Marketing strategy: Preparing for the first quarter

As we wind down 2013, many folks are looking back on the year that was, but I know that you as a forward-thinking owner of a dental or orthodontic practice are looking forward to the new year.  Specifically, you are zoned in on what should be a very lucrative quarter: the first calendar quarter of the year.

Historically, the first quarter is a strong demand quarter for potential new patients.  On top of that, you usually don’t see any other major expenditures besides, potentially, end of year income tax payments.  As such, the demand from new patients plus low stress on the expense side equal a possible increase in the bank account.  

How do you take advantage of the opportunity presented here?  In other words, how should your marketing be structured to attract as many new patients as possible during the first quarter?  As you consider this, note that two major factors come into play during the first quarter:

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5 acquisition warning flags

We’ve recently come across several acquisition deals that had real potential when reading the basic description of the practice (who writes those?  Most of them are fantastic).  But at some point in the process, red flags got thrown up that caused us to pack up our bags and head in the other direction.  

Here are some of the things that we’ve seen recently and over the years that should immediately sound warning alarms all throughout your head.  Please note that not all of these are necessarily deal-killers, but they should cause you to give extra thought and do extra homework before making a deal.

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5 ways your practice is like Bar Rescue (even if your practice doesn't need a rescue)

If you watch basic cable TV, you may be familiar with the show Bar Rescue on Spike.  In it, consultant Jon Taffer visits a failing bar and turns it around.  Generally, this involves upgrading the menu, correcting some operational problems, weeding out unruly staff, remodeling the interior and renaming the establishment.  Add a healthy dose of drama and yelling and you’ve got a recipe for a successful turnaround.

As an unabashed fan of the show, I am regularly amazed by the parallels between the rescue projects on the show and the operating challenges for dental and orthodontic practices.  How could I possibly compare the average watering hole with a professional practice?  At the essence, you’re simply running a business in both cases so key similarities are present.

Specifically, and without any yelling or drama, here’s what I’ve seen:

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Group Practice Roadmap: the offer

If you're reading this, you've probably read our Group Practice Roadmap book and checked out the discussion of our offer to you in the final chapter.  

Here is the current offering:

• We will provide our talents to help you identify potential strong markets for new locations.
• We will help you to evaluate vacant spaces, lease possibilities and add our comments in reviewing your lease.
• We will work with you to identify a source of financing for your project.  This includes preparing business plans and projections as necessary.
• We will help you find a construction company to build your locations and help you to ensure that construction goes as smoothly as possible.
• If you elect to acquire a practice, we will review and give our input and guidance on the due diligence work.
• We will assist you in designing an advertising campaign that fits within your budget and marketing campaign.
• We will help you find a source for equipment.
• We will help you with your scheduling, staffing and other operational issues required to get the office profitable as quickly as possible.
• Once open, we’ll design your reporting and notification systems to keep you apprised of potential problem areas as soon as they occur.
• If you need to develop corporate services, we will help you to design those functions to minimize costs and maximize efficiency.

All of these services are provided to you absolutely free of charge until the office is profitable before personal expenses and doctor pay (including associates). 

Once the office is profitable, the fee due to us would be $2,500 per month per office.  We would also set you up with our online supply purchasing system – with group practice pricing along with our full range of reporting services.  Within a short time, the savings on the purchases should more than offset this fee.

If at any point, you want to part company with us, you are free to do so.  There is no long term commitment.  Our hope and belief is that you’ll enjoy our services and stick with us.

This offer expires on February 28, 2014 so e-mail me at bpalmisano2@gmail.com and get started today!

Check out our new e-book!

If you've read our blog before, you know that we have a lot of experience and passion when it comes to building dental practices and orthodontic practices from the standard 1 to 2 office setup to one having 5, 10 or more full-time offices.

We've summarized the process in our e-book: Group Practice Roadmap.  In it, we lay out the path for hyper-growing your practice beyond its current existence.  We start with a self-assessment for doctors considering this path and then take you through site selection, financial modeling, financing, construction, building back office services, adding specialties, acquiring existing offices and staying on top of the whole operation.  On top of that, we'll show you a number of potential pitfalls and how to avoid them.

If you need further assistance in building your dream practice, check out our offer here.

Get your copy of the book today!!

PDF version here (free!)

Kindle version here (99 cents, Amazon's rules, not mine).

Marketing strategy: social media updates

We all know that there are thousands and thousands of articles out there about the best way to advertise on social media, but let’s take a closer look at some recent developments within the big 3 – Twitter, Facebook and LinkedIn – to see how dental and orthodontic practices might be impacted.

To the news wire:

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Employee incentives: lesson learned

In the brief existence of this blog, I think you have noticed that we have regularly preached the importance of numbers and good reporting.  More important than just having the information is understanding what that information is telling you.  Does the data appear to indicate one thing, but the practice is moving in a completely different direction?

When it comes to employee incentives, the importance of quality information and goals is doubly important because if your team is unfocused or has goals different from yours, you will end up with a mess on your hands.  And by mess, I mean you are paying a bunch of money for reaching an incentive that has nothing to do with the overall success of your practice.  

I’d like to give you a story of one case in which we thought we had all the incentives lined up properly, but ended up learning a costly, yet valuable lesson instead (kind of like the plot of most sitcoms).  

