63. The Practice That Almost Failed: A Turnaround Story
This story shows how even a good dentist can run into serious trouble when the business side of the practice gets off track. Dr. Marcus was a strong clinician with loyal patients, but behind the scenes, his practice was struggling. Collections had stalled, his fee schedule was outdated, and communication with the team was not working the way it should. Over time, those issues started to pile up and put the practice in a tough financial spot.
The episode walks through the challenges he faced and how he turned things around. Once he got outside help and took a close look at what was not working, the real problems became clear and fixable. With the right changes and a better handle on operations, Dr. Marcus was able to save his practice and put it on a path toward steady growth and better profitability. It is a good reminder that dentists cannot ignore the business side if they want a healthy, successful practice.
Chapters:
- 00:11 - The Gap Between Education and Entrepreneurship
- 01:14 - The Story of Dr. Marcus: A Dental Practice on the Verge of Closing
- 09:05 - Analyzing Dr. Marcus's Practice Challenges
- 14:51 - Turning Point: The Shift from Vague Dread to Specific Solutions
- 20:10 - The Transformation of Dr. Marcus's Practice
- 25:09 - Addressing Dental Practice Challenges
Transcript
Foreign.
Speaker A:Is brought to you by the CLASS Dental Entrepreneur Program.
Speaker A:Here's something I believe deeply.
Speaker A:Today's schools make incredible clinicians.
Speaker A:It does not make business owners.
Speaker A:And the gap between being great at dentistry and being great at running a dental practice is where so many practices quietly struggle.
Speaker A:The CLASS Dental Entrepreneur Program was built to close that gap.
Speaker A:It's a structured, hands on program for practice owners who are ready to stop guessing and start operating with real strategy covering everything from overhead and cash flow to team management, leadership skills and accountability, patient experience and owning your numbers and long term practice valuation.
Speaker A:This isn't a generic online course.
Speaker A:This is a class coaching engagement built around your practice, your numbers and your goals.
Speaker A:If you're ready to run your practice like the business it is, visit classsolutions.com or call our office to learn more.
Speaker A:Now let's get into today's story Foreign welcome back to the Dental Business Podcast.
Speaker A:I'm Phil Cole, CEO of Class Solutions and today we're doing something a little bit different.
Speaker A:Like had mentioned in previous podcasts for this year, and that is there's going to be no frameworks, there's no benchmark percentages up front, no category by category breakdowns.
Speaker A:At least.
Speaker A:Least not yet.
Speaker A:Today I'm going to tell you a story.
Speaker A:It's the story of a dental practice that was by almost every measure on the verge of closing.
Speaker A:A practice that had good dentistry, a decent location, a doctor who genuinely cared about his patients and yet was bleeding money month after month with no clear answer as to why.
Speaker A:A practice that came within about 90 days of the doctor walking away and shutting the doors.
Speaker A:And then it didn't.
Speaker A:The details in this story have been changed to protect the privacy of the people involved.
Speaker A:But the bones of it, the numbers, the mistakes, the turning points and the outcomes are real.
Speaker A:I lived this one alongside the doctor and his team, and I've watched some version of this story play out more than more times than I can count in the 25 years plus that I've been in this industry.
Speaker A:I'm telling it today because I think there's something in this story.
Speaker A:For every practice owner who's ever looked at their bank account on a Thursday and wondered why there's nothing there.
Speaker A:For every dentist who feels like they're working harder than ever and somehow still not getting ahead.
Speaker A:For everyone who has ever thought, even quietly, even just once, I don't know if I can keep doing this.
Speaker A:Well, hopefully this story is for you.
Speaker A:So let's call this doctor or the doctor for this story.
Speaker A:Dr. Marcus, once again, I want to reiterate, this is not his real name, but everything else about him is so.
Speaker A: Marcus graduated in the early: Speaker A:He, he did a general practice residency, spent four years as an associate at a busy multi doctor group.
