Thomas L. Snyder, DMD, MBA Managing Partner The Snyder Group, LLC Printer Friendly Version

Purchasing a Practice? – Buyer Beware

For those of you who are considering purchasing a practice, there are many factors to consider. Analyzing practice overhead and the ramifications on your future financial success is essential as part of your due diligence. The most problematic inherited expense can be staff expenses. Purchasing a practice, particularly one where the owner is retiring, requires even more careful due diligence. 

Many practices have long standing and loyal staff. This can be a two-edged sword in your purchase decision. Along with the great staff is high overhead.   If you will be on our own, your staff will be the key ingredient in the successful transfer of many patients. They’ve had established relationships with patients and can be a significant bridge in the patient transfer. However, highly compensated staff may come at high price.

Conversely, it is our experience in valuating many dental practices that those practices with staff overhead  ratio in excess of 30 % are discounted appropriately to reflect the lower potential cash flow that the practice may generate in the future.  However, if the practice you purchase has great upside potential the existing staff may be very instrumental, if properly directed and motivated to grow the practice.  For example, if revenue increases by $100,000 in 12 to 18 months, then that 30% overhead ratio will be history!

Some advisors recommend a complete staff turnover of highly compensated employees, especially if it means retaining high overhead ratios.  We have found that strategy to be risky in cases of a retiring owner. Keep the staff and measure their effectiveness over the first six to nine months of employment. If they are good team players, retain them, if not, hire new staff.

The team members that usually have the greatest impact on practice’s transfer of good will are receptionists(s) and hygienist(s). So, if you have to make critical choices be prudent on whom you replace. Beyond the hourly rate or salary of your newly inherited staff are their fringe benefits.  Careful analysis is necessary to avoid any surprises. Listed below are several benefits to review and take possible corrective action.

Health Insurance
Most dental practices provide health insurance, and, with ever increasing premiums, you may have to introduce some cost cutting approaches such as transferring some of the premium burden to the staff. Sharing the financial burden is a better alternative than entirely losing this necessary benefit. Corporate America has been doing this in increasing frequency.

Vacations
This can be “killer”. Especially, small practices employing long term team members that are getting three or four weeks paid vacation. As a new employer you are not obligated to continue the same vacation package, but from a practical point of view, you have to provide some financial alternatives, otherwise that employee may leave. Offering increased compensation for trading down vacation time may work in some instances. For example a hygienist who gives back a week’s vacation in lieu of a higher pay rate will add 4 to 5 days of hygiene production to your annual revenue.  So it may be a workable strategy. In today’s economy more money may be a viable alternative to more time off. Most, employees aren’t going to give up anything unless they get something equal in value or better in return.

Retirement Plan
When the practice is sold, the Seller’s retirement plan is terminated. You may have to consider providing some form such as a  401 K retirement plan ( which is a voluntary plan) coupled with  the possibility that you will establish a profit sharing retirement  plan in the future if the practice reaches certain financial goals. The pension plan issue may be more of a problem when inheriting older staff whose retirement is on the horizon.

Special Deals
We have also found instances, especially in smaller sized practices, where the Seller had made special “side deals” with individual employees, such as child care, travel expense, special bonuses, etc. Again, these all should be discovered in the due diligence phase.

Staff Incentive Plans
Are there any staff incentive plans in place?  Ask your advisor if it makes economic sense to continue and, more importantly, are they structured to continue motivating your “new employees” to perform at high levels.

Summary
At the end of the day, after reviewing the overall personnel package, you may find that this practice purchase may be more than you can handle, and so you may pass on this particular opportunity.  Knowing the facts up front end is better than having a “surprise” after you purchase the practice.

The Snyder Group provides a vast array of practice transition services including practice valuations. Please visit their website for details.

Interested in having Dr. Snyder speak to your dental society or study club? Click Here

Joel Harris, President ADA Intelligent Dental Marketing, Inc. Printer Friendly Version

Improve Your Marketing-- Write Unforgettable Headlines

According to most advertising and marketing experts, 50% of the value of any advertisement is made up of the headline itself. In fact, many less conservative experts give the headline of an ad as much as 70-80%.  No matter the actual value, great headline writing is absolutely critical to the success of any magazine, newspaper, direct mail or other printed advertisement. It isn't enough to write perfectly compelling body copy or promote an amazing offer. Some of the most tremendous flops in the history of advertising contained powerful information and significant written material, but the writer failed to present an enticing headline. The otherwise flawless ads weren’t even noticed.

