In the 1990s, I was part of a very enjoyable business partnership and between the two of us we owned three practices. Although we employed six associates and several hygienists, I think a fair assessment of the business we created was that each practice only truly worked (and made a profit) when one of the partners was in one of the practices and seeing patients.
So why on earth would you want to own more than one practice?
Here are three reasons:
- One of the great advantages of owning more than one practice is that by implementing the right business model, you can create a situation where the practice will earn you profit whether you are working in it (as a dentist) or not. Many practice owners would love to benefit from creating this ‘leverage’ and those that do are envied by those that don’t!
- Currently dental practices are valued (mostly) on their turnover rather than their profit. This means that the more turnover you grow in each practice, the higher the sale price will be. In the UK, capital gains are taxed at 10%, yet income is taxed at anything up to 50%.
- I believe that one of the greatest problems for middle-aged dentists to overcome is (say it quietly) boredom. Therefore, having more than one practice to go to work in will make life a lot more interesting.
At Breathe Business we run an Entrepreneurs Club for our clients who own (or who wish to own) more than one practice. So we have first hand knowledge of the difficulties involved with trying to make this business model work.
What’s so difficult about owning more than one practice?
In summary, to make an enterprise of several practices work our entrepreneurs have to play this game at the right level. This means that they have to find enough of their time when they are not being a clinical dentist, enough money and the right people to delegate to.
- Time. What’s difficult is for these practice owners to allocate their time in the most effective and entrepreneurial way. Because practice owners are usually on the dental register, they tend to believe that they should do at least some of the dentistry (thereby, avoiding paying somebody else to do it). This gives them the impression that their business is more profitable. The reality is that in the short term it probably is, however longer term they will quickly use up all their available time and hit the glass ceiling, limiting the size of their business. The best strategy would be for them to cancel their GDC registration (yes really) so that they would then stop being tempted to pick up a hand-piece and focus all their time leading and marketing their practices!
- Enough money. Inevitably, building a series of practices requires considerable investment and although it is relatively straight- forward to fund the practice capital costs, it is the day-to-day running costs (working capital) that are hard to find. This will usually limit profits in the early life of the practices.
- The right people. The skills required to oversee the management and operations of a group of practices are often different to those required for a single practice. Suitable folk will be natural self-starters and comfortable with taking responsibility.
Making It Work
The key to making a multi-site dental business work is to understand how to plan the business so that there is some profit left after everyone else has been paid! This might sound banal, but so far the existing dental corporates have struggled to make a profit from the operation of their practice portfolios.
I would suggest that the individual sites are ruthlessly systemised and that the behaviour of the team is united by a common brand that runs through the practices like a name through a stick of rock!
The most common roadblock is likely to be the practice owner. He or she may display several qualities which in a single practice might not compromise success, but in a bigger business will sabotage growth. These include:
- Poor leadership/lack of delegation
- Poor recruitment
- Lack of resources
Other roadblocks to growth may be that the proposition for the business is not compelling enough to attract sufficient clients and that the competition catches up and undercuts the business.
The fixed costs in running any dental practice are bound to increase in the short term with the advent of new compliances. However, demand is increasing and in June this year, leading dental market analysts forecasted a 21% increase in the size of the private dentistry sector (in real terms) and a 12% increase in the size of the NHS dentistry sector (in real terms) by 2014. This increased demand for dentistry will occur across the whole range of dental services but will be felt most by the practices who are able to offer a ‘look good, feel good’ service. The dental corporates and some high profile retailers will also want a slice of this new business. Ultimately, I suspect that there will be a smaller number of practice owners who own around the same number of practices.
If you would like to know more about how Breathe Business can help you own more than one practice and make it work, then please contact Ernie on0845 299 7209 or firstname.lastname@example.org.