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Henry Schein Dental: So you want to build a group practice?

Multi-location group practices and dental service organizations (“groups”) continue to evolve and more entrepreneurial dentists are entering the fray. Given the numerous advantages groups provide dentists and their patients, the attraction likely comes as no surprise and chances are you have thought about or begun the journey.

Over the last 15 years, we at OneSmile have looked closely at the operations of thousands of practices and, from our vantage point, we’ve observed a lot about the elements that go into building a successful group. While the list is long, two elements stand out:

  • Codifying your business model and staying true to it.
  • Defining your role and how it must evolve as the business grows.

Each element is heavily dependent on the other and underestimating the importance of or failing to execute either will undermine your success.

Your Business Model
What is your business model and why is so important to stick to it? Before answering this question you should know there is no one best model. We have observed and built dozens of successful business models and believe the key to a successful business model lies within how well all of its pieces fit together.

Think of a business model like the gears of a watch where each gear serves the others. The precision of the parts determines the accuracy of the timepiece. If components of a business model are poorly designed or mismatched, the business model is destined for inefficiency at best!

Some important business model components for groups include: target patient base/demographics, doctor relationships, scope of dental services, real estate/geographic location, marketing, technology, and support services.

While the watch analogy is simple, designing an efficient business model is complicated and it is even more challenging to execute it consistently. In short, it’s a full-time job.

We’ve observed that staying true to the model is often the biggest challenge for growing groups. This challenge often follows the owner incorrectly assuming economies of scale follow scale.

The reality is that economies of scale are not achieved through scale but rather by applying economies to scale. Unfortunately, the misapplication of this fundamental law of economics often leads to actions that are destructive to the business. How you ask? A business lacking the necessary infrastructure (i.e. the economies) to support its growth will face disruptions and inefficiencies which result in incremental costs. In addition, in the pursuit of scale, many groups under-estimate the importance of fit with their existing business model and, in turn, acquire or build practices that don’t fit (wrong size “gears”).

Your Role
What do you envision your role to be and how will it change as the business grows?

The first part of this question is often considered when starting up a group. However, the second part is often overlooked as the group expands.

Is your passion chair-side dentistry or leading the growth and expansion of your business? For many doctors, the answer is they want to do both. However, in most cases where dentists have built successful groups, meaningful success came after replacing themselves at the chair and devoting their time to building the business and leading its growth. In short, they transitioned from lead dentist to CEO.

Early on, most dentists don’t have a choice as to the role they play and must do it all (clinical leader, CEO, IT person, HR manager, etc.). This is for good reason since they are often the biggest producer in their group and they can’t afford to step away from the chair. Nor can they afford to hire people to fill other roles.

The tipping point for most dentists has been 3-4 locations. To successfully grow beyond this size, the business requires full-time leadership. If you haven’t prepared for this tipping point in advance – either by transitioning away from the chair or by hiring the necessary resources to lead the growth of the business – you’re likely to experience a very stressful period and your business will likely suffer operationally and financially in the process.

We’re not suggesting one can’t successfully grow beyond 3-4 locations without replacing themself at the chair. We know a few who have successfully done it, but only a few – and then rarely beyond 6-7 locations. The point is that careful, proactive consideration is needed here and at every juncture as opposed to adjusting reactively once the heavy demands of a group are upon you. We suspect most who have done it agree – replacing yourself at the chair without experiencing a decline in profitability requires a significant amount of time, preparation, and effort.

So what is your business model? Where are you building your group? Rural markets, suburban markets, or possibly urban markets? What is your real-estate strategy? Who is your target patient base? What services are you offering? What is your pricing strategy? What is your marketing strategy? What type of providers do you need? How will you maintain strong and long-lasting relationships with them? What is your compensation strategy? These are some of the questions you as the CEO need to ask and ask again.

Your daily struggle and full-time job will be to refine your answers and to keep your business’ execution consistent with those ever-evolving responses. You can do it, but it’s not a part time job for long!
By Sean Epp, Managing Director, Business Development, OneSmile, LLC
View the original article at Henry Schein Dental