South Florida Hospital News
Tuesday September 29, 2020

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July 2008 - Volume 5 - Issue 1


Practice Succession: Cash Flow and Value Enhancement

At one time, dental practices sold for approximately 65 percent of their annual gross collections. Beginning with the new millennium, these values began dropping and currently rest at approximately 55 percent. The reason: A flooded market for dental practices as more dentists leave than enter the profession (a trend expected to intensify as baby-boomer dentists retire).

That’s the bad news.

The good news is that dental practices with healthy cash flow and profitability typically sell for much more. With that in mind, you’ll want to start enhancing the value of your practice long before you think of selling it.

Cut Expenses … Or Boost Production?

There’s no magic bullet here. To increase practice value, you must either decrease expenses or increase production.

Most practice management consultants would agree that dentists can cut expenses — but typically not enough to really move the needle. That’s because salaries are usually the biggest practice expense, and most practices cannot afford to cut them.

That leaves the focus on increasing production.

Is There Room To Grow?

Currently, solo dentists with a full hygiene schedule produce between $250,000 and $1.6 million annually in a four-and-a-half-day workweek. This wide range of productivity suggests that increases are certainly possible for practices on the low end of the scale. The key is that increased production must come not from working more hours but by producing more per clinical hour.

Some practical means of accomplishing this include:

Raise your fees. If you are staying on top of your game (i.e., receiving ongoing continuing education for you and your staff, investing in your equipment and office, and focusing on providing top-notch customer service), you should be able to warrant fees in the 80th to 90th percentile for your geographic location.

Improve scheduling efficiency. This involves preblocking your schedule with procedure mixes that meet your production goals. Also have your staff review files for patients who have delayed treatment and hygiene recalls.

Offer a variety of payment options. Keeping dentistry affordable benefits both patient and dentist. Of course, it doesn’t end with simply offering flexible payment options – you’ll also need proper financial policies to collect what you produce.

Become an effective manager. Dentists who become effective managers and leaders enjoy dramatic increases in hourly production as well as improvements in patient care and reduced staff conflicts. Here, investing in some practice-management training could be invaluable.

Plan Ahead

Finally, give yourself some time. Long-term planning increases the chance that you'll get maximum value from your practice. Practice succession plans should begin well in advance of your planned departure. In fact, three years ahead is not too far. The more time you allow prior to retirement, the more options you will have.

Peter Anderson, V.P. Healthcare Business Banking Officer, National City SE Florida Region, can be reached at or (954) 745-1185.
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