I want to take some time to talk about the following:
- Why You Should Keep Ownership of Your Practice
- What it Would Look Like if You Were to Maximize its Potential
- How Can I Invest in My Practice?
If you are a dentist who owns your own practice, I want you to understand that your dental practice is often your greatest asset. Typically speaking, this asset is going to pay you more than any other asset over your lifespan.
If you make on average $250,000 a year as the practice owner, and you own it for 20 years, this single asset will pay you $5,000,000 dollars over that time period.
If you make on average $400,000 a year as the practice owner, and you own your practice for 20 years, this single asset will pay you $8,000,000 dollars over that time period.
The above figure does not even include the value of the practice itself. We have just been discussing the “dividend” this asset pays. Private Equity and Corporate DSO’s want to buy your practice because they know how great of an asset it can be.
The 4% Rule
One frequently used rule of thumb in the financial space or retirement space is called the 4% Rule. It is a rule of thumb that says, you should be able to live on 4% of your retirement savings. In order for your retirement to provide you an income of $250,000, you would need to accumulate $6,250,000. A 4% withdrawal would be equal to $250,000. This rule of thumb is put in place to guide investors to make sure they don’t withdraw too much and deplete their retirement savings too fast.
“Business ownership is one of, if not the greatest, place to accumulate wealth.”
Business ownership is one of, if not the greatest, place to accumulate wealth. When I conduct Business Strategy Sessions with clients, I like to ask who comes to mind when they think of wealthy individuals. Some of the most common recurring names are people like Elon Musk, Jeff Bezos, Bill Gates, and Mark Zuckerburg. When we think about it, these individuals built their wealth through business ownership.
The point I am trying to make here is that your business is your greatest asset. Therefore, I want you to keep it for as long as possible, but more importantly, I want you to maximize its potential.
So, what does it look like to maximize the potential of your practice?
First, let’s define what it means to maximize the potential of your practice. In a general practitioner’s practice, we like to use the number of $40,000 revenue per operatory per month as the maximum revenue potential. So a 5 operatory practice would max out its revenue potential around $200,000 of revenue per month and a 8 operatory practice would max out its revenue potential around $320,000 per month. This means a 5 operatory practice has the potential to do about $2,400,000 in annual revenue and an 8 operatory practice has the potential to do about $3,840,000 in annual revenue. We have a number of our clients who have been able to achieve these numbers in their practice.
As a practice owner, you should strive to maximize the potential of your business; which means, you should invest into your business until you have maximized its potential. I also find it interesting when I first meet with a client and discover they take money and invest it into the market, i.e. other people’s businesses, but don’t have a plan to maximize the potential of their own business. We already identified that “your” business is likely your greatest asset, and therefore, ideally you should strive to maximize your own investment first.
Where should you invest in your practice?
To start, I think it’s important that we remember our dental practice is a service based business. One of the first places you should invest inside your practice would be in the service. Let me ask you this, who delivers the service to your patients? Your team!
Your team is your greatest asset and should be invested in continuously. Invest in them to be able to deliver a higher quality service.
I have never seen a patient review talking about how amazing your equipment is. Most reviews talk about the team and how well they delivered the service to the patient. However, practice owners tend to focus on equipment when investing in their practice rather than their team. Elite business owners invest in their team through training, coaching and development; they understand by investing in their team, they will provide a better service and experience for their patients and therefore increase revenues.At BIZROK, we specialize in scaling dental practices to their maximum potential. We work with practice owners to create a strategy allowing them to grow and scale profitability, all while training your team to deliver a higher quality service for your patients.
Be mindful of individuals who want you to take money and capital out of your practice and invest in other places before you have reached your maximum potential. Elon Musk made his wealth by building his own companies. Bezos built his wealth in Amazon. Bill Gates built his wealth in Microsoft. Mark Zuckerburg built his wealth in Facebook/Meta.
You have the opportunity to build your wealth in one of the greatest businesses possible: your dental practice.
Tim Johnson is the Chief Executive Officer and Co-founder of BIZROK. After years of experience in leadership roles as an officer in the Georgia Army National Guard, a fortune 500 corporation, local government positions, and helping build a small startup business, Tim Johnson made the decision to launch BIZROK in 2021 with his wife, Lauren. Providing dedicated and proven business coaching and team training processes, Tim uses his expertise and record of success to help elite dental practice and group owners identify their purpose and goals while training them to cultivate, fine-tune, and prioritize leadership development, personal growth, financial training, and more. Using strategic, tailored plans that meet the unique needs of each client, Tim focuses on creating achievable goals that maximize their dental practice and wealth creation potential.
When he is not helping dental practices succeed, Tim loves spending time with loved ones, running, playing golf, and relaxing at the beach. His favorite way to start his day is with a good run, and he enjoys nothing more than ending it with his family!
