Do you currently have a business plan?
It’s a simple question. And the answer for most dental practices and indeed the majority of small to medium size businesses in Australia, is also simple – No.
Yet, we all know the many benefits of creating and following plans. In fact, many of us use planning all the time, from patient treatment plans to creating the perfect holiday – so why not for our businesses?
The answer is not as simple as it seems. There’s a combination of factors, but a major reason, ironically, comes from the accounting sector. Most small business, including dental practices, use local suburban accounting firms that are little more than bookkeeping services. If you think our profession is seeing an over supply of dentists, consider the figures within the accounting sector.
The number of students finishing accounting degrees skyrocketed by 500 per cent between 2001 and 2012 and as a result the sector now has a 20 per cent unemployment level. Many of the accountants who move into suburban practice have never written a business plan outside the classroom and don’t even write a business plan for their own business. These same accountants usually never create large businesses for themselves, have the same failure rate as other small businesses and never grasp what makes a successful business.
The other major reason why business plans are not prevalent in smaller business is cultural. Research shows that business owners with an annual turnover under $5m believe that business plans are some lofty document that will cost the earth and is only relevant for large companies. In dentistry, creating a business plan was not discussed at dental school, introduced by the family lawyer or accountant and most practices are born with little or no market research, no real differentiation in the market place, no value proposition and little in the way of systems and financial planning.
Creating a business plan has always made sense for every business including dental practices. However, lets face it, in previous years the sector had the luxury of high demand and a under supply, so if you opened a practice ten years ago, chances are you would automatically become busy enough to pay the bills pretty quickly. But that luxury is now a thing of the past and the dental profession faces the same challenges as the rest of the business community.
According to Forbes, the number one reason eight out of 10 small businesses fail in the first five years is the lack of a coherent business plan. These alarming numbers are almost reversed when we look at companies that seek proper legal and accounting advice and have a solid business plan in place.
One of the top tier accounting firms will charge around $30,000 to develop a business plan. A mid tier firm about $18,000 and the local suburban accountant probably won’t quote as they would not know how to write one. If you had a daughter or son starting a new small business and you knew by spending $30,000 with a top accounting firm you could reduce their chance of failure from 80 per cent to 20 per cent – do you think a business plan would be a wise investment? Of course it would.
Now the statistics of failure within the dental sector on the face of it do not seem anywhere near as shocking as very few practices fail to the degree of the trading entity being closed and put into liquidation, which is the measure failure statistics are published. But failure can be measured in other ways.
Years of education to become a doctor and then ‘just getting by’ is a good result, nor is not developing a business that functions at a high level in every way and is enormously rewarding both financially and from a personal satisfaction point of view.
If you look at the great business people around the world, including some dentists, you will find a number of commonalities between them:
- They write highly comprehensive business plans
- They seek out mentors
- They only take advice from people who have proven themselves
- They have a strong vision of what they wanted to achieve
- They create real points of differentiation
- They communicate value propositions in clear, concise and compelling ways
- They have a marketing plan
- They understand their leadership style
- They are ‘in-touch’ with their customer’s needs and wants though deep dialogue
- They are committed to systems.
One of these great business people is Dr David Penn.
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