Ted Morgan, DDS
Dentists are, as a group, horrible at business! And, diving right into controversy, I?d say that most problems that frustrate dentists and make them want out of dentistry are fundamentally caused by poor business choices and decisions. It?s not entirely our own fault, though. Traditional dental school education has deprived us of even the slightest shred of practical training in running a business. And it seems to be getting worse as dental schools lower the expectations of the students to anticipate a career as an employee of a corporate or government entity. What the students should be hearing more of, is that along side of these opportunities for a career as an employee, there is another opportunity to be an owner of a business that is the envy of serious business people outside our industry. Evidence of that?The proliferation of DSOs: Wall Street has discovered that dentistry is an extremely attractive place to invest large chunks of capital; and they are showing just how good they think it is as they offer astronomical amounts to buy dental practices
I put myself among those dentists who came into practice ignorant of business principles. Looking back, I didn?t even realize I was in business for my first 25 years in practice. Then I was awakened by a businessman named Walter Hailey, to the realization that dentistry, like any endeavor to sell goods or services, is a business. I had made the conscious choice not to be in the business world, and had thought until then that I wasn?t. But Walter pointed out that not only is dentistry a business, it is, lo and behold, the best business imaginable! He told us to think about the advantages of dentistry as a business: profit margins of 30-50% and higher, a virtual monopoly, shared among our profession, that is legally protected by training and licensing requirements, has competition limited by barriers to entry, an unlimited market size, high demand fueled by helping people ?look good and feel good?, and a service needed by everyone. This business has so many advantages in fact that even people like me who didn?t even know they were in business, could usually make a great living at it, in spite of themselves. Are there downsides? Of course! Dentistry is stressful. And when you have something this good, there is always somebody else trying to get it away from you. In the marketplace, we are innocent guppies swimming with sharks ? insurance companies and private equity firms to name the biggest ones. Neither of those are always all bad (did I just say that about insurance companies?), but both have accounted for a lot of frustration and many struggles, even the ruin of some dentists who were overmatched by ruthless players using sophisticated tools like PPO contracts and convoluted purchase agreements that rob dentists of profit, of accumulated value, and of independence. (And you know how passionate we at DenVantage are about independence!)
If you own a practice you own a phenomenal business and have the best financial asset you can have; better than any investment instrument you can find! I can hear the responses of some readers right now: ?dentistry is not all about profit; it is about relationships and about treating the needs of the patient without regard to financial gain?. Yes, true. My point is you can fully be that clinician of the highest integrity and be a competent and successful business person at the same time.
This is not an either/or situation; it is both/and. You will be a BETTER dentist overall when you are better at business; you will serve your patients better, with more confidence, from a position of solvency and profitability than you will if you are frustrated by low case acceptance, low reimbursements, high costs, inability to pay for a team of high quality professionals, and teetering on the brink of financial distress. You will make better treatment decisions, and present them more impartially and confidently if you are not in a state of stress and scarcity.
This is where I remind you that DenVantage exists to strengthen your business and defeat the robbers creating that financial duress I mentioned. If you still have some of those ruinous PPO contracts where it costs more to serve the patients than you get back in reimbursements and copays, you need a PPO exit plan. DenVantage is a major component of a strategy to dump those contracts while increasing profit. (Go to https://denvantage.com/dental-freedom-academy/ if you want help making such a plan). And a thriving membership plan will also increase the value of your practice when it is time to plan your transition. Which brings us to DSOs...
How do DSOs make us look bad at business when they are offering such great deals to buy our practices? Partly it?s because we have, as a group, under-valued our practices?worth for decades, while from a business perspective, they were actually worth more like what the DSO?s are offering all along. But all too often, it seems, those offers are not as advertised. I have come across many more tales of woe than tales of riches in actual DSO transactions I?ve heard of.
We dentists are especially enticed by the DSO offers because we have sold our practices in the past for a fraction of what comparable businesses (comparable profit, comparable EBITDA) have sold for.
But now, somebody is willing to pay a comparable price. Look at what your practice provides: an income stream that will continue indefinitely if managed right. That is what the DSO is so anxious to buy; the profit stream. Selling it when you are done practicing may not be the best thing to do, depending on circumstances. Many times, it will be far better to keep it, manage it, and maybe employ other dentists to do the dentistry and keep ownership of the business that you built (basically what a DSO would do while employing you as one of the dentists). It should be worth more to you, than to an investor group from outside dentistry who may have no concept of running a practice, except strictly by the accounting numbers. Keeping it will give you more control and predictability of your future than a promise from a DSO full of escape clauses, or a portfolio funded by the after-tax proceeds from the sale or your practice. Selling later rather than sooner once you stop practicing, is something any retiring dentist should look at, in my opinion, as one of the very viable options, before signing a sale agreement with anyone, dentist or DSO.
For a more detailed look at selling to a DSO, here is a must-read article from a dental accounting firm that will help if you are thinking of selling; or if you just want to be better informed: www.practicefinancialgroup.com/should-you-sell-to-a-dso/
The fascinating question to me in all of this is: why are some dentists struggling with frustration, low profits, and burnout while at the same time other dentists are on an upward trajectory and achieving new highs? I think the answer is the same now as at any other time: on the surface, it?s their ability to operate their dental practice as what it is: a business. And that begs the question: what is the reason below the surface that the struggling, frustrated dentists are not taking the business steps necessary to grow and thrive? The answer to the second question is attitude.
Your attitude is what interprets your circumstances either as positive and full of opportunity; or negative and fraught with problems. All of us live with a mix of opportunities and problems, but it?s attitude that filters what we focus on among those. An attitude of gratitude will see opportunity and blessings even inside the problems; an attitude of negativity will only see problems and obstacles without solutions. Yet our circumstances always contain all of those in varying proportions.
The times we live in and the events taking place around us are not something we can control. This seems especially true right now. But we can control our attitude toward our circumstances and we can learn to navigate our practices through the challenges with sound business principles.
There are always things you can do to move your practice forward. From where I sit, one of those things, among many, that will certainly put your practice on a more solid business footing is having a well-designed and fully implemented membership plan like DenVantage (truthfully there is no other membership plan like DenVantage). Along with the many benefits of a robust membership is that it puts the relationship with the patient back to one-to-one, removing the third party. And it solidifies your base of loyal patients thereby increasing the value of your practice, which brings you more options when it comes time to transition.