The Ten Myths of Practice Management 1

And the Truth that will Set You Free (Part 1 of 2)

by Tyson Steele

The most common type of retirement plan in the United States is an IRA. So, here's an easy question. Do you know what the initials I.R.A. stand for?

If you said "individual retirement account", you're wrong. The initials IRA actually stand for "individual retirement arrangement" -- at least, that's what it says in Section 408 of the internal revenue code, which defines an IRA as a method where you "arrange individually (rather than through a group) for your retirement."

Of course, almost everyone seems to think that the "A" stands for "account", not "arrangement." People even say "individual retirement account" on the news. But it's a myth. They're all wrong. And regardless of how many people call it an account, the facts don't change. The truth is right there in the tax code -- in plain old black and white.

It's the same thing with practice management. Many of the accepted "truths" regarding how to improve your dental practice are just plain erroneous, or at the least, misleading. Most of us believe these myths, however, because they sound so reasonable. Besides, it's the conventional wisdom -- everyone says the same things. Unfortunately, these myths can get you easily disoriented, shifting your focus away from good practice management strategies. And that's the problem -- the more you focus on the myth, the less time you have to focus on the truth.

So, here they are . . . ten of the most pervasive myths in dental practice management and the truth that will set you free.

But before you start, I want to urge you to keep an open mind. After all, many people once thought the world was flat. It sure sounded reasonable. It was the conventional wisdom. Those guys who thought the earth was a sphere sure seemed like they were nuts. But . . . hey, look who had the last laugh.

Myth #1 -- The more information I have regarding practice management, the more successful I'll be.

My associate Mike Farley once started a two-day staff orientation by reviewing the building blocks of practice management. In meticulous detail, he introduced twenty of the best practice building strategies of all time. He told success stories, recounted failures and showed how each simple strategy could have a profound effect on the practice -- lowering stress levels and dramatically increasing profitability.

The next morning, as soon as the whole team had gathered, one of the staff members said, "Mike, you know, I've been in dentistry for more than twenty years now, and I've studied a lot of practice management. So, I hope you don't mind me saying that I listened very carefully yesterday, and I didn't hear one new idea during the whole day. In fact, I even took home all the materials you haven't covered yet. I read the whole thing last night. And do you know what? . . . I still didn't find any new ideas. So, I'm just wondering if you are going to cover anything new today?"

Mike was eager to clarify, so he asked the staff member, "Now, just let me be sure I've got this right. You've studied a lot of practice management, and you listened carefully all day yesterday and read all the other materials last night. You've seen all this before?"

"Yes," she said. "I know this stuff like it's the back of my hand. I was hoping for something new."

"Well," Mike said. "Are you doing any of the stuff you know so well?"

"No, we're not actually doing any of it," she replied. "But we've heard it all before."

Of course, that's the deal with Myth #1. Knowledge is great, but without action, it's worthless.

You see, in many cases we gather more and more information regarding practice management because it keeps us from ever actually taking action. Gathering information is safe. It's hard to fail when you're just gathering information. But taking action is hard. You risk failure. You put yourself on the line. You have to actually deal with

other people.

It's very likely that you already know enough about practice management to create a great practice. You just need to do it.

Sure, it's still okay to attend seminars and read newsletters (especially this one.) But, rather than looking for something new, use those tools as a catalyst to take action.

Because the truth is that gathering more information will not make you successful. It's what you do with the information you already have.

Myth #2 -- Emulate the "gurus" and success will come.

The gurus fascinate me. They practice in facilities with locked doors, serve fresh baked bread, have big screen TVs in the reception area, offer espresso to patients, and go out on the speaking circuit every weekend. They develop new products, write articles, get their MBAs, and even provide consulting services to other dentists. For the life of me, I can't figure out when they actually find the time to practice dentistry. But, hey, what do I know, I'm not a guru.

By all accounts, the gurus have amazing practices. They earn 50% profit, do tons of cosmetic dentistry, and produce more than $1 million each year in towns with fewer than 500 people. Why not emulate them? They've got to be doing something right. You know the saying, "Just find someone who's doing what you want to do and copy them, model them. If you do what they do, you'll create the same result."

Of course, there are two problems with this myth. First, it assumes that the gurus are actually generating the results they claim. And, second, it assumes that your practice situation is in a position to benefit from the implementation of the guru's tactics.

Let's take a look at the assumption that the gurus are actually generating the results they claim. As practice management consultants, we have had the opportunity to analyze a number of "guru" practices. As you might expect, we have discovered two things -- some of the gurus really do have great practices and some don't.

You see, it's quite easy to mislead with statistics. For example, let's say that a guy tells you he's running only 50% overhead. That may be true. However, what he doesn't tell you is that his dad owns the dental facility and only charges the practice $300 monthly rent. In addition, the guru's wife is the top hygienist in the practice, and she's only paid $2,000 per year in order to fund an IRA. In other words, the guru's claim of 50% profitability is artificially overstated. He may have a decent practice, but it's not anything to write home about.

