INDEX OF MGE WEBLETTERS
(For earlier editions of MGE’s Newsletters, click here.)
Additional Locations – the Do’s and Don’ts, Part I by Jeffrey M. Blumberg
Additional Locations – the Do’s and Don’ts, Part II by Jeffrey M. Blumberg
Additional Locations – the Do’s and Don’ts, Part III by Jeffrey M. Blumberg
MGE’s weekly webletter, Issue 26.
Here is the next edition of MGE’s weekly webletter. The purpose of this webletter is to provide ideas, tips and suggestions to make your practice more successful.
Feel free to send us your comments and suggestions, or requests for future webletter topics you would like to see covered.
If you wish to read earlier webletters, click here and select the topic(s) of your interest.
Additional Locations – the Do’s and Don’ts, Part III
By Jeffrey M. Blumberg,
Chief Operating Officer, MGE
This webletter is part 3 of 3 in a series on opening additional locations.
Multiple locations can be a blessing or a curse. Much of how you feel about office #2 (and beyond) rests upon how you set things up from the start.
In this webletter series, we’ve covered a number basic “do’s & don’ts” for you to consider when opening additional offices. This information is targeted primarily at GPs who are looking at additional locations – not specialists. While some of this information would be helpful for specialists, there are a few different rules that apply to them with multiple offices. If you are a specialist and you find that you have questions that haven’t been answered in these webletters, e-mail me at jeffb@mgeonline.com or call me here at MGE at (727) 530-4277. The same goes for anyone else who reads these – feel free to contact me with questions.
I began this series by listing out eight questions that I would ask (not necessarily in sequence) a client if they were looking at an additional location.
The questions are:
- Why are they opening another office?
- Is their “house in order” at their current location?
- Where are they looking at opening the second (or third, fourth, etc.) office?
- Are they going to work in the new location? If so, how many days and how will this affect their primary location?
- Are they bringing in a partner in this venture or are they going it alone?
- Are they starting a scratch practice or buying an existing office?
- How are they going to staff the new office?
- How will they administer the finances for each office?
I broke down questions 1-3 in the first webletter. In the last issue, we hit on numbers 4 and 5. As this is the last issue, we’ll wrap up with questions 6-8.
Assuming we’ve ironed things out regarding 1-5 above, the next thing I’d look at is:
6. Are they looking at buying an existing office or starting an office from scratch?
I ask this question for three reasons: a) To make sure the doctor is walking into a positive situation, b) To see how the new office (depending on level of productivity) will impact office #1 and c) out of pure curiosity.
You can be wildly successful taking either route (scratch or existing).
In my opinion, your viewpoint toward office #2 is simple: If you’re looking at an additional location and your first location is successful (which should be a prerequisite for opening #2 anyway), you’ve most likely learned quite a bit. If you knew what you know now when you opened your first office, there would probably be a number of things you would have done differently.
So, use that knowledge when you open office #2.
I personally would ensure that office #2 fit my definition of “ideal.” Why do otherwise? You already have a successful practice – you shouldn’t have to compromise with what you want for office #2. Find the right location. Maybe there’s an existing office there for sale, maybe there isn’t. Equip it the way you want without going overboard and placing a gun to your head with an unmanageable overhead. You may be leasing at your first location and want to buy the building for location #2. Sometimes you’ll find an unbelievable opportunity that falls right in your lap that’s exactly what you’re looking for.
Once you’ve established what you want you would have to work it against the numbers – meaning you would want to determine a) if the price and any financing you would get is manageable and b) how projected revenues and time worked at office #2 would impact office #1’s productivity and finance (along with your personal finances). We spent a bit of time on this point (finance) in the last webletter.
Which brings us to the next issue:
7. How are you going to staff the new office?
If you’re opening from scratch, this isn’t too difficult to figure out. Again though, take what you’ve learned from office #1, including policies and procedures you’ve developed over the years. Ideally, your first employee would be a potential long-term office manager candidate that can grow with the office. It’s not uncommon for an MGE client who is looking at a second office to do one of the following, months prior to opening:
a) Train an existing employee at location #1, with office manager potential and who wants to advance on the MGE Office Manager Training Package. This obviously assumes you have a functional office manager at location #1 already in place. And please, if you’re going to move your current office manager from location 1 into location 2, you MUST make sure they are adequately replaced. As we covered in the first webletter, you don’t want to disrupt office 1 for office 2.
b) If no candidate for the office manager at the new office is currently on staff, go out and hire a new one, train them and have them work in location 1 until location 2 opens. This offers a number of advantages from just hiring someone cold for office 2, not the least of which they get to see “how it’s done” in office 1, which is already a successful office.
