Author: marketing

What Does Practice Management Mean to You?

Date Posted: 2004/01/14

Many articles and courses devoted to Dental Practice Management (DPM) have attempted to offer advice laid out in a “cookbook” manner, where the various authors and speakers contend that their particular step-by-step approach will lead to great success. We believe that there is tremendous danger in thinking about DPM this way.

Last autumn, several dental industry advisors and experts, including the authors, travelled to Dalhousie University’s Faculty of Dentistry. Each was asked to give a presentation focused exclusively on DPM. After the weekend session was completed, and upon reflection of the many words of wisdom shared with the dentists and their teams who attended, one underlying theme seemed to emerge; namely, that collectively, dentists do not agree on a precise definition of what DPM actually means. Some believe it is the task of managing the day-to-day operations of a dental business, while others think it is the hiring of consultants to help them achieve such things as greater hygiene efficiency or overall profitability goals. Still others believe it is strategic planning for certain long-term objectives of the dentist, such as retirement.

Considering these and a myriad of other acceptable definitions, we can only suggest what DPM is not. We purport that DPM proficiency is not about being a disciple of the latest guru on the speaker’s circuit, determining the current “profit centre” in one’s practice and exploiting it to financial gain!

DPM involves planning, and although this is a relatively simple task, many of us fail to do it. One might suggest this is mostly due to a person’s fear of committing to a strategy that may not materialize, resulting in embarrassment over the decisions they have made. Real planners do not look at it this way.

In fact, both of us have made decisions we have later come to realize were incorrect; but part of our plan is to learn from them, forgive ourselves, move on, and try to plan more shrewdly the next time around.

We should all accept that we are allowed to make mistakes. After all, in order to profit, risks – although ones that are calculated and reasonable – must be taken. In the light of those risks, some mistakes will be made; but thereafter, one of the greatest learning tools we will have acquired is the ability to make better DPM decisions in the future. True, there is a lot of information out there upon which to base such a plan, and it comes from many sources – but it all has to be processed, if only to make the decision to “roundfile” – i.e., trash – it.

If you need some expertise to help with the processing, feel free: it is readily available in the marketplace. However, let us offer a word of caution on the use of DPM experts. Some of the pitfalls associated with using consultants is that they frequently attempt to fit the client into a pre-set programme of action. Further, their measure of success is too often the achievement of goals determined by someone else – often some perceived industry standard – and not by the dentist who requests the help in the first place. Each dentist has a distinctly unique skill set, and the DPM needs of one dentist are not necessarily the same as those of the next. There is never a “one size fits all” solution.

We have each worked with previously proud and satisfied dentists, who suddenly develop feelings of inadequacy when they see their practices compared unfavourably to certain “performance benchmarks” or “efficiency rankings vs. peers” in the same city, county or province. Our message is: you can be both happy and successful doing what you do, the way you want to do it! So, when you do seek advice, use the information given to guide the “life plan” for your individual dental practice style.

Once you have your plan formulated, stick to it, while continually being cognizant of the basics. What you do has to make sense for you. A dental practice is fundamentally a simple business enterprise. The core business systems employed by today’s dental practices are essentially the same as those designed over 100 years ago. Why continue to try to re-invent the wheel?

To us, Dental Practice Management should always be about achieving a comfortable and fulfilling balance between giving your patients the best care possible, in the most professional manner while making efficient use of time and other resources, all the while maintaining an empowered and loyal team of office personnel. It also means frequently taking the time to stop and smell the roses by enjoying friends, family and all the other good things we too often take for granted.

At this point, we have learned not only that DPM can include all of the aforementioned tenets, but much more. We challenge you to consider a definition of DPM as being the life-plan of your practice. We have all heard about short-term and long-term goal setting for years, and we all know we should do some sort of planning relating to all aspects of our lives. As business owners, it is incumbent upon dentists to process a great volume of information and advice to manage the daily, annual and lifespan objectives of their practice.

So now let us ask you: What is your definition of DPM? How much DPM advice have you received lately? What are the various sources of this advice, and have you considered the motivations of those sources? Are you following the hottest new DPM trend of the month, or again, are you sticking to the life-plan of your practice? In other words: are you doing what is right for you?

In closing, reflect on the words of American author, Gertrude Stein, (1874-1946): “Everyone gets so much information all day long that they lose their common sense.”

