steps to practice ownership what’s right for me?
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Steps to Practice Ownership What’s right for me?. Presented by: Jessie Kunkle Bank of America Practice Solutions. Today’s Agenda. 1 .) Practice Ownership Options 2.) Understanding Your Credit 3.) Business Plan 4 .) Approval Process 5 .) Financing Options. - PowerPoint PPT PresentationTRANSCRIPT
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Steps to Practice Ownership
What’s right for me?
Presented by: Jessie Kunkle
Bank of America Practice Solutions
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Today’s Agenda
1.) Practice Ownership Options
2.) Understanding Your Credit
3.) Business Plan
4.) Approval Process
5.) Financing Options
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Practice Ownership Options
Start Up
Practice Purchase
Buy In/Partnership
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Starting Up a PracticeStart Up Positives:
– Build a practice the way you want to build it in the space you like the most. New equipment, furniture, etc. that fits your personal style.
– Hire and train your own staff using your business and service philosophies.
– You ultimately get to reap the rewards of your hard work with 100% of profits
– Your work produces results that create value in a business that you own.
– Patient selection matches your personality strengths and weaknesses.
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Start Up Items to Consider:
– Stress of managing and running an office.
– No patient base– You have to deal with the growing
pains, i.e. staffing, billing, benefits, pay plans, scheduling, to name a few, and then provide dental care.
– You will have to continue as an associate until the practice can support itself.
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Practice Purchase Positives:– Your patient base is mature
– Established insurance relationships
– Have a patient base already established
– Staff understands their roles and are trained
– Staff maintains relationships with patients and can give you
guidance with individual needs and care
– You are purchasing cash-flow, enabling you to pay yourself
immediately
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Practice Purchase Details to Consider:
– Possible patient attrition.
– You are buying someone else’s practice
(philosophy, flow, treatment planning,
staff training, systems, etc…)
– The equipment and office may be old
and worn which will require additional
economic investment.
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Buy In/Partnership Positives:
– Same as Practice
Acquisition
– Very little risk of patient
attrition
– Management of staff is
constant
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Buy In/PartnershipBuy in Negatives:
– How well do you know your partner
– What do you own?• Undivided Interest….
– Do you share similar philosophies regarding treatment planning, practice management…
– Partnerships are historically difficult to manage and maintain.
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The 3 National US Credit Bureaus
Competitors: Equifax, TransUnion, Experian
Get a copy every 6 months
Review all 3 bureau files
Your rights under the Fair Credit Reporting Act (FCRA)
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Your Credit Bureau FileWhat is included in your file
• Contact Information• Trade lines/Accounts
– Installment loans– Revolving lines of credit– Open loans
• Public Record and Derogatory Information• Inquiries• Credit Score
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The 3 National US Credit Bureaus• Creditors can and will report derogatory information to the
credit bureau when you do not “pay as agreed”
– 30 days past due
– 60 days past due
– 90 days past due
– Charge off
– Collections
– Public Records
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Your Credit Bureau File
Public Record Information• Suits• Judgments• Tax Liens• Bankruptcy
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Credit Scores
Understanding Credit Scores
• Your Credit Score is a grade on your credit report.
• Scores Range from 300 to 850+
• Median FICO Score is Approx 723
• Average FICO Score is Approx 693
• Bank of America Practice Solutions 680
• Auto Industry- Tiered Based Pricing
A+
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Credit Scoring
How are Credit Scores Calculated?
35%
30%
15%
10%10% Payment History
Amounts Owed
Length of Credit
New Credit
Type of Credit
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First Thing’s First – Create a Business Plan
1.) Summary Plan– A. Type of Practice– B. Mission Statement– C. Practice Structure– D. Market Opportunity– E. Competitive Advantage – F. Management Team– G. Office Manual– H. Benchmarks– I. Capital Requirements
2.) Target Market3.) Management Team4.) Business and Personal Budget5.) Marketing Strategies
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The best way to experience success in any venture is to plan.
Need a Business Plan Template???Email Jessie Kunkle for one at –[email protected]
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The Approval Process• What does it take to get approved?
• The 3 C’s– Credit – We Covered– Collateral
• Your Personal Financial Statement• Liquidity• Are you a home owner?
– Character • Stay away from lavish purchases• Live within your means• Have you started a retirement plan?
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The Approval ProcessStart UpsApplication Information
• Dental Lic #
• Requested Amount
• Project Information
• Current Associate Info
• Application and Personal Financial Statement
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The Approval ProcessPractice AcquisitionsGet Pre-Qualified!!!Pre-qualified vs. Commitment letter (Approval)
Pre-qualified means the buyer’s credit, production capabilities, and financials qualify to obtain financing. THIS IS NOT a final approval.
Banks need to review the seller’s financials to review the cash flow, office information to ensure the practice is a good fit for the buyer
So why pre-qualify?: Getting pre-qualified could move you to the front of the line in buying a practice!
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Required Information-Practice Purchase
• Buyer-– Application and Personal
Financial Statement provided
by Lender
– Curriculum Vitae
– Last 3 years of tax returns
– 12 months of production
reports if available
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Seller Required Information• Seller
– Seller Profile form provided by Bank
or Broker appraisal
– Current Profit and Loss statement
– Last 2 Years of tax returns (3 years if
loan request is >$500,000)– *Note – If practice broker is
involved normally they can provide all seller information.
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What to Look for in a Bank Proposal• Practice Finance Loan Proposals-
Important Details to Consider– Terms Available – 5,7,10,12,15 years?– Approval VS. Proposal– Fees – Advance Payments, Admin Fees,
Closing Costs, Origination Fees– Interest Rate- Fixed or Variable? Balloon? – Collateral Requirements? Additional
Collateral? Read the fine print.– Ability to lock the rate?– Prepayment and Principle Reduction
Options?
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A Tale of Two LoansLoan A
• Interest Rate 5.99%• Term 84 months• Fixed for 5 years• Approved for $400,000• Cost Restrictions• Level Payments• 3% Doc Fee +10% down• 2% Prepayment Penalty
and no principle reduction
BAD LOAN
Loan B• Interest Rate 6.39%• Term 180 months• Fixed for 15 years• Approved for $450,000• No Cost Restrictions• Graduated Payments• 100% Financing• Principle Reduction and
no prepayment penalty after 12 months
GOOD LOAN
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Sample Loan Structures• Start up Loan
$450,000
• 6.39% 15 year fixed
• 4 months @ $0• 8 months @ $1,587• 12 months @ $3,175• 156 months @ $4,536
• Acquisition Loan $450,000
• 6.39% 15 Year Fixed
• 180 months @ $4,042
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Questions?