Bruce Bryen is a certified public accountant with over 45 years of experience and is a part of Baratz & Associates CPAs. He specializes in deferred compensation, such as retirement planning design; income and estate tax planning; determination of the proper organizational business structure; asset protection and structuring loan packages for presentation to financial institutions. He is experienced in providing litigation support services to dentists with Valuation and Expert Witness testimony in matrimonial and partnership dispute cases. He is also a financial writer for several dental journals. You may contact him at 609-502-0691 or at 

Bruce Bryen, CPA, CVA

What to Know About Dental Practice Valuations During Divorce Proceedings | Image Credit: © alex - stock.adobe.com

For dentists involved with divorce proceedings, the first question asked of an evaluator often involves what the cost of the dental practice valuation will be.

This may be better off asked at the end of the interview with the evaluator. Finding out about the evaluator’s credentials, experience, expertise in the court room and the number of times dental practice valuations have been prepared may be better questions to ask at the outset prior to getting to the cost of the valuation.

As most people realize, price can be misleading. A low price for the preparation of the valuation may be because the evaluator does not have the experience necessary to present the practice in an independent format so that the judge or mediator will not laugh him or her out of the room. The evaluator should not be an advocate for the dentist. That is the job of the attorney.

The evaluator’s job is to present the dental practice in such a way as to maintain his or her independence and not be led by the dental client or the client’s lawyer. Just like the dentist wants the best dental CPA for his or her business services, the best evaluator of the dental practice will present a sometimes financially life-changing report that will dominate one with facts that is prepared at a lesser cost.

Is price the object or is the best evaluator the object?

Price is certainly an important consideration when determining which evaluator to choose but it should not be the sole criteria for determining who is chosen to prepare the valuation. The dentist and his or her spouse will probably both retain attorneys. They will be advocating exclusively for their client. They will also be relying on the valuation prepared by the independent evaluator.

The lawyer’s proof when making his or her presentation about the value of the dental practice will be swayed by the supporting documents in his or her possession. The valuation report should be the most important document that the attorney is relying upon to support the dentist’s case about the value of the dental practice. If the spouse is getting an evaluator with the expertise needed who understands what is required from him or her, the lack of the best evaluator because of the cheapest price will hurt the dentist probably to the extent of hundreds of thousands of dollars over the long term.

It is analogous to the use of a computer and the results obtained when someone in the know remarks, “junk in, junk out.” When the valuations are exchanged for their critique during discovery, the dentist’s attorney may be surprised by the inclusions in the spouse’s expert’s valuation compared to what is in place for reliance by the dentist’s own attorney. You can also be assured that the dentist’s attorney is not hedging on legal fees while the case is ongoing.

What credentials should be assessed when determining the choice of dental practice evaluator?

Since it is rare for an attorney to know a great deal about dental practices, and even more unusual for the lawyer to admit a lack of knowledge, relying on the dental CPA is probably the place to start the search or dialogue regarding which evaluator should be retained. Hiring a CPA for the dental practice who does not have any dental clients is probably a bad decision.

Once the dental CPA is engaged, the dentist should easily see the difference between the general-type CPA and the dental CPA based on experience, advice about percentages of costs compared to gross revenue, and knowledge of appropriate dental practice evaluators as well. The dental CPA will have knowledge of evaluators to interview probably well in excess of the attorney’s knowledge as experience creates wisdom as well as the ability to have more contacts in a particular field of endeavor.

Some of the interview process should include but not be limited to the following questions: How many dental practices valuations have you completed? How often have you testified in court? What is the number of mediations or settlement conferences that you have attended? How about attendance at depositions? Have you ever worked in the geographic area in which the dental practice is located?

Since cost is a question, what are the additional costs for attending the mediations, settlement conferences and trial if necessary? The dentist and the lawyer do not want to have any surprises. What information is needed to be provided to the evaluator and what is the estimated time of completion of the valuation once the information is presented to the evaluator?

Are there other reports besides the valuation that are important?

There are only about 10 states that are not what is known as “equitable distribution states.” That means that at least 40 states do use the method of “equitable distribution,” to determine the amount to be distributed from an asset value to the spouse and to the dentist. Equitable does not mean equal. Many feel that it does mean a 50% division of the assets including the dental office. That is not true.

There are numerous factors that are presented in a report that many evaluators do not prepare to assist a court or mediator in determining what amount the dentist and the spouse are to receive. The most important factor in these 40+ states for the dentist is the amount of personal goodwill that is attributed to him or her. Those evaluators who do not prepare an allocation of goodwill are hurting the dentist and attorney for the dentist with the presentation of the case.

It is rare to find a court where the judge is not an attorney. Since most lawyers have had little experience with dentists, the judge will also need assistance in determining what the presentation means. When the evaluator of the dental practice includes an allocation of the goodwill between the personal and enterprise ratios, the judge and the dentist’s attorney will be greatly helped in being able to decide to render an opinion of the distribution of the value that he or she determined. Some of the criteria for assisting the court and the dentist’s attorney are found in the Multi Attribute Utility Method, commonly known as MUM. This discourse highlights many of the attributes used to determine how much is personal goodwill, which is not a marital asset, and how much is enterprise goodwill, which is a marital asset.

Examples are how much is produced by the dentist compared to other producers in the office such as hygienists? Where is the location of the office and how important is that for patients to access easily? What information is included on the website? What is the work ethic and health of the dentist? What type of marketing is being used? There are many other attributes to be included under the MUM method. Each of these gets a weight which is used for assisting the court in decision making about the distribution to each party.

