The Professional Advisory 63

The Professional Advisory

63

FOR DENTAL PROFFESSIONALS

VOL. 63 February 2014

Progressus – a going forward, advance

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Contents

4 5 7

Progress...

Ralph Crawford BA., DMD

Two Contentious “C” Words In Dental Practice Dr. Ron Weintraub

Sometimes, Timing Is Everything

David Chong Yen CPA, CA, CFP Louise Wong CPA, CA, TEP

9 11 13

Bigger Is Better

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Administering The Offer To Lease

David Lind

Associate Agreements – Part 3 David E. Rosenthal BA., LL.B.

Dentists With $3,500,000 Portfolios

Mark McNulty BA, CFP®, CIM®

Ian D. Toms B.Sc. (Hons)

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Biographies

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Ralph Crawford is an Honours Graduate from the University of Manitoba and has enjoyed a varied dental career. Prior to being editor of the Canadian Dental Association Journal from 1989 to 1997, he operated a Winnipeg private practice concurrently with being a clinical instructor at the University of Manitoba. He served as President of both the Manitoba Dental Association and Canadian Dental Association.

Ron Weintraub is the founder of Innovative Practice Solutions (IPS) and former owner and founer of Bayview Village Dental Associates and Downtown Dental Associates. He practiced dentistry from 1963-2004 and has consulted on behalf of major dental suppliers, manufacturing companies, as well as individual dental offices for over 20 years. In 2004, Ron gave up clinical practice in order to focus soley on Practice Management.

David Chong Yen and his chartered accounting firm currently advise hundreds of dentists and healthcare professionals on tax, estate and financial planning, valuations and accounting. David obtained his Bachelor of Arts degree from the University of Toronto, attained his Chartered Accountant’s Designation while working at an international firm and has subsequently completed the CICA In-Depth Tax Courses.

David Lind is the Principal and Broker of Record and Professional Practice Sales Ltd., which was established in Ontario in 1991 and is a leader in dental practice valuations and sales. Prior to joining PPS, David lead the healthcare business for CIT Financial Ltd. This gave him a strong understanding of the personal and professional needs of dentists as they entered and exited to profession.

David Rosenthal is a senior lawyer whose law practice is devoted to business, corporate and healthcare law for dentists. David advises dentists on a broad range of legal matters, with particular emphasis and legal advice on purchases and sales of practices, corporate reorganizations and professional corporations. David also speaks frequently about such matters, including guest lectures at the faculties of dentistry.

Mark McNulty is President of McNulty Group, a firm responsible for $200 million of Ontario dentists’ retirement savings. McNulty Group helps professional families transition from a life of successful practice to a stress-free retirement by using a holistic approach of practice and personal retirement planning. Mark is the author of The Transition Coach 2.0–A Canadian Dentist’s Guide to a Perfect Retirement.

Ian D. Toms is a nationally recognized real property lease consultant with over 27 years experience. He is considered an authority on tenancy issues, lease features, facilities and technicalities, and the art of tenancy negotiation. Ian has drafted and negotiated thousands of lease arrangements for national retail and medical professional tenants in 16 states and 8 provinces, with a specific emphasis on the GTA.

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“The Professional Advisory consists of a group of six independent professionals who provide services to the dental profession, each of whom specializes in a different field. They have gathered to keep each other informed of the latest developments relating to the profession, and to produce this publication which is designed to provide expert information and advice solely for dentists and their advisors.”

Notes from the editor:

Progress...

Ralph Crawford BA., DMD crawford@dccner.com

Progress is a truly word of life itself as mankind, down through the ages, has made every effort to make things better.

In reflecting upon this particular issue of The Professional Advisory (ThePA) I did, as I sometimes do upon reflecting on particular words, turn to the Latin/English dictionary I used during my high school days those many, many years ago.

Sure enough, there I found it, the Latin word for progress: progressus — a going forward, advance. And just to bring us into the so-called modern era I checked Wikipedia on the computer and found: Progress, the idea that the world can become increasingly better in terms of science, technology, modernization, liberty, democracy, quality of life, etc.

