New U.S. Census Data and Trends to Watch

By: Shannon Patterson
The population changes every year in the United States. Generally we see a positive change with the overall populations meaning more births and deaths, however, a few states had more deaths than births according to the U.S. Census Bureau.

According to the Bureau’s factors that contribute to the 2016-2017 estimates for populations for the 50 states results are international and domestic migration and the “natural population change,” which is the net births minus deaths.

The results showed that two states, Maine and West Virginia, actually saw more deaths than births. Maine’s natural population went down by 0.9 residents per 1,000, while West Virginia’s dropped by 1.7 residents per 1,000. However, Utah had an excess of births over deaths contributing to why it’s ranked the third fastest growing state with natural increase.

Idaho was the nation’s fastest-growing state over the last year. Its population increased 2.2 percent to 1.7 million from July 1, 2016, to July 1, 2017. The next largest percentage increases in state population were; Nevada (2.0 percent), Utah (1.9 percent), Washington (1.7 percent), and Florida along with Arizona (1.6 percent).

The two fastest growing states Idaho and Nevada experienced “domestic migration,” which is defined by the number of residents who move into a state from another, minus the people who moved out of that state. The census showed that the Northeastern and Midwestern states tended to lose population due to domestic migration as more residents moved out of the state than into the state. By region, the Western and Southern states mostly saw gains from other parts of the country. States that saw dramatic increases due to domestic migration were Idaho, Nevada, Oregon, Washington, Arizona, and Montana.

Overall, the southern and western regions led America’s population growth. In 2017, 38 percent of the nation’s population was in the Southern states and 23.8 percent in the Western states.

A number of common factors affect migration patterns throughout the country. Residents move from state to state for economic and educational opportunities as well as quality of life factors and the cost of living. Many of the fastest growing states have midsize cities with quality school systems, low unemployment rates, and offer affordable housing.

To determine the fastest growing and shrinking states, the WSJ reviewed the one-year population change of all 50 states from 2015 to 2016 with data from the U.S. Census Bureau. Below is a list of the fastest growing and shrinking states in the U.S.

Fastest Growing
Idaho
The population of Idaho increased by 1.8% in 2016. Idaho has a relatively high birth rate, and natural growth accounting for about one-third of all new Idahoans in 2016. The remaining population growth was due to the large influx of residents from other parts of the country. A net total of 17,143 Americans relocated to Idaho in 2016, far more than in most states.

Utah
The population of Utah grew by 2.0% in 2016, nearly three times the 0.7% national population growth rate and the fastest pace of any state. Unlike most fast-growing states, the majority of Utah’s population increase was due to natural growth. Utah has the largest average family size in the country. While Utah’s high birth-to-death ratio accounted for most of the state’s population growth, Utah’s population also grew more from inbound migration than many other states.

Nevada
The population of Nevada increased by 2.0% in 2016, The state has sustained strong population growth over the past decade, growing by 16.5% from 2006 to 2016, nearly twice the 8.3% national growth rate.

Florida
Like many of the fastest-growing states, Florida’s rapid population growth was largely due to migration. About 9 in every 10 new Floridians either moved from another state or from another country.

Washington
Washington state’s population grew by 1.8% in 2016, more than twice the 0.7% national population growth rate. The state’s strong population growth over the past decade was accompanied by a large increase in their GDP. The states information sector such as industry giants including Microsoft, Amazon, and Expedia ignited the growth.

Oregon
Since 2006, Oregon’s population has grown at an average rate of 1.1%. Approximately 3 in every 4 new Oregonians in 2016 moved to the state from another state (domestic migration), with the remaining population increase due to natural growth. Many new residents likely came to Oregon for economic opportunity.

Colorado
Colorado’s population grew by 1.7% in 2016, among the fastest pace of any state. Like many of the fastest growing states, domestic migration contributed the most to the states rapid population growth. A net influx of 50,216 Americans relocated to Colorado in 2016.

Arizona
Arizona’s population grew by 1.7% in 2016, more than twice the 0.7% national population growth rate. Most of the state’s growth was again due to new residents migrating from another state. A net total of 61,544 Americans relocated to Arizona that year in 2016.