If you’re buying an existing office, with a staff already in place, this becomes a more complex issue. I’ve seen this go both ways – i.e. I’ve seen plenty of instances where the transition was smooth and the staff worked out quite well for the new doctor to cases where the new doctor dismissed most if not all of them.
A few things you might want to look at prior to purchase:
1. Discuss the staff with the doctor you’re buying from and get an honest assessment for each and every employee. You may also want to review any personnel files, salary history and overall production statistics. With employees, everything should be performance based. While they may not keep statistics, you can try a couple of things to figure them out. For instance, you could look at overall practice production and note where various staff were hired and examine the impact. If job descriptions are more specific, possibly examine productivity from their individual areas – i.e. for collections; look at the percentage since they’ve been on the job and so on.
2. Observe the office in action if possible. See how patients are handled. Is that how you would want it done in your office? If there’s a problem, how hard would it be to correct?
3. Ensure salaries are in line with basic overhead percentages. We did a series of five webletters on this called Managing Overhead and Profitability and they can be found in our webletter archives. In Webletter #2 we cover basic overhead percentages. For ALL staff, back and front, excluding the doctor and associates (but including hygienists), salaries including attendant taxes shouldn’t exceed 22.5%. You might find that salaries in this office you’re looking to buy are 30-40%, which may not be a problem for the current owner, but will probably be one for you, especially with the debt you’ll have to service with the new office.
4. A big thing to consider here is how successful the office is. Is it very productive compared to other offices? Well the staff there contributed to that. The better the situation, the less change you’re going to want to introduce. It’s human nature to want to “put your mark on something” or change everything when you take over a new job or scene. Unfortunately it’s not always the best idea. I’ve had new practitioners taking over successful offices change little to nothing in the office initially. And why would they? It was working. Slowly but surely they got to know the patients and made improvements. Now, obviously if you see any gross errors clinically or any legal issues – you’d change these as a matter of course and FAST. But for the most part if it’s a working scene, ease into it and change little.
5. Lastly, you’re not really going to know the staff – for real – until you work with them. And regardless of any “glowing” recommendations from the doctor you bought from, you’ve not worked with these people. So, start out and see what happens. You might want to apply whatever you’re using for performance criteria in office #1 to determine your next move.
There are different ways to set up the purchase of an office with regards to staff, so you should consult your employment attorney with any questions you may have.
And this brings us to our last question:
8. How will they administer the finances for each office?
In most cases a second office is a separate corporation. It should be treated as such – separate checkbooks, overhead calculations, etc. In many cases, I don’t see these separated out. You end up with a mish-mash back and forth that an accountant has to swim through at the end of the year because one practice was floating the other or taking care of some of the other’s expenses.
I say this for one simple reason: Every business needs to be able to stand on its own and be profitable. Mixing up the finances obscures this fact. It can give you the wrong idea of one or both.
How you go about doing this is best established by your lawyer and accountant. But for simplicities sake, you’ll probably be best served keeping each office as separate as possible.
An intriguing aspect of multiple offices that I don’t see discussed very much is the idea of centralizing some of the functions. While each office should be their own separate entities and financially viable, this does not preclude you from eliminating what would be duplicative jobs or activities and putting it all in one place. Again, how you could do this corporately would be something to discuss with your attorney or accountant. But I’ve seen it done very successfully.
Things that are easy to “centralize” are: marketing & PR, bookkeeping/accounting, ordering and supplies and staff training.
For example, if you have four offices, you might have one central location for training new staff as opposed to having a person at each office responsible for it and so on.
More offices can also create more favorable purchasing situations via volume discounts on marketing for instance. Obviously, the need for all of this would depend on how many offices you have and their overall volume.
