#2: The Build-Up Weekly

Dear friends and colleagues,

Welcome to the 2nd edition of the Build-Up Weekly, where we’ll be delivering weekly insights and inspiration for dentists on every stage of the private practice journey! Thanks for joining us. 😁 

I hope you all stay safe, warm, and dry this weekend as the atmospheric river winds its way through California. Or, you know, jump in puddles and dance in the street. Whatever floats your proverbial boat.

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

• 🚀 The Acquisition: What Credit Score Do You Need to Get a Loan?

• 🪴 Growth Stage: Patient Rage + Seeing Your Practice with Fresh Eyes

• 🤝 The Transition: The Value of Competition in a Sale

• 💡Weekly Inspiration: A Framework to Minimize Regret

But before we dive in, I want to make one final plug for my webinar at 10am Pacific Time today. We’re looking at the dental market in 2023 - inflation, interest rates, possible recession, practice values, workplace issues, and more.

You can register at 2023marketreport.com.

And with that, let’s get started!

Credit Scores and Practice Finance

In order to purchase a dental practice, you really only need three things:

1. A license to practice dentistry.

2. A willing seller.

3. Money.

That’s it. Pretty simple, eh?

You were in school for years and have that dental license in hand (or you’re in school now and are getting ahead of the curve, in which case, way to go!).

We’ve got willing sellers that we can connect you with.

For most buyers, #3 is the most confusing. How are you supposed to get a bank to lend you $500k to $1M+ to purchase your first practice? Especially when you’re carrying $250k+ in student loan debt?

Quick answer: Lenders are looking for 1) a good credit score, 2) some money in the bank, 3) a history of production, and 4) a solid practice that covers about 125% of your projected monthly expenses (including the practice loan).

In these series, I’m going to break this down for you, starting with your credit score.

History of the Credit Score

I always found this interesting. The broad strokes of this story in America are as follows: 1) debt used to be personal. You knew the owner of the general store, and they would extend credit to use on the basis of that relationship. 2) But as cities expanded, this became untenable. Unscrupulous borrowers would exploit different stores and then skip town. 3) Enterprising individuals worked to compile financial information (often rumors) about individuals and then sold that information to other companies.

The history isn’t always pretty (racial, religious, and cultural factors with were absolutely reflected in these scores), but this was the genesis of modern credit reporting.

What Credit Score do I Need to Buy a Dental Practice?

Credit scores range from 300 - 850.

To purchase a dental practice, you need a credit score of at least 680 and preferably over 700.

If you’re not at this level, the most straightforward option is to work on your credit.

Get Your Credit Score: If you’re not sure about your credit score, you’re entitled to one free report per year from each major reporting agency. You can get your reports from the three major agencies at this site.

23 Ways to Improve Your Credit: Includes “making on-time payments, keeping balances low, limiting new credit applications” and 19 other ways to improve. Click here to read more.

Should you hire a company to fix your credit? “There's nothing a credit repair service can legally do for you—even removing wrong information—that you can't do for yourself for little or no expense.” Click here to read more.

Register as a Buyer

We have 60+ listings for sale at Integrity Practice Sales, with new listings coming on the market every week.

Click the button below to set your individual criteria and receive personalized updates when new listings hit the market.

The National Customer Rage Survey

A new study out this week confirms what we’ve all suspected: the customers are upset.

Some highlights from the survey:

• Seventy-four percent of customers reported experiencing a product or service problem in the past year, more than doubling since 1976.

• The percentage of customers seeking revenge for their hassles has tripled since 2020.

• Complaining is increasingly becoming a digital phenomenon.

This shouldn’t come as much of a surprise, but the language of “seeking revenge” is a little frightening. Thankfully, this is primarily online revenge, i.e. leaving a bad review. And we know this. It’s not the generally content patient who is pleasant and friendly leaving a review.

What should you do about it?

1. Get in front of the rage by asking your patients how their visit went. I find that it’s almost always appropriate to have someone in your front office check with the patient as they schedule their next appointment or collect payment. This often happens naturally, but it’s great when it’s really intentional. We want to know, and asking is often the best way to find out (sometimes upset patients will let you know and sometimes they will seethe silently). And if the patient is upset, deal with it now. Don’t be passive as they walk away.

2. Ask for reviews to build your “backstop”. You can’t catch every unhappy patient and you can’t always mitigate their anger. A bad review is almost inevitable (sometimes it’s even in error, but those can also be tough to take down). In order to protect yourself, you need at least 100 great reviews on Google. If the patient is super happy on the way out, ask them to leave a review and follow up with a text message later in the day. I call these 100 reviews the ‘backstop’ because they will prevent a bad review from tanking your overall rating.

3. Look at your practice with fresh eyes. We become accustomed to our own environment - psychologists call this ‘habituation’. But if you explicitly put yourself in your patients’ shoes, you can see your practice with fresh eyes (the “vicarious construal effect”). Walk through your office and ask what your patients see, how they are greeted, how they probably feel. You may discover small ways that you can improve that all-important patient experience and avoid consumer rage in the first place (always preferable).

Competition and Practice Values

Like any market, supply and demand determines the shape of the practice sales market. When there are more buyers than sellers (when supply is low and demand is high), prices are driven up. When there are more sellers than buyers (when supply is high and demand is low), prices are driven down.

It’s Econ 101.

At the moment, supply is low and demand is high. There is a lot of competition for great practices out there.

But I’m also seeing a lot of work on behalf of buyers to reduce competition by getting in front of doctors and pitching them directly.

If you’re a doctor who owns a successful practice, you’ve probably received all kinds of unsolicited offers from DSOs, possibly other private buyers, and maybe even your own associate(s).

Many of the DSO have entire teams dedicated to business development and going directly to doctors. They also incentivize other doctors for their referrals.

But by going direct, they’re not doing you - the selling dentist - any favors. Instead, they’re reducing competition.

It’s a savvy move (one that you and I would also probably make as well). As acquirers, their job is to reduce the price so that they can maximize returns for their investors or themselves.

But remember:

More competition = higher values.

Less competition = lower values.

There’s nothing wrong with a DSO deal - there are some great corporate groups out there. And there’s nothing wrong with selling to your associate (if you two can agree on terms, which can be difficult).

But, as a seller, more competition for your practice means a better price and better terms.

And as brokers, our job is to create competition.

If you’re considering a sale, get connected with your local Integrity Practice Sales agent here.

It’s worth having a conversation no matter what your current transition plans are. 

Add some competition and whatever you were going to receive for your practice could increase dramatically. I’ve seen it happen time and time again.

Back before the guy on the left emerged from his techno-cocoon as the guy on the right, he was weighing whether or not to open a bookstore on the internet.

While the rest is history, there was no guarantee at the time that it would work.

In a great, short article on Risk and Regret, Morgan Housel investigates the cost of regret, which he argues is the real risk factor in investing and in life.

In the article, he shares this ‘regret minimization framework’ that Jeff Bezos used when deciding whether to leave his job and start Amazon.

Maybe it’s a business decision, maybe it’s something personal.

Perhaps it’s time to buy that practice or to actually retire and enjoy time with your family.

Whatever the case, I hope you find this framework as useful as I have. It’s never a bad idea to cultivate moments that you know you’ll look back on without regret.

And with that, I hope you enjoyed our second 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.