Feb 15, 2023
Creating Efficiency in Your Dental Practice to Maximize Transaction Value
Dee Fischer has decades of experience helping doctors create systems and passion in the workplace. Her company, Fischer’s Professional Group, can do everything from improving your scheduling system to designing your office. Here’s a snippet from our recent conversation.
What are your thoughts on the current state of the dental industry?
I think it’s a great time. I hear people say “recession,” and I see “redirect.” By that, I mean it’s getting people thinking: “Am I going to make that move in two to three years, whether I go from one office to three, or three to 50, or make my exit,” and I love that.
The other day, a dentist asked me, “Should I sell? What should I do?” I said, “Let’s just sit down and put a plan together.” Because there will always be buyers. But what are they actually buying? And I said, “If you have great efficiencies in your practice, our industry is going to stay right where it needs to stay when you go to exit.”
What are the largest DSO companies looking for?
They say, “I want to be able to grow this, but I don’t want to have to plug in 10 or 15 or 20 people to get to where I need to be.” I guess the word they’re looking for is “ease.” If you go back 10 years ago, everyone thought the greatest buy was the most distressed practice in the country. But I think we learned it’s not easy to turn that around. So, the mindset has changed a little bit.
What are some of the key metrics that owners should focus on?
We start by looking at the major key performance indicators (KPIs), which are your staff cost, your supply cost—all those things. Then I say, “Okay, that’s great, but are you looking at the micro KPIs?”
Take AR, for instance. What is that made up of? I was in an office the other day, and the gentleman was saying, “I don’t know why I’m not hitting my cash-flow KPIs.” I asked, “Are you breaking it down by provider?” And sure enough, there was one doctor who had a lot outstanding. After making three phone calls, we found out he was never credentialed with the insurance company, and the checks have been going to the patients.
I went into another office and said, “Let’s dig down into the staff cost.” And they found out that they were too top-heavy. Their staff cost is at 32%, but 18% of it was going to the top level. It was a lot of redirecting of great talent. But if they didn’t look at the micro KPI from the staff salaries, it just would have been, “Okay, our bucket’s too full.”
How do you deal with the difficult decisions that KPIs can expose?
You have to think of what’s going to make you better if you want to exit. For instance, we diagnosed 1,000 crowns this year, but we only performed 600. So I say, “Doc, if we had done another 200 at $1,000 each, how much income is that?” And all of a sudden, the lightbulbs go off.
In terms of staff, why don’t we look at all the undiagnosed treatment that’s sitting on the books? And if we were to convert that, would we really be so overstaffed? And can we make the correction without cutting people or just retrain them to do something better?
What issues do you see in terms of workplace culture?
Just yesterday, I saw a disconnect between the executive leadership and the practice. They just bought this great machine, and the doctor thought it was the greatest thing. But people are like, “What is this? We don’t need this; it’s going to make our lives really hectic.” I turned to the doctor and said, “Why don’t we do a training session on what this is going to accomplish so everyone can connect the dots.”
Reminds me of the JFK story when he went to NASA and said, “I’m giving you a new mission. I want you to put a man on the moon before the end of the decade.” Then he came back three months later and asked a janitor, “What do you do here?” The janitor turned around and said, “Sir, I’m putting a man on the moon.”
Exactly. I’m a big believer that everybody has a page in the playbook. They can say, “This is my page in the playbook, and this is what I’m working on,” and it complements the next page, and it complements the executive team. I believe that if you’re complementing each other all the way through the process, your growth is going to be so much greater.
Where do you see the greatest opportunities leading up to an exit?
The thing that jumps out is schedule management and collection management. And by that, I mean we’re going in, and we’re looking at the individual providers. A lot of times, the schedule is very busy, but it’s not efficient.
For example, if you add one crown a day at $1,000 each, what is that going to look like? You’re paying your overhead, you’re paying your assistant, so it’s going to hit the bottom line. And are we collecting that efficiently? If you’re working with insurance, are you getting 76 cents or 80 cents on the dollar? So, I look at those areas really closely because we can make an impact pretty quickly there.
The other thing I’m looking at is their supplies list, from office supplies to are they on a great formulary. Have they really negotiated? There’s a lot of room in those areas that we don’t really pay attention to every day.
If you’re able to bring 10 more cents on the dollar down to the EBITDA with these corrections when you’re going for sale, it’s 10 x 10 x 10, right? It really rolls down and makes a large difference in valuation.
What does it look like when you come in and work with somebody?
We go through every KPI and develop the team’s growth plan and get you ready to exit if that’s what you want to do. It’s a process that takes time. Part of that process is asking, “Do you have the right team of exit advisors?”
Then it’s customizing workflows, customizing the doctor’s mindset and the team’s mindset. I’ve been told that I’m about the only one in the industry who does it like this. It seems to work. We’re giving you a treatment plan for growth and for a sale.
It’s said that 75% are not happy with the sale of their business. Why is that?
There’s a blame game going on. I’m blaming who bought me. But if you had prepared correctly, you’d be a lot happier. The tie for me is really having someone on the financial side holding my hand through the process.
I think the biggest accomplishment for me is when someone walks up and says, “I’m so happy I sold. I’m going to Mexico for five days—see you later!”
