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Scale or fail?
They say dentistry is one of the most stable business models out there. They say dentistry cannot, will not, and shall not fail. They say that once you get that degree, banks will fund your dreams, and it is all gravy after that. They say if you can make one office successful, you can just rinse and repeat till one day, you are on the beach somewhere, sipping Mai Tais while your minions run the business for you.
Who are ‘they’? As Kendrick Lamar puts it, “They not like us.”
“They” could be your friends, family, business or dental experts you look up to, or even your own brain cells telling you that growth is the only way. Telling you that growth upwards and outwards is the only option, otherwise you’re a failure. Telling you that more is better.
The reality is that, as an emerging DSO, only you know your situation. Dental business veterans have experienced this numerous times, but here we are, the emerging guys, striving to make it, thinking that if we have to scale back or scale down, we have failed.
Just like in my first article for Group Dentistry Now, my thoughts in this article are primarily for emerging group owners. Someone further along in their career may not find this helpful, but if you’re in the 1 to 3 location realm, this might help you.
Scaling up is sexy, scaling down is necessary.
If you’re an entrepreneur, scaling is exciting for you. You have plans and schematics on what you want to do, how you want to do it, who you want helping you, and what the end results should be. You’re a thinker, a doer, a forecaster. Scalability is an entrepreneur’s dream. You have read Traction and Start with Why fifty times as all entrepreneurs do. This is what we live for!
But what if scaling isn’t the right approach to growing your dental business? Scalability doesn’t always equate to growth. A well-managed, scalable business can remain just as profitable—if not more—by doing less. At times, we must set aside our egos and emotions to think objectively and take the necessary actions to achieve results.
While we might resist the notion of regression or “going back,” and these discussions can be difficult and uncomfortable, they are essential. Scaling down can be a healthy way to respond to an otherwise unhealthy situation.
Why scaling down needs to be part of your business strategy.
The ideal size for your business is one at which it can have adequate resources to produce what’s needed to be profitable.
If you’re unable to fill the chairs—whether with patients or clinicians—it signals a potential problem that may require you to scale back. Low occupancy can lead to financial strain, reduced staff morale, and decreased patient trust, which can ultimately jeopardize the sustainability of your dental group.
As you scale up, you may see an overall increase in profit, but the profit margins as a percentage of revenue might decline. This is typically normal and can be a positive sign if growth aligns with your strategic goals.
However, if those margins shrink to the extent that they hinder your ability to realize your vision, it may be time to reassess that vision. Similarly, if external factors—such as economic shifts, a pandemic, or personal challenges like illness or work-life imbalance—warrant a reevaluation, adapting your vision may be necessary.
Pivoting has to be a disciplined and dedicated process.
Who remembers the Friends episode with the couch? Pivot!
Once you (or your circumstances) decide that scaling back is necessary, whether to keep you afloat or to strategically improve your bottom line, you have to make it happen in a controlled and definitive manner.
Ways of scaling down without reducing locations:
1 – Get rid of unprofitable procedures. If something is a low-fee procedure but takes a lot of resources, then it might be time to stop offering it. Alternatively, increase the fees. An example of this is whitening – sure, it’s a good marketing strategy and is a planned loss leader, but too many of these long and unproductive appointments can eat up profits. Another example is offering more endodontic procedures to a more seasoned dentist while training up a newer one simultaneously.
2 – Delegate but verify. You might need to find third party companies to outsource certain things to, especially if you’re downsizing your team. Start with outsourcing things that take up a lot of time, such as insurance verification. Make sure you vet third party vendors carefully and be sure to make someone in your organization responsible for monitoring their work. This may end up saving you money directly, but also indirectly by being able to reallocate some of your human capital – even if you don’t let anyone go, they can be more productive with their time.
3 – Reduce staffing. This ties in with delegation and outsourcing. You may not need extra hands if the superstars of the organization can be trained up and trained more. Letting team members can be a drain emotionally and can upset team morale, but you may have no choice. When it comes to sink or swim, you need to swim. They will find a different dental home – just look at the job market!
4 – Stay patient-centric. When inundated with the stresses of managing a group practice, it’s easy to lose track of how we’re treating our patients. Get better patient care out of your teams and continue to focus on their comfort, convenience, and quality of healthcare provided to them. You might need to make the tough decision to drop some insurance plans if you cannot afford to ethically treat some patients. Their health and wealth may be better aligned with a different provider.
