Nigel Jones, Sales Director at Practice Plan, discusses the shift in practice value and long-term business planning and how you can ensure you are on the right track.
In what I suppose is a reflection of a more commercial sensibility within dentistry, it’s been interesting to see how in recent years the term ‘exit strategy’ has gone from being something that might have been occasionally bandied around in debate about military interventions overseas, to a phrase that crops up in at least half of the practice meetings with which I’m involved. Although for some, the ‘strategy’ doesn’t extend much beyond giving a few corporates a call when it all gets too much, for others there is some real thought being put in to maximising the value of their business ahead of a potential retirement or sale several years down the line.
Although NHS goodwill values are still commanding a premium due to the security of cashflow and the perceived insulation from the economic woes of the country, a growing number of those thinking on a five-year timeline to retirement are far from convinced that, with the spectre of contractual changes and time-limited contracts on the horizon, such value will be maintained. Not that conventional pay-as-you-go private practice necessarily provides the answer as is reflected valuations of private practice vulnerable to patients attending less regularly and deferring treatment more frequently in these financially uncertain times.
Membership Base = Confidence
It’s perhaps not surprising then that the development of a significant base of patients on a membership plan is forming an integral part of the exit strategies for many practice owners. Okay, yes, I’ve got a vested interest having championed the cause of membership! So don’t just listen to me, listen to the practice valuers that are saying the saleability of a practice improves with a plan base; listen to the banks who are saying they are happier lending against the more secure cashflow and the greater patient loyalty membership creates; or listen to the corporates who are getting increasingly interested in the acquisition of practices with a substantial membership list.
For those in the NHS, the opportunity to develop a large plan patient base comes hand-in-hand with the decision to withdraw the offer of NHS care from all or some patients and that’s not a decision to be taken lightly. It requires careful analysis of each situation and a comprehensive communications plan to ensure such a transition can happen safely. But that’s a topic for another day.
For dentists already in private practice, including those who may have a small number of patients on a plan, the challenges are somewhat different as the driver to use a plan to facilitate a smooth conversion away from the NHS isn’t there. Despite the differences in circumstance, there remains the need to make sure the plan is well promoted through posters, leaflets and maybe newsletters. This should be backed up with a clear process of when patients, especially those new to the practice, are introduced to the concept of membership and by whom. Of similar importance is the need to ensure all members of the practice team feel confident about their knowledge of the elements of each plan type and in particular, what benefits the plans offer patients.
And therein, perhaps, lies the real nub of the matter: what benefits does your plan offer over and above the option for patients to pay-as-they-go? In so many cases, the quick maths a patient does (the cost of two exams, two hygiene appointments and any other benefits versus twelve monthly fees) when weighing up the pros and cons of joining a membership plan simply doesn’t add up. And it’s not only the patients that do the arithmetic, it’s the practice team as well who will not be able to talk about the plan with any conviction if they are not convinced it’s worth it for the patient and any fresh attempt to develop a plan base can quickly lose momentum and be excused with the thought that ‘plans simply don’t work around here’.
The Key = Relative Pricing
Such a scenario applies to many practices across the UK but what’s encouraging is the growing number that are taking steps to address the issue and, as a consequence, are reaping the rewards. Often, the key is the relative pricing between pay-as-you-go fees and the plan. In some cases, this made sense several years ago but with price rises confined to plan fees and not applied to pay-as-you-go charges, the value of the plan has been inadvertently eroded. Addressing this requires confidence in the benefits of the membership for the practice both for the long-term with exit in mind, but also in the short-term with the knowledge that the more regular attendance of plan patients compared to pay-as-you-go patients is likely to be good for their oral health and for the practice’s cashflow.
An alternative tactic can be the inclusion of additional benefits to the membership and it’s amazing just how creative a practice team can be when given the challenge of making the plan something they would consider joining.
In the last two decades, membership has gone from being a useful tool to retain patient loyalty by making private dentistry more affordable when a practice reduces its NHS dependency, to membership becoming an integral part of the longer-term business plans of independent practices and dental chains alike. This shift has come about for some very good reasons; reasons that make taking steps to address the value of a dental plan in the eyes of both patients and the practice team very worthwhile.