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Marketing case study: Daily deals site

In our last post, we ruminated on some of the issues involved with using daily deals sites to promote dental and orthodontic procedures.  At the top of that post, we promised to discuss some results that we’ve had with using them so this post is dedicated to that subject.

Before diving in, note that as believers in quality advertising, we are willing to try a number of new avenues to keep marketing diversified and in front of as many people as possible.  You may have found the formula that works for your practice and do not want to change things.  That makes perfect sense.  But if you ever want to experiment with something without having to affect your delicate balance, we might be willing to try it (if the cost and setup are reasonable) in one or more of our offices for you and then provide full feedback on how things went.  This gives you a “live fire” test without deleteriously impacting your results if things don’t go according to plan.

With that, on to the case study:

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Marketing strategy: Daily deals sites

One media channel that some practices, including some of ours, have experimented with over the past few years are the daily deals services that have sprung up throughout the world.  You know some of the bigger names: Groupon, Living Social, Sweet Jack.  We know that they can be effective for restaurants, kids’ play areas and the like, but what about the dental and orthodontic practice?  

Generally, the process is the following: you contract with one or more of the services to advertise a price or other promotion to their “fan” base.  The ads are usually limited to a period of time and/or a certain number of people.  Once someone utilizes your services with one of the coupons from the site, you split the proceeds with the daily deals company.  Typically, you’ll split the proceeds 50/50, although Groupon has been cutting its take down to 35% in some cases to beat on the competition.  So, let’s say that you offer a deal for a $20 cleaning through Groupon.  When you get the $20 from that patient, $10 of it goes to Groupon and you keep the other $10.

In this post, we give you some of our thoughts and results that we’ve seen.  As you might expect, when the conversation with a doctor ventures into the realm of something like Groupon, we get a response along the lines of “No way.  That may work for other businesses, but not mine.”  Here are the main objections we get:

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Process simplified: generating important numbers

Over the last couple of months, we’ve thrown several computations and numbers at you.  Taking the time to compute things like the batting average, conversion rate, show up rate, etc. can benefit your practice and help you make effective, efficient decisions.  But a savvy practitioner may ask, “Those numbers are all well and good, but do you expect me to spend all of my time summarizing results and making computations?  Not only is that boring, but it also takes away time from analysis and focusing on my practice.”

And this, savvy practitioner, is an excellent point.  There are quite a number of ways to get to these numbers without burdening you with a green visor and a bunch of 7 column paper.  Here are some of your options:

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3 ways to improve your new patient show up rate

In our last post, we discussed the useful number known as the conversion rate.  One component of that conversion rate relates to patients who have made an appointment, but do not show up for that appointment.  In our scheme, the percentage of the patients that show up for their new patient consultation is known as the show up rate.  Like the conversion rate, the computation is very simple: take the number of patients that showed up for a new patient appointment divided by the number that made a new patient appointment for that period.

Like the conversion rate, this number will result in a percentage between 0 and 100 (if the number is greater than 100%, you probably have an issue with the process that computes this number).  Also like the conversion rate, we’re concerned with the trend and performance over time.  If your show up rate is 80% for 6 months straight, drops to 40% in one month and then goes right back to 80%, we’ll look at that one aberrant month, but not spend too much time stressing about it.

In a lot of ways, getting a patient to show up for that first appointment represents the last major hurdle in getting a patient into your system.  

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Key metric: conversion rate

On a regular basis, we here at My Practice Engine like to equip your dental or orthodontic practice with simple, meaningful statistics to track.  When you look at the number, that number is telling you something very powerful about your practice.  In the past, we’ve discussed things like benchmark expenses as a percentage of revenue and batting averages.  

Here’s a key marketing barometer to add to your quiver.  We refer to it as the conversion rate and it is very easy to compute.  For any given month, take your number of new contracts or total of new patients who have agreed to start treatment and divide that total by the number of consultation appointments made.  That bit of mathematics will yield a percentage somewhere between 0 and 100%. 

More important than the number itself is what does this number tell us?

As you can probably tell from the numerator and denominator, we are answering the following vital question: At what rate did potential new patients get converted into actual new patients?  If I want to sign x patients, how many consultations should be on the books for a given month.  For example, say that your conversion rate is normally 30%.  If you want to sign 10 new contracts in a month, you need to have 34 consultations booked (actually 33.333 if we take 10 divided by 30%).  

When we have a consultation on the books, there are 4 things that can cause this potential patient not to become an ongoing, paying patient.

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Avoid these information errors

If you’ve read this site before, you know that we preach the importance of information.  But what seems to be lost in the discussion is the fact that the information needs to be pointed, simple and useful.  Practice management software companies and other services are perfectly capable of generating reams of data.  But who has the time to look through all of that stuff?  And does all of that information have meaning?  

Today, we’ll discuss those and other fallacies that come with the generation of information and the usage of those data.  You don’t want to be presented with information that consumes excessive amounts of your time to understand or that lead you in the wrong direction.

Here are the potential mistakes you want to avoid:

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Turn old inquiries into new patients

As we progress toward the end of the year and demand begins to decline into the abyss of the holiday season, you are probably looking for source of potential new patients – probably not for the rest of this year, but certainly as we head into the new year.  A recent post discussed the fact that generating fresh demand from patients is extremely difficult at this time of year, but most practices miss out on a hidden treasure trove of potential new patients.

