DIAGNOSE YOURSELF: PART 1
If you missed last week’s blog, we discussed really understanding where you are in your practice. Basically, where you do well and where you have challenges. You need to have downloaded the Growth Analysis Spreadsheet from this link. You should have filled in the first two pages (page 3 fills automatically) with absolutely correct data without leaving out any numbers. You have also tracked down a year-end Profit and Loss Statement as well as a copy of one week’s schedule. If you are reading this and have not filled in the data on your spreadsheet and have your P & L Statement and schedule sitting right in front of you, it is certain that you will not benefit by reading this blog. Think about it. Having failed to have your data is just one more confirmation of not really wanting to improve your practice. People who don’t accept accountability for their results are the very ones that fail to even take the time to track down this data. This week we are going to take a look at the first page of the spreadsheet, so pull it out and let’s go over this together.
As you look at the first page of the spreadsheet, you have entered the number of staff members (and number of operatories) at the top of the page beside their job titles. It is important that you have the exact number down. You need to assume a full-time person is about 32 hours a week. If you have part-time staff members then record the number of employees in each category as a fraction. You might have 2 full-time and one part-time assistant that would add up to be 2.25 assistants, or 2 part-time hygienists that would add up to effectively equal one full time hygienist. You get the idea. If you did not do it correctly go back and change it now. The number of staff as well as the number of ops will change the results on page three. Wrong numbers put in, wrong results, and a bad solution based on the numbers. I don’t want you worrying about a problem that isn’t there. But even more important is that if there is a problem you identify it and work on the correction.
When we look at the number of employees the first fundamental practice axiom is that your goal is to have a net adjusted production of about $20,000 to $25,000 per full-time employee. Most of us can do this in our head, but on page three you can see your summary of net adjusted production/collection per employee. Average practices do about $14,000/employee. This is sort of the default setting. You will want to shoot for higher numbers. If you are not close to $20,000/employee or higher, you have room for improvement, but more importantly, you will find that your overhead is high. This is the one area that I see most often out of whack.
As with the employee numbers, the same comparison should be looked at for the number of operatories. You should be striving for $25,000 to $30,000 of production per month per operatory. Do the math. If you are lower than the goal, you have room for improvement. We will discuss the fixes later when we get to page three of the spreadsheet.
In the process of looking at production per employee and per op, you will have figured out your average production per month. Take the time to look at your schedule and see the total number of doctor’s hours and office hours. It is pretty easy to take the total number of office hours per month and divide them into the average monthly collections to find the production per hour. This is an important benchmark to follow.
THE AVERAGE DENTAL PRACTICE NUMBERS:
• $650,000 collections/year.
• $54,000 collections/month.
• 20-25 New Patients/month.
• 3-4 employees (with just one full-time hygienist).
• Overhead of 67%-75%.
• Works 16, 8-hour days per month or about 128 hours in an average month.
• $3,375 average collections a day.
• $421.00 collected production per hour for the entire office.
• The hygienist should produce about 33% of the total production or about $18,000 per month (this is usually lower in average practices) or about $1,125 per day before adjustments for an average practice.
• Dentist produces the other 67% or about $36,000/month or $2,250/day and about 281.00/hour.
Take the time to figure out your hourly production and become familiar with average practice benchmarks. The word “average” is a default setting for the entire dental community. It is not a goal. It is the easiest benchmark to hit. In a way, Dr. L. D. Pankey was right when he said: “Average is just the best of the worst or the worst of the best”. For our purposes, I would like you to not settle for average but to shoot for more.
Next take a look at your hours. You need to ask yourself several questions in light of not actually hitting the results you have hoped for from a new patient perspective. Do I work enough hours to meet my financial goals? If you are one of those doctors working more than 32 hours a week, make sure your production per hour is at least $600. “Average” will not keep your overhead to an ideal of less than 60% unless you can produce and collect more than the average practice at $421/hour. If you work less, do the math and figure out your hourly production rate, the total hours per year you work, and subtract that number of hours from what an average dentist spends working about 190 days a year or about 1,520 hours a year. If you worked three days a week or 25% less than an average practice, you would work about 143 days or about 1,144 hours for the year. In this case you work about 368 hours less a year than an average or even great practice. Multiply these 368 hours that you did not work times your hourly average production and you can see how much money you are leaving on the table by working less. In the above example, the 368 hours you worked less than the average practice was about 3.8 months less than the average practice. Numbers matter. Doing a little less each week translates into a lot by the end of the year. In light of how difficult it is to attract a sufficient number of new patients, the next question is: Are the hours and days you work consumer friendly? Patients consider good hours to be 7 to 9 AM, 3 to 6 PM, and Saturdays. Your job is to make sure you are there when your patients want to come in.
The last area I want to look at is the box where you filled in your address, phone numbers, email address, and domain name. Pretty straight forward but the facts are that if you have been in the same location more than 10 or 15 years, you are probably in the wrong location now. Everything has changed in the last decade except you and your location. Gone are the days when you could just throw up a sign and settle in for the rest of your career. Consumers have become educated and they want what they want. When they enter your office, they are comparing you, your staff, and your facility to every other dentist they have ever visited. How well are you comparing? Do you and your staff inspire the people you have the privilege to treat? While you have snuggled into your comfortable location the potential clients (those within an 18-minute drive of your office) have had changes in income, families, education, marriage status, and race demographics. Your audience today looks nothing like the people that surrounded your office 10 years ago.
Consider your web site and domain name. If your practice is called your name, it is less valuable when you sell. It is difficult to hang onto goodwill when there has to be a name change because you are gone or have taken on a partner that wants the domain and name of the practice to reflect both of you. We already know what organic searches look like on the Internet. Over 45% of the time they type in the word “dentist” or “dental” and a location: A dentist in McKinney, Texas. This is the number one search with number 2 being “braces” and a location and number three being insurance with “Delta Dental” being the number one mentioned. It isn’t until you get to the last three categories that you ever see an organic search for Cosmetic, Implant, or Sedation. And these 3 only represent 4% of the searches and only 1% of the searchers.
My hope is that you are beginning to see how even the most normal stats on your office tell a story and create a culture and narrative leading to success or failure in the dental economy we find ourselves in. Attention to detail, understanding the implications of where you are, and acting quickly to embrace change will come up again and again as we dissect your practice. This is how you Summit.
Michael Abernathy, DDS
PS. The defeated person sees life as a series of difficulties, disappointments, and dilemmas. The victorious person sees life as an adventure consisting of puzzles to be solved, battles to be fought, and problems to be overcome. Roy H. Williams