METRICS THAT MATTER –VALUATION & … Bentson...Presented by: Chris Bentson AAO Practice Transition...
Transcript of METRICS THAT MATTER –VALUATION & … Bentson...Presented by: Chris Bentson AAO Practice Transition...
Presented by: Chris BentsonAAO Practice Transition Seminar
METRICS THAT MATTER – VALUATION & TRANSITION FUNDAMENTALS FOR BUYERS AND SELLERS
397 South Swing Rd 1-800-621-4664Greensboro, NC 27409 bentsonclark.com
Overview
• Valuation and Transition 101
• Orthodontic Practice Benchmarks
• Practice Overhead
• Trends
Let’s Define Transition
• tran·si·tion (noun) \tran(t)-'si-sh'n, tran-ezi-, chiefly British tran(t)-'si-zhen\
• Definition: Passage from one state, stage, subject, or place to another : change
Current Environment
Visualizing EconomicsSource: visualizingeconomics.com, July 22, 2007
1934
My Dad
CASH
1961
EXPANSION
Me
1992
ENTITLEMENT
My Kids
Median Household Income in Relation to Unemployment Rate
Source: For income data: Sentier Research, LLC estimates of annual household income derived from the monthly Current mmmmmmmmPopulation Survey (CPS) conducted by the U.S. Census Bureau; for the unemployment rate and the CPI‐U: the U.S. Bureau of Labor Statistics.
Good News: Family Debt Burden at Record LowSource: An Amazing Chart About U.S. Finance You Have to See to Believe, July 3, 2013, Stansberryresearch.com
Good News: Family Debt Burden at Record LowSource: Wall Street Journal/Vistage Small Business Survey, August 28, 2013
Keep Your Perspective: Best Paying Jobs in America
Source: Forbes Magazine, May 15, 2012
20121. Anesthesiologists2. Surgeons3. Obstetricians &
Gynecologists4. Oral and
Maxillofacial Surgeons
5. Orthodontists
20111. Surgeons 2. Anesthesiologists3. Oral and
Maxillofacial Surgeons
4. Obstetricians &Gynecologists
5. Orthodontists
Source: Forbes Magazine, May 7, 2011
20101. Surgeons 2. Anesthesiologists3. Oral and
Maxillofacial Surgeons
4. Orthodontists5. Obstetricians &
Gynecologists
Source: Forbes Magazine, July 12, 2010
20091. Surgeons 2. Anesthesiologists3. Orthodontists4. Obstetricians &
Gynecologists5. Oral and
Maxillofacial Surgeons
Source: Forbes Magazine, May 4, 2009
Keep Your Perspective: Best Paying Jobs in America
Source: Forbes Magazine, May 15, 2012
20121. Anesthesiologists2. Surgeons3. Obstetricians &
Gynecologists4. Oral and
Maxillofacial Surgeons
5. Orthodontists
20111. Surgeons 2. Anesthesiologists3. Oral and
Maxillofacial Surgeons
4. Obstetricians &Gynecologists
5. Orthodontists
Source: Forbes Magazine, May 7, 2011
20101. Surgeons 2. Anesthesiologists3. Oral and
Maxillofacial Surgeons
4. Orthodontists5. Obstetricians &
Gynecologists
Source: Forbes Magazine, July 12, 2010
20091. Surgeons 2. Anesthesiologists3. Orthodontists4. Obstetricians &
Gynecologists5. Oral and
Maxillofacial Surgeons
Source: Forbes Magazine, May 4, 2009
20131. Anesthesiologists2. Surgeons3. Obstetricians and
Gynecologists4. Oral and Maxillofacial
Surgeons5. General Internists6. OrthodontistsSource: Forbes Magazine, May 13, 2013
Source: Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, 2012-2013 Edition
Where Do You Fit In?
69%
16%
6%4% 5% Solo Practice
Partnerships
Associateships
InterdisciplinaryPractice
Large CorporatePractice
Source: ADA News, ADA Explores Growth of Large Group Practices April 9, 2012
AAO Membership Breakdown
Oct ‘08
Apr ‘09
June ‘09
Sep’09
Nov ‘09
Mar ‘10
Jul‘10
Oct ‘10
Jan ‘11
Oct ‘11
Dec ‘11
May‘12
Oct ‘12
Apr‘13
Sept ‘13
Dec ‘13
Feb’14
Sellers 165 152 135 144 160 120 132 135 146 153 143 160 155 174 204 222 242
Buyers 564 701 768 900 1008 668 674 530 540 457 464 531 403 452 473 449 587
Source: American Association of Orthodontists, Practice Opportunity Database
Current AAO Matching Service
Orthodontic Mentor
CPA
Attorney
Insurance Advisor
Spouse
Practice Consultant/Wealth Manager
Local Banker
Transition Advisor
Who’s on My Team?
