What is An Orthodontic Practice Valuation?

Bentson Clark & Copple specializes in orthodontic valuations and transitions, but what does this really mean and involve? We are in the business of helping orthodontists during the pivotal points within their careers. We perform practice valuations, provide partner location services, offer practice sales and marketing services and help negotiate practice transactions.

Let’s focus on practice valuation. You are more than likely aware of the concept of business valuation, but may question how orthodontic practice valuations work. When an orthodontist is ready to find out what their practice is worth, they come to us. We then provide them with an information request document. This multiple page form requests the doctor’s personal information, and general information about the practice, including, the staff, hours of operation, leasing arrangements, number of locations and referral sources, among other items. After this information is collected, we then accumulate statistical and operational information. We inquire about the practice’s fees, the number of start cases and case completions, contracts receivable balance, number of active and recall patients and information on all active patients with paid in full balances.

Besides the on-site practice visit, perhaps the most important part of the valuation is collecting the practices’ financial information. We ask doctors to provide the past three years’ profit and loss statements and the most current interim profit and loss statement. We also obtain the most recent tax year-end and month-end balance sheets and a fixed assets listing. Lastly, doctors need to submit tax returns for the past three years including any other supporting statements. (Generally, we find that practices that employ practice consultants have a good grasp on key operational metrics and systems compared to practices that do not use practice consultants.)

We take all this information and determine a fair market value of a practice through a valuation report. The report briefly explains the various general valuation approaches and the valuation approach used by Bentson Clark & Copple. Through a variety of charts, graphs and statements, we explain how the value is calculated. The report includes a practitioner biography, the practice history, state and local demographics and an industry profile.

For more information regarding orthodontic practice valuations, please contact our office.

Residents’ Skewed View of the Orthodontic Industry

Chris Bentson had the opportunity to spend some extended time with the first and second year residents attending two Mid-western programs a while back. Prior to the visit, he requested each resident complete a basic questionnaire regarding general information for U.S. orthodontic practices. Here is a list of the resident questions:

1. Approximately how many private orthodontic practices exist in the U.S.?
2. What is the average annual collections of a single doctor practice in the U.S.?
3. What is the average overhead of a private practice in the U.S.?
4. What percentage of practices in the U.S. are using Invisalign?
5. Name a ratio of revenue of collections per full time employee in the orthodontic industry.
6. Name some common rules of thumb used to express a practice value.
7. How much money will a lender loan to purchase or start-up a practice?
8. What are the expectations of income for a first year, full-time associate?
9. Would you consider using a practice management consultant in the first two years of practice ownership or start-up? Why or why not?
10. Name some considerations that need to be examined when considering a long term partnership.

It was fun to compare the residents’ responses before and after the presentation. Chris compiled answers to all the questions given prior to the lecture. Using the extreme answers, below is a radical, fictional description of the U.S Orthodontic market from the mouths of residents:

There are 1,000 practices in the U.S., having average annual collections of $300,000 and an overhead of 75%. One-hundred percent of the practices in the U.S. currently use Invisalign. The average revenue per employee is approximately $50,000, and I’m planning to employ six employees in my practice that grosses $300,000 per year. I will pay about 30% of annual collections to purchase an orthodontic practice. A lender will loan up to $2,000,000, and I expect to take home $250,000 within my first year of practice. I would consider hiring a consultant because they only cost about $100 per day and probably have some good ideas. If I go into a partnership arrangement, my biggest concern is tracking vacation time.

Obviously everyone in the orthodontic industry has a lot of work to do when it comes to residents’ knowledge of the industry.

On the Road Again…Traveling to Tucson

The fall meeting schedule has been in full swing for the Bentson Clark & Copple team! We are once again packing our bags, putting together our marketing materials and reviewing our PowerPoint presentation for the upcoming OrthoSynetics’ 2012 Practice Meeting. We are honored to be invited to participate and can’t wait to finally get there!

We are extremely excited about the 1950’s themed Friday Night Sock Hop. We have heard through the grapevine that Chris Bentson will be rocking a leather jacket, white t-shirt and loafers at the event. Be sure to keep your eyes peeled (and snap a photo). The evening’s entertainment will include a performance from Shanana from the movie Grease! That should be a treat for all.

