The most common type of retirement plan in the United States is an IRA. So, here’s an easy question. Do you know what the initials I.R.A. stand for?
If you said “individual retirement account,” you’re wrong. The initials IRA actually stand for “individual retirement arrangement” â at least, that’s what it says in Section 408 of the internal revenue code, which defines an IRA as a method where you “arrange individually (rather than through a group) for your retirement.”
Of course, almost everyone seems to think that the “A” stands for “account,” not “arrangement.” People even say “individual retirement account” on the news. But it’s a myth. They’re all wrong. And regardless of how many people call it an account, the facts don’t change. The truth is right there in the tax code â in plain old black and white.
It’s the same thing with practice management. Many of the accepted “truths” regarding how to improve your dental practice are just plain erroneous, or at the least, misleading. Most of us believe these myths, however, because they sound so reasonable. Besides, it’s the conventional wisdom â everyone says the same things. Unfortunately, these myths can get you easily disoriented, shifting your focus away from good practice management strategies. And that’s the problem â the more you focus on the myth, the less time you have to focus on the truth.
So, here they are . . . 10 of the most pervasive myths in dental practice success and the truth that will set you free.
But before you start, I want to urge you to keep an open mind. After all, many people once thought the world was flat. It sure sounded reasonable. It was the conventional wisdom. Those guys who thought the earth was a sphere sure seemed like they were nuts. But . . . hey, look who had the last laugh.
Myth #1 â The more information I have regarding practice management, the more successful I’ll be.
My long time associate, Mike Farley, once started a two-day staff orientation by reviewing the building blocks of practice management. In meticulous detail, he introduced 20 of the best practice building strategies of all time. He told success stories, recounted failures and showed how each simple strategy could have a profound effect on the practice â lowering stress levels and dramatically increasing profitability.
The next morning, as soon as the whole team had gathered, one of the staff members said, “Mike, you know, I’ve been in dentistry for more than 20 years now, and I’ve studied a lot of practice management. So, I hope you don’t mind me saying that I listened very carefully yesterday, and I didn’t hear one new idea during the whole day. In fact, I even took home all the materials you haven’t covered yet. I read the whole thing last night. And do you know what? I still didn’t find any new ideas. So, I’m just wondering if you are going to cover anything new today?”
Mike was eager to clarify, so he asked the staff member, “Now, just let me be sure I’ve got this right. You’ve studied a lot of practice management, and you listened carefully all day yesterday and read all the other materials last night. You’ve seen all this before?”
“Yes,” she said. “I know this stuff like it’s the back of my hand. I was hoping for something new.”
“Well,” Mike said. “Are you doing any of the stuff you know so well?”
“No, we’re not actually doing any of it,” she replied. “But we’ve heard it all before.”
Of course, that’s the deal with Myth Number One. Knowledge is great, but without action, it’s worthless.
You see, in many cases we gather more and more information regarding practice management because it keeps us from ever actually taking action. Gathering information is safe. It’s hard to fail when you’re just gathering information. But taking action is hard. You risk failure. You put yourself on the line. You have to actually deal with other people.
It’s very likely that you already know enough about practice management to create a great practice. You just need to do it.
Sure, it’s still okay to attend seminars and read newsletters (especially this one.) But, rather than looking for something new, use those tools as a catalyst to take action.
Because the truth is that gathering more information will not make you successful. It’s what you do with the information you already have.
Myth #2 â Emulate the “gurus” and success will come.
The gurus fascinate me. They practice in facilities with locked doors, serve fresh baked bread, have big screen TVs in the reception area, offer espresso to patients, and go out on the speaking circuit every weekend. They develop new products, write articles, get their MBAs, and even provide consulting services to other dentists. For the life of me, I can’t figure out when they actually find the time to practice dentistry. But, hey, what do I know, I’m not a guru.