And that about wraps up the subject. If you’ve managed to get through all three of these without an inordinate amount of caffeine – I applaud you (I’ve never been short on words…). If I missed some points or you have more specific questions, please feel free to contact me via email jeffb@mgeonline.com or call our office.
In the face of all of the advice in the world, you ultimately, have to do what you think is right as you will be the one responsible for whatever actions you take. With that in mind though, I hope that this information has served up some “food for thought” to make your experience with additional offices pleasant, profitable and more successful.
PLEASE NOTE: This article provided by MGE: Management Experts, Inc. consists of suggestions and ideas that could be used to help improve the solvency and viability of a dental practice. There is no guarantee that the information provided is appropriate to your practice. Each practice, their owners, officers and staff are individually responsible for ensuring that any system implemented in the practice complies with the applicable federal, state and local accounting, tax and employment laws, rules and regulations governing the place in which your practice is located. These suggestions do NOT constitute legal or accounting advice. You should seek advice from your own accounting and legal advisors as to what is appropriate to implement in your practice, prior to implementation. MGE: Management Experts, Inc., its officers, directors, shareholders, employees, agents and the writer of this article, are not responsible for any claims, real or otherwise, associated with this material and information or any part thereof.
MGE’s weekly webletter, Issue 25.
Here is the next edition of MGE’s weekly webletter. The purpose of this webletter is to provide ideas, tips and suggestions to make your practice more successful.
Feel free to send us your comments and suggestions, or requests for future webletter topics you would like to see covered.
If you wish to read the first in the series of webletters, click here.
Additional Locations – the Do’s and Don’ts, Part II
By Jeffrey M. Blumberg,
Chief Operating Officer, MGE
This webletter is part 2 of 3 in a series on opening additional locations. For part one in this particular series, click here.
Like many things, having more than one location can work out very well, assuming you’ve set yourself up to succeed.
In this series of webletters (3 in all), we’re covering some basic “do’s & don’ts” compiled from a combination of observation and fundamental laws of management. As I mentioned in the last issue, these webletters are based on personal observations on the subject and should be treated as such – you must always do what you feel is right as ultimately you are the one responsible for your actions. My purpose behind writing these things is to offer up a number of issues to consider and/or potentially address when it comes time to expand – thereby making any such expansion smoother, less stressful and as successful as possible.
And, as I mentioned in the last webletter, this information is targeted primarily at GPs who are looking at additional locations – not specialists. While some of this information would be helpful for specialists, there are a few different rules that apply to them with multiple offices. If you are a specialist and you find that you have questions that haven’t been answered in these webletters, e-mail me at jeffb@mgeonline.com or call me here at MGE at (727) 530-4277. The same goes for anyone else who reads these – feel free to contact me with questions
All right then, last week, we hit on eight key points I would discuss with a client who was looking at additional locations. They were:
- Why are they opening another office?
- Is their “house in order” at their current location?
- Where are they looking at opening the second (or third, fourth, etc.) office?
- Are they going to work in the new location? If so, how many days and how will this affect their primary location?
- Are they bringing in a partner in this venture or are they going it alone?
- Are they starting a scratch practice or buying an existing office?
- How are they going to staff the new office?
- How will they administer the finances for each office?
I broke down 1-3 above in last week’s webletter, which can be found here.
This week, we’ll delve into 4-5. And with that, I’ll start with point #4:
4. Are you going to work in the new location? If so, how many days and how will this affect your primary location?
This point is important from the standpoint of your financial future and the potential profitability of your new (and current) office.
You have an office that is successful and, as covered last week, this should be a prerequisite to opening location number “2.” You find an incredible location in a new, expanding area about 45 minutes from your office and close to where you live. It is, for all intents and purposes, an “ideal” spot to open an office.
Branching out to this new location, while exciting, should also demand a hard look at your current scene.
A few things to look at off the bat would be:
Do you have an associate?
I write this as I’ve seen plenty of cases where a solo GP opens a second location and decides to work both of them. This normally results in:
Lowered production/collections at location #1
- Doctor working six days a week.
- Doctor under financial stress as a result of trying to meet obligations at both offices.
- Doctor wishing he or she had not opened office #2
- Doctor trying to sell one of the offices.