And Readers will note upon reading this particular issue, Volume #63 of The Professional Advisory, that once again progressus — a going forward, advance — is truly in place.

Starting with its inaugural issue in May 2001 and then initiating a new format in November of 2007, The Professional Advisory advances forward yet again. Down through the years Readers have been privileged to receive copies of ThePA accompanying delivery of their Oral Health. Now, ThePA is privileged to have Oral Health not only continue to regularly deliver ThePA to Readers’ mail boxes but also by e-blast to their e-mail addresses. The format has also been updated and enhanced into a new very attractive presentation that encourages Readers to open or click through the pages for information that will surely help to develop Progress within their practices and private lives.

Nor is that all! Beginning with this issue, Volume #63, The Professional Advisory — and all other issues since Volume #1 in May, 2001 — ThePA will be available in its entirety on the Internet merely by going to http://www.professionaladvisory.ca/. Now that is what we call Progress!

And speaking of Progress: Just look at what ThePA’s contributors have to say about the Latin dictionary’s going forward, advance. In his article David Lind’s opening sentence is “Dental practices in general are growing” and throughout

the remainder of his article gives the reasons and explanations why “Bigger is Better”. David Rosenthal certainly deals with Progress as he advances from Part 1 in Volume #61, Part 2 in Volume #62 and now into Part 3 of his Associate Agreements where he focuses in from the associate’s perspective. Ron Weintraub in his article Two Contentious “C” Words in Dental Practice — client and cleaning — makes an excellent case why dentists should Progress into the reality of what a practice is all about — dentists are really dealing with patients and delivering recare. Ian Toms within his Administering the Offer to Lease clearly shows that not properly following the proper steps in the offer to lease — that is, carefully making Progress from one step to another — can cost hundreds of thousands of dollars. And who wants to do that! Whenever we talk of Progress surely an inherent element is the proper allocation of when and how it is timed.

David Chong Yen and Louise Wong in their article, Sometimes, Timing is Everything show exactly that and how careful timing your business decisions, income inclusions and tax deductions can postpone or even save taxes. For his article, Dentists With $3,500,000 Portfolios Mark McNulty and his team reviewed the files of dentists with such impressive retirement incomes, with the specific goal of looking for the consistencies — isn’t that Progress — in the way those dentists manage their finances.

Yes, when looking at past history, the development of dental practices, the enormous strides that has brought us into today’s technology and the advances of The Professional Advisory, it surely must be admitted that Wikipedia is on the right track: Progress, is the idea that the world can become increasingly better in terms of science, technology, modernization, liberty, democracy, quality of life, etc.

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Two Contentious “C” Words In Dental Practice Dr. Ron Weintraub

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wo terms commonly used in many everyday dental practices are particularly contentious:

CLIENT AND CLEANING Client

Hygiene departments in dental practices have been defaulting to the nomenclature that refers to those who traditionally have been called “patients” as “clients.” Although this transition may seem unimportant and only stylistically relevant, actually it implies a subtle, but important, shift in focus from a different relationship and sets of responsibilities within the practice.

“Clients” are those who avail themselves of services offered by any professional organization, lawyer, accountants, real estate agents, or other certified professionals whereas “patient” is reserved for the provision of health services. The term “patient” implies an elevated sense of responsibility and trust predicated on a long-perceived and on-going perception of what a patient has the right to expect. Substituting the term “client” for “patient” downgrades the entire interaction.

} Radiographic survey of hard tissues — full

Cleaning

mouth series of periapical films or Panorex survey or merely bite-wing exposures; } Oral cancer screen; }D ietary analysis regarding caries inhibition; } R ecording of any apparent abnormal appearing oral manifestations; } Performing full periodontal examination which would include pocket probing and depth recording on all surfaces of all the teeth; } Potentially active hand or mechanical debridement of all calculus accretions found supra and subgingivaly; } Taking diagnostics study models; } Possible review of previously suggested remedial treatment that had not yet occurred; } Oral hygiene instructions and review of homecare; } Possible review of previously suggested remedial treatment that had not yet been addressed.

