Maximizing Practice Value Through Improved Profitability

Profitability, also known as Net Cash Flow, is the primary factor influencing the value of a dental practice. Enhancing productivity and strengthening your financial position not only increases personal income but also boosts the marketability and overall value of your practice when the time comes to sell. Below are key strategies to improve efficiency, optimize revenue, and enhance practice profitability.

Optimize Your Fee Schedule

• Annually increase your Usual, Customary, and Reasonable (UCR) fee schedule by 1–3%.

• If you participate in PPO insurance plans, routinely review and update your fee schedule to negotiate higher reimbursement rates.

• Consider hiring a professional service (e.g., Five Lakes) to assess PPO participation and negotiate more favorable fee structures.

Flexible Payment Solutions

• Offer patients extended payment plans through third-party financing providers like CareCredit.

• Implement an in-house payment system that allows patients to set up recurring credit card payments.

Expense Management & Overhead Reduction

Conduct a financial analysis of your practice to identify areas where costs can be reduced. Compare your major expenses against industry benchmarks and make necessary adjustments:

• Staff salaries (including benefits & payroll taxes): 25–27% of revenue

• Rent & utilities: 6–10% of revenue

• Lab expenses: 6–10% of revenue

• Dental supplies: 5–6% of revenue

• Office supplies: 1–2% of revenue

• Advertising & marketing: 2–5% of revenue

• Total practice overhead: Aim for 60% or lower

Enhance Your Online Presence & Patient Communication

• Upgrade your website by incorporating patient testimonials and highlighting unique aspects of your practice.

• Implement an automated patient communication system for recall notices and newsletters via email and text messaging.

Boost New Patient Acquisition

• Train your team to ask for patient referrals: “We appreciate having you as a patient. How can we encourage more patients like you to visit us?”

• Send thank-you notes or offer small tokens of appreciation to patients who refer friends and family.

• Strengthen your online reputation by encouraging satisfied patients to leave positive reviews on Google and Yelp. Consider utilizing marketing services to streamline this process.

• Provide staff members with business cards and incentivize them to bring in new patient referrals.

• Track referral sources and eliminate marketing efforts that do not yield a strong return on investment (ROI).

Strategic Financial & Operational Adjustments

• If your practice carries debt, explore loan consolidation options at lower interest rates to free up cash flow for marketing and equipment upgrades.

• Lower disability and health insurance costs by adjusting elimination periods and deductibles.

• Renegotiate lease terms as your agreement nears expiration. Landlords may offer lower rates or improvement allowances in exchange for a lease extension.

Team Engagement & Performance Optimization

• Hold regular team meetings to brainstorm strategies for increasing patient flow, enhancing efficiency, and reducing overhead.

• Set daily, weekly, or monthly production and collection goals, and implement an incentive program to reward staff for meeting targets.

• Evaluate staff performance to ensure that each team member contributes positively to practice growth. Consider replacing underperformers with high-achieving employees.

Patient Experience & Retention

• Follow up with patients post-appointment to check on their well-being. A personal phone call or handwritten note for new patients can leave a lasting impression.

• Conduct patient satisfaction surveys to assess and improve upon key areas such as:

  • Staff friendliness and attentiveness

  • Appointment scheduling efficiency

  • Clarity in explaining treatment options and costs

  • Comfort and ambiance of the office environment

  • Availability of insurance and financing options

  • Convenience of office hours

Preparing for a Future Sale

• Maintain accurate financial records and report all cash collections.

• Minimize discretionary expenses through the practice’s financials in the 2–3 years leading up to a potential sale.

By implementing these strategies and maintaining a strong focus on profitability, you can ensure the long-term success of your practice while positioning it for maximum value when it’s time to transition.