By Ross Martin, Management Consultant at Hive Business
In 2017 I wrote a blog about a concept called the iron triangle. It recast the concept of opposing forces limiting each other in the universal marketplace (cost, quality, time) into a special one for dental practice owners in relation to tax strategy: low tax rate; access to cash; happy HMRC. This blog has been the one I’ve referred people to most. It’s helped clients understand a relatively complex area that every business owner needs to consider.
Today I have a new iron triangle: finance; operations; marketing. At Hive we’ve been referring to them as our four commercial pillars (the fourth one in the middle is people, which transverses all areas and is arguably the most vital work of a business owner). This goes deep and I’ve noticed I’m using this just as often to explain our philosophy on business. We don’t just expect our clients to acknowledge that these areas are important, it’s that they must consciously interact in a successful business.
It’s actually relatively simple but most people are biased towards the production segment, probably because that’s what they spend most of their time thinking about (see our post about the availability heuristic). It’s not that production is not important. But it’s not the only part of a well functioning, efficient and profitable business.
A lot of people, and dentists-turned-entrepreneurs are particularly prone to this, don’t appreciate the difference. If a dentist buys their practice they assume they are now running a business, whereas I’d argue that all that’s happening is they’re taking on all the risk and still getting paid the same quantum as an associate. There is no clear phasing between life as an associate, life as a sole trader and life as business owner. A business has to be more than operations.
Let’s use some examples. If you don’t invest in marketing then it impacts on your sales, and hence on your financial position, but also on your people. People like to have a purpose. A vibrant business with a clear mission attracts the best quality staff. You may say, as many practice owners do, that you prefer word of mouth referrals. OK, but you can do both. On the financial side, you might believe, as many practice owners also do, that bookkeeping is the same as monitoring the financial position of your business. It isn’t. Most practice owners don’t measure how much they get paid in their clinical role. I’m afraid these commercial fallacies remain widespread.
This iron triangle can facilitate nuanced conversations that turn out to be highly valuable. One of these is about the missing interaction between people and production. Most owners want high performing associates, and I’m not saying it’ll ever be perfect, but if you are a more experienced clinician, can you honestly say you’ve done all that you can to mentor them? “I’ve been busy in surgery,” is often the honest reply. So you understand that your decisions around production do have implications for the business? And that as a leader you’ve maybe not developed your team enough?
These are nothing if not commercial questions. If you can lift your associate’s average daily yield by £250 a day then you add £40k to your revenue line. A lot of owners will say to that, “Yeah but I have to pay them as well.” Yes you do, but they’ve added value to your business by increasing its mass, momentum and learning experiences. This is what I mean by the difference in mentality between associates, sole traders and business owners. It’s a psychological block rather than anything else. That’s why we’ve come up with the new iron triangle — please use it and enjoy the benefits.
If you would like us to objectively analyse your individual business’ performance in these segments, and assess what your business could be harnessing, please contact us for a Diagnostic Day.