#11: The Build-Up Weekly

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Dear friends and colleagues,

Welcome to the 11th edition of The Build-Up, where we deliver weekly insights and inspiration for dentists on every stage of the private practice journey.

This week was allergy week for me. It happens every year, and it’s terrible. Hope the rest of you are faring better.

Here’s what I’ve got lined up this week:

• 🪄 CDA Anaheim: Join Us for a Magical Night!

• 🐾 George Update Because He’s So Dang Cute

• 🤿 Deep Dive: What does a broker do with your financials?

• 🎶 Zelda and Chill: In Honor of Tears of the Kingdom

Let’s get started!

🪄 You’re Invited: VIP Gala at CDA Anaheim 🪄

If you’re going to be at CDA, my friend Tim McNeely is celebrating the launch of his new book Dental Wealth Nation: 7 Steps to Decrease Taxes, Increase Impact, and Leave Your Thriving Legacy by throwing a party on Friday the 19th from 6pm to 10pm.

In true Tim fashion, it’s going to be a blast. There will be an open bar, great food, and magicians from the Magic Castle. Get on it!

Tickets are $149 and are available here.

HOWEVER, Integrity Practice Sales is sponsoring the event and I have access to some free tickets.

Several of you have already requested tickets, but I still have a handful of FREE tickets to give out.

Reply to this email and let me know if you want me to get you on the list. Even if you can only drop by for an hour or two, seeing you there would be great.

And whether or not you’re coming to the Gala, please do stop by Booth #1649. Hope to see you there!

🐾 George Update 🐾

Nine months old and cuter than ever!

Whoa man. Cutie. Just had to share. Too bad I can’t bring him to CDA - I think he’d be a hit.

🤿 Deep Dive: ‘Recasting’ and Valuation

You know the importance of regular exams for your patients, but what about a regular check-up for your practice financials?

I’ve been working on building out our paid valuation product (which is now a complete steal at $1,500) to include more information about the market, different transition options, benchmarks for practice factors like AR, Production/Chair, New Patients, Doctor vs Hygiene Production, Collection Percentages, and a full ‘recast’ of your practice financials (as well as a valuation, of course).

It got me thinking this would be a good newsletter topic: what does a broker do when a seller or potential seller trusts us with their financial documents?

We do what is called ‘recasting’, and it’s a process I’d like to explain here:

What is recasting?

Recasting is like giving your financial records a prophy. We enter your practice’s financial information into an Excel document and go through a process of scaling and polishing (alright, I’m taking this too far) to show the real performance of your practice.

This helps potential buyers see the true profitability of your business and compare one practice to another.

In the process of recasting, we make two primary types of adjustments: addbacks and normalization.

What are addbacks?

Addbacks are costs specific to you as the current owner, which wouldn't necessarily apply to a new owner. This could include personal expenses you've run through the business, like a personal vehicle or a family member's salary. By adding these back to your profits, you demonstrate the actual earnings a new owner could expect.

What is normalization?

Normalization is the process of adjusting your financials to show what a typical year might look like. This could mean adjusting for unusually high or low revenues or expenses that aren't part of regular business operations. For example, if you received a government grant in 2021, we would adjust the revenue to account for that. Or if you made a large, once-a-decade equipment purchase, we would adjust that expense to reflect a ‘normal’ year.

What’s the result of this process?

The result of our recasting is determining the true overhead and SDE (Seller’s Discretionary Earnings) of your practice. Unless your P&L is set up with the specific intention of showing these figures (which I highly recommend), then it takes some work to get there.

We can now compare your practice to some industry financial benchmarks. Here are some pretty solid ranges for a general practice:

• Lab: 6 – 8%

• Supplies: 4 – 6%

• Facility: 8 – 10%

• Payroll: 24 – 28%

• Business Expenses: 8 – 12%

• Owner Compensation and Profit: 36 – 45%

Going through this process takes work, but it’s necessary if you want to see how your practice stacks up in order to find potential areas of improvement.

Remember that this process is about finding opportunities!

Comparison, it’s said, is the thief of joy. And if there’s one thing I want for all of us, it’s more joy.

But this process isn’t about comparing something we cannot change - it’s about identifying the next steps toward building your dream practice.

And that’s something I hope we can all get behind.

Zelda and Chill

I didn’t grow up playing video games, but a few years ago I bought myself a Nintendo Switch.

My favorite game by far was The Legend of Zelda: Breath of the Wild (it’s considered one of the best games ever made), and this weekend marks the launch of the highly anticipated sequel: The Legend of Zelda: Tears of the Kingdom.

I’m super excited to play (will probably have to be after CDA, unfortunately), and in honor of this weekend’s launch, I thought I’d share some great background music that features the familiar Zelda themes with a contemporary beat.

And with that, I hope you enjoyed the 11th 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

A Guide for Selling Your Dental Practice

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.