Common traits of the million-dollar practice
Back in 1966, when I graduated from dental school, one of the most popular books was Bob Levoy`s How to Build a $100,000 Practice.
Listed here are 21 traits of the million-dollar practice. How do you stack up, doctor?
Robert E. Hamric, DMD
Back in 1966, when I graduated from dental school, one of the most popular books was Bob Levoy`s How to Build a $100,000 Practice.
Today, the million-dollar practice is here. How do you build a million-dollar practice?
First, you must know it can happen. It already is being done. One thing is for sure; it takes organization! I recently studied 10 practices that gross (and collect) over $1 million dollars annually.
I am familiar with a practice with an annual gross of $225,000 where the doctor nets $180,000 of that, with a nice retirement plan. I`ve also seen a practice with a gross of $1.8 million annually and the doctor nets $700,000. Both are excellent practices. Ask yourself, which do you prefer? Perhaps somewhere in between. The good news is...the choice can be yours.
That`s the beautiful thing about dentistry. You can become the dentist you would like to be-you can achieve the level you want to achieve. It`s all up to you.
I have several million-dollar practices as clients through our management firm, and it truly was interesting to study their common traits.
In the process of studying these practices, I often found myself reflecting on the words: "Bigger is not always better." Yet, none of these practices seemed too big to me. I know many consultants advocate three employees (front desk, hygienist and assistant), and advise you to "keep it lean and mean." That works, also. The million-dollar practice, however, cannot be easily done with only three employees.
When I compared the 10 practices I studied, I was hoping to formulate seven habits of a million-dollar practice. I came up with 21!
Allow me to suggest that you take these common traits and share them with your staff at an all-day retreat. How can these principles apply to you and your practice?
1. Exceptional Staff-A good dentist/businessman will surround him/herself with people who aspire to take responsibility. Once they understand and master their staff position, they want to be allowed to "handle it." I call these people "eagles" or "10s." A staff like this feels ownership. This is the kind of staff that could take over the practice if the doctor died, hire another dentist and never miss a lick. (In fact, this has happened.) The textbook term for this is empowerment.
One practice I studied has five people in administration-they are administrator (office manager); receptionist/hostess; administrative assistant (financial); insurance specialist and switchboard/hostess. With five hygienists and four doctors, production will be close to $3 million annually.
Four practices have no PPO or HMO patients. Yes, these are quality-care practices devoted to excellence. Six practices have limited PPO-HMO participation.
2. Staff well-paid, shared bonus, understand overhead-Great staff people seek out great practices. Word gets out about where the good jobs are in dentistry. Most staff members work for money and recognition. Only monkeys work for peanuts. Every million-dollar practice has excellent salaries and shared bonus money. All staff members are given a briefing each month on overhead-as part owners, they need to know the expenses. Salaries range from 20 to 30 percent in these offices (including benefits). Benefits are the perks that people are looking for. In some areas, employee leasing has caught on. FICA, workman`s comp, unemployment, medical, cafeteria plans and a 401(k) are available through a leasing agency and can save doctors expenses, perhaps by as much as 10-12 percent. By the year 2000, many businesses will be leasing all their employees. Dental practices are good candidates for employee leasing.
3. Staff high-energy/likeable/people-oriented-If you drag around in a million-dollar practice, someone will run over you. High-energy people who are movers and shakers, who like people and like themselves, thrive in this business atmosphere. Every practice seems to radiate energy. Have you ever called another office and the person answering seemed half-dead? What sort of impression does that make on you? Good or bad? I`d prefer that no one answer the phone than for someone to make a rotten impression.
4. Staff highly-trained in customer service-Yes, customer service. Your leading businesses-Norstrom, Neiman Marcus, Saks, Tiffany`s spend hours training staff in customer service. Yet, few dentists even know there are courses in customer service. Use your good judgment in all situations. That is Norstrom`s one rule in customer service. Highly-trained staff do not run to the doctor for every decision. They use their good judgment. Therefore, training is utmost in allowing the staff to function in an empowered practice, reaching the ultimate levels of the million-dollar practice.
Have you noticed that the first four traits are staff-related? You will never see a million-dollar practice without a million-dollar staff.
How do you find that great staff? Remember, those you are seeking are seeking you. Good staff people want the best available opportunities. I believe in personality testing and the use of the Carlson personality profile of D-I-S-C and the caliper profile. Staff compatibility is that critical! Top practices profile their staff. Also, once you have found that excellent person, do everything in your power to keep him or her. The million-dollar practices have a stable staff; with many working in the practice 15 years or more.
