Subscribe
Share
Share
Embed
Dentists, Puns, and Money is a podcast focused on two things: The financial topics relevant to dentists leaving clinical practice and the stories and lessons of dentists who have already done so.
1. The stories of dentists who have transitioned from full-time clinical dentistry.
2. The financial topics that are relevant for dentists making that transition.
If you’re a dentist thinking about your exit from clinical, and you’d like to learn from the experiences of other dentists who have made that transition, be sure to subscribe to your favorite podcast app.
Host Shawn Terrell also dives deep into the many financial components of exiting dentistry, including tax reduction strategies and how to live off your assets.
And, we try to keep it light by mixing in a bad joke… or two.
Please note: Dentists, Puns, and Money was previously known as The Practice Growth Podcast until March 2022.
Welcome to Dentists, Puns, and Money. I am your host, Shawn Terrell. A guest on today's show is Tom Hemmen, president and owner of Hemmen and Associates, a dental practice brokerage.
Tom and I discuss how far out a dentist should have practice valuations done ahead of their dental practice sale. We also dive into why his company completes something called a letter of direction for all his dental practice owner clients.
As a reminder, our company, Dentist Exit Planning, helps dentists leaving clinical with the financial piece of that transition. Specifically, how to reduce that massive lifetime tax Bill and how to optimize living off your assets.
If you're interested in guidance on taxes and your income as you exit clinical, schedule an initial consultation with us on our website, which is DentistExit.com.
And with that introduction, I hope you enjoy my conversation with Tom Hemmen.
Tom Hemmen with Hemmen and Associates
Welcome to Dentists, Puns, and Money. I am excited to hear your story. Thank you for joining us, Tom.
Tom: I'm doing well, my favorite place.
Shawn: How you start with these podcasts is just to give the audience some background on each guest and kind of their journey. Where they started and where they are now. Could you share a little bit about how you've reached this current point of your career?
Tom: Okay. Whenever I'm talking to a new client, I'll give him a brief history about Eminent Associates and how we got to where we're at today.
Our company was started by my father Henry back in the sixties, and he was an accountant that specialized in dentistry. I graduated college in 87, got a finance degree, a business degree in economics, and decided I was gonna go into business with him. Did that for about a year and a half, size of the county just not for me.
He says, "Hold on, you know it's gonna get more exciting." I said, "You know, give me a call when it does." And so I left, and a few years later, he gave me a call that was right around 2000. He had started up a brokerage because his clientele was reaching retirement age, and instead of just closing the doors, he says, "Hey, why don't we sell your practice?" And that was the birth of the brokerage.
I was working with him part time at that time, and then in 2015, at the end of 2015, started full time, bought into the prior may. Just to clarify, here we go, and Associates has transitioned from being a dental accounting firm to a dental sale brokerage firm, present day.
In my experience, yeah, handling big pieces of selling dental practices, knowing how much it's worth and the valuation of it. Also, in my experience, a dentist can often have a timeline in their head for when they want to think about selling their practice.
How should a dentist go about thinking the value of their practice and kind of the timeline when they want to sell it? In your experience, Tom.
You know, that's a great question because a lot of times what happens is the doctor will wait until six months or a year before they want to sell, and that's a little too late. We recommend a minimum, if you think about selling in the next five years, is to give us a call.
When you go through an evaluation or use anywhere between three and four years of information to come up with the areas of opportunity and the worth of the practice. If you can find the areas of opportunity now, change whatever you need to change and increase your productivity, etc. What's gonna happen is in four years from now, when we use the last three years, they're gonna be at the pinnacle, and you're gonna get the biggest return on investment as you can for the sale of your practice.
A lot of times, what we'll run into are doctors going, "Oh my gosh, I thought it was worth more." If you're waiting till the very end to figure out what your practice is worth, that would be the wrong time because you're not gonna have enough time to make any changes.
We also recommend perhaps what you do is you start throughout your career every four to five years having evaluations on. It's more than just the value of the practice; it's analyzing how the practice is working, how the business is going. When you can identify the areas of opportunity and improve your performance and improve your bottom line, you're putting more money in your pocket on an annual basis.
And so that is increasing about you. They would like to be there. Their practice to be worth X number of dollars by a certain point in the future. If we know how much it's worth today, then we can do something, or we can take steps actively to make it worth more in the future if it needs to be worth more than it is currently.
It gets to the point where times will hear, "I should have done this years ago," just simply because they know how much more and not doctors aren't in the business for money, you know, most aren't in it for money. They're in it for the people, but as long as you're doing the procedures and everything else, you might as well get paid what it's worth.
