You have probably heard that Dental Practices rarely fail. Well, recent economic woes have changed that story to some degree. There seems to be many more “motivated” practice sellers lately and I’ve recently run across a few dental practice bankruptcies and foreclosures. Surely this is a testament to our economic times. According to dental statistics, here are some of the primary reasons dental practices fail (in no order);
- General Dentist focusing on Cosmetic Dentistry. A lot of general dentists are placing too much focus on cosmetic dentistry and not enough focus on bread and butter dentistry. If you focus more on the bread and butter – crowns and bridges, the cosmetic stuff will follow within your own patient base.
- Dropping your PPO’s/insurance too early. You can drop or cap your PPO’s at some point if your practice is flourishing. However, if you drop them too early, you can quickly get into trouble. Accepting insurance is a form of marketing and it comes with a heavy price.
- Stop Marketing – My philosophy in business and in life is if you are not growing, you are dying. Marketing, both internal and external, should always be done. Just like death and taxes, losing patients will happen and caused by a variety of reasons. Therefore, you always need to find more patients. For those of you who are in a growing phase, you need to allocate about 5% of your collections on marketing. For those who are in a stable phase, allocate about 2%.
- Not knowing your numbers. What are your daily goals for production? Collections? Hygiene? Overhead? Payroll? Are you managing to those numbers? I know several practices that keep missing their numbers and think they can sit back and wait for better times ahead. Stop waiting and start managing! Take Action before it’s too late.
- No Internal Referrals. This may sound simple, but internal referrals is an indicator that you are giving your patients great service and care. If you are not getting internal referrals, you are not giving your patients the care they expect.
- Overstaffed – Remember the formula for payroll as a percentage of production? It should be about 27% (existing practices of more than 2 years). Another formula to consider is that you should be producing $20,000 for each team member in your practice. If you have three staff members, you should be producing $60,000 per month. Again, these are benchmarks.
- Not Recognizing You’re in Trouble and Not Seeking Help – This has been happening in the real estate market as people are losing their homes left and right. They don’t realize that they’re in trouble before it’s too late. They have used up all of their resources to continuously bail them out and now their lines of credit are used up. They get behind on payments and they lose their house or practice. Know when you’re in trouble, seek help, listen to the advice that you are being given and take action.
- Insanity – This is the dentist who continues doing the same thing over and over again and expecting a different result. They figure that eventually production will kick in, or the same marketing they keep doing will catch on. Or, the same case acceptance techniques will start working. Or the same lab that charges them $250 per crown will magically lower their rates. You get the point!
Now that you know why some of these practices have failed, do the opposite:
- Focus on your bread and butter as your first priority dentistry.
- Keep your PPO/Insurance in place for right now.
- Keep the marketing going, both internal and external.
- Know your numbers and manage to those numbers, especially accounts receivable, production and overhead.
- Monitor your internal referrals to ensure you are making your patients happy
- Keep staff levels at 27% of production or understand that increased spending comes from somewhere!
- If you are not making your numbers, make adjustments, try new things, don’t reinvent the wheel, find out what is working in other practices.
- Finally, seek a practice coach and ask your coach for help. Don’t stop there. Implement what they suggest as long as it makes sense and produces results.
Keeping these bullet points in mind will help you get through the slow times so that you are around when the good times come back.