1. Owning a Dental Practice Quick Reference of “MUST DO” steps Presented by: Matthew S. Smith, CPA, CFE msmith@barcpa.com Jennifer Cecil, CPA jcecil@barcpa.com L. Porter Roberts, Jr., CPA lproberts@barcpa.com Barr, Anderson & Roberts, PSC Healthcare Division 2335 Sterlington Road Suite 100 Lexington, KY 40517 Telephone: (859) 268-1040 Fax: (859) 268-6165 www.barcpa.com

2. The decision to move from an associate to an owner is going to be one of the biggest decisions of your financial career.  You need to do your homework first.  Four typical paths from dental school:  Work as an associate  Work as an associate with the understanding that buying into the practice or buying the entire practice will be an option in the near term  Purchase an existing practice  Start a practice from scratch

3. Owner vs. Associate  As an associate:  you have to know dentistry  Potentially some incentive for producing more/seeing more patients.  Small amount of risk & small amount of reward.  As an owner:  you have to know dentistry  PLUS know how to operate a financially successful business.  Large amount of risk (and time) & large amount of potential reward.

4. Overview of Steps  Determine – buying existing practice or starting from scratch & estimated cost  Determine how to fund business/talk to banks  Form business entity/talk to attorney & CPA  Close on purchase/construct at location  Select and implement systems  Monitor and improve If you want a more detailed 70+ step checklist for opening a practice, please send me an email with this request and I’ll get a copy to you. It is also important to note that forming relationships with advisors who are dedicated to helping you succeed will go a long way towards your success.

5. Determine – Existing Practice or Start from Scratch?  Existing Practice  Comes with established patient base (and most times experienced staff)  Equipment/furniture may be near end of useful life  Work with valuation expert/broker when looking at existing practices  Need to obtain and review prior year tax returns and/or financial statements & billing reports  Substantial portion of purchase price will be for goodwill of existing patient base  Covenant not to compete / transition period with exiting dentist  Could be easier to finance due to the bank having access to existing business financial history  Potential resistance to change from existing patient base and from existing staff  Need to prepare estimated cash flow projections to see if the decision makes sense financially

6. Determine – Existing Practice or Start from Scratch? (continued)  Start from Scratch  Talk with dental supply companies when looking to start from scratch  Location is key – visibility, demographics of location/feasibility study to determine # of people per dentist in area  What types of dental equipment do you want?  # of rooms/chairs & style of cabinets/furniture?  Getting new patients in the door quickly is extremely important towards getting to break-even quickly  Multi-year projection will be needed for financing  Need to prepare estimated cash flow projections to see if the decision makes sense financially

7. Determine How to Fund  Funds available/on-hand?  Bank financing?  Seller financing?  Interest only or other preferential repayment terms for new practices.  How much operating capital is needed?

8. Form Business Entity  Choose type:  Sole proprietorship  S Corporation  C Corporation  LLC  Taxed as sole proprietorship  Taxed as S corporation  File required paperwork with:  Secretary of state  IRS  Kentucky Department of Revenue  Local governments

9. Close on Sale of Existing Practice/Build out new Practice  All documents should be in the name of the newly formed entity.  Loan documents to be finalized.  If purchasing practice, need to determine asset allocations.  Transition from existing dentist to new dentist is key for practice sales.  Open house/grand opening marketing key for new practice from scratch (and is useful for purchasing existing practice too).

10. Systems  Practice management/scheduling/billing  Scheduling patients & reminding them about appointments  Managing workflow  Billing – insurance, self-pay, coding, collections  Accounting/tax/legal compliance  Bookkeeping/accounting/check-writing system?  In compliance with all taxing & legal authorities?  Taking advantage of all deductions?  Accurately tracking financial activity  Payroll & HR  Recommend outsourcing payroll processing  Employee handbook/policies  How many staff? Benefits?  Website  Facebook, other social media  Maintained/built by 3 rd party?  Purpose? New patients? Information for existing patients? Both?

11. Systems (continued)  Marketing & referrals  Tracking how marketing $ is spent  Tracking where new patients come from  Rewarding existing patients for referrals  Insurance  Malpractice  Workers compensation  Business owners/liability  Computer/network  Cloud-based or hardware based?  # of machines needed?  Tablets, laptops, desktops, servers?  All software & hardware integrated?  Supplies  Office supplies & ordering  Dental supplies & ordering  Labs to use  Locking up petty cash, RX pads, meds

12. Monitor & Improve  Set monthly goals, such as  Target $ production goals  Reduce no-shows  Target # of new patients  Use dashboard to track important information  Reward accomplishments and hold accountable/modify areas where improvements can be made  As the practice grows, more opportunities become available to improve practice & owner financially. For example, saving more for retirement with tax-deductible retirement plan contributions & purchasing more additional equipment to increase production and capabilities

13. Thank you for your attention. Questions?  Matthew S. Smith, CPA, CFE  msmith@barcpa.com msmith@barcpa.com  859-977-2403  Jennifer Cecil, CPA  jcecil@barcpa.com jcecil@barcpa.com  859-977-2428  L. Porter Roberts, Jr., CPA  lproberts@barcpa.com lproberts@barcpa.com  859-977-2404  Barr, Anderson & Roberts, PSC  2335 Sterlington Rd, Ste 100, Lexington, KY 40517  www.barcpa.com www.barcpa.com  859-268-1040 main line  859-268-6165 fax