Arnold Schwarzenegger is originally known for his bodybuilding success. He wanted to be the champion who was always remembered. There was no reason for him to be hiding behind clothes or makeup. His physique was impressive. His success as a bodybuilder did not happen because he was lucky, was at the right place at the right time, or because someone had given him his body in that strengthened condition. He was proactive by always being in the gym, monitoring his entire food intake, and focusing on muscle groups that were not up to par.
"I think the biggest mistake people make is that they go to the gym and just go through the motions," Schwarzenegger said at one point. "They don't have their mind inside the muscle."
"There were guys next to me who trained just as long as I did, but they looked like s*** because they didn't concentrate. They did the same exercises that I did, but they weren't paying attention. They didn't know why they were training; they weren't inside their biceps. You have to be inside the muscle," he said.
Schwarzenegger understands the importance of doing everything it takes to become a champion. Just as he improved his physique by getting "inside" his muscle, the Naked Dentist is here to improve your practice in a similar fashion, by getting inside the numbers of your practice.
In the last column, I began the discussion of how a doctor in Colorado collected $2.3 million in 2014, while taking home less than 7% of collections (a healthy practice should be taking home between 40% to 45%). After stripping away some of the "clothes" of his practice, it was noticed that his break-even point (BEP) was being reached very near to the end of each month.
To achieve the BEP earlier each month, several key factors need to be monitored and tracked. The two numbers that this practice had been monitoring included collections and production. "Dr. Colorado" did a great job at both, yet he was being fooled by "clothes" and "makeup" that covered the truth of what was really happening within the practice.
Monitoring gross collections is a great indicator of a practice's growth, shrinkage, or even staying constant month to month. However, collections is a lagging indicator, meaning it is simply a past result and provides zero guidance regarding what caused the result. In fact, once you see this number, there is nothing you can do to change it. What has happened has happened, and you cannot go back to make up for any shortfalls.
From simple metrics such as gross production to more detailed and complicated metrics such as case acceptance percentage, you are at a severe disadvantage without relevant, accurate, and timely numbers relating to all aspects of your practice. While numerical literacy is an absolute must, there's no need for going back to school for an MBA or finance degree.
My goal is to help you understand how to lead your practice by numbers, identify key performance indicators, understand what they mean, why they are important, and how to regularly monitor them. By doing so, you will be able to catch early on the warning signs of an unhealthy trend, which leads to an unhealthy practice.
By learning these things, you will be able to maximize the profits in your dental practice and, most important, improve the quality of your life and that of your staff as well.
One of several metrics that are of concern within Dr. Colorado's office is staff wages. A healthy practice should be between 20% to 26% in wages. Dr. Colorado's staff wages were at 34%! Here are some other numbers that were unhealthy:
- Collection percentage
- Number of future visits
- Average production per patient visit
When looking more deeply into the metric number of patient visits in the period, what happened? Did new patient opportunities decrease? Did cancellations and no-shows increase? Have hygiene reappointments been decreasing gradually over the last six to 12 months, and it's just now starting to catch up financially?
Daily tracking of your collections will never tell you how to improve, it will only tell you if you failed or achieved your goal. Think about this for just a moment: If your collections were 20% less than where you expected them to be for the month, you didn't just lose out on the shortfall of last month's revenues but shortfalls in the future too, because you don't know where to apply the correction. The shortfall will continue until you specifically identify what caused the shortage, so that the cause can be fixed.
The next article of clothing to take off this practice will be revealed in the next column. Soon, we will have this dentist naked and perfect all his flaws.
Let's all look good naked.
Curtis Marshall serves as the vice president of marketing at Dental Intel. If you would like your practice to be in the next Naked Dentist column and have your practice undressed, contact him at email@example.com or 801-380-7070.
The comments and observations expressed herein do not necessarily reflect the opinions of DrBicuspid.com, nor should they be construed as an endorsement or admonishment of any particular idea, vendor, or organization.