E38: Podcast: Tips for recent dental graduates
Hello and welcome to Ascent Dental Radio. A program dedicated to the balance between the clinical aspect of healthcare and the business of healthcare. And now here is your host, Dr. Kevin Coughlin.
Welcome. Today’s podcast is brought to you by Ascent-Dental-Solutions. You’re listening to Ascent Radio and my name is Dr. Kevin Coughlin.
As always, I’d like to give special thanks to Mr. Doug Foresta and his company, Stand Out and Be Heard. Without his expertise in podcasting none of this information would be available. I also would like to thank VOCO. VOCO Dental Supplies provide some of the topnotch, best supplies in the dental business.
VOCO has been sponsoring Ascent-Dental-Solutions and my thanks go out to their company and their support in providing information to the dental community.
Today’s topic is from dental school to a dental practice. Twenty questions to get your career going in the right direction. My name is Dr. Kevin Coughlin. I have 14 practices here in Massachusetts with 150 plus employees, 23 dental associates and I’ve been practicing general dentistry for the last 34 years, and still practice to this day, and actually was practicing a few hours ago.
So the trials and tribulations that I deal with on a day to day basis are coming from personal experience.
But today’s topic, if you’re interested in hearing more, you can go to www.ascent-dental-solutions.com, sign up for our program and we have a free webinar offered June 26th at 6:00 pm EST. That webinar will go into greater detail about the trials and tribulations of being a recent grad and looking for that first job. Also, this ties in for the senior dentist, knowing what that new graduate is looking for so that both parties end up with the best results.
Let’s get started. First, as a new graduate, you must actually have some kind of background and understanding of where you’d like to go. Your options are generally as follows: you can start in a solo practice on your own, you can join a solo or group private practice, you can consider your corporate options such as a DSO or Dental Support Organization or MSO, Managed Support Organization.
The difference between the two is, in general terms, the Dental Support Organization is backed by dentists, owned by dentists, controlled by dentists. The MSO or Managed Support Organization is generally backed by venture capitalists equity groups.
And although the probably would like to think that the dentist is in control, in general, like most business, the people who put up the money and are paying the bills are generally in control. That would be up for further discussion in a follow up podcast.
But to stay on topic today, what I really would like the new graduate to look at and to consider is to determine what course is best for you. Think about dating. Think about marriage. If you decide that you’d like to have a different partner every six to eight weeks, if you like to play the field, if you’re not really interested in children or settling down, then probably a marriage would not be the best opportunity for you.
In business, ask yourself the following questions;
- Would you prefer to handpick your employees, yes or no?
- Are you good at networking, meeting new people and marketing your services, yes or no?
- Do you have a clear and unique vision for the type of dental practice that you want to create, run and manage, yes or no?
- Are you comfortable developing policies and procedures for a wide variety of topics, not just clinically but business-wise for your practice?
- Are you passionate about creating a professional environment and surroundings?
- Do you have an idea or goal or vision of what you’d like to see your practice and how you’d like to treat your patients and provide care and services?
- Are you willing to invest the time it takes to get started? In general terms, in my 34 years of practicing dentistry, I have found that it takes between six and 18 months before your business starts running a profit. And for the new graduate, you must understand the trials and tribulations of not being on a guaranteed income. The risks that not being on a guaranteed income create for you and your family.
- Are you comfortable being financially frugal for at least some period of time? Because in those growing years, there’s tremendous risk and there’s tremendous trials and tribulations until your processes and procedures are in place and your patient flow is in order.
- Are you interested in handpicking your equipment and your employees?
- Do you have a distinct idea of what you want in an employee and in an equipment and supplies?
- Do you enjoy and have the self-knowledge and acumen to make business decisions, whether that’s deciding whether to lease or purchase, whether it’s deciding which insurance plans or third party players you’d like to join or not join?
- Are you flexible with the location and the community in which you’re willing to work?
- Is having a commitment and a tie to the community important to you?
If the answers to those questions are yes, then then more than likely, your personality profile will fit ownership; buying an existing practice, running it and controlling it yourself. If the answers to these questions are no, then in most cases, you would probably be better off considering some kind of corporate entity or group practice where you’re more or less an employee.
And by all means, there’s nothing derogatory with being an employee. Some people actually are much more happy just focusing on their clinical care and treatment and letting the trials and tribulations of running a small or medium or large size business to people who may have better business training, better knowledge and expertise in these areas . So please, don’t take this podcast out of context.
My personal opinion is based on your personality, your drive, your fortitude and what you’re looking for in the ten to 20 questions that I just posed, will probably help you decide whether you really like to be in business for yourself or you’d rather have someone else be in charge of those types of decisions.
I cannot emphasize how critically important coming to that conclusion and answer within yourself will drive you in the correct direction and make your business and personal life so much more comfortable and in my opinion, so much less stressful.
So think about those questions and consider the podcast on June 26th at 6:00 pm for additional information when I’ll go into greater details with Mr. Steve Parker, the CEO of Excellence in Dentistry and also the producer with Woody Oakes, Dr. Woody Oakes of The Profitable Dentist Magazine. I cannot emphasize the importance, again, of asking these questions, reflecting on them and having them determine the direction that’s best suited for you, your family and your personality.