Co-authored by Dr. Jeff Williams

Ontario Dentist – January 2004

Selling a Practice: Valuing a Non-Competition Agreement

Date Posted: 2003/12/13

Several accountants and lawyers who specialize in advising clients in the dental profession often share valuable information from their industry-specific newsletters and journals. One such person is Allan Garber, a chartered accountant, who recently forwarded to me a detailed analysis explaining how a Non-Competition Agreement (NCA) may be employed in the sale of a dental practice and how it may help to minimize the taxes payable when selling professional goodwill. I am always seeking industry-accepted methods to minimize my clients’ tax burden when selling a practice, and this is certainly one worth mentioning.

Dentists who have not initiated the process of professional incorporation may find this strategy of interest, as it apparently has little or no effect upon the purchaser’s future tax planning. In a traditional asset sale, a seller seeks to structure the transaction such that the tax burden is minimized. This approach is permitted under the new professional incorporation regulations and it usually benefits the seller while penalizing the purchaser. The seller can reduce his or her tax burden, while the purchaser suffers a loss in future tax relief, also known as the “lost tax shield.”

However, the introduction of a value for the NCA, or restrictive covenant – an item included in almost every agreement of purchase and sale – appears to be a win-win situation; a rare occurrence in today’s complicated tax environment. The Federal Court of Appeal ruled on this matter in Manrell (2003 DTC 5225). Your accountant should know where to find the written decision.

A professional appraisal does not normally include an allocation of fair market value for a Non-Competition Agreement, but an Agreement of Purchase and Sale can include such a clause. To determine the value and allocation of an NCA, many factors need to be considered, such as: Does the seller have the ability to compete against the purchaser?; Does the seller possess any unique or proprietary skills that may damage the sustainability of the business if such skills are employed after the sale?; and, What specific business practices will the seller cease from performing after the sale?

Other issues such as the non-solicitation of staff, referring sources, financial capacity, age, health and the stated intentions of the seller should also be considered.

The steps needed to determine the value of an NCA are complex. First, the entire practice should be professionally appraised on an asset basis in order to produce individual tangible asset figures. The capitalization of earnings appraisal method, a commonly accepted approach, often fails to produce a separate value for the goodwill. Next, in the event the seller does not provide an NCA, the potential loss in future revenues is estimated. Added to this estimate is the notational loss in goodwill value. This series of sophisticated calculations and assumptions will result in a value for an NCA. It is essential that both the seller and buyer agree on the value figure. This process may be difficult, but with the help of a knowledgeable accountant and lawyer, it is worth investigating when pursuing the sale of a dental practice.

Ontario Dentist – December 2003

Privacy Legislation and the Appraisal and Sale of a Practice

Date Posted: 2003/11/05

The Personal Information Protection and Electronic Documents Act (PIPEDA), a Federal Act, has an impact upon your practice and my business. Accordingly, I have identified three issues that must be considered when having your practice professionally appraised or while investigating a practice that is for sale.

As it pertains to the appraisal of a dental practice, the most important aspect of the Act is its effect on chart access. As I interpret the legislation, a lay person is forbidden to access your charts, for any reason, in any manner whatsoever. Therefore, an appraiser, even those that are registered dentists, should not be given access to patient charts for business or commercial purposes. While chart count is an important indicator of busyness in a dental practice, I have always maintained that the number of charts has no direct bearing on its business value. For this reason, I have never made it a practice to count a client’s charts, asking instead that the client do so.

Unfortunately, there are methods of valuation that do rely upon chart count to determine business value. If you are having your practice professionally appraised, the method employed to calculate value should not include a chart review by the appraiser. My advice is to be certain that you, or your staff, perform the chart review, count or audit, and supply the figures to your appraiser. This count should not include any confidential patient data.

The second important point you should be aware of in light of PIPEDA is that the sale of a practice normally includes a review of charts by the prospective purchasers. It is customary for a serious, qualified candidate to randomly access charts to determine their clinical compatibility with your style of record keeping, treatment planning protocols, fee guide usage and fees charged, among other data. We do not know at this time if purchasers will be permitted to perform this service after January 1, 2004, as the present legislation restricts access, even to dentists, for business or commercial purposes. However, I stress that lay persons should not be accessing charts, for any purposes, during the sale process. Brokers are therefore restricted. I advise you to make this point clear to anyone who may inspect your practice while it is being offered for sale on the open market.

