Dentaltown April 2022 - 57

by Dr. Victoria Peterson
Dr. Victoria Peterson,
co-founder and
CEO of Productive
Dentist Academy,
combines her lifetime
of entrepreneurship
with a doctorate in
spirituality. Her latest
book, Building an Investment Grade Practice,
will be released in summer 2022. For more
information, visit productivedentist.com.
What would it feel like to know the exact
date you'd achieve financial freedom-the
moment that you wake up each day excited to
go to work, not because you must financially,
but because you truly enjoy what you do?
Sadly, for nine out of 10 dentists, this feels
like wishful thinking.
It has been reported that 95%-96%
of dentists cannot retire at age 65 and
maintain their lifestyle.1
In a typical career
spanning 30 years, nearly $30 million
will flow through your business, yet most
dentists can't overcome their overhead to the
point of creating true wealth. The reality is,
most dentists fall short in receiving what is
deserved at the time of transition.
It doesn't have to be this way: The top
5% are not significantly different than the
rest. Top-performing owners focus on key
areas of business that make all the difference.
In the process, maximum value is created.
We call this building an " investment-grade
practice " (IGP).
Defining the terms
Applying Wall Street terminology to
your dental practice is appropriate because
shifting your language from that of a practice
owner to that of an investor is the first step
to achieving financial freedom. Here's how
financial education website WallStreetMojo
defines " investment grade " :
" A rating of fixed-income bonds,
bills and notes by credit rating agencies
like Standard and Poor's (S&P), Fitch
and Moody's, which signifies a low risk
of default. The rating determines the
creditworthiness of companies based on their
financial strengths and structure, past data
and growth potentials. Companies with
good levels of debt, debt repayment, good
earning potential and growth will have
good credit ratings. "
The keys to success are written in this
definition: optimizing earning potential,
creating predictable growth year over year,
balancing debt, building durability into
the systems and a structure for ongoing
success. It sounds easy enough, so why is
it so hard? Two things set IGP practices
apart: profits and career satisfaction. Let's
visualize why so many average practices
fail to thrive.
* The average dentist produces
$400 per hour.
* The average practice collects
about $725,000 including
hygiene revenues.
* Average overhead (including
owner salary) is 90%.
* Revenues increase about 5%
year over year.
That leaves only $72,500/year to service
debt and new growth, and fund retirement.
Owners who operate in a business-asusual
fashion typically experience growth
of 5% per year. Moving from $725,000 to
$763,000 to $803,000 over three years may
feel like adequate growth, but when you layer
in inflation, increased salary requirements
and continuous decreases in insurance
reimbursements, profits get squeezed. What
appears to be a growing practice is often
barely treading water.
The business life cycle
Visualizing your business life cycle as a
bell curve from the beginning of your career
through the long midcareer phase to contemplation
of selling might look something like
Fig. 1. Notice that the average practice peaks
long before it hits the optimization curve.
Even practitioners who elevate to $600 per
hour in productivity-about $1.1 million in
office revenue-create a very comfortable
living but may be compromising their ability
to fund their lifestyle in retirement.
Top-line revenue is only one data point.
The more informative piece of information
is the net income, often referred to as
EBITDA (earnings before interest, taxes,
depreciation and amortization). You may
have a healthy top line yet suffer high
overhead because of:
* Team turnover, creating loss
of continuity with systems and
rising wages.
* Downward pressure on fees from
insurance reimbursements.
* Increased regulation.
* Lack of business education for topics
such as taxes, accounting, legal issues,
HR and lease negotiations.
* Physical discomfort and mental
fatigue, slowing down productivity.
These financial pressures often lead to
a disorganized, chaotic and stressful work
environment. Remember, the difference
between business as usual and an investment-grade
practice involves profits and
career satisfaction. With this type of stress,
both happiness and profits suffer.
dentaltown.com \\ APRIL 2022 57
http://www.productivedentist.com http://www.dentaltown.com
Dentaltown April 2022

Table of Contents for the Digital Edition of Dentaltown April 2022