Take another example . . . the guru practice that produces $1 million per year. For some reason, $1 million in annual production seems to convey bragging rights like nothing else. Never mind the fact that someday almost all practices will produce more than $1 million just from gradual fee increases. It's like a magic number. The gurus talk about it all the time. "The Million Dollar Puzzle." "How to Produce a Million." The problem, of course, is that it doesn't matter what you produce. The only thing that matters is what you take home. And, as consultants, we can unequivocally say that we've seen many dentists who have $1 million practices take home amounts equal to or less than their friends who trail them in production by 30% or more.

On another note, I've even heard of gurus who flow their speaker fees through their mediocre practices in order to inflate revenue figures.

The "copy the guru" myth also assumes that your practice situation is similar enough to the guru's practice to benefit from the implementation of the guru's tactics. This, of course, is a pretty big assumption.

Although some of the gurus overstate their performance, many gurus and seminar speakers really have developed fantastic practices. It seems logical, then, that imitating these dentists could generate great results in your own practice. And to a certain extent this is true. However, some aspects of these ultra-highly profitable practices cannot be duplicated.

You see, certain tactics inherently work better in some locations than they do in others. Your ability to sell treatment may never equal that of some of the gurus no matter how much you work at it. Staff members in your practice may have different skills than staff members in the guru's practice. And, importantly, you may not be driven to succeed at the level of the guru. After all, some of those guys are certified work "junkies."

The truth, of course, is that this doesn't mean that you should not emulate any guru ideas. Even the "pretenders" have ideas with merit. Rather, you should pick and choose the tactics that work for you. You should build "your" practice "your" way. Use good strategies that will serve your particular location, team and practice style. Don't try to become someone you're not.

Myth #3 -- My (staff salaries, lab costs, rent, etc.) are too high.

The practice management mantra in some study clubs today goes something like this: "The local staff salaries are killing us. Who could afford this? Our salaries are running 40% of production. We should have all gone to hygiene school. I heard that Dr. John had to marry his receptionist just to lower his overhead."

Of course, it is important to have some benchmarks regarding expected ranges for overhead items. However, you can't assume that any overhead item is too expensive just because you are paying a higher percentage than the benchmark.

Take staff salaries for example. Let's assume that your salaries are running at 35% of production, far above our target benchmark of 28% or less. A natural assumption would be that you are overstaffed or paying too high salaries. But this is just the beginning.

Gradually, this thought will take over your brain. Everything that happens in the practice will be filtered through a portion of your brain that says, "remember, you're paying too much." You begin to dwell on the expense. The next time you give someone a 50 cent raise, you start to add up the additional costs of payroll taxes and retirement plan contributions you will have to make.

The funny thing, though, is that there's not much you can do to lower your gross staff salaries. (When was the last time you heard of someone successfully giving his staff a salary reduction?) Sure, you may be able to lay off a staff member, but this rarely happens. Instead, you feel trapped, destined to suffer from high overhead for the rest of your life.

The truth, of course, is that your salaries, lab fees, rent or other overhead items may be too high. But they are only too high in comparison to your production level. In other words, if you were to increase production and keep all your overhead items close to their current levels, you could substantially "reduce" your overhead.

Take those pesky staff salaries that were running at 35% in our example. If you were to increase production by 20%, your salary expense would be "lowered" to just 29% of production, placing you very close to expected overhead ranges. That's why you can implement a team bonus system even when your salaries are running "too high." Any increase production will more than offset the increased overhead cost.

The truth is that you should quit focusing on overhead reduction. Rather, your energy should go into the implementation of strategies that will increase production.

Myth #4 -- Somewhere, there's an external marketing strategy that will massively increase my profits.

This is one of my favorite myths. It's basically the idea that something "out there" will change your life. All you've got to do is find the genius who invented it, and the "better mousetrap" will fill your practice with new patients who are begging to buy major treatment.

We get calls all the time from dentists who want to know how best to market their practice. They want an ad campaign, mail piece, yellow page ad, billboard or web site that will do what no one has ever succeeded in doing -- generate high quality, rich new patients who want extensive treatment.

Of course, external marketing can work. But it works primarily as a sorting tool. Sure, you may even generate a high patient new patient flow, (I've seen dentists get more than 50 patients a month from a yellow page ad) but the quality of these new patients is highly variable. Thus, out of this flow of patients you must sort for the good ones and then build the kind of quality relationship that fosters referrals. Of course, if your internal marketing strategies aren't in place, this is awfully hard to do.

Once again, this myth helps you avoid taking action. After all, it sure seems like it would be easier to pay for an external marketing program than it would be to improve your case presentations, ask for referrals and make after care calls.

The truth is that all great practices have been built on internal marketing, including high quality patient care and strong patient relationships. Sure, you may do some external marketing to help drive new prospects in the door, but the foundation for success is based on what you do to build those strong long-term relationships. So, stop looking "out there" for a way to get the patients you want. Instead, do the things that you know will generate success. (to be continued . . .)