These potential patients are essentially any patients that have made any type of contact with you in the past, but for whatever reason, did not sign up with you.  Let’s take a look at these patients and some ideas for marketing to them:

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Should I relocate?

If you have an office that has been operating for a period of time, at some point within the first 5 years, you will reach a key decision point.  Maybe your lease is expiring.  Maybe a spanking new mall is being built a few miles away.  Perhaps you feel that the area around your office is in decline.  Whatever the case, you are probably faced with the decision of whether or not to relocate the office to a new facility.  

Clearly, the first thing you need to do is to assess the cost of a potential move.  In a lot of cases, you can move your equipment, waiting room furniture and other office furniture to the new facility.  You’ll probably want to upgrade some electronics so maybe you are looking at another $10,000 or so for that plus $5,000 or so for the movers.  You won’t be able to take your leaseholds with you so, for a standard office, you are probably looking at another $150,000 of buildout cost (excluding any tenant improvement allowances).  If your office was profitable at the time of the move, there should not be any startup costs to bear.  You also may be looking at a rent deposit or other costs to get into your new facility.  So, we’ll peg the total cost at about $175,000.  

With that cost in mind, what should you be thinking about with regard to a relocation?  Let’s take a look at the issues:

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Marketing strategy: Dealing with the holidays

Perhaps you recall our piece on advertising during the high-demand summer months.  With the expiration of dental health month, we move into the holiday season and the absolute nadir of demand for services, especially for the specialists in the field.  

The reason for this is simple: most people have limited incomes and limited time.  That income and time generally turns toward holiday purchases and getting everything organized for the season – searching for gifts, preparing meals, attending parties, etc.  Unless there’s an emergency of some kind, you generally don’t see people trying to fit appointments into their schedule.  If they’ve waited this long to get started with treatment, another couple of months cannot possibly hurt, right? 

And, on the money side, not only do you see people spending money on gifts, food, etc., but you also see these type of situations: “I budgeted $200 for gifts for the kids, but I spent $1,000 on them.  Where’s the nearest lottery?’  Those types of situations add even more stress to an already stressful time of year.  Even the most favorable economic offer can seem like an additional burden.

So, how should you handle this time of year?  Here are some tips:

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Group practice roadmap: Real world applications

We’ve spent so much time on the group practice roadmap for a couple of reasons: first, it is a tremendous opportunity for those who are willing to take on the challenge of substantially growing their business.  Second, we live this type of environment every day with our own group practices.  We love doing this and want to share our experience and evolution within the process with anyone who is willing to give us a read.

Of course, we constantly see new issues and opportunities and learn new things every day.  In the following paragraphs, we’d like to share some things that we’ve learned from some actual experiences over just the last few weeks.  I find that it’s always helpful to show some real world applications of what we’ve written about.  Hopefully, you’ll see parallels with your own experience in the past and future and be able to apply the lessons herein.

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Group practice roadmap: You don't have to sacrifice patients for profits

With everything laid out for the group practice development, some of even the most aggressively growth-minded doctors get stopped in their tracks by a fundamental concern: they don’t want to be that practice that upsets their own principles, and colleagues, by making business decisions that work contrary to the treatment of the patients.

The term “corporate practice of dentistry” has taken on a very negative connotation.  For quite a number of years, I was one of those people in a corporate office charged with providing management services in a relatively sizable company.  I heard about the potential evils of a group practice or MSO involvement in dental and orthodontic practices several times a week.  We’ll address that issue a bit later, but for now, we know that few people want to be tagged as the owner of a “patient mill” or that guy who will put braces on a patient with 9 teeth.  Heck, even a body as august as the U.S. Senate has broadly painted “corporate operations” as ones that place “profits above patients.”  And if you can’t trust the government, who can you trust?

For a group practice, we should examine some more practical examples.  And no, this is not some kind of ethics class.  I’ll leave that to the experts in the field.  Rather, this is an attempt to show you some of the common problems and decision making you will see as you go through this group practice process.

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Group practice roadmap: Acquisition outliers

We wrap up our acquisition discussion by hitting on some frequently asked questions  about some situations in practice purchases that do not fall neatly within the examples we’ve discussed in the previous musings on this topic.

Of course, every situation is unique and it would be impossible to cover everything here, but here are some outliers that we’ve seen frequently enough that you will probably stumble across a couple of them if you are serious about practice acquisitions.  

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Group practice roadmap: Finding deals

You’ve read the post about the basics of a practice purchase, the pitfalls and how to determine a price.  After reading them, your response is, “Looks great! Where can I get one of those?”  And the answer is relatively simple, “Lots of places.”  

Here, we’ll take you through a number of things we’ve seen and some of the pros and cons of each.  In a number of cases, the principles of finding a practice to purchase are similar to those when purchasing a home.  The best deals tend to be ones that are never publicized and the longer a practice remains on the market (especially in a retirement situation), the more wary you should be.

Just about every practice for sale will come with its own issues – some more severe than others.  The question is whether or not those issues matter to you and your situation or if they are deal breakers.  

Still, good deals can be found everywhere – especially because every potential purchaser has his own goals and intentions.  If you are interested in a practice purchase, make sure to explore as many avenues as possible because gems are out there and what may not be appealing to others may be the perfect fit for you.

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Group practice roadmap: how much should I pay for a practice?