Fastest Shrinking States
West Virginia
West Virginia was one of two states to see both negative natural growth and net migration loss in 2016. West Virginia, which has one of the oldest populations of any state, has the highest death rate and one of the lowest birth rates in the country. Approximately 2,700 more West Virginians died than were born in 2016, accounting for one-fourth of the state’s total population loss. Most of the population loss was due to people leaving the state. Major factors causing people to migrate out of West Virginia were the high unemployment rates and poverty. In total, West Virginia’s population decreased by about 10,000 residents in 2016, the most of any state relative to population size.

Illinois
While the population of Illinois has increased nearly every year in the past five decades, the state’s population declined in 2014, 2015 and 2016. The state’s population shrank by 0.3% in 2016, the second fastest pace of decline of any state. A large share of the population loss was due to residents leaving the Chicago-Naperville-Elgin metro area. In a survey conducted by the Chicago Tribune, residents who had moved out of the city in recent years cited high taxes, unemployment, poor weather, and violent crime as primary reasons for leaving Chicago. The population decreased by over 37,508 residents with the majority of them being from the city of Chicago (19,570).

Vermont
The population of Vermont declined by 0.2% in 2016, the third largest contraction of any state. Most of the population decline was largely due to outbound migration. Approximately 2,000 more residents moved out of Vermont in 2016 than moved in, nearly the largest loss of any state when adjusted for population size. Vermont’s population growth was also impacted by the state’s low birth rate.

Connecticut
The state’s population shrank by 0.2% in 2016, the fourth largest decline in the nation. Connecticut’s population has declined substantially in recent years, with approximately 20,000 residents exciting since 2013. Unfortunately, many of the residents leaving the state are young, college-educated professionals. The population loss will likely hurt the state’s economic potential.

Wyoming
Wyoming was the only state to grow more from natural growth than the United States as a whole in 2016 and still have population loss overall. Approximately 2,800 more new Wyomingites were born than died in 2016, however, heavy outbound migration led to negative population growth in Wyoming overall. Overall 3,823 more residents moved out of Wyoming in 2016 than moved in, more than in any other state relative to population size.

Pennsylvania
While the U.S. population grew by 0.7% in 2016, the population of Pennsylvania shrank by 0.1%. The change was largely due to residents who moved out of the state; approximately 45,600 more residents exited the state than moved in making it one the largest domestic outflow states in the nation. Pennsylvania’s population loss was also partially due to the state’s low birth-to-death ratio. Overall, Pennsylvania grew less from natural growth than any state other than New Hampshire, Maine, and West Virginia.

Mississippi
The population of Mississippi declined by approximately 660 residents in 2016. The population loss was largely due to outbound migration to other states. Roughly 7,500 more Mississippi residents moved out of the state than moved in during 2016. While Mississippi had positive natural growth in 2016, the state’s death rate was relatively high, and the natural population growth was lower than the national average. Many residents exited the state due to the state’s low quality of life, and depressed economy. Today, over 20% of state residents live in poverty, the largest share in the country.

New York
New York is one of many Northeastern states whose populations are rapidly declining due to outbound migration. While the state gained a net total of 118,478 new residents from other countries, over 190,000 residents moved out of New York to another state in 2016 than moved in.


This article was featured in the August 2018 edition of The InSight, our monthly email published for orthodontic residents and doctors seeking practice opportunities. This monthly email provides news and information focused on the fast-changing orthodontic industry and its relation to current and future orthodontic careers, highlight commonly asked questions that are timely to the young orthodontic community, and provide a current list of available practice opportunities. Click here to sign up for the email. 

Is it Necessary to Market Your Orthodontic Practice on Social Media?

Social Media Marketing                                                                                    By:  Mandy King

In today’s society; the answer is most definitely YES! Social media is an opportunity to attract new patients, boost referrals, and build a loyal online patient base by actively interacting with your followers. Studies show it is no longer dominated by just the young; 80% of American adults are actively using it as well. Your return on investment is huge because sites such as Facebook, Twitter, Instagram, Pinterest, and YouTube are free to use.

Relationship marketing through social media helps you focus on the people you are treating. This engagement will set you apart. Remember that the quality of the content you post is more important than the frequency. Social media needs to be carefully planned and executed by making your message consistent on all platforms your office may choose. A scheduling calendar is a great way to keep you organized.

