Humble Brush, Quintess Denta and Bridge2Aid

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Here are a few things I would like you to do in the next 24 hours:

1. download this brief brochure from Quintess Denta, distributors of Humble Brush in the UK and Ireland and learn about the product

Humble Brush

Humble Brush – UK Presentation

2. take a look at www.humblebrush.org and learn about the work they are doing;

Humble Smile

3. make a mental note that my friends at Bridge2Aid have become foundation partners with Humble Brush, which means that they will receive a donation every time you sell a Humblebrush;

4. discuss with your team whether you would like to add the Humblebrush to your consumable product range;

Need – to brush your teeth regularly

Benefit – oral health, good dental education and fewer visits to the dentist

Feature – Humble Brush is different

Feature – Humble Brush is fun

Feature – Humble Brush will donate to those less privileged

Feature – Stocking Humble Brush will show your patients that you have a Corporate Social Responsibility programme

5. connect with info@humblebrush.com to arrange your first order.

Pension Auto-enrolment – a guest blog

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If only we were Danish…

We are living longer, much longer. Millions of us will be spending around a third of our lives or more in a retirement. And someone has to pay for the longest holidays of our lives.

Apparently, Danish have exactly the same problem and they came out with a brilliant solution – send Danish couples on a romantic holiday to help increase the Danish birth rate.

British government also came out with a solution – Pension Auto-enrolment is the latest attempt to reinvigorate pension savings in this country by making an obligation on all employers to enrol their staff into a pension.

Auto-enrolment started in 2012 though for most dental practices the staging date will be 2016/17 (depending on how many people you employ).

If you fail to live up to your duties you may have to pay a fine of up to £500 a day.

The total number of employers fined for failing to comply reached 169 by the end of 2014, according to figures released by The Pensions Regulator.

Setting up qualifying pension scheme is an extremely time consuming process, which is more about project management, data and compliance and less about pensions and retirement.

You should get your act together well ahead your staging date so you don’t end up panicking last minute.

Preparation and planning is key for your businesses in order for you to understand and determine the impact it will have on you and your team.

Your 6-step action checklist

  • Know when you need to act
  • Start the planning process early
  • Brief your key personnel
  • Mobilize an implementation team
  • Communicate changes to the staff
  • Take advice

We can help you with identifying

  • How auto enrolment will affect your business and your employees
  • How you should plan and prepare for auto-enrolment
  • How to ensure an existing pension scheme is compliant
  • How to deal with administrative requirements of auto-enrolment
  • How to ensure you get the right support and advice

12x8marta003

Marta Derpenska BA (Hons) DipFA

Associate Partner

St. James’s Place Wealth Management

TeL: 0207 744 1600

Mob: 07931837224

Web: www.sjpp.co.uk/martaderpenska

Email: marta.derpenska@sjpp.co.uk

York House, 23 Kingsway, London, WC2B 6UJ

Please note: 7connections do not accept introducer’s fees or commissions from professional advisors. If we publish a guest blog it is because we like the idea and/or the person with the idea.

Digital Treatment Planning

DTP course brochure without outcomes page 1 of 20

DTP course brochure.pdf

I’ve been following the Digital Treatment Planning movement for some time and have attended overseas courses presented by Livio Yoshinaga (business partner of Christian Coachman) and Florin Cofar.

During the Spring I had the opportunity to attend and present at the hands-on course developed by Elaine Halley and Gary Jenkinson and commented at the time that they had taken a refreshingly pragmatic and useful approach to DTxP training, including valuable experience in partnering with treatment co-ordinators in the patient experience.

Elaine and Gary have decided to offer more training and I’m delighted to have been asked to contribute sessions on emotional marketing (how to get more people in the door for DTxP consultations).

Please take a look at the course brochure. For the record, we don’t have any commercial relationship with Elaine and Gary – I’m promoting this because it is good quality.

A very effective and economical way to continue your understanding of emotional dentistry and digital treatment planning.

