On the Income & Expense Summary from two weeks ago, there were summaries of your Profit & Loss Statement as well as 8 other numbers or percentages that you should benchmark to make wise practice management and financial decisions. I wanted to quickly explain them along with the ideal goal for each of them. I think it is interesting that I have gotten so many responses from the last article and from the surprise of the doctors that texted, emailed, or called confused by the fact that they were not winning at dentistry. They were flabbergasted that something so common-sense flies in the face of what most practices do. It was an example of herd mentality as a majority of dentists just followed the next practice doing what they did and never really understanding the business of dentistry. Each and every doctor, over and over again, commented that what we were discussing was so common-sense.
Take the time and review this follow up of the Income and & Expense summary.
$25-$30K production per operatory/month (5 Ops = $100K-$150K/month). If you are not at this production level, it does not mean you are a failure. It does mean you have room to grow, and there are no physical capacity problems. There is no need to add more rooms to produce more until you meet or exceed this ratio.
$20-$25K production per employee/month. If you are not meeting this benchmark, you are either overstaffed, or under producing, or both. Once again, you have no staff blockages (not enough staff) if you fall short of this goal. It is possible to increase production without adding a single staff member. If someone quits, do not replace them. Try and work with fewer employees.
50-75 new patients/doctor/month. (Remember: we are talking about a well-run general dental practice, not a “Boutique” practice.) Normal dental practices have a mixture of treatment and ages. As you and your practice age, it is normal to see fewer children. Along with this increase in age, confidence, and competence, comes more and more crown and bridge. The negative is that you have limited the size of the patient pool that you can vie for. Generally speaking, a dentist will only attract and inspire patients who are about 10 years on either side of the doctor’s age. Open up a practice and still be in the same location 15 years later, and you are probably in the wrong location. Demographics will change, and before you know it the neighborhood has gone downhill, and there is a dentist on every corner (To help you compete, you need to have a ratio of 1 doctor for about 2000 patients). Go to www.zipskinny.com, put in your zip code and up will pop all of your demographic information. This will be a revelation for most of you and an aid in getting more new patients from updated marketing for others. Bottom line: There is no excuse for not getting your share of the new patient pool. You either grow or die. There is no way to just stay at a particular production plateau. Inflation, demographics, and the economy slowly erode your business until it is too late. It is like cooking a live frog. You can’t drop him in boiling water because he will just jump out. Put him in cold water and slowly raise the temperature, and he never realizes his plight until it is too late. Welcome to the story of the average dentist. No one ever left dental school wanting to end up an average dentist. L.D. Pankey said: “The average dentist is either the best of the worst, or the worst of the best.” If you’re average, which are you?
2 Hygienists per doctor. This indicates a healthy recall, new patient flow, and shows that you have the back door closed. This is the lifeblood of a healthy practice. If you have been in practice for more than 5 years and have not found the need to hire another hygienist, you are not inspiring your patients. With the average new patient flow of 25 new patients per month, you would need to add a new hygienist every 24 months just to service them. If you are not seeing this, then you have as many patients leaving as you have coming in. You have the back door wide open. This usually indicates a lack of systems, inconsistent internal marketing, and a low ability to inspire the patients you have. It is black or white: You are either growing, or you are not. This is one of the reasons I believe that every practice needs to invest in a coach: Someone to fine tune your practice and help you to the next level. Without exception, everyone needs a mentor. I would have to say that the success of my own practices is directly related to practice management coaching, meeting with a mentor, and hiring for attitude. Practice consulting is not expensive. It is priceless. It is the best investment you can make in building a successful practice.
Hygienists are producing $1100-$2500 per day unassisted. For our Summit clients we are now able to bring in one of my hygienists who regularly produces $30K-$45K per month, unassisted at no cost to you. We will just let them replace one of our regular consultant visits.
Hygiene department produces 33% of the total production of the practice. Whether it is 1 or 10 hygienists, you should be getting at least one third of your production out of your hygienist. If you are not monitoring this, you will be surprised at how easy it is to lower your overhead and increase production when your hygiene department is running on all 8 cylinders.
60% of your day is filled with substantial cases. A substantial case is anything that is about the fee of a crown. Example: Your production goal is $5,000/day. If a crown is about a $1,000, you would need to have 60% of $5,000, or $3,600 (3.6 crowns or their equivalent) booked each day to reach a significant goal. This is also true in hygiene, except the dollar amount would be different. A substantial case for hygiene might be quadrants of sealants, or soft tissue management patients, but not normal everyday recall patients. 60% of their day must be in substantial cases also. Fail to do this, and you are guaranteed to not make a significant goal for you and your hygienist. Your hygiene department should account for about 33% of your total production. Each hygienist should produce at least 3 times what they are paid.
