DO YOU KNOW YOUR NUMBERS?
When you are like me and you’re closer to your use before date than born on date, knowing your numbers hovers around blood pressure, cholesterol, PSA, lipid panels and weight. For the rest of you regular Dentists it means something altogether different. I am writing this article because I had a doctor give me a call and ask me about bonuses. He is the client of a large consulting firm, so I am a little quizzical about why he keeps calling me and paying them. His dilemma was that the previous bonus he had was breaking him, and the one his consultant suggested to replace it was not working. While trying to understand his circumstances, I asked him some pretty simple questions about new patients, overhead percentages, production and collection percentages, etc. Basically, he had no idea about any of these numbers. So I figure maybe some of the rest of you need a little refresher on what you needed to keep your eyes on.
There are over 300 key practice numbers that you could track, but the sheer volume makes that impossible. There is an old idiom that says: “You can’t manage what you don’t track”. We need to come up with a hand full of practice indicators that if tracked, watched, benchmarked, and acted on would guarantee you consistent management success. You need to watch these like your professional life depends on it, because it does. Here are the seven numbers that I always turn to first. If these are good, you need not look any further, everything is doing well in your practice.
- Number of New Patients per Month: Ideally we need somewhere in the range of 50-75 new patients per month per doctor. From a hygiene perspective, we need about 32 new patients per month or about two new patients per day per hygienist. Remember as you ponder these key numbers that they are not just a goal to knock down but also the reflection of how the public sees you. If you are having trouble attracting and keeping these kinds of new patient numbers, there is some reason that people don’t like you or your systems. Leadership means asking the tough questions and then acting to correct any anomalies, wherever they may lead.
- Percentage of Direct Referrals: This should be the number one indicator of whether all of your systems are working together to get patients to show up, pay for their treatment, and refer everyone they know. You need to have at least a 50% direct referral rate to even consider investing in marketing. In fact, your benchmark should be about a 70% direct referral rate. If you find yourself struggling with this, keep in mind you can never fix an internal problem by chasing an external solution (spending more on marketing). Your direct referral rate defines how the public sees you.
- Phone Call Conversion: The average million dollar a year dental practice only has a 35% conversion rate from new patients calling in. Keep in mind that the first impression a new patient receives is made by the person who answers your phone (including how it is handled after hours and weekends). Fail to be perceived as caring and compassionate, having consumer hours, being in-network for their insurance, meeting the needs of the entire family, and offering a wider range of services than are commonly found in a single doctor office and you will have a poor conversion rate. These patients make lifetime decisions about having you as their dentist within the first couple of minutes of that very first phone call. Don’t mess this up.
- Cancellation and No-Show Rates: The average million dollar practice is lucky if they can keep it under 15%, but the Super General Dental Practice will be in the 8%-10% range. Only having 85% or worse showing up for appointments insures a marginal practice. In a way, this too may indicate an inability on your part to inspire your potential patients.
- Case Acceptance: The average million dollar practice has a 60% case acceptance rate. Imagine a practice with systems that consistently get 90% acceptance. Because Dentistry is a small, consumer driven business, nothing happens until the patient says “YES”. If you are getting only a 60% case acceptance, then you’re seeing a lot of the backs of new patient’s heads leaving your practice to have their work done somewhere else.
- Production: While most of us tend to think monthly, we need to adjust our attention to a daily basis. Set a challenging goal, strive for it, and understand the “whys” of great production. Hygiene should be bringing in about 33% of the total production with the doctor(s) supplying 67%. You only get one shot at each day. You can never go back, so make the best of it. In a million dollar practice, 1% equals $10,000. If you are off even one percent, the long-term result is the loss of hundreds of thousands of dollars over your career. It is the small percentage that separates the average from the great.
- Overhead: It’s all about net. Forget the multi-million dollar practice unless you can maintain a 50%-60% overall overhead. Where is the win if you produce a lot but take home little? Other than staff turnover, stress, and financial challenges, high production with low net is a dog chasing it’s tail. Just to summarize, I would divide my overhead into seven categories:
- Compensation: Everything you pay any employee. Any and all costs for anything directly to or on behalf of any employee. It should be 24-25%.
- Facility: This includes rent, notes payable, utilities, water, insurance, equipment cost, leases, repairs, etc. It should be 7-9%.
- Marketing: This should be a minimum of 3% and provide for the NP numbers shared earlier. Start-up practices would be a dollar amount of $40,000-$60,000 in the first 6 months. Great marketing is the intersection of message and methods. Get this right and you have written your ticket for life.
- Dental Supplies: 6% or less.
- Lab: 8-10%
- Office supplies: 2% or less.
- Owner doctor money: 40-50% of practice collections.
That’s it. Seven priceless practice numbers you must know and act on. Imagine the exponential growth you would have if you went from a 35% conversion rate on the phone to just 45%. Or going from 60% case acceptance to 70%. Just a small difference will spell an extra two or three thousand dollars a year extra in your pocket with no additional cost in staff or facility. Max likes to simplify it this way: Produce More, Collect All, Keep Half.
This is how you Summit.
Michael Abernathy DDS
PS – On Nov. 3 in beautiful Scottsdale, AZ, a group of like-minded dentists will gather to discuss the future of the profession and how to position yourself and your practice to thrive despite the ever-increasing pressures on private practice from insurance companies and corporate dentistry. (As you should know by now, BEST for Dentistry was founded for this express purpose.)
This meeting is for BEST member dentists, so if you haven’t joined yet (still no cost to join) just click this link: https://bestfordentistry.com/apply-for-membership-now/
If you are already a BEST member (THANK YOU!) just click here to register: https://bestfordentistry.formstack.com/forms/member_summit_registration
SEE YOU ON NOVEMBER 3