Here is an email I got last week. Great question. In fact, if we all could ask better questions, we will have discovered the secret sauce to success. It is in the questions we ask that we quickly move from confusion to a plan of attack and ultimate improvement on our situation. Here was the question:
I recently downloaded your book, The Super General Dental Practice, and I love what I have read so far. I am GUILTY about not knowing my numbers. Do you have a Monthly numbers report that I should be tracking each month? And can you send me a sample P&L that is appropriate for a dental practice?
I enjoy your weekly newsletter with Max.
Thanks in advance,
PS I am a Baylor grad.
Dentistry has definitely moved from “just” a practice to a business and should be run that way. Often times we inherit coaching clients from other groups and it is always interesting to see what numbers they have their clients track. For the most part I see a trend towards tracking too many key practice indicators or KPI’s on spread sheets that would put a CPA to sleep. What you need is a quick, consistent way to monitor the overall health of your practice, along with a definitive strategy to correct any problems that come up. I would recommend that each dentist simplify the numbers that they routinely track. With that said, I believe that you can limit this to about 10 numbers. If done correctly these 10 KPI’s will allow you to monitor the pulse of the practice without being distracted by the labor of filling in a huge spread sheet. If you go to www.summitpracticesolutions.com you can download a copy of The Super General Practice in which you will find an entire chapter (Chapter 13) on Benchmarks (numbers).
As a starting point, here are the areas I would be tracking along with a short explanation for each.
- Production per Operatory: Just divide the number of Ops into your monthly collection rate. It should be $25,000-$30,000 per op/month.
- Production per employee: Same thing, just divide the total number of employees into your collection rate. It should be $20,000-$25,000 per employee/month.
- Hygiene production: Should be at least 3 times what they are paid, which would include bonuses, benefits, taxes, continuing education, uniforms, food for meeting, etc. The goal is to have twice the number of hygiene hours as doctor’s hours or about two full time hygienists per dentist.
- Collection percentage: Should be about 100%. With outside financing you should never fall short on this and a really good practice should end up with more than 100% collections in some months.
- Recall percentage: Should be over 80%. Anything less means you have a huge problem in hygiene recall.
- New patients: Should be at least 2 per day per hygienist. One hygienist working 16 days a month should see about 32 new patients. Increase the number of hygienists, and then you need to increase the number of new patients. Conversely, increase the number of new patients and you will need additional hygiene hours.
- Direct referral rate: The number of new patients directly referred from existing patients should be at least 50% of total new patients every month. If not, people don’t like something about your practice.
- Marketing: You should spend in the range of 3-5% of collections every month. When coupled with direct referrals, you should be averaging about 50-75 new patients per doctor per month.
The last couple of numbers revolve around overhead. Below you will find links to a couple of financial statements for the same office. One is in the format (Profit & Loss) that most CPA’s want it to be and that is bad. The second is in the format (Cash Flow) that takes into consideration the 7 areas of your overhead that will give you the opportunity to keep your fingers on the pulse of your practice while being able to have these numbers and percentages in a format that allows you to just monitor KPI’s.
The second example divides your expenses into 7 simple categories as follows:
- Compensation 24-25%
- Facility 7-9%
- Lab 8-10%
- Marketing 3-5%
- Office supplies 2% (or less)
- Dental supplies 6% (or less)
Total: Between 50-60%
Doctor: Over 30%
While this simplifies the management of your practice by the numbers, it also allows you to act quickly if you see something going wrong based on the benchmarks and KPI’s we track. Simple, consistent, reproducible systems will give you the knowledge to steer your practice towards success. That’s how you Summit.
Michael Abernathy, DDS