Once you get through with the direction, you must then consider, what are the options for developing and purchasing a solo practice? In this short 20 minute podcast, I could generally tell you these are some of the things that you should consider. You should be able to obtain the last three year tax returns from the office that you’re interested in purchasing.
For this hypothetical example, assume that the average is $1 million. I will then tell you in general terms, somewhere between 35 and 60 percent of that fee would be the purchase price, excluding any real estate. That would be generally 80 to 65 percent would be associated with goodwill and the balance would be accounts receivable, supplies and inventory.
Just as a general rule, anywhere between 35 and 65 percent of those average three years will be a ballpark figure of what I think will be a relatively fair acquisition for the practice. The reason there’s such a broad range between 35 and 65 percent is the practice that you’re considering, is the existing owner going to stay with the practice or are they going to leave the practice immediately, or in some timeframe in the next 12 to 24 months?
The longer the existing owner is willing to stay with you, in my personal opinion, the higher the percentage and the more valuable the practice would be for you. Because more likely than not, the goodwill that you’re paying for you’ll actually get value for. More than likely, the staff will stay with you. More than likely the majority of patients will stay with you.
When you make this acquisition into a solo practice and the existing owner plans on leaving the practice relatively soon, then my personal experience over three decades is that approximately 30 to 40 percent of the patient base will be lost and approximately 50 percent of the staff will leave within 12 months. And that’s because they haven’t had a chance to adjust to your philosophies, your process and procedures.
Taking a look at the next option, which is joining a corporate entity, I think you have to understand some of the basic business principles. When you’re joining a corporate, whether it be a DSO or MSO, understand one thing; it is a business and they have investors and they must provide a return on their investment to those investors. If they don’t, then that equity group has made a bad decision and in my opinion, very seldom do they like making a bad decision.
Knowing that, the first thing you have to understand is in most cases you’ll be compensated on either a production or collection basis. Right now throughout the United States, anywhere between 25 and 35 percent of net collected money is generally considered a realistic compensation package. In many cases, these corporate entities will want you to pay between 25 to 100 percent of your laboratory bill.
In most cases, they’ll be willing to offer you some kind of continuing education package, some type of 401k profit plan. In most cases, they won’t contribute to their profit plan, but at least it would be managed and maintained and be a vehicle for you to put in pre-tax dollars. In many cases, they will pay for your malpractice insurance.
And for the new graduates, generally you can expect the malpractice cost annually of anywhere from $1,800 a year to about $5,500 dollars a year, depending on the procedures, your background and training that you’re implementing.
I cannot emphasize enough that from my own personal bias, owning something, in most cases, offers the greatest likelihood of financial success. Obviously, there are exceptions all over the place, but my personal opinion is for the best financial success I would guide the new graduate to consider ownership.
Remember, for those novices, when you don’t own the majority or 100 percent, many times the decision processes will be made by other people. So you may share in the profit, you may have ownership, but the decision process may be out of your hands because the majority or principal ownership is owned by other entities, other individuals. And that may or may not be something for you to consider.
In the end, corporations that offer MSOs and DSOs, they offer you a work-life balance. As I like to say, they paint a tremendous picture of how you can go home at night with less worries and stress, focus in on what you’ve learned over the last four to six years of dental education and provide excellent high level care and service to your patients, which in my personal opinion as a healthcare provider, should be the number one goal.
What you give up is control. What you give up is the autonomy to take your business, your patients and your practice in the direction that you think is best.
That corporation may in the back of their mind want the best, but they have a different strategy and different obligations. Their obligation is to minimize expenses, maximize profit. So in a specific period of time, usually between three and seven years, they’ll plan on selling that asset and move on to another category of assets or perhaps in an entirely different business direction. And the new owners may have similar or different wants and needs. So you must understand that you may have to be flexible because what you like now, three to seven years down the road may be entirely different. It may be better, but it could also be worse.
When you’re in that solo practice or group practice that’s owned and provided by dentists, many times you’re on like minds. You have a similar idea, you’re more focused on quality control, you’re more focused on long term relations and you’re more focused on building long term relationships and business processes and procedures that will prove over the test of time. You’re in it for the long gain.
I always say that these are difficult decisions. They need a process and a procedure. You need to really think long and hard about what makes you tick. And once you understand that, you’ll make the correct decision, or most likely the correct decision, to move in the direction of solo and group practices controlled and owned by dentists or corporate dentistry that are generally managed and run by VCs, business men and women that may or may not have a similar strategy that meets your wants and needs.
Like everything in life, there is no 100 percent guarantee in any route. Each of us in our dental profession have strong beliefs and desires about what corporate dentistry is and is not, and what private practice is and is not. And after 34 years, my personal opinion, again, is your personality, what makes you tick will determine whether one direction or the other direction is best for you.
I’m planning in going into greater detail on the upcoming webinar this June 26th at approximately 6:00 pm at night. Please go to Ascent-Dental-Solutions, in that website to sign up. I look forward to going into greater detail with Mr. Steve Parker and I hope to be able to answer questions online.
Please feel free to submit them to Ascent-Dental-Solutions so that I can, perhaps, address some of these questions ahead of time and be prepared for them.
You’ve been listening to Ascent Radio. My name is Dr. Kevin Coughlin. And again, special thanks to Mr. Doug Foresta and his company, Stand Out and Be Heard.
