What to take into account before adding additional dental office locations so that your business decisions pay off to the fullest.
Picture this: Business is booming at your dental practice. Your appointment calendar is full, the waiting room can’t hold any more people, and you’re so booked you’re referring out practically as many cases as you’re completing. By all accounts, your practice is a business success
But you could be doing even more. You’re losing potential revenue in new patients you’ve had to turn away because you don’t have the time. Referrals are taking your business elsewhere (and it might not be returning). Potential earnings are slipping out the door.
Sounds like it’s time to expand to a second location! Or is it? Before you dive into adding additional locations, there are some important things to take into account.
1. How is your current practice REALLY doing?
While the impulse to expand may seem to be the most reasonable when your schedule is full, practice owners should make sure their current practice is really succeeding before entering into a new endeavor. This means understanding your practice’s key performance indicators (KPIs) and making sure they are solid. Evaluating these metrics allow practitioners to make data-driven decisions that can best benefit their practice, and also offer the opportunity to evaluate areas that could use improvement.
“The fact is, healthcare is a business and we need to monitor the business and understand the KPIs,” Laci Phillips Newland, practice-management speaker and coach and founding partner at Practice Dynamics, says. “It’s so important for doctor-owners to understand the business side of dentistry and what the KPIs are telling them.”
This includes taking a look at not only profit and loss statements and average monthly revenue, but also evaluating overhead expenses and collection rate. Additionally, practitioners should examine key statistics such as hygiene pre-appointment rates, appointment cancellation frequency, patient retention, case acceptance, and new patient flow. If one of these areas is weak, any issues should be remedied before embarking on a new endeavor that will split your time and may double your problems.
For example, if patient retention is poor at your first location, what guarantees are there that they will be any better at the second? Patient attrition rates will probably not improve at your second location if you haven’t figured out a strategy to handle it at the first. These problem areas should be addressed—and processes effectively streamlined—before spreading your practice’s shortcomings across multiple locations. You want to be duplicating a well-oiled machine, not a sinking ship.
2. Can you afford the addition?
In adding a second location (and starting from scratch, rather than purchasing an existing practice), you’re not just adding a second lease: You’re doubling your staff, equipment, inventory, and associates. Remember that huge investment you just made in a state-of-the art CBCT system? You now need a second one. The expensive air-filtration systems you upgraded to during the COVID pandemic? Your second office will require that, too—and it will need it before you even open your doors.
You’ll also probably need to add an associate or 2 at the new location (which means dividing your profits), hire a second hygiene team, and staff the front desk. While the old adage may be correct that you need to spend money to make money, you need to ensure you’re not spending more than you will recoup.
To add a second practice, you’ll probably be leveraging your current practice investment to get a loan. This means if your second practice fails, your first one is likely going down with it. Practitioners need to weigh the return on investment carefully, and consider both the immediate and long-term costs.
3. Is the timing right?
Timing is everything, as they say, and that goes for opening a new dental practice as well. Not only does the timing need to be right financially, but you need to think about time in regards to your patient schedule—and your own.
Do you currently have the ideal number of patients at your practice? Are you overbooked and unable to fit patients in, or are there huge, gaping holes in your appointment schedule? If you have the time in your schedule to increase your patient load at your first practice, adding an additional location may not be a good idea. If you’re struggling to find time to treat all your current patients, it may be time to expand.
But it’s not just about your appointment schedule: You have to take your own schedule into account as well. Do you want to work more hours than you already are? Managing a new practice will eat up numerous hours each week. Do you have the time to get a new business set up (including the setup and design, hiring, marketing, and management required by starting a second location)? Getting the new practice off the ground is going to take a lot of upfront legwork that may pull you away from your clinical duties. If your days are already full, you may not want to add these time-consuming tasks to your schedule. In the end, do you even want to spend time commuting to a second location?
“If you’re trying to do too much, someone’s going to lose—and that someone will be the dentist,” Gary Kadi, founder of Next Level practice, says. “They lose because they end up working more hours, working harder and working longer, and not taking time off or ever leaving the office. And they suffer, and their kids and families suffer, and no one is happy.”
4. Where will the practice be located?
Location, location, location. Where you decide to set up your second shop could be the difference between success and failure. While you need to consider things like visibility, traffic, area dental-practice saturation, and even parking, you also need to factor in proximity to your first practice.
One way to maximize revenue between your 2 practices is to seek out an area that services a different demographic. You don’t want to be cannibalizing your existing patient base (or have your locations so close together that your patients drift back and forth between the 2 practices). By tapping into a new market, you can double your potential patient base and create a new opportunity for growth. Of course, this means adjusting your marketing strategies (and dropping some money on new marketing), but it will help draw new patients that haven’t already been targeted. If there is a good location nearby that won’t split your patient base, it may be a good time to make a move into that market.
Another thing to take into consideration when evaluating proximity to your current location is, how close is too close? Eventually, closer to retirement, you may want to cut back and sell 1 of the locations. If it’s located too near your original location, a potential buyer may see it as an oversaturated market and may have concerns about competition—particularly if you have a patient base that goes back and forth between the 2 locations, as in the event of a sale, they’ll probably choose 1 over the other (and odds are, they’ll stick with the doctor they know).
5. Is your staff ready for the expansion?
Preparing your staff for the new addition is critical to success. Staff needs to ensure patients know which location their appointment is at; supply orders or lab results need to be sent to the correct office; staffing needs have to be met at both locations; existing staff needs to understand what bringing on a new associate will mean for them and their workflow. By properly preparing your staff, you’re laying the groundwork for a smoother expansion. But first, the staff need to be on board.
“It's so important for practitioners to not only help the team understand the business side of dentistry,” Phillips Newland says, “but to also get them to buy in. You want to breed that ownership mentality that this doesn’t work without all of them, that every single member of the staff is important and every job is important.”
Building this sense of ownership can be a challenge, so any problems with staffing or company culture at the first location should be addressed before the stress of a second location is added to the mix.
“Team acknowledgement is number one,” Kadi says. “You need to say, ‘I’m asking you to join me on this journey. We are implementing change but it’s going to benefit us all. We’ve been producing results and it has taken all of us, as a team, to make that happen. And now we can take it even farther.’”
Keeping your team cohesive across multiple locations is also no easy feat, so regular training and communication will be imperative. Standardizing processes across both locations and creating standard operating procedures will simplify training and any staff crossover. Daily morning meetings to touch base, and more in-depth monthly meetings to cover goals and KPIs will keep everyone in the loop and bridge the gap between the 2 practices. While managing 2 practices can be a challenging endeavor that isn’t for everyone, for the practitioners than can balance the needs of multiple locations, it can be a lucrative investment.