Personal Development
∙ March 20, 2023

Formulas for Success!

Clinical dentistry is the scientific application of art to the oral cavity.  Through knowledge, training, and experience, practitioners skillfully recreate lost tooth structure with the precision of a scientist and the eye of a sculptor.  The business of dentistry, however, is more clearly defined and can employ certain formulas to achieve success.

Perhaps the most useful formula for a general practice is to recognize that, for every 200 active patients of record (anyone seen for any reason during the past eighteen months), one full day of hygiene is needed each week.  Unfortunately, many practices, post-pandemic, are understaffed and cannot schedule new patient or scaling and root planning appointments in a timely manner.

Another great formula is to recognize that, once a practice’s overhead is met each day, 80%* of every dollar produced thereafter is profit.  For example, if a dentist treatment plans quadrant care and focuses on just one or two restorative patients each morning, chances are good that the bills will be paid by lunchtime.

What about discretionary spending?  If the cost of an elective purchase is less than ten percent of monthly collections, cash flow will remain positive.  A $3,000 purchase of small equipment by a practice collecting more than $30,000/month, then, can be paid for out of cash flow.  For a more costly investment however, such as the addition of an operatory to increase practice capacity, a commercial loan (with payments less than ten per cent of monthly collections) should be obtained to avoid a negative cash flow.

Defining a daily production goal, or break-even point, enables a practitioner to know at the end of each day whether the practice is profitable, and is a critical guide to monitor success.  Multiply the practice’s fixed annual overhead by 120%* to allow for variable expenses.  To that new total, add any one-time expenses (like liability insurance or ADA dues) and the doctor’s personal (family) budget.  Divide the grand total by the number of days committed to patient care for the year, and the “magic number” to reach or exceed each day is the result.  If the practice is falling behind its financial goals, it’s much better to discover that on the 11th or 12th of the month rather than the 27th or 28th so that definitive action can be taken to correct the problem.

Dentists typically provide excellent clinical care but lack many basic business skills.  Applying these simple formulas can make a positive impact on any practice and should be considered.

Wayne Kerr, DDS, MAGD

*Note: Post-pandemic supply chain issues have significantly increased the cost of variable expenses (disposable items) which may adversely impact profitability and alter the “back-door” calculation (fixed overhead x 120%) for annual overhead.  Assess your own practice numbers to determine the appropriate factors.

Mountain Moments: “The magic formula that successful businesses have discovered is to treat customers like guests and employees like people.” Tom Peters

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