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Hello and welcome to Ascent Dental Radio. A program dedicated to the balance between the clinical aspect of health care and the business of health care. And now here is your host, Dr. Kevin Coughlin.
Today’s podcast involves those young dentists getting ready to graduate from the 60 dental schools in the United States of America. As you’re preparing to graduate, almost all of you will be unprepared to purchase a dental practice. This is brought about by many of the following points; one, the vast majority of dental students will be approximately $250,000 in debt from their dental and undergraduate education. The vast majority of you will be lacking basic business knowledge to run a small or medium size business because since the ninth grade, you’ve been focused on the sciences and over the last four years of an intense dental education, the focus has been primarily on clinic.
I’m happy to say that in 2016, most dental schools that are going to continue to be accredited must provide at least sixteen hours of practice management education in a formal sense to prepare the students, not only to be highly in debt, but to make sound business intelligent type decisions on whether they will join a group practice, join corporate dentistry, join a solo practice as an associate or open up their own practice and de novo sets. All of these options can be exceptionally successful, however, based on your personality, your drive, your determination will more than likely guide you to one particular area or the other.
Do you want to get your dental career started on the right path? Are you looking to put in place the practices and procedures to make your existing dental business more profitable? Send Dr. Coughlin a quick email today!
I suggest that when considering starting your own practice, this process should be occurring while you’re in dental school. In most cases, you are overwhelmed, not just by debt and time constraints, learning a new profession and gaining experience clinically, however, you should understand that there are several stages that a practice goes through when you’re looking to either purchase or start your own.
Stage one is simply opening up your own practice de novo. This means you’re just going up, put a shingle on the door, market the hell out of the practice and yourself and hope to God you have a patient base to support your debt and your income that’s necessary for you to survive. In general, you will need approximately 1,800 active patients, meaning that the patients come to your practice at least every 18 months to support this type of practice.
Stage two; you enter into the growth of your practice. Understand that patients will select for or against your practice based on your style and type of dental practice that you begin.
Stage three; when your practice reaches maturity, the practice reaches its intended goal and objectives.
And finally stage four is the redevelopment of your practice, which means you either let the practice die a natural death or you take steps to maximize its value and continue its growth.
In any type of business, but in particularly a dental practice, you will have to deal with external environment, socio-cultural environments, economic and regulatory along with ethical environments. You also need to focus on operating environments such as suppliers, patient influence groups, along with allies and competitors. The internal environment or internal organization will generally revolve around hiring the right personnel, marketing, production, financial and personal concerns. They generally will be focused on the clinical and financial aspects of the practice.
I suggest you consider whether you are buying an existing practice or starting your own practice, eventually it will start by developing your core values. This is what your patient care objectives will be, the quality of care you hope to perform, the type of work environment that you want for yourself and your team members, the management style, whether you’ll be a top-down, bottom-up or somewhere in between type of management system. You’ll also determine your team members, the number, the types and the responsibilities that they will undertake. You will also need to chart your professional growth for not just yourself, but your team members. Which means continuing education, not just clinically but also from a management and business standpoint. And lastly, the type of relationship you’d like to develop between your practice, yourself and your community.
Step two; you must establish your practice mission. Basically, core values are what you believe in. The practice mission statement describes what you want your practice to accomplish. It is really your practice philosophy. Your mission statement should be written down and should coincide with each of the core values you possess. Your mission statement will be based on your attitudes in your background, along with your wants and needs.
Step three; you must assess your environment. In business they call this the SWOT analysis. The S stands for Strengths, the W for weakness, the O for opportunities and the T for threats. It is critical as you assess your internal and external environment issues that we discussed earlier that you look at the strength, weaknesses, opportunities and threats of each of them to make an informed, intelligent decision.
Step four; spend time determining your strategies. Are you going to accept third party insurance plans? What will your credit and collection policies be? Do you understand what a fair and reasonable fee schedule should be to accommodate and reward you for your expertise and services? What kind of dental operatories will you be constructing or working in? The type and number of hours of operation you plan to be open. The number and types of continuing education that you will take and offer to your team members.
What type of staff compensation, what rate, what percentile of overall revenue will your staff consume for compensation? Will they be on bonuses, will they share in profits or will they be hourly rates or will they be salaried or some combination? What will be your practice style? Will you focus on prevention, aesthetics, high end, care for all? What type of advertising will you pursue? Will you look at internal marketing, external marketing, a combination of both? And what is your loan structure or debt structure? Is it set up correctly to provide the most favorable environment for you to pay down debt as soon as possible so that you can increase profit and reduce the stress and strain from a financial standpoint?
Step five; you must start setting goals and objectives. You want to make sure that your practice is always profitable. You want to make sure you’re dealing with a reasonable overload so you don’t burn out. You want to make sure that you’re adequately financially and personally rewarded for your expertise and time. You want to make sure that your staff and your patient base is happy and satisfied. And in many cases, I think it’s important to offer something tangible to the community where the people come to your practice and you support them in some kind of tangible fashion.
Step six; you must develop methods to achieve your goals. You must try to improve or increase marketing depending on your wants and needs. You may want to consider hours of operation should you shorten them or expand them. You may want to consider accepting additional insurance plans or eliminating certain plans. You may want to determine whether you should be hiring or terminating team members, whether you need to add or reduce dental operatories, whether you should be increasing or lowering your fees, tightening or easing your credit policies, increasing pay for team members or decreasing team members, evaluating your benefits for your team members and do you have a secure financial capital. Are the banks working with you so if an opportunity exists you have the working capital necessary to expand if necessary?
Step seven is you must set up systems or metrics to measure your success. I suggest you consider knowing the number of new patients each month. You must know where these new patients are coming from, what’s the source of these new patients. Are they coming from insurance websites, are they coming from specific internal and external marketing sources? You must also know how many patients are leaving your practice and why each month. You must also know the number of procedures you’re doing each month. I see over and over again many times dentists make determinations on increase or decrease in fees and sometimes it’s more important to take a look at the number of procedures you’re doing to determine which fee should be increased or decreased.
You must know your net production, your net collection. You should, either yourself or your accountant, be able to determine EBITDA, earnings before interest, taxes, and depreciation. You should have a firm grasp of your accounts receivable, zero to 30, 30 to 60, 60 to 90 and those over 120 days. You must also have quality assessment and quality assurance for not just your patients but your staff to make sure you’re providing the highest level of care and service on a daily basis and you must have this written down so that you can follow and track your progress, not just as a clinician, but a business man and woman.
You must also take a look at the number of treatment plans that have been completed versus those that are incomplete. This will give you an idea of how successful you’re communicating with your patients to your side or your staff is communicating to your side. And lastly, you must fully understand and appreciate what your profits are. Are they increasing or decreasing, and what factors are affecting them.
I hope you enjoyed this podcast. For this and other information, please turn to my website www.ascent-dental-solutions.com. My name is Dr. Kevin Coughlin and thanks for listening.