Why patients choose your practice

Why are some dental practices growing 9X faster than other practices in the same community, are 50% more profitable, and yet spend less than the average on advertising and promotion?

To find the answer to this question, Lee Frederiksen, a PhD at Virginia Tech, conducted three years of research to determine the elements which create a high growth professional services firm. His findings are contained in the book: “Spiraling Up”.

What patients are looking for is expertise, and experience. It does not mean that the dentist with the greatest technical experience will get the lion’s share of new patients, because most patients are not equipped to evaluate the technical expertise of the dentist. On the flip side, patients want to avoid poor results and failing to solve their problem.

So, what do patients really want?

Based on his research results patients are looking for answers to three fundamental questions.

  1. Can you fix my problem?

The selection criteria are aimed at answering this question: Do you understand my situation? Have you solved a similar problem before? Do you have the skills to do the job? You have to convince the patient that you can and will solve his or her problems.

  1. Will you make my life easier?

The patients’ next biggest concern is how difficult, painful or expensive the process will be. Issues include such things as cost, and availability.

  1. Do I enjoy you as a person?

Relationships matter. But they do not trump your ability to meet the first two criteria. If patients like you, they may give you preference, but they are not going to retain you, if they don’t believe you can solve the problem. Nor are they likely to choose you if your price is significantly higher or you come across as inflexible or arrogant.

Referred patients are the best, as they will easily accept the treatment recommendations. There are some patients so enthusiastic about the practice that they refer you without prompting. When asked why people don’t refer, slightly less than three quarters of the respondents in the research said that nobody had asked. Most people don’t go out of their way to make a referral but when asked, they would gladly make one.

You have a patient who is totally happy with your practice. Then you find out that the patient went to another dentist for implants, a service, you also can offer with your eyes closed. So, what happened?

The research shows that over 85% of the time practices already offered what the patient wanted – only the patient did not know it. When you want to expand the patient relationship by offering additional services, keep this in mind: it is not your patient’s responsibility to figure out how you can help. That is your job.

Marketing the qualities of your staff, or the new dental equipment and office decor are not factors in the patient’s decision to choose your practice.

11 Strategies to boost the selling price of your practice

Here are a number of steps you should take well in advance of the actual sale date.

  1. Obtain tax and financial advice.

Make sure that you get the benefit of receiving the sales proceeds tax-free. Do you have the financial security to retire?

  1. Keep up your production.

The No. 1 advice of transition experts is: Don’t slow down and do not work fewer days.

  1. Consider increasing fees.

Prepare a fee analysis and if your fees are below average, consider increasing them.

  1. Lower overhead.

The lower the overhead, the higher the profit margin and ultimate sale price. Compare your overhead against industry standards to determine problem areas. The key is to control staff costs, which is the largest expense of any practice.

  1. Review the facility lease.

The ideal lease arrangement from a purchaser’s point of view is a 15 to 20-year lease term including lease renewals.

  1. Upgrade your office and technology.

Enhance the curb appeal of your practice by upgrading office technology, recovering chairs, replacing carpets, and spiffing the facility with some fresh paint and landscaping.

  1. Stick to basic dentistry.

Established family practices sell at a premium. They are low risk as patients are easily transitioned to the new dentist.

  1. Have a strong team.

Dedicated, experienced staff is a key asset in the eyes of the purchaser.

  1. Document procedures and systems.

Are your systems well documented? Does every staff member know what to do, and how to do it? Document job descriptions and systems such as billings and collections, hygiene appointments and recall procedures.

  1. Get serious about marketing.

Get professional help to boost your website presence and implement effective internal marketing strategies to increase referrals and new patient counts.

  1. Review the Associate agreement.

Make sure that your associate has a restrictive covenant and a non-solicitation clause for patients and staff.

Four Major Obstacles to Practice Success

No matter how talented you are or how many hours you spend in your practice, you will never reach the pinnacle of practice success if you are suffering from any of these afflictions:

  1. Super Inflated Ego. Being enamoured of your own self-importance and advertising your dental “Superman” skills at every opportunity does not build relationships with patients and staff. Nobody loves someone who thinks they can walk on water.
  2. Greed. If you’re living with the impression that a dental degree is a license to print money, dentistry will not be a rewarding career and eventually you will grow to hate your chosen profession. When your treatment planning is driven by greed, you will lose not only patients by the truckload, but also the respect of your staff. Your only legacy will be a bad reputation.
  3. Lost passion. According Rod Stewart, everybody needs passion, and I agree with him. When your passion for golf or breeding Arabian horses exceeds your passion for your career, then your future will become shaky and unpredictable. You will end up marking time in the office, with little time or energy for staff and patients, keeping your continuing education efforts to the absolute minimum required.
  4. Roving Eye. Starting an extramarital relationship with your assistant is like a ticking bomb. It is only a matter of time before it explodes, and the casualties will be your marriage, possibly the relationship with your kids, staff morale and ultimately the success of your practice. All that will be left are the smoking remnants of your retirement nest egg, and the obligation for sizable support payments. Don’t be led into temptation, hire employees based on their skills and not other more obvious attributes.

