by Debra Isman
Making strategic decisions and practicing dentistry go hand in hand. Whether these decisions are business, financial, management or clinical, they are best made when all options are carefully explored and understood.
Certainly the two most significant decisions you make are how you first start your dental career/practice and how you decide to transition into retirement. Most of you are somewhere in the middle, dealing with the day-to-day, month-to month management challenges of just being productive and profitable. In fact, so many of the dentists I talk to have their “heads down” so to speak, trying to serve their patients with quality care, manage staff, their business and their time. Often they forget to look up and plan for the future.
Let me ask you – Do you have a transition plan in place? Usually, when I ask this question, doctors answer by saying that they are not retiring or bringing on an associate for at least three to five more years. They add that they will make their retirement plans when that time rolls around. Sometimes doctors say that they can’t even think about slowing down because they feel they can’t afford to retire. My response to them is that three to five, even ten years out is exactly when you need to be molding your transition plan. With three to five years of advance planning you will be able to maximize all areas of your business so that it will successfully transition when you are ready to slow down or phase out of the practice.
For the first time in a long time, new dentists will have plenty of practices to choose from. In order to have your practice at the top of the list, you’ll need to make sure that you’ve got a practice that is a well-oiled machine with efficient management, great equipment, excellent collections and good new patient flow.
Start your transition plan by consulting with your financial planner or a CPA who has taken advanced training in financial planning. If you have been working with a financial planner, you should know exactly when you can afford to retire. It may not be the date you choose to retire, but you will have the peace of mind of knowing when retirement is possible. Financial planners can run projections in order to formulate a savings plan that will insure a successful retirement. Do not rely solely on the sale of your practice to fund your retirement.
Next, evaluate whether or not you are maximizing the financial potential of your practice. Is your practice profitable with effective management systems in place?
During the five-year transition plan, learn how to grow your business and be committed to doing what it takes to bring your practice to its full potential. Some key areas to focus on are:
Do you have adequate new patient flow?
Although the “best” number of new patients varies from practice to practice, and from general to specialty practices, your business will be much more attractive if you show a history of a healthy stream of new patients. You may want to slow down, but don’t let your practice show signs of decline. Keep both production and new patient numbers growing.
Do you have a productive hygiene department?
Each day of hygiene reflects about 200 patients in your practice. So, five days would indicate an active patient base of about 1,000. To be considered healthy, a practice should have approximately 85% of patients with a hygiene appointment (current or future). Check this by looking at 30 – 40 charts/records and doing the math. As you prepare your practice for future sale, make hygiene scheduling a priority. A full hygiene schedule is a big plus to a buyer.
Are you collecting 98% of production?
When a practice is appraised, the focus is on income as well as charges. However, when it comes time for a buyer to get a loan to purchase your practice, the lender will only look at actual income or collections. By maintaining a healthy 98% collection percentage of UCR production, your practice will reflect efficiency and hold its value. In addition, during your five-year transition plan keep an eye on what you are adjusting off for reduced fee programs and discounts. Make sure that someone is working consistently everyday on collections. Sending out statements once a month is costly and usually not effective in maintaining a 98% collection rate.
Is your equipment and facility in excellent condition?
I recommend you go through the office together with a trusted equipment dealer and a pad of paper. Make a five-year plan of what equipment needs to be replaced, added or updated. Take advantage of any tax incentives available and you may find that this expense can be greatly offset by the tax savings. Intraoral cameras and digital radiography are all the standard in dental schools and must become so in your office. Even something as simple as replacing lens covers on your lights and/or replacing hoses on your units can make a difference. Just like selling a house, a little paint, cleaning and updating can go a long way. Donate equipment or supplies you no longer need.
No matter where you are in your practice life start working on your transition plan now. Having a plan in place doesn’t mean you must slow down or retire, it means you will have the choice to do so when you are ready. With that choice comes peace of mind and security, and the best possible return on your most valuable asset.
Debra Isman is an independent practice development specialist based in Houston. She helps practices build strong teams who share the doctor’s vision, who implement systems to improve efficiency and who increase production and collections while providing an exceptional experience for their patients. She can be reached at (713) 522-6670, firstname.lastname@example.org
or visit www.idealdentalpractice.com.