Finally, regarding your charting system, Michael Gommerman of Safeguard Business Systems says, “It seems inconceivable that a dentist would compromise the practice by disclosing patient information without the patient’s consent. Naturally, this information is important for treatment purposes, and dentists would more than likely disclose patient information for this purpose only. With the impending legislation, consent needs to be given not only to disclose information, but to collect and use this information for treatment. Patient charts should reflect this change.”

Mr. Gommerman adds, “This Act warrants filing cabinets that are lockable in order to protect your practice and your livelihood. A new filing system or modifications to your existing system may be required. For offices with open shelving, doors or locks can be installed on the drawer style cabinets, or perhaps a lockable mobile shelving system for larger practices.”

Whatever your records management system is today, it may need modification to meet the new requirements. In the event that you are considering the appraisal or sale of your practice, be aware of the restrictions for lay persons and ensure that you protect one of your most valuable assets – your patient records.

Ontario Dentist – November 2003

The Top Five Fears of the Dental Practice Purchaser

Date Posted: 2003/10/14

While investigating a dental practice for sale, purchasers express their fears with the broker. Many of the same questions are asked repeatedly. Some are influenced by rumour or a lack of information. Presented in my column this month are the five most common issues I hear.

One

“The patients will not accept me as their new dentist.”

Patients visit a dental practice for many reasons. The dentist is only one of them. According to my data, after a practice is sold, and if the new owner does not make major changes, 85 to 95 per cent of the pre-existing patients will return to the same dental office as their trusted source of oral health care. They are familiar with the staff, the location, the policies, the equipment and décor among many other aspects. Switching dental offices, purely due to a change in the dentist, is not a common patient behaviour, as it results in a multitude of change. As an alternative, it is easier to accept the change in their dentist only, and return to the same office.

Based on my experience of almost 30 years of dental practice purchases, I predict that a large majority of patients will continue to return to a practice after the previous owner has departed, in the typical transaction.

Two

“The staff will not accept me as the new boss and may quit.”

Staff have two key concerns when a practice sells. The first is that they will continue to be paid the same wage. The second is that they will be able to perform their duties more or less on the same schedule as previously. If these two key factors are maintained, most staff will remain. Much like your patients, most would prefer to remain in a familiar environment rather than moving to an unknown working environment. Because they are a valuable asset to a dental practice, it is wise to make as few personnel changes as possible in the early stages. Many new owners report that, after time, they recognized staff value to the practice and realize they are lucky to have them on their team.

Three

“The number of patient charts should indicate the value of the practice.”

The debate over active patient count will never end, as most of us simply do not agree upon the definition of an “active” patient. One or two years is often considered a reasonable term to decide whether a patient is active or not. Unfortunately, this is unreliable because many patients have varying treatment and behaviour patterns. From an appraiser’s perspective, the number of charts only demonstrates the busyness of the practice, not the business value.

It is common to examine a practice treating 1,000 active patients, as defined by the owner, yet they may generate entirely different revenues. Every dentist has a unique clinical training and philosophy. Thus, most dentists will generate different revenues from the same number of patients. Therefore, using the number of patients to determine value is unreliable.

Four

“Financing is not available.”

Many financial institutions continue to offer 100 per cent financing to purchasers. Institutions have recognized that dentists are a secure, reliable credit risk and they are actively pursuing dental practice financing opportunities. Many dentists expand the practice and offer treatments normally referred out by the previous owner. Others increase working hours and operatory time. Youthful marketing ideas often produce higher new patient flow. Financial institutions know these facts.

Five

“I will not be able to sell the practice for the same price I paid for it.”

I survey buyers within one year of their purchase. This informal research has uncovered a long-standing trend. The buyers regularly admit to higher revenues within the first year of acquisition. In some instances, they are much higher. Young dentists work hard while in debt. While doing so, they are often unaware that they have also increased the value of their practice. Hard work produces results. When you own a practice, you know this fact. Valuations may be trending towards lower sale prices in the future. However, hard work can more than compensate for this trend and you may sell your practice for more than you paid.

I have seen many anxious dental practice purchasers in my experience. But I can tell you that most of their fears are unfounded, with the vast majority moving on to great success.

Ontario Dentist – October 2003

Moving on Up

Date Posted: 2003/09/05

This is a brief story about a friend of mine, an ODA member who practised dentistry in central Toronto for more than 20 years.  He owned a modest-sized, high-quality, adult crown and bridge practice.  He ran it on a part-time schedule for all those years, mostly because he was very active in organized dentistry.  He and his wife enjoyed many years of working with wonderful, regular patients in Toronto, yet they always yearned for the life outside the metropolis.