Suppose the spouse’s evaluator understands and includes this report in addition to the valuation and the dentist’s evaluator does not? The judge and the attorney for the spouse will have a tremendous advantage over the more cheaply priced evaluator chosen by the dentist based solely on the price of the dental practice valuation.

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The cost of the dental practice valuation is seldom the right way to select the best evaluator.

What to Know About Dental Practice Valuations During Divorce Proceedings

Know the Benefits of DSOs If You’re Looking to Sell Your Practice | Image Credit: © Andrey Popov - stock.adobe.com

The Dental Service Organization (DSO) offers many attributes to the dental practice owner as a going concern because of its lower costs to operate.

Examples include the purchase of dental supplies, equipment and marketing costs among other items. This is mostly because of the large volume of purchases made by the DSO. Their purchase volume is large because they are buying for many dental practices that they own now or will own shortly in the future.

The question would be that if the dental practitioner wants to be part of a going concern where he or she is a profit center and a payout is based on future earnings, this may be the best place to be.

In the event that the dental practice owner wants a payment that is not based on the future, a solo or multi-partner ownership who offers to buy the practice may be the best for the dentist. In either case, the dental practitioner who is looking to sell his or her practice will want to know how much he or she is receiving now or now plus in the future.

There may be many reasons that the dental practice owner wants to sell his or her practice. Some examples are the dentist’s own health, the stress of working and trying to maintain a strong cash position to meet payroll requirements, and other items too numerous to mention here. Sometimes it is difficult for the dentist and his or her advisor to understand exactly what the DSO is offering because so much of the bid for the practice is based on what will happen in the future.

What does it mean when the DSO offers cash, a note payable to the seller, and a stock ownership in the DSO to the dental practitioner?

When a private offer is on the table for the dentist who is selling, the typical sale includes a closing that is scheduled to take place quickly. The amount of the purchase includes a lump sum payment at the closing with the potential for an earn out to give the seller more if certain conditions have been met. This is somewhat like the offer from the DSO except that the private purchase will be much lower than the DSO will offer to the seller. The reason for this is at the closing, the DSO will pay some cash as a down payment and then based on some agreed upon conditions that the seller and the DSO hope will occur in the future, more cash and the potential for a note payable to the owner who just sold his or her practice to the DSO. 

As the years go by and additional goals are achieved by the DSO, the stock of the DSO may be offered to induce the seller to work harder, if employed by the DSO, to obtain an ownership position. It is common for the DSO to employ the seller for a period of time after the closing occurs to keep the owner’s “skin in the game.” If the owner wants to be paid and to be retired, the sale price would probably be lower since there would be no incentive available to the seller. He or she would not be around to work and to offer advice to those who are in the employ of the DSO. One of the attributes of the DSO is that there is no or little administrative work to do and the dentist would have to use his or her clinical skills only at the chair.

When do the advisors to the dentist and the dentist understand what he or she would be receiving from the DSO?

The dental practice has a dental CPA, an attorney with experience in working with clients who are dentists and a hedge fund or venture capital group who are the money people to the DSO. They also may have settled quite a few of these transactions with dental practices so they have experience with what it takes to close a transaction. If each side to the transition really want the transaction to occur, it will and it will be sooner rather than later. The understanding does not guarantee that the goals will be met since that is based on the future. The DSO knows that it must offer quite a bit more than the private practice that may be bidding on the dental practice acquisition as well.

Since the big upside for the dentist is based on reaching certain goals, the DSO knows that it must set these goals realistically or they will get a reputation as not being able to perform. The goals will be set so that the acquisition will have to work hard to reach them, but they will have the opportunity to do so. The DSO profits as well if the new dental practice just acquired can reach its goals. If they do, it will make the DSO more attractive to a third-party buyer that may be a larger DSO or a venture capital firm or hedge fund. Everyone benefits if that occurs.

After the dental CPA, attorneys for both parties to the transaction and the principals are satisfied with the terms and conditions of the transaction, the transition will probably close. Everyone must compromise a little bit but if the goals are met there will be a pot of gold for the dentist and the DSO at the end of the transaction. Depending on the wishes of the dentist and whether there is a realistic opportunity to reach those goals, a second and maybe a third settlement will take place as the upside of the transition will occur. The dentist should know that the first offer from the DSO will not be the last offer. The DSO has the capital and lines of credit to continue the negotiating while the private buyer has a limit.

Dentists who are well informed can negotiate the best terms and conditions when dealing with the acquisition of a dental practice.

Know the Benefits of DSOs If You’re Looking to Sell Your Practice

Dental Practice Evaluators Must Be Keen on Goodwill | Image Credit: Good Ideas - stock.adobe.com

A dental practice owner looking for a dental practice evaluator is not putting himself in the best situation if the person leading the way is an attorney. That is because it is rare for an attorney to have had much if any experience in representing dental practices in general.

The situation with a divorce is even more complex than a divorce situation with a general business person. The main difference between the general business situation and the dental practice is goodwill and its significant value to the dental practice compared to its less-than-important value to the general business.

For the plaintiff or defendant in a dental practice divorce situation who has never been involved with litigation before, the retention of an attorney may seem like 1 step closer to completion. Unfortunately, this will not be the case if the attorney with no knowledge of dental practices or just a little bit of knowledge about the subject knows little about the occurrences in a dental practice. This expert attorney will need a lot of assistance in preparing his or her case for the courtroom and proceeding to trial. If the attorney has the humility or lack of ego to request help, the best place for him or her to go with the request is to a dental CPA.

