by Roger P. Levin, DDS
For more on this topic, go to www.dentaleconomics.com and search using the following key words: practice cycles, practice start–up, growth, maturity, decline, economic change, consultants, corrective actions, Dr. Roger Levin.
Has your practice slowed down recently? Or maybe your office is in that exciting phase where you're on fire and growing faster than you can manage. No matter what stage your practice is in, it's just one of the various cycles practices can experience over time. Each stage brings with it unique challenges, financial concerns, and particular team issues. Knowing what stage you're in can help you maximize the opportunities and avoid any pitfalls.
Understanding business cycles
As a third–generation dentist, I remember hearing about my grandfather's practice. It simply grew every year. Whether there was a recession, inflation, or any number of variable conditions — the practice just grew yearly. Today, many dentists believe that, like my grandfather, their practices will likewise continually grow. However, it's a new day in dentistry. Dentistry has become like other businesses with similar pressures affecting practice growth or decline.
In every Management 101 textbook, the reader learns about the basic business cycles — expansion, peak, contraction, decline, etc. Inevitably, every practice will move through some of these cycles. There are practices that move into cycles of plateau or early decline, while other practices momentarily stall, and then become reinvigorated. There are no guarantees that any dental practice will emerge from a slowdown with growth as the next logical phase.
The challenge today is to create a business plan that allows dental practices to grow continuously. Proactive planning is absolutely necessary for continued growth. When Levin Group analyzes new client practices, we look for evidence that the dentist has taken steps to ensure continual growth. Increasingly, we find more practices remaining in a flat or plateau phase, due to factors such as competition, advertising, insurance, staffing, new services, and technologies.
Four stages of the dental practice business cycle
Levin Group has identified four stages of the dental practice business cycle. As you can see in Fig. 1, the four stages create a curve. These stages are:
- Start–up
- Growth
- Maturity
- Decline
Start–up phase
The first stage of a practice is the start–up mode. Almost all start–ups grow unless they are so overcapitalized that they cannot pay down their debt. The start–up phase is an exciting time for both the doctor and team. In the first two or three years, practices can literally undergo exponential growth.
Growth phase
Levin Group identifies early growth, middle growth, and late growth as practices move toward maturity. Most practices will go through the growth phase; however, different practices will reach higher levels of growth at varying speeds. How quickly a young practice achieves high levels of growth is often determined by its systems. Some practices continue with their existing systems and hope growth occurs when the community discovers them. Others are very proactive in their systems development, customer service, and marketing. During the last 23 years, we have seen many young practices experience explosive growth when the right systems and marketing are in place. This transformation can be enhanced by either business know–how or the outside guidance of consultants.
Maturity phase
Maturity is a flattening out of the practice. In many of the seminars I present, dentists will remark that their practices have become flat. I explain that they are probably in what we refer to as early decline. The good news about early decline is that it can be very easily reversed. Early decline occurs when a practice grows by less than 4% per year.
