COVID-19 Update #5 from IPS
Dear friends and colleagues,
Chag Sameach and Happy Easter! Another momentous week in this on-going saga has come to a close. It is a strange time to be celebrating a holiday, but – celebrating or not – this is an especially good time to take a moment and be grateful for the many blessings that we continue to enjoy, even in the midst of a very challenging time.
Once again, here is the Friday roundup of the latest news, some helpful info, and a bit of fun (including a way to measure the speed of light with a microwave and a chocolate bar).
Survey of Dentists Re: Covid-19
Yesterday we launched an anonymous survey to gauge your thoughts and feelings about the current pandemic. I’ve already received lots of helpful responses, and I’d love to hear from more of you!
If you haven’t already, please take 5 minutes to fill out our survey.
New SBA Database of PPP Lenders
If you are still looking for a lender for the PPP, the SBA has just released a helpful new database of banks participating in the program. Just enter your zip code and you’ll be directed to banks in your area.
Federal Student Loan Payments POSTPONED
From March 13 (retroactive) to September 30th, the federal government is providing automatic forbearance to all federal loan borrowers. This means that your loan payments have been suspended. The government is also waiving your interest and ceasing all collection activities on loans in default.
If you’d like more information, here’s a helpful article.
When should I apply for the PPP?
As I mentioned last week, timing is critical for the PPP loan. As soon as you receive the loan, the clock starts on an 8-week period. During those 8 weeks, the PPP money you spend on qualified payroll expenses and some other expenses (lease, utilities, mortgage interest – up to 25% of the total loan amount) will be forgiven.
So when does the 8 week period start? According to new guidelines issued on April 8th, “The eight-week period begins on the date the lender makes the first disbursement of the PPP loan to the borrower. The lender must make the first disbursement of the loan no later than ten calendar days from the date of loan approval.”
In other words, once the bank has approved the loan, you must receive the funds and start the 8 week period within 10 days. So, as we thought before, it is probably a good idea to wait until you are closer to opening.
That said, the money is running out. We are very hopeful that Congress will allocate additional funds towards the PPP, but the most recent efforts have stalled out. I still remain optimistic, and I think the political will is there. You can see more information about the loan forgiveness from the SBA guidelines here.
What does this mean for the practice sales market?
I’ve been getting this question a lot right now. Will my practice be worth less? Are buyers more reluctant? Will more dentists be looking to sell?
The most honest and realistic answer is that I’m not 100% sure. But I do have high confidence in a number of things. First, as I keep mentioning over and over, the demand for dentistry is not going away. Dentists have improvised and adapted to new infection control procedures before, and you will be able to do it again. There is a tremendous backlog of patients who will be anxious to get in once you re-open.
We have received full price offers for practices in the last two weeks (including one more last night), with the closing timeline subject to the lifting of the shelter in place order. Some lenders are still moving forward with the same underwriting standards in place. While much of the industry is paused, we haven’t stopped working for our clients.
In terms of valuations, I personally don’t see the multiples that we generally use for valuations changing. For example, the quickest, down and dirty metric for a back of the napkin valuation on a practice doing less than $1.5M in revenue is 2x your discretionary income (doctor salary + business profit + perks run through the business + depreciation and interest). I don’t see this changing drastically.
I think the lending and valuation community will agree to ignore (or strongly correct for) March, April, and May of this year when looking at seller financial statements. The actual value of your practice will continue to be most directly related to cash flow (your income), so prepare to add some hours/days to your regular schedule when you return!
Determining the Speed of Light with Chocolate and a Microwave
I saw this very fun set of 44 science and engineering challenges this week and thought I would pass it on.
Produced by the James Dyson Foundation (vacuum cleaners are apparently rather lucrative!), the challenges are ostensibly “for kids”, but I might try some this weekend!
If you’re looking for fun ways to ignite some curiosity with the kids at home, check this out! Click here to see the challenges. The speed of light one is #13.
Another “Song of Comfort” from Yo-Yo Ma
At this point, these Yo-Yo Ma videos are basic obligatory. Here’s the link. Enjoy!
Good health and best wishes to you and your families,
Trevor Kimball, PhD
President, Integrity Practice Sales