Start the meeting with a positive focus.  Ask each staff member to share with the team something positive or a success for the month.  This is an opportunity for each of them to shine and feel good about their successes.  Allow them to share a professional and personal success or positive focus.  One of their success stories may encourage another team member or just inform them of something they did that worked — and others can learn from it!

Always have an agenda and stick to it.  If someone gets off topic and strays from the meeting, the agenda provides a structure to bring you back to the topic at hand, and if important enough, let them know that the other item can be discussed after the meeting.  In order for the meeting to be effective, you need to stick to the plan!  Don’t discuss the most important topic last.  If you run out of time, you may end up rushing through a critical topic.

Change things up each month.  Allow the team members to rotate putting the agenda together (you will review it, of course!) and then allow that team member to run the meeting.  It will make them think about the practice in a different perspective if they are the one responsible for preparing for the meeting.  It will also allow for a variety of discussions each month.  Ask a separate team member to take notes or keep minutes of the meeting to be sure all is documented for future discussions.

Always discuss current goals.  If there are not goals set, then put those in place.  Compare the achievement of the goal to the set goal.  Was it met?  If not, why not?  Identify those barriers to reaching the goals with the entire team.  Get their input.  Encourage them to throw ideas out and to be interactive with the group.  They need to feel their input is valued and heard to feel a part of the team, so be sure to make your intentions clear.

Schedule the meetings ahead of time and stick to the scheduled meeting time.  Do not reschedule a meeting if one person cannot make it.  The team needs to know that these meetings are required and will not be rescheduled due to a personal conflict.  Keep the meetings to a realistic time frame.  You want to keep their interest in what you have planned to discuss so try to make the best use of everyone’s time.

Energize the team by allowing them to be heard and be involved with the success of your practice.  Not only will they become more successful, but your practice will too!

Tax goodwill is defined statutorily (with exceptions) to include the following; goodwill, going concern value, workforce in place, business books and records, operating systems, patents, copyrights, licenses, permits, a covenant not to compete, franchises, trademarks, and trade names.  This of course is not an all-inclusive list, but in other words, it is mostly anything that is tangible.  As opposed to practical goodwill or legal goodwill, tax goodwill is more of a catch-all.

Technically, the IRS outlines how tax goodwill should be determined.  In determining the amount of tax goodwill under IRS guidelines, it is the amount left over after all other assets have been allocated an amount up to their fair market value, using what is called the residual method.  Effectively, each asset class (cash, accounts receivables, inventory, fixed assets) is subtracted from the total transaction price at its fair market value.  If any amount remains once all classes have been subtracted, that is the tax goodwill.

Practically, tax goodwill is a piece of dental practice transition that is negotiated and agreed upon in a transaction agreement.  Since in typical dental practice transitions each individual asset class is not specifically valued, it is up to the two parties involved to agree upon the fair market value.  This is usually a push-pull negotiation because what is better for the seller is usually less favorable for the buyer and vice versa.

Generally speaking, a seller wants more of the sale to be assigned to goodwill and less to all of the other assets, whereas the buyer prefers more assigned to A/R, inventory, and fixed assets.  These preferences are driven because of tax treatment.  A seller will usually have a lower tax rate (capital gains rate) on the portion of the sale allocated to goodwill, where higher ordinary income rates apply to gains from amounts assigned to the other asset classes.  A buyer wants more assigned to everything that is not goodwill, because those amounts can be deducted much sooner than the goodwill amount, which is deducted as amortization over 15 years.

As you become involved in a dental transition, be sure you and/or your advisors understand the role goodwill will play and that it is specifically addressed.  A misstep can cost buyers and sellers thousands of dollars in taxes.

You’ll want to complete a personal assessment to determine if you are “fit” for a start-up.  Do you consider yourself a leader?  Do you like to make decisions?  Do you like to have competition and do you handle it well?  Are you a risk taker?  These are just a few questions to consider.  We have see many dentists think about start up, but realized they were more fit to buy an existing practice once they got involved in the details and found it was not in their comfort level to actually go through a start-up.

