an opportunity?’

You should begin to determine in which state and city or town you wish to practice after the first six months of your residency. If you wait until your last year to start the process of identifying the area in which you wish to live, you are taking a gamble on finding an opportunity. Some of you are pretty open to different areas, which is great because this will give you more opportunities. A good rule of thumb is, beginning when you are one year out from graduation, you should dedicate two hours per week to your job search depending on your geographical preferences.

If you are considering buying-in or purchasing a practice, you need to start preparing early. Be on the lookout a year or two in advance for practices for sale in the areas where you hope to purchase. Speak with a lender to determine financial goals you may need to meet in order to be extended a loan.

Do not hesitate to inquire about opportunities that interest you or to ask questions you may have about current market trends. You never know when the “right” one will present itself.

Each month our team sends out the Bentson Copple InSight e-newsletter which includes a list of available practice opportunities. If you are not receiving the InSight and would like to stay up-to-date with current orthodontic career opportunities, please click here and sign up.

Orthodontic Practice For Sale: Research Triangle Park, North Carolina

RTP.BlogAn orthodontic practice located in North Carolina’s Research Triangle Park is for sale.

Research Triangle Park is the largest research park in the United States making it a national leader in medical research and health care. This area is able to offer opportunities to businesses and newcomers in a variety of fields and provides the culture, the restaurants, and the industry. The RTP community which is made up of Raleigh, Durham, and Chapel Hill, is friendly and welcoming, not to mention has a lower cost of living. The central location is less than 20 miles from three major universities; Duke University, North Carolina State University, and the University of North Carolina giving residents ample opportunity to catch a college game.

This is a great opportunity to purchase a practice in an area that is consistently ranked as one of the best places in the U.S. to live, work, and retire. Ideal candidate is available by fall 2019 and eligible for North Carolina licensure. 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: Slidell, Louisiana

Slidell.BlogAn orthodontic practice is looking for an associate in Slidell, Louisiana.

Slidell is located on the northeast shore of Lake Pontchartrain in St. Tammany Parish. Slidell is in close proximity to New Orleans and Baton Rouge which has made the area one of the fastest-growing metropolitan suburbs in Louisiana. This quiet, friendly community is filled with great dining, plenty of shopping, and live entertainment throughout Olde Towne. Residents enjoy the festivals that are held there and the many parks Slidell has to offer.

This is a wonderful opportunity for an associate orthodontist to join a high-quality orthodontic practice. The ideal candidate is available by summer 2019 and eligible for Louisiana state licensure. 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: Lee’s Summit, Missouri

Lee's Summit.BlogAn orthodontic group practice located in Lee’s Summit, Missouri is seeking an orthodontic associate.

Lee’s Summit is a suburb of Kansas City which offers easy access for sports enthusiast to teams like the Royals and Chiefs. Lee’s Summit is known as a family-friendly community, having award-winning educational opportunities, and top-notch health care. The city prides itself on having many recreational activities, from lakes to parks, and a pedestrian-friendly downtown. There is a balance we all seek between family and work, and Lee’s Summit provides a much sought after quality of life.

This is a great opportunity for an associate to join an orthodontic practice that offers a very competitive employment package. Ideal candidate is available by summer 2019. To learn more about this practice opportunity please send your CV and letter of interest to Shannon Patterson via email at shannon@bentsoncopple.com.

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

Orthodontic Job Opportunity: Gulfport, Mississippi

Gulport, BlogA group practice in Gulfport, Mississippi is seeking an orthodontic associate.

Gulfport is the second largest city in Mississippi and located 65 miles NE of New Orleans, Louisiana. This metropolitan area offer residents a suburban feel in an active beach community. Many young families live in Gulfport and it ranks as one of best places for young professionals. Harbor Square Park is frequented by town residents as this is a great recreational spot. The fresh Gulf seafood will make your mouth water and the nightlife is hopping.

This is a multi-year employment opportunity and offers a very competitive employment package. Ideal candidate is available by summer 2019 and eligible for Mississippi state licensure. 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: Champaign, Illinois

Champaign.blogAn orthodontic practice with multiple locations is seeking a full-time associate in Champaign, Illinois.

This opportunity is located in Central Illinois just two hours south of Chicago. The area is part of “Silicon Prairie” and home to multiple high technology industries. Champaign offers its residents affordable housing, good schools, and an excellent health care system. Amazing local parks, youth sports programs and miles of walking and biking opportunities make this a great place for families and individuals to have fun and stay healthy. Area lakes and rivers for boating, fishing, canoeing, camping and nature park areas for hiking all add to the fun.

The ideal candidate is available by summer 2019 and eligible for Illinois licensure. 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.