reSource - 1st Qtr 2009

Volume IV Issue I1st Quarter 2009 A Quarterly Publication For Successful OrthodontistsTaking a Glimpse at the Valuations of 2008 In This Issue: Chris Bentson, President of Bentson Clark & Copple, LLC Taking a Glimpse at the Valuations of 2008A s a tradition, each 1st quarter edition of the Bentson Clark reSource takes a look at several statistics from valuations that were completed throughout page 1 the previous year. Twenty-five valuations have been selected from 2008, providing a glimpse into the current orthodontic valuation market as seen by Bentson Technology Trends: Clark & Copple. We will provide some significant and informative data that can be Patient used to compare and measure non-valued orthodontic practices. We will also examine Communication the summary data collected from the last four years of our annual valuation summaries. This data will represent a total of one hundred orthodontic valuations completed by page 3 Bentson Clark & Copple during the past four years. Getting In Line with 25 Practice Valuations from 2008 AlignPractice Net Practice Overhead Value Value Number page 5 Collections Income Rate Before Debt as % of of (Rounded) (Rounded) Collections The Bentson Clark reSource (ISSN 1559-1360) is 78.7% Locations published quarterly by Bentson Clark & Copple, LLC,1 $ 470,000 $ 225,600 52.0% $ 370,000 69.2% 1 301 North Elm Street, Suite 301, Greensboro, North 80.0% 1 Carolina 27401. Periodicals postage paid at Greensboro,2 1,226,000 523,502 57.3% 849,000 79.8% 2 North Carolina 27401. 85.1% 23 1,900,000 898,700 52.7% 1,520,000 63.0% 1 Telephone: (336) 379-8822 / (800) 621-4664 78.3% 3 Fax: (336) 333-00154 1,519,000 729,120 52.0% 1,212,000 79.0% 1 Website: www.bentsonclark.com 83.4% 8 E-mail: [email protected] 1,657,000 916.321 44.7% 1,410,000 52.4% 1 46.2% 1 Subscription Price: $80.00 per year, 4 issues6 1,664,000 687,232 58.7% 1,048,000 79.2% 2 Cover Price: $25.00 each 57.8% 47 1,440,000 802,080 44.3% 1,127,000 71.1% 2 ©Bentson Clark & Copple, LLC. 2009. 74.1% 2 Copyright strictly reserved. This journal is intended for8 3,575,000 1,973,400 44.8% 2,825,000 72.1% 3 use by the individual to whom it is addressed and may 75.7% 2 not be reproduced in whole or in part or redistributed in9 471,000 256,695 45.5% 393,000 83.3% 2 any way – including reproduction for internal distribution 60.1% 3 – without the prior written permission of Bentson Clark10 1,226,000 446,264 63.6% 642,000 64.3% 1 & Copple, LLC. 74.7% 111 911,000 296,075 67.5% 421,000 62.3% 2 71.5% 112 3,900,000 1,891,500 51.5% 3,088,000 84.6% 3 61.7% 113 463,500 163,616 64.7% 268,000 71.5% 114 1,000,000 452,000 54.8% 711,00015 1,178,000 550,126 53.3% 873,00016 753,000 320,778 57.4% 543,00017 1,269,000 544,401 57.1% 960,00018 2,315,000 1,143,610 50.6% 1,928,00019 945,000 327,915 65.3% 568,00020 1,000,000 390,000 61.0% 643,00021 1,394,000 688,636 50.6% 1,041,00022 313,000 128,330 59.0% 195,00023 1,250,000 515,000 58.8% 894,00024 2,091,000 1,110,321 46.9% 1,770,00025 457,000 117,316 61.2% 282,000Average* $ 1,375,500 $ 646,342 55.0% $ 1,023,240*The average line represents the average of each statistic. Continued on page 2

Bentson Clark reSource 1st Quarter 2009Taking a Glimpse at the Valuations of 2008Continued from page 1 The reported data for 2008 presents the rounded net current 2008 sample, 11 of the 25 practices analyzed were single location practices. Two of the single location practicescollections, practice income, adjusted overhead rate, value had two full-time practitioners (Practices #5 and #24). The majority (66%) of the practices in the data sample had at leastbefore debt, value expressed as a percent of collections, and one satellite location. Practice #8 had seven satellite locations and two practitioners, while Practice #12 had three satellitenumber of locations for each respective practice shown. We locations and three practitioners. Four other practices (#6, #15, #18 and #23) operated two satellite locations in addition to acaution that solely looking at this high level data cannot main office. Of these, only Practice #6 had multiple doctors, with the others being operated by solo practitioners. Theprovide an accurate value of a practice, but can instead only remaining eight practices in the sample data had one satellite location operated by solo practitioners, except Practice #17,\"Each practice provide a general overview. Other which was operated by two full-time doctors.being valued key factors must be taken into consideration and analyzed forhas unique each practice valued, including, but not limited to, current andcharacteristics historical financial and operationalthat cannot be data, demographic data, condition of the practice facilityaccounted for and its location, competitive In terms of dollars, the average value of the eleven with only a environment, referral patterns, single-office practices is $750,000, whereas the fourteenfew high level quality of staff, and examination multi-location practices had an average value of $1,238,000.metrics.