By all accounts, the gurus have amazing practices. They earn 50% profit, do tons of cosmetic dentistry, and produce more than $1 million each year in towns with fewer than 500 people. Why not emulate them? They’ve got to be doing something right. You know the saying, “Just find someone who’s doing what you want to do and copy them, model them. If you do what they do, you’ll create the same result.”
Of course, there are two problems with this myth. First, it assumes that the gurus are actually generating the results they claim. And, second, it assumes that your practice situation is in a position to benefit from the implementation of the guru’s tactics.
Let’s take a look at the assumption that the gurus are actually generating the results they claim. As practice management consultants, we have had the opportunity to analyze a number of “guru” practices. As you might expect, we have discovered two things â some of the gurus really do have great practices and some don’t.
You see, it’s quite easy to mislead with statistics. For example, let’s say that a guy tells you he’s running only 50% overhead. That may be true. However, what he doesn’t tell you is that his dad owns the dental facility and only charges the practice $300 monthly rent. In addition, the guru’s wife is the top hygienist in the practice, and she’s only paid $2,000 per year in order to fund an IRA. In other words, the guru’s claim of 50% profitability is artificially overstated. He may have a decent practice, but it’s not anything to write home about.
Take another example . . . the guru practice that produces $1 million per year. For some reason, $1 million in annual production seems to convey bragging rights like nothing else. Never mind the fact that someday almost all practices will produce more than $1 million just from gradual fee increases. It’s like a magic number. The gurus talk about it all the time. “The Million Dollar Puzzle.” “How to Produce a Million.” The problem, of course, is that it doesn’t matter what you produce. The only thing that matters is what you take home. And, as consultants, we can unequivocally say that we’ve seen many dentists who have $1 million practices take home amounts equal to or less than their friends who trail them in production by 30% or more.
On another note, I’ve even heard of gurus who flow their speaker fees through their mediocre practices in order to inflate revenue figures.
The “copy the guru” myth also assumes that your practice situation is similar enough to the guru’s practice to benefit from the implementation of the guru’s tactics. This, of course, is a pretty big assumption.
Although some of the gurus overstate their performance, many gurus and seminar speakers really have developed fantastic practices. It seems logical, then, that imitating these dentists could generate great results in your own practice. And to a certain extent this is true. However, some aspects of these ultra-highly profitable practices cannot be duplicated.
You see, certain tactics inherently work better in some locations than they do in others. Your ability to sell treatment may never equal that of some of the gurus no matter how much you work at it. Staff members in your practice may have different skills than staff members in the guru’s practice. And, importantly, you may not be driven to succeed at the level of the guru. After all, some of those guys are certified work “junkies.”
The truth, of course, is that this doesn’t mean that you should not emulate any guru ideas. Even the “pretenders” have ideas with merit. Rather, you should pick and choose the tactics that work for you. You should build “your” practice “your” way. Use good strategies that will serve your particular location, team and practice style. Don’t try to become someone you’re not.
Myth #3 â My (staff salaries, lab costs, rent, etc.) are too high.
The practice management mantra in some study clubs today goes something like this: “The local staff salaries are killing us. Who could afford this? Our salaries are running 40% of production. We should have all gone to hygiene school. I heard that Dr. John had to marry his receptionist just to lower his overhead.”
Of course, it is important to have some benchmarks regarding expected ranges for overhead items. However, you can’t assume that any overhead item is too expensive just because you are paying a higher percentage than the benchmark.
Take staff salaries for example. Let’s assume that your salaries are running at 35% of production, far above our target benchmark of 28% or less. A natural assumption would be that you are overstaffed or paying too high salaries. But this is just the beginning.
Gradually, this thought will take over your brain. Everything that happens in the practice will be filtered through a portion of your brain that says, “Remember, you’re paying too much.” You begin to dwell on the expense. The next time you give someone a 50-cent raise, you start to add up the additional costs of payroll taxes and retirement plan contributions you will have to make.
The funny thing, though, is that there’s not much you can do to lower your gross staff salaries. (When was the last time you heard of someone successfully giving his staff a salary reduction?) Sure, you may be able to lay off a staff member, but this rarely happens. Instead, you feel trapped, destined to suffer from high overhead for the rest of your life.