David Ogilvy, the father of modern advertising, was quoted as saying: “It is the headline that gets people into the copy; the copy doesn't get them into the headline. In other words, the copywriter's aim in life should be to try to make it harder for people to pass up his advertisement than to read it. And right in his headline he takes the first, and truly giant, step on the road to that goal. On the average, 5 times as many people read the headlines as read the body copy. It follows that unless your headline sells your product, you have wasted 90% of your money.”

Imagine boosting the response of your dental advertising efforts by 100% after changing only the first two lines of your ad! Here are some tried and true secrets from decades of testing that can help to make sure your headlines achieve the best results possible.

Study Your Patients

• What do they care about?
• What is the biggest problem they face?
• How can you help them solve it?

Dental professionals must be targeted and deliberate about whom they are trying to reach.  Reaching every kind of patient with every kind of dental need is futile… and it’s the short route to a boring ad. Use these three questions to focus your message and create a profile of your target patient. Be as specific as possible and you’ll create a message that best resonates with their dental concerns and situation. Always refer back to this exercise and clearly ask yourself if you are designing or writing with this patient in mind.

 Learn From Other People. Unless you are a seasoned marketing veteran, never write your own headlines without analyzing other successful ad campaigns and applying winning formulas and trends that work for other products and services. This is what all great headline writers do. 

Study the ads in national newspapers and magazines. Look closely at billboards as you drive to work. World-class headlines are literally all around you. The more you pay attention to the world of advertising you’ll notice these headline formulas are repeated over and over. It’s not wrong to copy something that gets results. You can rest assured that there is very little completely “original” advertising. Here are a few sample headlines to get you started.

1. Give Me Just [short time period] and I’ll Give You [blank].This headline promises a strong benefit to a prospective patient. But this one is even more effective because it promises to deliver in a given time period that’s hopefully short. Here’s an example:
   Give Me Just Two Weeks – And I’ll give You the Smile You’ve Always Wanted!
2. If You Don’t [blank] Now, You’ll Hate Yourself Later. Consumers respond well to the idea of missing out on something. Whether it is a huge discount on a favorite product or the concert event of the year, most of us simply hate the idea of getting left out. Here’s an example:
   If You Miss Out On Free Whitening For Life, You’ll Hate Yourself Later.
3. The Lazy [blank’s] Way to [blank].This headline style works well with time-pressured people, which is almost everyone today. Even though no one likes to think of themselves as lazy, everyone likes to save time and effort. Here’s an example:
   The Lazy Person’s Way to Whiter Teeth.
4. Do You Recognize the [number] Early Warning Signs of [blank]? More and more this type of headline is being effectively used to get the attention of the ever-distracted consumer. Here’s an example:
   Do You Recognize the 4 Early Warning Signs of Oral Cancer?
5. See How Easy It Is To [desirable result].Consumers will always respond to the idea of quick and easy when it comes to a new product or service such as dental care. Here’s an example:
   See How Easy It Is To Straighten Crooked Teeth.
6. You Don’t Have to Be [something challenging] to Have [desired result].People almost always have preconceived notions about things, and this can be a barrier to taking action. Remove the barrier that stands between them and the desired result with your headline, and people will flock to read what you have to say. Here’s an example:
   You Don’t Have to Be a Celebrity to Have Perfect Teeth.

The 13 most powerful words in dental marketing
It’s also important as you create headlines and advertising copy that you don’t waste time wondering which words will create an emotional response with potential patients.  Although none of these words are dental specific they can be easily applied to any dental ad. These thirteen words are winners and should be incorporated in your marketing efforts.

1. You
2. Save
3. Money
4. New
5. Easy
6. Results
7. Health
8. Guarantee
9. Love
10. Proven
11. Discovery
12. Safety
13. Free

Writing effective headlines can be a creative diversion, challenging and a great way to improve the return on your advertising and marketing investment. As always, I’d love to hear from any of you. Send me a headline that you think is a sure winner and we can have some fun discussing it.

Interested in knowing more about how to market your practice?  Click Here

To reach Joel Harris Email him at Joel@thedentistsnetwork.net

Interested in having Joel speak to your dental society or study club? Click Here

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