Then you’ll want to review your resume.  Do you have experience?  What type of dental procedures and services have you done in the past?  Will your resume meet the expectations of a lender when you go to apply for financing?  Your experiences will not only help you from a financial standpoint, but they will also assist in building your practice.

Do you have prior Associate contracts (employee or independent contractor contracts) that may be a barrier to you starting your practice in the desired location?  Keep this in mind when determining your practice location.

You’ll also want to complete a practice assessment to gain a general idea as to what you foresee for your future practice.  How many operatories do you want to have?  Does that number differ 5 and 10 years down the road?  What types of procedures do you want to do?  Will you accept Medicaid and PPOs and what types of PPOs do you plan on accepting?  What hours do you plan on being open?  Will you be open in the evenings or on Saturdays?  How do you want to staff your office in the first year?  Do you have individuals in mind for these positions?

Next, address the financing aspect.  Are you prepared for financing?  When was the last time you checked your credit score?  Do you have someone who will be able to co-sign on the debt, if needed?  Do you have personal savings?  Look into your personal financial situation very early on prior to starting so you have time to clean up your credit, if needed.

Stay up-to-date on dental specific references and find a mentor.  For example, read Dental Economics and DentalTown online.  Research trends and read about real life experiences.  Find a mentor and learn from his or her real life experiences.

I hope you’ve started to ask yourself some of these questions if you’ve considered starting your own practice.  They’ll get you thinking ahead and prepare you for the excitement of your start-up!

In my words, practical goodwill is the perception of the practice and the dentist in the marketplace.  A practice with a good reputation and good location would likely have a good level of goodwill.  A dentist can have goodwill too.  Most often in a solo practice, the practice goodwill and the dentist goodwill will be similar.  While practical goodwill is difficult to measure, a practice that receives a solid volume of referrals and new patients through internal marketing would appear to have a good level of goodwill.

Goodwill from a legal perspective is similar to the practical goodwill outlined above.  It is the benefit of a business having a good business under its name and regular patronage.  In transition, goodwill is most always defined as one of the assets sold.  Goodwill from a legal perspective is much more narrow than from a tax perspective.  Legal goodwill is difficult to measure, although valuation analysts such as myself would tell you that the earnings of a business are an indication of its goodwill when compared to its competitors.

Tax goodwill is more broadly defined.  In brief terms, goodwill in the tax code is any asset that is not tangible or money — so if it isn’t cash or receivables, inventory or supplies, hard assets or real estate, then it is goodwill.  This is a very basic explanation.  In a transition that is an asset deal (which most all should be), goodwill is the number that is “plugged” after all of the other assets have been assigned a value, at least as explained in the Internal Revenue Code (not necessarily how it is always done).

In Part II, I’ll go into some detail on tax goodwill and the importance of understanding the impact that goodwill can have in a purchase or sale of a practice.

But who should you talk to?  You should talk to dentists who have done it!  Interview them and get their experiences.  You will not only learn from these experienced dentists as a new dentist yourself, but you will also build long-term relationships and will be able to bounce ideas off of each other in the future as well.

If you are thinking about acquiring a practice, then talk to a dentist who has purchased a practice.  What mistakes did he or she make?  What would they have done differently?  What went well?  Get advice as to who helped them during their transition.  Ask about fees.  How much did they pay the advisors who helped them?  What challenges can you expect to go through?

If you are thinking about going through the start-up process, do the same thing!  Ask someone who has started from scratch and get their opinion on the process.  Are you prepared to go through the start-up process?  How much did they spend?  You will learn many things from hearing their true experiences.

For example, I knew a dentist who started with two operatories.  To this dentist (as a new dentist), this made sense and was cost effective.  But within a short period of time, this dentist was having problems scheduling patients timely due to the limitations of chair space.  This doctor will tell new dentists today that you have to have three chairs.  An overflow chair is a must-have, in their opinion.  But these are all good things to note.  You may not agree with some of the items you will hear, but it will help you gain perspective.

If you decide to go the associateship route, you’ll want to talk with others in associateships and ask who they hired to review their contract.  Ask questions about compensation.  What is fair compensation for an associate?  Understand the different between being paid a daily base pay rate, bonus incentives, paid on production, etc.  What were they paid and was it “fair?”  Inquire upon the differences between being an employee vs. an independent contractor.  Who advised them on tax advantages and disadvantages of the agreement?