Speaker A: He saved up his money and in: Speaker A:The practice was 11 years old when he bought it.
Speaker A:It was once again good location, established patient base.
Speaker A:The retiring doctor had built something real over his career.
Speaker A: stepped into a book of about: Speaker A:The purchase price was just over 600,000.
Speaker A:He finished most, he financed most of it, I should say.
Speaker A:For the first three years, things were okay.
Speaker A:Not great, but okay.
Speaker A:He was paying his loan, he was keeping his team.
Speaker A:Collections were holding around 850,000 a year, which felt solid.
Speaker A:He was busy, he was tired the way the new practice owners always are tired, but he was making it work.
Speaker A:And then slowly, he, and I would say so slowly that he almost didn't notice it was happening, things started to slide.
Speaker A:Collections plateaued.
Speaker A:Then he started, then that, that they started dipping.
Speaker A: By: Speaker A: By: Speaker A:His overhead hadn't changed.
Speaker A:In fact, it had crept up slightly each year as he gave raises to keep his team.
Speaker A:He hired a second hygienist because he thought, well, I needed more hygiene capacity.
Speaker A:He upgraded his digital X ray system, thinking that would help.
Speaker A:He signed a lease renewal at a 12% rent increase because he didn't feel like he should be trying to deal with a move.
Speaker A: But by late: Speaker A:He was taking home less money than he had made as an associate a decade earlier.
Speaker A:He had a six hundred thousand dollar practice loan, a team of seven employees, a lease he couldn't get out of for six more years, and a growing sense that something was very, very wrong.
Speaker A:He didn't tell, didn't call anybody, I should say.
Speaker A:He didn't tell his wife how bad it was.
Speaker A:He did not talk to his accountant about anything other than taxes.
Speaker A:He came in every day, put on his loops and treated patients because that's what he was supposed to do.
Speaker A:Because asking for help felt like admitting failure because the practice was his.
Speaker A:His name was on the door.
Speaker A:His was his investment, his reputation, and he was going to figure it out himself.
Speaker A:Well, he did not figure it out for himself.
Speaker A: sday afternoon in February of: Speaker A:Dr. Marcus had been referred to us by his dental school classmate.
Speaker A:He who had used class for a practice transition the year before.
Speaker A:He told us he was thinking about selling.
Speaker A:I took the call myself.
Speaker A:In those first few minutes, I could tell something was off.
Speaker A:He wasn't asking the questions that practice owners ask when they're selling from a position of strength.
Speaker A:Questions about timing, about finding the right buyer, about maximizing their value.
Speaker A:He was asking, how fast can you move this?
Speaker A:I want to know if you could close this and know.
Speaker A:Six months.
Speaker A:So I asked him directly, why is there such an urgency?
Speaker A:There was a big pause, and then he told me the truth.
Speaker A:His line of credit was nearly exhausted.
Speaker A:He had missed payroll tax deposit for the previous quarter and was carrying a balance with the irs.
Speaker A:His practice loan was current, barely, but he had burned through most of his personal savings, making up the difference for the slow months.
Speaker A:He was three months behind on his own draw.
Speaker A:And he hasn't told anybody.
Speaker A:He said, I think I need to sell before it forces me to.
Speaker A:I told him I was glad that he called.
Speaker A:And then I told him something he didn't expect.
Speaker A:I said, before we talk about selling, I want to look at whatever, whether there's something worth saving here.
Speaker A:Because what he had described to me didn't sound like it was a bad practice.
Speaker A:It sounded like a practice that had lost its way operationally.
Speaker A:And those two things are very different.
Speaker A:He agreed to let us take a look when we did our full practice health assessment on Dr. Marcus's practice, the picture emerged, and it was painful, but it was clarifying.
Speaker A:This wasn't a practice in structural decline.
Speaker A:It was a practice that had been making the same set of correctable mistakes for years, and no one had ever sat down and named them off for him.
