Is Business Ownership Driving You Crazy?
Most dental professionals would agree that school did not prepare them for the business of dentistry.
As a dentist, you may have mastered the art of a perfect crown temp, but have you been able to master the art of success as a business owner? If you answered “no”, you are in good company. When asked, more than 1,000 dental professionals admitted that managing their practice was outside their wheelhouse. Dental skills and business skills are completely separate yet most dentist owners were never properly trained to manage the business side of dentistry. What parameters do you consider when defining success?
As a dental consultant, I ask several business questions before taking on a client. My questions used to be centered around success benchmarks such as new patients, recall rate, collection rate, and so on. After about 10 minutes of this conversation, most dentist’s eyes glaze over and I can tell that I had lost their attention. It baffles me at the lack of interest in these benchmarks. I’ve now changed my approach in our initial conversation. I simply ask one question, “How do you define success in your practice?” Now, I get the dentist owners talking about their passion… which by the way, is not practice statistics.
Dentists define success in their practice using a variety of measuring sticks. The most common I hear is, “I consider a successful practice if both the patients and staff are happy.” I love this answer. It is true. We definitely want happy patients because they will refer friends, give us great Google reviews, and will actually show up for their appointments. However, happy patients and team members is not the only formula for success. The next most common answer I hear is, “I measure success by the quality of dentistry we offer in the practice.” This is also a very true, relevant point. We must stay up-to-date on the most effective dental techniques and products in an effort to provide quality dentistry to our patients. Dentists must be well-trained and have an interest in continuing their education regularly, although this doesn’t ensure success. The last most common answer I hear is, “I don’t know. That’s why I called you. I am in the back doing dentistry all day and have no idea what is going on in the other areas of the practice.” This response concerns me. These dentist owners are putting the success of their practice into the hands of employees yet wonder why the money isn’t flowing like a river. Yikes!
Now I ask you, “How do you define success in your dental practice?”
Regardless of how you define true success, your dental practice is a business and it requires a healthy financial flow to operate. As a business owner, you MUST keep tabs on a few key numbers that equate to financial success.
First, you MUST know your production / collection numbers. This means knowing how much money was produced for the month and how much was collected. The minimum acceptable collections ratio for a dental practice is 98%. This means that you should collect at least 98% of the amount of money you produced each month. Many practice employees argue the point that because insurance companies can take as long as 90 days to pay a claim, the collection percentage may vary depending on prior month’s production. Ex: If you produced $100,000 in July, you should collect a minimum of $98,000 in August. However, if you produce $130,000 in August yet only collect $98,000, your collections rate will go down to 75%. While this is a valid point, there is an easy solution. If you use a dental specific software such as Dentrix or Eaglesoft, there are reports that you can run to show you exact production / collection numbers. Continue to run these reports once per month in an effort to kept an eye on the numbers; however, calculate the collection percentage as a 3 month average ratio. Ex: Add the total amount of production over a 3 month timeframe as well as the amount collected for the same timeframe. Then, divide by three and there is your answer.
Second, you MUST know how many new patients come to your dental practice per month. The standard rule is 50 new patients per doctor per month. Accuracy is so important when it comes to tracking new patients. As I’ve mentioned in many other articles, if you are spending money on marketing and you aren’t tracking your new patient numbers, how do you know if your marketing dollars are working properly? How do you know if your front office team is converting the new patient phone calls into dollars on the schedule? If you’ve ever spent any time answering the phones at the practice, you have heard a prospective new patient ask, “Are you accepting new patients?” And you immediately think… Are you crazy?! Of course we are taking new patients!” If you don’t have at least 50 new patients on the schedule each month, it means that either your marketing isn’t working or your front desk team isn’t converting. Either way, it is a problem that needs to be fixed.
Third, you MUST know the recall rate in the practice. Hygiene fuels production. Simple as that. If you don’t have a healthy hygiene program, your production numbers will lack significantly. As a dental consultant, I’m always surprised at how many practice owners ask me what a “recall rate” really means. Recall rate is the number that represents how many patients are scheduled for their 3, 4, or 6 month hygiene appointment. In addition to emergency exams, most of your production will be a result of periodic exams during these hygiene appointments. Even better, these visits allow the opportunity for you to offer “same day treatment” to the patients on days that need more dollars to meet the daily goal. The minimum acceptable recall rate at any dental practice is 80%. This means that at least 80% of your patients are scheduled for a hygiene visit. If your practice rate is less than 80%, there are some things you can do to fix the issue. First, talk to your hygienist about scheduling the patient’s recare visit in the operatory vs. at the front desk. Depending on overhead numbers in the practice, you may want to consider hiring a Recall Coordinator. This position is responsible for ensuring that every patient is contacted in an effort to schedule their hygiene appoint. Recall Coordinators are also responsible for confirming all appointments. This way, they have the opportunity to overcome any objections from the patient in regards to canceling the appointment. If hiring a Recall Coordinator doesn’t make sense for the practice, consider adding this role to the job description for another front desk team member.
As a practice owner, if you will keep an eye on these three key numbers in the practice, you will never be caught off guard with the financial health of the business.
As always, if you would like some help deciphering through the numbers of your practice, please reach out to us. Whether you need help cleaning up your practice management software so that you are seeing “REAL numbers”, or if you just want a second set of eyes on the numbers, call us to help. We are always here for you, 214-755-0955.
Cheers to your success,
Front Office Coach