In 2002, he contacted our firm and we proceeded to sell his Toronto practice. With that behind them, he and his wife looked north, to the growing communities of the Muskokas.  They found that Huntsville was the most appealing for their lifestyle and they have now opened a brand-new, compact, tasteful, solo, dental practice.  The other dentists in town have welcomed him into their community.  I find that the professional environment in many of these growing communities is generally less competitive than in the big city.

My friend and his wife intend to run the practice on a carefully designed, efficient part-time schedule of three or four days per week.  They will rarely work evenings and weekends, which allows them the luxury of enjoying their chosen lifestyle.  They report that their new patients are very kind, easy going, and most are receptive to his comprehensive treatment planning, which fits nicely with my friend’s style, adopted from his extensive participation in continuing education programs.

Does this scenario appeal to you?  I view it as a “part-time for life” dental practice, with little financial or competitive pressure, situated in a unique, custom-designed, low-overhead office. You could enjoy the freedom to plan treatment and practise exactly as you always wished, with much less urgency to meet budgets or produce beyond your energy or comfort levels.  Start at 10 a.m. if you prefer.  Close at 3 p.m. a few days and go skiing, boating, golfing or perhaps just take a walk.

It is not common to see this situation discussed in the practice management journals or to hear about these success stories from the experts who frequent the lecture circuit.  Why is this? I believe it’s because the people who profit from this practice style are the owner, the staff and the patients, not so much the third party advisors they employ.  Some big city practices may produce big problems and need considerable management help – the type of aid that generates higher management fees.

Many dentists tell me they dream of the solo operator style as their last practice.  Why not make it your first?  Some admit they feel accidentally trapped in a system of high rent, large staff, too many patients and a host of other obligations that they feel compelled to maintain. The question I ask is, “Who are they really working for?”

I believe that you, and only you, are in control of your life and your career.  If the big city hassles really do seem like too much, consider the simplicities of rural and northern communities and the extensive lifestyle benefits that accompany them.

Where do you want to be 10 years from now?  You may wish to look north.  The lifestyle, the freedom and the practice opportunities are abundant.

Ontario Dentist – September 2003

Tech It Up a Notch

Date Posted: 2003/07/13

In the usual course of my business, about 15 to 20 dentists visit my office every week, confidentially, to explore the various practices that we have for sale.  One important part of this process is a review of the detailed equipment listings and photographs that are contained within a profession appraisal.  On the other side, one of the most common questions we receive from vendors is, “what changes should I make before putting my practice up for sale?”  There are many cosmetic improvements you can implement to make your practice more attractive to buyers, but there are a number of other issues related to new dental technologies that you ought to consider.

Purchasers are usually honest and frank in their opinions about the technology, equipment and facilities employed in practices they see for sale, and they express their thoughts openly about what equipment they find desirable and which items they consider to be of little or no value.  They are looking for a meaningful way to negotiate a lower price when considering the purchase of a practice.

Below is a short list of the technology that, according to the purchasers, you might consider upgrading before placing your practice on the market.  (I would like to thank Mr. Ross McCallum, Equipment Manager at Patterson Dental, for his assistance in compiling this list.)

1. Computers and Software (Unix, Xenix, and DOS based programs).  The typical purchaser has become accustomed to the Windows environment for their home computer and does not want to buy a practice that uses outdated technology that may not support the emerging computer needs in a dental practice.  I recommend updating your system two or more years before selling.  This ensures that the system in fully integrated and that your staff is trained.  I caution against implementing a brand new software package if you plan to sell in one year or less, as it may not be possible to fully integrate all your patients files in less than one year, and the data may be inaccurate.  As well, your last year of practice ownership should be as stress-free as possible, and new software programs can sometimes present challenges.  The investment you make in the hardware and/or software is normally recovered in the sale price, but you will not make a profit from the system itself.  However, if your office becomes more efficient after a complete integration, you may see an increase in your income and recall effectiveness, and this usually influences selling prices.

