If you want to become the Alpha Predator Practice® in your area, you need to reinvest a substantial amount of your profits back into growing your business.
What is profit?
What we’re talking about when discussing dental profit is:
- Your patients and insurance companies pay to use your treatments and services.
- You deduct material and operating costs (e.g. equipment, rent, utilities).
- You deduct staff salaries and compensation.
- You deduct miscellaneous business expenses.
- Account for how much it will cost to hire an associate to replace your dental production.
- Anything left over is profit.
It’s what you do with this profit that matters. Whereas some owners will want to pay themselves more, the Alpha Predator Practice® reinvests profit to grow the business.
Growing your profit isn’t about focusing on cutting costs. Unless your business has completely maxed out its operational capacity, you will almost always be better off focusing on growing your profit through scaling up rather than focusing on reducing costs.
As an example, if we look at corporate dentistry, they have the scale to lower their costs, but that’s not the reason they’re a threat to some dental practices. Corporate dentistry can be a threat because they have effective and efficient business systems that are generating a profit, and that’s where you need to challenge them.
The magic of scale is partly how it affects your profit margin by reducing the effects of fixed costs. Variable costs including lab fees and materials will increase with your volume of work, but your fixed costs can be spread out across a much broader group of patients. The result is a healthier bottom line.
The larger your practice gets, the more money you can put into marketing. This means you’ll win more patients, taking them from your competitors. It’s a snowball effect, and your increased revenue means you can also invest in equipment, technology, training, and recruiting more staff.
Growing your practice as a whole is more important than focusing on providing “high-end” procedures. Many consultants will insist you focus on the more expensive services - Deep-scaling, cosmetic surgery, dental implants, and crowns.
It’s actually much more important to get the basics of your dental business right by growing through scale, and putting the business systems, processes, marketing, and staff in place to make that work first.
Actively investing in your practice’s future will help you scale more quickly, make you competitive, and let you sustain medium- and long-term growth. This is a compounding effect - The more profit you put into your dental practice now, the greater its valuation and your future rewards.
-Invest in the short to medium term to reap the benefits long-term-
Why focusing on high-end treatments shouldn’t be the first focus
Many dental consultants traditionally recommend focusing on the top end of the market - Expensive treatments like cosmetic dentistry, dental implants, deep-scaling and other high-revenue procedures. These procedures can be so lucrative, that you don’t even need an efficient business to generate a profit. However, there’s a couple of problems with this approach:
- It ignores first establishing a solid patient base through hygiene and general dentistry to help limit risk.
- It ignores establishing the business systems that will allow you to create the “snowball effect” of growth in your business.
- The marketplace is changing and in most geographies, high-end treatments are a very risky way to grow.
It’s more important than ever you run an efficient and sustainable business that can scale in the basic treatments before you worry about generating incremental revenues from higher-end procedures. The same business processes you put in place to create a strong foundation now will also help you in future when you expand your higher-end procedures.
Focusing on the whole spectrum of dentistry lets you grow more quickly. It’s about scaling across all of your services and treatments, from simple hygiene cleans and checkups to specialized techniques. There are several other benefits:
- There’s more resilience in your business as patients come and go.
- It works alongside the changing marketplace.
- More patients means a wider range of treatments and increased word-of-mouth.
- Your fixed costs become a smaller percentage of your revenue, meaning more profits you can reinvest.
- You have the ability to hire associates to replace your clinical workload and ensure the sustainability of your business.
-This lets you be more competitive, gives you more freedom, lets you take time off, and ensures the future of your dental practice-
How to make re-investment decisions
- Prioritize based on what your metrics are telling you (Don’t forget to use a dental dashboard!)
- Don’t try to grow too quickly; it will be difficult to control and the other parts of your practice might not be able to keep up.
- Cost and plan any growth carefully - Make sure you keep a tight control on cash-flow.
- Remember that there will be some dependencies for growth - For example, you’ll want to open more operatories / exam rooms and hire more staff at the same time.
Here are some potential options:
- Increase the number of operatories.
- Extend your hygiene treatments and hours.
- Recruit more staff to improve phone coverage, patient outreach, or customer service.
- Improve your business technology and processes.
- Grow your marketing and treatment sales efforts.
- Increase or decrease your insurance participation.
Increase the number of operatories
The best way to grow your space is by opening new operatories or exam rooms. You have several options for this. Depending on your current arrangements, you could:
- Extend your space in your current premises, if there’s room.
- Build an extension onto your current premises, if you have permission.
- Move to a larger building.
- Open an additional location.
Expanding your space is likely to be the most expensive of your options to grow, but it’s also the one that will net the highest rewards.
Increasing your space will:
- Give you a greater capacity to see more patients.
- Reduce waiting times, leading to happier customers and better service.
- Give you flexibility on when and where to see patients.
- Perform more treatments, increasing your revenue and profits.
- Plan your future operatories carefully, you’ll want a good balance between hygiene, general dentistry, and specialized treatments.
Increase your hygiene treatments and hours
Hygiene is key to growing a dental business. With hygiene growth, you’ll grow your whole patient base, giving you the opportunity to see more patients. They could come back for needed treatment or for for elective treatments such as Invisalign, teeth whitening, or cosmetic procedures. Growing hygiene also helps to increase your referrals. Because patients like to be seen at a convenient time for them, extending the hours when they can come in for a hygiene treatment will put you ahead of your competitors.
Recruit and train employees
Increasing your space and your staff go hand in hand. As you open up more operatories, you’ll need dentists and hygienists to staff them, and other staff to support them. A larger employee base gives you more flexibility and the ability to add new business processes that improve customer service.
Areas you can focus on include:
- Better phone and email coverage
- More patient outreach and reminders on treatments.
- Improved customer service.
Improve your business processes and technology
Improving your processes and technology means making your business processes faster, more efficient, and easier to use. For example, you might invest in a better patient management and onboarding system, or streamline how you deal with insurance payments.
Good business processes, working across your whole business, can help you manage everything more easily and ensure everything is going as planned. A dental dashboard can be very helpful in gathering all your data together and help you to make informed decisions.
When you get large enough, it can even be worth automating or outsourcing some of your business processes entirely, so you don’t need to worry about them. Outsourced companies can provide flexibility and expertise.
Grow your marketing and sales
You can’t market your dental practice in isolation. As you grow, you’ll be able to spend more on marketing, especially local marketing. Getting good reviews and ads in local media will significantly enhance your reach and people’s awareness.
You will need to combine successful marketing with better sales and onboarding processes to make it quick and easy to get patients through your doors.
Manage your insurance
When it comes to managing your insurance, there are several ways to approach it:
- Participate in more insurance plans - PPOs are becoming even more popular, and they’re a great way to appeal to a wider potential patient base, especially if you can get good margins on all your treatments as a result of larger volume.
- Drop insurance plans that aren’t paying you enough for your treatments.
- Negotiate your fees with insurance providers - Just a small increase in individual treatment charges can make a huge difference to your bottom line.
As you can see, growing and scaling will take time, effort, planning, and resources. Ultimately though, the payoff is more than worth it. As you reinvest in your business, you’ll increase value, both now and in the future - That’s good for everyone.