Speaker A:Let me walk you through what we found, because I want you to hear this not as a list of failures, but, but as a pattern.
Speaker A:Because I've seen this same pattern in dozens of practices or ones very similar to them, and the odds are good that at least one or two of these shows up in your numbers as well.
Speaker A:Problem number one, and it's one that you can easily look at right away, is the fee schedule decay.
Speaker A: pdated his fee schedule since: Speaker A:He was afraid that he was going to lose patience, afraid of the pushback from the front desk team who handled most fee questions and had Once mentioned offhand that a patient complained about the cost of a crown he had frozen in place on his fees, and he never unfroze.
Speaker A:When we pulled his UCR fees against the 80th percentile for his zip code, he was undercharging on his 10 most common procedures by an average of 18%.
Speaker A:On a practice doing 780,000 in collections.
Speaker A:An 18% fee gap is not small.
Speaker A:Conservatively, he was leaving $100,000 to approximately 130 on the table every single year.
Speaker A:Not from patients who wouldn't pay.
Speaker A:From patients who were already in his chair already saying yes, who would have never batted an eye at the correct fee.
Speaker A:Problem number two, insurance participation.
Speaker A:That no longer made sense.
Speaker A:Dr. Marcus was in a network with six insurance plans.
Speaker A:He had rolled in most of them in his first year of ownership to build volume quickly, which was, I would say, maybe reasonable at the time.
Speaker A: But by: Speaker A:He had never analyzed the math.
Speaker A:He was working hard for those patients and losing a third of every dollar to write offs before anyone touched a handpiece.
Speaker A:Problem number three was hygiene underperformance.
Speaker A:The the second hygienist he had hired 18 months earlier was writing a schedule that was on average 61% utilized that hygienist salary, benefits and associated overhead costs roughly around $78,000 a year.
Speaker A:At 61% chair utilization, that operatory was not close to covering its own cost, much less contributing to the overhead of the practice.
Speaker A:The problem wasn't the hygienist.
Speaker A:The problem was the system, or rather the absence of one.
Speaker A:There was no active recall pro call protocols.
Speaker A:Excuse me.
Speaker A:There was no unscheduled treatment report being reviewed.
Speaker A:There was no one accountable for hygiene scheduling metrics.
Speaker A:Appointments were being made and being broken, and no one was tracking why or by whom.
Speaker A:The fourth problem was the team didn't know the numbers.
Speaker A:When I asked Dr. Marcus what his monthly production goal was for the practice, he gave me a rough answer.
Speaker A:When I asked the office manager the same question, she gave me a whole different number.
Speaker A:And when I asked the lead front desk coordinator, she said she didn't know there was even goals.
Speaker A:That's not a staffing problem.
Speaker A:That's a leadership and communication problem.
Speaker A:The people responsible for scheduling treatment presentation, the patient follow up, had no shared target to work towards.
Speaker A:They were doing their jobs and they were good people, but they were operating without a scorecard or a scoreboard you can't win a game that you don't know that you're even playing.
Speaker A:So after we presented our findings to Dr. Marcus, he sat across the table from me for a long moment without saying anything.
Speaker A:I've been in that room with a lot of practice owners.
Speaker A:The silence usually means one of two things.
Speaker A:Either they're about to get really defensive with me or they're about to get really real.
Speaker A:Well, Dr. Marcus, he got real.
Speaker A:He said, I knew something was wrong, I just didn't know it was that specific.
Speaker A:And I didn't know even where to start to look.
Speaker A:That's one of the most important sentences I've ever heard a practice owner say.
Speaker A:Because vague dread is paralyzing.
Speaker A:Specific problems are solvable the moment you can name what's actually wrong.
Speaker A:Not the practice is struggling or.
Speaker A:But my fee schedule hasn't been updated in six years.
Speaker A:I'm in for insurance plans.
Speaker A:I should exit you shift from victim to operator.
Speaker A:That shift changes everything.
Speaker A:We laid out a whole 12 month turnaround plan.
