Tom Orent, DMD
Another distressing title for this could be, "Building the zero-value practice!" Of course, I am going to try to help you avoid both of these outcomes.
"Begin with the end in mind"
You've heard it before. Dr. Stephen Covey drove this point home in his book, The 7 Habits of Highly Effective People. As dentists, we rarely build our practices this way, but this advice could net you additional hundreds of thousands of dollars when you're ready to hang up your drill. In business, they call it an "exit strategy." For maximum yield upon the eventual sale of your practice, a very important part of your long-term business plan must include your own, individualized exit strategy.
Three phases in the life of your dental practice
1. Just trying to "crack the nut." Starting out, we're most often behind an enormous 8-ball — the "nut" or monthly figure needed just pay the monthly loans. That nut may still include school loans, and certainly includes all of the borrowed funds required to build or purchase your new practice.
The nut can be a monster, looming over head like the Creature from the Black Lagoon. The psychological pressure and stress caused by business debt is more than some can bear, contributing toward dentists' high rates of divorce, alcoholism, drug dependency, and suicide (I chose the first of the four).
Some doctors sign every managed-care plan crossing their desks with the idea of having more chairs "filled." It seems like a plan (just not a good one). Others treat beyond their clinical competency — procedures they shouldn't yet be attempting. I attempted a full lower reconstruction when I was about five years into practice. This was about 10 years before I should have! It was a full-blown TMJ case waiting to explode!
2. Following your dream. The middle phase in practice is marked by growth on all fronts. Debt is reduced (or hopefully, eliminated). There's lots of continuing education. The middle phase in practice affords us the luxury of following our dreams. You've figured out just who you want to be. It is general practice with a focus on TMJ? Orthodontics and aesthetics? The possibilities are too many to list here.
Some dentists still struggle financially, never really making it to this phase. Most practices mature nicely and allow us the freedom of choices. A few make a small fortune. To those few, the world is their oyster.
Still, we are not immune to the ultimate and basic business need for better long-term planning. Though long-term planning should have been done from the start, it's the middle phase during which dentists can still repair the damage done by the lack of a solid exit strategy.
3. Stop the world, I want to get off! You're 55 or 60 years old. You've decided it's time to hang up the drill. You seek the expert advice of someone to help you locate a buyer for your practice. Whether you're looking for an associate to buy in or an outright immediate sale, you may be in for a rude awakening. Some of these experts will tell you that dentists can no longer expect to get a great chunk of cash for their practices. This is an unfortunate generalization. Many dentists are getting top dollar for their practices, however, numerous factors will influence your practice sale value. Learning too late what it takes to create practice value can be a sad shock to your retirement wallet!
Exit strategy is the first thing to plan
Your profession — your business — is a means to support your lifestyle. You may love what you do, but ignoring the business aspects will only cause you undue stress through a major loss of unrealized cash value. When it comes to a well-devised exit strategy, I've made some of the biggest mistakes a dentist can make and have spent considerable time and money correcting them over the last few years. Late planning is better than none at all! Part 2 will deliver the nuts and bolts — the GEMS to build massive equity into almost any dental practice.
Dr. Tom Orent, the GEMS GUY, is a management consultant and practicing dentist. He is a founding member and past president of the New England Chapter of the AACD. He has presented his "1,000 Gems Seminars™" in four countries and at state and national meetings in 46 states. He has lectured at numerous dental schools and is the author of four books and numerous articles on aesthetic dentistry, practice management, TMJ, and "Extreme Customer Service." Dr. Orent may be reached by phone at (888) 880-4367, by fax at (508) 872-0020, by email at [email protected], or visit www.1000gems.com.
