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Goodwill Value: Sitting Pretty

Posted on November 16, 2021 in Articles & Frank Taylor & Associates

Increasing chair occupancy will increase goodwill value says Lis Hughes, Managing Director of Frank Taylor & Associates

A relatively new phenomenon in the restaurant industry is the two-hour table limit. As a diner we see a table with beautiful linen, polished cutlery, and crystal glassware – or depending on where you are a paper bag and cup with a straw!

The point is the restauranteur sees it differently. They work on covers – a table for 4 people represents 4 covers. If the restaurant is open from 6pm through to midnight, with a two-hour table limit, each table of 4 can deliver 12 covers. Meaning the table can be flipped 3 times in an evening. Without the two-hour limit a table may only get used twice in an evening. Increasing this to 3 is a 50% increase in revenue per table.

This change in how the space is managed can delay the need for an expansion programme, by adding on extension with additional seating or even opening a second restaurant.

You’re probably thinking what’s this got to do with dentistry, but you can apply this same logic to chair occupancy in your dental practice.

Over the years I’ve visited many dental practices that are not maximising the space they have. Let’s say the practice has 3 surgeries and is open Monday to Friday. The principal works four clinical days; two associates work three days and two days; and a hygienist just one day per week so in total, there are 10 clinical days worked per week.

The current capacity is 15 days, so chair occupancy is running at 67%. If we extended it to a 6 day week by opening on Saturdays, the occupancy rate drops to 55%. By further tweaking the opening hours it may be well be the rate drops to 50% or even below.

Driving up chair occupancy should be the focus before considering an additional surgery. An extra surgery does not add to the goodwill value, it actually will cost you money. Let’s say it costs £60k to create and fit out a new surgery – this investment is immediately discounted or depreciated. Until this space is generating dental fees it does not add to the goodwill value.

Increasing chair occupancy requires no further investment and increases the value of your dental practice immediately.

Ideally you should be operating at 80%+ capacity for a sustainable period, say a few months, before seriously planning in an extra surgery. Whilst it might be tight on capacity for those few months you can then be sure the investment being made is to meet an ongoing patient need.

Efficiency is all about doing more of what you currently do but doing it better.

 

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