To mark the end of the year we are sharing this reflective piece from our friend Ross Martin, Accountancy Director at Hive Business. Thank you Ross, and a prosperous new year to you, loyal reader. See you in 2018.
In August 2007 the French bank BNP Paribas announced it was freezing the assets of hedge funds that were heavily exposed to the US sub-prime mortgage market. Over here queues soon formed outside branches of Northern Rock, a bank that relied on loans from other banks and investors. That model was suddenly obsolete, and by autumn 2008 the entire banking system had failed.
Many people will tell you that the intervening decade has been characterised by static wages, food banks and austerity, yet it’s not clear that things have been that bad, or were even that good before. Yes, there have been major cuts to government departments, and public sector employment is not what it was, but the man in the street might have benefitted from the London property boom, the rise of crypto-currency, or apps like AirBnB and Uber that let him leverage his assets in new ways. If it really was such a poor decade, how come Apple, the luxury brand par excellence, became the most valuable company on the planet? Everyone now has iPhones, even people with very modest incomes.
On balance it’s been a good decade for dentists too. Yes, there has been an oversupply of clinicians, resulting in a downward pressure on associate fees, and goodwill values have soared, making the transition from associate to practice owner harder. And yes, the market has been getting more competitive, which is why some practices now have a semi-decent website and even upload regular written and video content. But these extra costs of doing business are outweighed by the fact that the dental sector has been in rude health since 2008, and the value of the market is forecast to further increase by between 3.5% and 4.2% per year until 2021 (Mintel 2016).
In particular, people are buying more cosmetic dentistry, more adult orthodontics and more facial aesthetics. We’re seeing this reflected in the average size of turnover. The majority of practices used to come in at under £750k, but at some point in the past three years it became normal for turnover to be greater than £750k. Technological breakthroughs are notoriously hard to predict, but it’s always fascinating how unforeseen applications can transform consumer behaviour. For instance, since the military technology GPS was first added to smartphones in 2008 we have collectively forgotten how to read ‘static’ maps.
Can you imagine having to read a map that doesn’t show you where you are? And one that doesn’t even show you where all the restaurants, shops and dental practices are, so you can’t see where the closest one is, or check how good it is by looking at its average customer feedback score. The whole online review thing has been a power shift with profound implications on how it feels to be a business owner, particularly a dental practice owner. In some ways it’s scary, but deep down I think we all know that it’s making things better.
A deluge of technological innovations are coming our way and they will keep transforming consumer behaviour like this in ways that we can’t imagine. We already know what some of these technologies will be, but we can’t yet grasp how they will affect business. Take the self-driving car, which will be on our roads by 2021 according to Chancellor Philip Hammond, who’s going to allow them to be tested without human operators or the legal constraints that apply in other EU countries.
Some people think self-driving cars will cut congestion because they will pick people up and drop them off on command, cutting the wasted capacity we currently see. So maybe a reduced number of automated cars could serve the same number of people. But people do love owning and driving cars, so no one really knows until it happens. If you are buying a practice in the next few years you’re going to have to take a position on this and then hold on for the ride. Just try to stay sensitive to the novel ways consumer behaviour interfaces with technology, as we will, and here’s to your continued prosperity.