Recurring revenue is the holy grail for increasing the value of a dental practice. A healthy stream of recurring revenue before the sale increases the probability of stable and predictable revenue after the sale. This reduces risk for the buyer that the past isn’t indicative of the future. Many buyers willingly pay a premium for a practice with a steady stream of recurring revenue for this reason.
Most traditional dental practices already have this with patients who come in for their annual cleaning and checkups. The relationship they have with their dentist and hygienist makes them “sticky” — less likely to change practitioners. Even if their dental insurance doesn't consider your practice a preferred provider, many patients will continue that relationship if they’re happy with the care they receive.
Recurring revenue improves cash flow now and in the future. It reduces stress now because you can make plans for future growth without worries about sustainability.
A practice with recurring revenue means every new patient has a higher lifetime value. Your practice is also less sensitive to downturns in the economy.
Two new ways to increase recurring revenue
In recent years, a number of dental practices have been experimenting with in-house membership programs. For a fixed monthly fee, an individual or a family will receive routine care plus steep discounts on other services. These have the benefit of increased patient loyalty and less hassle with insurance companies. Cash flow evens out, and there is a potential for higher spending due to the convenience and steep discounts.
In-house financing is another model that has gotten attention lately. Many dentists already practice this in an ad-hoc manner. But setting up formal arrangements for more expensive procedures can be of great benefit. Developing a system that reliably collects most of the fees is key here. If you do this, make sure that the down payment covers your hard expenses for the procedure.
Let’s make a growth strategy for you
Call our office today and we’ll have an in-depth discussion of your practice’s strengths and your long-term goals. Based on this, we’ll determine the best growth strategy for you!