The truth, of course, is that your salaries, lab fees, rent or other overhead items may be too high. But they are only too high in comparison to your production level. In other words, if you were to increase production and keep all your overhead items close to their current levels, you could substantially “reduce” your overhead.
Take those pesky staff salaries that were running at 35% in our example. If you were to increase production by 20%, your salary expense would be “lowered” to just 29% of production, placing you very close to expected overhead ranges. That’s why you can implement a team bonus system even when your salaries are running “too high.” Any increase production will more than offset the increased overhead cost.
The truth is that you should quit focusing on overhead reduction. Rather, your energy should go into the implementation of strategies that will increase production.
Myth #4 â Somewhere, there’s a new marketing campaign that will massively increase my profits.
This is one of my favorite myths. It’s basically the idea that something “out there” will change your life. All you’ve got to do is find the genius who invented it, and the “better mousetrap” will fill your practice with new patients who are begging to buy major treatment.
We get calls all the time from dentists who have decided that they already know how best to market their practice. They think they know how to create an ad campaign, mail piece, yellow page ad, billboard or web site that will do what no one has ever succeeded in doing â generate high quality, rich new patients who want extensive treatment.
Of course, external marketing does work when done effectively. But it works primarily as one component of your entire business strategy. Ultimately, in order to actually increase profits, your marketing campaign needs to be integrated with everything else â like case presentations, collections, patient relations, team meetings, and communication.
Like most myths, this myth helps you avoid taking action. After all, it sure seems like it would be easier to pay for a new postcard mailing than it would be to improve your case presentations, ask for referrals, and make after care calls.
Recently I received a call from a dentist and his wife. They told me that they ONLY needed some extra new patients. Unfortunately, after 22 years in practice, their practice was mediocre at best. When I asked about “why” they were motivated now (in the middle of the Great Recession) they said they needed to make money. When I asked about the building blocks that had been missing for 22 years â things like daily huddles, staff reviews, and team meetings â they simply said that they ONLY needed some extra new patients. They wanted us to launch a targeted direct mail campaign in the hopes that it would help them “make more money.” Of course, their premise was ridiculous. If we could simply launch a mailing campaign and make more dentists more money without them actually doing any actual work . . . well, let’s just say I’d we writing this from my mega-yacht in Tahiti.
The truth is that all great practices have been built on a solid combination of internal and external marketing, including high quality patient care and strong patient relationships. Sure, external marketing is often needed to help drive new prospects in the door, but the foundation for success is based on what you do to build those strong long-term relationships. So, stop looking “out there” for a way to get the patients you want. Instead, do the things that you know will generate success.
Myth #5 â Cosmetically focused practices are highly profitable.
If you were to listen to most seminar speakers, dental gurus and magazine editors out there today, you would think that cosmetic dentistry is the key to success in your practice. “Just focus on performing high-end aesthetic procedures,” they say. “And you will dine on caviar for the rest of your life!”
This myth assumes that because cosmetic procedures generally demand high fees, they must be highly profitable. Of course, this is an oversimplification.
In order to build a cosmetically focused practice, you must “sort through” prospects to find patients who desire cosmetic treatment and have the ability to pay for it. No matter how you slice it, the number of “receptive” cosmetic patients is lower than the number of “receptive” preventative patients. Thus, the cosmetically focused dentist has to spend more time and money searching for appropriate patients than his restorative counterpart.
In addition, marketing costs, exam time and case presentation time can be quite high in a cosmetic practice even before doing any treatment. Then, you’ve got lab fees and treatment time. Add to this the fact that many cosmetic cases require some additional re-working and re-selling even after treatment is finished, and you can begin to see why cosmetic dentistry can have limited profitability.