Find a good mentor who you can trust, respect and learn from.  Everyone’s personal and professional experiences are different, so keep that in mind when comparing your situation to someone else’s.  Take good notes as you learn to help guide your decision in the future!

We’re often asked this sequence of questions.  In response, we look at many factors when determining if a dentist is ready to add a new operatory.  Consider the following when identifying your needs for that next opeartory:

• How will you be paying for the new operatory (equipment plus buildout costs)?
• If you’ll be financing it, can you afford the monthly payment?
• How much additional production can be expected from the new operatory?

Here are some limitations you might run into that would lead you to this consideration…

• Are you unable to schedule hygiene patients timely?
• Are you having a difficult time keeping up with the patient inflow?
• Is your scheduling coordinator struggling with the daily schedule?
• Do you feel your office could be running more efficiently?
• Are you losing production due to space limitations?
• Are you limited to future growth?
• Is the current space situation causing stress in the office?
• Are your patients waiting longer than normal to be seen?

If you are able to answer “yes” to most of these items, then you may consider taking that next step of adding an operatory.

You’ll want to run some financial projections and determine your break-even point on the new addition prior to moving forward.  Ensure it fits within your budget and continue to focus on      practice growth and office efficiency!

Step 1:
HIRE THE RIGHT TEAM!
Work with your team of advisors and take your time in putting your plan together.  Get proper advice from dental specific advisors to assist in mapping out your career path.  Ask your peers who they recommend working with.  Hear their stories for what worked and what didn’t work for them.

Step 2:
Get prepared for financing!  Start off by maintaining a good credit rating.  Determine what your estimated financing needs may be and if you’ll be able to get approved for a loan.

When was the last time you checked your credit score?  Determine if there are areas that you can be working on now to improve your credit score to increase the opportunity for you to be approved for the loan. Prepare and review your personal budget and savings.  Do you have a co-signer available for a secondary source of income, if needed?  These are all factors that should be considered when preparing for financing.

Step 3:
Determine your business model.  What are the things that are going to be important to you as a business owner?  Think long-term.  Perform a self analysis.  What are your needs, your wants, and what are your deal breakers?  What is your risk tolerance?  We have seen many doctors go back and forth between start-up and acquisition and after performing a simple analysis, they can more clearly identify the right fit for themselves.

Step 4:
Identify your practice model.  What kind of dentistry do you want to do?  Fee for service, PPO, Medicaid?  How may operatories do you want?  What is your desired annual production?  What do your staffing needs look like?  What type of procedure mix will you have?

Step 5:
DO NOT SETTLE!
If your dream is to start a practice from scratch, then stay focused on getting your very own practice started.

Making the best decision that is going to fit you and make you happy now and in the future takes time and planning.  Be patient and focus on one thing at a time!

An aspect where this deeper understanding is very noticeable in what we deliver is balancing the dentist’s financial health and their mental health.  What do I mean by that?  There will be a time or two where the most correct financial answer doesn’t weigh in as well against a mentally healthy answer.  Sometimes maximizing returns, minimizing risk, or increasing wealth doesn’t exactly jive with what will help you sleep well at night.  It’s in these moments and scenarios where the deeper understanding and partnership allows us to help bring a solid perspective that includes a healthy financial and mental balance.

For instance, consider the dentist who has been practicing for five or six years and has a decent chunk of student loan debt.  Fortunately, the loans are at a favorable interest rate.  The practice is profitable and generating some good excess cash, but still has decisions to make in how that cash is used.  A good strategy, and perhaps the financially superior one, may be to maximize tax deferred retirement savings.  This will save a lot in taxes both short-term and long-term.  However, we’ve come to understand that this student loan debt just drives dentists crazy.  It’s not so much the, “I have all of this debt and I don’t like it,” but more along the lines of, “I can’t sleep at night until I deal with this debt!”  So in this instance, striking a healthy mental and financial balance is important and the financially superior answer is likely not the best in this case.