The often-heard casual reference to “book for your cleaning” is omnipresent. We hear this in many practices that run the gamut from sophisticated multi-providers to all other types of established practices. The all-inclusive reference to “cleaning” actually refers to a predictable recurring scheduled appointment that sometimes generates close to 50 per cent total production of the office.

“Cleaning” actually refers to the scheduled recare or health maintenance appointment or the oral care preventive hygiene program. This crucial component of normative practice commonly delivered by an in-house dental hygienist or resident dentist is often comprised of crucial dental services depending on the actual needs of patients and may include the following: } Updating of medical history; } Visual examination of dentition and surrounding tissues in oral cavity and head and neck region;

Many of these procedures are routinely incorporated in the average, albeit misnamed, “cleaning appointment.”

Besides being the backbone of the patient base’s perception of what they expect from their dental office, the recare department often interacts with them more frequently and for longer time than any other component of the dental office. Patients often develop close, lasting relationships with their recare provider and sometimes depend on their input in making treatment decisions. Over the years, the role of recare providers has evolved from the posture of “You’re my dentist. I expect you to scale my teeth” to “Why are YOU doing this? Don’t you have a dedicated person for this?” If the answer is no, the question in patients’ minds is whether this is a sufficiently contemporary office to give the total care they may need. It also impedes the trust that people need in order to refer their friends and family to their practice.

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Recognizing the reality of the crucial standing that recare really possesses in today’s contemporary dental practice, in many of our projects, we have appointed a dedicated recare coordinator. Yet, we still have some dentists, hygienists, and administrative staff who continue to refer patients to book for their “cleaning” or call back to book for their overdue “cleaning” appointment.

It’s hard to reconcile a one hour $170.00 appointment when it is referred to as “just a cleaning appointment.” A small adjustment to change the phrase from “let me book your next cleaning appointment” to “let me book your oral health recare appointment” promotes a positive perception of the care reflective of patients’ expectations from healthcare professionals.

Historically, appointments most susceptible for short term cancellation are recare appointments particularly when presented as unimportant as when using the terminology “just a check up and cleaning.” It reflects a lowered awareness of the value of “just a check up and cleaning” with the connotation that nothing much is lost if put off for another time.

Knowing the deleterious effect of using the common words “client” and “cleaning,” and phrase “just a check up and cleaning,” one would think that it would be easy to substitute more appropriate terminology. Such a paradigm shift, however, requires retraining of all the players in the office to consciously use the more appropriate “Patient and preventive recare appointment.” It is not easy to change habits; semantic expressions die hard.

Hygiene departments in dental practices have been defaulting to the nomenclature that refers to those who traditionally have been called ‘patients’ as ‘clients.’

Please send comments to

Ron Weintraub is a founding partner with the Bayview Village & Downtown Dental Associates and brings over thirty-five years of knowledge and experience in the practice of general dentistry to the Professional Advisory. Large companies such as Patterson Dental, Ash Temple Ltd, Henry Schein Arcona, & the former Canadian Dental Co. have benefited from his insight. As owner of Innovative Practice Solutions, Ron advises dentists on practice enhancement, practice purchases, sales, location evaluations, associate buy-ins, and business mergers. Dr. Weintraub can be contacted at (905) 470-6222 Ext. 221 or drronips@rogers.com.

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Sometimes, Timing Is Everything David Chong Yen CPA, CA, CFP Louise Wong CPA, CA, TEP

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n important opportunity for tax-saving, often overlooked, is careful timing of your income and expenses, and your personal deductions. This does not refer to when you actually receive cash (income), or disburse cash (expenses): income is taxed when it is earned, not when the cash is received, and expenses are deductible when incurred, not when the cash is paid out.

Therefore, how you time your work can produce very different tax results.

