Dan Fine and Luc Wade explain what may happen during the first year of practice ownership and how to make the investment a success in the future.
With practice prices as they are, there’s a good chance you’re going to be investing €500k, maybe more, to acquire a practice.
Now you’re through the door, you may need to spend a bit of cash to make the place look presentable and kit it out clinically – let’s say €100k.
There is no point buying a practice if you are not going to grow it. It will be effective marketing that drives this growth.
With that in mind, there may be a marketing systems investment of, let’s say, €35k. Then, your monthly budget to think about. Your monthly budget should be 5% of the revenue you want to have in 12 months.
So, a practice growing from €500k to €650k (ambitious but reasonable 30% growth) will require an annual budget of €32k, around €3k per month. All in, you could be €600k+ in the hole… In a sense, the capital investment is the easy part; it is tangible and specific, but just because you spend it doesn’t mean it is going to work.
Ultimately, what decides whether the investment and risk pay off is you. This should be a terrifying and exhilarating insight. You are responsible for your own destiny, but you will have to own it.
The first year
We can make a few assumptions about what will happen when you take over your business in the first 12 months:
- You will work harder than ever before
- Nothing in your experience has prepared you to be a business owner
- At times, you will be exhausted
- Sometimes you will want to give up.
These assumptions point to where the less tangible, but often more expensive, investments will have to be made. Let’s take them in order.
You will work harder than ever before
This does not mean clinically (although it often does too). It means you will have to invest a significant amount of time running the business.
You will quickly understand that time is one of your most valuable commodities. How it is created and invested will be critical in the success of your business.
Nothing has prepared you to be a business owner
Even though you are more educated than 98% of the population (estimates vary), nothing in that educating has direct application to the chaotic collective of people, processes and projects that is a business. You will have to learn rapidly and continually, formally and tacitly.
Your investment in becoming an effective and diverse learner will best allow you to interpret and capitalise on the chaos.
At times, you will be exhausted
With more hours worked and continually learning new things, you will need to invest energy to drive this.
This is not something that you should take lightly; it will take everything you have to keep the business running. But simply maintaining is not enough, you have to grow and this will require you to dig deep and invest energy that you did not know you had.
Sometimes you will want to give up
Running a business is lonely and thankless. Your patients will think you charge them too much, your staff will think you will pay them too little, and your partner will not care.
The emotional investment is often the one people are least prepared for and the one that will often make or break your success as a business leader.
So, before buying a practice, make sure you have thought through the true cost and consider if it is something you are happy to pay.
Your growth plan
Few businesses, and very few dental businesses, are good at assessing their capabilities and identifying skill gaps. Here are five ideas to try out in your new practice.
Know your numbers (…again)
It’s just silly that many dental practices couldn’t tell you their new patient enquiry rate, treatment conversion rate or average patient value. It’s a fact that knowing them at the start of a growth programme will make a difference. You won’t know if you’re making the right decision otherwise.
For example, if you miscalculate your average patient value, you’ll favour unproductive marketing campaigns and stop ones that were actually making a profit.
If your competitors calculate this value accurately, they’ll have more budget to outbid you and take market share.
Despite the heavy time resource, knowing your numbers is your most worthy marketing investment.
Be open about the direction of the business: tell the team
Simplify your goals down to six metrics. Share these KPIs so the whole team can see how they’re doing. Making this highly visible will help with morale. If you don’t have these systems in place, you risk slowing down growth and looking at marketing as a series of one-off events.
Avoid one-off events
One-off events are essentially any marketing effort that lasts for a limited period and feel gimmicky – and they negatively impact growth.
One-off events display a lack of confidence. Dental practices that focus entirely on this type of marketing hurt growth because they force their teams to scramble around getting campaigns ready, launched and promoted, only to earn a return on that investment for a limited period.
This type of marketing investment, for instance on monthly promotional deals, isn’t scalable over time and you’re only as good as your last offer.
To grow faster, focus more of your time on a blend of brand building and sales activation campaigns that are unaffected by time and won’t expire.
Love the bottom of the funnel
This is about loyalty and advocacy, including efforts to retain patients and generate more word-of-mouth referrals and increased patient value. Don’t hesitate to ask for testimonials and online reviews across all the digital channels available to you.
By spending more time on the bottom of the marketing funnel, you’ll generate additional revenue from every new customer without extra advertising costs.
This will allow you to spend more at the top of your funnel too, building market share and growing your business faster.
Don’t move slowly
Moving too slowly holds back so many practices. How quickly you make business decisions, get new initiatives live and test them is of critical importance to your commercial success. Slowness seems ingrained in many dental practices, and it can be hard to change.
An effective business leader
People tend to have innate leadership qualities, for instance, you might be a great communicator, charismatic or decisive. However, unless you are engaging in your own development, you probably won’t be a well-rounded leader.
With four books on leadership published a day, it’s an incredibly deep subject with a lot of chaff, so here are two simple principles to start that development.
We all work jobs that we get paid for, that we spend most of our time doing. Jobs that we aim to become exceptional at. This expertise blinds us from becoming an effective leader.
As a clinician, you have rigorous training that allows you to interpret information in a certain way, always with the wellbeing of the patient in mind.
As a business leader, this information is relevant but not gospel. It can actually impede your thinking unless you are able to detach from it.
When thinking through a problem or a situation, assume you have your clinician’s hat on.
To detach you need to drop your professional expertise and consider other points of view:
- What would the shareholder say?
- What would my enemy think?
- Would this improve my team?
As a dentist, you are more educated than much of society so, unquestionably, you will be intelligent. But knowledge of this may block you from gaining insights that allow you to become an effective leader.
You have to take yourself off the pedestal and assume that people you interact with have something interesting to tell you.
What got you to the party in the first place is not going to make you an effective leader. Understanding this is the first step to getting there.
Creating order from chaos
When someone acquires a new dental practice, a common fallacy occurs. It usually sounds something like: ‘I’m just going to run it as is for a year or so, get my knees under the desk…’ For a number of reasons, this is an unacceptable strategy to take when acquiring a business.
Commercially speaking, there is no reason to acquire a dental practice unless you are looking at growing it. In the dental marketplace, growth looks like 30% per annum. Because the growth opportunities are so wide, it essentially means you will need to be creating a new business each year.
Your role as a business leader is to create order out of the potential of the future. This means you will have to have a clear vision, be comfortable with uncertainty, and embrace and understand risk.
To grow a business means stepping out of a binary world of right and wrong. You must create your own context by which to interpret emergent events.
The context will be the strategy of the business and your own leadership values. Without these as an anchor, you will never know the opportunity you have missed out on.
The stoic philosopher Seneca the Younger said: ‘A good person dyes events with his own colour and turns whatever happens to his own benefit’.
To lead a growing business, you need to understand and internalise this concept and create new order from chaos.