Another example is the dentist who has been told countless times from consultants, colleagues, and advisors that they should eliminate acceptance of Medicaid because it is not profitable and they are booked 8 weeks out.  Standing alone, this may be the best approach from a financial standpoint  However, this particular dentist may be very compelled to serve in this capacity and sees it as a social obligation to accept Medicaid-paying patients.  Again, the mental aspect of a social obligation here would bid well against the financial maximization of zero Medicaid acceptance.  In this instance, we would advise an approach where mental health could be achieved and still balance that with a financial approach that isn’t devastating.

There is no manual or guide that tells you what the right balance is for you.  It’s truly unique to each dentist and the surrounding circumstances.  Having someone who can help dig in and move toward that balance can be key to both financial and mental health in the short-term and long-term.

Have you recently noticed someone who stands out?  Take a minute to thank him or her.  Your employees may already understand their responsibility to perform their daily tasks, but taking that extra step to thank them for doing it well only takes a few moments.

As the dentist or “leader” of your practice, you want to lead by example.  You want your team to see you showing acts of appreciation so they then appreciate each other.  That positive influence in the office will not only funnel through your team, but it will flow into their interaction with the patients.

“Thanks for staying late tonight,” or “Thanks for going the extra mile today,” or “Thanks for filling in for Sally since she went home sick today,” are all great examples.  Praise for appreciation doesn’t always have to be costly either.  People enjoy just the feeling of being recognized.

Here are some great low-cost ways to show more appreciation:

• Recognize the team’s efforts during monthly meetings or daily huddles
• Take the team to lunch or breakfast
• Gift them with movie tickets
• Provide positive feedback on a job well done
• Give an unexpected “thank you” card
• Send them to a continuing education course they’ve been wanting to attend
• Greet your team each morning with a smile on your face
• Come up with an employee award that is passed on from one employee to the next for a specific item accomplished
• Spend time with your team members – they will appreciate the interaction with the “leader”

The impact of appreciation can be contagious and spread throughout the office. So encourage your team by showing that you appreciate them!

This will happen sometime in your career as a manager of staff: you decide to do something good for your team and then you watch it go totally wrong.  Somehow, “badwill” is then created instead of goodwill.  Your well-intentioned gesture, bonus, or reward is perceived in an entirely different light than you had intended.  And you may say to yourself, “Why did I even try to do this in the first place?”

We recently worked with an office that was adding a benefit partially paid for by the office and partially paid for by the employee.  Effectively, the participating employees were getting raises to account for the benefit.  Unfortunately, there was miscommunication on the amount that it was going to cost the employee for their portion.  So after a couple pays at the wrong amount, the correct amount was deducted from the paychecks.  Employees then saw their net pay go down.  Talk about a good gesture gone wrong!

In another instance, we worked with an office that had established a nice benefit for its team to go on an annual trip paid by the dentist when their annual goals were hit.  They had gone on this very nice trip for a number of years.  Then one year, the office was well off track from its goals, yet the staff was spending time each week planning the trip.  The dentist was faced with the decision to either not have the trip since the goals weren’t met or to go ahead with the trip anyway.  Neither outcome was going to have a favorable consequence for the dentist when having to explain it to the employees.

I’ll say from my own experience that even the best planning won’t assure getting to avoid these situations.  So either you don’t ever do anything extra for your staff or you have a plan to deal with these matters when they go the wrong way.  I’m a believer in rewards, so having a plan is the option I use.  In the first example, I recommended that the doctor sit down with each individual affected and explain what had happened, explain the circumstance, provide an option to opt out of the benefit at that time, and then empathize with their situation.  It won’t make it all better, but at least hopefully provide an understanding of the circumstance and explain your intentions.  This will help remove some of the created “badwill.”  In the second instance that I mentioned above, my suggestion is to be firm about the goal and not have the trip.  While it will likely create the unwanted “badwill” initially, an honest discussion about the intent and the purpose can at least help gain perspective with the situation.  Again, it won’t make it all better, but it should help.

You aren’t going to be able to avoid bad team member situations entirely.  But dealing with them quickly, personally, and honestly will help hedge the unintended negative results.