It’s the sales, stupid!
Do you know what it takes to drive and grow a profitable practice?
Governments stand and fall by the economy (many believe), and hence James Carville’s now infamous phrase, ‘It’s the economy, stupid’, coined during Bill Clinton’s Presidential election campaign of 1992. A practice’s success or otherwise, is largely governed by the level of its sales. Here we will discuss why this is and therefore what you need to focus on, to ensure you have a growing, highly profitable practice.
Costs in the practice are highly predictable. The benchmark percentage of costs as a ratio of sales, should be well known to every owner:
Associates 45%
Materials 7%
Labs 7%
Staff 19%
You can work out your overhead costs per surgery per day – fixed costs/number of surgeries x working days in the month. £250-£600 per surgery per day (depending on where you are and assuming you pay a market rent/mortgage).
Your biggest cost is staff, and we will assume that you have an engaged and effective team who are paid market rates. It also assumes you have a procurement policy that ensures you receive ‘best value’ from your other suppliers such as bookkeeper/accountant, digital marketing agency etc.
So now we need to get ‘granular’ with where the ‘sales’ come from. This means we need to know every ‘producer’s’, average daily yield/production/gross, call it what you will. We’ll call it, ADY. Coupled to this we need to know what our plan membership delivers each month and other revenue streams.
Armed with above numbers we can see that if an associate grosses £500/day (and a surgery costs £250/day) their contribution is to overheads ….. but that’s all!
So, we need to have an ADY target for each ‘producer’, which contributes to our overall profit target.
The ADY that is achievable is based on the services (treatments) that a clinician provides, the charges for those services, the utilised hours/days (you could open 8-8 and seven days/week) and the demand (how many new patients; recall rates).
It is interesting to note how consistent (in production rate) that most clinicians are. All other parameters being equal, I’ve seen a £90k/month dentist produce that month in, month out, +/-3 per cent and the same with a £15k/month dentist. Therefore, any increase in ADY only happens with a meaningful change in one or more of the drivers of ADY.
Meaningful improvement
So how could a meaningful increase in ADY be achieved? Here are some ways.
Create treatment clinic (zones) in each clinician’s book. Start with one hour in the morning and one hour in the afternoon. Then only allow treatment to be scheduled into those times – NO CHECK-UPS!
Track progress. Calculate ADYs for every clinician every month and then review with each individual. Remember, ‘Don’t expect, what you don’t inspect’. Ask them how you can help them to achieve the target ADY.
Buy an intra-oral camera, install it correctly and ensure all associates quickly start to use it with most patients. Then ensure they learn how to use the images they are capturing to clearly show (and then describe) to the patient where dental problems could be developing. They should be able to articulate the same level of concern as if the problems where in their mouth.
Work faster! Remove any rate-limiting steps such as an ineffective nurse who can’t quickly and accurately provide notes that hardly need any updating from the clinician.
Invest £5,000 in a new website (this doesn’t include video or photography or new uniforms for all staff). Then spend £1,500/month on SEO and PPC for the treatments you can deliver with great, evidenced outcomes.
Employ an automated system to get Google reviews so you have at least 100 reviews and 10 new ones/month. Aim to get 15 new patients/month for each 4+ days/week dentist. Then review the treatment plans from each of those 30-minute new patient consultations, with each associate, every month and track the conversion rate – how many book in for follow-on treatment?
If your practice profitability is below where you need it to be, then it’s the sales, stupid!
Get the right people, with the right skills and the right equipment, then market them effectively. Easy to write but a little more complicated to implement – you will almost certainly need some help.
Richard Pearce lives in Northern Ireland. Following a business career in various sectors and an MBA, he joined his dentist wife in dentistry. Richard combines his wide commercial experience with being attuned to what it is like for an associate dentist, a practice owner and a practice manager. His unique perspective ensures he can assist a practice owner with every area of the practice to create a more profitable practice and to achieve their smart objectives.
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