The Campbell Academy Year Implant Course

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The Year Implant Course Brochure PDF

I’m delighted to have been invited to join the Faculty for this ground-breaking new course from the team at The Campbell Academy.

My own contribution will, predictably, be on the subject of marketing for implants. The course brochure speaks for the quality of this Manchester-based programme and I encourage you to download a copy.

Places are limited so action will be necessary as part of your 2016 personal planning.

Brilliant work from the brightest new force in post-graduate education.

The £10m micro-corporate – final thoughts

Man or Woman.

It has been a wonderful discipline to create this mini-series; an opportunity to research, observe, listen and reflect on current market conditions and the likely future landscape.

Along the way there have been some helpful comments from the dental world.

One of the most unusual was the attached newsletter from dental accountant Alan Suggett, whose opinions I value.

The very first article is “breaking news” and adds a new dimension to the series:

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UNW Dental Bulletin June 2015

If you have been inspired by this series to consider yourself as a dental entrepreneur, can I suggest that you add a copy of The E-Myth Dentist to your reading list. I was honoured to co-author the book with Michael Gerber and it contains lots of tips on how to become the person you will need to be, as well as thoughts and tips on the key systems and people that you will need around you.

The_E-Myth_Dentist_Book_-_7connections

You can order the book from Amazon via this link:

http://7connections.com/the-e-myth-dentist-book/

When you are ready to take the first steps to build your micro-corporate (or, perhaps, inspired to kick-start a plan that may have stagnated) then drop an email to coachbarrow@me.com – I would be delighted to meet you on a no-obligation, no charge basis and discuss how I can help.

My special thanks go to those clients (and their managers) who have shared their personal experiences, in particular:

Trevor and Aaron Ferguson – West End Dental Group, Colwyn Bay.

David & Dawn Cunningham – Spring Grove Dental Group, Glasgow & Central Scotland.

Mark Skimmings – Dentistry on the Square, Glasgow.

Colin Campbell – The Campbell Clinic, Nottingham.

Shaun McClure, Raid Ali & Richard Vangasse – Restore Dental Group, South Wales.

Building the £10m micro-corporate – Step 7 of 7

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Growth

Contracts exchanged, deal done, team settled and clinicians calmed – now the real work starts, the work of growing sales in your satellite by 50% over a 2-3 year period after purchase.

You want your £500,000 satellite to become a £750,000 turnover business, with net profit before tax of 15-20%.

That is a lower profit level than the mother ship because you are not there, and so all production carries a fee-earner cost, even if your associate(s) are stakeholders.

You also want your patients to feel valued, relaxed, unthreatened by the new owners and for your team to deliver excellent standards of customer service and clinical care.

The following comments could, in reality, be applied to any practice – but let’s focus on your new adopted child.

Money:

You will need to allocate an additional marketing budget of 5% of satellite sales each year – let’s say £25,000 in year one after acquisition, rising to £37,500 per annum at maximum cruise.

People:

You will need to ask your existing marketing manager/assistant to take on board the responsibility for the satellite as well as the mother ship. My guideline here is 1 full day per week of uninterrupted marketing activity for every £400,000 of group turnover until such time as it becomes a full-time job (at £2m of group sales).

Uninterrupted means what it says – you cannot “do” effective marketing and answer a phone, greet and meet at a front desk or assist in surgery.

You can, however, mix marketing activity with treatment co-ordination whilst growing.

The cost of your marketing person is NOT included in the marketing budget – it is a payroll cost.

Resources:

The marketing budget will have to be allocated across a colourful pizza-topping of activities and sliced accordingly.

Any practice needs to understand the totality of marketing activities necessary to ensure a positive and fruitful Return on Investment (ROI).

Let me start the marketing conversation by describing your order of priority in targeting:

1. existing patients (up-selling further treatment)

2. word of mouth recommendations

3. attracting strangers

So often, I see marketing plans that take the opposite approach, investing thousands in attracting strangers whilst leaving little time or effort to appreciate the people who already trust you.

Your recall system is a primary marketing opportunity and yet, so often, is handled as a chore and with a total lack of passion.