Among the top 3 questions that always come up when you purchase a practice, one of them is “how much?”  Clearly, the price of a practice is often a major, if not the, determining factor in whether or not to ink the purchase contract.

A lot of variables go into the determination of a purchase price, but here, we’ll boil it down to its simple essence.  We’ll also give you some rules of thumb for making a good practice purchase so that when you close, the practice is producing income for you right away – unless you’ve bought a fixer upper.

Before getting into any part of the purchase process, please understand this: the starting point for you in negotiating a purchase price is NOT the seller’s asking price.  Rather, your starting point is your own independent evaluation and computation of price.  If the asking price for a practice is $500,000, and your independent assessment is that the practice is worth $300,000, you should have no problem passing and looking for other opportunities.  On the other hand, if the asking price is $500,000 and you value it at $750,000, we have a winner.

Let’s break down the process of determining the value for a practice:

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Group practice roadmap: Acquisition pitfalls

Buying a practice is not unlike dating.  You see someone that looks good to you, evaluate the situation, and think only of all the great possibilities.  Then, you enter a final “transaction” and once you are committed to that transaction, BAM!, you discover some horrible skeleton in the closet.  Unfortunately for you, now you are in and extricating yourself from the situation is difficult.  

Without extending that painful analogy further, let’s take a look at some things that have gone wrong in acquisitions.  We’ll also discuss how you can prevent yourself from becoming a victim.  And here, we’re not talking about the normal due diligence issues that arise: unpaid tax bills, bad credit ratings on purchased corporations, looming lawsuits, etc.  We’re digging a bit deeper here to find a few of the messier situations that you might run into.

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Group practice roadmap: the purchase option

As we’ve wound our way through this group practice roadmap, we regularly get asked a simple question: throughout the discussion, you’ve talked about building a new location as the means to add new locations to your group practice.  What about acquiring an existing practice?  And certainly this is an effective, useful way to grow your practice.  In fact, most of the top group practices grew through a combination of new office development and acquisitions.  And we were definitely going to get around to discussing it.  Now, would be a good time to have that discussion.

Like a lot of other folks out there, we’ve done our standard hundreds of acquisition deals – from having no money and begging for owner-financed deals to having public market money and overpaying in cash to beat out competitors.  And while every deal has its own characteristics and unique issues, things can generally be boiled down under the umbrella of some major overriding points.

In our first review of acquisitions in this post, we’ll talk about things you need to know and should consider.  We’ll follow that up with a discussion of some problem areas, do a breakdown of how the economics of a deal might look and then give you some places to look for a practice to buy.

If you are going to buy a practice, make sure to consider these handful of items before signing that final deal.

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The multi-specialty practice: the marketing

One of the main considerations when building a multi-specialty practice is effectively marketing to let potential patients know that you offer different specialties.  This is especially challenging if you have established a reputation as a practice with one particular specialty and now need to recreate that brand to encompass broader offerings.  It’s not totally unlike James Gandolfini attempting to show the world that he’s more than just Tony Soprano.

In addition to that, an oft overlooked part of switch to a multi-specialty practice is what happens during consultations themselves.  Here’s a very typical scenario: A patient needs an implant and schedules a consultation with the implant doctor working in your office.  This patient also happens to need orthodontic treatment.  Will the implantologist notice that the patient needs orthodontic treatment?  If so, will that doctor have the presence and incentive to refer that patient to the orthodontist in the office?

Here, we’ll address both of those topics.  First to the practice marketing side:

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The multi-specialty practice: the money portion

In our last post, we discussed the basics of what you need to know about a multispecialty practice.  Beyond the basics (and after doing quite a number of these, I can tell you that it is that basic).  From there, you need to properly set up your financial relationship with the specialist(s) working in your office.  

There are several ways to do it, but the most successful fall into 2 different categories, each with varying levels of involvement and risk to you as the owner doctor.  

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The multi-specialty practice: the basics

As we move along through the group practice roadmap, we occasionally hit topics that apply not only to the group practice, but also to practically any individual practice.  This is one such topic.  Here’s the situation in which you may find yourself: your practice may have reached its highest possible level of patient volume or you are one doctor spreading yourself among 2-3 different offices.  In either scenario, you are experiencing a fair amount of nonpatient, or “dark” time in the practice.  In the first case, your patient base may only merit running 8 days per month – leaving 12-14 work days per month of nonpatient days.  In the second case, on the days you are working in Office A, Office B and C are not seeing patients.  

On those dark days, doesn’t it make sense to try to make those days productive and profitable rather than simply incur rent, utility or employee costs with no revenue to offset those.  Think about this: Let’s say that you are paying $400 per day in costs for your office on dark days including rent, staff costs, etc.  If you can bring in just a little bit of money, say $700 net, before those costs, you now make $300 per day in profit instead of losing $400 per day.  In a practice with 14 days of dark time per month, you now turn a $5,600 loss per month on dark days (that’s $67,200 per year to you and me) to a profit of $4,200 per month ($50,400 per year).  That’s a turnaround of $117,200 per year all payable to you.

Interested?  If you are, this means that you have considered, are considering or are working on setting up a multispecialty practice.  Here, I’m not just talking about an orthodontic practice including a general dentist or a general dentist adding an orthodontist.  I’m talking about more than 2 types of dental specialists including endodontists, periodontists, pediatric dentists, implantologists, etc.

