Because we've been successful (and from time to time, unsuccessful) expanding BDG Dental Services, I'm often asked what our secret is. Here it is: There is no secret one-size-fits-all solution. In fact, there are many reputable sources of advice. Every one of them is good, if something works for you. So instead of giving detailed instructions that you can find via many sources, this article will give you a jump start. I hope you can learn from our experience as I share some things here that have, and have not, worked for our organization.
There are essentially two ways to expand-build up new practices, or acquire practices through acquisitions. Let's talk about each.
Build up new practices
Here's what we consider with each potential office.
Location-We've all heard it: the most important thing for a business is location, location, location. We prefer high visibility retail space, even if it means paying top-dollar rent.
Lease-We require a few items with the lease:
1. It must be transferrable with the same term so we have flexibility to pass the location to another partner down the road. The term should be fixed escalation compared to market rate adjustments.
2. It must have a lease buy-out clause, in case the business doesn't do well.
3. The landlord should provide the highest exposure on the signage, which preferably includes the website and full phone number.
Office design-Our goal is to maximize production areas (x-ray room, doctor rooms, and hygienist rooms) and minimize all nonproduction areas. We use a simple process to plan the offices. With the floor plan drawn to scale, we cut pieces of paper that represent each room. Everything can be flexible except for treatment rooms and bathroom size (required by building code), so we lay out those "puzzle pieces" first and then decide where everything else goes.
We follow these general guidelines:
1. We like five operatoriess, three for doctors and two for hygiene. The next size is eight operatories, which adds three for another doctor.
2. Treatment rooms can be made roughly 10'x10' or 11'x11' in slow-paced, fee-for-service offices. In high-volume, insurance-driven offices, the space can be maximized further, fitting in extra production rooms by making them 8'x8' (positioning the chair diagonally).
3. Small spaces can be made to feel larger by eliminating doors and increasing ceiling heights to 12'.
4. Hallways can be minimized; they're dead space.
5. The size of the breakroom can be reduced so it's perfect for a meal but not comfortable enough for a nap.
6. We placed doctors in a corner of the reception area instead of in their own offices so they can supervise office flow when they're not seeing patients.
7. We added an x-ray room so patients waiting for their x-rays don't monopolize precious production chair time.
8. We left allowances for 4" to 6" thick drywall.
Décor-Because it will appeal to patients, the décor of the office is also important. Don't worry about luxury items such as marble tiles and granite countertops. A simple color scheme is the most cost-effective way to dress up an office. For ease of maintenance and to reduce costs, use ceramic tile instead of carpet. Consider good lighting as part of your décor. We like our rooms bright.
Equipment-We could talk about a lot of things here, but our organization's bottom line is: If it helps productivity and efficiency, we're willing to spend money on it. Everything else is a luxury. That said, if patients perceive something as valuable, we're more likely to consider it. For example, while both might be good equipment, an extra thick cushioned dental chair adds more value for patients than an energy-saving vacuum suction pump.
One non-negotiable investment as most practices grow is enterprise-level, complete practice management software (such as Dentrix Enterprise, which we have used for many years). It's a common mistake for solo practitioners to continue using basic software as they expand. With each new office, that bargain software costs more and more with lost efficiencies. We suggest you do your research, and invest early on in your expansion in the enterprise software that works best for you.
Insurance-We sign up for all insurance plans other than HMOs. Dentists may not like certain plans' fee schedules, but being visible on multiple insurance lists is a great way to drive traffic to a new office initially. After a new location becomes busy, the practice can slash the less desirable plans.
To figure out whether an acquisition is a good idea, we consider whether we would spend about the same amount of money on it as we would to build new. We use this general process:
1. Plug operating expenses into the target's profit-and-loss statement to see what would happen if the practice were taken over today. A few potential gains include improving on lab fees (should be 6% to 7%), supply costs (4%), and human resources costs (18% to 20%, excluding doctors and hygienists).
2. When you know your new-patient acquisition cost and average production per patient, you can predict net practice growth using your management and marketing plan.
3. Consider retaining the selling doctor. If you negotiate an earn-out payment schedule over two years, the doctor might be motivated to work harder during the transition time.
4. Be aware that you might lose your newly acquired staff, since some team members will leave or retire with the selling doctor.
5. Look for potential improvements that might come from extending weekend and evening hours.
6. Start with minor changes: lighting, paint, and staff uniforms. Everything else can come after you begin generating profit from the new office.
As you expand with your new offices and acquisitions, establish a good relationship right away with attorneys. With a bigger operation, there will be potential legal issues. We were glad to have a legal relationship in place when we were recently sued by a nondentist-owned dental group for trademark infringement. Surprisingly, we found that being sued was a blessing in a way, because it cemented our philosophy that once you believe in what you do, you can handle anything.
Finally, as you grow your practice, keep on persevering! Once you step on the path to multipractice ownership, there will be obstacles. But remember that these obstacles are making you strong. Enjoy your journey to the maximum!
The perfect formula
Each of us is in a unique situation, so your personal "perfect formula" can be found only through trial and error.
As you learn from your experience and gain helpful information, pass it along! Even if you make a mistake, you can still be grateful that you made it now when the stakes were low instead of down the road when the loss could be disastrous. Whether you feel like you're winning or losing right now, you can always be grateful.
I learned this lesson early when I started trading penny stocks in my first year of dental school. I cashed out $4,000 on my credit card, which was a lot of money for me. In four months, my return was $18,000. I thought I was a financial genius! Six months later, I lost it all and more-including my pride. However, I became grateful for the experience because I found out I could always make money back. I saved myself a lot of potential pain by learning that I should never gamble again.
Learning from mistakes, being generous, leading life with purpose, standing for what you believe in, and being grateful for both wins and losses is the perfect formula I've found for a prosperous business and life.
If you're interested in more tips about expanding your practice, read my first three Dental Economics articles-Part 1 [bit.ly/2aADRC1], Part 2 [bit.ly/2fCvxZV], Part 3 [bit.ly/2dTlRJv]-or my e-book, Keys to a Successful Multiple Location Practice, [bit.ly/2e8Grpk].
Although Dr. David Ting uses Dentrix Enterprise software, he was not compensated for this article.
David Ting, DMD, started practicing dentistry in Las Vegas in 2000, and established what is now BDG Dental Services in 2002. There are 23 BDG Dental Services locations in Nevada, California, and Arizona, with a team of 40 dentists and 250 employees. What drives Dr. Ting is "creating a better life for all," including patients, employees, and the community. He welcomes comments and questions and can be reached at [email protected].
This article is part four of a four-part series. Find previous installments on our website. Search "Ting."