I plan to conduct an ongoing project of interviewing business owners about how they got into their businesses and some of the problems they have encountered. For my first interview I spoke with William S. Scholes, DDS, of Scholes Family Dentistry in Boise. It occurred to me that while medical professionals may not go into their fields planning to be businessmen, for those who open their own practices, that’s exactly what they become. I decided to interview a medical professional about their experience in opening a practice.
Thom Stratton: How long have you been practicing Dentistry?
William S. Scholes, DDS: Seven and a half years.
TS: And did you have your own practice right away?
WS: No, I worked for two years for a group, and then after two years I found a practice and bought it from somebody. The practice, when I first bought it, was about five years old, so it was somewhat existent, but it’s been growing since then.
TS: So why were they looking to sell?
WS: The person I bought it from went back to specialize in pediatric dentistry, so she went down to Las Vegas to specialize, and then went to Texas. So even with that situation she would have come back and it wouldn’t have been the right practice for her anyway. She ‘d have had to do a pediatric one.
TS: In your experience is that the more common way of getting into a practice, or do a lot of people start their own?
WS: You know, it depends on the economy, the dentist-to-population ration also. If you’ve got a small enough dentist-to-population ratio then you can start your own because there’s enough people out there that, you know, you’ll open your doors and you’ll get some. By buying a practice from somebody you’re pretty much guaranteed something to start out, you have patients right off the bat. In my opinion it’s probably one of the best things to do with dentistry, is to either work for somebody for a couple of years, and that way you get some experience, and then buy a practice or start your own. But it’s pretty difficult to come right out of school and just start your own, because you’ve got a lot of debt with no guaranteed income.
TS: When you were working in the group of dentists did you actively take a hand in the business side of things to learn that side?
WS: No, not really, because they wouldn’t let us too much. You know we saw some aspects of it, the insurance aspects. You’d see little things, but you didn’t see the full management position with it. I was able to see how much production was made, and we were paid off our production. So you could see all that, but I couldn’t see, like, payroll and everything. So as far as a business, it didn’t help a lot.
TS: So there were a couple of partners who started it?
WS: Yeah. It’s two people that own it, and then usually they’ll hire on dentists as an independent contractor.
TS: So they wouldn’t really want you seeing all the…
WS: Yes, so they don’t want you to. They just care that you saw how much you made, and that’s it.
TS: What experience or training did you have when you started up [your own practice]?
WS: As far as business?
WS: In school they give you a little bit, not very much. We talked about corporations a little bit, partnerships, independent contractors, so you kind of understood what the different options are there. We talked a little bit even about ideal percentages that…your overhead should be this much and that way you can take home a certain percentage. Those are the ideals, what you try to strive for. Ways of reducing your overhead, not having too much staff taking up too much percentage of your income, things like that.
So we did have some. It was my freshman year. We did have one class, then also the senior year you had one class. So not a lot. But it gives you a basic understanding of some business aspects.
TS: Are there any sources you turn to for business advice now?
WS: Other dentists, somewhat, I will. One thing that I think is for any small business, is that you’ve got to have a good banker, a good accountant, and even a good lawyer; especially as you’re starting up the business, because your lawyer is going to do a lot of your contracts and things like that. Like when I bought the practice we had to have the contract of the sale and all that. But probably one of the biggest things is my accountant has helped me the most as I’ve asked them questions. They’ve taught me how to do the payroll, pay the payroll tax quarterly… So that’s been a huge thing.
TS: It seems like with a lot of the accountants I talk to that, whether they wanted to or not, they end up being business coaches.
WS: Yes, to some degree they do. In dentistry you can also pay for advisers to come in and kind of assess the practice, and teach you ways to be more productive, to make the business more effective. I haven’t ever done it, [but] they can, like I said, they have dental consultants that that’s what they do. They come in and just teach you, making sure you’re utilizing your staff to the most, setting up different systems and making sure you’re getting the most profit.
TS: So, if you don’t mind my asking, how did you fund your practice?
WS: Actually, I talked to several different bankers about it, once we had agreed on the price of the practice. I talked to several different bankers about financing of the practice, and just borrowed it from a bank. I didn’t have to have anything down, which was nice. They did a ten year loan for me.
TS: That was just a one-time buyout for her.
WS: Yeah. And there are a lot of different—in dentistry—a lot of different ways to do it. You can go in and gradual buyout from somebody as they retire. In some they’ll have you come in like in an apprenticeship and kind of work for a few years and eventually buy it. Or work together and then sell it all at one time.
In any of those situations typically, you’ll go in and you’ll want to establish what the selling price is before you start working for them. That way you don’t build up their practice and all of a sudden they want more than you—you get to pay for your own work.
TS: In hindsight, what would you do differently, if anything?