For example, if work performed on December 30 was deferred till January 2, you would then report it as income for the following year, (assuming a December 31 fiscal year-end), and thus defer the related tax for a whole year. Therefore, many practitioners choose a fiscal year-end coinciding with their annual holiday.

When they return from holiday, there is often a backlog of work to be done, and they will enjoy a one-year deferral on the tax paid on all that new work.

Timing your expenses is usually more within your control. For example, if your computer needs servicing, have the work performed on December 30 so you can expense it in that year, since if you wait till January 2, you must wait twelve months for the tax savings. Note this does not allow you to “pre-pay” expenses and time your deductions accordingly: for example, if you pay rent for the next three months on December 30, that payment is treated as “prepaid expenses” as of December 31, and only expensed for tax purposes in the next year. This is important when making large outlays for new equipment. If you buy and begin using new equipment before December 31, you can make a full first-year depreciation claim for tax purposes; however, if you bought it on January 2, the tax savings from your first-year depreciation claim are delayed by a full year. Therefore, buy dental and computer equipment, and renovations, just before your fiscal year-end.

One common approach for deferring taxes is to ac-

crue a salary bonus in your professional corporation’s (PC ’s) year-end. For example, if your PC has a September 30, 2013 year-end, you can accrue a bonus to be paid to you within the next 179 days, and expense it as of September 30, 2013. An extra $60,000 bonus expense, at the 15.5 per cent corporate tax rate, means PC saves tax of $9,300 for its 2013 tax year.

The $60,000 bonus must be paid to you as salary within 179 days of September 30, 2013, i.e., PC must remit the related personal tax withholdings on this $60,000 to the CRA generally due by April 15, 2014. If your standard monthly salary is $10,000, then by March 28, 2014 (179 days after PC year-end) you will have received the full bonus, and the necessary tax remittances will have been made. Note that this will not reduce your over-all corporate income tax, but in this example, it defers $9,300 of corporate tax for a full year. Likewise, while not reducing your personal tax, it defers the tax remittance on the $60,000 salary, which you were going to receive anyhow, for up to six months. While the same amount of corporate and personal tax will be paid, this helps your cash flow, assuming you intended to take the $60,000 salary anyhow, since it allows you to defer the personal tax/payroll remittances for six months. This can also be useful if you expect to be in a lower bracket in the following year (for example, you will only be working for a few months before taking an extended leave): the $60,000 which would have been taxed at high rates in 2013 is now taxed at low-bracket rates in 2014. Because it results in lower PC income in 2013, your PC will also have lower tax instalments for the 2014 tax year.

If you already have a PC, careful timing can save significant tax. For example, adding low-bracket family members as shareholders before December 31 means dividends can be paid to them for that calendar year, giving

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them a whole extra year of low-tax dividends. How you time the purchase or sale of your practice can also mean large savings. For example, if you already have a PC with a May 31 year-end and are buying practice assets, then closing the deal in late May gives you the first year’s depreciation almost at once, rather than waiting for a full year if the deal closes in early June. Likewise, delaying a share sale till the next calendar year defers the capital gains tax on the sale for 12 months, and if you are retiring, may allow you to declare the sale in a lower tax-bracket year.

How you time deductions on your personal return can also save tax. For example, there is no requirement to claim an RRSP deduction in the same year you make the RRSP contribution. So a large RRSP contribution made in a low-income year (when you are in a low tax bracket and would therefore lose most of the potential benefit of the deduction), should be claimed in a later year. For example, in year 1, you make a $20,000 RRSP contribution; but if due to low income or large tuition tax credit carry-forwards, you are in a low tax bracket, the $20,000 deduction will save little or no tax. However, if your income in the following year will be $160,000, and you claim the $20,000 in the following year, the same deduction could yield up to $9,200 of tax savings, at the high 46 per cent tax rate.

Therefore, carefully timing your business decisions, income inclusions and tax deductions can postpone or even save tax.

One common approach for deferring taxes is to accrue a salary bonus in your professional corporation’s (PC’s) year-end.

