Be business minded

[Anonymous]

Every segment of our economy today is facing stiff headwinds, and it is not clear that an end is in sight. Many dentists are reporting a drop off in business, yet a significant number are managing to grow their practices during this challenging time. While the economic climate is outside of our control, it’s important to step back and take a look at the trends in the dental profession in order to formulate a proactive approach to preserving and growing one’s practice. How can we become more effective and efficient? How can we better adapt and thrive? How can we more fully enjoy our profession and our lifestyle?

SURVEY OF US DENTISTS
We recently conducted an extensive (30-question) survey of more than 200 dentists throughout the United States. This survey addressed the business side of practices and level of doctor satisfaction. We surveyed each dentist on the experience he or she had upon entering the profession and how his or her practices have grown to the present. As we analyzed the data, some patterns emerged. Hopefully, these findings will be of interest to dentists at any and all stages of their careers. This is especially relevant as a doctor works to achieve practice goals and searches to find enjoyment in both the professional and personal aspects of life.
Dentistry is a very entrepreneurial industry. Three in 4 practitioners are self-employed. And, as in any business, financial success in dentistry requires good management and marketing skills along with clear goals and strategies. Where, when, and how do dentists learn these skills—if at all?

EVERYTHING I EVER NEEDED TO KNOW I LEARNED IN…DENTAL SCHOOL?
We asked dentists how well prepared they were, from a business standpoint, to own a practice upon graduation from dental school. Only 7% surveyed felt that they were well prepared. This is probably not a shock to most practicing dentists, but it begs the question: How can an education system, whose graduates overwhelmingly own their own businesses, ignore the importance of preparing them for this reality? Our dental schools do a pretty good job on clinical education—86.9% felt at least moderately prepared in their clinical skills upon graduation. Yet, despite the stunningly low level of business preparedness, 46% of our respondents owned their own practice within one year of graduation—about one half purchased an existing practice and the other half started a practice from scratch.
The data strongly suggest how important it is for new dentists to tap into the knowledge/experience of those who can advise them and help them in embarking on their journey from dental school graduate to business owner. These fledgling dentists face a multitude of important decisions and tasks—finding the right location, negotiating a real estate lease, building/remodeling an office, financing the practice, developing a marketing strategy, hiring and training staff, etc. How can young doctors avail themselves of counsel or support from those who have already navigated the same waters? Must they learn, like so many before them, primarily through the very expensive school of hard knocks?

DO CONSULTANTS REALLY HELP?
Young doctors, still trying to cope with the reality of all the debt that they accumulated during their school years, often shy away from using consultants. They seem too expensive. And how do you know if they’re going to lead you down the right path?
We tried to determine if the use of consultants correlates to financial success. Here’s what we found. The top 10% of practices we surveyed (those practices producing over $1.5 million in annual revenue) tended to employ consultants. Nearly 75% of them have used or are using consultants. And the satisfaction rate is high—97% of them were at least moderately satisfied with their return on investment from consulting.
Only 35% of the bottom 13% of practices (those producing less than $500,000 in yearly revenue) had employed consultants, and generally at a lower level of engagement. And their satisfaction with their return on investment was also lower—27% of them were dissatisfied with their return on investment in consulting services. These findings underscore 2 important points: first, there is a strong correlation between investment in consulting and higher revenues; and second, those in the top 10%, who are more content with their return on investment on consulting, are either having better success at finding good consultants or are more adept in translating advice from consultants into results. It is interesting and important to note that only 17% of respondents were “highly satisfied” with their experience with consultants. Bottom line? Finding the right fit is important.

HAVE A PLAN!
Perhaps the greatest benefit of engaging outside help to manage and grow your practice is that it usually results in the setting of goals and tracking results. Consultant or not, successful practices have one thing in common: a good plan with meaningful goals and systems to track results.
For example, our study found that 96% of the practices in the top 15% of practice revenues had a new-patient-flow goal (a goal they are presumably tracking regularly). A recent study by Stewart Gandolf and Lonnie Hirsch, published in Dental Economics, September 2008, reported that “100% of survey practices with revenue in the $1 to $3 million range all have a marketing plan and are experiencing an upward financial trend. The majority of practices with a plan have set (and appear to be meeting) stronger growth goals, feel less impacted by competition, and report attracting 30 or more new patients per office monthly.” The article goes on to say that, unfortunately, “most practices (over 80%) say they do not have a written marketing plan to reach their goals.”

