Like most things, success is in the details. Almost every dentist I speak with wants to grow a practice to the point of needing a new doctor. The details in getting the timing right are critical to the successful execution of any transition in dentistry. Adding a doctor is not the time to wing it. There are solid reasons, benchmarks, and systems to make any transition work. So, the question is, are you really ready for that new doctor?
The new dental economy we find ourselves in is a great place to start. We are seeing solo dental practices decreasing in numbers by 7% per year, while multi-doctor offices are increasing 20% per year. The evolution of managed care, the competition of corporations, and the ever more educated consumer that demands more are driving these changes.
John Gardener said it best: “Most organizations have developed a functional blindness to their own defects. They are not suffering because they cannot resolve their problems but because they cannot see their problems.” It is the myths and miscalculations that destroy any chance for a successful transition. Self-reflection as well as having a committed doctor and staff is essential to the process. Take note that adding an associate or partner never eliminates problems. This addition most often creates or points out the problems that already existed but were not dealt with when you were a solo practice. Once you step into the multi-doctor arena, you will soon find that your systems, staff, and protocols no longer are sufficient for continued growth.
I want to take the time to look at the pre-qualifying benchmarks that every practice must look at in order to have the greatest chance of success in a transition. What follows is a concise list of things you need to be able to check the boxes on prior to hiring that new doctor. So, when should an associate or partner be considered?
- When the senior doctor is ready to grow the practice or cut back hours. The caveat is it cannot be anything in between.
- When the schedule is too full. Not when you are struggling to fill it.
- When the senior doctor is tired and busy but poised for growth. Poised includes a commitment to do whatever it takes to make this work. No coasting. Offices that succeed in transitions are engaged thoroughly in the process and the needed results.
- When you have a 15% growth rate per year. This indicates that you embrace change and are constantly improving your office to adapt to an ever-changing dental climate.
- When you have a committed team that shares your vision for a multi-doctor office and are on board and willing to pitch in to make this happen. There is a huge difference in a committed team and just a group of workers that are compliant. The number one reason transitions fail is that the senior doctor fails to involve and take the council of his staff. Taking the time to involve your staff creates a “staff ownership” mentality.
- An overhead of 63% or less. Any higher begs the question of sound financial policies in your business. All-inclusive costs for staff compensation (pay, taxes, uniforms, benefits, etc.) should fall around 25%. Marketing should be at 3%-5%, lab at 8%-10%, dental supplies at 6%, office supplies at less than 2%, and facility costs would run 7-9%.
- New patients should be 50-75 new patients per dentist per month. Hire another doctor and you need to make sure that you can ramp up that number. If we look at it from a hygiene perspective, you would need about 32 new patients a month per hygienist. This is not a benchmark that you can compensate for by checking the boxes on the other areas. Numbers of new patients directly affect your bottom line and ability to consistently grow.
- Recall should be at least 70% and hopefully higher. The average practice has a recall percentage of about 42%. If you have not figured it out yet, average practices are not candidates for associates or partners. An average practice, according to ADA statistics, sees about 25-30 new patients a month, has 1 hygienist, has a total staff of 4, has a 67%-75% overhead, recall at or below 42%, and a direct referral rate of less than 40%.
- When you have at least 2000 active patients (patients who have been in during the last 12 months)
- When you can consistently maintain adjusted net production and/or collections of at least $120,000-$140,000 per month. Struggling or failing to hit these numbers indicate a lack of understanding and implementation of sound business acumen. Falling short here will assure a poor overhead when the new doctor comes on board. Doctors who produce at these levels understand consumerism, key practice indicators, marketing, systems, and protocols.
- When you have at least a referral rate of 50% or greater. This one number best indicates your overall practice health and competence in the market place. Don’t start down the road until you hit this benchmark. People have to like you, your office systems, and staff to sustain enough growth to add another doctor.
- You will need to have at least twice the number of hygiene hours as doctor’s hours. In other words, two full time hygienists per doctor. Keep in mind that the hiring of another doctor should quickly mean an increase in new patients as well as the need to hire another hygienist to service them.
- You should be pretty close to producing $25,000-$30,000 per month per op. 6 total ops would be $150,000-$180,000 per month. While you will probably fall short here, production per op is a great way of looking at capacity. Assuming that you will overlap schedules with the new doctor, you will need about 2 rooms per doc, and one per hygienist with at least one extra room available above this number. If you are getting close to these production benchmarks, you will need to consider if your facility is up to the task of housing more hygienists, assistants, and ops.
- You need to look at the production per employee. The average practice will produce about $14,000 per month per employee. Average practices will not be able to effectively integrate an associate without moving closer to $20,000-$25,000 per employee per month.
- Debt structure: Assume no debt: You are not bringing in an associate/partner to bail out the senior doctor.
Lots of boxes to check, but these are the “not so small things” that make transitions work. Start with a cold harsh unimpassioned look at where your practice actually is as well as where you are emotionally and financially before embarking on bringing in a new doctor. Do this and you can find yourself with a 15%-20% growth rate every year and a long-term associate/partner.
Michael Abernathy, DDS
PS. If you would like the quintessential guide to adding associates, partners, or any form of transition, consider reading my book called THE ROADMAP to Wealth & Security: Your Complete Guide to Dental Transitions. It is available to order online at: www.summitpracticesolutions.com/our-products.