While life consists of a number of experiences – this is one that can be easily avoided! If you want to open location #2 because you are doing poorly at location #1, see last week’s newsletter. In that same line of reasoning, don’t demolish the productivity at location #1 in order to open location #2.
At minimum you would need a functioning associate, who you were completely certain about – clinically and otherwise – before jumping into #2. They would have to be an excellent clinician – this is a no-brainer. They would also have to be proficient at case presentation and have a high rate of case acceptance. If you are the only one good at getting patients to agree to their treatment plans, you’ll see an appreciable drop when you start cutting out days at location #1. And keep in mind, location #1 has been paying your bills and supporting your family.
The type of location you open will have a lot to do with how much you will have to work in it. A scratch practice might only demand 1-2 days a week of your time, while a going concern could be a full time job.
Depending on the type of associate you have (i.e. maybe they are future partner material, which we’ll discuss in a bit), you might split time at the new place with the associate.
In sum, you’ll have to work things out so location #1 stays at the same level of productivity or better when opening #2.
Have you calculated how taking days out of location #1 (and paying an associate instead) will impact your personal and practice bottom line?
Associates don’t come cheap – and well they shouldn’t. Let’s say you’re paying 30% of collections to your associate and they collect about $40,000 per month, making their average monthly compensation about $12,000. You decide to spend two days a week in location #2 with the associate picking up the slack. By moving the patients you would have seen over to the associate for those two days, let’s say that you’ll be adding about $20-$40,000 to his or her schedule. Net result would be an additional $6-12,000 in compensation. This $6-$12,000 would come out of your profit. In this scenario, the owner/doctor would have to consider the financial impact this would create for them. If they are making that (or more) from location #2 and there’s a lot of upside then this might work fine.
Let’s take another example: Primary owner/doctor spends most of their time placing implants three or four mornings a week with two associates picking up the rest of the production. He or she decides to open a new office close to home. This set-up provides a lot more flexibility as they already have a fairly established production machine and their time chair-side is minimal. Tweaking the schedule a bit at office #1 allows them time to put into office #2 without missing a beat. And, as office #2 expands, associates from #1 might want to put in some additional time at #2 along with new associates coming on board. Net result: two very productive offices where primary owner doctor can focus on higher end work.
While there are a million different scenarios you can paint here, the point is simple – however you configure your expansion, these plans have to include running the numbers and figuring out how to make it work.
5. Are you bringing in a partner in this venture or are you going it alone?
With regards to partnerships, the pros and cons are pretty self-explanatory. Having said that, let me throw out something to “think about.”
A large part of what makes your office work is YOU. And there is a BIG reason that goes beyond the obvious reasons why: i.e. being the main producer, etc. This reason is simple: you have a vested interest and responsibility in seeing your office survive and succeed. Now, this is not to say that your staff don’t want this. You may have the greatest and most dedicated staff in the world. But, when push comes to shove, if your office were to go out of business or go bankrupt, the most your staff would lose would be their jobs. Now, I’m not saying this to make light of it and this would of course make it tough on them both economically and emotionally. But if this were to happen to you as a business owner – you would be in a far worse position. You have much more to lose.
This factor – both the responsibility and care you must have as a business owner – makes your presence on the scene very important.
Without you there in the office, things can only get worse if you have employees (or associates) who really aren’t dedicated or don’t care what happens to the business.
I’m not a dentist, but I’ll tell you this. If I were going into multiple locations I would probably go into some type of partnership for the old or new location – which one would depend on where I’d be working the most. It wouldn’t have to be 50/50. If I wanted to maintain controlling interest, it might only be as low as 10-25%. Either way, I’d know that the dentist in my other location had a stake in how that location performed, both clinically and fiscally and had their “neck out” just like me.
This would have additional benefits: my partner – unlike an associate – couldn’t just quit and open up down the street. They would have a responsibility to the practice.
A big downside for many associate relationships is that the associate could, in theory, just come in tomorrow and quit, depending on their contract (or lack thereof). Normally, partnerships are not ended quite that easily. This factor can make a partnership tough when it’s not working out due to personality conflicts or any number of other reasons. So, while you should afford ample time and effort to due diligence when selecting an associate, you would have to expend even more effort when selecting a potential partner.