Reference the famously bland “we note from our records” message that I’ve written about before.

A recall system and regular dental health reviews are wonderful opportunities to upsell and obtain recommendations, as would be a long-term sequence of monthly email newsletters, sharing stories about patients whose lives you have changed for the better.

Once you have invested in appreciating the people that you know and the people they can introduce you to, what’s left of your budget can be invested in a variety of attraction techniques.

At this point, owners become bewildered by the choices and the contradictory myths and legends they hear from marketing service suppliers and their clinical peers.

Even as committed marketers, we find it hard to keep up with the ever-changing landscape as existing techniques have to be adapted and new technologies embraced.

Your marketing manager/assistant is going to have to work hard to stay ahead of the curve – constant research and review are necessary as well as access to trusted advisors and colleagues in the dental marketing space, with whom ideas can be tested and results exchanged.

The reason you embarked on this micro-corporate project wasn’t just to grow through acquisition but to grow organically as well – that’s where your super-profit resides and, if required, your future exit strategy.

Below, I share with you an example of the ground we are covering in a proposed future marketing workshop. You can use this as a template for the knowledge required as you build your group.

For now – we have covered our 7 steps and, in the concluding instalment of this series, I will share with you some general observations.

Thanks for staying with me this far – and good hunting.

The 48-hour Ultimate Marketing Workshop

Day One

Session 1 09:00 – 10:30

Introductions

Understanding The Lifecycle Marketing Philosophy

Attracting Up-Sales, Referrals and Strangers (in that order)

The importance of the IOT (internet of things)

Resources – time, money and people

What your people have to do (marketing as a team event)

Measuring marketing ROI

Session 2 11:00 – 12:30

The critical essentials required on your web site

Driving traffic to your web site

Optimisation

Digital marketing basics – paid media

Funnels, lead magnets and tripwires

Session 3 13:30 – 15:00

Direct marketing basics

Word of Mouth marketing basics

Networking basics

The roving reporter in your practice

Session 4 15:30 – 17:00

The importance of social media marketing

Managing your social media channels

Reflections on day one

Day Two

Session 5 09:00 – 10:30

White paper marketing

Short-term nurture sequences

Long-term nurture sequences

Session 6 11:00 – 12:30

The patient experience

Telephony

Front desk

Smile checks

Treatment co-ordination

Treatment plan presentation

Conversion

Session 7 13:30 – 15:00

Pipeline management

Reactivation

Long-term care

Session 8 15:30 – 17:00

Reflections

Your own MAP (marketing action plan)

Q&A

Next steps

Building the £10m micro-corporate – Step 6 of 7

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The stakeholder associate

I made a teasing reference to the stakeholder associate earlier in this series.

Let me set the context.

Years ago I enjoyed some success lecturing to VT’s at their end of year conferences around a few of the Deaneries.

My predictably direct comments about the future of dentistry were usually welcomed by the young dentists but may have seemed a little too BOP (bold, outrageous and provocative) for the Trainers and the Deans – that (and the attempted development of Private VT with Andy Lane) saw this source of speaking engagements dry up – c’est la vie.

During my presentations, I would typically ask those present how many sought ownership as a career choice.

I would have said that at least half the audience would have raised their hands back in the mid-2000’s.

Not so now – a recent speaking gig with my friend Dr. Colin Campbell to a large group at The British Dental Student Conference in London revealed a very different result to my straw poll, with very few of the audience suggesting that the trials of the dental entrepreneur were attractive to them.

The legacy no doubt, of recent years, the GDC, the CQC, the competition and the economy. Perhaps for some, the most significant event in this context has been the banking collapse of 2008 and the subsequent reluctance of lenders to lend (although there are signs of that easing). Reference my previous points in the post on “funding”.

Even if there is £100-150,000 cash around and the willingness of a lender or a family member, the prospect of ownership and all of its responsibilities can seem daunting when compared to the ease of working for good cash flow as an associate and then investing super-profits into an investment property portfolio with the help of experienced people like Dr. Harry Singh.