WS: I’m not sure if I would have, because for me it’s worked out good. It’s good to learn under somebody else, you know, some of the aspects, and so that’s why it was good for the two years to get myself to where I’m ready. Obviously our small business is different from others in that all the product is by me or my staff. It’s not a physical product, so you’ve got to develop your skills to where your product is more sellable, so it can be so.
I also, with Boise I think it was still a good situation going in and buying somebody else’s practice. [With] up-front costs it was probably more, but I liked having the income right off the bat instead of opening the door and hoping people come in.
TS: Yeah, that’s a little scary…
WS: …it’s got it’s scary aspects to it.
TS: In this case, did you actually work with her for any length of time?
WS: I didn’t. Nope, she was done one day and I was in the next.
TS: How much visibility did you have into the books and all that before?
WS: Pretty good. I could go in, and I saw all her taxes for the last four years, I think, before that. I could see her information. So she did let me, which I think if you’re going to buy anything from anybody like that they’ve got to be pretty open that they’re not hiding something.
TS: I’ve known people who probably didn’t get as good a look as they should have.
WS: And I guess maybe one thing, too, with that aspect is probably consulting with someone to even know what to look for, because when I bought mine—I mean I saw all the information, but I didn’t fully understand everything. I think that just comes with experience. It’s not a bad idea to go to somebody that knows what to look for, and it’s probably worth paying the money for them to consult with you.
TS: What marketing methods have you tried since you took over the practice?
WS: I’ve tried a couple of different ways. The first one is…I’ve done the Yellow Pages, an ad in the Yellow Pages. I found that that’s not that effective—cost effective. It’s minimal because there are so many other ads for the same market, that unless you’re willing to pay a lot of money you’re just in the mix.
TS: Take out a full page ad…
WS: Exactly. And even those full-page ads you almost have to be the first one to make it…
TS: “A+ Dental”
WS: Exactly. And people do name the name of their practice for that reason, so they get to be the first one in it.
The other thing I’ve done is that I’ve gotten new move-ins. You can order from different companies, and they’ll send you the names of those who move in within a certain zip code. So I would put it on a little thing and mail it out with a letter basically saying “welcome to the neighborhood, we hope everything’s going well, if you need a dentist here we are…” At that same time we also offered a free whitening with it—some kind of incentive to get them in. Which it worked pretty good. I would get probably about fifty names a month, and I probably would schedule…probably three or four families, maybe, out of that. So it’s not bad.
TS: That’s not bad at all, actually, depending on how much you have to spend for those.
WS: Yeah, exactly. The third way, which is probably the best way, is by patient referrals. We’ve offered if you refer a family to us we’ll give you a $20 credit or something toward some future work. And really, like I said, the ideal is just to get to get referrals from patients. If you’re seeing a wife—she’s married—just saying “Hey, does your husband have a dentist?” Because that way you’ve got patients, and you know what the one person is like, that typically the ones they associate with are pretty similar. You kind of target your market right there.
TS: Of course I would imagine, then, that if you’re buying an existing practice you’re probably not quite as under the gun to get a lot of new patients.
WS: No, not nearly as bad.
TS: Though obviously you still want to make sure you’ve got some new ones coming in.
WS: And that’s the scary thing, too, even buying an existing practice you’re just hoping that they come back to you. It’s not a guarantee. They’re not bound by any means to come to you, so that transition has to be a good transition, too.
TS: Did you do anything special to introduce yourself to the existing patients?
WS: One of the things that we did is we kind of wrote a joint letter and sent it to every patient. She basically said, “I’m leaving the practice, and this is why. But this is who is buying my practice, and I highly encourage you to try him and see. And all the staff is going to stay the same, too. (And that’s a huge thing, too, if you can keep your employees so there’s that consistency for them.) And that I was the only change—everything else was the same.”
TS: Is there anything specific you did to try and keep the same people? If they knew they would already have a job they might not be that tempted to run, but uncertainty always makes…
WS: You know, actually, when I first bought the practice one of my staff did decide that she was going to. But I talked to her, had her working just part time because she was worried if I’d be mean or not. She didn’t know. So in the end, actually, she still works for me, and she’s full-time—she’s come back on.
With that, one of the things that was big was that I knew what they were getting paid, all their benefits, things like that, before I came in. The best thing to keep staff is not to drop their pay and make major changes. That’s one thing staff doesn’t like is major changes, so you can’t just come in all at once wanting to change everything or else you’re going to lose employees.
TS: And yet there may be some things they’re hoping you might change…
WS: Yeah. Exactly. And so communication is really big. But I think initially—That was one thing I told them, too, as I was coming in was that I was not going to change anything for four months, and at that point if I find that there are things… So communication with staff is huge, make them feel like their input is worth something. It doesn’t mean you always follow what their input it, but you’ve got to let them feel that it is important, that it’s listened to.