And with that, I’ll wrap up this week’s installment. Next week, we’ll look at the last three issues: Are you starting from scratch or with an existing office along with how you would staff and manage the finances of each location.
PLEASE NOTE: This article provided by MGE: Management Experts, Inc. consists of suggestions and ideas that could be used to help improve the solvency and viability of a dental practice. There is no guarantee that the information provided is appropriate to your practice. Each practice, their owners, officers and staff are individually responsible for ensuring that any system implemented in the practice complies with the applicable federal, state and local accounting, tax and employment laws, rules and regulations governing the place in which your practice is located. These suggestions do NOT constitute legal or accounting advice. You should seek advice from your own accounting and legal advisors as to what is appropriate to implement in your practice, prior to implementation. MGE: Management Experts, Inc., its officers, directors, shareholders, employees, agents and the writer of this article, are not responsible for any claims, real or otherwise, associated with this material and information or any part thereof.
MGE’s weekly webletter, Issue 24.
Here is the next edition of MGE’s weekly webletter. The purpose of this webletter is to provide ideas, tips and suggestions to make your practice more successful.
Feel free to send us your comments and suggestions, or requests for future webletter topics you would like to see covered.
If you wish to read the first series of articles, click here.
Additional Locations – the Do’s and Don’ts, Part I
By Jeffrey M. Blumberg,
Chief Operating Officer, MGE
This webletter is part 1 of 3 in a series on opening additional locations.
MGE Power Program clients’ offices tend to expand fast – sometimes VERY fast.
Having taken so much ground in such a short period of time, it’s not unnatural to want to expand your “game” and maybe open an additional office (or ten…).
I say more power to you and, in that vein, wanted to share a few observations I’ve made over the years on what seems to work and what does not when it comes to opening multiple locations.
Before I get into this, let me give you a little disclaimer. This webletter is based on my personal opinions and observations. Please treat it as such. As always, you must do what you feel is right and is your own reality. This is not the “official position of MGE in these matters,” it is however my official position. Additionally, this information is targeted primarily at GPs who are looking at additional locations, not specialists. While some of this information would be helpful for specialists, there are a few different rules that apply to them with multiple offices. If you are a specialist and you find that you have questions that haven’t been answered in these webletters, e-mail me at jeffb@mgeonline.com or call me here at MGE at (727) 530-4277. The same goes for anyone else who reads these – feel free to contact me with questions.
Ok, with that out of the way, let’s take a look at this subject.
If a client were to approach me and ask for my advice on opening a new location, I would initially have them consider the following:
1. Why are they opening another office?
2. Is their “house in order” at their current location?
3. Where are they looking at opening the second (or third, fourth, etc.) office?
4. Are they going to work in the new location? If so, how many days and how will this affect their primary location?
5. Are they bringing in a partner in this venture or are they going it alone?
6. Are they starting a scratch practice or buying an existing office?
7. How are they going to staff the new office?
8. How will they administer the finances for each office?
I’ll break each of these down further and give you an idea of what I’m looking at in each instance.
1. Why are they opening another office?
People can do what they want, but obviously I have a responsibility to a client. While I don’t ultimately control what a client is going to do, I’ll be the first one to say something if I think they are making a mistake. So, I usually ask this question first. I want to know what’s motivating them to add an additional location. If I hear answers like “I hate my office and want another one,” I’d find out why. If the location was a real problem (e.g., not enough space, no room for expansion, etc.), I might advise that, distance permitting, they just move. If I hear, “I’m not making enough money from my first location,” or similarly, “my first location isn’t very profitable,” I’d probably advise them to hold off on a second location until they sort this out. Why? Well, if your primary location isn’t profitable, then we’d better fix that first (more on this later). And if location #1 isn’t making money, what’s to stop this client from repeating this in location #2?