A dental CPA who has had experience with dental practices as well as with dental practice evaluations and evaluations and the courtroom will be the best person to assist the attorney with his or her case. The dental CPA can’t present the case for the client to the court but he or she can prepare the attorney with questions to ask the witnesses so that the judge has a clear understanding of what the dental practice is all about. Since almost all judges are former attorneys, it is rare for them to know much about dental practices as well since they are also less likely to have had a client who was involved with a dental practice when they were practicing attorneys.

Time, money, and frustration felt in preparing for the trial:

For the client, the time spent preparing for the trial can be overwhelming. The hours and days of finding information that is needed for the proof presented when the trial is taking place become a true hardship. The work being undertaken and the time away from working with his or her dental practice becomes a severe financial burden for the client. Patients may start looking elsewhere for their oral care needs if their regular caregiver is not available to them. Constantly switching appointments with their patients is not a good thing to do even though it may not be avoidable as the information gathering seems to never come to an end.

Understanding the Importance of Goodwill to Both the Dentist and the Dental Practice 

There is also the need for money to pay the attorney and the dental CPA as they spend enormous amounts of time in the preparation of the case for the courtroom. The format for trial must be addressed like it will be going to court or at least to settlement conferences so there really shouldn’t be any skipping in the gathering of data and in its presentation. The frustration by the client is something that is really difficult to quantify since to those who have not been to court, the never-ending requests to gather information and then find more data for responses to depositions and settlement conferences seems surreal.

With the hard work and years of identity building spent with the dental practice, the amount of time incurred with the preparation for the trial seems like it is pulling away the work that was done to build the practice. The reputation of employees can be severely affected by the time and money spent on the preparation for the trial as it took away from the relationships that took years to build. The only alternative to end this drain of time and money and loss of dental practice credibility may be a settlement that may cost thousands of dollars more than expected in a trial. This may leave the dentist in an almost impossible situation concerning the options that are available. There is no easy way for the dentist to end this problem where he or she can feel like whatever choice is taken will be the correct one so that his or her life can go on peacefully.

Summary of the steps to take as the divorce process begins:

If the dentist chooses to retain an attorney without the advice of his or her dental CPA, the hope is that the attorney does not possess such a big ego that the advice of the dental CPA is ignored. In the almost perfect situation, the dentist has retained the dental CPA first, and this person then assists with the hiring of the attorney. This is because the dental CPA has probably worked with attorneys in the past who have represented practices during divorce proceedings.

This process allows the dental CPA to know those attorneys who have excelled with their representation of dental practices and those who have not. One of the first things the dental CPA will recommend to the dentist is that he or she retain a dental practice evaluator to prepare a dental practice valuation based on the financial records of the dentist. This will be of the utmost importance for the determination of which party to the divorce case receives what amount of distribution from the dental practice. Sometimes the adverse party does not bother with getting a dental practice valuation. This is not something to be concerned about for the dentist since the mediator or judge will have the dentist’s independent valuation and will have nothing else to use to determine the outcome of the case. Being prepared is extremely important since it is the dentist’s practice that is being looked at for its division.

When shopping around for a dental practice evaluator, the top choice to lead the search should not be an attorney with little dental practice experience.

Dental Practice Evaluators Must Be Keen on Goodwill 

What Are You Really Getting When You Sell Your Practice to a DSO? | Image Credit: andrey popov - stock.adobe.com

The art of negotiating a contract and what you will earn from it should make you feel terrific based on what the lead people from the dental service organization (DSO) are telling you about your dental practice.

The promises they offer you may keep getting more and more exciting from a practical standpoint. One of the most important things while discussing what you are going to get is what has been written down and promised. This matter can become confusing because there have been so many promises made by those leading the discussions that it is hard to remember what all was said.

There are many opportunities for each type of dental practice. The importance of dental practice advisors is probably the key to making a decision that will be life-changing whether it be for the good or for the bad. The dental practice advisors’ list should begin with the dental CPA. This person should not be a CPA who has an expertise in general business accounting such as someone who has experience with businesses that have a large inventory of a product.

Consider Pros and Cons Before Executing a Dental Practice Partnership Dissolution

The main difference that will affect the dentist is that a general business with a high valuation for inventory typically does not have a good understanding of goodwill. This item is probably the most valuable with the highest value assigned in a dental practice valuation. Goodwill can account for as much as 75% to 80% of the value in a dental practice valuation. Compared to the general business model, the inventory may have 75% to 80% valuation of the business. When selling the general business compared to selling the dental practice, because of the allocation to goodwill, the dental practice transition will typically allow a capital gain tax approach while the inventory valuation will not.

That alone may be the difference in receiving or not getting a 25% tax compared to a 50% tax for the seller of the dental practice when comparing it to the sale of the general business.

The dental practice advisors. Who are they?

When advising a dental practice and the dentist, the most important advisor is almost always the dental CPA. This is a person with experience in evaluating dental practices and in assisting the dentist in acquiring the loan for the dental practice acquisition or start up. The dental CPA will have knowledge of other dental practices that he or she has advised in the past. This person knows what a lender is looking for with financial projections and can make sure that the expense ratio to projection gross revenue is within the guidelines established by national and local experts who compile averages and publish in various well-known professional dental publications. After all the work done by the dental practice advisor to assist in establishing a value for the dental practice, the dentist will surely be happy that he or she chose the dental CPA for this assignment and not the general business CPA. 