\" of the office and its operating When comparing the collections of single-office practices systems. By understanding and versus multi-office practices, single-office practices’ collectionsutilizing all of this data and applying appropriate valuation averaged $1,207,000, while the fourteen multi-office practices’principles and methodology to each practice being valued, a collections averaged $1,649,000. \"Managing Since the majority of practices do overhead isreliable fair market value can be calculated for any individual not have more than one satellitepractice. location, we examined the average one of the The practice data presented in the table shows that value and collections of the seven most criticalvalue as a percentage of collections in our 2008 sample practices with only one satellite componentsranges from a minimal 46.2% (Practice #11) to a high location. The average value forof 85.1% (Practice #5), a variance of 38.9%. To put thisinto perspective, if both of these practices were grossing these practices is $817,000, with to maximizing$1,000,000, the values would be $462,000 and $851,000, average collections of $1,134,000.respectively, representing a difference in practice values of The difference in collections a practice’s84%. This extreme variance illustrates that simply using arule of thumb (i.e., value as a percentage of collections, which between the average single income and itsis the most common one) will not provide a reliable figure for location practice ($1,207,000) andan individual practice’s value. Each practice being valued has the average two location practice value.\"unique characteristics that cannot be accounted for with only afew high level metrics like those in the sample. Nevertheless, ($1,134,000) is $107,000. By simply looking at the averages,the figures in the sample can be useful to understand how eachpractice’s overhead and profitability affects its value. the obvious suggestion is that practices with more than one location can afford the opportunity for higher collections and therefore a higher practice value. Last year, we started tracking the number of locations An analysis of the practice overhead of the two groupsfor each practice valued, since we felt this information was of practices (single location versus multiple locations) revealsimportant when understanding the valuation data. In the that the eleven single location practices have an overhead averaging 54.6% and the fourteen multiple location practices have an overhead averaging 55.3%, a relatively insignificant Annual Valuation Summary Year Net Practice Overhead Value Value Collections Income Rate Before Debt as % of 2005 Average (Rounded) (Rounded) Collections 2006 Average 2007 Average $ 1,392,764 $ 715,238 49.00% $ 1,098,108 76.85% 2008 Average 1,130,800 550,037 50.41% 809,480 72.90% Average 1,366,000 690,370 50.60% 1,056,440 75.30% 1,375,500 646,342 55.00% 1,023,240 71.50% $ 1,316,266 $ 650,497 51.25% $ 996,817 74.14% Continued on page 7 2

Bentson Clark reSource 1st Quarter 2009Technology Trends: Patient CommunicationB Allison White, MBA, Director of Marketing Communications for TeleVox Software y now we all know just how important technology There is an increasing reliance on the Internet as both a source has become in nearly every facet of our busy lives. In of information and means of communication. As the demands fact, many of us rely on it. Within orthodontics this on people’s time grow, they are looking for more efficient,emphasis on technology is just as apparent, as practices strive non-intrusive ways to conduct all areas of their life.to be seen as high-tech and cutting-edge from both clinical and So what does this mean for your practice? First, apatient relations perspectives. Just as technology has evolved,so has the mindset about how best to use it in a practice. Not website is absolutely necessary. A website that presents youreven five years ago, many orthodontists were reluctant to usetechnology for patient communication and service out of a practice in a professional, inviting way is likely to draw potentialconcern that too much technology would result in a loss ofthe personal touch. However, a growing emphasis on the idea patients who are searching \"There is anof a patient-centric practice has helped to shift the practicetechnology paradigm. The fact is, patients expect the best in for orthodontic care online. increasing relianceoverall quality of care, which includes patient relations and A well designed websitecommunication. shows patients that you on the Internet are focused on their needs Fortunately, orthodontists are able to improve even when they are not in as both a sourcepatient communication without expending a lot of practice your office. By including of information useful information on and means of orthodontics, answers to common questions, office communication.