So what I’m proposing here is a route to ownership that may well suit the pocket and the risk profile of a young dentist – and, at the same time, solve a leadership and management problem for the budding micro-corporate builder.

The stakeholder associate would be offered the opportunity to “buy-in” to a satellite at outset and/or on a progressive basis over the years ahead.

There is an old joke about the difference between an associate and an owner being demonstrated after a severe overnight winter snow-storm.

Peering out of the bedroom window to see the drive deep in drifts, the owner drags his or herself out of bed and starts to dig, whilst the associate re-sets the alarm and calls in to say that he/she couldn’t make it because of the weather.

I know – sweeping generalisations (isn’t all humour?) but you get the point.

My suggestion is that an associate with a small and growing equity stake in the business, with a sliding scale contract PLUS a prospective dividend at the end of the year is more likely to dig out their drive.

You may decide that to attract a talented associate into your business it would be worth “gifting” a small shareholding at outset (5%?) but you will need to take some professional advice on the tax consequences.

Alternatively, offer a small percentage now at the price you paid for the goodwill and a means by which said stakeholder associate can increase their shareholding in the satellite over time by straight cash payment or some form of income sacrifice into a capital account (money retained in the business). Again, a good dental accountant will guide both parties on the most effective route.

I’m actually going to wind the clock even further back on this – not directly related to growing a micro-corporate but something of interest and relevant.

Some of my clients are now advertising for “apprentice dentists”. People who have just completed FD1/2 and are looking for a permanent position – but don’t want to get swallowed into the NHS corporate machine and spend years bashing out UDA’s in a back room.

My private clients are offering a fixed salary (around £35,000) plus a year of intense clinical mentoring with the owner – at the end of which the successful apprentice is offered a permanent position as a sliding scale associate – imagine an extension of this that includes a stakeholding opportunity for those who shine.

So we begin to see a new career pathway for the enterprising dental graduate with limited experience and access to funding:

1. dental school

2. FD 1 & 2

3. salaried apprenticeship (mentored)

4. associate (mentored)

5. stakeholder

In this way, you can solve the problem of the mice playing (in the satellite) whilst the cat is away.

Imagine a situation in 10-15 years from now in which you are the 100% owner of a central hub practice (turnover c.£2m) and own 50% of 10 satellites, each of which enjoy sales of £1m and refer patients to the hub for advanced and/or specialised treatment.

You have created a highly profitable group, a huge database of patients and a team of 10 stakeholders who have a vested interest in the sale and, perhaps, have created an internal market for exchange of satellites as well as a potential MBO team who want to take the micro-corporate off you?

A prospect that certainly changes the game on associateship.

Building the £10m micro-corporate – Step 5 of 7

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Transition and assimilation

Here’s what the owners and practice managers tell me when they are two or three acquisitions into their micro-corporate:

1. We had no idea that the initial negotiation, due diligence and exchange would take so long.

2. Agreement of the associate contract with the former owner took longer than we expected.

3. No matter how much due diligence and interviewing we did, there were still skeletons in cupboards and bodies buried in gardens when we got there.

4. We reluctantly came to realise that not everyone in the acquired practice would accept our culture and that they had to be replaced.

5. It took longer than we expected to ensure that all clinicians were compliant to our standards of governance and compliance.

6. The existing business systems were either non-existent or very primitive – it took time to align their systems with ours.

7. The shift in loyalty to our culture was relatively easy with the existing PAYE team but took longer than expected with the clinical team.

8. It took us 18-24 months to feel comfortable that the satellite practice could fend for itself.

So it is, perhaps, appropriate here to pause and consider some time-served observations on leadership and management – if you don’t mind, I’m going to share a bit of vintage Coach Barrow material that relates well to the challenges mentioned above.

Leadership is about people.

Management is about systems.

You can lead people but you cannot manage them.

You can manage systems but you cannot lead them.