2. X-rays.  Due to the highly regulated nature of X-ray units, purchasers will have concerns about older units and will comment about their age.  Older dental chairs, lights, and delivery units are usually forgiven, but the X-ray units are essential diagnostic tools that most purchasers will invariably compare to the units they used in university.  Thus, they target older X-rays as an opportunity for price negotiations.  My father sold hundreds of Siemens 50Kv X-ray units in the 1950s and ’60s, and many of them are still in perfect operation today; some of my more mature clients even suggest that they take better images than newer units.  However, it is the buyer’s perception we must learn to deal with, and X-ray units are a hot topic of debate.  An upgrade may be in order if your units are over 25 years of age and, due to the limited availability of parts, you may be better off financially to upgrade.

3. Intra-Oral Cameras.  The first cameras appeared just over a decade ago, and while many of them continue to be effective, the original technologies of the IOC have been far superseded.  An upgrade to your IOC, usually at a lower cost than 10 years ago, with substantially better function and utility, is highly recommended.  The IOC continues to be one of the most powerful patient education tools invented and buyers view the IOC as an indication that you employ a modern, patient-education-based practice philosophy.

4.  Sterilizing.  The Statim, made by SciCan, has become the standard.  Purchasers comment that one of the very first investments they will make is a Statim when older-style sterilizing protocols are in place.  We recognize that many old steam sterilizers continue to function, but the expected standard has changed, and so has the dentist’s expectations of a speedy turn-around time.

5.  Hand pieces.  Non-fiber-optic high-speed hand pieces are not of any interest to a buyer.  Although they more or less carried the last generation of dentists into the high-speed age, if they do not employ optics, today’s purchaser rarely desire them.  Upgrade or discard them.

I have written many times about the procedures and issues to consider when preparing a practice for sale.  Upgrading your equipment can be a simple, commonsense, and low-cost means of making your practice more attractive to buyers, and should be a relatively non-disruptive process for you and your staff.  In the end, any investments you make should produce a sale price that is equal to, or perhaps higher, than the time and money invested.

Ontario Dentist – August 2003

Is a Dental Practice a Wise Investment?

Date Posted: 2003/06/03

I recently met with a young dentist who asked if it was better to invest his money into buying or setting up a new practice, versus staying as a career associate and buying other income-producing assets.

I performed a brief analysis of traditional investments compared to the average annual return from a dental practice, and concluded that a dentist will earn a higher rate of return on capital employed in dental practice ownership compared with most other investment vehicles.

Let’s use an established dental practice that grosses $400,000 per year as an example.  Most dentists manage to pay off their set-up or purchase loans and equipment leases within eight years of start up.  For this calculation, the total time in ownership is 28 years, and I assumed that operating expenses (true overhead) are 60 per cent of gross, and the owner draws 30 per cent of annual gross ($120,000 per year) in salary.  After the debt is retired, the annual profit is 10 per cent of gross income, or about $40,000 per year, for a term of 20 years.  For comparison, it requires about $800,000 in cash investments to generate $40,000 per year in pre-tax profits, at a five per cent rate of return.

I then would calculate the net present value (NPV) of an income stream of $40,000 per year for 20 years, using an expected rate of return of five per cent.  The resulting NPV, in 2003 dollars, is $498,000.  Investment experts often use this type of calculation and it suggests that $500,000 is a rational sale price for this practice.  Unfortunately for the owners, the average dental practice does not sell for more than its annual gross, but a select few have indeed sold for more in the past year.

When I study actual, open market sales figures for the typical dental practice, and factor in the initial capital that was required to create that practice 28 years ago, as in the sample calculation, the actual rate of return is well in excess of five per cent for today’s sellers.  This is due to current sale prices compared to the initial cost ($25,000 to $50,000) to set up back in the late 1960s and early 1970s.  Set-up costs then began to increase, and combined with the declining average time of ownership (roughly 15 years for females and 25 years for males) the rate of return decreases.  Within a decade, the average number of years in ownership will likely be less than 20 years for all dentists, as this trend is already emerging.

A typical practice sale price in 2003 will be about $350,000 to $450,000.  If the trend of the last 30 years continues, will practices sell for millions in the year 2030, when some of today’s graduates will be selling?  Unfortunately, I doubt that they will.

With the upcoming surge in the number of practices that will be for sale, and the resulting drop in practice values, the dentist who buys a practice today may experience a marginally lower rate of return when compared with the previous generation, yet the security of the investment should continue to be high and the risk mitigated.

The best dental practices will likely continue to sell for as high as one year’s gross until the year 2005.  After that, and assuming the trend towards early retiring baby boomer dentist emerges, practice values will begin to decline somewhat and they will be selling in the range of 30 to 80 per cent of annual gross with prices trending, over a five- to 10-year term, toward the lower end.