A good dental practice attorney will know that he or she should rely on the dental CPA for additional help when drafting contracts and assisting the dentist with other legal matters. There are attorneys who have assisted in helping the dentist interested in joining a DSO and knowing the laws in the states where the DSO has successfully opened their doors and gotten their employees to understand the big picture. It is important for the dentist to retain an attorney who has had experience with DSOs.That attorney as well as the dental CPA probably have contacts with the lenders as well who understand how to lend to a DSO or an individual dentist who may be joining the DSO.

The clinical side and the administrative side of the DSO

Of course, the entire concept of the DSO is the size of the practice, its clinical side as well as its administrative side and making sure the employees are expert at what they are hired to be doing. The DSO does not want a dentist to be working on the administrative side of the practice. The dentist should be at the chair doing clinical work and bringing in the money. The CPA, attorney, and other administrative people should be working on the administrative side of the practice and trying to keep the money that is being earned to remain in the practice. Other administrators will be looking to acquire additional dental practices and will have input into who shall be hired, their compensation and benefits and potentially their rights to buy into the DSO and to become shareholders. Sometimes the founders of the DSO are skilled in administrative details and may join in the nonclinical workings of it for a time in the beginning of the organization until top-notch administrators are hired.

The goal of the DSO is to have the top-producing dentists produce as much as they possibly can. As the DSO becomes stronger financially and its employee base is stable, it will then start to look at other DSOs as well as additional dental practices to increase their cash flow and to make them more attractive to others who may be interested in merging with them or acquiring them. This is the point where the dental CPAs and the attorneys with experience in working with DSOs and their lenders will have an opportunity to shine. The process can start again but with a much higher base of positive cash flow, employees in strategic positions, and without the need to hire more highly-priced personnel.

If the clinicians and administrators stick to their field of expertise and don’t interfere with the overall operation by thinking like they were still involved in a small way rather than the large DSO organization that they have become all the above writings will almost guarantee a blueprint for success, especially for those who were among the original members of the DSO.

If clinicians, administrators, and the proper dental advisors do their homework and work well together, plenty of success can follow.

What Are You Really Getting When You Sell Your Practice to a DSO?

Consider Pros and Cons Before Executing a Dental Practice Partnership Dissolution: © HBS - STOCK.ADOBE.COM

When a dental partnership has been together for over 30 years and experienced all the ins of outs of a business partnership, one would think that almost everything has been seen and done. Once a small matter has been overcome, the idea that the partnership would become very stable and not worry about something minor after so many years seems to be a normal situation.

Unfortunately, the dental partnership is just like a marriage partnership in that there can be times that a repeat of what has occurred previously happens 1 more time and things become boring or so repetitive that the practice becomes unexciting. Issues that should not cause problems, suddenly do. Of course, almost everything is about money, and this is when bickering begins. The small matter that causes one of the partners to become upset brings up the cost of what just happened.

It may be a matter of a small amount of money but can be the boiling point emotionally. When so many other things have occurred and added to the cost of the practice one of the partners looks at this small amount and forgets the 30 years of being together and overcoming difficulties. The big picture of how much he or she has been taking home over the years does not enter the minds of either partner while the spat over the small item is ongoing. It is just about now when each partner says that the end is near and it is time to see an attorney.

What happens next after the fall out of the relationship?

Hopefully one of the partners is brought down to earth and starts thinking about what has happened and the financial consequences of breaking up the dental partnership. The minor item that the partners were arguing about may be a $100 charge or some amount not significant based on their history of earnings. The partners have each been taking home hundreds of thousands of dollars and now at last they realize what they are jeopardizing. Let’s look at some of the charges that occur when a partnership is in the process of dissolving. First there is the retainer paid to the attorney. Hopefully, the retainer is enough to satisfy all the time that will be involved with the dissolution. The dental CPA comes next, and what he or she must do to affect the end of the partnership is determined. This includes filing final tax returns and probably assisting with the formation of a new business entity for the partner that he or she may still be representing. There may be administrative personnel to be hired such as a bookkeeper, insurance person and an office manager. The charge from the dental CPA will be significant as he or she may have more to do than the attorney who was retained. These are some of the direct costs that are on the horizon.

Indirect and hidden costs coming to the dentist who is going to continue to operate:

Winding down the partnership until the dissolution occurs causes the dentist to have to resolve arrangements with the patients and to let them know where he or she is going to be continuing the practice. With the effort needed to be involved with the attorney and the dental CPA and the time needed to gather information for those people, a lot of production will be lost. Unless the dentist changes his or her hours of operation and without working at night and possibly on weekends as well, the revenue of the practice will most likely drop significantly. This may be when each of the dentists in the partnership decides that starting over again is not such a good idea. This is a good “back to reality check” on the costs incurred when dissolving a partnership. It also is a time to think about the costs of creating a new dental practice.

Starting over and creating a new dental practice:

If the partnership described above is dissolved and a new dental office is created, there is at least somewhat of a patient base joining the new dental practice. The patients who come to the practice because of the dentist gives a decent starting point for him or her. The marketing money spent and the cost of the move are items that will hopefully be recovered as time passes and the new location becomes known to the public.

