Maximizing the Value of Your Dental Practice - Part 1: Growth
What can you do now to make your dental practice more profitable now, and more valuable in the future? In our next series, we will explore the CoreValue framework of value drivers — a set of factors that impact the value of an enterprise. All of these value drivers also make your practice more profitable now. The first value driver we’ll examine is Growth.
A firm with steadily growing revenues is more valuable than one with stagnant or declining revenues. For a dental practice, growth in revenues comes from two main sources: an increase in the number of patient visits and increases in revenue per patient visit.
Growing your patient base
Steady growth in new patients is a sign of a healthy practice, especially when those new patients return year after year. New patients arrive at a dental practice from two primary sources: referrals from other satisfied patients and awareness from marketing. For specialty practices, your referrals will likely come from other dentists whose patients are in need of your services.
Growing your practice via referrals is virtually free, especially compared to the costs of advertising. A steady stream of referrals is a direct reflection of the systems you have in place to delight your patients and the excellent service you provide.
This type of growth will ultimately be limited by the physical capacity of your practice. Once you and your staff are fully booked, you can only continue growing by hiring additional staff, bringing in associates and possibly getting a bigger office. Be careful when you expand that you don’t lose the qualities that made your practice attractive to your patients. And make sure that your additional costs from expansion don’t destroy your profit margin.
Making more money from each patient
Another way to grow your revenues is by increasing your revenue per patient. This can be done in two ways: raising your prices for the same services or adding specialty services that patients willingly pay more for. Practices that do this understand that some people are willing to pay more when they feel they have received exceptional value for their money — the same reason a new Rolls Royce costs much more than the ten-year-old Honda at the used car lot.
Growing in this way means that revenues are not constrained by capacity, but only by your imagination. Besides raising your fees, you can also provide additional services to patients. Tracking revenue by staff member in your office may be helpful here. Find out what your highest performers are doing differently, and teach everyone else to do the same things.
--Melissa Ackerman, Analyst