The next step is selecting which social media platform is right for your practice. Facebook is by far the most preferred social media out there but don’t limit your strategy to it only. Keep in mind that each channel presents you with a unique promotional opportunity by updating them with fresh, relevant content.

Facebook will likely attract the majority of your target audience. A great way to promote your practice is by running paid advertising campaigns to attract new patients. Encourage your active patients to follow you on facebook. They will likely post positive reviews that will be seen by prospective patients visiting the site. Use facebook to introduce your team and practice culture. It is a great avenue to promote non-profit, local community initiatives you take part in as well. Think about making a clever use of #hashtags as people use them to search for specific content. Celebrate with your patients by taking pictures with them the day their braces are placed or removed. Creating an album of before and after photos will grab peoples attention! Organizing contests and giveaways will help spread your reach to your patients family and friends.

Twitter is the place to be for teenagers. The content on this social media platform has a short lifespan, so you have to be more active when sharing. Keep your tweets short and to the point with the latest orthodontic news or fun fact. Remember to include relevant #hashtags in your tweets as they could boost the visibility for a longer period of time.

Instagram and Pinterest are a great way to showcase images of your orthodontic practice and your team. Be creative by coming up with visually appealing content. Use these avenues as a way to share successful orthodontic cases. Creating stories on instagram by recording a short video could be fun for your staff and patients. Moms love Pinterest! This is an endless source of content for a variety of orthodontic tips, do’s and don’ts, and infographics about orthodontics. While creating your content for Instagram and Pinterest, gather fresh ideas and don’t forget to use your #hashtags.

A Modern Day Business Tale of David vs. Goliath: What Orthodontists Can Learn From Dollar Shave Club vs. Gillette

A Modern Day Business Tale of David vs. GoliathIn 2006, Proctor & Gamble made a $56 Billion, with a “B”, investment in the razor blade market, purchasing the Gillette products and brand. With a 70% market share in the razor blade market and the advantages that Proctor & Gamble had in research and development, branding/advertising and distribution – who would or could compete with them?

Well…over cocktails at a holiday party in 2010, Michael Dubin, then 34 years old, found himself next to the father of one of his friends’ fiancée in a discussion that somehow meandered into complaining about what a rip-off $4.00 and up razors were and was there a better way. A year later, with Michael Dubin as pitchman and his now partner Mark Levine in operations, the two launched Dollar Shave Club (dollarshaveclub.com); selling razors on the internet for $1.00 plus $2.00 shipping and handling. Hardly a threat to the formidable Gillette brand that had recently launched the three blade Mach3 after spending $750 million in research and development on the product.

Dubin invested his life savings, about $35,000, to build a website that was launched in July of 2011. Working tirelessly, the early going was slow. He spent six months driving around trying to connect with media to spread the word and signed up the first 1,000 members without spending any other money. Then came the idea to create a goofy video to promote the brand and product at a cost of around $4,000, which launched in early 2012. The slightly irreverent video went viral – extolling convenience, price and featuring two cheeky slogans: “Shave Time. Shave Money.” and “Our Blades are F***ing Great.” In the two weeks following the initial YouTube post, over 12,000 new orders flowed in, and that was after the website crashed due to volume in the first hour and was down for twelve hours.

The rest is history. Dollar Shave Club gained subscribers, or as they like to call it “members,” for its razors with blades imported from Korean manufacturer Dorco. In 2015 sales surpassed $150 million and 2016 sales are on pace to surpass $200 million in razors costing about a quarter to buy and package and selling for a dollar. The punch line is this – two weeks ago Dollar Shave Club was purchased for over five times sales for one billion in cash by Unilever, Proctor & Gamble’s largest competitor.

Yes, David can take on Goliath in today’s business world. What are some takeaways from the story?

1. There are new ways to sell old products – Dollar Shave Club went to the consumer.

2. A form of guerrilla marketing is available today that can neutralize the advantages of older established brands. Dollar Shave Club content is hosted on Amazon Web Services (launched in 2006), YouTube (launched in 2007) made it easy and inexpensive to view their video, and Facebook (launched in 2004) made it possible to share the video to millions for free.

