I recently listened to a Dentaltown podcast that featured Bill Rossi of Advanced Practice Management in the Twin Cities. Mr. Rossi is a well-known practice consultant with a great reputation and the podcast highlighted the common traits he saw in successful practices. He provided his professional opinion, but also employed a statistician to review his clients’ numbers and back-up his assertions.
I agreed with many of his points, but also found a few other similarities between our highly successful dental clients – that is, practices that collect at least $1,000,000 per full-time doctor and have overhead of no more than 60%. Of course, there are many ways to define success, and I won’t claim that revenue and take-home pay are the only measures. However, if you want to create a high-volume, high-profit practice here is what I believe needs to be done.
They Use Consultants
I am generally pre-disposed to dislike consultants. The old saying old of “those who can do, do, and those can’t consult” would seem appropriate, however, I can’t deny that our best practices rely on a consultant at some point during their career. There are a variety of reasons why consultants are valuable to a private practice dentist, but more than anything, it creates an atmosphere of holding the dentist accountable to the numbers and it also creates an enthusiasm in the dentist for their business.
Successful dentist-clients also tend to be continuing education junkies. They are learning new procedures and staying up-to-date on dental trends. Again, maybe the benefit is simply re-energizing the dentist, but there is no doubt that our most successful clients spend more than the average client on continuing education.
While people shouldn’t spend money simply to get a tax deduction, there is a correlation between having the latest technology and the clients who are at that top tier of performance. Many times I can make an argument for a purchase (e.g. CERAC) based on return on investment, but there is an additional intangible benefit to keeping up with the latest technology too. The dentist oftentimes seems more engaged in his/her craft and the feeling flows through to the patients for a better overall experience.
This seems like a no-brainer, but practices with a freestanding building or in a commercial development tend to be more successful than a client located within a professional building – all else equal. Mr. Rossi said you should never locate a practice in a spot that Starbucks wouldn’t be willing to go to. I agree with him if the intent is to build a large practice.
Having a great location is nice, but all of our most successful clients have the biggest signs that their municipality will allow. Signs do cost some money, but there’s no doubt the return on investment is there.
The clients we have in the upper tier tend to have 2 days a week where they are open until 7pm or 8pm. Yes, there will be a cancellation or two, but Mr. Rossi’s research showed that the utilization rate was actually higher in these extended hours than it was during normal business hours. My professional experience backs up this assertion.
Marketing is a necessity. Our top-performing dentist-clients spend at least 3% of revenues on marketing and also have a top-notch website. All materials and collateral are professionally done.
All of our top performers take some PPO insurance. PPO is almost a 4-letter word in dental, but I believe some is a necessary amount.
Some of our best clients are located in cities; however, most are in the exurbs. Less competition means more patients and lower overhead.
2-4 Partners Maximum
In my experience, there seems to be economies of scale from a partnership or even a small group, but the benefits tend to diminish after 4 doctors. Mr. Rossi posited that larger groups tend to become unmanageable and we certainly see the numbers begin to suffer at certain sizes.
As noted at the beginning, there are a lot of different ways to practice – and even more ways to define success. As a financial services firm, we bring to light what we observe and, by our nature, that information is typically quantitative. This is not to say that its the right answer or the only way to go about running your business. Some of our favorite (and happiest) clients have smaller revenue practices but enjoy their work/life balance.