At this point, we’ll talk about some of the considerations involved and then follow up with how to set up your multispecialty practice.

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We resume tomorrow

The group practice roadmap continues to lead us to bigger and better things tomorrow, October 8.

Group practice roadmap: solving the "corporate" problem part 2

By now, you’ve read about the corporate problem in your group dental and orthodontic practice and the first part of the solution to that problem.  We continue our discussion on that topic.

Not every corporate problem relates solely to the number of people in the office.  In a number of cases, problems arise from a lack of focus, training and simple disorganization.  Here’s what I see a lot: you hire someone, or start a new system or engage a new outside service and then wipe your hands of the situation and let things happen.  That almost never works.  You run a practice and there are certain ways you want things to be done – and we all know that there are dozens of ways to run a successful practice.  If you don’t communicate those things and keep the business on track, you have mass chaos and a business going in the opposite direction of what you anticipated.

Here’s what you need to do:

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Group practice roadmap: solving the "corporate" problem - part 1

When we last left our story, we were talking about the “corporate” problem: the #1 destroyer of group dental and orthodontic practices.  So, what do you do about it?

First of all, keep our initial discussion on group practices in mind.  Know your weak areas and shore them up.  In my experience, for a majority of owners of group practices, handling the pure business side represents a weakness, especially as the size grows and the business issues become more involved.  This may be because doctors do not have the training to handle this side, have more of a focus on patient care or simply don’t want to deal with that side of the practice.  The reason does not matter.  And this is not a criticism in any way.  Just what I’ve seen.

And this desire to have someone else handle the business side is why I have a job, OCA grew to the point it did and because you see a number of management companies, service companies and consultants out there.  They fill that void in business services.  Some of these companies are very knowledgeable and some plain suck, but that is not the point of our discussion here.  We want to show you some tools to handle it on your own.  If you still feel uncomfortable with that side of the operation, by all means look at some outside help.  But for now, check out our discussion and talk to us about it.

If you do plan to have staff to handle purely business (aka “corporate”) functions, you need to apply these techniques:

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Group practice roadmap: the #1 group practice killer

                                                               (Image credit:  skinzweb.wordpress.com)

As we look back on history, we see an absolute graveyard of group practices that have accumulated debt, expanded rapidly, burned brightly for a period of time and then disintegrated quicker and more spectacularly than a Newt Gingrich presidential campaign (insert Howard Dean there if you lean red).  

And if you look closely at the tombstones of these practices, the epitaph for many will read something along these lines: “Here lies practice x – killed by an out of control corporate office.”

Here’s an example of what typically happens.  You have a member of your front desk staff handling your accounts payable in addition to his/her regular responsibilities at the front desk.  And for one office, it’s not a big deal.  You don’t have a very large volume of bills, the number of vendors are small, all expenses relate to that office (making the accounting for bills very easy) and all tasks can be fit in during slow points in the schedule.  Now, if you have 10 offices, that dynamic changes.  The volume of bills is 10 times what it was (maybe more), each bill may have some coding and allocation issues to get the accounting correct, erroneous bills may take more time to correct because those bills may be more complicated, etc., etc.  Most significantly, that person needs to spend more or maybe all of his/her time on accounts payable now due to the sheer volume and complexity.  So, you switch that person to become a full time accounts payable manager and hire someone to take over the front desk duties.  And so it begins…

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Group practice roadmap: 5 tips for super staffing and scheduling

As your office count grows, one of the costs that most frequently grows out of control is employee costs.  This happens for 2 reasons.  The first is that poor information  and scheduling strategy leads to a disorganized schedule, confused staff and patients and spiraling costs.

The second is that adding staff seems like an easy, quick way to solve a particular problem, especially a problem that relates to your patient and office volume increase.  The thought process goes along these lines: “With one office, I didn’t need a person to handle [function x], but with 10, I’ll need someone full time to do that.”  So, for doing the financial accounting, you add an extra person.  For handling the marketing, add a person.  Tech support?  Need a body.  And so on.  We’ll deal with this issue in our next post.

Here is how you keep your schedule and staff organized to keep that cost under control.

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Group practice roadmap: More offices, more problems

To this point, we’ve painted a nice, white picket fence, daffodils and roses view of opening a group practice.  If you have a good system, find new locations, get financing, open the offices using that system, monitor results, lather, rinse, repeat.  Of course, life isn’t that simple.  Yes, no matter how many offices you have, supply orders will get screwed up, employees will quit and a patient or two will have an unpleasant experience.  On top of that, certain problems unique to a group practice setting will loom over you at some point or another.

Here we discuss some of the problems that you will see as you develop and operate a group practice.  We’re not going to discuss the most frequently occurring problems, but a number of the ones that tend to cause negative emotions to swell, hard feelings to harden and chairs to get thrown (OK, I haven’t seen any chairs actually thrown, but a few were grabbed in anger before cooler heads prevailed).

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Group practice roadmap: Your most important hire(s)

Among the most important personnel decisions you will make as your group practice grows is which associate doctors you will want to employ in the practice.  On patient days when you are not there, this doctor represents not just the attitude and environment you want to convey to patients, but also have to treat patients with a level of quality that is satisfactory to you.  Clearly, you want this person or people to fit the treatment style for all of your patients and have an amenable personality.