Speaker A:It was not magic.
Speaker A:It was not painless either.
Speaker A:It required Dr. Marcus to make decisions he had been avoiding for years, but it was concrete.
Speaker A:It had phases, it had milestones, and critically, it had a team behind him.
Speaker A:Not just his own team, but ours.
Speaker A:He didn't sell the practice.
Speaker A:He chose to fight for it.
Speaker A:Month one through three was the foundation.
Speaker A:You know, the first thing we did was stabilize the financial bleeding.
Speaker A:We worked with his accountant, someone we brought in from our own accounting and tax division who understood dental practices, to set up cash flow plans, address the IRS situation with a payment arrangement and establish a minimum operating reserve.
Speaker A:Dr. Marcus could not build anything while the floor was on fire.
Speaker A:So first we have to put out the fire.
Speaker A:Simultaneously.
Speaker A:We did a full fee schedule revision.
Speaker A:Not a dramatic over the night overhaul that would spook his front desk team, but a structured methodological update.
Speaker A:Starting with the procedures where the fee gaps were the widest, adjusting in increments that were justifiable, I should say, and sustainable.
Speaker A:We built talking points for the front desk so they could handle fee questions with confidence rather than apology.
Speaker A:The results of the fee schedule adjustment alone in the first 90 days was an increase in per visit revenue of just over 11% on a practice that with that volume, that was meaningful money.
Speaker A:And it came from the same patients, the same procedures, the same number of days in the chair.
Speaker A:Now month three through six was the insurance strategy.
Speaker A:We did a full insurance profitability analysis, plan by plan, procedure by procedure, and identified the two plans with the worst write off rates and the lowest production concentration.
Speaker A:Dr. Marcus gave notice to both plans.
Speaker A:This is always a nerve wracking step for a practice owner because the fear is that the patients will leave and no holes barred.
Speaker A:Some did.
Speaker A:About 30% of the patients from those two plans chose not to follow him out of network.
Speaker A:But here's where the math actually shows.
Speaker A:The patients who left were generating revenue that after write offs was costing the practice money to produce.
Speaker A:The patients who stayed were now being billed at full fee.
Speaker A:Collections from those former in network patients who covered, who converted I should say to out of network actually increased by 22% per patient because the write offs were gone.
Speaker A:Net effect after the dust settled was that the collections from the impacted patient pool decrease by about $60,000 annually.
Speaker A:But the net revenue money that the practice actually kept increased by over $40,000 because the write offs were eliminated.
Speaker A:You can lose revenue and still make more money.
Speaker A:That sentence is worth reading twice and so listen again.
Speaker A:You can lose revenue and make more money.
Speaker A:Months six through nine Rebuilding the hygiene.
Speaker A:What came next?
Speaker A:We work with the office manager, implement a hygiene performance system.
Speaker A:It's not complicated.
Speaker A:A weekly check in on hygiene scheduling utilization.
Speaker A:An unscheduled treatment report reviewed every Monday morning.
Speaker A:A reactivation protocol for patients who hadn't been seen in more than 18 months.
Speaker A:And a clear monthly production goal posted in the break room that every team member, and I mean every team member, could see.
Speaker A:By month nine, hygiene chair utilization had climbed from 61% to 84%.
Speaker A:Second hygienist, the one who had been a financial liability for six months earlier, was now one of the highest producers in the practice on a per hour basis.
Speaker A:Nothing about her changed though.
Speaker A:The system around her changed.
Speaker A:Month nine through 12, the team and the culture came next.
Speaker A:The last phase of the turnaround was the hardest because it wasn't about numbers.
Speaker A:It was about people and trust.
Speaker A:Dr. Marcus had been carrying the weight of his practices struggles largely alone for years.
Speaker A:His team knew something was wrong.
Speaker A:And let me get this straight to everyone that's listening.
Speaker A:Teams always know.
Speaker A:But because no one had ever talked openly about goals, challenges or expectations, there was a low grade anxiety that ran through the office.
