Piloting the Financial Success of Your Dental Practice
I spoke at a seminar for new dental practice owners and those seeking to own or buy into a practice. I was surprised to find out that many of the dentists in attendance who were aspiring to achieve a financially successful career in dentistry were unaware of some key measurements of practice success.
I have been told by reliable sources that the dentist practice failure rate in the US is less than 1% per year. That is an amazing success rate. But if a practice does not fail, is it providing the income and quality of life the owner’s desire? Some practices fail, some just survive and others thrive. I believe that in order to achieve a thriving, financially successful practice, progress toward that goal needs to be measured.
Imagine you are the pilot of an airplane. You have set the course for your destination. You have run through the checklist of procedures to follow including making sure you have enough fuel to get to your destination. Think of the airplane as your practice. The checklist is your education. The fuel is all the skills you have mastered through your dental education. And, your destination is how you will look back on your career and measure your success.
A pilot of an airplane has a cockpit dashboard that is filled with many dials. These dials help the pilot measure the planes progress and steer it towards its destination. Some dials need to be observed more frequently than others but all of them are important to the overall success of the flight. A pilot’s failure to look at a particular dial on his dashboard might result in the plane not reaching its destination. Catastrophic results can happen and sometimes by luck, the plane arrives safely.
As a dentist, you should have your own dials on your dashboard to measure your practice’s progress. Most dentists that I meet for the first time measure their practice by comparing production or collections to the prior year or prior month. Some measure how much money is in the bank account. These are all valid measurements but used alone do not provide a complete picture of the practice’s progress.
Are you measuring daily production? Are you measuring treatment plan acceptance rates? Are you measuring the number of new patients monthly? What sources in your marketing plan for new patients are most effective? Are you measuring your monthly collections compared to production? Are you comparing your overhead to average dental practice percentages on a quarterly basis? Are you monitoring your hygiene production? Are you speaking with a CPA at least twice a year who understands dental practices to help make recommendations for efficiency and effectiveness? Are you projecting your production for the following year and calculating daily production to measure progress towards your goal? These are just some of the dials to measure on your dental practice dashboard.
There are many dials that make up your practice’s dashboard. Some are checked more frequently than others. Maybe you are checking some but not all of the dials on your practice dashboard. Maybe you are headed to your destination or maybe you are leaving it up to luck. And, if you use all the financial information available you have a much better chance of arriving safely at your destination.