Dental Profit and Dental Marketing Tips
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Dental Teams and the Flat Earth Society
Today I called the advertising dept of a major daily newspaper in a large city. The voice mail said they were ‘on lunch’ and would have to get back to me later. As I was attempting to spend my client’s…
Continue Reading »City Dentist or Country Dentist
Where to practice? We reside on the west coast – where many brand new dentists congregate. The weather is fine (when it is not raining cats and dogs), and there is an urban attraction to living in the big city….
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How Much Does It Cost To Open a New Practice?
It’s a Sunday afternoon, and I just finished a marathon call from a client on the other end of the country. He has a multiple location business, and has been painfully going through the process of selling an interest in one location – or that location entirely.
He has discovered what we already knew. Associates with no business experience (and frequently with little clinical experience either) have zero appreciation for what kind of investment – both financial and sweat equity – has gone into bringing a practice to a certain level. It appears pretty simplistic. They buy in as a partner, purchase the practice entirely, or sign a new lease and open a brand new practice on their own. After all, someone will finance it!
My very wise accountant told me decades ago that expansion is best served by purchasing existing businesses, because there is less distraction regardless of how you feel you may be overpaying for assets. We purchased an electrical distributor during one expansion, and thought we may have overpaid for the asset. As it turned out – the yellow page listing from the previous owner stayed with us, and we earned enough in one year from an obscure account we wouldn’t have found in a million years to pay for the entire acquisition. That was a ‘grey area’ benefit never factored into the original numbers.
A new dentist looks at equipment, rent, wages, and base level wages as the cost of doing business. Frequently they feel they can generate a patient base cheaper than ‘buying’ goodwill from an existing practice. This may be true, but is typically not. They don’t know at that point that 93% of all dental advertising is a waste of money, and if they did they wouldn’t know how to differentiate the other 7%! They don’t usually know how to run the ‘business’ side of dentistry, because they still ‘don’t know what they don’t know’. The HR component is fudged through – and they will run through a couple of bad hires before they get it right. Each one of those will cost them 6 figures a year – if they keep that wrong individual around for a year. As most dentists hire too fast and fire too slow – that is almost guaranteed.
They don’t understand that you either purchase patients through buying a business, or you purchase them through external lead generation. An ‘introductory special’ type of patient will cost you $150 to put in a chair – and this is simply an audition on your part for their future business. If the practitioners see themselves as cosmetic dentists (like 98% of dentists), that same prospect will cost $500+ to place in their chair – simply to earn the right to audition for their business too! When you consider that internal marketing is the least expensive method to grow a business – the inherent value of a solid chart base becomes pretty transparent.
During our coaching sessions – it is a rare associate who ever feels it is worth their time to sit in on our meetings with the practice owner. They realize that they presently earn 40%, and ‘understand’ the other 60% is basically profit going to the practice owner! Things like the utility bills, property taxes, janitorial fees, insurance, employee acquisition costs, CE events, professional fees, Christmas parties, cancelled appointment wages, etc. all come from — where?
They cannot be faulted for not being business savvy. No dental school has time in their curriculum to provide the business training they really require. The sad thing is basing their business valuation assumptions on insufficient information. This particular client today has a gift on a platter for his potential future partner. The prospect thought he could lowball it with a 50% offer. If he chooses to open his own doors, he will get his half million dollar ‘lesson’ over the next 24 months. As we are privy to all the pertinent numbers and we see daily the scars from poor dental business decision – that young dentist just passed up the opportunity to save a half million dollars by spending a half million dollars. He will take as much as 5 years to get to the same level, and have to make all the mistakes on his own dime and on his own time!
Literally, being a business coach is sometimes like parenting teenagers. You have to watch them run into the wall and hope they learn from it. I wish this young associate luck, because he will need it.
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