\"resources. Thousands are doing this by utilizing an automated policies, key patient forms and even games on your website,communication system to relay various routine messages to you are, in effect, keeping the practice open around the clock topatients. Using an automated system gives practices the serve patients.ability to communicate with patients outside the office more The key to getting the best online image is professional design. A few years ago, it was acceptable to put up a basic,frequently and with more variety, since no staff time is needed static website and call it online marketing. These days, that is little more than an online business card. In order for a websiteto execute the contact. For example, the system works to help a practice communicate with and market to potential patients, it needs to be dynamic. Websites are so ubiquitousthrough the practice management software to automatically now that an orthodontist needs a site that will truly make the practice stand out from all the other orthodontists in the area.deliver information to patients via telephone, e-mail, and text This is where professional design becomes crucial. Many orthodontists who started years ago with a basic website are\"Orthodontists messages. This allows now upgrading their web presence with a custom-built site the practice to develop a that more adequately reflects the personality of their practice.are able to communication plan that Professional website designers should be able to translate the vision of any practice, no matter how unique, into animprove patient best fits patients’ needs eye-catching, yet functional website that accurately reflects the practice image.communication and then easily scale that plan up or down aswithout expending necessary. Consider thea lot of practice ability to deliver courtesy appointment reminders,resources.\" follow up on past-duepayments, deliver birthday and holiday greetings, send recallnotifications, and more. Not only does this technology help make a better Second, the fact that people are looking for ways topatient experience, but it has benefits for the practice as streamline their lives provides a great opportunity to take patientwell. Using automated systems to confirm appointments has communication to a whole new level. Many orthodontists arebeen shown to decrease the number of missed appointments, utilizing their websites as an interactive patient service tool.therefore retaining revenue for the practice. Another benefit At the very least, they offer e-mail capabilities through theirto the practice is the savings in staff time. Many practices websites to make patient communication more convenient.realize the need to communicate regularly with patients for Many are also adding key features like the ability for patientsappointment confirmations and other notifications, but find it (or, more likely, their parents) to view upcoming appointmentdifficult to allocate the staff resources needed to accomplish it. information (such as date, time, special instructions) andAutomated systems take the burden off of staff, requiring little account balance information online through the website. Stillto no effort to set up and execute a patient communication others take patient service even further by making it possible toplan. accept secure online payments for orthodontic treatment.Another area of technology that orthodontists are As with an automated messaging system, the benefitsfocusing on to improve patient communication is the Internet. of an interactive website extend beyond patient service. When Continued on page 4 3

Bentson Clark reSource 1st Quarter 2009Technology Trends: Patient CommunicationContinued from page 3 transforms the telephone into a marketing vehicle, aimed at a captive audience. Callers feel that they are getting to knowall of these services are available through an orthodontist’s more about the practice every time they listen to an on-holdwebsite, the volume of incoming calls to the practice is notably message, and this makes them more likely to try, re-visit, anddecreased, and the website becomes the patients’ go-to source refer.for information relating to the practice and their treatment.Interactive websites are an extremely efficient and effective The characteristics that define an orthodontic officetool for supplemental communication that actually enhances as “high-tech” will continue to evolve with advancements inthe doctor-patient relationship. This patient-centric approach technology, but what every orthodontist can agree on is thatto using the Internet is what