3. The established market leader could not change its model to compete. Proctor & Gamble simply wasn’t structured to drop their price on the Gillette razor line to compete with the new competitive threat. Their built-in overhead and delivery model ended up costing Gillette an 11% drop in market share to 59% of the razor market, down from a commanding 70% share in 2006.

4. Gillette essentially over-engineered the razor market. It turns out that two blades were enough to satisfy customers. After the launch of the three blade Mach3 came the five-blade Fusion from Gillette; which had a 40% premium to the Mach 3, but was met with slower than expected sales. No worries for Gillette, customers still purchased the Mach3, but the concept of more blades for more money was challenged.

5. Proctor & Gamble thought their market position was unassailable.

Questions for Orthodontic Practice Owners:

  • How are you speaking to the consumer?
  • Are you leveraging the social media products like Amazon, YouTube and Facebook to your best advantage?
  • Can you exploit your competitor’s weakness with disruptive strategy? Or, if you are met with a disruptive strategy in your market, are you able to adapt quickly?
  • Are you offering too much by over-engineering your services to meet customer needs and wants?
  • If you are the market leader in your drawing area, are you studying how the disruptions in dentistry could affect your business?

Food for thought from a modern day David and Goliath business tale.

Orthodontic Partnership Seminar Announced

Bentson Clark & Copple Partnership SeminarPartnerships are on the rise. They are one of the fastest growing practice types throughout the United States. However, creating a successful partnership between two dental professionals isn’t easy – it’s more than just a handshake. Clear expectations and a solid financial plan are the keys to a smooth transition. Establishing effective and inclusive partnerships takes time. It is important to create the right framework from the start and review both the structure and process of the partnership on an ongoing basis.

If you have considered adding an orthodontic partner or even a pediatric dentist to your practice, we invite you to attend a full-day lecture, hosted by Bentson Clark & Copple, which will focus on the key elements of partnerships from a panel of distinguished experts with first-hand experience.

Building a Lifelong Partnership is scheduled for Friday, June 19th from 7:30 a.m. to 4:30 p.m. at the O. Henry Hotel, located in the heart of Greensboro, North Carolina. This educational lecture will focus on the business of building a lifelong, successful partnership. From the legal aspects of creating a partnership to the physical building requirements needed for a partnership, our guest speakers will offer their first-hand experience of long-term partnerships with both orthodontists and pediatric dentists. Many topics will be discussed, including the different types of partnerships, considerations in building a partnership and how to locate a partner.

The lecture will close with an open forum, panel discussion, where you may pose questions to the Bentson Clark & Copple team and guest presenters regarding anything partnership-related. Scheduled to present are Chris Bentson; Doug Copple, CVA; Dr. Jeffrey Johnson; Joyce Matlack, RDH, ASID; Dr. Michael F. Nelson; Shannon Patterson, CPR; Dr. Ronald K. Risinger and Daniel Sroka, JD.

Bring your potential orthodontic partner, future pediatric dental partner and/or your spouse to this event. Registration is open now. Early bird rates of $499 are available before March 1, 2015. Registration fees will increase to $599 after that date.

 

True Overhead of an Orthodontic Practice

P&L StatementWe find that a doctor’s Profit and Loss Statement (or P&L Statement) hardly ever reflects the true expenses required to produce the top line revenue stated. Why? Depending on how the practice is structured, there are a number of discretionary expenses that a doctor and his/her accountant may choose to run through the practice. Some common items hidden within a P&L Statement are the doctor’s payroll taxes, the doctor’s health/life (and sometimes disability) insurance, the doctor’s retirement contributions, automobile expenses, and certain travel and entertainment expenses, just to name a few.

To understand the true overhead of an orthodontic practice, it is often necessary to deduct these expenses from your P&L Statement, and then recalculate your overhead rate. After doing so, the question most doctors ask us is how they compare to industry norms. While there is no correct answer to what a practice’s overhead should be, we have produced a document that will help doctors compare his/her overhead to the average benchmarks seen in the orthodontic practices we value. Click here to access this sample P&L Statement document. Once you download this reference sheet, take out your P&L Statement from the last complete year and begin to make entries. Enter your actual expenses in the unadjusted column on the left (entering each into the best available category), and then remove discretionary business expenses in the adjustments column to determine the final adjusted figures, which will provide your true expenses to operate the practice. In an hour or less, you’ll have the best view of your practice.

