Aiming for the good life
Simon Hocken says building a perfectly-sized dental practice will ultimately improve your work/life balance
I’m a lifestyle kind of guy. My work/life balance is important to me and unlike many dentists I meet, I’m not so willing (these days) to sacrifice my lifestyle for work. In reality this means that I can earn plenty of income in four days a week and have three day weekends to enjoy my family. My gurus in the nineties (Tony Robbins, Omer Reed, Paddi Lund and Ken James) preached life first, then business and it has sort of stuck with me.
We all know that the life of a dental practice principal is hard work (and likely to get harder still) – so I’m curious as to how a practice principal can be successful in 2016 and still hang onto some of their work/life balance. I believe that the most important strategy in enabling this to happen is to get the size of your practice right.
A long time ago, I owned a one-surgery practice and having just one room to earn fees in made it almost impossible to get past the business overhead, leaving me very little profit to spend on developing the practice. I quickly moved to a two-surgery model which delivered plenty of profits and enough surplus to make my life easier (such as: more fee-earners, proper manager, book-keeper, effective marketing, plenty of training etc).
So, what is the ideal size for a dental practice that still allows you some time for the rest of your life? Dental practices come in many shapes and sizes and their profits vary as much as their treatment plans. Often the size they end up at has more to do with the building that accommodates the practice than the business plan and many practices stopped growing a long time ago.
In my experience, small (definitely) isn’t beautiful. Small practices are hard work for the reason I identified earlier, that there isn’t enough profit to hire enough people to get everything done. And so the hapless owner gets to spend his/her evenings and weekends administrating the practice on top of 40 hours a week being a dentist. Miserable! Whereas a bigger practice can afford to hire the right help to get everything done.
What about super-sized practices? Well, I’ve worked with many large practices (four surgeries or more) the biggest to date a 12-surgery site in London. Paradoxically, many large practices find that although they have plenty of turnover, larger profits are harder to generate because of the complexity and the cost of running a much bigger practice. (I should point out at this juncture that I have worked with practices that buck these generalisations, however, they seem to be a minority!)
So, I believe there is a sweet spot for the size of a practice where there is plenty of profit left after paying for a great support team, allowing the principal to work reasonable hours and keep their weekends and (proper) holidays free of work.
The right sized practice is easier to run than its smaller or bigger counterpart and has enough resources to make the principal’s life bearable and have a life beyond his/her practice.
It looks something like this:
• A private practice with three surgeries, on a site in the right part of town with plenty of easy parking, and open beyond office hours
• 2,000-3,000 general dentistry patients with some provision of high-fee services such as implants and adult ortho
• Good solid marketing delivering enough new patients to replace the leavers (probably around 10-15% a year) and to gently grow the patient lists
• A retail-type environment (not domestic or office environment) which is clearly modern and medical in style.
Let’s look at the numbers. The gross could look something like this:
This type and size of practice, in the right urban environment, should be able to fill each of the three surgeries for 50 hours a week, (6 x 8.5 hour days or 5 x 10 hour days) with around 10% of down-time.
This will create gross fees of around £180/hour in two surgeries and £100/hour in the third surgery, for 46 weeks a year. That’s £828k for the two surgeries and £230k for the third; £1,058,000 at 90% occupancy = £952k gross/year.
The costs should look something like this:
• Clinicians at 45% after lab bills at 10% = £385k
• Lab and materials, 17% = £162k
• Overhead at £50/surgery/hour = £345k
• Total costs = £892k
• Super profits = £60k
If the principal takes a seat in one of the two higher grossing surgeries and pays himself as an associate, he would receive £167k for going to work plus the super profit (for re-investing?) of £60k = £227k (admittedly for a 50-hour week). Sitting in the same surgery for 33 hours a week at 90% occupancy plus the super profit would earn him/her £160k profits/annum and have another clinician work the surgery for the remaining 17 hours/week. (That’s what I would do!)
Clearly, the numbers stack up in this size of practice. One of the most important numbers is the overhead cost of opening a surgery per day. In my example above, it’s running at £500/surgery/day. In a one-surgery model, it can be almost twice this. In larger practices this figure seems to creep up as well, mainly due to the staffing costs (around 20% of the gross fees) and also the costs to buy/rent and run a bigger building.
Making it work
To make this model work really well, you have to focus on: efficiency, economies of scale and sweating the three-surgery asset. The surgeries have to work hard, being open for 50 hours a week and earning fees for 45 of those hours.
The model also depends on:
• Containing costs, associates on a 45% deal. Support team at 20% of gross fees and lab and materials costs at 17% of gross
• Developing and implementing an effective marketing strategy
• Having a functional sales process
• Dentists who can communicate well with their patients, identify their needs and offer the patients choices and appropriate, long-lasting solutions.
The most common blockers that stop this type of practice from working well tend to be:
1. Lower than 90% surgery occupancy
2. Low value treatment plans due to poor quality dentists or poor quality communication skills (or new patients with no needs and no wants!)
3. Insufficient new patients
4. Support team are resistant to working what they perceive as anti-social hours.
The key to success in creating a busy three surgery is to set out with this in mind. If it’s a squat practice, get the location and space right from day one, (moving a practice can be costly). If you want to evolve the practice you already own into this model, then the three significant driving forces are:
1. The quality of the clinicians
2. The opening hours
3. The surgery occupancy – the marketing and sales process to fill those hours.
But it’s not just the numbers is it? Dentistry is a challenging occupation and having your own business is difficult and demanding. A practice of the size I describe allows the owner to be a dentist, be a practice owner and have time for the rest of his/her life. Whereas in my experience, anything bigger (or smaller) tends to demand a much bigger chunk of your life. That’s a price many of us have stopped wanting to pay!
For more information
If you like the sound of a practice like this one and you would like some help in adapting your practice quickly, contact Simon for a chat telephone: 07770 430576
email: [email protected]