Speaker A:People were doing their jobs, but not invested in the mission.
Speaker A:And that's because there wasn't a mission.
Speaker A:We helped Dr. Marcus hold a team meeting where he talked honestly, not about the depths of the crisis, but about what the practice, where the practice was going.
Speaker A:He shared the production goal for the next quarter.
Speaker A:He explained what hygiene utilization meant and why it mattered.
Speaker A:He asked his team to be partners in building something, not just employees doing tasks.
Speaker A:The response?
Speaker A:Well, I can tell you it surprised him.
Speaker A:His office manager told him afterward it was the first time she had ever felt like she understood the business that he expected her to run.
Speaker A:His lead hygienist asked if she could start doing more morning huddles.
Speaker A:His front desk coordinator asked for a script to use when following up on unscheduled treatment, something she had wanted for years but never had.
Speaker A:They were already on his side.
Speaker A:They just needed to know what side they were on.
Speaker A:At the end of the 12 months is here is where Dr. Marcus's practice stood.
Speaker A:Collections had grown from 780,000 to just over $960,000, a 23% increase without adding a single new operatory, without buying any new equipment, and without a single dollar spent on advertising.
Speaker A:Every dollar of that growth came from optimizing what was already there.
Speaker A:Operating overhead, excluding doctor compensation, had dropped from 74% to 61%, a 13 point improvement on nearly a million dollars in collections.
Speaker A:That swing represents over $125,000 in additional earnings.
Speaker A:His team, with one planned exception, was intact.
Speaker A:His IRS balance was cleared.
Speaker A:His line of credit had been paid down to zero.
Speaker A:And his practice loan, which had once felt like an anchor, was simply a manageable business debt on a practice worth more than he had paid for it.
Speaker A:When we ran a formal valuation at the end of that year, the practice appraised for $820,000, a $220,000 more than his purchase price on a practice that he had come within 90 days of abandoning for nothing.
Speaker A:He did not sell.
Speaker A:He still hasn't sold, as far as I know.
Speaker A:Last I heard he was thinking about expanding into a second location.
Speaker A:I want to be honest with you about why I tell this story.
Speaker A:It's not to make class look good, though I am proud of what we did alongside Dr. Marcus and his team.
Speaker A:It's not to make you feel better about your own struggles, though I hope it does.
Speaker A:It's to make a very specific point that I think gets missed in almost every conversation about dental practice management.
Speaker A:The problems that nearly destroyed Dr. Marcus practice were not unusual.
Speaker A:They were not extreme.
Speaker A:They were not the result of fraud, malpractice, natural disaster or catastrophic bad luck.
Speaker A:They were ordinary.
Speaker A:They were correctable operational failures that had been allowed to compound over time because no one had ever put a name on them.
Speaker A:And this is what happens to 90% of those practices that feel this way.
Speaker A:A fee schedule that hadn't been reviewed, insurance plans that no longer were penciled in.
Speaker A:A hygiene department running without targets and a team that didn't even know the numbers.
Speaker A:That's it.
Speaker A:Those four things left unaddressed for six years almost ended dental practice.
Speaker A:I want you to sit with that for a moment, because if any part of Dr. Marcus's story sounds familiar, if you read those four problems or hear those four problems and felt even a small flicker of recognition, then this episode wasn't just a story.
Speaker A:I hope it became a mirror for you.
Speaker A:The good news the reason I tell this story instead of being at a tragedy is that every single one of those problems was fixable.
Speaker A:It wasn't easy, and I'm not going to lie, it's not painless either, but it's fixable with the right information, the right support, and the decision to actually look at the numbers honestly.
Speaker A:Practices come back from worse than this every year.
Speaker A:The variable isn't the problem.
Speaker A:The variable is whether the doctor decides to address it before the clock runs out.
Speaker A:Let me close the content portion of today's episode with something practical, because that's the kind of show this is.