Click here to download the sample P&L Statement.

Copyright Compliance in the Orthodontic Industry

Recently, a number of AAO members have received a letter from the Motion Picture Licensing Corporation (MPLC) regarding the alleged improper showing of movies in waiting rooms or other areas of the members’ orthodontic offices. The letter that has been received is strongly worded suggesting doctors should enter into a licensing agreement in order to avoid paying penalties in the future for violations.

The AAO offers a sampling of frequently asked questions regarding the MPLC and the display of movies in orthodontic offices. Also, the Bentson Clark reSource discussed copyright compliance a few months ago before this issue was brought to the orthodontic mainstream. Contact Bentson Clark & Copple to request a copy of an article regarding copyright laws and infringement written by Daniel Sroka, the attorney that drafts the majority of Bentson Clark & Copple’s legal documents.

Reasons an Orthodontic Practice Cannot Grow

As valuation and transition consultants, we have the duty to analyze a practice for sale or purchase with great scrutiny. When performing a practice valuation study, we analyze the last three years of a practice’s financial performance and operational performance for each practice. This provides us not only the revenue and expenses, but the patient flow, the conversion ratios from new patient exams to starts, the fee structure, the marketing plan, etc. More importantly, when visiting each practice, we observe the physical facility, fixed assets in service, staff, location within the practice’s drawing area, competitors’ location(s), and so on. We also perform a detailed demographic analysis of the patient drawing area. Needless to say, we end up with a great deal of data on each practice; having the opportunity to see practices in every geographic region of the country.

Taken together, we see practices that are declining at various rates, practices that are maintaining a relatively flat “status quo” with regards to growth, and practices that are growing at various rates. We see these practices in all areas of the country, in all environments, generally battling a similar competitive and economic environment. However, there are situations that cause a practice not to grow.

There are many contributing reasons as to why a practice cannot grow: competitive environment, demographic environment, geographic limitations, and so on; however, our observation of the number one reason practices cannot grow is because they do not currently operate with efficient systems. Systems are perhaps the key foundation to growth and without them, a practice in chaos will experience greater chaos as it makes decisions and tries to grow, ultimately imploding under the weight of poor systems. Some examples are:

• If patients are not seated on time, adding growth to a practice will only exacerbate the problem.

• If cases are not finishing on time, growth presents real problems as chairs fill up with unhappy zero contract balance patients.

• If the highest level of customer service cannot be currently offered, then providing the same average, predictable, run-of-the-mill, mediocre service inhibits growth.

• If the staff is turning over at an accelerated rate, and there is gossip, backstabbing, and an ununified team that is just getting by, growth is not in a practice’s future.

• If there is poor direction and leadership from the owner, counting on the staff to pick up the leadership role and grow the practice is likely not going to occur.

To learn more, read Chris Bentson’s article, Observations on Growing an Orthodontic Practice, published in Orthodontic Practice US January/February 2013 issue.

Orthodontic Practice Lease Considerations – Part 2

We previously discussed some of the issues regarding an office lease that need to be considered when buying an orthodontic practice and the selling doctor owns the office. In this article, we will discuss lease issues to be considered when the office is leased from a third party.

The first item to consider is when you can contact the landlord about lease terms once you purchase the practice. Quite often, the selling orthodontist wants the sale of the practice to remain confidential as long as possible. The seller may not want the landlord to know that he/she is selling the practice until many of the other sale and financing terms are agreed to by the buyer and seller. Thus, the buyer’s conversations with the landlord may not begin until later in the negotiation process.

Just like when the selling orthodontist owns the real estate, the lease terms must be considered. The buyer generally has to get at least a 5 year lease term, inclusive of renewal options, in order for a bank to provide financing for the transaction (the bank wants assurance that the buyer will have an office to treat patients and earn income for a reasonable amount of time in order to repay the purchase loan). The landlord generally prefers a longer lease term, and the buyer has to consider how long he/she plans to stay in the office and whether another office or location in the city is better for the practice. If the buyer’s plans are to relocate the practice soon, he/she should try to negotiate a shorter initial lease term with options to extend the lease for one year periods (to satisfy the lender’s requirement).

