Dental Practice – Is It Time To Expand?
. B. AKey Performance Indicators and Your Dental Practice
When running a dental practice, specific measures can help you understand practice performance. These metrics or key performance indicators are useful to evaluate your practice’s performance. And, if you would be considering the acquisition of another dental practice.
There are infinite metrics that you could identify and possibly run reports. We recommend that you stick with the ones that make the most sense to your immediate business goals and add more as your progress.
1) New Patients vs. Attrition
Every practice needs to bring in new patients because no matter how good is the quality of your dentistry or your practice experience, every dental practice suffers from attrition. It’s easy to be fooled by the arrival of several new patients and overlook the fact that you haven’t seen Mr. Brown or Ms. Jackson for the last 18 months. Go back over the previous year and analyze the average number of new patients and patients lost per month. Look into the revenue comparison as well. It will tell you if you are growing or not.
If attrition is an issue, look closer to the underlying causes of why your practice has been losing patients. According to Henry Schein Professional Practice Transitions, the average attrition rate is around 17%.
“If a practice undergoes a normal attrition rate, they will experience approximately a 17% erosion of their active patient base each year as patients relocate, die, etc. In a healthy, growing practice, the practice will replace these patients with 20–25 new patients per month.”
—Henry Schein Practice Transitions
2) What is your treatment conversion rate?
Performing regular dental treatments is a pillar of any successful and profitable dental practice. It is part of a healthy revenue cycle, promoting dental treatment to your active patient base, as well as converting new patients into appointments.
Tracking case acceptance monthly is an essential key performance indicator to understand your practice’s effectiveness and opportunity. Treatment conversion rates will depend on different factors, such as new patients vs. existing patients; or type of services. However, monitoring and analyzing it is fundamental for your practice health.
➤ Do you know what your treatment conversion rate is?
➤ Are your results aligned with your practice goals?
3) Are you collecting effectively?
Managing cash flow is critical for any successful dental practice. If you are a PPO or fee for service practice and cannot collect more than 90% of your revenue within 30 days, your cash flow is a leaky bucket that needs addressing before any expansion thoughts.
An orthodontist that facilitates treatment to patients with payment plans might be an exception to this rule.
4) Practice Overhead
It is where most of your office expenses go, including staffing, rent, equipment, office supplies, dental supplies, marketing, lab fees, and others. Dentistry is very competitive, which has resulted in slow revenue growth for some practices, while, for many, overhead costs have increased faster. That does not mean that dentistry cannot be profitable, but it means that overhead expenses need to be carefully managed so the business can be profitable. Analyze your overhead costs making some comparisons with previous years.
- Observe which areas your Overhead has increased and whether if these areas correlate with business growth
- If you are bleeding, make a rigorous assessment of what is truly necessary, putting some strategies in place to ensure your practice’s longer-term financial health.
One important thing is to not forget about marketing. You may not have spent much here in the past. But, as the market becomes even more competitive, you may need a more significant investment. Especially, if you need to generate more new patients per month.
As the largest of your overhead expenses, staffing is worthy of special mention. For a general dentistry practice, payroll costs average 20-28% of the practice’s income (not including any associates and other doctors).
Payroll is an important metric to monitor. Especially, in a market where turnover rates are high, and well-trained staff is hard to find. You may have a loyal team that, so far, you have retained despite paying below the market rate, and that is keeping your staff percentage artificially low. If you lost two or three staff tomorrow, how much would their replacements cost you? Would you still fall within 20-28%?
Training your team can help you significantly with staff turn over. And,
- With employee retention
- Enables cross-function roles where you have people who can pick up the tasks of others who may be on vacation or ill, reducing your need for temp staff expenses.
6) What is the state of your equipment?
If you have avoided updating your dental equipment, you will naturally have kept your costs low. But, it soon might come back to you. Consider that newer technology can support your team to improve office productivity and efficiency. Such as:
- Patient Experience
- Patient Perception
- Treatment Acceptance
- Operational efficiency becoming “faster” and or more accurate
Be sure to objectively assess your historical equipment expenditure to understand if you are well-positioned or merely reaping the rewards of a momentarily unsustainable situation.
Tracking and diagnosing the health of your dental practice is critical in today’s competitive market.
Success is about identifying patterns over time, comparing yourself to industry benchmarks, and addressing gaps with proven strategies. The good thing is that you can address many irregularities with a few simple actions, involving a bit of process and a well-trained team. From there, you can be on your way to practice success and potential expansion.
About NGT Academy
We are one of the few turnkey Learning Management System providers that specializes in the dental industry. Our platform contains dental-specific eLearning courses designed to help you with dental practice operations and all other aspects of dental practice management.
Did you know eLearning typically costs at least 30% less than conventional training? It could be a truly efficient solution for your dental organization.
Do you want to learn more? Contact us for more information or schedule a demo