There are many intangible benefits of ownership, and they are uniquely different for everyone, yet ownership continues to be one of the top objectives of graduates.  Some buyers tell me that they prefer ownership mostly for job security, due to the ever-present uncertainty of being an associate.

There are risks associated with all investments.  However, a dental practice should deliver a highly predicable return for many years, reducing the risk.  I also believe that this income stream is secure because the dentist is in sole control of the business with little or no outside influences.

With all the investment options in mind, a dental practice is one of the best investments that a dentist can make and will remain so for many years to follow, regardless of the trend towards lower valuations.

Ontario Dentist – June 2003

Can You Afford to Take a Break?

Date Posted: 2003/05/07

In response to one of my recent columns, entitled “Freedom 55? Who are we kidding?” a number of dentists telephoned to express their appreciation for my perspective on this topic.  It appears as though some financial experts have been advising them to work, work, work, to achieve an early retirement.  This advice has placed a considerable amount of pressure on dentists to meet the goals set by their advisors, not necessarily themselves.

My advice is to follow your own goals, not those set by others.  Slow down and take your time.  A dental career is not a race to see who finishes first.  If your classmates have let go of ownership before you, so be it.  There is no script or master plan that dictates when you should exit dentistry.

The locum concept is an alternative career path for some dentists.  It allows professionals to extend their earning years.  Those who choose to work part-time for many years, as opposed to those who work full-time for a lesser number of years, may live longer and extend the length of time they can earn an income.

Part-time is good.  Part time should be encouraged for those who have most of their life obligations met.  Our society has not encouraged a slow and steady pace, and something can be gained from working with less intensity.  When we reach the age of 50, we should be allowed to slow down and plan a continued career of another 20 or 30 years.

I recently received a letter from Dr. Galina Mayer.  She had returned from a long maternity leave in 1999, and was looking for a part-time associate position.  I suggested that she consider a locum position in the practice of a dentist who had recently passed away.  Her thoughts may help you to see the wisdom of part-time dentistry for life, while enjoying the freedom of not owning a practice.

In her letter, Dr. Mayer said this strategy “has set me upon a wonderful path.”  Being a locum gave her the flexibility to practise dentistry without owning a practice, while the owner had the freedom to practise without worrying about internal competition.

She added that there are many advantages to hiring a locum: “The locum is mature, and offers knowledge and experience; (is) not looking to open a practice next door; (and is) experienced with establishing rapport with patients and staff.

“If you are tiring of routine and wish to reduce hours, days and patient load; if you wish to concentrate on specialized procedures; if you are contemplating the sale of your practice in the next 3 to 5 years, the long-term dental locum is the way to go,” she added.

Dr. Mayer’s letter suggests that a new trend may be forming.  I call it part-time dentistry for life.  Many professions such as law, accounting and medicine, among others, are experiencing similar practice changes.

“I an see myself in the office of such a doctor, filling in 2 to 3 days a week, and helping to improve the value of the practice with a few of my practice management skills, so the doctor could enjoy his or her time and have a better practice to sell too!”  she wrote.

These trends are a direct result of the maturation of the baby boomer’s lifestyle needs.  We need income, yet we recognize that we do not need to own a business in order to secure the income.  I call this trend the freedom from ownership cycle.

What’s your career trend?

Too Many Patients?

Date Posted: 2003/04/14

A large percentage of Canada’s ‘middle-age’ dentists are about to reach a point in their career where they desire to reduce their working hours.  This is a direct result of the aging baby boomer population.  The need to work fewer hours as we age is a natural process that most self-employed professionals experience.  I believe this trend should be encouraged, to prolong our lifespan and career span.

Evidence of this trend among dentists is found in the discussions I have with clients.  Many report that they have too many patients in the practice and they lack the energy to treat their increasing need.  Effectively, they have too many patient demands yet they want to reduce their hours.  This dilemma occurs most often with solo dentists.  It’s an unfortunate side effect of being successful and choosing to operate as a sole proprietor.  I predict that every solo dentist will experience this at one stage of his or her career.

What should you do when this happens to you?

Relax.  This is a common symptom of the maturation of your practice.  Having too many patients is a luxury and an opportunity to modify both your dental practice and your practice philosophy.

Let’s consider the basic economic principle of supply and demand for a moment.  It states that supply has an impact upon demand and vice-versa.  It also proves that price changes with a rise or fall in either variable.