Of course, you can get “big bucks” for cosmetic treatment. However, many dentists find that good old “bread and butter” preventative dentistry is ultimately more profitable. In fact, in our detailed analysis of hundreds of dental practices, we’ve found this to be true â the top money earners tend to have preventative/restorative-focused practices and use cosmetic dentistry as an additional “tool” to serve all of their patients.
The truth is that, for most practices, cosmetic dentistry is often less profitable than it appears.
Myth # 6 â The best practices achieve 45% profitability
For decades, many practice management experts have set targets of 45% practice profitability â meaning that for every $100,000 of production each year, the dentist’s before tax profit would be $45,000.
This was probably a good target in times past. However, dentists today are using new materials, equipment, accelerated hygiene and associate dentists in ways that provide increase production in excess of any increased overhead.
In fact, we have found that many of the best money earners today are not achieving 45% profitability. This is because their focus on maintaining a high level of production more than offsets their reduced percentage of profitability. Think about it. If Doctor South produces $500,000 per year at an excellent 45% profitability, he has a net profit of $225,000.
However, if his friend Doctor South produces $900,000 per year at a relatively low level of 30% profitability, he has a net profit of $270,000. This means that Doctor North is less profitable as a percentage but more profitable in the stuff that really counts â the green stuff.
Of course, producing more doesn’t always equate to earning more. That’s why you have to measure production and profitability while also keeping track of time spent and intangibles such as stress.
Ultimately, the goal is to balance gross production with your percentage of profitability to come up with the greatest amount of profit, while maintaining a low stress level and quality lifestyle. All of these things work together.
The truth is that, while some practices do achieve 45% or greater profitability, the practices that put the most money in the dentist’s pocket rarely run that efficiently. Rather, these dentists are willing to accept a reduced margin as long as they can offset that with increased production.
Myth #7 â I can’t increase my production, because I can’t run any faster.
This is more of an internal lie than a myth. It causes you to focus on what you think you “can’t” do, rather than what you “can” do. It’s an excuse that keeps you from taking action to improve your practice.
Of course, you don’t need to run any faster to produce more. Instead, you just need to work “smarter.” A dentist who earns $450,000 in profit each year obviously doesn’t work three times as many hours as a dentist who earns $150,000. So, one can assume that the high earner doesn’t work three times as hard either.
The nail in the coffin of this myth is the fee schedule. You can easily increase production without running any faster simply by raising fees. Rollerskating from room to room is not required to raise fees. You don’t even need a third arm. You simply change your fees and â poof! - you’ve increased your production.
Of course, this works for many systems in your practice. Just change the way you work, and you can increase production without any tangible increase in effort.
The truth is that you can increase your production. You don’t need to run any faster. You just need to be willing to make the improvements necessary to succeed. It’s the speed of your brain that counts.
Myth #8 â I can’t find good staff members in my town, city, county, etc.
This is a huge one. It leads dentists to do crazy things â like the guy who wouldn’t fire a staff member who had stolen from him several times because he thought it would be too hard to replace her.
Make no mistake â good staff members are hard to find. However, they are out there, and they can be found.
The real question is one of “experience” versus “quality.” You see, most dentists knock themselves out looking for staff members with experience in the dental field. Unfortunately, regardless of where you live, this leaves you with a relatively small pool of prospects. If you’re good at recruiting and you don’t mind the possibility of stepping on some colleague’s toes, you may be able to hire a great, pre-trained staff member. Otherwise, you’ll just have to rely on “luck.”
Of course, your other option is to find someone who lacks experience â a top quality person who will fit in well with your team â and train them. But here’s where the problem arises. No one wants to train a new staff member from scratch. It takes time. It costs money. They might leave soon. There are no guarantees.
But, hey, what is guaranteed?
We all know that the quality of your staff has a greater impact on the quality of your practice than anything else, except you. We know that a great team member can be worth more than double an average team member. We know that the overall quality of your life in regard to income and stress levels can be greatly affected by your team.
So, make an investment in your future â decide that training is a worthwhile endeavor when it comes to potentially great employees. Start with the best employees you already have. Set aside time to actively train them. Invest in their education. Pay them well. But never, ever settle for mediocrity.