Recall effectiveness of 80% (Nationally, you see the average general practice at 42%, and this stinks.)
50-60% of your new patients come from direct referrals from a patient of record. Practices that are not inspiring patients to refer find themselves “marketing” driven. You are paying patients to come in the door, and they are leaving just as fast. If you are not growing, you are not inspiring your patients. In a society that votes with their feet, you cannot afford to have a majority of your patients getting second opinions or not scheduling for treatment. You cannot get better at giving patients what they do not want. Change your direction and reap a new outlook for your practice.
98% or greater collection rate (The average practice is about 94%. This will not do.) Our practice has always collected more than 100% a month.
Consumer hours: 7-10am, 3-6pm, Monday-Friday, and Saturday hours. This is difficult without multiple doctors, but 9-5 Monday through Thursday does not meet your patients’ needs. Consumerism is a creed you need to adopt in order to prosper in any economic environment.
Convenience is huge in today’s practice environment. Patients show up where their needs are met. We talk a lot about consumerism and capacity. The best definition I could give you is your ability (capacity) to give patients what they want, when they want it, at a price they can afford (consumerism).
A small incremental fee increases of about 2-3% every January and July. Inflation and subsequent costs of operating a practice continue to climb. Review and update your fees on a systematic, regular basis. A usual scenario would be to compare your fees to our fee survey and place them in the 85th percentile. You would then raise your fees a couple of percentage points every January and July. This would offset the effects of inflation and cost of living.
Pricing: Keep comparables comparable. Do a fee survey. Try to keep your fees in about the 85th percentile. Consumers shop, and price is important. As a note: A fee increase of 10% creates a 9% decrease in overhead. Over the lifetime of a practice, millions of dollars are lost from having fees that are 5% too low. The cumulative effect could fund a substantial portion of your retirement.
A minimal production of $600-$750 per hour per Dentist.
A goal of 15% growth per year in productivity. Growth is a sign of meeting your patient’s needs. No growth means you are not inspiring your patients. Lack of growth means there is something drastically wrong. Managing a practice by the numbers to establish goals to ensure growth and the proper overhead is the only logical choice. Insurance company statistics tell us that 97% of the population at age 65 will either be “dead or dead broke”. Only 2-3% will become financially independent at that age. Failure to plan is a plan to fail. You must start from day one to lay out a strategy for financial success. No one else can do this for you. The one saving grace is that it is never too late to start.
You are closer to your “do before date than your born-on date”. For a young doctor or midcareer doctor who has an entrepreneurial bent, we have the number one wealth building strategy to share with you: Ways to remove equity from your practice, while producing more and lowering your overhead to insure a comfortable retirement at any age. You cannot discount a life with “choices”. A secure financial future is the best choice you can provide for you and your family.
Production of $2,500/New patient. (National average is $1,100/New Patient) Just divide the monthly production by the number of new patients, and this will give you a ratio of production per new patient, not production on each new patient. The $2,500 per new patient is a lofty goal for an average general practice, but it is very doable. Production over $2,500/New Patient puts you in the realm of a boutique practice. Along with a fee survey, we can help all our clients see how a failure to do a certain type or number of procedures indicates a lack of planning. We can help you restructure your fees and treatment modalities to maximize your demographics to create a lower overhead and increased production without more staff, facility, or stress.
90% case acceptance. The “monkey score” is a case acceptance of 67%. The number one reason people do not have dental work done is that they were never told what they needed to do. Just tell them what they need, and statistically, 67% will say yes. Add in consumerism, and the scripts that we can provide, and it will always go up.
This should give you a place to start. Take your current P&L statement and arrange it to fit the overhead items as listed on the Income & Expense Summary in the last article as wells as the benchmarks we discussed here. Give me a call if you have a problem. Take a look at each of the benchmarks and compare where you are to where you want to go. With the team’s help, take these goals and set a path for the next 12 months to improve in every category. It is no longer possible for us to just get by. We must set challenging goals and begin to run our practices like a business. Make the difficult decisions about staffing and when and how to work. Pay the price and take the prize. This is now your “business goal”. Below, you will find another Goal Planning Sheet that will add feet to the process of setting and obtaining these benchmark goals.
This “Goal Planning Sheet” will help you formulate and follow through on your vision of what is to come. Keep in mind that for a goal to work you must take the time to really consider what you want, write it down, and have a date of completion. The Goal sheet does this and more. As a side bar, the WIIFF stands for “what’s in it for me”. The rest is self-explanatory. The final line is an “Affirmation” which is just a positive statement about how it will feel to have accomplished the goal you have chosen. You should use this not just for your goals, but for any staff goals or family goals you might have.
Michael Abernathy DDS
PS – If you would like a copy of this to print and use in your office, just let me know.