The revenue from the new location is what brings hope that the move and dissolution of the old partnership were worth it. The peace of mind coming from the lack of “harassment” also has a lot to do with the success now that the move has occurred. This change in ownership structure and becoming a solo practitioner may be like fresh air blown into the life of the dentist. It may be that his or her income will grow past what it had been in the partnership. Weighing the costs and the freedom of being an individual owner may be the best thing that has happened to each dentist after all the years of being together. Let’s look at the pros and cons of the start-up of the new practice.

Starting this dental practice compared to a truly new dental practice without recognition of the name, reputation, and base of patients available to this practice is a different set of circumstances. This existing dental practice has a running start because of these items that are part of the “already going concern,” available to it. A new dental practice without these items will most likely take a while and a lot of money to get the recognition and revenue to make it a successful dental practice.

Building a network of referral sources and a patient base takes time and money. Marketing, joining local study clubs for introductions to the community of dentists and other organizations where people and leaders in the banking, legal and other professional groups are met is a must. All these things are time sensitive and exhaustive procedures. Is it the right thing to dissolve the partnership and go out as a solo practitioner? The answer is that only time and money will tell.

Before making any hasty decisions about a split, make sure to investigate all that is involved in opening a new practice and weigh both the positives and the negatives of such a move.

Not all marriages have fairytale finishes. Some end in divorce, which often leads to lawyers and lots of negotiations. When a dentist is involved, the division of assets can vary from state to state.

Depending upon where the dentist and his or her partner live, their divorce may assist the dentist or the dentist’s spouse. As an example, if the couple lives in a state in which equitable distribution is the rule, the dentist’s personal goodwill will help him or her escape a large judgement in favor of the spouse.

This is because the dentist’s personal goodwill is not considered to be a marital asset. It is aligned with the personal assets of the dentist and is not available for distribution to the spouse. The enterprise or dental practice goodwill is not a personal asset. It is considered a marital asset and that amount attributed to it is available for distribution to the spouse. It is not a personal asset, but it is considered marital property and is divisible based upon what the judge in the case decides is the percentage to go to the spouse and what will go to the dentist. This will enable the case before the judge to be complete. It is important to add a study of the goodwill attributes and the assignment to the marital and personal goodwill of the dentist.

What occurs at a trial in a state that is recognized as a community property state?

Unlike a state that is recognized as an equitable distribution state, in a state that is termed as a community property state, everything is divided into 2 parts. One is for the dentist and the other is for the spouse of the dentist. In this type of state, the spouse will most likely receive more of a distribution from the dental practice than in an equitable distribution state because of the valuation of the dental practice with no need for a goodwill allocation. The dental practice being evaluated presents no need for an allocation between a personal goodwill and dental practice goodwill step by step amount allocated because of the attributes of goodwill. Preparing for the tax approach if the practice is eventually sold, the personal and dental practice goodwill is an important approach to be allocated.

The hypothetical final settlement and the example for the dentist and his or her advisors:

To give a hypothetical example of the difference between the equitable distribution state and the community property state, the following should assist those wondering about who gets what in a divorce settlement: If there is $1,000,000 to distribute from the dental practice and the state is a community property state, the hypothetical distribution would be $500,000 to the dentist and the other $500,000 to the spouse of the dentist. There would be no regard to the goodwill of the dentist or of the dental enterprise. In an equitable distribution state, the goodwill of the dentist was $700,000 and the goodwill of the dental practice was $300,000. The dentist would then receive $700,000 and the spouse would receive $300,000. This allocation is what the court would decide. Of course, the judge’s final opinion could be appealed and the arguments would be put forth to an appeal’s court who would either concur with the trial judge’s opinion or change the amount that would go to each of the parties. An appeals court could also send it back to the trial judge for “reconsideration.”

Equitable distribution and community property states

The dentist and the spouse of the dentist live where they live. They can not change their address just because they want to have their case heard in an equitable distribution state or a community property state unless the dentist moves his or her dental practice.

It is hard enough to move a house. Moving the dental practice is an arduous process that takes a lot of time. It can also ruin the positives that took so long to build in the prior existing dental practice office. The settlement is based on a court’s decision. The best approach is to allow the court to have as much information as possible and to present facts that will assist the court in its determination about whether the presentation by the dentist and his or her spouse is strong enough to favor the client who is being represented. If it is not, it is time to go back to the valuation and dental practice attributes and make as many revisions as it takes to assist the client. Pricing the presentation may have to be adjusted but if honesty is what the dental practice presenter wants to see and what his or her client wants then an adjustment to the valuation that may cost more now, can cost quite a bit less than if the dental practice evaluator must return to update the proposal.

Finding the best dental practice evaluator and the best attorney available to present the case and to win it:

Everything is all about the money. There is an adage that goes like this: “Pay me now or pay me later:”

Get the best dental practice evaluator that you can find. This person will be more expensive than an evaluator who does not specialize in dental practice evaluation. Get the evaluator who is also someone who may go to court. Do not get an evaluator who is leery about a court room appearance. The evaluator’s testimony may win or lose the case for you.During your interview process to get the best, remember that some of the top evaluators will not testify. They are afraid to go ahead with the valuation and critique of the other evaluator’s valuation. These people will want to know if there is going to be a definite court room appearance. They will many times not take the case if it means that they must testify. Having the adversarial attorney rip up your case is a humiliating and humbling feeling since you are an expert.

So, here’s a final bit of advice: Let the client interview you and he or she can assist your client’s attorney in deciding who to hire.

