The Four Entrepreneurial Stages of Dental Practice
Roger P. Levin, DDS
Like most businesses, dental practices go through a series of stages from infancy through maturity. Whether a dentist opens a practice from scratch or purchases an existing one that is underperforming, the practice will experience a series of four "entrepreneurial stages." Practice owners should be able to identify the stage their practice is currently in and know what steps to take to move to the next stage.
Certain general principles are common to each entrepreneurial stage. The first is that the early part of each stage is usually the easiest and most enjoyable. This is because the practice is ready to move forward and has taken certain steps that allow it to operate smoother with less frustration and greater satisfaction. The second principle is that many practices wait far too long to move into the next stage. This costs them lost revenue and income that could have been accrued and also builds higher levels of frustration, which leads to the third principle.
The third principle is that late in each stage, practices start to become overwhelmed, having outgrown their basic operational systems and structure. This leads to a breakdown in systems that can cause even higher levels of stress and frustration. Taking the steps necessary to move into the subsequent stage is often the key to transitioning the practice from stressful, frustrating conditions back to an easier, more pleasant environment.
The fourth principle is that while most dental practices will eventually reach stage 3, unfortunately only a small number are able to enter and sustain stage 4, which is the most financially rewarding and enjoyable stage in which to practice.
Stage 1: Startup
Whether a practice is brand new or one that is newly purchased, for the purposes of this article it is considered a "startup," ie, the general definition of stage 1. Stage 1 has three characteristics:
Hard work. Although the launch of a business is the "hard work" phase, it is generally not unpleasant because a high level of motivation and excitement exists. Startups must watch their overhead; thus, in stage 1 both the doctor and team members wear many hats, doing an assortment of tasks, because the practice typically cannot hire all the staff positions that are reflected in a more mature practice.
Chaos.While "chaos" in a dental practice is usually frowned upon, this is not the case in a startup operation. When chaos is controlled and not exposed to the patients, it is acceptable in stage 1 because the practice has open time in the schedule and systems are not necessarily in place yet. This means the practice can be flexible and less rigid, able to take on emergency patients or those who want same-day treatment. Such flexibility, however, can get chaotic. The chaos that occurs in stage 1, though, is normal in most entrepreneurial businesses.
A lean mentality.Although it may build a beautiful office and acquire the latest state-of-the-art technology, a practice often functions "lean" in stage 1 in terms of day-to-day operations, staff, and inventory of supplies. The practice may open only on certain days of the week as the dentist may be working elsewhere to supplement income. This gradually shifts as the practice becomes busier.
In the later part of stage 1, the practice becomes overwhelmed as these three characteristics begin to no longer work smoothly. Chaos grows and the lean staff becomes overworked. This means the practice is now ready to move into stage 2.
Stage 2: Growth
Stage 2 is a growth stage, and growth will often occur faster than in stage 1. In stage 2 the practice often accelerates rapidly, taking off like a rocket ship, with annual growth levels of 20% or more for a few years. This growth is different than in stage 1, which has high growth percentages but fewer patients and procedures (until the late part of stage 1). Stage 2's three main characteristics are as follows:
Additional staff. In stage 2, overcoming the chaos and the feeling of being overwhelmed that occurs late in stage 1 is achieved by adding more staff personnel and realigning job descriptions. More traditional staffing is put in place both at the front desk and clinically. Hours or days may be added around dental hygiene, allowing the dentist to focus more on doctor-related clinical procedures. As staff positions are added, training must be implemented, and this introduces the early evolution of practice systems that enable better efficiency.
Delegation. The practice now moves from the "hard work" phase noted in stage 1 to the beginning of a process of delegation. The dentist and original team members can delegate tasks to new team members, allowing everyone to focus on their most important responsibilities. For example, a separate staff member may be needed to handle scheduling and telephones versus insurance processing and collections. Throughout stage 2, the practice will continue to grow, and new staff members will be able to absorb and manage many of the additional responsibilities.
Revenue.Practice revenue increases in stage 2 at a faster rate than any other stage. While the total revenue will be higher in later stages, the rate of growth during stage 2 will be intense. As revenue grows, the practice can invest in additional technologies or staff members to create a smoother operational flow.
In the late part of stage 2, practice systems become increasingly less defined, and the practice once again becomes overwhelmed. At this point, adding new team members alone will no longer suffice in helping the practice operate properly or reach the next level of performance.
Stage 3: Maturity
Stage 3 means higher revenue, and it is also the last stage that most practices will reach. This is the maturity stage where practices have slower growth, start to plateau, or slightly decline. In stage 3, the practice begins to lock into a certain type of daily operations. This can be a double-edged sword in that systems that work well in the early part of stage 3 are likely to limit future growth in the later portions of stage 3. Three characteristics are notable in stage 3:
Autopilot. The doctor and team often operate on "autopilot," and the consistent drive for change or innovation wanes. This is not necessarily a bad thing in the early part of stage 3 as the practice reaches a strong level of production and revenue. External factors such as the changing levels of insurance reimbursements, selection of insurance plans, and the overall general economy strongly affect the practice. Overall, the practice operates in a consistent fashion day-to-day but with no specific growth goals.
Systems. Stage 3 is often when practices begin implementing new systems. Such systems will often allow for a growth spurt for several years as they enhance the skillset, daily activity, and performance of the team. The team's knowledgeable use of systems has a direct effect on the overall financial production and revenue of the practice. Systems must be clearly defined and usable by the team so it can maintain a higher level of performance. There are many important systems in a dental practice. Examples include scheduling, financial management, hygiene productivity, the new patient experience, and more. Systems are also essential when adding new staff members who may not have the same skillset or experience as previous team members.
Associates.As the practice evolves and becomes busier, it may consider adding an associate. Associates' chances of succeeding are optimized when the practice has excellent systems already in place to support them when they join.
As noted earlier, stage 3 is typically the last stage that most dental practices reach. Having a mature, successful practice is a commendable accomplishment, but there is one more stage that can push a practice toward an even higher level of financial reward and satisfaction.
Stage 4: Leadership
Characterized by strong leadership on the part of the doctor or owners, stage 4 is reached by only a small number of practices. It is the most financially rewarding and satisfying stage because the practice tends to run with great efficiency and very little breakdown or chaos. For the most part, work is easy, effortless, and enjoyable. Three characteristics in stage 4 stand out:
Leadership. By stage 4, the dentist becomes a clear leader, helping all team members rise to their highest level of potential. Team members can perform at a higher level if they are given the guidance, mentorship, and training that will allow them to do so.
Extreme delegation. At this stage, dentists often have a low tolerance for doing anything other than what they do best, which is dentistry. Thanks to superb delegation, they now are able to arrive at the office, see patients throughout the day as directed by the dental assistants, and leave on time. The team, meanwhile, is able to function at an optimal level and reach its true performance potential.
Financial.Financially, practices in stage 4 typically perform in the top percentiles of dental practices. They build large patient bases, attract new patients, and have high levels of case acceptance. Their operational systems are continually improving, and they are able to manage a high volume of treatment with excellence in operations and efficiency. This process of continual improvement is not accidental, but a natural, intentional outgrowth of how the practice functions.
While this article has categorized four entrepreneurial stages of dental practices, there are always exceptions to every categorization. However, the author has found that most practices move through the first three stages and a minority are able to continue through to stage 4. Practice owners should attempt to identify which stage their practice is currently in, assess the practice based on the characteristics noted above, and determine what changes need to be made to prepare to enter the next stage.
About the Author
Roger P. Levin, DDS
CEO and Founder, Levin Group, Inc. (levingroup.com), a practice management consulting firm that has worked with more than 30,000 dental practices