Remember when dentists had one clear path toward building a successful business and lifelong career? Some 30 years ago, dentists earned their degree, worked under the watchful eye of a dental veteran, and when they learned the ropes, they ventured off on their own and started a private practice.
Today’s equation has gotten a bit more complex. With dental school debt above $200,000,1 young dentists often want to immediately pay off their loans and make a tidy sum for themselves, often by working for a DSO. Many of them succumb to corporate life, earning comfortable paychecks, but rarely real wealth.
Odds are this isn’t what you chose to do. On the other hand, if you’re a new dentist working for a DSO, stick with me here. I want to share a broad perspective on what being in business for yourself entails. First, understand that the old model still works to some degree. Believing in it, and yourself, is commendable. I hold my client base in high regard because they’re masters of their own fate. They gave birth to an enterprise, and in doing so, they learned that their private practice has a definitive life cycle.
Knowing where you are in the life cycle of your business gives you insight on what to do next. Remember that your practice’s life cycle does not necessarily coincide with the lifespan of your career. In other words, you could be late in your career, and your business could be in its teenage years.
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The life cycle of a practice
During the early years of the life cycle, the infant stage is self-explanatory; you’re getting your footing, building a roster of patients, and assembling a workforce. Things get interesting when your business enters teenage territory; it’s not unlike a 16-year-old with a driver's license and a shiny new Camaro. Your focus is predominantly on speed, specifically on growth and increasing sales. This is when you're likely to throw caution to the wind, along with other crucial business attributes such as company culture and customer satisfaction.
In a practice’s teenage years, dentists look at dollars and often fail to see the larger framework of where those dollars come from. If you’re at all self-reflective and have a good advisory team, then you eventually sort this out. You learn to build a company that exhibits a strong work ethic and is centered around patient satisfaction and value.
Once you’ve got a well-oiled machine in place—a fantastic staff, a robust list of loyal patients, and a passion for your work—you’ve reached maturity, or what I call the age of maximization. This is the golden zone, the peak of the mountain where there’s nothing but blue sky as far as you can see. It’s here that you set your sights on expansion, perhaps in the form of a partnership or second practice.
Maximization is a glorious state, and it’s possible to stay in this enviable position indefinitely. Not surprisingly, that isn’t often the case. Most dentists let the aging process set in and allow their practice to slip, watching old patients and employees leave while neglecting to fill the empty slots. Most private practitioners assume that decline is inevitable. Suddenly, golfing and taking vacations seem a whole lot more interesting than growing the business, and as a result, dentists begin the slow descent into mediocrity.
Here’s an important message: decline is not inevitable. Your business doesn’t have to weaken simply because you want a month-long vacation with your family or leisurely afternoons on the green. But managing your newfound desires requires implementating systems ahead of time. In other words, you need a plan.
The state of maximization
I frequently remind my clients of the benefits of the state of maximization. You have leverage, which means you can implement systems that give you more time away from the office and even extended periods of travel. If your business has aged past maturity, you can reverse course and bring it back to maximization. Catching this early gives you ample opportunity to restructure key components to create efficiency and more growth.
However, the decline may have progressed beyond return to boundless prosperity. If it gets really bad, then the practice may lose profitability altogether and you may have to rely on your retirement savings or bank loans to keep it afloat. Thankfully, even in this dire situation, all is not lost. You haven’t yet reached death, the point at which the business is worth absolutely nothing.
In what I call the teardown phase, the point at which operations must cease in their present form, private practitioners often still retain two highly valuable assets: their reputation and patient base. Even if you’re certain that your ship has sailed, don’t be so quick to give up. When you take an honest look at where your business is in terms of its life cycle, you can make clear-minded decisions on how to properly proceed. If your practice is limp and lifeless, I’ve got great news: hundreds of dentists just starting out or in a state of maximization want exactly what you have to sell.
Sometimes we impose unnecessary limitations on ourselves and our businesses based on faulty premises and we’re quick to shortchange ourselves. Other times, we overestimate our capabilities. I can’t count the number of talented dentists I’ve helped who have made some abysmal business decisions before coming to see me. Even when you’re top of the class, it’s impossible to see those inevitable blind spots. That’s where your advisory team comes in.
Working for yourself might be your wisest decision to date, in which case, it can’t be your last. Each year brings more possibilities to align your business model with your goals, depending on where your practice is in its life cycle. With the right team and proper systems, it’s possible to retire early and still reap the lucrative benefits of business ownership. Or maybe you prefer to sell everything to the highest bidder and leave quietly, but with a supremely handsome nest egg in place. The key is to understand the current state of your business, and most important, where you aim to be within it.
Editor's note: This article appeared in the June 2023 print edition of Dental Economics magazine. Dentists in North America are eligible for a complimentary print subscription. Sign up here.
Reference
1. Hanson M. Average dental school debt. Education Data Initiative. November 19, 2022. https://educationdata.org/average-dental-school-debt
