The Business Side of Dentistry
Josh Turnbull & Gordon J. Christensen, DDS, MSD, PhD
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, although a significant portion 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 industry 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?
We recently conducted an extensive, 30-question survey of over 200 dentists throughout the United States addressing the business side of their practices and their level of satisfaction. We surveyed each dentist on the experience he/she had upon entering the profession, and how his/her practices have grown to the present. As we analyzed the data, some patterns emerged (Click to see table 1, table 2). Hopefully these findings will be of interest to dentists at any and all stages of their careers as they work to achieve their goals and find enjoyment in their professional and personal lives.
Dentistry is a very entrepreneurial industry. Three in four 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% felt they were well prepared. This will probably not be a shock to anyone who attended dental school. 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 half purchased an existing practice and half started a practice from scratch.
The data strongly suggest how important it is for new dentists to tap into the knowledge and 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 out 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 navigated the waters? Or must they learn primarily through the very expensive school of hard knocks?
Do Consultants Help?
Young doctors, still trying to digest the reality of the debt they accumulated during their school years, often shy away from using consultants. They seem 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 three-fourths 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 two important points: first, there is a strong correlation between investment in consulting and higher revenues; second, those in the top 10%, who are more content with their ROI on consulting, are either having better success at finding good consultants or are more adept in translating advice from consultants into results. It important to note that only 17% of respondents were “highly satisfied” with their experience with consultants. 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 (pubihsed 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.
37% of respondents reported a stress level of high or very high. Only 14% reported a low stress level. The major sources of stress were
- 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%) find 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’s striking 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 on treating patients and 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 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 1/4 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 v. 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 SEO, pay-per-click and website) 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% don’t have a plan yet. Of those who have tried to find a buyer (assoc iate/partner), 40% have been unsuccessful. 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. ■
I first became interested in research during my first two years at Harvard Medical School, where we read, analyzed and discussed research articles from many aspects of medicine. I really enjoyed the research and elected to pursue the 5-year curriculum at HSDM with a year of research built in between second and third year. I decided to move my family (wife and baby girl) to Arizona to work on a project at the Mayo Clinic that dealt with dental clearance for solid-organ transplant patients. As we were slogging away at the project, I decided to design another study that dealt with a passion of mine: business. Prior to dental school, I had formed a marketing company, but later sold it after realizing that I was not going to find long-term fulfillment in that particular industry. I put together a 30-question survey and presented it to Dr. Gordon Christensen, who liked it, made a few much-needed revisions and graciously agreed to distribute it at his seminars. I have learned a great deal under the tutelage of Dr. Christensen and would not have been able to undertake this project without his knowledge and support.
The study underscores the importance of seeking out mentors, especially those young dentists just leaving the nest of dental school. It also identifies some patterns that emerged as we analyzed data from setting up a practice, marketing, consulting, revenues, overhead and exit strategies. The common thread that runs through the paper is how beneficial it is to engage oneself with others, particularly those with more knowledge and experience. The greater the pool of knowledge, the better equipped practitioners will be to adapt and thrive in any environment. I feel very fortunate to have learned this so early on in my career.
– Josh Turnbull
Joshua Turnbull is a student and a 2011 DMD candidate at the Harvard School of Dental Medicine. He can be reached at joshuawturnbull@gmail.com.
Gordon J. Christensen, DDS, MDS, PhD, is Founder and Director of Practical Clinical Courses (PCC) in Utah, and Senior Academic Advisor of the Scottsdale Center for Dentistry (SCD) in Arizona. Both groups are international continuing education organizations providing courses and videos for all dental professionals. Dr. Christensen has presented over 45,000 hours of continuing education throughout the world and has published many articles and books. Dr. Christensen can be reached at Practical Clinical Courses 3707 N Canyon Rd Ste 3D Provo UT 84604 (800) 223-6569 (801) 226-6569 info@pccdental.com www.pccdental.com