If they are doing fine in location 1 and just want to do more, then they could be ready to move on to location 2 and beyond, which leads us to the next point:
2. Is their “house in order” at their current location?
This one is a very big deal. If you are looking at expanding out, you’d want to make sure that your primary location is in pretty good working shape. The last thing I’d want someone to do is leave to start a new location with a mess at the old office – employee strife, low profit, down statistics, etc. All of these issues will just suck their attention back into that office. I would look at a couple of things here with relation to the primary location:
a. Is the office properly organized and staffed both adequately and stably?
b. Does the office have competent and trained executives who can run the office successfully as shown by statistics?
c. Are the stats of the primary location in a good range?
d. Is the primary location continuing to grow? Even if this growth is minimal – it shouldn’t be contracting. This would apply to revenues and new patients.
e. Is the primary location profitable? Here I would want to know that it’s not just “paying the bills.” It should be able to save a decent amount each and every month and continue to support the main owner/doctor. Especially if the owner/doctor is going to be spending some time in the new office. Let’s say, you are going to cut down to two days in your old office and add two days at the new location, with an associate picking up the slack. In this case, I’d want to make sure that the old office is still viable for the owner/doctor while factoring in what you’ll have to pay the associate.
3. Where are they looking at opening the second (or third, fourth, etc.) office?
Whether you are buying an existing practice or starting from scratch (again more on this later), where you buy or start it is important.
And by this I don’t mean picking the “ideal” location – i.e., traffic, visibility, etc. That is something completely different. What I mean here is the proximity of your new location to your primary office.
In my opinion, I wouldn’t put the new office so close to the old one that patients could drift back and forth between the two. I’ve seen this before and while it might appear to be convenient, it can cause problems down the road. Similarly, I probably wouldn’t go out and start an office three hours away – if for nothing else the inconvenience.
Think about how all of this will play out down the road. Some day you’re going to want to retire or cut back. You may, at some point, want to sell one of your locations and stay practicing in another. If the locations are too close, this can prove to be problematic. For example, let’s say you have two practices within five miles of one another. They are both successful. Patients move back and forth between the two. You decide to sell one of the locations and keep practicing in the other. A prospective buyer looking at this deal may have a problem with this. Why? They are so close that he or she runs the risk of buying your office only to see the patients follow you to the office you are staying in.
This could kill some of the goodwill value of your practice when it comes to the sale. Conversely, you could sell the location itself with no charts, keeping and moving the patients (which means a lot less for you in the transaction), only to see some of the patients go to the doctor who purchased the other office due to familiarity or convenience.
If you are selling all of your offices to one buyer then this is obviously a non-issue, although needing a buyer like this to pull the sale off definitely limits your pool of potential buyers.
This all handles by asking yourself a simple question before you open the new office: If you were a dentist and looking at buying one of your offices, with the idea that the dentist you were buying from was staying put in the other, would you buy it?
If the answer, based on location and proximity, is “Yes,” then you should be OK. If the answer was “No way,” then you might need to find a different location.
How far apart they should be is completely subjective and depends on where you are and you’ll have to take this into account. In New York City, fifty blocks (about 2 ½ miles) is a world away. In a normal suburban area this is a five to ten minute drive depending on traffic and no real inconvenience.
Starting or buying a dental office is an expensive proposition. It’s definitely more involved and usually more expensive than buying the family home. Don’t put yourself in a position where you’ve laid out hundreds of thousands of dollars only to wish you’d located elsewhere. While it’s not the end of the world, it’s avoidable, so do your due diligence, especially on this point.
And with that, I’ll wrap up this week’s installment. Next week, we’ll look at the next two issues: How much time you’ll spend in your new location and the pros and cons of adding a partner in the new location.
PLEASE NOTE: This article provided by MGE: Management Experts, Inc. consists of suggestions and ideas that could be used to help improve the solvency and viability of a dental practice. There is no guarantee that the information provided is appropriate to your practice. Each practice, their owners, officers and staff are individually responsible for ensuring that any system implemented in the practice complies with the applicable federal, state and local accounting, tax and employment laws, rules and regulations governing the place in which your practice is located. These suggestions do NOT constitute legal or accounting advice. You should seek advice from your own accounting and legal advisors as to what is appropriate to implement in your practice, prior to implementation. MGE: Management Experts, Inc., its officers, directors, shareholders, employees, agents and the writer of this article, are not responsible for any claims, real or otherwise, associated with this material and information or any part thereof.
