Stock photo of a dental hygienist

General Family Dentistry MTG753

Map image of Central Kansas
Central Kansas
Status: Active

For over 22 years, this family dentist has been providing this underserved area in West Central Kansas with excellent dental services and procedures, focusing on preventative and restorative services. With the recent passing of the dentist/owner, the owner's wife is now highly motivated to sell the practice. To serve as an added incentive, the KDA is offering the purchaser a $25,000 Kansas Initiative for New Dentists (KIND) Program dental school loan forgiveness grant if the dentist fulfills a 2-year service commitment to practice in rural Kansas and be a Kansas/Medicaid provider with an open panel of up to 35% patient encounters. Operating as an S-Corp, this practice is well respected in the town for its dentistry and community involvement. In this rural area, treating their patients like family is what sets them apart and has made them the busiest dentist office in the area. With the practice currently operating 4 days a week (Monday-Thursday), a new owner could easily expand operating hours to include Fridays. By operating as an almost "fee-for-service" practice they have been able maintain collections at 98% of billings. Aside from the previous owner/dentist, the practice consists of 6 full-time workers and 1 part-time employee. Locum tenens dentists are currently being used to take care of patients until a new buyer can be found. Full-time staff at the practice include 2 hygienists, 2 chair-side assistants, and 2 front office staff, with the sole part-time employee operating the company's payroll. According to the dentists spouse all staff are expected to remain on after a sale.

Most of the practice's offerings are general dentistry preventative services which include patient exams, hygiene therapy, fluoride treatments, and x-rays. Restorative services offered include removing tooth decay, fillings, crowns or bridgework, and treatment for dental trauma. Advanced treatments are also available and include root canal therapy, orthodontics, and dental implants, with some endodontics available as well. Complex endodontics and orthodontics are outsourced as well. Even after becoming a fee-for-service practice they still serve ~3,000 clients with an estimated client retention of 95%. Many patients have come back to the practice who initially left for other dentists contracted in their PPO plan. Office staff will still file insurance claims on behalf of the patients and accept most insurance plans. Currently the practice has no website and does little marketing. By creating a website, increasing marketing efforts, offering expanded services and increasing operating hours for the practice, a new owner may have an opportunity to grow the practice. Conveniently, this practice is located in the downtown area of its Kansas community. The ~2,250 sq. ft. building is owned by the dentist's family and includes a 1,724 sq. ft. main level with a 532 sq. ft. basement for storage and a parking lot located behind the building.

Concerning the future of the building, the owner would be open to an outright purchase, a lease, or a lease-to-purchase agreement. When you walk into the one story building, you are welcomed by reception area complete with two computer workstations operating on Windent software for appointments and billing along with a waiting area for patients. Breaking off from the reception area are two hallways which lead to the rest of the practice, which includes the operatories. Of the five operatories, two are for the dentist, leaving the remaining three rooms for the two hygienists, with one of their rooms often being used for overflow for the dentist. Also included in the building is a laboratory, basement, private office, and two bathrooms. Each operatory is equipped with an adjustable Adec chair, an exam light, and a computer. Additionally the practice includes a Panorex panoramic x-ray machine, ScanX digital scanner, Autoclave sterilizer, Cavitron JET Plus Ultrasonic Scaler, and a Ray Foster Model Trimmer. An outright sale would include all of the assets, equipment, supplies and the well-established patient list.

Historically, this practice provides steady positive cash flows of $750k+, however, the 2019 numbers are expected to be lower following the death of the owner due to natural clientele attrition. Historically, they have achieved a Cost of Sales margin of ~12%, leading to an estimated gross margin of ~88% of sales and operating margins, after normalizing general and admin expenses to industry standards, at 11%+, in line with industry averages. If a new single owner / dentist were to acquire this practice today, annual discretionary cash flow earnings, i.e. adjusted EDITBA or doctors gross income, is estimated to be more than 38%+, i.e. ~$275k+, sufficient for a new outright owner to service any debt financing and still receive a very generous remuneration package. The estimated value range from this practice is between $350K and $480K (excluding cash, receivables, liabilities and facilities). For illustration purposes, based on weighted averages of our analysis/method, as described in our valuation report, the estimate of value of the Company as of December 31, 2018 is around $430K.

General Family Dentistry MTG753 Historical
2018
Base
2019
Forecast
2020
Forecast
2021
Forecast
2022
Forecast
2023
Revenue/Sales
% Increase
756,610
1.2
718,780
-5.0
733,155
2.0
747,818
2.0
762,775
2.0
778,030
2.0
Gross Profit
GP Margin (%)
668,840
88.4
633,255
88.1
647,354
88.3
662,632
88.6
676,439
88.7
691,962
88.9
Net Income (EBIT)
NI Margin (%)
94,397
12.5
64,580
9.0
82,840
11.3
83,367
11.1
83,657
11.0
84,649
10.9
Adjusted EBITDA*
EBITDA Margin (%)
303,671
40.1
275,948
38.4
296,321
40.4
298,982
40.0
301,429
39.5
304,598
39.1

* Adjusted EBITDA = EBIT plus Depreciation and Adjustments (excludes Owners compensation)