Understanding the Fundamentals of Operating a Business

Most dental clinicians are not accustomed to or comfortable with managing their businesses. How can they be? The general dentist is the primary revenue producer (2/3 dentist and 1/3 dental hygiene) and needs to be chairside generating income 95 percent of the time. Practicing dentistry and running a successful and profitable business is not easy. As colleagues, we all know dentistry can be demanding, both physically and emotionally. 

A December 2015 study published in Dental Economics revealed that only 7 percent of dentists enjoy managing their businesses. In other words, 93 percent of dentists do not enjoy their management roles and would prefer to focus on providing dental treatment and leave the administration to others. Intuitively, this makes sense, as most dentist were science majors, not business majors. Herein lies one of the problems.

Few dental offices employ office managers who have a comprehensive knowledge or formal education in the basics of managing any type of business. Instead, most clinicians rely upon front-office employees who have acquired their knowledge through on-the-job training or from others who may be ill-equipped and lack the comprehensive knowledge to train them. The results can be catastrophic. This is the reality in most dental offices across the country.

As a clinician and dental analyst who uses data and metrics to make informed decisions, I am astonished at the number of colleagues (new and experienced) who are being taken advantage of by staff, vendors, landlords, corporate dental offices and insurance companies. And because many clinicians haven’t received formal business training and don’t possess a thorough knowledge of how to operate a business, they simply don’t know what they don’t know. Many owners are afraid of change and/or admitting that they need help. I have witnessed far too many great clinicians who have left hundreds of thousands of dollars on the table.

Speaking of insurance companies, can you name all of the insurance companies your front-office managers have signed up for, your unified carrier registration fees and the percentile within your area? Were your fees balanced before your office manager negotiated with the insurance company? If not, you just lost money that you can never recover. Can he or she really negotiate on your behalf? What leverage do they have? How about the back-door arrangements and umbrella of insurance companies that affect your in-network status? Maybe it would be good to ask your office manager to review this with you next week. Understanding dental insurance is a full-time job. Maybe you could hire a dental insurance adjudicator who has worked for an insurance company and has a comprehensive knowledge of the dental industry.

Remember when you prepared your first crown? Your first set of veneers? Your first full-mouth rehabilitation in a patient with a gummy smile? It took time to learn how to diagnose and treat the case properly. Learning how to manage your business is no different. Our dental school curriculums have failed to provide the graduating dentist with a comprehensive knowledge of the business of dentistry. I suspect this is associated with time and money and the fact that there are many lifetime dental instructors/academicians who are not educated in this field. They may be great dental school instructors, but they can’t teach what they don’t know.

For those owners who run lean, efficient operations supported with systems, processes, excellent human capital, monthly review of all key performance indicators, return on investment (ROI) on marketing efforts, call tracking systems and a thorough understanding of their surrounding demographics, congratulations! For those who are struggling to survive and haven’t experienced a successful business operation, you need to take the time and learn how to do so. Surround yourself with mentors and experts in your field who have walked in your shoes and possess a comprehensive knowledge clinically and operationally and have the business acumen to help you. Your return on investment should conservatively yield you 10 times the cost of a qualified mentor or expert over your career. As the great golfer Lee Trevino said: “I don’t need advice on how to correct my swing from someone who hasn’t stood on the ninth tee at the Masters with the world watching.”

Historically, the dental profession has been fortunate to have realized net profit margins of 20–50 percent and beyond. Other industries would be ecstatic with a 10 percent net profit margin. For example, the big-box wholesaler Costco reported a 2.09 percent net profit margin for the fiscal year ending August 2015. Imagine if we had to operate on such low profit margins. Or, the grocery business that routinely operates on a 1–2 percent net profit margin. No wonder corporate and big-box dentistry is growing and will continue to do so. Why wouldn’t they?

Remember the saying, “Follow the money?” We all want to make sound financial decisions and maximize our ROI. In order to maintain and increase our profit margins, we need to take the time to understand the fundamentals of operating an excellent business built upon great leadership, systems, processes, human capital and continuous improvement. I have seen way too many dental offices that are struggling to make ends meet. Don’t wait until it is too late. We have all invested substantial money and time in our educations, and we deserve more.


Duke Aldridge, DDS, MBA, MAGD, DICOI, MICOI, FMISCH