September 2018--Fred Joyal, founder and former CEO of Futuredontics, the parent company of 1-800-DENTIST, uses a metaphor from NASA to explain what happens when a dental practice “escapes gravity” and reaches the tipping point of profitability.
The profitability tipping point is the point at which a series of small changes becomes significant enough to cause larger growth in profitability.
When discussing the profitability tipping point of a dental practice, I like to use the metaphor of escaping gravity. When a rocket is launched into space, something like 50% of the fuel is burned in the first hundred miles. Once the rocket escapes gravity, significantly less fuel is burned. Less fuel is used in the remainder of a trip to the moon, than is used in the first 100 miles.
A dental practice is a business model where there are large, fixed costs and a small amount of variable costs. Once you reach a certain level of income, the margin is not as large on everything else you do. The problem is that a lot of dentists are always hovering at their break-even point. They aren’t spending the next $10,000 in marketing or another item that will net them a 70-80% return.
I have had this conversation in the marketing context with many dentists about why they should spend $5,000 on a campaign. They argue it will only bring in $20,000 in revenue and the overhead will cost them more than 75%. It makes no sense to them. What they miss is that they are at their break-even point and about to escape gravity, so the profitability margin on that $20,000 will be much higher.
When you are at that point, you have more money to spend on items that will propel the practice upward. For example:
When a dental practice stays ahead of the curve, profitability snowballs. For example:
There is a point where additional investment in a particular area may not grow your dental practice. If you monitor the return on each next investment you make, say in marketing, technology, or human resources, you may even see a point of diminishing return.