Beyond that, there are a number of other important considerations when identifying and employing associates (not that I use the term employing here – if you and your tax advisor feel that an independent contractor arrangement is superior and IRS-friendly, the considerations described in this post do not change).

Here are the items to consider with an associate:

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Group practice roadmap: 3 changes to your marketing

At this point the in the process, we’ve been through the process of identifying locations, getting financing, determining where to start in the process and establishing systems to monitor how the everything is going.  We’ve covered what you need to know about building those offices in our podcast on new office development.  Now, we turn our focus to some operating issues.   

The way you look at general practice operations will necessarily change in a group practice setting.  Effects of decisions are now multiplied not just by the number of offices you have, but by the staff people working the practice and the enlarged patient base positioned under your umbrella.  Just as your role changes, so must your way of approaching operational decisions.

In this post, we focus on marketing and how strategy and decision making shifts from a 1-2 office practice to a larger scale.  Here are 3 major considerations now for your marketing campaign:

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Group practice roadmap: Weak Data, Big Problem

When we began this roadmap, the self-assessment discussion included a brief note about the changing role of the owner doctor in a group practice setting.  In essence, your role evolves from day-to-day operator, technician and handler of minutiae to manager and custodian of a much larger operation.

The catalyst for this shift is obvious.  As you move from 1 location and 1,000 patients to, say, 10 locations and 10,000 patients, you cannot possibly look in the mouth of every patient, review every chart or personally resolve every insurance filing discrepancy.  And, just as clearly, you cannot be in every office on every operating day.  If you want to maintain your same role as before, either have a strong manager to run the business side or be prepared to hear an analogy about Nero and Rome burning.  Yes, information is vital and you know how we feel about the importance of it.

Right from the start, you need a methodology to monitor your operation on a larger scale.  Keeping track of individual payments in a one office model is very doable.  In a group practice, it is nearly impossible.  You need to look at summary numbers and exceptions to determine whether or not a problem exists and what you should do to resolve the problem.  In sum, quality information and reporting becomes vital to the life of your business.

Without it, you will potentially miss a problem and get buried underneath the rubble from the avalanche it creates.  If you recall our history post, a doctor trying to build a group practice in Florida did not have good collection information, got robbed and had to give up the practice.  In another, a doctor in Colorado ignored the information that told him that consultations were in steep decline in one of his offices.  Current collections were just fine because he had a solid existing patient base, but he did not see the crash in collections looming on the horizon when the existing patients finished making payments and new patients were not there to replace them.

If you are going to have a successful group practice, your reporting needs to have the following characteristics:

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Group practice roadmap: Nail your first new location

Our group practice process is now starting to kick into a higher gear.   A lot of the prep work has been done.  You’ve identified your locations, put together a business plan and gotten financing in place or at least started that process moving forward.  

Now, it’s time to start with the less tedious, theoretical part of the process.  We’re going to start putting offices into place and dealing with the operational part of building our group practice.  In other words, now it gets fun and nerve-wracking all at the same time.  Let’s take a look at some of the key considerations at this point in the process:

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Group practice roadmap: how am I going to pay for this?

At this point in the process, you’ve got your locations selected and your projections are done.  The obvious question looms: how am I going to pay for all of this?  This is usually the limiting factor in your growth.  If you had $10 million of cash or available credit and 8 locations you wanted to add, you would certainly be able to add them all at once.  Since most of us are not in such a position, other options need to be examined.  

As you learned from our new office development podcast, costs for a new office are probably going to run $300,000 - $600,000 per facility so keep that in mind.

Let’s take a look at the various options out there for you:

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Group practice roadmap: 5 steps to the bottom line

Now that you’ve gotten revenue looking exactly like you want, it’s time to set up your projection for those expense items.  As you go through your expense projections, keep 2 things in mind.  First, are my numbers conservative.  In other words, in the face of uncertainty, have I somewhat erred to the high side of the cost amount.  For example, if I ask for an insurance quote and the agent gives me a number of $753 per month, to be conservative, I would round that number up to $800.  Second, do the final numbers make sense to me?  If my employee cost number comes out to 5% of revenue in the first 6 months, that result does not make intuitive sense.  Something is wrong and must be revised.

Here are some tips as you create your individual expense items:

Employee costs (don’t worry, we’ll explain the *** at the end of the post)

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Group practice roadmap: top line projections

At this point in the process, you’ve compiled a list of your potential locations.  Whether or not you select 5 locations, 7 locations or 10 locations or another number is up to you.  It largely depends on what your numbers tell you and how much you want to be able to grow.

With that information in hand, you want to take the next step in the process: putting together a set of projections.  You’ve heard that anyone who enters into a new business or new line within an existing business puts together a business plan before investing any material sums in that business.  When you go from an 1-2 office practice to a practice with double-digit locations, you are entering into a new business.  Heck, in life, you wouldn’t make a major move without a plan.  Here is your chance.  The business plan usually consists of written descriptions and a financial projection.  Here, we’ll focus on the projection.  Your projections do 2 things for you:

First, putting together projections allow you to think through the different issues that will affect your business.  You’ll be able to consider what you expect patient volume to be, what will total advertising spending be for the whole practice, how many total employees will you need (we’ll get into all these topics as the roadmap progresses).  Once you’ve thought through everything and done your projections, you can decide if your plan makes sense.  If your projections tell you that you need to invest $4 million to earn an additional $150,000 per year, the reward may not justify the risk and effort.  Second, if you need financing at any point in the process, a business plan and projections are required.