Leadership is defined as:

1. You being the custodian of the vision and the culture – and communicating that vision and culture on a regular basis.

2. You setting the example of the vision and the culture through your own performance and behaviour.

3. Your ability to delegate.

4. Creating an environment in which people can become self-motivated.

Management is defined as systems for:

1. financial control

2. marketing

3. the patient experience

4. clinical and non-clinical operational controls

5. human resources

6. clinical governance and compliance

Each of these branches into many tributaries.

We have already mentioned in this series of posts the importance of your organisational structure.

It is in the leadership and management skills demonstrated by you and your senior management team that the difference will be made.

I often quote the phrase “all problems exist in the absence of a good conversation” and the growth of your micro-corporate is an arena in which this phrase could not be more relevant.

Your managers will need to meet face to face with the PAYE team in your satellite on a VERY frequent basis to begin with (perhaps the 18-24 month bedding in period mentioned in feedback).

You will have to accept the role of Clinical Director and MENTOR the clinicians individually for a similar time period.

Mentoring for you will mean regular conversation, constant case review, comradeship at post-graduate meetings and an invitation for the clinician being mentored to observe you at work and in communication with patients at your home practice.

Part of this leadership and management responsibility will also include your ability to respond rapidly to the skeletons mentioned earlier and to the inevitable behavioural problems that will arise between people.

NOTHING, absolutely nothing, can be left to fester, whether it is a system failure or a relationship challenge.

Remember that the existing patients that you have paid handsomely for will be watching carefully as all of this plays out.

They will be initially cautious and might see your arrival as the first sign of a decrease in quality of the personal relationship they have built with the people in the practice. The cynics will also be waiting for the next price rise.

You have to ensure that no patient has an excuse to shop around.

Ultimately, each acquisition has the capability to become a problem child or a star apprentice – the choice will depend on your level of engagement.

There will be no such thing as spending too much time on transition and assimilation.

Building the £10m micro-corporate – Step 4 of 7

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Funding the acquisition and handing over the cash

After mutually agreeing a price for the goodwill, fixtures/fittings and (hopefully) the freehold property, we then come to the prospect of firstly, raising the finance and, hand in hand, agreeing the timing of the cash transfer.

Allow me, however, to reverse those events chronologically and discuss the timing of payments to the vendor.

As you yourself are unlikely to want to spend much time in the satellite practice as a fee-earning clinician, somebody is going to have to look after those patients and, hopefully, generate the growth.

Choices are, first, the existing owner, who agrees to stay for 2 or 3 years and facilitate a happy hand-over or, second, a new (possibly stake-holding) associate who will step straight into the vendor’s shoes (and the patient database).

If the first, you will need to agree an appropriate remuneration plan with the owner turned associate.

If he\she is “old school” they may well be expecting a 50% contract and so a conversation will need to take place to bring them back to the reality of current associate pay in the private sector, namely a sliding scale from 35-50% or a flat-rate of 40-45%, less an agreed % of lab (45-55%).

The vendor will be wanting to have a think about that and perform some fag-packet calculations as to post-sale earnings, as well as run the offer past professional advisors and mates – all of whom will have an opinion, mostly negative – do not underestimate the delay and hassle that this will cause. All of the vendor’s circle will counsel caution and a request for “more”, most often in the absence of any real dental experience. They will indirectly drive you crazy and can kill the deal.

This is one of the main reasons that time invested with the vendor at outset to build mutual trust and respect will pay you back.

The plot, though, is about to thicken.

1. you may want to keep a retention from any final payment for goodwill, to cover liability on recently or part-completed treatment that still has the capacity to become financially problematic.

2. you may want to agree with the vendor that a larger proportion of the goodwill value will be retained during the period of the earn-out, to ensure smooth transition, maintenance of productivity by the vendor as associate and, to be frank, as a bit of insurance that your new friend doesn’t suddenly resign and turn up in “that” practice down the road, after miraculously informing his previous patients.

Not that anyone you know would ever do that of course – just saying.

