Creating a business plan

Success doesn’t happen by accident. It requires a plan. Obviously, dental school was part of your career plan. You have learned the clinical skills to become a successful dentist. However, to achieve a rewarding career, you will also need to become skilled at the business side of dentistry. 

One of those skills is learning how to create a business plan. Many dentists learn too late in life that being a successful dentist means not only being an excellent clinician but also understanding that they are the CEO of a business. Whether the company is large or small, successful CEOs operate with a business plan. It is important for two primary reasons. One is the future success of the practice, and two is initial financing. A business plan is something that lenders require for most new businesses. 

Associate or practice owner? 

Dr. Roger P. Levin.

Before creating your business plan, there are questions that you must answer. Do I want to own a practice, or do I want to be an associate? If I am going to be an associate, is it a short-term arrangement, or is it a committed career choice? 

Those who choose to become associates have a much simpler work life in many ways -- but not all. As long as your relationship with the owner and staff is solid, and you make your patients happy, life is good. You will not have the day-to-day management and staffing issues or be financially responsible for the liabilities of the practice. In exchange for a simpler career choice, you forego the upside of the profit potential that practice ownership can provide. 

Once you have answered the question of ownership versus associateship, your business plan becomes the next order of business. If you decide that being an associate is your path, you should review the business plan of the practice you are considering joining or help create one with the existing owner. 

By doing so, all parties are fully aware of the expectations of the others involved, which will minimize the likelihood of unpleasant conversations in the future. It may also help you choose which practice to join. Those who are committed to this process tend to treat the practice more like a profitable business that rewards all team members. 

Should you decide to start your own practice, you are no longer only a dentist but also the CEO of a small company. With that title comes enormous responsibility and equal opportunity. The business plan helps you to determine if the opportunity is worth pursuing and whether it will be as profitable and rewarding for you as it should be. 

A business plan defined

A business plan is a fairly simple concept, yet it requires significant thought. While the framework of business plans vary, the major components are: 

• An executive summary
• Vision and goals
• Market analysis
• Operational analysis
• The numbers 

An executive summary 

In this portion of the plan, you outline the business concept for your practice. Will you accept all or some patient insurance, or will you operate a high-end, fee-for-service-only practice? Do you plan to be a two-chair or a 12-chair practice or somewhere in between? 

You must define your business concept and think through exactly what you want your practice to look like. What differentiates your practice from others in your area? What factors are critical to your success other than your clinical skill? After you have summarized your business plan, it is time to dig into the details. 

Vision and goals 

To build the practice of your dreams, you must first commit those dreams to paper in the form of a vision statement and a set of goals. The vision statement is a short two- or three-sentence description of the practice. All of your short-term and long-term goals must take your practice closer to your vision. The milestones set out in your business plan should be specific, measurable, attainable, and time-specific. 

Once the vision is clear and goals have been identified, analyzing the current market is the next step in building your business plan. What is the market for patients in the practice’s geographical area? What is the overall size of the population? What changes are occurring? What portion of this population will be your target audience? 

In addition, specialists should consider how many potential referring doctors are in the area. What are the characteristics of the patient base? What are their needs? What would cause them to choose your practice? 

Market analysis

To perform a market analysis, here are some of the questions you should ask:

• How many competitors are already in the community?
• For specialists, what competition exists for referring doctors?
• What changes have taken place in the recent past?
• Are there many small competitors, or is there a dominant practice or two in the market?
• What is the potential for short-term and long-term growth?
• What opportunities exist in your market that are not being served by other practitioners?
• What are the risks and threats to you from your competitors? 

You have already identified the market and the competition, which sets you apart from many in your field. The next step in building your success is defining your strategy. Here are some questions you should ask about your practice: 

• What are your practice’s key competitive advantages over your competitors
• What are your weaknesses, and how can you work to improve them?
• What strategies will you employ to attract new patients and retain them after their initial visit?
• Who will implement these strategies: you or your staff members?
• How will you position the services and range of treatments you provide in the competitive landscape?
• How will you augment your services in the future? Understanding the competitive arena and how your practice is positioned is quite possibly the single most important element of your plan. 

Once you have gotten to this point, you have figured out most of your business plan. The next step is determining how you will let others know about your business. Some dentists open a superior practice only to close or suffer the expense of moving the office to a different location later because of a lack of patients. 

If you are the world’s best clinician, it will not mean very much if you are not treating enough patients in your office or if your average production per patient is extremely low. You must develop an effective marketing strategy to let people know that you are open for business. 

Operational analysis

Another key ingredient in developing your plan is to design an operational strategy. What level of staffing will you need? What days and hours will you be open? How many staff members will you employ in nonclinical roles and how many in patient care? How will your schedule be developed? How much time will each procedure take, and how should your ideal day be scheduled? There are consultants who can help you with the operational elements of your practice and help you implement the right operational structure. 

The numbers 

All of these areas involve projections of various costs and expenses, along with projections of income streams. This leads to the final element of your business plan -- the creation of your financial statements. You will create two financial statements: the income statement and the balance sheet. 

The income statement will project your income and expenses and help you determine if the practice has profit potential. 

The balance sheet lists your assets and liabilities and will determine if there is sufficient value in the practice for future financing or sale. Your accountant will use both of these statements to develop a series of ratios to determine the financial health of your practice. 

A business plan is vital to the success of dental practices. After determining what kind of practice you want to have, you must establish a practice vision that defines where you want to take the practice and goals that are specific, measurable, attainable, and time-specific. You also need to look at the geographic area to decide what differentiates you from competitors. Once these have been accomplished, you are well on your way to creating a practice that will be profitable now and in the future. 

Dr. Roger P. Levin is CEO of Levin Group, a leading practice management and marketing consulting firm. To contact him or to join the 40,000 dental professionals who receive his Practice Production Tip of the Day, visit LevinGroup.com or email [email protected]. 

The comments and observations expressed herein do not necessarily reflect the opinions of DrBicuspid.com, nor should they be construed as an endorsement or admonishment of any particular idea, vendor, or organization.