Practice Development Charles J. Arcoria, DDS, MBA Demographics Location Leasing/Purchasing Options Financing Selection of Equipment/Supplies Fee Schedules Utilization of Dental Consultants Background Information FACT = Most dental practices struggle financially because the practitioner does not FULLY understand the concepts of marketing and promotional activities. GOAL = Obtain optimum business by ANTICIPATING, then meeting the needs of the patient. Demographics Financial/economic Population Trends Competition U.S. Census Bureau Fact Finder http://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml The Policy Map http://www.policymap.com/LandingPages/competitors.html?gclid=CMjj-9CjlKwCFUXu7QodgmwFmw City-Data.com http://www.city-data.com/ Demographics – Consumer Flow Demographics Now Scott McDonald http://www.dentaldemographics.com/reports_marketing_demographic.asp ADA Workforce Data http://www.ada.org/1622.aspx Perceived Competition Demographics Controllable Marketing Variables >Price and costs >Service >People >Place or location Uncontrollable Marketing Variables >Social & cultural >Government & legal >Technology >Economic conditions >Competition Location >What type of practice do you want? >How much can you physically produce? >Find reliable information & sources >How much income is enough? >Focus on wealth and/or income? >Where do you really want to live? >Set goals - financial, personal, professional >Continually study economic trends >Initially keep costs low - budget Location – Study Economic trends Site Selection Location Urban vs. Suburban vs. Rural Office Building vs. Professional Building vs. Retail Center Commercial Real Estate Brokers Negotiate lease for you Will slightly increase your rental rate Can get you into spaces that you do not have access to Are aware of new projects/developments before the public is Referral Base Important for Specialists; Know which General Dentists currently refer to existing specialty practices Leasing/Purchasing Options Leasing vs. Building Tax advantages of leasing vs. building >Entire lease payment is written off each month >Buildings are treated as real estate – financed over a long period of time (usually 20 years) >Buildings have a small payment per month, but the tax write-off is spread out over the 20 year loan. >Advantage regarding Building = No landlord >Disadvantage regarding Building = Neighborhoods change over time >Advantage regarding Leasing = Can move to better location quickly >Leasing is more popular in Urban locations Leasing/Purchasing Options Site selection/space/leasing/improvements >Design plans vs. Construction plans >Design Plans are not acceptable by most City Inspection Departments >Construction Plans have the complete Engineering Specifications on the blueprints >Construction Costs These usually average around $70 per square feet Landlords want to approve the construction bid >Leasehold improvement allowance >Landlord will provide either cash or free rent, after the construction is finished >Subjective location analysis >Use your gut feelings about a generic location Types of Financing 1. 2. 3. 4. Conventional bank loan SBA loan Lease or signature loan Unconventional financing Financing Conventional Bank Loan 1. “Bricks & Mortar” set-up 2. May have a healthcare division 3. Simple interest loans with fixed terms 4. Will finance less than 100% of need 5. Significant paperwork to fill out Financing SBA Loan 1. Backed by U.S. Treasury – good for the bank that you are filing with 2. Usually has a healthcare division 3. Simple interest loans with fixed terms 4. Will finance up to 95% of need 5. Much paperwork to fill out Financing Lease or Signature loan 1. Finance Company – not a real bank 2. Responsible to their shareholders 3. Use lease financing terms that do not calculate simple interest 4. Will finance up to 100% of need 5. Little paperwork to fill out Unsecured Loan Financing Unconventional Financing 1. From a relative or a friend 2. Must pass IRS criteria – cannot be a “no” interest loan 3. Interest rates are usually slightly less than SBA loans 4. Must pay back all of loan, or it is classified as a gift – taxable issues Financing Costs – Spreadsheet Analysis Financing Costs – Expense Items Financing Costs – Loan Proceeds LOAN PROCEEDS Working capital Dental equipment & computer software Leasehold improvements Sign, external fixtures Furniture Dental supplies Security deposit, attorney, consultants Office supplies Landlord allowance - improvements TOTAL LOAN $45,000 $95,000 $75,000 $3,000 $8,000 $12,000 $7,000 $10,000 ($5,000) $250,000 Selection of Equipment/Supplies >Use of equipment dealers vs. mail order >Bids and budgets >Service after the sale Selection of Equipment/Supplies >Equipment dealers vs. Independents Comparing Bids ::: Service after the sale ::: Warranties on Equipment Henry Schein Dental Southwest Medical & Dental Buy Dental Equipment.com Independent Dental.com Patterson Dental J&B Dental Burkhart Dental Lone Star Dental Fee Schedules 1. 2. 3. 4. Obtaining Fee Schedules Call offices in your area Get schedules from insurance companies ADA surveys Purchase schedules Purchasing Fee Schedules 1. Udell Webb DDS 2. National Dental Advisory Service 3. Atlanta Dental Consultants – Tom Limoli DDS Utilization of Dental Consultants Types of consultants 1. Practice Management: Improve practice finances (mostly revenues) 2. Practice Brokers: Assist with buying and selling practices; appraisals 3. Hands-On Practice Managers: Actually work in a practice to enhance finances or operations Utilization of Dental Consultants How are consultants paid or hired? 1. By the job – fixed fee 2. By the clock – hourly or daily rate 3. Percentage of revenues or sale Utilization of Dental Consultants Experience & Advice 1. ADA has directory of Dental Practice Management Consultants 2. National Association of Healthcare Consultants 3. ***Referral from colleague is the most optimum The End