Dental consumer spending, which began to slow in the early 2000s, is expected to continue to lag for the next three to five years. PPOs and changes in dental insurance have created intense pressure on practice profitability. The rise of group practices and corporate dentistry have increased competition for the solo practitioner. When adjusted for inflation, dentists’ average net income has decreased since its peak in 2005. Clinical expertise is no longer enough to be successful in dentistry. To run a profitable practice, dentists need to be small business owners whose product is dentistry.
Today you are not just the dentist, you are the CEO, CFO and COO of your practice. Whether you choose to obtain the business skills to run a more efficient company or outsource those functions, there are three things every dentist/small business owner should have.
Business Plan
You’ve been practicing dentistry for 15 years and never had a business plan. Why now? Your business plan is a blueprint for reaching your goals. If you ultimately want to sell your practice, bring on an associate or add a second location, you’ll need a written business plan to share with potential buyers, business partners or investors.
According to Bob Gray, EA, CHBC, who is an instructor at Henry Schein’s Dental Business Institute, a professional business plan should include an executive summary; a company overview and business description; information on your target market and marketing plan; a management plan, including any outsourcing; an operations plan; financial information and income projections.
Exit Strategy
Your practice should not be your retirement plan. There is only one young dentist planning to buy a solo practice for every four retiring solos looking to sell their practice. Develop an exit plan based on a realistic valuation of your practice and your current retirement savings. If you choose to reduce your work hours over time as you move toward retirement, calculate how the resulting patient and production loss will decrease the value of your practice.
Embezzlement Prevention Plan
Over 60% of dentists are at risk of embezzlement during their career. Administrative personnel often work with little or no supervision in the dental office, creating an atmosphere of opportunity. A potential embezzler can appear as a model employee who arrives early, stays late, doesn’t take vacations and insists on doing everything themselves. Warning signs include: low collection percent, high accounts receivable, excessive overhead in several categories, employee lifestyle changes and disorganized books or computer entries.
For more help developing these three documents or to learn more about the business skills needed to compete in today’s dental environment, visit www.HenryScheinDental.com/DentalBusinessInstitute.