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Dental Tribune Middle East & Africa Edition No.2, 2016

Determiningsuccess(Photo:Pixabay/geralt) Dental Tribune Middle East & Africa Edition | 2/2016 42 practice management Assessing your practice success ByDr.EhabHeikal,Egypt How is practice success determined? This is not an easily answered ques- tion. It is virtually impossible to point to one positive practice statis- tic. Yet in today’s fast-paced world, everyone wants a quick fix. We are programmed to want cut-and-dried solutions and easy answers for eve- rything. Unfortunately, there is no simple equation to measure practice success. Sometimes it is tempting to view overhead as the barometer of practice success. The overhead is the amount spent to generate a specific sales amount (Fixed costs). It varies from industry to industry, and since reliable data is very rare in our, area; thus I will use the example of the average overhead rate in the west. So for example, 40 percent gener- ally is regarded as an ideal overhead percentage for a general practice (It could reach 60% as an ideal in USA). In our area, it could be far lower, it reaches 15% in some cases, yet I will stick to the high measure interna- tional measure just for the sake of theexample. So does attaining the ideal over- head ensure success? To answer this question, lets consider and compare three clinic or dental centers’ situa- tions. Dental Center A: has an annual pro- duction of $250,000 and overhead of 40 percent. If having the ideal overhead is all that matters, this practice is successful. However, at $250,000, production can be con- sidered decidedly below average. The center’s ability to invest in staff, technology or continuing education also is limited. By all definitions, this center is unsuccessful even though the overhead percentage may be on target. Clearly, overhead is not the true indicator of success, yet magic num- bersalsoaresoughtelsewhere.Many view production as the only figure that truly matters. High production means a great deal of revenue is comingintothepractice;surely,that isagoodindicatorofsuccess. Dental Center B: To address that is- sue, let us examine dental center B, which has an annual production of $1.1 million and an overhead of 85 percent. Although the production of this center is extremely high, the overheadisequallyhigh.Shouldthis center be defined as successful? $1.1 million sounds wonderful. However, appearances can be deceiving. Al- though the gross revenue measure- ment may be impressive, the reality of everyday profit creates the same scenario for this dentist as it does for the one in center A. With both having an approximate net profit of $150,000 - $165,000, there is little difference between centers A and B attheendoftheday. DentalCenterC:NowconsiderC,with an annual production of $800,000 anda50percentoverhead.Although this center has an overhead slightly higher than recommended, the overall picture is much better than that for either A or B. It is a good bet that the dentist in C is substantially better off. If center C is managed and operated properly, the dentist will have a fairly low-stress environment withsubstantiallyhigherprofit. The moral of the story: When comparing these three centers, keep in mind that the percentage of overhead is not the only factor to consider. It is only a ratio and always needs to be viewed in context. De- spite the excellent overhead of 40 percent, center A with $250,000 in production cannot be deemed as fi- nancially successful as center C with $800,000 in production and a 50 percentoverhead.Thesamephiloso- phy must be applied when assessing allareasofthedentalcentertoevalu- ateopportunitiesforimprovement. KeyPerformanceIndicators(KPI’s) We often tend to look at only one aspect of the clinic’s performance in- dicators. Dentists need the total pic- turetodeterminethesuccessoftheir clinics and plan for the future effec- tively. It is unwise to rely on a single number or statistic. For this reason, youcanusekeyperformanceindica- tors(KPIs)todeterminethehealthof yourdentaloffice. The following KPIs are among the mostcrucialfordentalpractices: –Production(Totalincome) –Profit –Collections –Production/collectionsratio –Numberofnewpatients –Numberofreferrals –Totalofaccountsreceivable(Uncol- lectedpaymentsfrompatients) –Averageproductionperpatient – Average production per new pa- tient. Only through consistent tracking of critical KPI’s can the clinic truly de- termineitssituation. No single number or statistic determines clinic success. A clinic that relies on one statistic to deter- mine the state of the clinic will not achieve an accurate assessment. In today’s increasingly competitive field of dentistry, dentists must con- sistently analyze and monitor clinic KPIs. Dentists who are keenly aware of clinic performance are able to ef- fectively adjust strategies to meet the demands of our ever-changing economic and technological realities and achieve both professional and personalsuccess. Dr.EhabHeikal BDS, FICD, MBA, DBA. PracticeManagement consultant. He can be contactedat: eheikal@gmail.com

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