Recently, a client asked the Breathe team to analyse the data of 39 private practices in order to compare their turnover and profit in 2010 to that in 2009. The results were shocking:
Average fall in turnover: 12% Average fall in profit: 37%
It is currently a difficult time for some principals to own and lead a dental practice, and many of them are (rightly) concerned by:
- Gappy books and low numbers of new patients
- Patients leaving and list sizes shrinking
- Patients shopping around on price
- Patients putting off treatment, especially check ups and hygienist appointments
- Falling profits and increasing overdrafts
- Shrinking practice gross fees
- Increasing personal tax bills
For some practices it is becoming harder to continue trading at the same level as in 2009. This pressure combines with substantial and complex new compliance and regulation including:
- 2010, HTM01/05
- 2011~ Care Quality Commission Registration
- 2012/13~ Revalidation
The increased cost of running a practice and the fall in turnover has considerably reduced the profitability of many dental practices. This is reflected in the valuations that private practice owners are now receiving from experienced agencies.
Growing expenditure and further constraints on profit are also coming from within the world of dental business. Factors include:
Difficulty locating skilled, profitable associates There is an oversupply of newly qualified, inexperienced dental graduates with insufficient technical and/or interpersonal skills to gross high enough fees.
Unsustainable pay demands Associates, therapists and hygienists continue to have unrealistic expectations about how much practice owners can afford to pay them.
Lots more competition Competitors include retailers, corporates, dental tourism, the Internet, new squat and re-invented practices, which means that practice owners have to increase their marketing presence and marketing costs.
The necessity to obtain new and increasingly complex skills Acquiring new skills incurs training costs, in addition to the funding of necessary additional equipment.
The result of this unusual combination of circumstances is that:
- Practice costs are going up
- Practice gross may be going down
- Practice profits are falling
- Private fees are unlikely to be rising fast enough to keep pace with all these new costs
As ex-Chairman of the BDA, John Renshaw, said on the dental website www.gdpuk.com in late 2010, when addressing some of these issues,“Colleagues, we are on borrowed time.“
However, despite this avalanche of change occurring alongside a political and economic environment where the recession, austerity budgets, public service cuts, increasing unemployment, rising oil prices, falling house prices and so on continually adorn the front pages of our national media… there are plenty of opportunities for dental practice principals to grow their practices.
In the 1990s during the last recession, Tesco and Sainsbury managed to grow their supermarket businesses by around 30%! In 2010, Dental Market analysts (Source, MBD June 2010) forecast that by 2014 there will be:
- A 21% increase in the size of the private dentistry sector (in real terms)
- A 12% increase in the size of the NHS dentistry sector (in real terms)
I believe that the increased demand for dentistry will occur across a whole range of dental services, but it will be most keenly felt by practices that are able to offer:
- Cosmetic Dentistry
- Quality Affordable Family Dentistry
- High Street Retail Style Dentistry
- Boutique, Business Class Dentistry
- Specialist Dentistry (Implants, Orthodontics etc)
I do not believe that average practices doing average dentistry and providing an average service will benefit from this uplift in demand. Neither will they continue to benefit from a decade or more of rising demand for cosmetic dentistry. They will have failed to notice that: 60 is the new 40, that the media continue to help dentists sell cosmetic dentistry, that the Internet makes information on cosmetic treatments freely available to prospective patients and that these patients demand a sophisticated response from their dentists to their enquiries.
Riding The Avalanche The avalanche of change will bury average practices. Successful principals will ride these changes, growing their practices and benefiting from bigger, more valuable and more profitable businesses. In order to ride the avalanche, successful practices are learning how to ‘play the game at the right level’. This means they are very serious about:
- How they clearly differentiate themselves from other practices
- Regular, effective marketing campaigns with a measurable return on investment
- Having a team that can sell new patient consultations and treatment plans!
- Their client journey
- Collecting and analysing data that measures their success
The are adept at:
- Providing exceptional customer service
- Looking after their existing clients as if they were old friends
- Having most of their regular clients commit to their practice by joining a compelling membership scheme
- Adding value to everything they do
- Providing opening hours that suit their busy clients
- Being passionate about what they do
- Not hurting, upsetting, or annoying their clients
- Making it easy for their clients to pay
- Offering a wide range of services
- Recruiting a team who are willing to be lead and embrace change
In summary, dental practice principals have a ‘double whammy’ that they must deal with effectively and quickly. They have to trade in a market that has become much more difficult over the last two years, whilst implementing a raft of changes in order to satisfy the rule-makers. Fortunately, the demand for good quality dentistry offered in a professional and comfortable environment is increasing, together with the competition for these clients. I suspect there will be some spectacular winners and many losers.
Probably the single most relevant indicator of future success in this rapidly changing market will be the attitude of the practice principal. A positive, ambitious, can-do attitude will, this time, win out over all those who are still complaining!
Simon Hocken Director of Coaching, Breathe Business
For more advice call the Breathe Team on 0845 299 7209 or info@nowbreathe.co.uk.