TS: Let’s see, we’ve already talked somewhat about what professional services you contract out with the banker, the accountant, and the lawyer. Are there any others?
WS: No, not really. And even through time I’ve gotten to where a lot of the accounting stuff I’ve learned how to do myself. Which even for a small business…one good thing is Quickbooks. It’s pretty self-sufficient. It tells you exactly how much to pay for your quarterly taxes, and as long as everything is in there right it will tell you the deadline for when to pay everything, and who to pay, even. So it does help quite a bit.
TS: This next question kind of assumes that you have, but what do you look for in deciding whether or not to put on more staff?
WS: No, I’ve had to increase my Hygiene. In my opinion you get until you’re almost busting at the seams, and then at that point you bring somebody on to…you don’t bring them on full time. You bring them on as needed, and then you can build them up from there with that expectation, knowing that they’re going to be part time until… And that’s going to give them incentive to help build the practice as well so that they can get full time.
And that’s, I guess, another thing that I’ve found with referrals is that a lot of the time my staff will talk with people, their friends and family, and they come in. Sometimes your staff can be your best referrals if they’re willing to talk.
TS: In a dental practice you’re probably the most expensive asset in there, as far as your per-hour time, so it’s not like you’re… Well, I guess you could bring on a contract dentist that could be cheaper than yourself, but… have you ever considered getting to that point?
WS: Yes, I think at this point I’m not there. I’ve got to get to where my schedule is busy enough that, like I said, you’re kind of busting at the seams. And I guess it depends on whoever you contract out. If they’re willing to just come in one day a week, or one day a month, then fantastic. But not everyone is willing to do that. You’ve got to have a little bit more commitment than that.
TS: What is the best bit of business information or advice you’ve ever received?
WS: That’s a good question. I would say keeping your employees happy. Because as you have bickering and issues with that then people notice, and then it gives them a bad taste toward your business. If someone is grumpy and not wanting to be there, then it shows.
The other thing is probably like I said before, and this is what one of my teachers taught, is to have a good banker, a good lawyer, and a good accountant. Because you don’t know everything. Get people around you that do know the answers, so that way you can consult with them.
TS: Do you think of yourself as a businessman?
WS: Um…sure. Do I think I’m the best businessman? No. Because to me the bottom line isn’t everything. There’s a lot of other aspects to it, too. To keep people happy and be happy. So in that way I’d say no, I’m not a great businessman. But that’s part of the job, is being a businessman.
TS: I wonder, too, how you would really define the “best” businessman. I mean, even when you look at someone like Donald Trump, he’s gone bankrupt how many times?
WS: Well, you look at someone like Warren Buffet. He’s got a lot of money, but he also drives old cars and things like that, too. Some somebody who’s still got reality is probably there—and common sense.
TS: Total net worth is one way of keeping score, but I think even Warren Buffet will tell you that’s not the best way. But I guess from my point of view, if you can afford to remain a businessman, then you’re a good businessman.
WS: –then you’re a good businessman. Exactly! Most businessmen say it’s not your first business that’s successful, it’s getting up if things fail, and then changing things and starting over.
TS: Do you have any business goals for this year or beyond?
WS: No, not really. Well, that’s not true. I do have some. My hope is, right now I’ve got a part-time hygienist, is to increase her days this year. Right now she works consistently one day, a lot of weeks two days, and getting it to the point that she’s at least working two to three days a week. So growing the practice that way.
And then obviously to do better than last year. Every year you want to get a little bit better, a little more productive.
TS: So it sounds like you’ve just passed one of those “bursting at the seams” points where you’ve had to start looking at adding on somebody.
WS: Yeah, there’s definitely times when it’s gotten really busy. Obviously there are times when it’s not as busy, but knowing when to add somebody, I guess—like I said, you’ve got to find somebody with some flexibility where they realize that if it’s not busy that they’re the ones who are not going to be going to work that day.
TS: For some people that can be ideal.
WS: Yea, exactly. And you’ve got to find a certain… Because there are some that that’s all they do is fill in work, because it gives them a flexibility that they can go to their kid’s soccer game and tell whoever that they can’t come in if someone calls them.
TS: What is one thing you wish you could change in your business?
WS: Personally, I think I’d like to get it larger to where I could bring somebody else on. Sometimes it’s lonely being the “Lone Ranger”.
TS: You find it hard to take off for any length of time.
WS: Yes, as a business owner it’s hard, because whenever you’re not at work your not making money and you’re losing money, so that’s one thing that’s a difficulty. Whereas if you did have somebody like another dentist that came and worked you could still produce—Really, because ultimately for a business to be successful it can’t rely upon one person to bring all the income, because then you’re limiting yourself to so much…at least in my field of work.