Please send comments to

This article was prepared by David Chong Yen, CPA, CA, CFP and Louise Wong, CPA, CA, TEP of DCY Professional Corporation Chartered Accountants who are tax specialists and have been advising dentists for decades. Additional information can be obtained by phone (416) 510-8888, fax (416) 510-2699, or e-mail david@dcy.ca / louise@dcy.ca. Visit our website at www.dcy.ca. This article is intended to present tax saving and planning ideas, and is not intended to replace professional advice.

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Bigger Is Better

David Lind

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ental practices in general are growing.

Dentists are taking more space and building bigger practices, buying neighbouring practices and merging them together, moving out of the “invisible” location and becoming more visible and accessible, extending hours and staying open on weekends. Why is this happening and what does it mean for dental practice values?

I believe this is happening for a few reasons.

Equipping and operating a dental practice is expensive. With average overhead expenses approaching 60 per cent, it is challenging in smaller practices to cover the overhead and earn a good income along with a return on capital investment. Bigger practices can afford to have all the latest technology such as digital x-rays, paperless charting, lasers, and CAD/CAM systems. All of these technology enhancements also produce efficiency gains, further reducing the overhead percentage. Smaller practices cannot afford these expensive improvements and are stuck being less efficient as a result.

Patients are demanding modern and more accessible dental practices. The older style practice that patients must walk up a set of stairs to get to, and is only open four days per week from 9:00 to 4:00 may still be viable for the current patient base that trusts and respects their dentist.

However, I suggest the new patient flow would be waning in that type of practice as the new patients are attracted by the more modern and accessible practice. With new patient flow slowing the practice will eventually decline and become even less efficient.

The broader business world is noticing dentistry and is intrigued by the returns offered. There are several new entrants in corporate dentistry in Canada. These businesses are not interested in small practices but do have an appetite for large practices as long as the owners will stay for an extended period. What do they know? They know that there are economies of scale enjoyed in larger practices that are not available in smaller practices. The risk associated with goodwill transfer is less in a larger practice because they are generally destination offices

rather than driven by one individual dentist.

Further, the cash flow in smaller practices is not worth the time it takes to analyze and acquire them. Corporate dentistry is not for everyone but it is here to stay and offers an alternative for some dental practice vendors.

The demographics of dentists have changed.

The graduating classes of dentists in the seventies and eighties were primarily male. Most of these dentists set up from scratch, made a very good living and were happy and fulfilled with a one dentist, one hygienist practice in a traditional office setting. Now more than half of the graduating classes are female. Many want to own their own practice but want more flexibility in their schedule in order to accommodate the various demands on their time. A traditional practice model cannot accommodate that kind of flexibility.

I am often asked by owners of these larger practices “Is there really someone out there that will be able to pay for my large practice?” And further “will they be able to get the financing they need to close the deal?” The answers are quite simply — yes and yes. Some are surprised by that, but what they find even more surprising is the fact that their large practice will actually bring a premium in terms of its value. The efficiencies that are gained in larger practices make them more profitable and therefore more valuable and there is a demand in the market for larger practices. We have large lists of prospective purchasers who have target prices over $1 million. We do have buyers for smaller practices but the demand is far less. Greater demand means greater value that the purchasers will place on the larger practices which is why

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the practice will sell for a premium. The reverse however is also true. The traditional small walk up practice will have less demand and will therefore be valued lower.

The real opportunity here lies for the practices that are in the middle of the pack. There are many practices that were built 20 or 30 years ago with an extra operatory or two to accommodate future growth; growth that never came.

There may be room to expand hours too. A practice like this could be significantly enhanced by purchasing a smaller local practice and merging them together. You will not have to pay a premium for the smaller practice which is a benefit. The real benefit however comes from the economies of scale that the new combined practice will enjoy. This will produce a higher value for the combined practice than the individual practices were worth pre-merger. Philosophers may describe it as a whole that is greater than the sum of its parts. Financial types call this accretive to value and earnings. I call it a classic win-win!

I am often asked by owners of these larger practices ‘Is there really someone out there that will be able to pay for my large practice?’

