It is not uncommon today to see dental practices struggling to pay the bills. Default rates for practice loans are as high as five percent. Looking at two decades worth of history regarding dental practices, a dentist named Michael Warm came up with a number of reasons why practices fail. Here are a few that perhaps you’ll be familiar with in your own practice.
Two of the most common reasons for failure are also the most obvious – a lack of cash flow and working capital. You probably thought you had plenty of working capital when you got your loan to start your business. The logic is that the loan gets your practice set up with all the equipment you need and your growing list of clientele provides you with all the cash flow you’ll need to grow your business from there. Unfortunately, too many dental practices get into a situation where they’re spending more than they bring in, and there are a few reasons for this, one being the number of patients who don’t keep current accounts.
Often, the best use of start-up capital is not only to outfit the office, but also to market the services the practice can offer clients. Aggressive marketing is a priority, or at least it should be.
Using capital funds for marketing is definitely a wise use of the money. What is unwise and can lead to trouble later is using capital funds as an emergency account. However, if they are ever dipped into for any reason other than business growth, it’s important to replenish them as soon as possible.
When you present your patients with a recommended plan for better dental health, they weigh the cost against what they can afford and whether they think they can do without the recommended treatment. While most businesses will say they have an 80 percent acceptance rate, according to Dr. Warm, that’s misleading. They might see eight out of 10 patients agree to the recommendation, but the two who don’t are the ones presented with the most costly procedures. A low acceptance rate, by quantity, is another reason practices fail. Taking an accurate measure of your acceptance rate is the right step to take in finding room for improvement. Most dentists find that expressing the true value of the expensive procedure is the weak link for them.
It takes an investment on your part to bring in new clients. Dentists who fail to see this will surely witness a decline in business. We’re back to talking about marketing again. You spent money on marketing when you started your business. Unfortunately, it’s an expense that shouldn’t go away. Keep in mind that for every dollar you spend on marketing, three should come back to you.
Regardless of how much you work on improving your bottom line, you’ll have patients who refuse to keep current accounts. When partnering with a third party debt collection company to manage your accounts, you’re better positioned to collect every dollar that’s owed to you. This is where Omega-RMS, llc., excels. Call us today and find out how our solutions can help you improve your cash flow by collection on payments that your practice depends on.