Speaker A:If this story gave you any pause about your own practice, here are three things that you can do this week and not next quarter, not next year, but do it this week.
Speaker A:First, pull your fee schedule and compare your 10 most common procedure codes against the 80th percentile UCR for your zip code.
Speaker A:You can get this data from your insurance coordinator, maybe your dental cpa, or you can call us and we'll do it.
Speaker A:If you find a gap of more than 10% on multiple procedures, you have a fee schedule problem that is costing you real money every single day.
Speaker A:Second, run a hygiene utilization report.
Speaker A:For the last 90 days, what percentage of available hygiene time was filled with scheduled and with kept appointments?
Speaker A:If that number is below 75%, you have a recall and reactivation opportunity that does not require a single new patient to capture that.
Speaker A:Third, ask your office manager and your front desk coordinator separately what's the practice's monthly production goal?
Speaker A:If they give you different answers or I suspect maybe not be able to give you an answer at all, well, then you have a communication and alignment problem that no software, no marketing company, and no new equipment can fix until the fundamentals are in place.
Speaker A:Three questions.
Speaker A:You can get all three answers before the week is out and what you find will tell you more about the health of your practice than anything at could say in this episode.
Speaker A:If you want help interpreting what you find, or if you already know your numbers and you want a structural plan for making them better.
Speaker A:Well, this is exactly what our Dental Entrepreneur Program is designed to do.
Speaker A:I'll tell you more about that in a moment.
Speaker A:One final word before we go.
Speaker A:And I mean this genuinely, if Dr. Marcus story resonated with you.
Speaker A:The class dental entrepreneur program was built for exactly that moment.
Speaker A:It's our structured coaching and advisory program for practice owners who are ready to run their practice with intention and not just survive month by month, but build a business with real value.
Speaker A:We're going to cover the fee strategies, overhead analysis, team performance, leadership accountability, ROIs on all your different aspects of the practice, and long term exit planning.
Speaker A:All of it is grounded in your actual numbers, your specific market and your goals.
Speaker A:It's not theory, not a binder that you put on the shelf, a work engagement that produces results that you can measure.
Speaker A:The doctors who go through this program don't just improve their margins, they change the way they think about their practice.
Speaker A:And that shift from clinician to business owner is the most valuable thing that you can, that we can help you build and that you can do for your practice.
Speaker A:Now let's close out today's episode.
Speaker A:That's the story of Dr. Marcus, or at least the version of it that I'm able to tell.
Speaker A:The real version, I will admit, is a was a little bit messier, way more human than what I've shared today.
Speaker A:There were hard conversations and there were moments of doubt and a Tuesday afternoon where he came close to calling it off.
Speaker A:Turnarounds always look cleaner in the retelling, of course, but the bones of it are true and the lessons are real.
Speaker A:You don't have to be a great to be great at business the day you buy a practice.
Speaker A:But you do have to be willing to learn and you have to be willing to ask for help before the situation asks for it on your behalf.
Speaker A:If you found value in today's episode, please share it with another practice owner.
Speaker A:Leave us a review, whether you're listening and if you want to take the next step.
Speaker A:Whether it's a practice health assessment, a conversation about our Dental Entrepreneur program, or just a call to talk through where your practice stands.
Speaker A:Reach out.
Speaker A:We're@classsolutions.com and we're happy to have that conversation and have a discovery call with you.
Speaker A:Next week we're going to get into the numbers behind dental practice valuations, specifically what buyers actually look at, what separates a practice excuse me, a practice that commands a premium from one that doesn't.
Speaker A:And what you can do right now, regardless of your timeline to move your practice toward the higher end of the range.
Speaker A:It's a conversation every practice owner needs to have, and we're going to make it accessible.
Speaker A:Until then, know your numbers, protect your margin, and build something worth having.
Speaker A:I'm Phil Cole.
Speaker A:This is the Dental Business podcast.
Speaker A:We'll see you next week.