And further ‘will they be able to get the financing they need to close the deal?’

Please send comments to

David Lind is a Principal and Broker of Record in Professional Practice Sales Ltd. (www.ppsales.com), which specializes in the valuation and sale of dental practices. He can be reached at (905) 472-6000 or 1-888-777-8825 or e-mail at: david.lind@ppsales.com

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Associate Agreements – PART 3 David E. Rosenthal BA., LL.B.

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n volumes 61 and 62 of The Professional Advisory I wrote about associate agreements from the principal’s perspective. This article focuses on associate agreements from the associate’s perspective.

An associate agreement is the legal contract that details the arrangements between the dentist who owns the practice (Principal) and the associate dentist (Associate) hired to work at the practice. For most new graduates, the associate agreement will be the first legal agreement they enter into as a practicing dentist. There are a number of issues to consider when becoming an Associate and signing an associate agreement (Agreement).

RELATIONSHIP In most cases the Associate is an independent self-employed individual. The Agreement governs the relationship between the Principal and Associate and details the terms on which the Associate agrees to provide his or her services to patients in the Principal’s office but as an independent practitioner.

Associates can be either individual dentists or dentistry professional corporations. This article does not deal with dentistry professional corporations. As there may be many potential tax benefits in doing so, it is always worthwhile to contact with your tax advisors to determine whether to use a professional corporation as the Associate.

As an independent practitioner the Associate is operating his or her own separate business and is self employed. The Principal pays the Associate a gross amount and the Associate must then remit from that gross amount the required taxes and other remittances to Canada Revenue Agency. The Agreement needs to clearly specify the independent contractor relationship between Principal and Associate. As an independent practitioner the Associate is typically responsible to pay for his or her own license fees, memberships, insurance, continuing education courses, seminars, and other expenses applicable to the Associate. Review the Agreement carefully to see what the Principal requires the Associate to pay for.

The Agreement should detail all of the services and facilities the Principal will provide to the Associate, including the use of the premises, equipment, dental supplies, staff and services. Staff and services might include the use of receptionists, chairside assistants, dental hygienists, management, administrative, bookkeeping and collection services. If specific equipment or staff is required (such as a designated operatory which is set up for a ‘left handed’ dentist or designated chairside assistant or hygienist) this should be detailed in the Agreement. Often the Agreement stipulates the Principal will provide certain standard equipment and routine dental supplies and it is the Associate’s cost if the Associate requires further specialized items.

REMUNERATION The Associate is typically paid based on a percentage of the Associate’s collected billings. The current standard going rate for general dentistry is 40 per cent of collected billings. A specialty practice Associate may command a higher percentage. The Associate is usually paid monthly as third party laboratory invoices are typically received by the Principal on a monthly basis.

The definition of collected billings in the Agreement is critical. Collected billings typically means the gross billings for dental services rendered by the Associate to patients of the dental practice for which payment has been received by the Principal, after deducting laboratory fees.

The definition of collective billings should also specify the Associate’s gross billings include the dentist examination fee for dental hygiene services where the examination has been performed by the Associate. The vast majority of associate agreements do not include Associate entitlement to any x-ray exam fee where the x-ray has been taken by the hygienist and read by the Associate.

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Review the definition of collected billings to determine if there are other deductions (in addition to deducting laboratory fees) from the Associate’s gross billings. For example, patients often pay for dental services by credit card. Credit card companies charge approximately two per cent as a processing fee. It is becoming more common in recent years that other deductions from the Associate’s gross billings include credit card processing fees and any other collection costs incurred by the Principal to collect payments from patients.

Note the definition refers to collected billings. If a patient does not pay an account, then it is not included in the calculation of collected billings. The Associate is not paid the percentage until the invoice is actually paid by the patient. If a bad debt is incurred for a fee previously included in the Associate’s gross billings and paid to the Associate (such as a patient’s cheque not being honoured at the bank), the Agreement will typically specify that such amount is deducted from the amount then owing to the Associate, or the Associate must repay the amount to the Principal.

