In the last blog, I mentioned that one of the common variables that seems to be contributing favourably and somewhat passively to practice growth right now is a critical mass of patients at or above 2,200. At that magic number, barring any mismanagement and bad luck, the organic growth of a practice from internal patient referrals seems to often exceed attrition.
The mid-size practices in this range of active patients are often the most sought after from buyers. Organic growth is one of the factors that makes these so desirable but certainly not the only one. Practices of this size can still be owned by a single dentist. Often there is a hands-on-owner-operator, an associate, and a strong hygiene program in these practices. At 2,200 patients and an annual revenue per patient of $900 – $1,000, gross revenue in the neighbourhood of $2.2M lends itself to a healthy bottom line and the ability to provide staff benefits that support team retention.
Individual purchasers looking to own a practice they work at love these offices because there is strong profitability, which supports a strong purchase price. Banks like these practices because there is often consistently strong revenues, which reduces risk. And many solo practitioner vendors aren’t looking to sell to a corporation where they would have to commit to a long-term associate contract with earn outs and clawbacks.
At 2,200 active patients or more, an 8-10% rate of attrition reflects about 220 patients per year. This is less than 20 new patients per month. In our experience, this organic growth happens often without marketing in these practices, so long as either the growth has been consistent over the past three years and/or the practice has been a long standing, progressive practice that keeps up with modern dentistry.
Measuring patient attrition is like tracking personal spending. It’s way less fun than measuring new patient growth or top line revenue. But much like spending, the amount we make matters far less than the amount we keep. The same is true of patients in a practice.
