The Most Important Lesson in Math
Up until I was a dentist, I found myself avoiding anything to do with math. In truth, I never really balance my checkbook. I just make sure that I have a couple of thousand dollars more than I spend every month in there at all times. When it comes to a dental practice, there are many important numbers. Numbers so important that if you ignore them, you will surely auger your practice straight into the ground. I want to introduce you to one specific number that, to me, is the single most important number when looking at a dental practice. If this number is where it should be, you are guaranteed to have a great overhead percentage, an increase of 20% per year in production, low staff turnover, and raving loyal patients that send you so many referrals you almost don’t need to market.
Every month I look at numbers from dozens of offices from various doctors that I have never met. The format is a small spreadsheet with two pages of information that the doctor inputs and then it automatically creates a third page that reduces the random numbers to trends and percentages. The one percentage number that I always turn to look at is the “direct referral percentage”. This is simply the number or percentage of new patients that actually come from another happy patient’s referral. This number, more than production, or profit, or even total new patients, can tell the tale of where you are in the success formula for a practice that will continue to prosper regardless of the economy or competition.
We all know that the average general dental practice in the US sees approximately 25-30 new patients per month. Your goal should be to have at least a 50% direct referral rate or about 15 in this example. The neat thing here is that if you averaged 30 new patients a month and received 50% or more from direct referrals, you could not be described as an average dental practice. Practices that get 50% or more direct referrals a month will shoot past what is commonly a new patient benchmark for an average practice. There would be so many people referring to you that the number would go from 30 one month to 35 the next, and stair step its way up and up and up. This direct referral rate is the most important indicator of your success potential in dentistry. You are giving people what they want, when they want it, at a price they can afford, and this consumerism strategy will reap you an unlimited number of new patients as long as you continue to inspire the folks that you come in contact with.
Walt Disney said it best: “Do what you do so well that others can’t help telling everyone they know about you”. This is how you Summit.
Mike Abernathy, DDS