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Steps to Practice Ownership What’s right for me?

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.

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Steps to Practice Ownership What’s right for me?

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  1. Steps to Practice Ownership What’s right for me? Presented by: Jessie Kunkle Bank of America Practice Solutions

  2. Today’s Agenda 1.) Practice Ownership Options 2.) Understanding Your Credit 3.) Business Plan 4.) Approval Process 5.) Financing Options

  3. Practice Ownership Options Start Up Practice Purchase Buy In/Partnership

  4. Starting Up a Practice Start 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.

  5. 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.

  6. 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

  7. 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.

  8. Buy In/Partnership Positives: • Same as Practice Acquisition • Very little risk of patient attrition • Management of staff is constant

  9. Buy In/Partnership Buy 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.

  10. 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)

  11. What 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 Your Credit Bureau File

  12. 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

  13. Public Record Information Suits Judgments Tax Liens Bankruptcy Your Credit Bureau File

  14. 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+

  15. How are Credit Scores Calculated? Credit Scoring

  16. 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 Market 3.) Management Team 4.) Business and Personal Budget 5.) Marketing Strategies The best way to experience success in any venture is to plan. Need a Business Plan Template??? Email Jessie Kunkle for one at – Jessie.kunkle@bankofamerica.com

  17. 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?

  18. The Approval Process Start Ups Application Information • Dental Lic # • Requested Amount • Project Information • Current Associate Info • Application and Personal Financial Statement

  19. The Approval Process Practice Acquisitions Get 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!

  20. 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

  21. 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.

  22. 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?

  23. Loan 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 A Tale of Two Loans • 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

  24. 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 Sample Loan Structures

  25. Questions?

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