will continue to set the cutting- patient service and communication will never go out of style.edge orthodontist apart from the pack for years to come. In fact, this is one area of the practice where experts predict increasing reliance on technology. For those practitioners The final element that rounds out the communication looking to set themselves apart to an ever-growing populationtechnology suite in many orthodontic practices is on-hold of patients and potential patients, communication technologymessaging. On-hold systems are helping practices turn a will always be a wise investment.seemingly basic medium, the telephone, into a marketing andeducational tool. Today’s most advanced on-hold systems Allison White, MBA, is Director of Marketing Communications forare developed using digital flash technology. This provides TeleVox Software. With more than 14,000 clients, TeleVox is the premierthe most reliability and ease of use for the practice, since provider of doctor-patient communication solutions in the orthodonticdigital technology works with virtually any phone system. industry. TeleVox solutions resolve time-consuming communicationBy providing custom messages on topics such as orthodontic issues associated with appointment reminders, patient notifications andcare, the backgrounds of doctor and staff, information on new patient inquiry. For more information, visit the company’s website attreatment options, and more, the on-hold system essentially www.televox.com or call 800-644-4266.Getting In Line with AlignA lign Technology, Inc., the makers of Invisalign Chris Bentson, President of Bentson Clark & Copple, LLC aligners, was founded in 1997. However, the the Nasdaq exchange under the ticker symbol ALGN. During December 2008, Align’s stock traded between $7.50 and $8.50company did not start actively shipping aligner cases per share, representing a market cap of approximately $550to orthodontists until 1999. The purpose of this article is to million.highlight Align’s performance and the ways that it has affected As stated earlier, Align started selling its productsprivate practice orthodontists over the last ten years. We arenot opining on the efficacy of aligner therapy as a treatment exclusively to orthodontists in 1999. Within a few years, themodality; there has been and will continue to be debate amongpractitioners on this subject. Regardless of your clinical view company also introduced their product to general dentistsof Invisalign, it is hard to dismiss the effect this product hashad on the adult orthodontic market. Align is also the only and began training them to \"Align has made apublicly traded company in the US that exclusively delivers use it. If you are a private significant impactproducts designed for orthodontic treatment. Since the stock practice orthodontist withinmarket is forward looking, a look at what analysts are sayingabout the future of Align is valuable information for private the US, you have likely been on the orthodonticpractice orthodontists looking toward 2009 and beyond. trained on Invisalign, as the company reports that it has market since its trained 8,600 of the 9,500 inception nearly a orthodontists in the US to use the product (see Figure decade ago...\"Align’s Performance 1, Page 5). For the past decade, Align Technology, Inc. has Align publishes its quarterly financial data on theirgrown from a start-up company into a multi-national business website (www.aligntech.com). The most recent data illustratesselling aligners to orthodontists and general dentists in that during the first three quarters of 2008, a quarterly averagemultiple countries throughout the world. Align’s corporate of just over 3,700 US orthodontists have submitted Invisalignheadquarters are located in Santa Clara, California. There is cases. The number of US orthodontists submitting cases hasa digital treatment and dental modeling facility in San Jose, remained relatively stable since the beginning of 2007, hoveringCosta Rica, while Juarez, Mexico is home to an aligner between 3,600 and 3,800 orthodontists (see Figure 2, Page 6).manufacturing facility with a capacity to fabricate up to It is also noted that in late 2006 Align won a lawsuit against40,000 unique aligners each day. The company is traded on OrthoClear, its primary competitor, ending a costly intellectual Continued on page 5 4