Bringing in an Associate as a Co-owner

Steps for a successful transition

Only one out of 10 associateships end in a partnership.

Here are five “must-do” steps to make sure your planned transition is successful.

 

  1. Plan ahead.

Ask yourself:

  • Why would I want to bring somebody into my practice and under what circumstances?
  • Would I like to expand the practice, or am I too busy to keep up with the increasing patient volume and I need somebody else to give me relief?
  • Do I want to slow down but the practice demands do not allow me to ease off?

or

  • Do I want to take some equity out of the practice?

It is important to assess what your objectives really are.

 

  1. Select the suitable candidate.

You must be prepared to create a mentoring relationship with the new dentist and show him or her how to become a successful partner in your practice. Determine the new dentist’s value system, work ethic, integrity and desire to look after the patients’ well-being. Obtain references to determine how the new dentist treats the staff, whether he or she has any personality quirks, and whether he or she is a hard-working, quality practitioner.

 

  1. A written agreement up front.

A verbal agreement is not worth the paper it’s (not) written on. Make sure that there is a written agreement in place before the new dentist sees any patients. The agreement should cover the initial associate period and address all phases of the transition process.

 

  1. A good faith deposit.

The fact that the new dentist is committed to the practice means nothing unless the commitment is backed up by cash. If the issue of the deposit becomes a deal breaker, break the deal! Never enter into a transition arrangement without receiving an initial deposit of at least 10% of the purchase price upfront.

 

  1. Assist in developing the patient base.

Do whatever you can to assist the new dentist in building production and help him or her to become successful.

Don’t bargain yourself out of the deal

Prospective purchasers often walk away from a practice purchase because they are unwilling to compromise on a relatively small price difference and, thus, miss the career opportunity of a lifetime.

We picked up the following exchange between students and established practitioners in a student forum, posted on the American Academy of Periodontology website, on the subject of purchasing and setting up your own practice.

A student posed this question to Dr. Nicholas Caplanis regarding his practice purchase.

Given what you know now, what might you do differently?

Dr. Caplanis replied: “There is not much that I would have done differently except that I probably would not have negotiated as hard regarding the practice purchase price. In my personal situation, the original asking price for the practice was approximately $400,000. The final negotiated purchase price was in the mid $300,000 range.

In retrospect, given how successful I have been in this practice, I do not feel that the $50,000 that we were negotiating back and forth is as important today as it was back then.

That amount of money could have been the deal breaker and I could have lost this practice to another buyer who was willing to pay it.

In retrospect, an extra $50,000 for the price of the practice would have not really changed my financial situation that much. My advice, therefore, is “don’t be penny wise and dollar foolish”!”

Closing the sale: 7 “Must-do’s” to maximize practice value

If you are planning to sell all or a portion of the dental practice here are some tips to turn your valuable practice asset into cash.

  1. Allow lots of time. Don’t rush to book the airline tickets to your retirement home in New Zealand. Don’t wait until health problems force your hand. Purchasers are astute. They can sense very quickly if you are in a hurry to retire, all of which is reflected in a lower offer.
  2. Never let billings slip. It does not matter how much money you made in the last 15 years, the revenues and the cash flow in the year of the sale is what counts. A practice with slipping profitability is a hard sell.
  3. Be involved. Unlike a home sale where the broker does all the work and the purchaser does not really care. If he ever meets you in a practice sale, on the other hand, you are the best salesperson. When you and the prospective purchaser “hit it off”, you can bet that the practice sale will go smoothly. Personal bonding is the glue which will keep the deal together.
  4. Do some housekeeping. Make sure that your practice has curb appeal. It means that your office is in good repair with fresh paint and clean carpets.
  5. Be realistic. Set a reasonable price and have it backed up with a professional Practice Valuation.
  6. Make sure that long-term commitments can be assigned. Ensure that the lease for the premises can be assigned and without your continuing personal guarantee.
  7. Prepare professionally looking documents. This would include a practice and patient profile, as well as up-to-date financial statements and billing records. If you are in a group practice, make sure that the cost-sharing and buy-sell agreements are up-to-date.

Do you have a practice transition plan?

When you start thinking about the practice succession and bringing another dentist into your practice, you must have a solid transition plan in place. This plan not only helps you spell out your financial and retirement goals but also provides a roadmap for the dentist joining a practice. It is important to share your transition plan with the new dentist. Do you want the new dentist to start as an associate and become a co-owner of your practice in a few years hence? There are many options to consider, and you must spell out what your vision is and set a timetable. You need to find a successor who shares your goals and vision otherwise the transition is doomed from the start. You must create a win-win situation, and by laying your entire transition plan on the table, you create the right negotiating climate needed for a successful deal.

