Want to transform your practice into a business? It’s a question of structure…
Matthew Rogers, Client Account Director at specialist accountants to dentists Clear Vision, explains the significant benefits to dentists when they adopt a principle of matching their revenue to profit.
In preparing my presentation for the latest series of Medi-cruit ‘Practice Matters’ seminars, I am reminded of how important it is to look at the working structure of your practice and how patient treatments are allocated.
Highly important because this directly relates to the profit you make. It is a significant factor in truly running your practice as a business.
When reviewing your practice structure, I recommend you treat the different areas of your practice as three distinct and separate businesses:
- the work you do as practice owner & principal
- the work conducted by your hygienists and therapists, and
- the work conducted by your associates and specialists
Look at the work you do as a clinician
Chances are, as you don’t pay others to provide the service, your profit when you carry out certain treatments yourself can be as high as 80-90%.
A crown charged at £750, say, with costs to you of £150, will make you £600 profit. That’s an 80% profit margin.
Similarly an implant and crown charged at £2,500, with costs to you of perhaps £500, also generates 80% profit. The difference is, as this treatment is of higher value, it makes you £2,000.
So you can see the key to more profit is to adopt a principle of allocating treatment which increases the amount of high value work you do.
Look at the work done by your hygienist/therapist
Firstly, calculate your profit margin. You can insert your own figures but let’s use the typical UK hygiene numbers as an example:
Hygiene time in the UK is typically charged between £90 and £130 per hour.
The cost to a dental practice is £25 to £35 per hour. So based on these averages a gross profit of 66% is made on each hygiene hour:
- Average £105
- Cost £35
- Profit £70
You make a reduced level of profit on the treatment your hygienist/therapist carries out. So to do the best for your business, you need to allocate them the appropriate work.
What lower-value treatments are you currently doing which your hygienist/therapist is permitted to take up? Are you utilising all their capabilities?
Look at the work done by your associates and specialists
It can be a gut-wrenching moment when you look at just how much money goes out the door to your specialists.
As an example, let’s assume you refer out one implant per month, at a cost of £2,500 to the patient. Over 12 months this is £30,000 worth of work. That’s a whopping £300,000 over ten years.
The process of carrying out this work in-house makes sense for your business. Here are your options:
- Carry out this work yourself (passing down lower-cost treatments to your hygienist/therapist will release time for you) – the level of profit you will make as detailed above
- Bring in an associate who can carry out this work if you do not have the training to do so – a profit of zero will rise to 40-50%, that’s as much as £15,000 before costs over the course of one year. £150,000 over ten years
Of course you need to retain a flexible approach. Situations change and the demand for dental services alters with them.
For instance, many dentists are currently seeing a downturn in the level of cosmetic treatment taken up by patients. So you have to be prepared for alterations to the work mix in each area.
But stick to this base working structure, matching your revenue to your profit whenever you can and it WILL improve your bottom line financial results.