What dentists can learn from venture capital

Venture capital funds disbursed into many different areas of healthcare, including dental care, have increased by more than 50% year over year.1 So love it or hate it, you can benefit from venture capital interest and dental infusion.

The influx of money presents opportunities for both new and experienced practitioners. If you’re planning to retire soon, the market is hot, and you may have an easy fix if yours is an independent practice. If you own an independent firm, you have a unique opportunity to see how an entity that focuses its decisions primarily on profit evaluates options. This is different from what dental care has historically prioritized: patient care.


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How do you attract the attention and fortune of venture capitalists? Start with a clearly defined end goal. It sounds simple enough, but practice owners are often reluctant to clearly articulate their goals because they feel it’s too restrictive. This is not the case with venture capital. You can always pivot, but if you don’t know where you’re aiming, you might miss the hit. Since venture capitalists generally exist to make money, we can learn a lot from how they assess opportunities and then select certain opportunities to turn them into reality. The number one rule of venture capital is to start with the defined end goals.

Define your end goals

If you haven’t thought about your end goals, start by listing when you’d like to retire, your ideal annual retirement income, and then how much time you’d like to spend at the office each week before retirement. Date. Once these figures are listed, rank them in order of importance. These clearly defined goals will serve as a metric to which you can return as opportunities arise. Find that compass and respect it. Does that mean you have to commit to only 25 hours at the office every week? Absolutely not. But if you’re not responsible for the goals, you won’t be able to coordinate your efforts.

Examples of scenarios

What does this look like in practice? Let’s go through the scenario of someone at the start of their career with a primary goal of spending no more than 30 hours in the clinic and a secondary goal of increasing profits, but not at the expense of more time in the clinic . A supply representative walks into the dental office and notices that he doesn’t have a scanner and hasn’t integrated CAD/CAM into the office. Should the new dentist only buy the scanner or the complete system? Experience from other clinics shows that CAD/CAM systems not only require a higher initial investment in equipment cost, but also a significant amount of technical training. However, being at the beginning of the dentist’s career, the high initial costs and technical training work to their advantage in achieving their primary and secondary goals, resulting in a reduction in chair time per prosthetic patient and also a reduction laboratory costs.2

On the other hand, for a dentist about to retire (disregarding strategic positioning for his clinic’s exit strategy), the investment will likely only eat into the 30 hours allotted for clinical hours without much time to realize the reward. Stay true to your goals.

Not only does a venture capitalist have a clearly defined end goal; they also have consideration thresholds. We have all heard of the main one: the return on investment (ROI). If a venture capitalist looks at your clinic, industry standards suggest they expect to close the deal at least 35%. That doesn’t mean you can skip budgeting, but it does mean that if you’re going to be investing time and money in a second clinic, equipment, or new staff, you should have a calculated return on investment and plan for that. run to get the numbers in pencil.

After defining your goal, find an opportunity that you are passionate about and calculate the return on investment. Let’s use the CAD/CAM machine. Start by listing all the variables that having a CAD/CAM machine would change with an estimate of what would change, and ignore those that would not change (eg admin salaries, rent, etc.). See Figure 1 for an example calculation.

Before you execute, remember that we’re not just asking if it’ll make you more money, we’re asking if it fits your goals. What other milestones do you want to achieve and by when? Will you need the capital tied up in equipment before you break even? These milestones come with their own ratings, but we can calculate how long it takes to get your money back on the CAD/CAM machine (Figure 2).

Once you’ve assessed the opportunity and determined that it’s a good fit with your goal, it’s time to execute. You’ve already done the math, so the next step is to check the projected actual and adjust from there. Keeping an eye on the financial performance of your investments will not only help you know where you stand, but also estimate your return on investment for future investments.

While some see the injection of venture capital into dental care (and broader health care) as the decline of patient care, it’s an opportunity that the owner of an independent practice focused on the patient can use to improve their own practice. When pitching your next investment opportunity, remember to consider not only whether it has the potential to increase revenue and improve patient satisfaction, but more importantly, whether it aligns with your defined end goals. .

Editor’s note: This article originally appeared in the May 2022 print edition of Dental economy magazine. Dentists in North America can take advantage of a free print subscription. Register here.


References

1. Anderson DG, Potter MJ, Morris DE. Venture Capital Investment in Healthcare: How to Succeed in a Booming Market. November 24, 2021. https://www.hfma.org/topics/hfm/2021/december/healthcare-venture-investing–how-to-succeed-in-a-white-hot-mark.html

2. Rodgers C. CAD/CAM Technology. February 1, 2013. https://www.dentaleconomics.com/money/article/16393531/cadcam-technology

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