Date: October 1, 2015

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Session 6 – Orthodontist


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Show Notes:

Session 6: The Perfect Place for an Orthodontic Practice

By Scott McDonald

 

In the 1933 novel, “Lost Horizons,” a troubled member of the British Diplomatic Service seeks to find the perfect place.  Dubbed “Shangri-La,” it had everything.  There was peace, harmony among its beautiful inhabitants, and endless longevity. It also had the very things that the “perfect” place to practice orthodontics seems to require: inaccessibility, remoteness, and secrecy.  So, does the perfect place to practice orthodontics exist only in fantasy, remote history, or can it be found today?

 

The point is not to find the “perfect place” where every aspect of practice is seamlessly and effortlessly discovered.  Rather, the goal is to find an “acceptable place” where a hard working professional (or practice husbandman) can build a practice in sufficiently fertile soil that a new practice can take root and thrive. Experience has shown us that there are some elements of a practice location that must be present.  But not all of these practice elements are equally necessary nor must they be found in precisely the same quantities to justify the “planting” of an office.

 

Fertile Soil

Ironically, this is not the first aspect of a practice location that is asked by most of our clients, particularly those who are young.  Instead, they want to find a place with no competition.  Granted, finding a place with no other orthodontists has some advantages but as discussed later, it is also an indication of why that place may not be suitable.

 

When we speak of fertile soil, there are two aspects of the ideal place to practice that are implied.  The first is the number of potential patients.   The second is “fertility” which we define as the potential for growth.

 

In the first case, we know that many people of all ages and income strata need and deserve a good orthodontist.  But the simple fact remains that there is a subset of the general population that is more inclined to seek this specialty to a far greater degree.  We can generally refer to them as “adolescents.”  But if the Reader is so inclined, we tend to identify them as 10-to-14 year olds.   Sure, many patients older than 14 (or younger) seek to get braces (or their parents want to get them on their behalf).  But if we are examining a site for its potential, we want to find a place with a significant number in this age range because it is an indicator of future growth for the practice (hence: fertility).

 

While it is tempting to consider a population that has a large percentage of this age group, this is not really an answer to the area’s potential.  In most communities in the U.S., the average percentage of 10-to-14 year olds ranges between 5% and 6.5%.   But if the base population is small, even if the percentage is 10%, there may not be sufficient potential patients to support a full-time practice.  For this reason, knowing what the percentage of adolescents in the potential age range is helpful but it is not the answer to the area’s fertility for practice.  This is especially true of a new or start-up practice. 

 

Instead, we want to know the actual number (or census) of 10-to-14 year olds.  Even if that percentage is only 4% of the total, if there are enough of them, a practice can flourish.  Typically, we look at a census of 10-to-14 year olds to fall into the range of 1,500 to 2,500 within a “practice draw area” (PDA).  The trick is to find what the PDA is for a particular practice area.  To take a real-world example, if we consider Peoria, IL the community draws for a 15-minute drive-time area.  For anyone who has been to Peoria, there are many outlying communities that depend upon this city for its jobs, entertainment, retail activity, and professional services.  Residents in the outlying neighborhoods think that driving 15-minutes to get into town is no big deal.  On the other hand, practices in Atlanta, GA which has a much larger and densely populated downtown have to expect that people will want an orthodontist that is 5-minutes away by car.  Therefore, the PDA is smaller and more concentrated on the population near the site.  

 

There is an additional caveat, however.  If the households that these 10-to-14 year olds fit a particularly desirable demographic character, the lower range will support a practice much easier than one where they don’t fit that character.  There are several demographic factors we consider.  These include the educational-attainment-level of parents, disposable income, and housing type.  There are more but these are the “big three.”  If parents are well-educated, have money, and live in an owner-occupied housing unit they will tend to be more “fertile” in producing patients than they would otherwise. 

 

Fertility Continued

The other aspect of a practice area’s fertility we referred to above has to do with potential for growth.  There are lots of ways to define this and they differ from one region of the country to another.  True, if there are more people moving into an area, an orthodontist will have an easier time with a new practice.  It will be no surprise that as one drives up to the site, there is already an orthodontist sign to great you.  But we are also referring to “development” when it comes to potential for growth.  As an example, in our neighborhood, there is relatively little new housing growth (particularly for single-family homes).  On the other hand, ground has just been broken for a fourth office park near an interstate freeway.  A large federal project is likely to open in the next year that will employ many thousands of new workers.  Is there sufficient population to support a new orthodontic practice right now?  Probably not.  But if you want to consider locations ahead of the curve, it makes sense to put this location on the map as “interesting.”

 

Much of what we and other location researchers do is keep track of “development” and assess what its nature is and its impact upon continued growth.  By the time the numbers of new housing are released, it is often too late. That is why “development potential” often trumps “population growth” as we look for practices for practice.

 

Competition Revealed

This may seem like a tangent but if you want to find the perfect place to practice, it must be discussed. “Find me a place with no competitors!” he cried.  No problem.  There are lots of places that are inaccessible, remote, and secret.  You just don’t want to go there.  When such a location is presented, our first research question is, “Why is there no one there now?”  In almost every case, there is a good reason.  It is most often too few potential patients, poor employment or development, or strongly negative demographic character.  Actually, we have found that a little competition can be a very good thing.

 

But, is competition really important?  Well, let’s discuss it: Many doctors in general practice want to increase their production (or maintain it) when times seem hard to them.  One of the ways they are told to do it is to offer orthodontic services in their offices.  True, they are not orthodontists but when asked they will respond, “Sure, we do ortho!”  But it should be kept in mind that orthodontists will most often be a “sideline” for them and not a dominant source of revenue.  It could eat into your production some but we haven’t seen that they will ever dominate the orthodontic landscape in the location.  While we don’t disregard them, they are no reason to “cower.”

 

Even a sane orthodontist can be driven to distraction trying to count the number of “potential” competitors, let alone real orthodontists.  That is why the most important place to practice is in the places with most fertility.  Some orthodontists are still stuck on the idea that the competition-to-patient ratio is all important.  The number we usually use is on a sliding scale.  If you have 1 orthodontist to 1,250 10-to-14 year olds in a defensible PDA, you are a “threshold” practice location for a start-up.  This assumes that the demographic character of residents is average and the overhead is not excessive.  Just keep in mind, this is a guideline and not a commandment.  In our opinion, we want growth and development to go along with that threshold.  In locations that have a poor demographic character, that number could easily go up to 1 orthodontist to 4,000 10-to-14 year olds before a practice can really “make a go” of it.

 

Lastly, when we speak about “make a go” we mean that the practice should be profitable within a relatively short period of time.  Also, when considering the factors in purchasing an existing practice, all of the elements we mentioned are still important but the numbers can shift and still justify the purchase.

 

It is also worth noting that the best place to practice might work especially well for an orthodontist who has a personal connection with the area and/or the people who live there.  That is why we always want to mention in this setting the value of a “natural constituency” that can help the practice thrive in its initial period of building.

 

Conclusion

The best place to practice is definitely not inaccessible, remote, and secret.  It will be where the people are.  But finding the right people in sufficient numbers is not something that will fall into one’s lap.  There are outstanding locations in the United State right now for the right doctor who is willing to do the research.

 

Scott McDonald is the President of Scott McDonald, LLC and DoctorDemographics.com.  He is the former Marketing Manager at the California Dental Association.  He consults and lectures on practice site analysis and the psychographic impact on dentistry.  Scott is currently a Master’s Candidate in Communications at Brigham Young University. He can be reached at (800) 424-6222 or by visiting www.DoctorDemographics.com.

 

 

 


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