Practice Valuation
Transition Negotiations
Information Gathering & Planning
Ownership Transfer
Association Period
Find a Seller
Transition Timeline
Information to Gather
Practice Activity TrendsSource: Journal of Clinical Orthodontists, 2013 Orthodontic Practice Study
1981 1987 1993 1999 2005 2007 2009 2011 2013*
Age 42 44 47 49 50 50 52 54 50
Yrs in Practice 12 15 16 19 19 20 22 23 18
Gross Income
(Rounded)$200K $300K $414K $600K $800K $923K $960K $950K $1,158K
OverheadRate 49% 53% 56% 53% 53% 55% 56% 59% 59%
Case Starts 150 150 160 200 200 222 220 200 245
Adult Case Starts 15.4% 23.8% 20.2% 18.8% 22.2% 20.0% 20.0% 20.0% 23.0%
Active Treatment
Cases300 350 366 450 460 480 495 450 500
Practice Activity Trends
Source: Journal of Clinical Orthodontists, 2013 Orthodontic Practice Study
1981 1987 1993 1999 2005 2007 2009 2011 2013*
Child Fee $1,900 $2,500 $3,200 $3,880 $4,700 $4,900 $5,150 $5,200 $5,280
Adult Fee $2,100 $2,700 $3,500 $4,200 $5,000 $5,300 $5,500 $5,550 $5,650
Two YearFee
Increase15.5% 10.3% 10.0% 8.0% 8.0% 7.0% 6.0% 3.0% 3.5%
Payment Period
(months)24 24 24 24 22 22 21 22 22
Assignmentof
Benefits37.5% 49.5% 68.2% 76.4% 73.7% 77.2% 80.8% 79.7% 88.0%
Patients Per Day 38.4 40.2 40.0 45.0 50.0 50.0 50.0 45.0 50.0
Where is the Data?
Example Profit & Loss Statement
Practice Expense Average
Staff Expense 24.2%
Orthodontic Supply & Lab Expense 11.6%
Business Management Expense 10.3%
Occupancy Expense 9.7%
Total Practice Expenses 55.8%
Practice Income 44.2%
Practice Expense Breakdown
Source: Does Your Practice Overhead Rate Compare? Bentson Clark reSource, 2nd Qtr 2013
Practice Expense Average
Salary & Wages 20.5%
Payroll Taxes 1.6%
Uniforms 0.2%
Continuing Education/Meetings 0.2%
Health, Life & Disability Insurance 0.8%
Pension, Profit Sharing 0.8%
Other Staff Expenses 0.1%
Total Staff Expense 24.2%
Total Staff Expense
Source: Exploring Practice Overhead: Staff & Supply Expenses, Bentson Clark reSource, 3rd Qtr 2013
Practice Expense Average
Orthodontic & Lab Supplies 8.9%
Lab Expenses 2.7%
Total Orthodontic SupplyExpense 11.6%
Total Supply Expense
Source: Exploring Practice Overhead: Staff & Supply Expenses, Bentson Clark reSource, 3rd Qtr 2013
Practice Expense Average
Bank Charges 1.1%
Advertising & Promotions 2.4%
Automobile 0.0%
General Office Supplies 1.9%
Computer Expense 0.9%
Insurance – Liability, General 0.9%
Licenses & Taxes 0.8%
Outside Services – Acct & Legal 0.8%
Outside Services – Other/Consultants 0.4%
Postage & Shipping 0.2%
Travel & Entertainment 0.3%
Dues & Subscriptions 0.4%
Other 0.2%
Total Business Management Expense 10.3%
Total Business Management ExpenseSource: Exploring Business & Occupancy Overhead Expenses, Bentson Clark reSource, 4th Qtr 2013
Practice Expense Average
Rent 6.9%
Utilities & Telephone 1.6%
Janitorial 0.2%
Repairs & Maintenance 0.9%
Other 0.1%
Total Occupancy Expense 9.7%
Total Occupancy Expense
Source: Exploring Business & Occupancy Overhead Expenses, Bentson Clark reSource, 4th Qtr 2013
2013 Orthodontic Resident Survey
22%21%
23%
19%
15%
26%
15%
22%
19%18%
26%
17%
23%
14%
20%
22%
14%
24%
18%
22%
0%
5%
10%
15%
20%
25%
30%
Less than $100,000 $100,001 - $200,000 $200,000 - $300,000 $300,000 - $400,000 More than $400,000
Perc
enta
ge o
f Res
iden
ts
Approximately how much student debt will you have accrued at the end of your residency?