The corporates will ask for up to 5 years for an earn out, will retain up to 25% of the goodwill value and will release that capital retention as targeted performance and behaviour are achieved. Woe betide a recession, the closure of a large employer in the area, an exodus of team members, the sacking of a Top Gear presenter or any other unthinkable eventuality.

If in competition, you can better that corporate offer with a shorter earn-out period and a more generous initial cash payment.

Having said all that – I do work with clients who pay all 100% of the agreed price up front if they feel safe and secure in so doing – or, of course, if “Old Dr Smith” really is retiring from clinical practice.

So, we eventually come to the funding of the cash up front price (a judicious calculation can fund the earn-out from future profits).

If you have a wealthy family who are prepared to totally fund you, take the day off from the rest of this post!

For the rest of us, you are going to need some institutional funding to get your micro-corporate off the ground.

As a planning assumption, I’m going to take a worst case scenario in today’s finance market and suggest that you will be able to raise 70% of the goodwill, fixtures & fittings and freehold property, on a commercial interest rate over a 10-year repayment period.

A huge “win” for you would be 80% finance over 20 years.

Somewhere between the two is where you will end up, depending on which lending institution and your relationship with them.

30 years ago, a bank manager was your friend. He (it was a he) lived in your bedroom wardrobe (am I the only one old enough to remember those TV adverts?), had a penchant for golf plus liquid lunches and the ability to make decisions.

Nowadays, the term “friendly bank manager” is oxymoronic.

It is more likely that he or she is younger than you (not that I’m ageist or anything), purports to know all about business, has a degree in something vaguely interesting and chose a perceived risk-free career in banking (lol).

This unfortunate individual is most likely suffering under a reign of terror from a head office retail manager who is banging the drum on sales targets, largely awarding survival points for the size of the arrangement fee they can wangle out of you, the quality of the security they can repossess if you screw up and the number of points over base rate at which your interest rate has been set.

They are not your friend – a smile may be used to beguile you but always remember that you are with an assimilated serpent who is compelled to serve the collective.

There is some rationale here in hiring a snake-charmer (otherwise known as accountant or financial advisor) to help you in the negotiation process. They are on your side and they know the habits of the adversary.

You will, of course, be required to submit a business plan and cash flow forecast which they will scan with interest and then send of to a regional or national underwriting centre where the real decision-makers reside.

Get used to the phrase “I would happily lend you the money/offer you these terms – but my hands are tied by head office.”

Don’t forget that there will be further asset finance in the equation to cover the cost of any equipment purchases or refurbishment should you be successful in the purchase.

Here’s a tip – you can create a nominal business plan and cash flow forecast before you identify your first acquisition target – with the help of a good accountant (and business coach?) a reasonable estimate of costs can be imagined and, given the security requirement, a “line of credit” agreed with the bank that will give you the advantage of speed should you meet a vendor who is keen to move.

Corporates can easily take 6 months to get a deal across the line.

So, to summarise:

1. security is everything – what bricks and mortar or other person’s guarantee are you going to offer to the bank?

2. the sooner you have a business plan, cash flow and line of credit, the better.

3. No matter how you look at it – you will require a 30% cash down deposit for your first purchase – so shall we say £150,000 of free cash available?

4. PLUS (and this is one that many people forget) the cost of refurb, rebrand, re-equip AND a marketing budget of at least £25,000 per annum to give the satellite that prophy shot it will need to generate new sales and cash flow.

You would be amazed at how many people spend ALL of their money on the purchase, finance the refurb and then leave no cash for marketing.

Building the £10m micro-corporate – Step 3 of 7

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Valuation, Growth Potential and Property

An ideal target would be a £500,000 practice that you can grow to £750,000 using the same number of surgeries (3) and perhaps the ability to add a fourth surgery and take the gross up to £1m.

So how much is that £500,000 practice going to cost you?

The “vox-pop” on practice valuations will inform you that an NHS contract value can change hands for up to 150% of value (165% of orthodontic contract value) depending on the location, size and appetite of the larger corporates in the area.

