June 30, 2023
How To Increase the Value of Your Dental Practice
There’s no one-size-fits-all approach to increasing the value of your dental practice. Understanding the value of your dental practice can be an asset, regardless of whether or not you are in the process of selling your practice. “It’s surprising that many dentists don’t even know the value of their practices,” Professional Transition Strategies (PTS) Founder and President Kyle Francis said.
At PTS, we know transitioning ownership of your dental practice is an intricate process, and we are here to guide you through it. As (most likely) your most valuable asset, your dental practice is worthy of the time and investment it takes to seek an appraisal.
But first, you may wonder:
- What is the most common way to value a dental practice?
- Can a dental clinic increase sales?
- Are there multiple ways to value a dental practice?
- How do you value a private dental practice?
- What are the values of a dental practice?
- What are the qualities of a good dental clinic?
- How much is one client worth to a dentist?
- What is the failure rate of dental practices?
We’ve put together a comprehensive list of considerations to make when looking to increase the value of your dental practice.
With inflation at its highest level in 40 years, dental entrepreneurs continue to feel the economic pressure to remain profitable. Studies have shown increasing fees by 1% in 90-day increments allows time to evaluate patient reactions. The goal is to increase fees by 5% to offset inflation and increase profitability. But don’t just increase fees without notifying your current patients; communication is key here, including why and how often you plan to raise fees, so your fee schedule stands the test of time.
Amp up your interior
In the best interest of staff and patients, dental entrepreneurs have started redesigning their spaces thinking in terms of optimization. The layout of a dental practice should enhance efficiency and flow while creating ease of movement, reducing stress and saving time. This could be the difference between functional and psychological needs that consider the flow of movement, plus open versus closed spaces in response to air quality and aerosol containment. What’s more, defining zones for the public, clinical staff and team helps to avoid cross-contamination and implement engineering controls and air quality measures.
Reach out to new patients
With a dental practice, whether new or existing, there are small but impactful ways to attract new patients. Maybe you’re looking to expand your services as the industry continues to move away from solo private-practice specialty providers toward collaborative multispecialty practices. Or perhaps a change in geographic location will not only inevitably attract new clients, but also present the opportunity to upgrade equipment and offer new services. If diversifying your insurance options is part of your plan, consider reaching out to small businesses.
Establish goodwill with existing patients
Hard assets, like equipment, are only worth what it will resell for rather than what insurance will pay for it and are therefore easy to put a price tag on. However, what makes up the majority of your practice’s value — as much as 80% — is its goodwill, those non-categorized assets for tax purposes that assist in the valuation process and help obtain the appropriate financing for the transaction. This can be as simple as community status, patient relationships, and staff loyalty and longevity. Best of all, you can put your efforts to work come tax time, according to the American Dental Association (ADA).
Get involved in the community
It’s one thing to treat your patients and staff with compassion and care, but if you’re not extending your reach into the dental community as a whole, you’re missing an altruistic opportunity. You could certainly donate a certain percentage of your profits for a tax write-off at the end of the year to a cause near and dear to your heart, but choosing to partner with one particular organization, like PTS does with Give Back a Smile, will leave a lasting impression on those involved. By attaching your name to a nonprofit, you receive the added bonus of name recognition within the community and those it serves. It’s a win-win for your dental practice and the charity.
Implement a life plan
Even the most successful dentists need to rediscover their passion for their life’s work. A paradox exists between being busy and feeling unfulfilled while being established in a career but needing an exit strategy. When owning your own practice, it can be easy to get lost in managerial responsibilities and forget the clinical reasons you got into dentistry in the first place. Creating a comprehensive life plan that strikes a balance between personal and professional goals will help get you started on the right path.
Ensure a passionate, cohesive dental team
The old adage “money doesn’t buy happiness” mostly holds true when talking about employees at your dental practice. Sure, there’s something to be said for paying your staff a decent wage that stands up to your competition, but a fair salary isn’t the only factor to motivate your team. These days, employees also want to know how their performance fits in with the rest of the company, what culture the company is setting and what role leadership plays in all this. It will only help you get ahead in the wake of the dental market hiring crisis and staffing shortage.
Keep your website updated
When looking to make a switch, most people want to know the bio of the dentist, what kind of procedures you do, what types of insurance you accept and more without having to pick up the phone. According to Stanford University, 75% of people judge the credibility of a company based on its website design. However, optimizing your website may seem like just another task to add to your already-full plate. A marketing professional will make sure your website is mobile-friendly, loads quickly for visitors, ranks for those all-important search terms and generates new leads for your business. Best of all, you’ll be proud to show off your hard work to new patients and even potential buyers, like dental service organizations (DSOs).
Use social media
As part of your team of advisors, a full-service marketing agency will help you establish your practice once the sale has been made. This will help you not only know your patient demographics, but also how they found your dental practice in the first place. How much are you spending to acquire each new patient? Having a single point of contact can help you answer this question and more. In addition, social media can keep current patients up to date with any changes happening at your dental practice, like a relocation or the addition of teledentistry appointments.
Don’t have the budget for a marketing agency or specialist at the moment? Consider trying ChatGPT to come up with social media prompts.
Invest in practice management software
Switching to a cloud-based management software will save your dental practice time, money and physical space with backup, integration and virtual access capabilities. But before choosing which software is right for your dental practice, you’ll want to look at ones specific to multi-location dental practices, local practices, and new or established practices. Oftentimes, the right software can end up saving you in overhead costs in the long run, from the front desk and back office to overall clinical workflows.
Test the latest technology
Advancements in computer processing, data analysis and cloud computing have driven the convergence of innovation and technology in dentistry. Graphical processing units, Internet of Things (IOT) devices, advanced algorithms and application programming interfaces (APIs) will all contribute to the evolution of technology in the dental practice to make it smarter and more useful, and in turn, grow your dental practice in ways you didn’t think were possible. Think artificial intelligence (AI) to support dentists and front-office staff, 3D printing in restorative dentistry, and augmented reality (AR) in the world of cosmetic dentistry and orthodontics.
Employ practice measurement tools
It’s easy to get wrapped up in the day-to-day responsibilities of running your dental practice, but unless you’re taking stock of the key performance indicators (KPIs) driving your business, you’re likely missing opportunities to grow and diversify. While there are many ways to measure the success of your dental practice that dictate which business decisions to make, focusing on patient demographics, financial statistics and patient satisfaction will help you improve profitability and increase efficiency.
Above all, you’ll want to make sure the value of your dental practice doesn’t drop during a transition of ownership. With so much going on during a dental practice transition, it’s easy to let things slide off your radar. A common and honest mistake is letting the fair market value of your practice wane leading up to the proverbial changing of the guards. Contact the experts at Professional Transition Strategies to receive a free valuation of your dental practice as it stands.
- 1Dentistry IQ, “Now is the time to find out what your dental practice is worth,” https://www.dentistryiq.com/practice-management/practice-transitions/article/14182054/now-is-the-time-to-find-out-what-your-dental-practice-is-worth.
- 2ADA News, “Taxes: What dentists need to know,” https://adanews.ada.org/ada-news/2023/march/taxes-what-dentists-need-to-know.
- 3Stanford Web Credibility Research, “Stanford Guidelines for Web Credibility,” https://credibility.stanford.edu/guidelines/index.html.