Different states and different individual circumstances can have an impact on dentists’ decisions about going to court or attempting to mediate a divorce settlement without court. 

Understanding Equitable Distribution, Community Property, and Goodwill When It Comes to Divorce Settlements

There are many ways to improve efficiencies and help your dental practice thrive. It seems easy to consider doing what must be done to enhance the dental practice and make it prosper.

However, some dentists procrastinate, which delays the dental practice from improving. One excuse is a response such as, “I was too busy to read the last financial article about practice value growth and income awareness.” When an adviser consults with a dentist, they advise the dentist to become organized and not delay what was set for the day’s schedule so there is no falling behind on items that will increase the value and income of the dental practice.

Reading a newsletter, listing questions to ask if there are any, and making sure that the questions are delivered and answers are fully understood is one way to assist in making helpful changes. It’s surprising how many situations and complexities in one dental practice are similar to those in others. Accomplishing things is not difficult if the dentist doesn’t stray from his or her tasks and completes them when they are addressed.

It is easy to place the professional dental publication on the counter and ignore it after reading a paragraph or two. However, the dentist will miss an opportunity to see what the experts are offering as advice. This is a free or inexpensive opportunity compared with taking the staff to seminars to learn about concepts that are unknown to the dentist or staff. A dental practice has the chance to grow, which will mean more net income for the dentist and employees who want the dentist to strengthen office procedures and give them the opportunity to earn more money.

If only part of the publication is read and the magazine or newsletter is left on the counter, you might not retain the information well enoughand the dentist will realize their time was wasted. The important thing here is the value of the dentist’s time, because time is what the dentist uses to generate gross revenue for the practice. Because most small dental offices are not coming back and continuing as the same type of office they were before the pandemic, this is a critical time for the dentist.

Just like completing an article about finances before starting something else, the next step should be taken as the next step; shifting to something else will interrupt what the dentist is already trying to learn. That said, patients need the dentist and employees need answers to various questions so they can finish their specific task with a patient, and many other interruptions will stop the dentist from finishing whatever they have started. The answer may be for the dentist to arrive half an hour early to the office or stay half an hour after business hours until the article is read and understood. Locking oneself in a room may be the only way to complete the task. There is nothing wrong with doing that because the dentist is often the owner of the practice and no one else is going to read the article for the owner. Reading and grasping the significance of an article about dental practice finances is one of the easiest ways to learn and achieve.

There are so many other sources for the dentist to learn how to enhance the dental practice and its finances. The practice should have a certified public accountant (CPA) who looks at the financial accounting records of the dental office. Start spending time with the dental CPA and listen to their advice. This will mean paying another employee, but hopefully the dental CPA already represents other dental practices and can teach the owner of the practice things they do not know much about and cannot find elsewhere.

Regular meetings with the dental CPA will bring more revenue into the practice, allowing it to increase the income of the dentist and their employees, with additional money for raises and benefits. If the dental CPA does not work with any other dentists, the practice is retaining the wrong dental CPA. The dental CPA should have the knowledge to educate the dentist and answer questions about the dental practice’s finances as well as the dentist’s own finances. The dental CPA should be put on the spot and have the answers or be able to find the answers quickly (at least by the next meeting between the dentist and dental CPA).

Financial Affairs of the Dental Office and Dentist

To acquire financial help that will be long term and cause the practice and dentist to upgrade their finances and emotional well-being, use the resources that are available and don’t procrastinate. Finances are too important to ignore or pay half-hearted attention to with the hopes of improvement. Finances need vigilant approaches and consistent watchfulness.

Dentists who want to have a practice that grows in value and worth must take the measures to make it happen.

Get the Lead Out and Stay on Top of Your Practice

Details are critical when it comes to dental practice valuations, and so is great communication.

For the dental practice evaluator and for the dentist who needs the dental practice valuation as quickly as possible, there is sometimes a miscommunication between the 2 as one is trying to find information and the other is waiting for the information to be forwarded to him or her.

The evaluation of the dental practice can’t begin until the dental practice data is in the hands of the evaluator. Discussions may be taking place and verbalizing may occur, but the evaluator will want something in the file to rely upon when the conversations have been completed and the written report is in the process of being written and then checked for accuracy before being forwarded to whomever retained the evaluator.

Sometimes it happens that the dentist has been shopping for the cheapest price and quickest turnaround of the valuation process so that the entire process is slowed down because of the timing of responses that the dentist receives when analysts are having conferences with the dentist while he or she is trying to determine who to retain for this important job. Deadlines for discovery, depositions and pretrial hearings have specific times and dates when the court demands completion of the assignment to appear for his or her review and expression of an opinion. If the deadlines are not met, the ire of the court may be present, and the plaintiff or defendant will have no excuse that may be acceptable.

Does the dentist understand the urgency of the matter?

It is probable that the dentist is having a court room experience or other situation where the urgency of the matter is not known by him or her. This is because it is probably one of the first times that the dentist has been in a situation where someone is telling them what must be accomplished and when it is due. The dentist in his or her professional life is usually the one who is telling the patient what must be done and when the next visit will occur so that the project can continue.

The attorneys and evaluators are used to deadlines but the typical situation for the dentist is one of caution when working with the patient and understanding patient lapses in time for completion as well as forgotten or missed assignments needed for completion by the patient before the next visit with the dentist or hygienist. Lawyers, consultants, and dental practice evaluators will continue to work through the evening and on weekends to finish their responsibilities for the dentist and the attorneys, but dentists are not used to working at night, on weekends or holidays for anyone. This becomes a test of the attorneys and other consultants convincing the dentist that this is for real and that there can be penalties and other consequences to the dentist if things are not completed on time.