Keep in mind that the projections are simply your best estimate.  Things almost never work out exactly as anticipated, but at least you have a plan going into it.  If and when events change, you can either revise the model or change your decision to fit the model you set up.

Despite what you may be told, outside of needing to include the basic financial statements – balance sheet and income statement-- there is no magic as far as format or time required for a projection.  Our initial projections were compiled during a weekend sequester at a Ramada Inn in Gulfport, MS.  We prefer the same income statement format as we do for our analysis of results.  Link to that is here.  In this case, the numbers are simply projected instead of historical.

For us, the most challenging part of constructing a projected income statement is coming up with a projected revenue number, also known as the top line.  Once you have that done, all of the other pieces of the puzzle fall into place.  I’d strongly suggest that you use a spreadsheet application like Excel to prepare this because once you do the first set of projections, you will probably want to revise your assumptions, especially if your initial assumptions result in projections that do not make sense.

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Marketing Monday: It's the economy. Or is it?

Friday’s jobs report produced another reminder of the state of our economy: sluggish, uneven growth with a large portion of our country’s job creation taking place among part-time jobs.  Predictions for future look similarly uninspiring.  Less than a stellar picture, indeed.  Regardless of whether you lean red, blue or neither in figuring the cause of this malaise, as a practice owner, you have to deal with the situation.

In well over half of the cases in our recent history, when we talk with a doctor about the reasons for a decline in revenue or new production, the answer is along the lines of: “it’s the economy, stupid.”  Well, it’s not always so obvious.

Certainly, no one has any doubt that the overall economy affects orthodontic and dental practices.  If a person’s income goes down, he or she begins to look for costs to eliminate or push back until better times return.  Orthodontic treatment certainly fits that category.  Delaying treatment typically does not cause pain, spreading infection or related health issues.  For dental treatment, while some procedures can and will be delayed, some severe cases have to be handled immediately.  

On the other hand, the economy-as-total-problem answer may obscure other issues in the practice that will need fixing regardless of GDP.  Here are some of the key considerations:

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Group practice roadmap: location, location, location

You’ve read our last post and decided that you are the type of person to dramatically expand on the size of your practice.  Now, you’re ready to get rolling.   Where to start?  For us, you begin with finding potential locations for your office.  If you want to add 5 offices, you want to target 5 areas in which to place an office.  You may not be building in that particular area immediately, but you want to identify the best areas and then focus in on the top ones in that group for immediate investigation.

There are a number of ways to go about picking areas.  Here are some of the methodologies and considerations.

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Group practice roadmap: Is this for me?

Today, we commence with a discussion we referenced last week.  In it, we lay out a roadmap for orthodontists and dentists to grow their practices substantially.  No, we’re not talking about 25-30% growth a year from your existing practice or pushing some maybe-it-works-maybe-it-doesn’t marketing hook.  We’re talking about adding multiple locations to the point at which you are now the owner/main renter of anywhere from 5-15 individual, fully functioning, locations.  So, if you have an office generating $500,000 per year in revenue and you are able to do that 10 times over, you are talking about a $5 million annual revenue practice with the attendant potential profit.  If you have 10 offices and take home a paltry 20% after paying everyone else, that still leaves you with a $1 million personal annual income.  

This is no get-rich-quick scheme.  It is a process that takes planning, effort, support and organization and plays out over a period of time.  

In the past, we’ve seen quite a numbers doctors build their own “group” practices –and guided a decent percentage of those all the way through the process-- run under the doctor’s own philosophy regarding treatment, facility design and patient experience.  We’ve seen these types of practices become wildly successful and we’ve seen some fail miserably.  We want to give you the information you need to put you in that first category.

The first assessment you must make is whether or not you have the desire or mentality to go through the process.  Here are some questions to ask yourself before jumping in to becoming a group practice.

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Podcast: Conversion doesn't have to hurt

When you decide to convert to a new practice management software, the process can be challenging.  New terminology, new processes, data errors and software hiccups can and often do leave staff frustrated, patients disillusioned and doctors feeling like they are stuck in the middle of constant crossfire.  Things don't have to be that way.  You just need to prepare, get organized and listen to this podcast to eliminate the conversion pain.

We bring back Mike Cusimano to follow up on our earlier podcast to discuss how to end your conversion experience with a trip to your favorite after work spot instead of a trip to the emergency room (true story!).  Check out the podcast here.

Of course, if you have additional questions or comments about your planned or contemplated conversion, please do not hesitate to contact us.

Your balance sheet: what can it tell you?

While the income statements that we have been dissecting over the last few posts generally provide the best source of information for us to financially analyze a practice, the balance sheet represents another portion of the financial statement package that provides valuable information.  

First, to put us ahead of most of the media – who seem to refer to any financial statement as a balance sheet – let’s define a balance sheet.  A balance sheet is representation of a practice’s financial position as of a given point in time.  So, if we were to take a snapshot of a practice as of, say, December 31, 2013, we would look at the items of value (assets), financial obligations (liabilities) and built-up worth (equity) in the practice at that point in time.