There is no doubt that prices are, once again, at an historic high in the NHS sector. It would be as dangerous to say that the market is overheated now as it was to say the same in early 2008 (100% of contract value) and 1997 (35% of contract value). Nobody knows where it will end but the nature of cycles is that it will, perhaps after the artist formerly known as IDH floats, after Oasis changes hands (again) or some external event provokes a collapse in market confidence.

Certainly the arrival of organisations like BUPA (health insurers), Sainsbury (retailers) and Denplan (existing suppliers) into the ownership landscape provide the fuel for change.

Imagine a world in which Zurich (the biggest health insurer in the world), Asda (owned by Walmart – the biggest dental business in the USA) and Henry Schein (they did say “everything dental”) decide that ownership of the patient database is attractive for cross-selling?

All of which, by the way, is a darned good reason for building your micro-corporate right now.

Meanwhile, back in the leafy suburban cul-de-sac of private dentistry, the volume of transactions has been lower, the feeding less frenzied – until now.

An economist would argue that a private dental practice is worth 4 times EBITDA which, for the non-accountants (like me) means:

Earnings Before owner’s drawings:

Add back Interest on loans and asset finance

Add back Taxation

Add back Depreciation

Add back Amortisation (a fancy word to describe writing your capital loans off over time)

The accountants reading this will howl – soz – but for you and me EBITDA represents what the business is really making if we take a look at income less expenses – the real world of money coming in and money going out.

A lot of practices in the £500,000 zone tend to make around 25% after all expenses (fixed and variable) are paid – and that is where the 100% of gross comes from – 25% x 4 = 100%.

A good economist will look at the actual EBITDA and pay 4 times that as a commonly accepted measure of the number of years the investor should take to get their money back.

What we then have to add in is what is called the “opportunity cost” of the deal – an emotional measure of value that has bugger all to do with economics.

Emotion can mean:

You want to live in the post code and send your kids to school there.

You want to flip or float your company and have time-activated targets to meet.

You want to block any unwelcome competition.

The opportunity cost will inflate or deflate the price, subject to market forces.

It can work against the vendor if opportunity cost reduction is the result of ill-health, debt or divorce.

So the dental entrepreneur picks his targets carefully, looks at the economic value (multiple of EBITDA) and the opportunity cost (negative or positive) before making an offer.

Which means…..

1. taking a good long look at the last audited accounts and the latest management accounts (you must have up to date numbers)

2. taking considerable time to engage the vendor in conversation to assess the impact of any opportunity cost on either side of the deal. To quote Stephen Covey “seek first to understand, then to be understood.”

But as the purchaser you also have you eye on the growth potential (upside) of the acquisition.

3. taking an equally good long look at the location, the existing common and clinical equipment, the business systems, the existing team (of which more later in this series) and the demographic and dental health of the existing patients.

That’s why, after the initial emotional high of an offer in principle, the vendor often then faces 3-6 months of gruelling due diligence, whilst the purchaser checks to see if the reality is the same as the estimate of value.

The tired practice is attractive in this respect. It may well be that the current owner has been losing his/her passion for the business in recent years and that reflects not just in the supervised neglect mentioned earlier but also in the fixtures, fittings and the attitude of the team.

A good dental entrepreneur will have a sixth sense around this and, rather like walking into a prospective new home and seeing past the G-Plan furniture and chintzy wallpaper to imagine your interior design, you will see what the practice can become with your input and the passion of your team.

There is also the subject of property.

Corporates don’t want property because they cannot rely on market sentiment to uplift the multiple of a property valuation in their balance sheet or share value. They will offer the vendor a long lease, usually through a subsidiary company.

As the owner of a micro-corporate, you DO want freehold property because that portfolio will form a valuable part of your overall asset base in 10+ years when you come to sell and aspire to be a landlord. In the meantime, your property portfolio will be a valuable bargaining tool with external lenders.

The current owner may want the same, so part of your conversation is going to be about that and about the timing of a property purchase.

I would advise against becoming the vendor’s tenant and press for a freehold sale at outset – the absence of that would make a deal a lot less attractive for you.