The lease rate also needs to be considered as we have seen some instances where the seller has been in a tenant in the office for a number of years without a rate increase, or without a formal lease agreement, and has a very good relationship with the landlord. When the seller is no longer the tenant, the landlord may see this as an opportunity to increase the rental rate to fair market rates, which has an impact on the practice’s profitability. Similar to when the seller owns the office and the fair market lease rates should be considered when the practice valuation is prepared, if it is fairly certain that the lease rate will be increased in the future, the practice valuation should take this into account and the buyer should be made aware of this early in the process.

Finally, one of the biggest issues we often face is the landlord’s reluctance to release the selling orthodontist from personal liability related to the lease (particularly when the lease is assigned to the buyer). The individual doctor often personally guarantees that his/her professional corporation will pay the lease.  The selling doctor usually has been a tenant in the building for a number of years, is financially well established, and may have a great relationship with the landlord. With the sale of the practice, the buyer will be required to personally guarantee the lease payments, but the buyer usually doesn’t have substantial personal assets as does the seller. More than likely, the buyer has minimal liquid assets, a lot of student debt, and very little or no experience running a practice. Understandably, this makes the landlord nervous and the landlord may refuse to release the selling doctor from his/her personal guarantee of the lease. This is an issue for the seller, which may require additional negotiations with the Landlord as to how long the seller will remain a guarantor.

There are many items to consider when selling and transitioning an orthodontic practice, and the lease agreement is just one of those items. However, the lease can often turn in to a multi-faceted negotiation process that can take longer than the parties anticipate.

Orthodontic Practice Lease Considerations – Part 1

Whenever dealing with a practice sale or transition, the buying and selling orthodontists have a lot to consider throughout the process, such as purchase price, length of the doctors working together before and after the sale, staffing issues, etc. However, we often see that one of the most important issues takes a back seat in the transition negotiations – the office lease! Whether the office is owned by the selling doctor or by an unrelated third party, we have seen numerous transactions be delayed due to lease issues not being resolved timely.

In the case where the selling doctor owns the real estate, the selling doctor often does not know what the fair market rental rate of the property is. The selling orthodontist often sets the lease rate he/she pays to himself/herself based on tax considerations or mortgage payments, which may be significantly higher or lower than fair market rental rates. We often have sellers tell us during the valuation process or transition negotiations that the rental rate should be $XX per square without really knowing the market, getting advice from a real estate expert, or understanding if this is a gross or net lease rate (“gross” meaning that the landlord pays most or all expenses, such as real estate taxes, insurances, maintenance, and “net” meaning that the tenant pays such expenses). The buyer, often inexperienced in these types of transactions, is generally advised to get the opinion of a local real estate expert to help evaluate the lease rate. The problems arise when the buyer’s expert says the rental rate should be significantly lower than the seller’s expectations. After much more time and research by the seller, it may be discovered that the rental rate he/she can receive from an actual tenant is much less than what he/she initially thought would be paid (or, often worse, if the seller realizes that the lease rate should be increased, which, if requested by the seller, creates other trust issues for the buyer). This situation can create a stumbling block in the transition negotiations and delay the closing of the transition.

The seller doctor, acting as the landlord of the property, has to understand that most buyers will do some research on what the fair market rental rate should be for similar spaces in the area. So, ultimately, the seller has to be reasonable and agree to lease the office at (or very close to) fair market rental rates. Otherwise, it may mean that the seller has to go through negotiations with multiple buyers to either: (1) find the buyer willing to pay a higher than reasonable rental rate, or (2) eventually understand that qualified buyers demand a reasonable rental rate and the rent must be set at market rates. Unfortunately, the latter often occurs after one or more qualified buyers have walked away.

Our advice to selling orthodontists that own the real estate is to do some research on the fair market rental rate for their office spaces when they first begin to consider selling their practices. The sooner these rates are established and supported by actual market research, the smoother and quicker the transition negotiations will go. It also helps in the valuation of the practice because the practice’s value is largely dependent on the income/profit accruing to the owner. If the income/profit used in the valuation is not correct (due to incorrect lease rates), the buyers may also challenge the valuation.

In our next blog post, we will review lease issues that can arise when the office is owned by a third party rather than the selling orthodontist.