Roger P. Levin, DDS is the CEO and founder of Levin Group, a leading practice management consulting firm that has worked with over 30,000 practices to increase production. A recognized expert on dental practice management and marketing, he has written 67 books and over 4,000 articles and regularly presents seminars in the U.S. and around the world. 

To contact Dr. Levin or to join the 40,000 dental professionals who receive his Practice Production Tip of the Day, visit www.levingroup. com or email rlevin@levingroup.com. 

Can Smaller Be More Profitable? − What’s the Right Size Practice for You?


Let me be very clear that I’m not advocating for smaller practices. I’m simply pointing out that they’re an option that I’ve seen many practices take following the last recession in 2008–2009. And it worked quite well, as many of those practices reduced expenses and increased profitability. As we move through COVID-19, this option should certainly be considered as practices evaluate their future; but there are several steps to take when making this decision. Getting smaller can be a matter of personal choice for the doctor or it could be necessitated by changes in production, revenue, cash and income.

IS GOING SMALL RIGHT FOR YOU

In the 2008–2009 recession, many practices decided to reduce expenses (i.e. technology purchases, supplies, materials and marketing expenditures) far enough that their production dropped as well. But even in the face of lower production, they were still able to increase profitability. In addition, many dentists found that they were much happier and that their previous desires to grow their practices only existed based on a good economy where growth was easy.

Today some practices may find that this is the time when reducing costs to get smaller can lead to increased profitability. No business owner likes to go to work every day racing around just to bring in enough revenue to pay the bills or bring in a small income. This is what entrepreneurs do when they are just starting out. However, entrepreneurs are usually younger, more energetic and willing to eat out of pizza boxes night after night.

Going smaller is a great option for dentists who simply want to enjoy their practices and no longer want to fight the battles of growing their practices, investing heavily in marketing and taking on more insurance battles. Yes, smaller practices have fewer patients, but they also have fewer team members to manage and fewer insurance plans to deal with.

Remember, dentists did not ask for COVID-19, nor did they see it coming. This was a crisis that was thrust upon us out of nowhere. But when a crisis occurs, change is inevitable. There are many options on the table. Getting smaller is one of them.

WHERE DO YOU CUT EXPENSES

Before reducing expenses, it is extremely important to have a true practice analysis performed. Having reviewed hundreds of these in our consulting process, we find many practices that have made poor decisions did so because they didn’t truly understand the profit, overhead and revenue factors that drive the practice. A practice analysis will allow you to understand how to get smaller without losing profitability.

The next step is to determine what the business plan for a smaller practice looks like. When planning, consider the following questions:

• What size would you like to be? 10% smaller? 20% smaller? Anything over 20% will be very difficult for the practice to make up in profitability.

• How many staff will you need, and what positions should be in the smaller practice? Is the doctor willing to perform hygiene? Can you reduce the number of hygienist days or hours or eliminate them

• How many front desk people do you need? What can you outsource? Can you outsource insurance filing and reimbursement, telephone answering or even basic accounting

• How many hours and which days does the doctor want to work? Will you have to eliminate patients to reach a smaller downscaled level or will you be able to handle all patients with a longer wait

• How many patients can you lose and still maintain the business plan of the smaller practice

• Do you have a rigorous methodology of overhead control to reduce expenses? Can you bid out larger expenditures ranging from insurance to supplies? Are the lab expenses reasonable and in line

These are a few of the basic questions that will help you determine if going smaller is for you and, if so, see how you can make it happen. A real business analysis is more complex and will evaluate all aspects of the practice, but these questions are a good starting point.

WILL A SMALLER PRACTICE MAKE YOU HAPPIER

The answer is that it depends. For some doctors, a smaller practice will get them back to why they became dentists in the first place. For others, they would miss the challenge of growing the practice, setting goals and creating ongoing excitement through new opportunities. Just keep in mind that staying where you are for a year or two or even getting smaller isn’t a prison sentence. You can always shift from wherever you are and go back into growth mode in 12 months or even years down the road. We have seen practices that have been on auto pilot and flat for years but suddenly decided it was time to grow again.

Also, keep in mind that simply having a fantasy of going smaller to help reduce stress and the chaos of COVID-19 doesn’t mean that doing so will create a utopian practice or even be more profitable. Going smaller still requires excellent systems and team training.

SUMMARY

Getting smaller can be great; but you shouldn’t make a knee-jerk decision without some level of analysis, only to find that you went from the frying pan into the fire of economic challenges. Yes, less stress and chaos are great, but I urge you to consider the questions in this article so that you can make the best decision for your practice.