CHAPTER 19
Planning the Dental Practice
It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way—in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.
Charles Dickens, A Tale of Two Cities
Starting a practice is much like having a child. A practice must be birthed, allowed to grow, and helped through problems before it becomes a fully functioning mature practice. The problems and opportunities faced by a child are different from those faced by an adolescent. Similarly, a start‐up practice faces different challenges from a mature practice. With both children and dental practices, a well‐articulated plan must be in place to move to the next level of development. In both instances, change happens regardless of whether there is a plan. Nevertheless, having a plan helps to guide the process and maximize opportunities that occur.
PRACTICE STAGES
Dental practices typically develop through several stages. Depending on where a dentist is in the practice development stage, planning needs and practice profiles will be different.
Four stages in a practice’s growth are shown in Box 19.1. During the first stage (establishment), the practitioner is concerned with getting warm bodies in through the door. Marketing efforts are critical. Practitioners often use managed care, welfare patients, emergency call, or other methods to increase the number of patient visits. Efficiency is not as much of a problem as in later stages because there is often slack time. The second, growth stage sees an acceleration in patient visits. Schedules begin to fill, and the practitioner begins to “weed out” managed care and other less profitable patients. The third, maturity stage sees practitioners concerned with making the practice efficient on production, cost, and revenue bases. Finally, during the redevelopment stage of practice, the dentist readjusts the practice to meet their long‐term personal and professional life goals. The practice is concerned with different problems in each phase of its development. Different problems and solutions will also be more important at different stages.
STAGE 1: PRACTICE ESTABLISHMENT
This initial stage begins with the practice’s set‐up, buy‐out, or buy‐in. The practitioner’s main concern is to increase the patient base and to acquaint those patients with the style and personality of the practice. To this end, they will see virtually anybody, any time. Marketing and advertising are important to attract people into the practice so that they may be won over as regular patients. Profits are low or non‐existent because revenue is slow to collect, whereas debts and start‐up costs are high. Operational efficiency is not a big problem because extra appointments are often available, and the practitioner is increasing their clinical and management skills. During this time, the practitioner develops operational systems and management skills that will be the basis of later practice efficiencies.
STAGE 2: PRACTICE GROWTH
The growth stage occurs when the practitioner continues to acquaint the patient base with their individual practice style. Because of the unique style, patients begin to self‐select for or against the practice. This leads to patients leaving the practice to find a dentist who is more compatible with their needs and wants, or patients who enjoy the style of practice will refer other patients with similar wants and desires. This internal referral process allows the practice to approach a “critical mass” of patients that will help it sustain itself from internal referrals.
Many marketing efforts begin to pay off as well. There is often so much new and previously deferred work that the practice begins to run the practitioner rather than vice versa. This can leave the practitioner with little time for personal growth or family interests. Although a large amount of money comes into the practice, there is low profit because the overhead is still high due to loan pay‐offs and personal debt associated with typical family start‐up expenses. This often leads to a “cash crunch” in which the practitioner has trouble paying the bills each month, though production reaches an all‐time high. Operational efficiency becomes a large problem as the number of patients increases. The practitioner needs to assess carefully when to add staff, change hours, or make other critical operational management decisions.
STAGE 3: PRACTICE MATURITY (REALIZATION)
The practitioner reaches their intended level of practice busyness during the maturity stage. Referrals increase as the dentist concentrates on the types of work that are of greater interest to them for personal, professional, or financial reasons. The dentist takes control of the time spent with the practice and balances this commitment with personal and family time uses. Involvement with professional societies and organizations increases as the practitioner gains in professional and personal stature. Profits increase as fixed costs decrease from loan pay‐offs. Production peaks and fees increase so that this stage becomes the most profitable. The dentist’s time is the limiting factor to production, so office operational efficiency is vital to maximum profitability. Many dentists’ goal is to maintain a mature type of practice for many years.
STAGE 4: PRACTICE REDEVELOPMENT
This stage of practice can take two different paths. One group of practitioners is content to continue the existing practice pattern. The patient pool begins to contract as patients move away, die, or have decreased need for dental care. If the practitioner has not encouraged children into the practice, the patients age along with the practitioner as the patients’ families grow and move away. Often the treatment scope is fairly limited, especially if the practitioner has not incorporated the newer techniques, methods, and materials. The practitioner takes more time off for outside pursuits. Profits remain high because the overhead is low, although profits and revenues are decreasing due to the shrinking patient pool. Operational efficiency is not important if the practitioner is satisfied with the profit and workload of the practice.
The second group of practitioners wants to maximize the value of the practice. To do this, they take in associate dentists, sell a part to a new partner, or merge their practice with another. They find ways to continue to develop and grow the business so that the practice becomes more of the focal point instead of them. As the practice grows, they often require additional, specialized staff to run it. Office managers, sterilization clerks, and insurance management staff members do tasks that are shared in smaller practices. Operational efficiency is paramount to these larger practices maintaining profitability in the face of this increased bureaucracy needed to run the practice.
THE ENVIRONMENT OF DENTAL PRACTICE
A dental practice does not exist in a vacuum. It exists in an environment that affects the practice either directly or by influencing the climate in which it operates. These environmental forces may be external to the practice or may exist internally as management‐related concerns or as personal positions taken by the owner–dentist. But each of these factors may profoundly affect how a dentist structures the practice. The individual practitioner should identify these forces, anticipate their effects, and use this information to plan practice growth in the most advantageous manner. An “environmental analysis” assesses the practice’s environment so that the dentist can anticipate problems and make changes in its direction to increase their chance of success. This becomes the framework for planning a successful practice.
EXTERNAL ENVIRONMENT
The external environment, by definition, lies outside the practice itself and is composed of specific individuals and general groups. It includes those people who influence the practice and those whom its actions affect. This is obviously a large, diverse, and complex group of factors. Therefore, external environmental factors generally fall into two categories: general environment and operating environment.
General Environment
The general environment includes the business, regulatory, legal, technological, cultural, and social factors that affect the climate in which dental practices operate. It includes factors that affect the number and types of patients and the number and types of inputs into the practice (labor, supplies, etc.). The general environment is divided into several domains.
Sociocultural Domain
The sociocultural domain consists of the demographics (e.g. age, education level, income level, etc.), values, customs, and historical interests of the people within the society the practice serves. Because dental practices exist to serve the needs of the population base, it is no wonder that these cultural factors should influence the organization and operation of the dental practice. The people the practice employs bring many of those cultural factors with them as background knowledge on the job. Social and cultural roots, for example, may in part determine an individual’s “work ethic” or affect their personal interactions with the practice’s clients.
Dental practices face a host of sociocultural influences. Demographic changes in the population will affect the practice’s future productivity. The US population overall is aging, as well as becoming more affluent and better educated. Some 20% of the population move home in any given year. People value preventive healthcare and practice more “self‐help” than ever before. The ethnic and racial composition of communities and the population at large is rapidly changing. The myriad positive and negative ways these factors might affect the dental profession overall (and a specific dental practice in particular) are considered the sociocultural factors of the external environment.
Economic Domain
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