Bentson Clark reSource 1st Quarter 2009Getting In Line with AlignContinued from page 4 remained constant over the last several years. Even though the orthodontists’ utilization rate is twice that of GP’s (4.8 vs. 2.4property battle between the two companies. Align purchased cases per quarter as of 3rd quarter 2008) the growth for AlignOrthoClear’s assets and eliminated its primary competition in over the last several years has been generated by training GP’sthe clear aligner arena, which increased the number of doctors and international doctors as US orthodontic growth has beenreceiving cases from 2006 to 2007. flat. Align expects its annual revenues to surpass $300 According to data reported from the Orthodonticmillion during 2008. Since 1999, the company has startedalmost one million patients in treatment, manufactured more Manufacturing Association, there were an estimated 2.1than 40 million unique Invisalign aligners, trained 8,600 USorthodontists, 31,300 US general dentists and nearly 14,000 million orthodontic cases started last year in the Unitedinternational doctors (53,570 total doctors trained), anddeveloped 133 patents, many of which have been battle tested \"...it is hard States. The most recent Journalin US courts. Today, over 300 worldwide patents are pending, to dismiss the of Clinical Orthodontic’sand the company employs approximately 1,300 people. In Orthodontic Survey reportedaddition, 63 university programs throughout the world offer effect this that approximately 20% ofInvisalign certification programs. product has had active cases are adult treatment,Align’s Recent Growth on the adult and therefore we can assume that approximately 420,000 There are roughly 135,000 general dentistpractitioners in private practice within the United States. orthodontic adult cases were started last year.Since the company’s inception, Align has trained only 31,300 According to Align’s estimates,of them. However, during calendar year 2007, general market.\" the company will ship just overdentists accounted for 50% of the cases shipped (see Figure3, Page 6). The company’s third quarter 2008 press release 140,000 full cases to US orthodontists and GP’s in 2008 andalso reports that during the third quarter of 2008, Align trained1,030 general dentists and 90 orthodontists, a trend that has an additional 30,000 Express cases, almost all of which are for Figure 1: Doctors Trained to Use Align Products adult treatment. Based on this data, it is estimated that nearly two out of five adult orthodontic cases are being delivered by Align products. In fact, according to the JCO survey data, adult treatment has risen from 15.4% of active cases in 1981 to a high of 22.5% of active cases in 2005, representing the fastest growing patient segment in orthodontics during that time. Invisalign either captured or was the beneficiary of much of that growth. New Product Pipeline at Align Over the last ten years, Align has primarily focused on its flagship product – Invisalign aligners – targeted for adult treatment. Investments were heavy in technology and efficiency on the operations and production side of their business as they continued to refine the Invisalign brand. The company introduced Invisalign Express in 2005. Also, new products were added in 2008, further expanding the company’s product line. In January of 2008 the company announced Vivera retainers, a subscription-based retainer program that is reportedly meeting sales expectations. Invisalign Assist, announced in October 2008, is a program designed to help general dentists gain confidence and speed adoption after training.Source: Align Technology, Inc. The most significant announcement made was the release of Invisalign Teen, with general availability starting in July 2008. Align announced in its 3rd quarter 2008 conference call that approximately 2,000 orthodontists have been trained to use this product as of September 2008, and that 50% of those doctors have submitted a teen case and 70% of those have submitted multiple cases. Align remains optimistic about the teen market and is counting on the orthodontists in the US to Continued on page 6 5

Bentson Clark reSource 1st Quarter 2009Getting In Line with AlignContinued from page 5 Figure 2: Total Number of Doctors Receiving Cases Source: Align Technology, Inc. for 2008). Earnings per share forecasted by Deutsch bank were likewise revised for 2009 from $0.31 to $0.00. While Alignstart the growth and adoption of this product. A new marketing may not be a true indicator for the US orthodontic market, itseffort to leverage the Internet and other digital strategies to latest guidance and analysts are forecasting a difficult course ofreach teens where they spend much of their time began in late growth in the near term based primarily on economic conditions2008, and marketing expenditures in this area are predicted to in the US and abroad.increase during 2009. SummaryAnalyst’s prospective At the time of publication, MarketWatch.com Align has made a significant impact on the orthodontic market since its inception nearly a decade ago, initiallyreports that nine analysts are following and publishing marketing its products solely to US orthodontists. Demandsrecommendations on Align's stock, with the average being a dictated that they