5. The practitioner and office manager are continuous stu-dents-The doctor takes advan-ced training in clinical-skills techniques and really concentrates on being the expert clinician. The office manager/ administrator concentrates on leadership. Courses offered by the Pankey Institute extend the clinical skills of the practitioner. Staff members and practitioner should seriously consider Covey`s Leadership Training, the Hyrum Smith Leadership Training and, certainly, Walter Hailey`s Boot Camp.
6. Radiate true quality throughout the office-I have heard it said that there is no way that you can generate true quality and obtain the million-dollar volume. That`s baloney! I have seen these practices and their type of care. It is excellent because of high clinical skills and advance people-training. There is absolutely no correlation between high production and poor quality within these practices. From the moment the patient calls the office and enters the reception room, the patient knows this is a quality operation.
Quality means treating people as you wish to be treated! Quality means providing the best service to fill patient needs without compromise. Quality is when the patient feels he got more than he paid for.
7. Every practice has all systems choreographed-By that, I mean the dental team has rehearsed and planned their systems and were perfectly clear on how the business is to operate, even to the extent of which seat the patient occupies in the conference room. New patient entry, consultations, continuing care, soft-tissue management and financial management are covered in extensive staff-training sessions. These people are highly organized and well-trained in verbal skills. Nothing at all happens by chance. The doctor has his clinical skills perfected to where he knows how long a procedure will take and instruments are kept to a minimum. Dental assistants are allowed to do more than just suction. Whatever the state Dental Practice Act allows an assistant to do, they do it and they do it with excellence and class!
8. Complete honesty and rapport present in all relationships- Respect is evident among the staff members because the administrator and doctors have respect for each of them. This carries over from the staff to the patient. When respect and rapport are evident, patients value what is said to them and they respond in a positive manner.
When you sit in the reception room and listen to responses or visit the hygiene area and hear what is being said, extra training is apparent by the verbal skills exhibited. Such comments as:
"What do you expect your teeth to be like in 20 years?"
"If there were a way we could work that out, would you...?"
"Do you see a reason why ...?"
Individuals are made to feel important and rapport is established quickly.
9. Sense of mission, values and goals-In most dental practices, there is a very definite feeling of mission, with about nine out of the 10 having a written mission statement. All of these practices have written goals. Some goals would astound you. Long-range goals of five, 10 and 15 years are well thought-out.
10. Highly-profitable bottom line-Let`s look at some examples in Figure 1.
Now, how do we define overhead? Overhead is the total amount of expenses it takes to operate. Some portions of the overhead are fixed, while many others are variable. Some consultants claim they can achieve a 45-percent overhead for the general practice. I find it hard to believe when the total amount of expenses is closely looked at. The big four: salaries (25 percent), rent (6 percent), lab (12 percent) and supplies (6 percent) equal 49 percent. There must be telephone, promotional expenses, office supplies, maintenance, insurance, etc.
Compare apples to apples. If you can keep overhead in the high 50s or low 60s, the practice is within the norm and doing great, regardless of what financial geniuses claim.
11. The appointment-control administrator engineers the appointment book-Eight out of 10 practices use computerized scheduling. The appointment-control engineer knows the daily-production goals and books toward that goal. This is a well-planned event. Each hygienist and doctor have exact time arrangements.
In the million-dollar practice, one staff member is responsible for the proper scheduling and lost time from no-shows or cancellations just do not happen. This requires a great number of patients, a person with expert verbal skills and an understanding of time economics.
12. Work 4 to 4 1/2 days per week-I noticed that the owners of these practices (and these are not shopping center clinics open seven days, 14 hours per day) average about 200 days per year, some even less. Some associates work evenings and Saturdays to better use the facility. These practitioners place a priority on time and family and community involvement.
13. Dental insurance coordinated and patients-accommodated-All practices have a complete insurance department, with a person well-trained in dental insurance. "Turn- around" on money is exceptional because forms are filed properly. Electronic filing is used wherever possible. Patients are well-informed about their coverage and financial arrangements are properly made. These offices make dental insurance a plus for patients and practice. Patients feel that they are getting the best possible use of their insurance.
14. Excellent financial arrangements-The million-dollar practices aren`t patchwork practices. Large cases are the norm. In one practice, the new patient value is $10,000. This is primarily due to a very thorough, new-patient exam, not a quick check at prophy.
All million-dollar practices have a financial coordinator. All have the policy to "inform before you perform." Only one practice would finance entirely in office, charging 18 percent annual interest. Dental credit cards and outside bank financing are arranged. One practice has the means for the patient to acquire a home-equity loan to do the dentistry. One practice suggests borrowing from a life-insurance policy. A written policy is followed, and a signed agreement is necessary. Definite follow-up is the responsibility of the financial coordinator.