5 – Focus on those KPIs. Revenue washes all sins, as they say. When revenue is shrinking, it’s ever more important to keep your team and yourself apprised of all important numbers to stop wastage. An easy example to focus on is your overdue hygiene patients. This is low hanging fruit, but is often ignored because the team isn’t engaged enough to chase it. Once you start focusing on your KPIs, you will likely identify many such simple and effective ways to maximize each location. By increasing certain KPIs, you can effectively scale down opposite KPIs.
6 – Do more with less. If you aren’t already focusing on quadrant dentistry, now is a good time to learn. You might need to make changes to how you schedule patients and everyone will need to be on board, but by doing more procedures on a patient at the same time, you can decrease your overhead a bit (both in terms of materials used and in terms of time spent when it comes to turning rooms around), and increase revenue. Consider adding sedation options to your group.
Now, what if you need to close or sell a location?
This might be your least favorite part of this scaling down conversation. Your dream seems like it is about to shatter. Even if you’re humble and objective in your decisions, losing a location can seem like losing a limb. How will you ever be whole again?
You will be ok. There’s more to life than counting locations. We have taken this approach, and it has significantly improved life. When executed strategically and thoughtfully, this process can lead to substantial improvements, placing you in a stronger position than when you began.
Ideally, try to sell the practice, even if it’s break-even or at a small loss. Trust me, the money will come back. Engage a reputable transitions firm, seek advice from your accountants, lawyer up, and check local state board rules and regulations. The idea is that if you’re able to sell a location, you can recoup what you can and reallocate resources to your more profitable offices to boost their profits.
If you find yourself unable to sell, it may be time to consider closing your practice. Ideally, you have negotiated favorable lease terms that will allow you to exit the lease with minimal complications. If the bank holds ownership of your equipment, they may reclaim it; however, if that’s not the case, you should be able to sell most of the equipment or transfer it to other locations within your network.
It is essential to consult with legal counsel and the state board regarding the proper handling of patient records and charts. In some cases, these records can be sold, but if that’s not an option, you may need to store them securely for a specified period. Ideally, if you close a location, transferring those patients to a nearby office can enhance the profitability of your other practices while ensuring continuity of care.
Ultimately, your job is to ensure your organization remains profitable and solvent.
You may very well find that once you scale down a bit, your organization’s cash flow may improve, your own personal income may improve, and most importantly, your stress level may decrease.
You can always scale back up when the timing is right, and in fact, it’s crucial to have a plan in place for that possibility.
If you are managing your business effectively, then:
- You have objectively recognized the need for change in your business or personal life by slowing down while maintaining profitability.
- You have identified strategies to scale back internally without reducing the number of locations, or you’ve made the decision to close or sell certain locations.
- You have outlined a plan for the next phase, even if it’s just a preliminary idea of your future direction.
- You have shed any self-imposed inhibitions, feelings of failure, or guilt, understanding that it’s simply part of doing business.
- You grasp the significance of scaling down as a vital step towards the future growth of both your business and yourself.
In conclusion, the journey of scaling your dental practice is complex and often laden with misconceptions. While the narrative of relentless growth is prevalent, the reality is that scaling back can be just as vital to your long-term success. The insights shared in this article highlight that a well-thought-out approach to scaling down is not a sign of failure, but rather a strategic move towards ensuring sustainability and profitability.
As an emerging DSO, embracing the need to pivot and reassess your operations can pave the way for a healthier business model. The strategies outlined—from optimizing your procedures to focusing on patient-centric care—are essential steps in creating a resilient practice that can thrive, even in challenging circumstances.
Remember, scaling back doesn’t mean the end of your ambitions; it sets the stage for a more robust resurgence when the time is right. By remaining open to change and focusing on what truly matters—patient care, efficient operations, and a sustainable vision—you can not only weather the storms but emerge stronger.
So, as you navigate this path, keep in mind that success is not just about the number of locations you operate but the quality of care and the stability of your practice. Embrace the process, and you’ll find that the journey toward growth can be as rewarding as the destination itself.
Written by Dr. Kartik Antani. Dr. Antani is a practice owner in New Mexico. His goal is to initiate and sustain a meaningful dialogue about the growth from small practices to small groups, addressing both clinical and administrative perspectives. He can be further reached at kantani@gmail.com or 848.
- Read Kartik’s other article: Expanding Your Dental Business from One Location to Two or Three is Easy, Until it Isn’t.
- Watch him on the Group Dentistry Now podcast: The Group Dentistry Now Show: The Voice Of The DSO Industry – Episode 98