The reason most selling dentists do not share their transition plan is because they don’t have one. In one situation, where both parties were ready to ink the deal after months of negotiations, the seller got cold feet and was ready to back out of the sale, unless he was guaranteed to work for another five years as a full-time associate. This of course was unacceptable, as the practice could only support one full-time dentist. The selling dentist realized that he didn’t have enough funds put aside for retirement, so he needed to keep working. A dentist who pulls the plug on a deal after months of negotiations loses total credibility. Make sure you have a solid transition plan in place before you put up your practice for sale.

If you are thinking about transition, give us a call. Over the last 35 years many dentists have called us to quarterback their practice transition. We take a business approach to practice transition: practical, no-nonsense, creative and cost efficient.

What separates the top 10% of dentists from the bottom 90%?

The question of what separates the top 10% from the bottom 90% of dentists was put to top performers in dentistry. The answers are contained in the bookTitans of Dentistry: How the Top Performers Think and Act Differently” by Drs. Short and Maloley.

Here is a sampling.

“Goals and FEAR. I believe that the top 10% in any profession or sport are ultracompetitive and goal oriented. They have a clear vision, and they know their WHY. Unfortunately, our engineer personalities lend us to being very risk averse, leading us to be hesitant in making decisions. Although I have fearful thoughts, I tell myself that it is BS, and I keep moving forward toward my goals.” (Dr. Brad Stutler, Transcend Dental Partners)

“The bottom 90% aren’t poor clinicians-most of them, at least. They lack the marketing skills to get the word out. Many still think like academics. They have not taken additional courses in business. They haven’t broadened their skills since dental school. And they have not connected with patients in business-savvy ways that empower them to become your brand’s biggest supporters and promoters”.  (Dr. Arun Garg, Centre of Dental Implants)

“The bottom 90% of the dentists will come up with a million reasons WHY something CANNOT be done. The successful 10% will instead question, “HOW CAN we do it?” (Dr. Gina Dorfman, creator of YAPI)

“The Top 10% think about what they want and how to get it. The Bottom 90% think about what they don’t want, and who to blame.” (Dr. Peter Bowman, Bowman Dental)

“Optimism, enthusiasm, drive, productivity, leadership. A passion for dentistry. An eclectic lifestyle. Learning something significant new procedure or concept each year and implementing it into life.” (Dr. Gordon J. Christensen)

“Communication skills; if you think about it, the patient doesn’t really know good work from bad. If the dentist can communicate the issues in a way that shows the patient the need and value of their services, then most patients will figure out how to do it. It’s that simple. (Dr. Justin Moody, The Dental Implant Centre)

Fast Tracking to Practice Ownership

Suffocating under a $300,000 student loan, most dental graduates decide to work as associates until the student debt is gone. If you really want to pay off your loan quickly, consider becoming an owner as soon as you can. Use a short-term associateship to hone your clinical and patient communication skills and enjoy the benefits of ownership sooner.

Below is a comparison between a new graduate who becomes a practice owner after two years of associateship and another dentist who works as an associate for seven years and then purchases the practice.

Over a 10-year period the dentist who chose the early ownership option in year 3 has over $800,000 more of excess cash flow than the dentist who did not become an owner until year 8.

Short-term associateships resolve your debts faster, and speed you toward ownership and its many rewards.

Incorporating with Student Debt

There is a general impression, particularly amongst young dentists, that there is no benefit to incorporate as long as they have personal debts. There are significant benefits for a new dentist if they spend less than they earn.

Here’s an illustration that shows how a new dentist can benefit from incorporating his/her practice:

Dr. Young is a new dentist in B.C. whose net income after expenses is $200,000. Dr. Young has $500,000 of personal debt, including a mortgage on her condo and student loans. She needs $3,000 per month for living expenses plus loan payments. If Dr. Young remains unincorporated, she will pay personal taxes of $62,900 on her $200,000 income.

If Dr. Young incorporates her practice she will pay corporate taxes of only $22,000 on her $200,000 income (B.C. tax rate of 11.0%). Her annual living expenses of $36,000 plus $44,000 loan payments total $80,000, which she can draw from the corporation as a dividend. In this model, total taxes will be $31,600 ($22,000 corporate and $9,600 personal). The personal tax on the $98,000 left in the company is deferred until withdrawn.

Incorporation saves the dentist $31,300 in year one!

Keeping the money inside the company and investing nets a much larger return than if the full amount of income was used to repay debt. This assumes the return on your investments inside the corporation would at least equal if not exceed the borrowing costs. Although counterintuitive to some, there is an advantage to paying personal debt off slowly instead of waiting until all debts are paid off before investing.