This quote’s origin is uncertain, but it was included in a letter written in November 1773 by Benjamin Franklin: A 244-year-old statement that is as true today as it ever was. Dentistry is a profession acting like sheep with the inevitable outcome of the death of Dentistry as we know it. In our case, the wolves are insurance companies, national dental corporations, debt, and a lack of being proactive. Becoming radical through our actions, reengagement and commitment to our businesses, with the need for speed will be the strategy for success. It is so important to rethink how we do business as well as understanding what metrics are important when it comes to success. In a recent article by Dr. Howard Farran, he states: “Between 1955 and 2014, a full 88 percent of what had been Fortune 500 companies either dropped off the list or disappeared entirely. Nine out of every 10 Fortune 500 companies in 1955 are gone today, because of market disruption and creative destruction, and that churn is getting even faster in our modern society. The companies that survive and thrive are the ones that can provide customers with low prices, high-quality products and services, and great service. Is your practice on track for success?”
I was speaking to a young dentist that had just opened her practice less than a year ago. Before I went over any of her numbers and the implications of change that they demanded, I wanted to remind her of an oft forgotten fact about our profession. Yes, we are a consumer driven business based on “wants” rather than “needs”, and as in any consumer driven business our clients vote with their feet. Yes, the supply of Dentists is now around 6,000 new doctors a year, yet the demand is one tenth of what it was 40 years ago. Yes, change, insurance companies, corporate practices, student debt, and delays in retirement for older dentists is the harsh reality creating a new Dental Economy. A climate shift as it were. But the most important reality that we seem to forget is that there are two types of consumer driven businesses:
- “Destination” businesses: The places that people “want” to go visit like vacation destinations, fine dining experiences, carnivals, sporting events, and concerts. Consumers will always pay for what they want, and these services and products will make dental practices a distant second.
- “Necessary evil” businesses: Sort of an unfortunate interruption to their busy day with examples like getting the car fixed, grocery stores, doctors and yes, dental visits.
Consumers spend money on both, but they are constantly trying to avoid the necessary evils. They will avoid paying too much for #2 and squander their money on their wants. With the increase of competition and the decrease in demand for our services, we find ourselves between a rock and a hard place. These facts have created a clear picture of the future. There is an obvious success track that each of us should begin to strive for. Currently, multi-doctor offices are increasing 20% a year, while solo practices are decreasing 7% a year. This creates a mandate to look at our trajectory and practice goals. It is obvious that if you are a solo practice the future is extremely tenuous. We should all understand that being a solo practice is the time in our careers where we perfect our systems, learn to hire and keep staff, master marketing and unlimited new patients, while avoiding plateaus in productivity and profitability by adding multiple doctors, hours, services, and attracting a wider range of new patients. Solo practices have become just part of the journey, not the destination. In a way, if you were truly inspiring your patients, you couldn’t help but grow.
So, what is a reasonable time line for moving from solo practice to a multiple doctor office? A five-year to a seven-year window would be the maximum time I would consider prudent. In a way, being solo tells the wolves that we don’t understand business principles, we are not giving patients what they want, and we are in denial of our situation. Pretty easy pickings when you consider that you could easily have a 35%-45% profit margin. It is time to take a hard look at your practice history, while asking the difficult questions about growth and sustainable practice benchmarks. Most solo practices that I see have reached a plateau or even stasis when we look at profitability, and lack sustainable growth. If you are not growing (production, profit, new patients, personnel, etc.) you are not meeting your patient’s needs. This is the point where you lose as many patients as you attract. With this time line as a goal, most of you reading this have some catching up to do. Over the next few weeks I want to explore the implications and actual steps each of you should take to insure your sustainability in this new Dental Economy.
Don’t dismiss this bit of prognostication as fear mongering. This is a factual, historically based prediction that can be avoided by anyone smart enough not to procrastinate their decision making and action steps to adapt. This is how you Summit. Keep in mind that in today’s dental economy, the solo practice is a stepping stone to multi-doctor single locations, multi-location and multi-doctor groups, to finally stepping up to a solo doctor operating their own DSO with an unlimited ceiling from a growth perspective. Get started today and follow this thread to its conclusion. Share it with your dental friends, and make the commitment to embrace change.
Michael Abernathy, DDS
PS – If you would like my opinion on whether or not you’re ready to add a doctor and move up to the next level, just click below to download the Practice Growth Analysis spreadsheet. Fill in the blanks on sheets 1 and 2. Return it to me and then we will talk. No cost. No obligation. Consider it my gift to you and your future in Dentistry.