You can identify the years of opportunity if expansion is what you're looking for, then okay, great, we can help there. But we can also identify just the day-to-day operations that you need to be part of the question. I heard you say something a little bit ago that doctors often say to you, "Gee, I thought it would be worth more."
First part of the question is, what often makes the doctor or dentist think that it would have been worth more? And then the second part of that question is that could be a tough pill to swallow or digest for a dentist that thought they were ready to retire and was banking on a certain number from the sale of their practice to exit clinical.
How do you, for lack of a better word, sugar coat that news when working with a dentist or kind of help them understand it a little bit better in a way that's a little bit more digestible?
Great question. What makes doctors also think that their practice is worth more than, after you do an analysis of it and evaluation of it, find out that it's worth less than the dentist thinks that it's going to be worth? What are some of the common factors that lead to that?
Okay, well, most doctors do not have a business degree, so they feel that when they're busy, they're working full time and everybody's working okay, fine. A lot of times, the focus on the financials aren't there. Many have not received the actual training to know what to look at, and that's why folks would pay us to do that for them, to do the valuation, to analyze it and explain it to them.
Usually, when we get done explaining, it's like anything else whenever you do an evaluation, what's the first thing people look at? They look at the bottom line; you know what's the value? They don't read the information that goes into the appraisal to say, "Okay, here are the areas that are in need of focus."
So when they get over the sticker shop, so to speak, you go back and explain it, say, "Understand that here's where we can help you, and here's what you need to do." And it's not about sugar coating but just more so a matter of fact. Here are the areas, and if you do A, B, and C, it will improve that bottom line, and they're usually pretty happy about that.
But they do have that, "Oh, you know, gosh, I thought it would be worth more," and that's just simply because they've been busy; they're not really focusing on analyzing. That really into the next topic of conversation. Maybe one way to not get to that point at the end of someone's clinical career would be to be doing some ongoing valuations along the way throughout their clinical career.
I can see why dentists would hesitate to do that because they're busy seeing patients, they are busy running the practice; they have maybe a family during these years. Is the valuation process time-consuming, or is there a way to simplify to make it not as arduous as it could appear to someone who doesn't do them every day?
No, and in fact, a lot of times, doctors will say, "Well, how much time is this gonna take out of my schedule?" For the most part, we'll send out a questionnaire; it's a four-page questionnaire, and the information that we're asking is fairly simple to fill in. Where the work comes in is dealing with the accountants and employment reports and what have you, but that we can walk there their administrative people through it.
I help the doctors exactly and say, "Here's how you pull these reports," and then we'll talk with the accountants and financial advisors to get all the information that we need, how to conduct the final appraisal. So for them, for a doctor to take the time and have an evaluation done is very minimal time; it's gonna take from them. We do it as an intense deep dive; I mean, we're asking for three or four years of reports, and most offices have those reports at the touch of a button.
So it doesn't take that long to produce those reports—productivity, collections, etc. Very little time and dust. Now from that standpoint, to okay, here are your areas of opportunity, whether it's in lab or supplies or salaries, what have you. We'll let them know here are the percentages that you need to be running at, here are some suggestions as to what you can do to make that happen.
In most cases, looking at these schedules, etc., will narrow it down for them to make an easy decision. Is there a time of year that is to do the best time to try to do that for an owner dentist? We live in the Midwest, so I try to do all my project work like this during the cold winter months. But I don't know, I don't wanna point in that direction. Is there a better time of the year to try to get that stuff done?
Yeah, no, you know what, that's a great question. I've been asked a lot of questions but never on, hey, what's the best time of year to do an appraisal from an appraisal valuation? It's any time.
Anytime Was Good, and it's looking at the history, it's looking at the year-to-date information. So if it's at the beginning of the year, there's not gonna be a whole lot of year-to-date, so that's not gonna have really that much of an impact. We'll look at the previous years. If it's in the middle of the year, we can do projections out through the end to give the doctor a very good look at what it's all about. It's more so, any time of year from an appraisal valuation, that it works.
Two people also ask, when's the best time to put my practice on the market? And there are times, and depending on who you're gonna target because there's different buyer markets that you're looking at. Some people want large DSOs, some may look at a small group, or some may make sense to have just an individual. So it depends on what the buyer group, as far as going to the market. But I know your question is as far as appraisal, any time of the year is a good time to have an appraisal, and they can count on once we have all the information that we're requesting, we'll have the appraisal done within and the time.