Now, let’s consider the dental practice that has too many patients.  This suggests a greater demand than supply.  The result should be a higher price.  Another resultant could be a limiting of the supply, which would support the increased price, while allowing for less work to be performed at higher fees.  Essentially, this is the work less/make more objective that most professionals strive towards as they develop their unique expertise.  The limiting of the supply of a service can also be related to the principle of scarcity.  Scarcity suggests that when the service is in very short supply, it may demand a very high price.  Specialists are a good example.

Can general dentists implement scarcity in practice?

Yes.  I believe that general dentists, at various stages of their careers, can test this theory.  This is how you test this theory for yourself.  Schedule a month or two of limited hours within your practice.  You must plan it purposely and resist the temptation to open up more than 10 or 20 hours each week in your schedule.  After the test period is over, return to your regular schedule for a few months then repeat the process again.  Then judge the results for yourself, both personally and financially.

You should discover that your scarcity (limited supply) immediately supports the increase in demand for your service.  At first this appears to be an obvious effect due to your reduced hours.  However, the unique side effect, which is often overlooked, is that you will be able to increase your fees.  Some patients will have difficulty adapting to the new fees and hours, and others will seek out a new dentist, thus creating a new patient loss for your practice.

This may seem bizarre to some of you, but I know of dentists who are budgeting for a net patient decrease figure, not the more typical new patient increase figure.  The resultant they are seeking is that fees will increase and hours will decrease.  Most professionals can take advantage of this phenomenon, assuming they are fully booked.  This test is not advisable to those who are servicing large debts or family obligations.  And furthermore, there are individual circumstances to consider.

The principle of supply and demand is at the core of most every capitalistic venture.  If, after trying this experiment you have not found relief, you may want to consider your other options, such as contracting a permanent, part-time Locum dentist to assist with your patient load.  Whatever your patient load is today, it can be modified to suit your personal need.  If you have too many patients, and desire to work less/make more, this test may prove to be one of the greatest you have undertaken.

Dental Practice Management – April 2003

Set Up on Your Own or Buy: The Recent Graduate’s Dilemma

Date Posted: 2003/04/13

Some say it’s a good time to become a dentist. Consumers are putting more value on their health, and spending more dollars on health related services, including oral health care. With our aging population, those health care needs will only increase. Today’s dentistry graduates have a wide range of options available to them, but with all these opportunities, it can be hard to know which path to follow.

If you are a recent graduate, you may feel a lot of uncertainty at this early stage of your career. We have all been there. Should you set up a new practice? Buy an established practice? Associate with an established dentist? What other options could you pursue? New dentists are subject to a great deal of advice in their early years in practice, so this column is written to provide some clear perspective on the advantages and disadvantages of buying a practice versus setting up one for yourself.

Setting Up a New Practice

There are several favourable reasons to start a practice for yourself. You and you alone, not a previous owner, will select the location, an increasingly important factor. The colours, equipment, forms, staff, and many other elements are totally within your control. New patient exams commence with precisely the philosophy you choose to employ, right from the outset. Each new patient will understand the policies and procedures without suggesting that it was not that way under previous ownership. And the list goes on. These are a select few of the advantages of building a practice from scratch, and for some dentists, they outweigh the disadvantages.

Of course, setting up a new practice requires patience. It also requires the ability to service debt, often exceeding a quarter million dollars these days, for several years without profits. Waiting for patients to discover the new location can be a long, expensive, and frustrating experience for some.

Buying an Established Practice

The number one advantage for buying an established practice is cash flow. The allure of cash flow is greater than most other elements of owning an established business. We all know that material items can be replaced, often within days if needed, and they are simply tools of our profession, but ask any business owner what they value the most, and they often mention a predictable income.

On the other hand, an established practice has many long-standing policies that are difficult to modify. There are thousands of practices in Ontario, each with their own unique styles. Clinical philosophies are unique to every practice. And further, an established practice employs many individual business systems, including staff configuration, office policies, hours of operation, charting systems, clinical and sterilization protocols, payment policies, recall programs and many more procedures with which you may not agree.

Conclusion

When you are ready to start your practice, you have two choices: purchase someone else’s practice, or accumulate your own income stream. One choice allows you to jump into an established business that will provide you with cash flow up front. The other lets you build your practice from the ground up, and you’ll have complete control. Your personal style and situation will be the determining factors for which route you choose.

Ontario Dentist  – April 2003