The evaluator and the attorney should have experience in the type of case that is being heard by the court so that the dentist has the best that he or she can afford for the presentation:

It is good for the dentist to interview a few attorneys, consultants, and dental practice evaluators prior to choosing which is the best for him or her and the type of case that they were involved with that may be going to the court room. An example would be that a personal injury attorney is not the one to represent a client who may be going through a divorce proceeding. An expert dental practice evaluator who cannot complete an assignment where an appearance in the court room to testify is part of the scope of the requirement for completion is the wrong person to be involved with litigation involved with a partnership dispute.

Being careful with friends who have good intentions but who offer to do something for free or at a deeply discounted price because they are friends is a warning sign that the attorney or evaluator is the wrong person to choose for representation if that person has little or no experience with what is being adjudicated. Remember to keep your friends close but not to engage them. Find someone who you have interviewed and has good credentials in the field of endeavor that you need for the valuation.

You don’t want to be embarrassed or your evaluator to be humiliated by a lack of knowledge with the subject matter. Worse than the embarrassment is the loss of money when the court decides who gets what from the arguments the judge has just heard. It makes no sense to wait until the last minute to retain those who will be needed when there is normally adequate time to prepare for the case to be presented to the court. The evaluation of the case can also speed up the settlement discussions once each side has something worthwhile to review in writing. This is where a good evaluator is worth a lot more than his or her charge since a settlement is worth a lot more than the cost in that it can result in settlement discussions where a trial is not needed, and a written settlement agreement is accepted by the parties and then endorsed by the parties to the case as well as the court.

Sometimes the dental practice evaluator must be retained who is out of the geographic area in which the dental practice is located. If that evaluator is the best one found, a little extra for travel, meals and lodging that is amortized over the rest of the life of the dentist but gets the best result for the dentist is a cheap price to pay for a victory.

Who else can the dentist rely upon for help and security with the matter?

Since almost every case involves money, someone who typically can be relied upon for additional support is the dental CPA. He or she offers a security blanket and a feeling of trust since they most likely have a good relationship with the dentist. The day-to-day contact with the dental CPA is usually that of the most contact of any advisor and someone who the dentist has relied upon before for important financial decisions.

When it comes to selecting the right dental practice evaluator for your valuation, a little patience and homework can go a long way.

Hurry Up and Wait for the Best Practice Evaluator

For the hard working dentist, the amount that he or she has saved in the dental practice retirement plan seems like it was worth a lot more just a few years ago. Today, the value of the retirement plan has sunken just like a ship with a hole in it to the bottom of the ocean.

The great idea that the dental CPA gave during 1 of the business conference sessions in the past was terrific, but now seems to be not worth the time and money for the services incurred to formulate the plan, get the IRS approvals and to get the plan up to date with all of the changes that the government has instituted within employer sponsored qualified retirement plans. The dental practice is still doing okay but with harsh inflation on the rise and having been in effect for a number of years, was this all worth it? This article will explain just how important the plan was and the ideas that are available to give it a comeback that it may need because of the declining value of the stock market and the overall economy.

Let’s look at some of the strong support that the retirement plan has given and how it can come roaring back:

Even if the retirement plan is worth what it was 5 years ago, without it being in place, there probably would have been nothing available for the dentist and his or her staff that would afford what the value became because of federal and state income taxes and employee turnover without the retirement plan. Though lower in value, it still is worth quite a bit. What would have taken its place?

Saving on one’s own without the use of a retirement plan would have been much harder because of the heavy federal and state tax on the practice’s earnings and few, if any types of replacement for it. The ability to designate funds on a pretax basis is 1 of the best ways to assist the office staff in accumulating assets and to encourage them to remain with the dental practice at least until the vesting has occurred. Since the plan value is down and each employee’s interest is also down, remaining with the practice will allow the employees to save once again with contributions coming from the dental practice and not from the employees’ own pocket.

Many dental practices today are revisiting their retirement plan formulas to determine the annual contributions to the retirement plans. Some dentists are even enhancing their retirement plans by upgrading the type of retirement plan they have adopted. In many cases, the dentist has changed his or her plan from a defined contribution plan to a defined benefit plan. This change produces increased contributions for the retirement plan with a higher contribution for each employee, including the owner. This type of change allows the owner—as well as the employees—a bigger contribution. In the event that the owner is older than the employees, the difference can be quite large and continue for a long time. This allows the retirement plan to adjust for the losses it incurred very quickly. In the event an employee’s boss does not take this step, he or she is limiting what the employee can recover and the length of time it will take for the recovery to occur.

Many dental practice owners try to take the cheapest way out and don’t want to give their employees anything more.

There are too many dentists who resort to hurting the employees when the stock market sinks and the retirement plans start to decrease in value. After years of contributions on behalf of the employees and himself or herself when the market is down, the owner/dentist may decide to eliminate the retirement plans or to add a retirement plan that has a much lower cost component compared to what just dropped so much in value. There are plans like these and they have names such as Simple IRA, profit sharing plans, and 401k with an employee contribution only.