15. Accounts receivable under control-These practices are not "mini-banks," as you might think. I was really surprised when I examined how little these practices have on the books in account receivables. Only one office carries three times the monthly production, and it is the one carrying all the financing. Seven practices have approximately two months` production on the books, and one carries less than two. Experts say 1.5 x monthly production is ideal.
However, a practice grossing $100,000 per month can be healthy and have $200,000-$250,000 on the books in accounts-receivable. All but one charges interest, ranging from 1 to 1 1/2 percent per month. All of them use VISA, MasterCard and a bank card of some type. A discount for cash upon beginning procedures ranges from 5 percent to 10 percent.
16. Charge higher-than-average fees-The million-dollar dentist knows what his dentistry is worth. These dentists have a high self-esteem. They do quality care, take quality time to do the exam and presentation and establish trust and rapport. The fee is really never a problem in this type of office. Their patients buy BMWs, Mercedes, Lexuses, diamonds and expect to pay for quality care. I see dentists` fees as a major problem. They are low, but not in the million-dollar practice.
17. Exceptional continual-care program and soft-tissue management-The average hygienist doing prophies can only produce $8,000 - $10,000 per month; with proper STM, that can easily double. The million-dollar practice has anywhere from three to five hygienists producing $16,000 - $20,000 each per month. The hygiene department is a terrific profit center. Imagine five hygienists, each producing $20,000 per month for 12 months-that`s $100,000 per month, or $1,200,000 annually in hygiene alone!
That`s possible; it is being done.
ii18. A high self-esteem is evident-People who are trained, who are appreciated, who work in this type of atmosphere, have a high self-esteem level. Doctors producing a million dollars feel good about themselves. Success perpetuates success. These practitioners are not cocky or arrogant or ego-maniacs. They are humble, polite, gentle and very likable.
19. Doctor delegates to the full extent of the dental-practice act-In all cases, the doctor grossing a million will allow staff to do all those things they can legally do. Staff should be properly trained to do those things, not just turned loose on a trial/error basis. Some practices have an assistant in the hygiene department.
Here`s a profile of the Practice Grossing $2 Million:
- Two doctors
- One office manager
- Administrative staff: receptionist, insurance coordinator, appointment-control specialist and financial-control administrator
- One clinical coordinator
- Clinical staff: four expanded-duty assistants working chairside
- Four hygienists
- One circulating assistant, also responsible for sterilization
- Salaries in this practice run 22 percent of gross.
20. Office decor is ultimately nice-These offices present a feeling of warmth and comfort, not like a clinic or the average dental offices that everyone expects. Beautiful plants, exceptional carpet-actually the reception room resembles a nice living room or den, even with a TV. Sounds from the operatories can`t be heard by patients in the reception room. The halls and operatories are all color-coordinated. Upon entering one of these offices, you know almost instantly that you are in a first-class place.
21. Excellent personal/corporate investment and retirement program with a "team" of advisors-Doctors and staff on this level of practice delegate and listen to their advisors. Usually, they are excellent dentists and average business people who seek the ultimate in advice. The doctor who grosses a million is a millionaire. He or she needs sound advice, especially on investments and how to save on taxes. These practitioners operate with an open mind and aren`t afraid to make decisions and move forward.
Now, you have it-21 traits of the million-dollar practice. Follow our list and see how you stack up. One at a time, accomplish them all. It will take time and hard work.
If you are grossing $300,000 and want to gross $400,000-find a way to take your practice to that next level. Increase your gross $100,000 annually for six years and gradually reach the million-dollar level.
How do you gross $1,000,000? One step at a time. Take these ideas and begin your journey toward the million-dollar practice.
EXAMPLES OF DENTAL PRACTICES WITH HIGHLY-PROFITABLE BOTTOM LINES
Practice A: One doctor, two hygienists, two dental assistants, three administrative assistants, located in a small town in Mississippi.
Practice B: Two doctors, four hygienists, three dental assistants, three administrative assistants, in medium-sized city in Alabama.
Practice C: Four doctors (one senior-owner, two associates, one part-time retiring), five hygienists, six dental assistants, three administrative assistants, one office manager, in metropolitan area in Texas.
The author is the owner of a consulting group, Practice Management Asso-ciates, and a practicing dentist in Birmingham, AL. He has authored many articles on practice management and has been a guest speaker at most major dental meetings and for many local dental organizations. For a brochure and information on future management symposiums, write PMA Productions, 3100 Wellington Pky., Birmingham, AL 35232; or call 205-967-5009; 800-685-7230, Ext. 6293.