2010 2011 2012 2013
Source: Bentson Clark & Copple, LLC Resident Survey, 2010-2013
Every Ortho Has a Budget…Not!Source: Journal of Clinical Orthodontists, 2013 Orthodontic Practice Study
Source: Bentson Clark reSource, 1st Quarter 2014
What’s My Practice Worth?
Source: Looking Back at the Practice Valuations of 2013, Bentson Clark reSource, 1st Quarter 2014
Year Net Collections Overhead Rate
Practice Income Value
Value as % of
Collections
2006 1,130,800 50.4% 550,037 809,480 72.9%
2007 1,366,000 50.6% 690,370 1,056,440 75.3%
2008 1,375,500 55.0% 646,342 1,023,240 71.5%
2009 1,383,680 53.9% 623,568 1,049,280 75.1%
2010 1,326,320 55.4% 580,038 1,020,280 76.1%
2011 1,569,480 55.1% 697,965 1,206,200 75.8%
2012 1,805,360 54.9% 794,756 1,428,640 79.6%
2013 1,549,520 55.6% 702,622 1,260,960 79.0%
What’s My Practice Worth?
Major Factors in Value/Price
• Profitability• Condition of office,
equipment, practice management system
• Contracts receivable balance / PIF
• Location, location, location• Competition• Staff• Referral Patterns• Demand
Today’s Orthodontic Residents
Place Yourself in These Shoes
Merleen (Holman) LeoncePractice Opportunities
Manager(800) 424-2841 Ext. [email protected]
AAO’s Practice Opportunities Service
Where to Practice?!
Source: Bentson Clark & Copple, LLC Resident Survey, 2013
1. California
2. Texas
3. Pennsylvania
4. Florida
5. Washington
6. New York
7. North Carolina
8. Colorado
9. Virginia
10. Georgia
2012
Source: Bentson Clark & Copple, LLC Resident Survey, 2009-2013
1. California
2. Washington
3. Pennsylvania
4. Colorado
5. New Jersey
6. Arizona
7. New York
8. Oregon
9. Texas
10. Virginia
2009
1. California
2. Texas
3. New York
4. Illinois
5. Pennsylvania
6. Washington
7. Colorado
8. Virginia
9. Georgia
10. Florida
2010
1. California
2. Texas
3. New York
4. Florida
5. Virginia
6. Colorado
7. Georgia
8. Pennsylvania
9. Illinois
10. Utah
2011
1. California
2. Texas
3. New York
4. Florida
5. North Carolina
6. Washington
7. Colorado
8. Michigan
9. Pennsylvania
10. Massachusetts
2013
Popular States for Residents
1. West Virginia
2. Vermont
3. South Dakota
4. New Hampshire
5. Washington, DC
6. Rhode Island
7. Wyoming
8. Nevada
9. Montana
10. Iowa
2012
1. Vermont
2. Montana
3. Arkansas
4. Delaware
5. Maine
6. Hawaii
7. Idaho
8. Iowa
9. North Dakota
10. Wyoming
2010
1. Wyoming
2. West Virginia
3. Wisconsin
4. Vermont
5. North Dakota
6. Oklahoma
7. Minnesota
8. Maine
9. Louisiana
10. Hawaii
2009
1. West Virginia
2. Vermont
3. Rhode Island
4. North Dakota
5. Iowa
6. Arkansas
7. Wyoming
8. South Dakota
9. New Mexico
10. New Hampshire
2011
1. West Virginia
2. Vermont
3. South Dakota
4. Rhode Island
5. New Mexico
6. Minnesota
7. Hawaii
8. Delaware
9. Alaska
10. North Dakota
2013
Source: Bentson Clark & Copple, LLC Resident Survey, 2009-2013
Least Popular States for Residents
• Startup • Associateship• Associateship, leading to buy
out • Associateship, leading to
partnership• Solo Group Practice • Employee of Corporate Entity • The pediatric dentist’s
orthodontist • The general dentist’s
orthodontist • Gypsy orthodontist/an
employee for several
Source: Dr. Bob Scholz’s website, www.drbobsweb.com
Multiple Types of Transitions
THANK YOU!
397 South Swing Rd 1-800-621-4664Greensboro, NC 27409 bentsonclark.com