By Dr. Paul J. Pavlik, Vice President, Dental Practice Management Consulting at Dentist.Business
"If only God would give me some clear sign like making a deposit in my name in a Swiss bank account.” -Woody Allen
Whether you are (1) preparing to graduate and deciding on a career where you will manage your own practice, or (2) planning on leaving your current employment and striking out on your own, or (3) you are an experienced dentist and owner looking to improve, this two-part blog series discusses some tips that may help you map out a better path for a successful future with fewer pitfalls.
The first three tips were included in the last newsletter, “Tips on Preparing for a Successful Solo Career – Part II.” The remaining tips follow below.
- Carefully predict your future
Develop a sound business plan (i.e., a BP) that includes a three-year forecast of your anticipated profits and expenses. Anticipating profits and expenses beyond three years is a “shot in the dark,” at best, so don’t attempt this exercise regardless of who recommends it.
Consider every possible source of income. Obviously, income anticipated from products and services rendered to your primary target patient audience will be your main revenue source. Don’t forget, however, to consider other potential revenue sources while your practice is establishing a patient base. These other revenue sources could include point-of-sale products (examples include but are not limited to Sonicares, or other electronic toothbrushes, WaterPiks, etc.) that will help guide your patients toward future purchases of your product line that will help them improve their dental condition and then maintain it, and/or hiring your expertise to outside employers during your free time (such as teaching at a local university or working in a government agency part-time) – this can also help build a future new patient base from contacts made at these locations.
When evaluating your new practice’s expenses, be sure to include all operational expenses such as (1) employee salaries and all additional expenses and benefits that may apply to them, (2) supplies including both general office/clerical supplies plus those clinical supplies needed to produce your product or service, (3) outside contracted expenses including subcontractor services, independent contractor services, laboratory services, etc., (4) facility expenses including rent/mortgage, cleaning services, maintenance, new equipment, computer hardware and software, utilities, etc., (5) administrative expenses including legal, accounting, bookkeeping, consulting, telephone, insurance, taxes, etc., (6) marketing, and (7) paying yourself including your salary, setting aside money for taxes, distributions, medical and disability insurances, continuing education, business meals, business transportation, and other benefits, etc. And, don’t forget that you will also need to consider other expenses such as repayments for business loans and educational loans.
To be safe, you'll want to tack on a profit margin. A healthy starting point is twenty to twenty-five percent after all expenses have been subtracted from revenue.
- Remember, you can't bill out every hour
When you are getting started in practice, don’t count on producing revenue for every hour your new practice is open. Unfortunately, you most likely will not have a full load of patients for your products and services until you establish name recognition and a strong patient base.
In order to be as successful as you can be, you will discover that there is more to a business than simply selling and producing; you must be involved in every detail of the business. For example, it is reasonable to expect that you will spend part of your time on administration (writing proposals, preparing budgets, evaluating your financial statements, monitoring, measuring, and analyzing progress, re-forecasting, billing, managing accounts receivables, preparing employee policies, etc.) and another part of your time evaluating your marketing program. Remember, however, that these endeavors take away time from your real area of expertise, providing services to your patients.
You have two choices: (1) you can develop a broad set of skills so that you can manage these projects on your own or, (2) if you want to know what is truly going on with your business finances, but you don’t want to allot time to non-money-making tasks, you can decide to save your time and efforts for “doing the business of your business” (i.e., spending your time treating patients) and then paying for these ancillary services either by hiring the appropriate employees or outsourcing to experts.
- Trust is a good quality, but …
Statistics show that one of every thirty patients is going to turn out to be a deadbeat. To minimize future problems, make sure you come up with a document that heads off expensive spats by spelling out everyone’s obligations – yours, your patients, and your vendors. The age-old handshakes and verbal agreements may demonstrate that you are a trusting individual, but experience tells us that long-term successful relationships and friendships are better ensured when both parties can refer back to agreements that have been put down in a written document.
You can find standard contracts online, but you may want your attorney to customize them.
- Job security
Simply put, there is no such thing as job security when you own a business. What was once a lucrative business can dry up in an instant. Therefore, prepare for the worst of times and enjoy the best of times.
*A special thank you goes out for ideas from Josh Hyatt, Senior Writer for Money Magazine.
The opinions expressed in this blog are those of the author. All of the information contained herein is intended to be general in nature without regard to specific types of businesses, geographical areas, or other circumstances, and should only be considered after consulting an appropriate expert, such as an attorney or accountant.