Then, when hiring new people, decide that “quality” is more important than “experience.” Know that you will have to make an investment in training in order to generate a return. It will be one of the best investments you ever make.
The truth is that you can find excellent staff members in your town, city, county, etc. They may not be “experienced,” but they may well be “qualified.”
Myth #9 â People in this area just don’t value good dentistry.
Let’s face it, few people value good dentistry. In fact, for the most part, good dentistry should be “invisible” â and it’s hard to place great value on something that’s invisible.
I like to compare good dentistry to good plumbing. It’s rare that you consider the quality of plumbing in your house and say something to your friends like, “This house is plumbed with 24-gauge, full-copper, Ridgeway piping! How cool is that?” Rather, good plumbing is invisible. It’s good because you don’t have to think about it. And, when there is a problem, you think more about the cost than the quality. After all, plumbing is viewed as a necessary evil. Sure, you say, “Put the good stuff in so it will last longer.” But you’re not exactly jumping up and down. It may cost as much as a new car, but it sure isn’t as much fun.
That’s how most people view dentistry, too. It’s a necessary evil. It’s hard to get excited about. Sure, maybe you can persuade your patients to value it a little. (Or even a lot if we’re talking about a major cosmetic case.) But, it’s never gonna have the emotional value of a new car.
That’s the problem, though. Those of us in dentistry keep focusing on the value of the clinical treatment, when the real value to the patient stems from their relationship with you. It’s a relationship of trust. It’s a relationship in which you, the dentist, carry a great burden â the responsibility to care for your patient’s health, to educate them on things unseen, to protect them far into the future when you may not be around.
Sure, the new car purchase is emotional, but there’s no real relationship between the customer and the salesman. He’s there to sell the product. There’s little trust and little loyalty.
So, why are dentists training to sell like car salesmen? You need to focus on the relationship. You need to be deserving of the patient’s trust. Your paramount goal should be to get the best for your patient. The patient doesn’t need to value good dentistry. They just need to value you.
The truth is that this myth is true! People really don’t value good dentistry â they value their relationship with you. Make the most of it!
Myth #10 â Dentistry is a highly profitable profession.
I sort of threw this one in to make a point. It’s not really a practice management oriented myth. However, your internal beliefs regarding this myth do affect how you manage your practice. So, I thought it was worth addressing.
According to the IRS, dentistry is the fourth most profitable profession in the United States. Unfortunately, this statistic tells us little about dentistry’s real profitability. For, although most dentists earn an excellent living, the true value of an investment is based on its return.
If you were to look at dentistry as an investment from a business perspective, I think you might be shocked. The current average out-of-pocket investment to become a dentist is approximately $450,000. This reflects the cost of eight years undergraduate and postgraduate study combined with an average practice purchase price of $220,000. If you take into account interest on school loans and the practice purchase, the start-up cost well exceeds $750,000.
In return for this investment, the dentist successfully procures a full time job, albeit with great earnings potential. The problem, of course, stems from the fact that production fails to occur if the dentist is not at work. In contrast, most other businesses that require a half-million dollar investment (franchises, internet companies, car washes, etc.) offer the added benefit that, after a start-up period, the owner may choose not to work in the business or sell it for a substantial profit. For that matter, the original $450,000 invested in the S&P 500 could theoretically return an average of $56,250 per year forever, without any work whatsoever.
In addition, as the number of full-time practicing dentists in the United States decreases, the value of many practices will decrease as well, further diminishing the return on your investment.
The truth is that dentistry is a mediocre business investment. But it’s a great investment when you consider it in relation to the “lifestyle” it provides â stability, great relationships, lots of time off, good cash flow. But you’ve got to make the most of it. You’ve got to work at developing a “low stress” practice. You’ve got to maximize your profits. You’ve got to enjoy every day. And that’s the great thing about dentistry â you are in control of your destiny.
For more information on the author, Tyson Steele, log on to www.tysonsteele.com.
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