grow and therefore expand into the general“Hold.” The most recent change in analyst recommendations dental and international markets. The company has effectivelyoccurred by Deutsche Bank on October 10, 2008, downgrading accomplished this goal with over half of its revenue andthe stock from buy to hold. Deutsch Bank stated, “We are almost all of its growth now derived from general dentists anddowngrading shares of Align to Hold from Buy as we believe international doctors. With the recent launch of Invisalignthe protracted macroeconomic pressures will limit the Teen, US orthodontists are left with whether to incorporate thiscompany’s ability to hit our outer year growth expectations.” treatment modality into their practice or not. If history repeatsOther concerns cited were competition from either 3M itself, the general dentists in the US will soon have the same(Unitek) or Danaher (Ormco) and “the extent to which the decision to make.GP dentist market is adding to or cannibalizing the specialistorthodontic practitioner market.” Deutsch Bank originally In this age of aesthetic dentistry and more orthodonticestimated Align’s 2009 revenue to be $359.7 million, but buying decisions being made by adolescent patients rather thansubsequently revised it to $274.8 million (vs. $308 million their parents, rest assured that the message of “invisible braces” will be heard by prospective teen patients. Educating yourself, Figure 3: Align Customer Mix - 3rd Qtr 2008 examining how Invisalign Teen may be used or viewed by your referrals, and being ready to answer the question, “Do you offer Source: Align Technology, Inc. Invisalign for teens?” in your new patient exams needs to be answered by each practitioner. Based on the figures released by Invisalign, your referral sources (general dentists) may be willing to offer Invisalign treatment to your potential patient base. Chris Bentson is President of Bentson Clark & Copple, LLC. Chris is a veteran in the field of orthodontics with an 19-year career in the industry. He can be reached via email at [email protected]. 6

Bentson Clark reSource 1st Quarter 2009Taking a Glimpse at the Valuations of 2008Continued from page 2 Hypothetically, if Practice #11’s annual collectionsvariance of 0.7%. When combining this information with were the same as Practice #14’s ($1,000,000) it would beour 2007 sample data (refer to reSource, Volume III, Issue I),which had a lower average overhead rate for multi-location valued at $462,000 (46.2% of collections per the table), and thepractices versus single location practices, it appears to dispelthe widely-held belief that adding a satellite location will difference in value between the States Represented insignificantly increase overhead as a percentage of collections. two practices would be $249,000. Valuation SampleWith the benefit of increased collections noted above with Two single-doctor practices, 1. Arizonalittle or no change in overhead rates, practitioners who operate both collecting the same amountmultiple orthodontic offices will most likely be rewarded with of money ($1,000,000 in this 2. Arkansasmaterial increases in practice income. However, each practicelocation and each practitioner’s situation is different and must example), practicing in the same 3. Coloradobe analyzed before one decides to add additional locations. state, in similar competitive 4. Florida Because the value of a professional practice is largely environments but with vastly 5. Georgiadependent on the amount of income available to the owner, different overhead rates, would 6. Idahothe practice’s level of operating expenses (i.e. overhead rate) yield very different financialhas a significant impact on practice value. The adjustedoverhead rates of the practices presented in the sample range results during its many years 7. Illinoisfrom 44.3% to 67.5%, yielding a variance of 23.2%. Theseoverhead rates have been adjusted to remove non-operating of practice and upon sale 8. Iowaexpenses, personal and discretionary expenses of the owner/doctor (e.g., automobile, payroll taxes, cell phone, personal of the practice. Simply put, 9. Marylandtravel and entertainment, family member salaries, etc.), and managing overhead is one of 10. Missourithe owner/doctor’s compensation and retirement contributions. the most critical components toThus, the overhead numbers presented represent the true costs 11. New Jerseyto operate the practice, with the net income representing the maximizing a practice’s incomeowner/doctor’s total economic benefit received from thepractice (for more information, a detailed three-part series and its value. 