You work hard to make sure that your patients’ teeth are healthy, but how healthy is your practice? Chances are good that you spend most of your time focused on serving patients and managing your staff, but long-term stability requires focusing on things that apply to your financial big picture as well. Part of understanding what makes a dental practice healthy centers around analyzing several KPIs (Key Performance Indicators) and then using the information you find to adapt and adjust how your practice functions.
The following 5 key indicators are a great way to assess the overall health and stability of your practice so that you can make solid decisions for how to improve it moving forward into the future:
- Patient Scheduling Data
While the average goal across most dental practices is to have 98% of all active patients scheduled for an appointment in the near future, the typical scheduled rate falls much closer to 80-85% at best. Whether due to increased competition or increasingly busy patient home and work-life schedules, it is not uncommon to experience difficulty in filling your company calendar to the brim.
However, you need to remember that unscheduled patients are an attrition risk – if they are not actively planning to come into your clinic, you face the possibility of losing them to another dental practice that is closer, cheaper, or newer. Finding ways to keep your current patients engaged and on your schedule is one of the best ways to maintain your practice’s overall health.
- Your Practice’s Overhead Data
While every company has some amount of overhead costs, you need to have a firm grasp of exactly how much you are spending so that you understand the big financial picture your company is in, whether good or bad. Unnecessarily high overhead costs, especially costs that are difficult to get out of or to creatively lower can cripple your practice’s future plans and can make it difficult to grow.
On average, your overhead costs should fall well under 60% of your total cost projections. If you are in a specialty service area like oral and maxillofacial surgery or endodontics, your overhead costs should be under 50% on average. If you evaluate your practice’s overhead costs and find them to be unusually high, it would be wise to audit your spending and uncover areas of bloat that you can reduce to put additional funds back into your pocket every month. You can use the added finds to hire more staff, expand your services, or even invest in marketing.
- Staff Labor Data
Without a doubt, staff labor costs make up the largest financial outflow line item for any practice, often making up 25-30% of all costs. As with overhead costs, specialty clinics often see lower percentages, falling more in the 18-25% range. Knowing how much you are paying your staff is vital to your practice’s overall health. If you are operating based on guesswork, you run the risk of overlooking budgetary obligations or missing out on areas where you could be saving money.
- Overall Production Data
On average, the production you will see per new patient will be double or triple that of existing patients. There are many factors that play into this, but dentists often find bigger issues requiring large treatment plans with brand new patients. It is vital to track your production and revenues for new patients so that you can accurately project income and budget into the future. Knowing where you stand with new patient services also lets you have a benchmark for how much marketing you need to do to achieve your revenue and production goals.
On the other hand, average production per existing patient paints a long-term picture of how much each patient contributes to the practice’s revenue each month or each year. This is an excellent baseline measurement and budgeting tool. Typically, average production should grow year upon year as your practice grows. If you see these numbers staying the same or even declining, it may be time to add a new service to your offerings to help keep your patient base coming back to you when they need something to help keep their smiles on point.
- Patient Attrition Data
Patient attrition is a fancy way of saying patients that leave your practice. It refers to the number of patients a practice loses on a monthly or annual basis. The most successful practices fall almost 10% below typical attrition rates for their industry. The reason behind this is simple: If you are losing patients, you are losing revenue, and you have to invest more money in marketing or patient loss prevention efforts. The best way to keep attrition rates low is to continually look for ways to add value to existing patients and to offer the best quality services possible.
These 5 Key Performance Indicators are an excellent place to start when it comes to understanding the overall health and stability of your dental practice. Evaluate them often, and look for ways – no matter how small – to increase the positive elements and decrease those that are not performing well.