And while making money is not a purpose but rather a result of fulfilling your purpose, it is still essential. It is also one of the ways that you guarantee that you can continue to fulfill your purpose. If you run a practice that does a great job of treating patients but don't do it profitably, then you're not going to be doing it for long.
In fact, being very successful financially is the best way to ensure that you can continue to have the most impact on your patients and your community, so it's essential that you learn your numbers. Of course, if you're like most people, you'd rather focus on doing what you're good at than spend time dealing with the financial and measurement side of your business. But there's no escaping it (we've all tried -- unsuccessfully!).
How do you begin? With annual planning. This is the time of year when you should be deciding what you plan to achieve financially over the next year. Ideally, you are doing this with a practice coach who has compiled the numbers from the previous year and can ask you the key questions as you make your plan.
Remember, profit isn't just what you take home. Your true profitability is the amount of money left over after you pay yourself 30% to 33% of your collectible production, even if you're the sole business owner.
Notice also that word "collectible." What you bill is an interesting number, but what you collect is the real revenue of the practice. Therefore, annual planning starts with deciding what you need to collect in 2020 to achieve your goals and then working backward.
A coach is going to want you to understand your profit and loss (P&L) statement, showing where you spent money and where you made it month by month. The value of a practice coach is he or she is going to quickly spot where your spending may be out of line with standard expenses. However, a coach is going to dig deeper than that. He or she will look at the following:
- How many new patients you treated last year
- What your hygiene recall is
- What your case acceptance rate is
- Your marketing results broken down by source
- And several more key performance indicators (KPIs)
KPIs tell you where you can improve and where you are doing well. They are the drivers of your profitability. And that's the point: You need to know what you expect to produce in the next year and how much you intend to profit as a result. You are starting with the end in mind and then breaking it down to what you need to do each month, each week, each day, and even hourly. This approach is the only sure way to get to your goal.
When it comes to achieving your purpose, profitability is the name of the game. It's what's going to allow you to keep up with new technology, hire and bonus the best team members, and allocate marketing money to grow your practice and achieve those financial goals, as well as to secure your future and your retirement.
Dentistry is a great profession. You can have a powerful effect on your community by making people healthier, donating your services, creating good jobs for your team, and making a good living. Knowing your numbers ensures that you're on track, creating a steady upward spiral of profitability and purpose.
Learn to love your numbers, and you'll love dentistry even more.
Editor's note: This is the first in a yearlong series provided to DrBicuspid.com by Fortune Management.
Kim McGuire has been an executive coach for nearly 20 years with Fortune Management. She brings a wealth of practice management knowledge, coaching acumen, and dental business expertise to Fortune Management clients across the U.S.
Fred Joyal is a renowned speaker, author, and consultant on dental marketing. He is the co-founder of 1-800-DENTIST and author of two best-selling books, Everything is Marketing and Becoming Remarkable.
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.
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