ARE WE HAPPY YET?
In our survey, we asked a number of questions relating to job satisfaction and stress levels, trying, among other things, to identify common sources of stress or discontent. Thirty-seven percent of respondents reported a stress level of high or very high. Only 14% reported a low stress level. The major sources of stress were the following:

Maintaining balance in life (43%)
Staff management/recruitment (41%)
Tracking and covering expenses (35%)
Lack of financial planning (23%)
Difficult patients (10%).

When asked what the least favorite part of their practice is, a combined 63% reported staff management and recruitment, dwarfing any other response. Conversely, the vast majority (a combined 85%) reported that treating patients and getting to know people are the most enjoyable part of practice. A majority of respondents (53%) reported that they were working more hours than they would like.
It is striking to see that maintaining balance in life and staff management and recruitment are cited as greater sources of stress and dissatisfaction than financial issues. It’s apparent that dentists would have a much better quality of life if they were able to focus more on treating patients and be able to more effectively delegate staff management and recruitment. Perhaps there is a need in the industry for better outsourcing options of certain human resource functions.

BRAVING THE HEADWIND
Recent studies from the ADA and CLINICIANS REPORT have shown that the economy has negatively affected the revenues of dental practices during the third and fourth quarters of 2008. In­terestingly, our study shows that despite these late quarterly losses, 56% of our respondents still claim to have posted higher revenues in 2008 than in 2007. About 13% stayed the same, and 30% report lower revenues. From our discussions with dentists, it is our belief that momentum going into the third and fourth quarters was such that the majority were still able to post gains despite the late-year contraction.

DRIVING NEW BUSINESS
We surveyed each doctor about new patient flow to see if it correlated with higher gross practice revenue. We found a positive correlation. It’s a bit of mixed story, however, since many of those with the highest gross revenues are often not seeking new patients. The most salient finding here was the importance of having a goal for new patient flow. As we mentioned before, while almost 25% of respondents did not have a target for new patient flow, 96% of those within the top 15% in gross revenue did have a target.

MARKETING: INTERNAL VERSUS EXTERNAL
The marketing landscape is changing rapidly. While word of mouth has always been and probably always will be the most effective way to market (98% of doctors found it effective, overshadowing any other advertising method), dentists, especially those who are looking to expand their patient base, should stay cognizant of developing trends. For example, an undoubtedly increasing number of people are using the Internet to compare and choose a dentist. Yet only 17% of our respondents reported using the Internet (including search engine optimization, pay-per-click, and Web site) effectively. It is key for dentists to harness the Internet as a marketing tool to stay competitive. Given that word of mouth continues to be the most effective method of marketing, there is an opportunity to tap into social networking sites and tools such as Facebook and Twitter.

RETIREMENT/EXIT STRATEGY
One surprising result of our survey was the number of doctors that never want to retire from dentistry: about 10%! About 70% are looking to sell at retirement, and 11% do not have a plan yet. Of those who have tried to find a buyer (associate/partner), 40% have been un-successful. About 25% of respondents plan on using a practice management transition program, another 25% plan on using an independent appraiser, and almost 20% plan on handling the process largely by themselves.

CONCLUSION
In summary, let’s highlight the key points:

New dentists are unprepared to run a business. Dental schools should revamp their curriculum to include some basic business training. New doctors should seek mentors or utilize a business strategy and management consultant as they navigate new waters.
There’s fairly strong evidence suggesting the benefits of using consulting services. But it’s critical to find a consultant that is the right fit for you.
Setting goals and tracking results is key to building a successful practice. Like any business, successful dental practices have clear strategies and measurable goals, and a team committed to both.
Stress levels are generally high and are most often attributable to staff management and recruitment. It makes sense to look at ways to eliminate this source of stress. Delegating these functions to a strong, trusted office manager is one approach. Some doctors have successfully outsourced some of these functions.
Dentistry is bucking the economic trends relatively well—particularly the stronger, better managed practices that deliver great patient care and have good internal marketing processes.
As a practice evolves, internal marketing should be the greatest source of growth in a practice. But in tough times, or if you have a young practice, innovative external marketing takes on added importance.

        

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