12. New Yorkanalyzing practice overhead is included in reSource, VolumeIII, Issues II, III, and IV). The average net 13. North Carolina collections in the 2008 sample is 14. Ohio $1,375,500, with overhead rates 15. Pennsylvania averaging 55.0% and values 16. South Carolina as a percentage of collections 17. Texas averaging 71.5%. The data represents practices operating 18. Virginia within twenty different states. 19. Washington The purposes of the valuations 20. Wisconsin varied from selling a partialTo illustrate the effect of various overhead rates on interest to a new partner, to a partner purchasing anotherpractice value, consider Practices #11 and #14, which have partner’s interest upon retirement, to selling only a satelliterespective net collections of $911,000 and $1,000,000, a location, to selling an entire practice. For each practice, thedifference of $89,000. Practice #11 has an adjusted overhead valuation was the beginning point of the planned practicerate of 67.5%, whereas Practice #14 has an adjusted overhead transition.rate of 54.8%, representinga difference of 12.7%. Both \"Due largely to Our analysis over the last four years illustrates thatpractices are single-doctor the economic average collections remain fairly constant, but that overheadpractices in the same state with downturn, many rates are moving stealthily higher, and that net income andvery similar demographic and practitionerscompetitive environments. value as a percent of collections has decreased more than in previous years. Due largely to the economic downturn,Practice #11 generates $296,075 are choosing to many practitioners are choosing to practice longer and delayof income to the owner-doctor practice longer transition. This has resulted in a current market environmentand Practice #14 generates and delay wherein many young orthodontists looking to purchase a$452,000 of income to the practice are finding fewer opportunities than in previousowner-doctor, for a difference transition.\" years. Data from the American Association of Orthodontists’of $155,925 per year. When matching service indicates approximately 660 doctors arecomparing the values of each, Practice #11 was valued at looking to purchase practices but only approximately 200$421,000, while Practice #14 was valued at $711,000, or practices are listed for sale. This current bubble of more buyers$290,000 more than Practice #11. (Although each practice’s than sellers is allowing practice values to hold up in certainoverhead rate contributed significantly to the final value, markets, even as most practices are experiencing no top-linefactors other than overhead rate also contributed to each of growth (or declining collections due to the current recession)these practice’s values.) and increased expenses. Continued on page 8 7

Bentson Clark reSource 1st Quarter 2009Taking a Glimpse at the Valuations of 2008Continued from page 7 of current and past financial and operational data, while also utilizing and properly applying generally accepted valuation We stress that it is important to note that factors principles and methodologies. We hope the valuation data other than overhead and profitability are taken into account analyzed will serve to help you make your practice more during the valuation process. In addition to those previously valuable in 2009 than it was in 2008. No matter where your noted, other factors that have a significant impact on a practice is located or what the size of your practice is today, a practice’s value may include, but are not limited to: current little focus on your numbers can be financially rewarding – not receivable levels, billing and collection policies, number of only when the practice is sold, but also each year as you realize and amount of treatment remaining for active patients with lower expenses and higher income. paid in full accounts, number of patients on recall, referral patterns, practice location, competitive environment, and Chris Bentson is President of Bentson Clark & Copple, LLC. Chris condition of the practice’s office(s) and fixed assets. is a veteran in the field of orthodontics with an 19-year career in the industry. He can be reached via email at [email protected]. As we have noted in prior issues, determining the value of an orthodontic practice takes an extensive reviewAny tax advice contained in this publication, including any attachments, was not written or intended to be used, and cannot be used, forthe purpose of avoiding tax-related penalties or promoting, marketing or recommending to another party any tax-related matter addressedherein. This publication is not intended to render authoritative legal or accounting advice. If legal or accounting advice or other expertassistance is required, the services of a competent professional should be sought.Thinking About Selling Your Practice or Adding an Associate? Call and schedule a free 30-minute consultation today!!! 1-800-621-4664 301 North Elm Street Suite 301 Greensboro, NC 27401 1-800-621-4664 www.bentsonclark.com