By Ross Martin, Accountancy Director at Hive Business.
Inflation matters to anyone with a business, especially now imports may get dearer (a lot of dental materials come from the EU). Yet the phenomenon of inflation is either not really appreciated or it is willingly glossed over by the majority of people at the helm of dental practices.
Inflation means a general increase in prices and a fall in the purchasing power of money. The Bank of England aims for an inflation rate of 2% (it’s 2.6% at the moment), and central banks on the whole like to try and avoid deflation and keep a bit of inflation going. It’s good for the system, they say, it keeps things moving. It means that what you’re thinking of buying today will cost more next year, so it encourages the feeling of money burning a hole in your pocket. And spending’s always good, right?
No, because spending no matter what, especially out of desperation of ‘missing the boat’ encourages overheated, bubbly marketplaces. As we know, bubbles have a habit of bursting because when the overheating is out of line with the underlying basis of valuation there’s pressure for valuations to snap back to ‘real’ levels (not that any of this is particularly real). That pressure is the pin that pops the balloon.
We’re seeing this in dentistry, which I suspect is a sign of the market maturing. For some time we’ve been used to seeing a principal and a single associate making half a million quid with a duff website and bland treatment options. But now the new kids on the block have arrived.
The dentists selling up are getting good money (goodwill valuations have risen very high for a small business) so, with debt burden, there’s more pressure on the new incumbents to find ways of being more profitable. This pressure is producing the evolution of more sophisticated patient journeys, with the advanced aesthetic dentistry and facial aesthetics that we see feeding into the selfie / Love Island zeitgeist.
Long established practice owners who are not quite ready to sell may not be able to cope with the challenges that lie ahead. I’m afraid the Baby Boomer generation created the bubble and did well out of it for a long time, but they won’t be able to stand up to Bupa, online ortho, and all the sophisticated independent practices run by tech-savvy younger principals that are sprouting up around them.
This is happening in accountancy too. There is so much digitisation and new software coming out that the industry has fundamentally changed and is no longer a number crunching game but an advisory one; but there are still far too many businesses still providing the same reactionary service as 15 years ago. Their customers are getting less value for money than the average customer in the industry. And why shouldn’t this happen in dentistry too? If you trust your long-time dentist, how would you know that amalgam fillings are a bad idea, and that you actually can have a nice smile?
It looks to me like the people in their 50s who haven’t yet sold may well be burdened with unmarketable practices in just a few short years. Look at what is happening to younger associates who are buying practices today.
The prices they are paying are changing the market — they are being forced to mature in a business sense and accordingly the market is being forced in a direction that I believe in five years will be alien to an owner who operates their practice the same as they did prior to 2008. Today we see seven-day dentistry regularly, but what about 24-7 opening times? Scary, or exciting? You choose.
Call 01872 300232 or email us at hello@hivebusiness.co.uk.