The dentist/owner hurts himself or herself the most when this occurs because the owner is receiving the largest contribution out of all of the employees. The contribution is based on many things but 1 of the most important is the compensation of each employee including the owner. An example would be if the total salaries of all the employees including the owner was $250,000, and the owner’s compensation was $150,000, the owner’s share of the retirement plan contribution would be 60% based on the compensation formula ($150,000/$250,000). Since there are other items used that are added to the compensation formula, the owner would receive more than 60%. If the owner downgrades the plan from its previous formula, this contribution for the new plan may only be $10,000 total so the owner would receive $6,000+ of the $10,000 and the other employees would receive the difference from the $10,000 minus the $6000. The plan administrators don’t like these plans because so much is being allocated to the owner.

Age is a defining formula as well. If the owner/employee is older than the other employees, it is typical with the formula for these plans to lean heavily on age and compensation to determine each employee’s contribution.

The cost of the adoption agreement for the qualified employer sponsored retirement plan and the IRS approval letter for the plan with all of its employees.

What is that cost? These fees typically cost about $5000 to $7500 to initiate and adopt the plan. The annual administration fees for the preparation of the tax information forms 5500 run about $2500 to $5000 per year. Many of the payroll services are now preparing these forms at cheaper rates than the independent actuaries for whom the fees were previously quoted.



Inflation is here, my dental practice is doing ok but my retirement plan is worth about what it was 5 years ago. What am I supposed to do now?  

How Little Is Your Retirement Plan Worth? 

After agonizing over whether or not to become part of a dental support organization (DSO), a decision has been made to join it. Reading the literature and becoming familiar with the terms of admittance and growth in the DSO, it seems like the correct choice has been made.

Based on the age of the dentist and how much longer he or she wishes to work, this seems like an ideal solution to the problem of the exit strategy of the professional. It allows clarity as to what will happen in the next phase of the dentist’s life as he or she will have had the time to plan with financial planners, the dental CPA and attorneys. Part of the planning process had to include interviews with more than 1 DSO to understand the differences between what was out there trying to entice joining the DSO with its benefits and financial rewards. Now you are part of the DSO and working and waiting for the upside of the organization.

The DSO will assuredly provide the benefits and compensation that they promised to the dentist. The lack of the need for administrative and non- clinical services should be available from the start of the acquisition. These chores and their lack of a desire to continue with them was a big selling point for joining the DSO. Now there are highly trained professionals who will be in charge of these services such as posting to accounting books, keeping track of hiring and firing personnel, and other administrative tasks like insurance and retirement plans.

Meeting with attorneys and other duties will no longer be part of the dentist’s job description. There will be more time for learning techniques, attending seminars and study clubs to enhance the professional clinical status and understanding of what the dentist was trained to do. This change in responsibility may induce the dentist to continue his or her career since there will be so much less stress in the dentist’s professional life. The dentist may even wish to participate in the DSO hierarchy with additional time and money commitments to the DSO. However the dentist is thinking, it will be more about the rest of his or her life and not about listing the dental practice with a professional broker or trying to find an associate to facilitate his or her exit strategy. This certainly sounds like the cure to aggravation and pressure in the day to day work life of the dentist.

What of the promises of the “pot of gold?”

The “pot of gold,” that most DSOs promise is the hope that another larger DSO will come along and acquire the current DSO with a higher earnings multiple so that there may be a 1-time payment or a series of payments that make the original investment become a much more attractive one.

It must be understood that there are no guarantees that the additional DSO, hedge fund or venture capital company will appear. This concept is what makes the DSO so attractive from a financial standpoint. Besides the relief from the daily non-clinical service that must be provided to the dental practice and which is certainly a major point of why the DSO is joined, the extra amount that may be available on a subsequent merger is something that a private practice can not achieve.

The steady stream of income with additional patients joining the private practice is a wonderful thing. A 5 percent or more increase in gross revenue or net income every year is not guaranteed but it almost always occurs as the dentist’s own practice becomes more well known and accepted in the community. With the slow but sure growth in the private dental practice, there is almost no chance for the large 1-time payment that is possible with the DSO on its next step.

The time to assess what is the best course of action for the dentist with his or her own practice:

As the dentist becomes older, the DSO seems like a terrific solution for exit strategies, reducing the stress of every day working and being responsible for all matters pertaining to the dental practice. It doesn’t matter if it is clinical or non-clinical, the dentist is the one who makes the decision about what must be done to resolve any situation. Once the dental practice is part of the DSO almost all administrative duties disappear. There is a highly trained team that takes over the responsibilities of the non-clinical side of the practice. This also includes the supply ordering, equipment repair and replacement obligation and all other administrative duties. The one caveat is to make sure that the merged practice and the dentist who joined the DSO understand that the “pot of gold,” may or may not occur and if it does take place, it may be later than expected.

What about not joining the DSO; how will the private dental practice proceed?

Prior to the popularity of the DSO, private dental practices certainly fared well enough and had good earnings and the respect of the community in which they were located. The material points of concern were the day to day administrative duties including hiring and firing staff, inventory supply and state of the art equipment at the dental office. The exit strategy was also a major concern with the potential for a large commission to be paid to the dental practice broker and the length of time necessary for the broker to find someone who would acquire the dental practice. Once the transition occurred, that was the end of the career for the dentist unless the buyer wanted the seller to work for a short time while the new dentist got his or her plan of succession into effect. There were no additional incentives with the transition. There is a lot for the private dentist to consider when determining which format is best for himself or herself. Study things carefully and make the decision. Don’t look back.

There’s a lot for the private dentist to consider when determining what is best when it comes to DSOs.