For most new graduates, the associate agreement will be the first legal agreement they enter into as a practicing dentist.

Part 4 of this article continues in the next volume of The Professional Advisory and will address non-solicitation and noncompetition covenants and termination of the Agreement.

Please send comments to

David Rosenthal is a senior lawyer with Spiegel Rosenthal Professional Corporation whose practice is devoted to corporate, commercial and business law, with special emphasis on advising dentists. He can be reached at (416) 865-0736 or e-mail to david@drlaw.ca.

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Dentists With $3,500,000 Portfolios Mark McNulty BA, CFP®, CIM®

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recently wrote an article about dentists with $6,000,000 portfolios. In twenty years of article writing, I have never received more comments from the dental profession in response to an article. The main point of the article was that despite what the general public thinks, most dentists are not wildly rich. In the thirty years McNulty Group has been advising dentists, we have only come across nine dentists who have built portfolios in excess of $6,000,000.

For this article, my team and I reviewed the files of dentists for whom we manage retirement incomes with portfolios in excess of $3,500,000. Our goal was to look for consistencies in the way these dentists manage their finances.

WHY IS $3,500,000 IMPRESSIVE? In order for our firm to maintain a small client base, dentists must have a minimum of $1,500,000 of savings for us to work with them.

More often than not, the dentists we meet do not have this minimum. That means our client base of dentists is likely more financially successful than the general population of dentists. However, only 20 per cent of our client base has ever crossed the $3,500,000 mark in savings.

How did they get to this size of nest egg when a full 80 per cent of the rest of the dental community don’t come close? Below are some of the consistencies we found with the $3.5 million dentists.

THEY LIVE OUTSIDE OF TORONTO For the most part (all but four in fact) the dentists we work with who have reached this level live outside of the Greater Toronto Area (GTA). Most are located in Ottawa, the Niagara region, or in small towns. There are likely a couple of reasons for this. While the fee guide is the same across Ontario, the cost of living is much cheaper outside of Toronto for housing, lifestyle costs, etc.

Another factor could also just be the nature of my business. Please be aware that this is far from a formal study.

We are only looking at the families I work with, and because most of my new business comes from referrals, it is likely skewing the results.

However, it is undeniable that Torontonians are more likely to allocate more of their nest egg to shelter than a dentist in Bracebridge.

PRACTICE For most of these dentists, their practice was valued in the $1,000,000 range and this makes up part of the $3.5 million. What surprised me was that almost all of them were in cost-sharing arrangements or true partnerships. I suppose part of their ability to save more than the average dentist could be due to lower overall expenses in the practice.

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SPEND LESS THAN THEY MAKE – DON’T DRIVE FANCY CARS While this may be obvious, the fact is these dentists do not have extravagant lifestyles. They pay themselves a smaller than average income and had automatic savings set up for all other cash flows.

THEY HAVE A FORMAL PRACTICE AND PERSONAL RETIREMENT PLAN IN PLACE This may also be obvious since they are our clients, and all we do is practice and personal retirement planning.

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The main point of the article was that despite what the general public thinks, most dentists are not wildly rich. plans. They “buy-in” whole heartedly to the concept of setting targets and monitoring them. Many dentists only want to review their retirement plans once a year, and don’t live their plans.

IN CONCLUSION If you are a new dentist just starting out and want to reach a higher than average level of savings, follow these simple few steps. Practice outside of the GTA, with another dentist.

Work hard, spend less. Design a plan and live your plan.

Sounds simple? Less than 20 per cent of dentists can do it.

Please send comments to

Mark McNulty is President of McNulty Group, a firm responsible for $200 million of Ontario dentists’ retirement savings. McNulty Group helps professional families transition from a life of successful practice to a stress-free retirement by using a holistic approach of practice and personal retirement planning. Mark is the author of The Transition Coach 2.0–A Canadian Dentist’s Guide to a Perfect Retirement. Mark may be contacted at 1-866-261-4768 ext 209 or mark@mcnultygroup.ca

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Administering The Offer To Lease Ian D. Toms B.Sc. (Hons)

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he offer to lease is the single most important lease document a tenant ever signs.