I heard you say about that appraisal; it sounds like the modern dental office software has made creating those appraisals a lot easier than maybe it used to be. They've got the supplying the reports, absolutely now. If you're not automated and you don't have, not using computers, what have you, it might be a little bit of a struggle, but nowadays they're using the software, words matter of pushing the button. Sometimes we have to figure out where the reports are, but we can help with that. And once they know where to locate them, having them put it off in the email all day and or how we talk about is not value and getting appraisals and evaluations done well in advance of when that dentist might want to sell your practice.
Your company has created something called the letter of direction for owner dentists who will eventually sell but aren't ready to sell yet. Could you explain what the letter of direction is and how a dentist might benefit from having one in place?
Absolutely, every appraisal that we do, we also offer the doctor a letter of direction, and that letter of direction comes into play death and disability. So in the event something drastic like that happens, what happens to the value of the practice? Is it immediately starts losing value. The letter or direction we share with the doctor; they share it with their attorney, they share it with family members, so that if anything were to happen to them, the attorney and or family members would contact Hemmon and Associates, and the practice would go on the market immediately.
What that involves is let's say we do an appraisal now and in 2023. So in 2024, we would reach out and say okay, let's have updated tax returns, profit and loss statements, etc., and we would update the valuation. So that in any given moment in the 12 month period, what we're looking at is a well-valued practice and one that's ready to hit the market at a moment's notice. That's what we do.
You said something important in there that invented a death or disability that the practice starts to lose value very quickly and almost immediately. So that's something that a letter of direction could help avoid. It'd be good to have. And as someone who runs my own small business and Tom, maybe you can appreciate this, so much of the business is in the owner's head that just getting some basic information on paper for everyone else that would have to figure everything out on their own, to me those breadcrumbs or those little hints would point people in the right direction, at least to make that process not as complicated, not as hard as it otherwise would be.
Oh well, in what's sad, Sean, is we've had this many times in the past and to get that phone call of saying, you know, oh my gosh, my wife died or my husband died and we need to get this taken care of, we really, we jump in action, and the quicker we can get it out there, the better obviously. Also, that the practice doesn't lose value and you're taking care of the family. And not only the immediate family but also the work family as well, staff, so that if you still have a place to go to work.
And with that, we take it to a point where if one didn't exist, and we do receive those calls from the family members saying hey, we need to sell the practice, we have to go through a four-page questionnaire, we have the information that it's usually pretty quick and easy to get, but it's still gonna be a time delay. So then the time delay on getting that information, getting the appraisal done versus being able to receive a phone call, so you put it on the market now Bam, that afternoon it's on the market. So the more time that we can save between getting it on the market is going to make a big difference in and what we've covered a lot of good information.
Is there anything we haven't hit on today in our conversation that you think would be important to include or add?
Yeah, no, I don't think so, Shawn, other than the point being when you and I initially touch face, our whole point is what we want to do is we want to help doctors, you know, we know we've got a good reputation throughout the Midwest. We handle sales from Michigan, the Indiana Colorado, we're all over the US but mainly focused in the Midwest.
And our message is we want to help doctors understand what their businesses are worth and give them an opportunity that when it does come time to sell, that they're maximizing return on investment and the time in between, whether it's 10 years before or just three years before, they're also realizing the income in their pocket and when it comes time to sell, they're maximizing their return. So really appreciate you allowing us to be our honor and are interested in connecting with you and starting a relationship.
What's the best way to get in touch with you and your company?
Uh, our website is pretty uh interactive website WWW.hemmaso.com, or they can call our 800 number at 800 uh 7 4 president and owner of Eminem Associates Tom, thank you for sharing your story, your exploitation for being a guest here on Dentist Puns and money. Thanks for listening and following along. Are you a dentist nearing your retirement from clinical or have you already hung up your handpiece? Would you like a treatment plan for the financial components of your exit from clinical?
Our company Dentist Exit Planning helps dentists like you reduce taxes in retirement and optimize how to best live off your assets, including the ideal time for you to start taking Social Security. If you'd like guidance on those critical pieces or just a second opinion, schedule an initial consultation with us on our website. Our web address is Dentistexit.com, and there's no obligation for your initial consultation. That website again Dentistexit.com. As a reminder, Dentist Exit Planning and Terrell Advisors LLC is a registered investment advisor.
The information presented should not be interpreted or construed as investments, legal, tax, financial planning, or wealth management advice. It does not substitute for personalized investment or financial planning from Dentist Exit Planning or Terrell Advisors LLC. Please consult with your accountants and attorney for tax and legal advice. This podcast conveys the views and opinions of Sean Terrell and his guests, and the information herein should not be considered a solicitation to engage in a particular investment, tax planning, or financial planning strategy.
Information presented is for educational purposes only, and past performance is not indicative of future results.