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VOLUME III   Issue V

What You Should Know About Your Practice

Any practice owner needs to know these two things:

1. What is your gross income?

2. What is your overhead percentage?

If you don't know another blessed thing, you need to know those two things.

As you are expanding, if you are staying at about the same percentage of overhead, that's okay because there's more profit as the numbers get larger.

But if you're expanding and your overhead percentage jumps by leaps and bounds (which is not unusual as you try to expand) — that's not good. You can wind up making less money even though you're producing more.

So keep track of the percentage of your collections versus overhead, and keep a statistic of the percentage of overhead. That's a really important thing to watch — that number keeps you right on the pulse of your practice.

We've been in practices that boast huge dollar amounts of collections, but the doctor had a 98% overhead — he's making two cents on the dollar! He's got associate doctors working for him that are making three times more than he does.

It's how much money sticks to you, not how much goes through the practice, that's important. That's a hard lesson to learn. Sometimes, by the time they've learned that lesson, doctors have already lost tens of thousands of dollars because they weren't paying attention. It's not that they were doing nothing — they were very, very busy! — it was just that they weren't making any money from all that work.

We cover the workable solutions to this in our Financial Planning training.

New Patients Can Jam Up A Practice

Too often, a doctor will realize "You know, I'm not nearly as busy as I could be." So he starts really pumping the marketing out and trying to get more and more new patients in the door. New patients take up even more time, on the front end, especially. They actually jam up your front desk because now they have questions to ask of your staff,

your staff now have questions they have to ask of the new patients, and so on.

Plus, they are having to fill out paperwork, do an insurance work-up, do a health history work-up. We've also found statistically that it is usually the second or third time that a patient comes back to you, over a period of a year and a half or so, that you can most effectively sell them a bigger case.

There's nothing wrong with a steady flow of new patients coming in, but if you all of a sudden jam yourself up with lots and lots of new patients, that doesn't actually solve the problem. There's an idea that what you should do is get a butt in every chair all day long, but you'd be surprised how many practices can double or triple the dollar amount per patient, without adding ANY new patients, because we start getting the doctor to sell elective dentistry.

Ask about our Sales Training course if this is something you feel could be improved in your practice.

Increasing Net Profit

To the degree that you are in control of that scheduling book, there will be more profit and less stress. To the degree that you're not in control of it, there will be more stress and less profit.

What will often happen on a really busy day is that the kind of tight control needed to set an effective appointment, make the patient aware that they have made a commitment to that appointment and do the things necessary so that they will come back — those things will fall out on a busy day. But you don't notice them, because that was a good, busy day. But then later, the reason you have slow days is that because on the busy days, the staff were too busy to make sure that the patients would show up on the days that wind up being slow.

So to the degree that you are in control of your schedule book, to the degree that you are in control of your finances, to the degree that you are in control of your marketing — all those things work to build up your profit.

To the degree that you are not in control of those things, there will be less income and more stress.

When we find something in a practice that is not under control, it is usually because of a lack of training on the staff. They don't know what to say, or how to say it, or there is not a supporting policy. Or you have a policy that says, "Always collect the money." And they don't know how to do it. They don't know what to say. "What IS the thing that I'm supposed to say now?" "What can I say right now so that I collect the money and the patients don't get uptight about it?"

Ask about our Executive Training to learn how to exert control on your practice and your staff.

It's The Systems

When you went to school to be a dentist, they didn't teach you how to schedule patients. They also didn't teach you the most effective way to collect money or deal with insurance companies.

So, what happens is you and your staff invent systems to handle these things, and those systems work really well — at 30 miles an hour. But when you expand and try to run the practice at 60 miles an hour, suddenly the systems in the practice show up as the weakest links — after all, they were only designed to run at 30 miles an hour.

There's usually a plateau in a dental practice at $40,000 a month, where the 30 mile an hour systems are holding it back from any further expansion. The staff start to feel like they are running at Mach 9 with their hair on fire if they try to go any faster using those old systems. Even though the doctor is not working at anywhere near his capacity, the systems in place and the comfort level of the staff will prevent the practice from expanding.

Typically an untrained doctor will just throw more staff at the problem, hoping that two more 30-mile an hour staff members will handle the problem. Usually this just increases his overhead to the point where the doctor is now working twice as hard to make the same amount of money he was making before.

What's needed to get into the next level of income are new systems — and those systems are exactly what we teach at Pacific Management.