This document describes tenancy terms and conditions which may continue for 50 or more years. Not properly administering your offer to lease can and will cost hundreds of thousands of dollars, and in some cases the value of your practice.

Typically, the offer to lease negotiation is the first step towards a lease when considering new premises. The offer is an abbreviated version of the lease, enabling the parties to focus on a simplified summary of tenancy terms.

In order to successfully negotiate an offer to lease, you need to administer two critical issues. } Know which terms and conditions you require, and } Know who should negotiate the offer on your behalf.

REQUIRED TERMS AND CONDITIONS Your advisor will guide you through the hundreds of tenancy terms and conditions that define the value of your practice, now and throughout the life of your practice. You need to be prepared to abandon the location if certain terms cannot be negotiated.

PRIMARY TERMS INCLUDE: Rent

a. Is the rent reasonable in the context of the market? b. Is the method used to calculate rent fair and reasonable? c. Will rent in renewal options be acceptable? d. Is the additional rent fair, reasonable and manageable? e. A re you getting the best rent, free rent, tenant allowance and landlords work negotiable possible?

Tenant

a. b. c. d.

W ho is the tenant?

Can the lease be assigned together with all obligations?

Can the premises be shared or sublet?

Is there personal exposure?

Use

a. Does the permitted use enable your practice throughout the tenancy? b. Does the zoning permit the use? c. Do the electrical, heating, cooling and ventilation, and plumbing systems permit the use? d. Does the landlord guarantee that no competitor may practice in your development at any time?

Lease form and content.

a. W ill you have the ability to negotiate the lease? b. W ill the lease be based only on offer to lease terms and conditions? c. W hat form of lease will be used?

WHO SHOULD NEGOTIATE THE OFFER TO LEASE Choose the person to negotiate your offer to lease based on three fundamental qualities: how much experience does that person have negotiating offers to lease, is that person properly licensed to provide the service, and is that person working to protect your interest only. Consider the following common choices.

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1. Realtors: } A re paid a commission only if they broker a deal — no

deal, no pay. Do you want this bias governing the future of your practice? } A re often paid by the landlord who is the “other side” in the negotiation; do you want this conflict of interest governing the future of your practice? } Commission is factored into the rent over time — make no mistake, you paid for the service; it’s not “free”.

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} A re not specialized, typically “negotiating� the odd offer

in addition to residential and commercial property sales.

2. Tenants: } A re not objective because of an emotional attachment

to the premises. } Ought to spend their time doing what they are trained

and paid to do; trying to save costs at the expense of billable time is false economy. } Have little or no experience negotiating or dealing with an offer to lease and are a danger to themselves.

3. Laywers: } Are invaluable to ensure that the offer is correct in law

but not business. Few lawyers have the experience of personally negotiating thousands of offers to lease, or current knowledge of the rental market.

4. Lease consultants, accountants and equipment suppliers: } Does the person who will actually complete the nego-

tiation have experience of thousands of offer to lease negotiations, or are they a representative of a company who has the experience? } Has the person ever been a tenant and personally experienced the penalty of a mistake? } Is the person professionally qualified and licensed to provide the service? } A re the fees reasonable and rational; is there a relationship between cost and benefit? } Is the person a bully who will leave you with a negative landlord-tenant relationship for the tenancy?

Not properly administering your offer to lease can and will cost hundreds of thousands of dollars, and in some cases the value of your practice.

Building a practice based on a f lawed offer to lease is building on an unstable foundation and will lead to trouble. Administer your position wisely before proceeding with an offer to lease negotiation.

Please send comments to

Ian D. Toms is licensed under the Real Estate and Business Broker Act to provide lease consulting services and has been negotiating offers to lease since 1986. He can be reached at (705) 743-1220 or by email at iantoms@pipcom.com. Visit his web site at www.iantoms.com.

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