TS: That, too, makes the medical industry rather interesting. Recently I read a book where the author’s whole point was to build your business from the ground up in such a way that you can duplicate it and franchise it. How exactly do you do that as a… Well, you can, I suppose, with some of these places like Willow Tree Dental and so on. You could probably duplicate the same thing again anywhere, but it’s still a different kind of ballgame in that regard.
WS: And I guess as far as that goes, you can have a staff handbook, a staff “policies” handbook, or something like that, so that everyone knows exactly what their role is, what’s expected of them. And then you can duplicate it, find out what’s successful, and what works and doesn’t work.
TS: Do you have a staff handbook and policies written up?
WS: We do.
TS: Who wrote those?
WS: Me. From other people. I’ve kind of taken ideas from different people and stuck them together. And then even that you just learn through time. Like one of the things I’ve learned is that you want a pretty consistent staff there, because it’s hard to fill in for certain things, because it just runs smoother. So typically we’ll have vacation days, but I don’t offer sick days, so unless you’re really sick, you know, you go to work. I don’t get people who call in just because they don’t want to go, and they’ve got a few sick days, because they know that they’re vital to the practice.
TS: How did you go about finding this particular practice you bought?
WS: Actually, I found it through my accountant. They knew that she was selling. That’s something I actually looked for in an accountant is somebody that works with dentists, to make sure they understood the tax aspects of it. They knew a couple, and I talked to two different dentists—they introduced me to her and to another practice. And I had talked to several others before, so I kind of knew what I was looking for a little bit, whether it was a good deal or not.
TS: Finally, how’s the recession been…
WS: It stinks!
TS: …I mean, I doubt there is any industry out there that is recession-proof, no matter what people say.
WS: Yeah, I agree. It’s been tougher, definitely. I’ve been pretty luck, though, in that I think I’ve got great patients. I’ve lost some—obviously lost some patients as some people lose dental insurance and they don’t go to the dentists quite as often. Also, I do a lot more big fillings rather than crowns. Different production things have changed. It’s recovering, though, is what I’ve seen. I don’t know…in every industry it’s not recovering, but in mine it’s getting better.
And I guess one thing that people notice in a lot of business too, is that there were some dentists that went bankrupt. So as they leave the market it does help everybody else out a little bit. And there wasn’t a ton, but there were a few.
TS: That’s something that doesn’t make the papers as much as when some other places go under.
WS: Exactly. It’s not quite the same. And most of those, they get to the point where they just…I don’t know, I guess I don’t know whether they fully go bankrupt or they just decide, alright, it’s time to get out and go to another place where I can be successful.
TS: Okay, one more question that just occurred to me. I’ve heard some business advice along the lines of “make sure you have an exit strategy.” Plan how you’re going to get out of your business. Do you have one?
WS: No, but I knew at what point I could sell and break even, at least. But no, I don’t really have an exit strategy, because that’s obviously the plan to stay in it until the end. But I guess you’ve got to know at what point, if you’re unsuccessful, getting out without getting into so much debt that it’s going to effect you for years to come. You’ve got to know when to say when, I guess.
TS: I guess, from another angle, it’s not like some businesses where their whole plan is “Oh yeah, I’m going to build up this business and then sell it.”
WS: Exactly. Because there are some where that is their pure intent to get to a certain point and sell it. Another thing that I think has been one of the best [things] is as the economy is great and booming, rather than going out and spending a ton of money, I saved, which carried me through a lot of the recession. The last two years has eaten into that savings a lot, but it’s made it to where I could still have a business. So just being conservative in some of those aspects of your spending.
It’s like some of these neighbors I’ve seen, people that moved into a house probably about four years ago that had the Hummer and all these toys and everything sitting out front to where you could see it. His license plate was clearly one where he owned a cell phone business, and as he was doing good he bought and bought and bought. And now the house is closed and nobody lives in it, and so just being smart in that, you know. When the money is there you’ve got to set some of it aside, because you never know. Obviously the recession came and hit a lot of people. We were a lot more prepared for it than some other people.
TS: Is there anything else you want to add?
WS: No. Small business is a good thing. It’s not—There are also tough aspects to it. In owning your own business, suddenly you have to have your own health insurance, and your own insurances, which aren’t cheap, so that’s one down-side to it. Whereas if you worked for a big corporation you get a lot of those benefits included. But then you also lose your individual flexibility, too.
And even as a small business owner you’re still tied to your market. You don’t have a hundred percent freedom. My hours…I’ve got to set hours to when patients will come. You know if it were up to me I’d work noon to five and call it good, but that doesn’t pay the bills, so you’re still somewhat reliant on whatever your product is and who you’re going to sell your product to, and be willing to put in a lot of hours to get it going. With not always a lot of pay. But once you can get everything going and established, that’s when you can start reaping some benefits.
TS: Well, that’s all I had. Thank you for your time!