One of the most profitable investments you can make is in your practice. This could even extend from buying your first practice to expanding into multiple practices. One of the most consistent results of a broad economic downturn from a financial recession, or in this case a pandemic, is that there are always incredible opportunities that don’t even exist in the best of times. The challenge is that you have to be poised for growth, have a great consistent growth track record, be flush with your money and have the testicular fortitude to act when others are sheltering in place. In other words you need to have your house in order: Overhead of less than 63%, hygiene providing 33% of your collections, stable long-term staff, 50% of your new patients are referred by existing patients, and have a consistent growth history of at least 12-15% a year. By anyone’s definition, a really good practice. Each and every dentist should make this job one. Doctors that are prepared will never get caught in an untenable financial position. I will remind you over the next few weeks of the specific benchmarks that you need to reach and maintain in order to successfully take on this strategy. 2021 will be an incredible opportunity for those who step up and take advantage of it. We will have about 10% of the now existing dental practices changing hands or just fading away . Some will call it quits, others will sell and work as employees, and most of the rest will be afraid to turn this catastrophe into the best investment they could imagine. We are talking 300% plus ROI.
I was speaking with a doctor that was in the hunt for her first practice. She has been out of school for five years and was narrowing down the location and had looked at two or three practices. Her first question was, “Do you think I’m making the right decision?” A good question, when we consider all of the happenings during 2020. From my personal perspective, I would, without hesitation, say yes, but finding out the “why” is more important than “if” she should. I took the time to find out a little more about her. She produced well above an average dentist, has added almost every procedure to her resume (Endo, Implants, Oral Surgery, Fast Braces). Impressive. Then I asked her “Why do you want to own your own practice?” Keep in mind that even great “employee” doctors do not necessarily make great owners. Her answer may surprise you but when asked why she wanted to be an owner, she responded: “I work in a great practice and take home over $300K a year without the headaches of ownership but I feel like the next step is ownership”.
If we go back two decades, well over 97% of graduating doctors ended up as owners. Today and for the last 15 years, the percentage of doctors moving to ownership has dropped just below 50% (67% of males and 32% of female graduates move to ownership). It is this generational shift and the ever-increasing graduation numbers (6,800 this year) along with the addition of 11 dental schools over the last decade with more to come, that have driven the rise of DSOs and large corporate dental companies. Never before was there an endless supply of employee dentists. Prior to 2005, the average stay of an associate was less than 24 months. That is no longer the case. Scarcity of ownership is increasing and the pandemic has only reinforced that trend and mindset.
So, back to my question: Why are you reading this and contemplating a purchase or expansion? There could be a few reasons you are following this Blog.
- You are wondering if this is the right time and if your practice is ready. In a way, you are not sure about the when and even if in your case. NOTE: Perfect timing is never possible. The when depends solely on you.
- You are looking into ownership for the first time and just don’t know what you don’t know. You are afraid of taking a step into something about which you are sure that you don’t have all the answers. Answers can be found or purchased. Don’t let the fear of the unknown hold you back. You can do this.
- You feel like you are doing great because you have measured your KPIs, consistently grown every year, and feel like expansion into multiple offices is the next step and want to do it right. Make sure you define great as meeting or beating the percentages and benchmarks of a Super General Dental Practice (download your free copy of the Revised Second Edition by clicking here.)
- Multiple doctors, multiple offices, and expansion are on your “to do” list, and you want to see what it entails. Too many doctors create or live to fulfill a “bucket list” that someone created for them. These offices are rarely ready and likely to crash and burn in their foolish attempt to keep up with the Jones’s. In other words, it is not really your calling or passion, you just feel like you need to keep up with the authors in Dental Economics and speakers that swarm the internet with marginal or incorrect advice based upon their self-lauded performance that no one can confirm. It always seems like everyone is killing it on Facebook. Yet, I have found the most vocal tend to be legends in their own minds with a great self-image for no apparent reason. Be positive about what you hear, but verify everything.
In a way, the “why” is going to be key in the success of this type of goal. Doing it for the wrong reason, at the wrong time, based on faulty logic will always be a catastrophe. It’s not what you know that scares me, but what you think you know that isn’t so. This is the time that you need to tip up the mirror and take a hard look at your practice. Recognize the shortfalls, understand the risks, and assume that your past history will be the likely outcome of any new venture. If you struggle now, you will really struggle with another office. The addition of another office or a second doctor does not fix problems. It only magnifies them. Life and business give you what you deserve, not what you want. If you start down this road and you want to succeed, it will all be uphill. Great strategies are always that way. They all seem to be tough to push to the finish. Next week we will cover some truths about management and success in your practice.
This is how you Summit.
Michael Abernathy, DDS