There will be a wide variety of speakers featured presenting on a diverse array of topics. We always enjoy speaking alongside industry leaders including Dr. Ben Burris, Dr. Mark Coreil, Dr. Jack Devereux (along with many others) and the wonderful OrthoSynetics team. Chris Bentson is scheduled to speak on Saturday, October 20 at 10am. Below are the details regarding his lecture.

Today’s Orthodontic Marketplace and How It Will Shape Tomorrow
Saturday, October 20 @ 10:00am
This presentation examines the economic state, current trends and existing benchmarks of the orthodontic marketplace and how these factors will affect today’s orthodontists and impact the future of the industry. The following areas will be discussed in detail:
• Current consumer and business owner behavior
• Operational and financial benchmarks
• Overhead standards
• Current trends: cause and effect

Upcoming AAO-Sponsored Orthodontic Resident Webinars

Bentson Clark & Copple is honored to participate in the AAO’s The Business of Orthodontics Webinar Series. This 10-part educational webinar series is directed toward today’s orthodontic resident community. The webinars began in September and will continue through April 2013. The series covers topics from starting/purchasing a practice to selling/retiring from practice, and everything in between. The webinars will be presented by a variety of industry insiders and consultants.

Chris Bentson will be presenting his first webinar (out of three that are scheduled) on October 9 at 8:15 PM EST/5:15 PM PST, and will last 75 minutes. There will be allocated time at the end for a question and answer session. The title of his lecture is Path to Ownership, Partnership, or Associateship.

For residents, understanding the options for employment, how to find them, and what to review when you do find them is extremely important. This webinar will be directed primarily with an orientation to the process of how buyers and sellers or employers for orthodontic opportunities happen. A review of the current market conditions and review of the timeline, expense, and materials needed to review an opportunity will be discussed. Current valuation methodology and a high-level overview of the operational and financial metrics that should be reviewed will be covered as well as associate pay, and cash flow pro-formas. Partnership methods of buying in will also be discussed.

This webinar series is free for all residents. It is funded by the AAO with the generous support of the AAO Insurance Company (AAOIC). For more information please contact the AAO.

Bentson Clark & Copple Announces Upcoming Speaking Schedule

The Bentson Clark & Copple team have a busy upcoming fall schedule. We always enjoy the opportunity to speak at orthodontic society meetings, study clubs, orthodontic schools, and resident functions. This fall we have been provided numerous opportunities to do so! Chris Bentson will be crisscrossing the country presenting to the orthodontic community.

Some of Chris’ presentation will be solely directed towards the orthodontic resident community, while others are targeted toward the general orthodontic doctor population. He will be speaking on a number of topics including, but not limited to: locating a practice opportunity, today’s orthodontic marketplace, orthodontic trends, practice transition (from both buyers’ and sellers’ perspectives), practice valuation, and the future of the orthodontic industry.

Below is a list of Bentson Clark & Copple’s upcoming speaking and exhibiting schedule.

September 20-23, 2012
Middle Atlantic Society of Orthodontists (MASO) Annual Session
Baltimore Hilton
Baltimore, MD
Booth # 405
Doctor Lecture: Benchmarking the Orthodontic Practice
Resident Lecture: The Process of Locating a Practice to Build, Join, Partner or Purchase

September 27-29, 2012
Southern Association of Orthodontists (SAO) 2012 Annual Meeting
Grove Park Inn
Ashville, NC
Booth # 605
Doctor Lecture: Today’s Orthodontic Practice & Marketplace
Resident Lecture: How to Locate a Practice Opportunity

October 9, 2012
AAO Sponsored Resident Webinar
Resident Webinar: Path to Ownership, Partnership or Associateship

October 11-13, 2012
OrthoVoice 2012
Bally’s Hotel
Las Vegas, NV
Booth # 311
Practice Transition Panel Discussion

October 18-20, 2012
OrthoSynetics’ 2012 Practice Meeting
Loews Ventana Canyon
Tucson, AZ
Doctor Lecture: Today’s Orthodontic Marketplace and How It Will Shape Tomorrow

October 25, 2012
TP Orthodontics Resident Presentation
TP Orthodontics Headquarters
La Porte, IN
Resident Presentation: The Resident Pathway to Future Practice Ownership

Be sure to attend one of Chris Bentson’s lectures, visit our booth (if we are exhibiting at that particular meeting) and pick up of the most recent copy of the Bentson Clark reSource!