#6: The Build-Up Weekly

Dear friends and colleagues,

Welcome to the 5th edition of The Build-Up, where we deliver weekly insights and inspiration for dentists on every stage of the private practice journey.

Happy Easter and Chag Sameach to all of us celebrating holidays!

Here’s what we’ve got lined up for this week:

• 🚀 The Acquisition: LOI vs APA (Unraveling the Acronyms)

• 🪴 Growth Stage: Presenting Consistent, Ideal Dentistry: A Challenge

• 🤝 The Transition: New E-book!

• 💡Weekly Inspiration: Not finance. Not strategy. Not technology.

Before we get started, I also wanted to plug a few upcoming events.

If you’re in the Greater LA area, please consider joining us for “Avoiding Mistakes When Developing Your Exit Strategy” at one of the following four locations:

• 4/15 - Valencia - 9am

• 4/15 - Palmdale - 2pm

• 4/29 - Camarillo - 9am

• 4/29 - Woodland Hills - 2pm

Click here to learn more and, if it looks good, register to attend.

And with that, let’s get started!

Unraveling the Acronyms: LOI vs APA

Are you familiar with the ‘curse of knowledge’?

The basic idea is simple: once we know something, we assume others know it too.

The ‘curse of knowledge’ applies just as easily to dentists as it does to dental consultants and brokers (and there’s definitely a newsletter topic here 🧐).

But I thought it would be helpful to outline some of the acronyms you’ll come across in your acquisition journey, starting with the LOI and the APA.

The Letter of Intent (LOI) and the Asset Purchase Agreement (APA) are both essential documents that play a significant role in your purchase.

Once you’re comfortable that the practice you’re reviewing looks like a good fit and you’re ready to take the next step, you submit a Letter of Intent (LOI).

The LOI comes from you (the buyer) and outlines what you are willing to pay and what considerations you require to close the deal. It is generally non-binding.

If the seller accepts your offer, you can then launch into the process of due diligence, working to get a loan, and finalizing the lease (as outlined in the LOI).

If it all looks good, then it’s time to get started with APA. Generally, the seller’s attorney will draw up the first draft and your attorney will review it from there.

Nearly all practice sales are asset sales, not stock sales. This means that you don’t take over the old corporation; you just move the assets of the old corp into your new corp. (You can read more about the difference here.)

The APA is the legally binding document that outlines what assets are being transferred, representations and warranties concerning those assets, allocations in the purchase price, and more. This document finalizes the sale.

So let’s break it down again in summary.

Letter of Intent (LOI):

• Non-binding document

• Outlines preliminary terms and conditions

• Includes purchase price, payment terms, due diligence period, lease requirements, and legal considerations

• Establishes mutual understanding between parties

• Sets the foundation for further negotiations

• Serves as a roadmap for the deal

• Designed to minimize misunderstandings during the negotiation process

Asset Purchase Agreement (APA):

• Legally binding document

• Outlines specific terms and conditions of the sale

• Provides comprehensive and detailed account of assets, liabilities, representations, and warranties

• Enforceable in court

• Final agreement signed by both parties to complete the transaction

• Addresses every aspect of the transaction, including allocation of purchase price, indemnification clauses, and post-closing obligations

• Ensures clarity about the transfer of tangible and intangible assets (equipment, patient records, goodwill)

While the LOI is a stepping stone toward reaching an agreement, the APA is the culmination of the negotiation process. The LOI helps streamline the deal by establishing a common ground, while the APA is a thorough document that addresses every aspect of the transaction.

In the case of dental practices, the APA ensures that both parties are clear about the transfer of tangible and intangible assets, such as equipment, patient records, and goodwill.

So I hope that these terms are now more clear! And if you have any requests for future explainers, send me an email!

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Imagine that you've got a new patient on the schedule,

and as you glance out the window, you see them pull up in a beat-up old Corolla. The patient steps out, wearing a worn-out t-shirt, dirty jeans, and sneakers that have seen better days. You can't help but feel a twinge of apprehension.

As the patient settles into the chair, he flashes a friendly smile (you can already see that he’s missing an upper bicuspid).

You begin the exam…and it’s not pretty.

You’ve probably been here before.

His dental needs are extensive, but you saw the car he pulled up in and the clothes he’s wearing. You get the sense that he might have trouble affording your treatment plan.

So you’re at a crossroads.

Do you offer ideal dentistry - the same dentistry you would offer to a patient who just won the lottery and was planning a round-the-world vacation (to areas without great dental care options)?

Or do you offer something less?

On a human level, of course, we want to be sensitive to people’s financial situations. Of course.

But your job as a clinician is not to be a mind-reading financial advisor.

As a dentist, beyond the obvious clinical exam, you should be paying attention to:

• the patient’s goals

• the patient’s demeanor

• the patient’s communication style

You should not be asking yourself, “Does the patient look like they can afford it?”

If you ask that question, what you’re really asking is something like:

Does the patient look like I should offer them something less than ideal dentistry? Should I alter my treatment plan because I think they’ll probably say no? Am I offering them less-than-ideal dentistry because I want to save them the embarrassment of having to say no?

Whatever the reason, here’s my challenge: be a clinician, not a financial advisor.

People make decisions to prioritize different things with their finances. Some prioritize handbags over dental work. Some patients don’t look like they have cash in the bank, but they actually do. And some patients cannot afford to have work done in your practice. That’s ok!

But it doesn’t excuse you from offering ideal dentistry to every patient.

And if you’ve been practicing for any length of time, you probably have a story about a patient who looked like the one I described…and then pulled out a wad of cash to pay upfront for 10 veneers.

By offering every patient state-of-the-art dentistry, you empower them to make informed decisions about their oral health based on their values and priorities.

We’ve got a new e-book out!

You can download it for free here. It’s material that I’ve covered in this newsletter before, but - if you’re contemplating a practice sale - the advice in this guide is crucial.

And if you’re ready to have a conversation with a practice sales professional, get connected with your local Integrity Practice Sales broker here.

It’s worth having a conversation no matter your current transition plans. You never know what you’ll discover together.

Over the last two days, I’ve been meeting in-person with our admin team to update all of our systems. It’s been great getting everything polished up, but - even more than that - it’s been fantastic spending time together as a group.

It made me think of this quote from Patrick Lencioni’s book The Five Dysfunctions of a Team:

Here’s to your team, and building them up!

And with that, I hope you enjoyed our sixth edition of The Build-Up Weekly.

Please consider using the link below to share our newsletter. 🙂 

With best wishes to you and your families,

Trevor Kimball, PhD

p.s. feel free to respond to this email! I’d love your feedback and suggestions.