This is not a financial accounting blog so I will not get into things like assets = liabilities + owners’ equity or inventory valuation methodologies.  Any popular financial accounting package will be able to generate a balance sheet for you.  Once that happens, the steps to analysis are very similar to those for an income statement:

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Case study: financial statement analysis - part 2

Our financial statement analysis case study rolls on unabated.  If you haven’t read it, you may want to check out part 1 first.  Today, we discuss our approach to the clinical supplies and employee costs portion of the income statement.

The problem: Clinical supplies cost regularly ran roughly around 12% of revenue when we would normally expect something in the 7% range (or less given the solid volume in the practice).  When we evaluated the process, we discovered no controls over the ordering process.  Doctors, the clinical supervisor and clinical staff were allowed to order as they saw fit.  Orders were placed via phone and individual supplier websites instead of consolidated into one place.  Like office supplies, shelves were overflowing with clinical supplies.

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Case study: financial statement analysis - part 1

Financial statement week has now extended into 2 ½ weeks of action, but it is an important enough topic (with still a lot more to go) that merit the extra time.  Today, we show how we applied the knowledge gleaned from part 1, part 2 and part 3 of our series to solve some issues with an actual practice a few years ago (some of the numbers and the quarters contemplated have been changed somewhat, but the overall feel remains the same).  

As always, we hope that the information here proves beneficial to you and the situations shown here might apply in some way to your practice, of if they don’t, at least get the juices flowing on potential solutions to issues that your practice may be facing.

To our case study bureau

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Marketing Monday: Don't be THAT practice

Recently came across this article (scroll down to the 8/11/13 post) in which the author goes through dentists like Kleenex because of the way he was treated at the front desk.  In what will be a series of obvious statements as I go through this, you’ve spent a lot of time and money and put your credibility on the line trying to get patients in the door.  Then, when they walk in, they are immediately turned off by the first 5 minutes of their experience.  You ever walk into a restaurant and have your entire meal be defined by your initial experience with the host or hostess?  Not a whole lot of difference here.

This gives an intro for a perfect Marketing Monday post.  How do you make sure that the patient experience is positive right from the start.  Try to think of it as your front desk person being the host or hostess of a big party.  You need to talk to everyone to make them feel good about themselves even though you don’t have a lot of time to spend with each person because you have a lot of people to which to attend.  A number of folks try to overcomplicate the process (like with a lot of things), but just like any other experience, a productive patient introduction to an office boils down to some basic, simple factors (make sure to stick around for our “melting pot” video at the end of the post):

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Financial statement analysis made easy - part 3

If you’re still with us, you’ve gone through part 1 and part 2 of the process to get ready to analyze your financial statements.  Now, we are ready to get down to the hardcore analysis part to find what the numbers are telling us.  Let’s take one more look at our sample statements.  

Here’s one way to break them down.  There’s no magic to the order in which you do these things, but going through each of the pieces we describe here will put you well on your way to identifying problem areas and putting a solution in place.  

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Financial statement analysis made easy - part 2

When we last left our story, we had a summary income statement, prepared on a consistent basis that looked like this:

What can we tell from this statement?  Not much.  Is $300,000 of revenue good for this practice?  Given this statement, we really don’t know.  We can compare to absolutes (e.g. revenue of $100,000 per month is pretty good).  But if the revenue for this quarter represents a drop of $75,000, there are problems to be addressed.  To set us up for effective analysis, we need 2 more pieces:

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Financial statement analysis made easy - part 1

Over the next several posts, we’re going to go through techniques for analyzing your financial statements along with some preparation tips to enable you to make the best decisions for your practice.  Please note that as we go through this information, we are not discussing reporting for tax purposes (an entire industry and blog unto itself), nor are we planning to discuss the rules of Generally Accepted Accounting Principles as it pertains to your financials.  That is a discussion for you and your accountant.  Here, we are focused on analyzing your financial information to make decisions about the operating needs and opportunities for your orthodontic practice and dental practice.  We’re also focused on the profit and loss statement (income statement) and not other financial statements.  At some point, we will get into those other statements as well.

When performing an analysis, here are some basic tips/techniques:

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Why is My Practice Engine free?

If you haven't visited us before, we can sum up My Practice Engine by stating that we are a service simply focused on providing expert, free advice on the business operations and related services (check out our tool kit to the right) for orthodontic and dental practices.  Among the most frequently asked questions we get on this site are ones like this: “Why do you say that all of your consulting and other services are free?  What’s the catch?  When do you sneak in with the big pitch or start hard-selling me to give up a big piece of my profit for your full range of services?  If not, how do you make money off of me?”

Let me try to answer each of these questions individually.

Why do you say that all of your consulting and other services are free?

You’ve read our history (For part 1, click here.  For part 2, click here).  We’ve been very fortunate to meet some excellent people in this business and we’ve been able to work with those people to achieve significant success, both for them and ourselves.  For evidence of the scope and size of Orthodontic Centers of America, Inc. (or later, OCA, Inc.), you can check out some of our old SEC filings online (here’s one).  For some evidence on the success of our affiliates, you can look at far-reaching practices like Orthodontic Specialists of Florida  and OCA Japan.  The results have been very positive, and now it is our time to pay it forward.  We’ve been able to learn a lot over the years –and we’re still developing practices all day, every day.  We want to share that knowledge with those who want to build their practices, turn around results or are just thinking about starting up a practice.  We’ve seen a lot, made a lot of mistakes and learned a number of important lessons that can benefit just about any other practice out there.  We want to be able to pass that on.

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