Understanding and Increasing Profitability – Six Ways to Increase the Worth of Your Dental Practice
Think back to the times when you decided to take dentistry as a profession and attend medical school, what were your aims at the time? You might be passionate about dental medicine, excited in the challenges that it encompasses, or wanted people to be more aware of their oral health and so wanted to play a part in it. Maybe you were attracted to the lucrative payback of the practice. Whatever may be your aim, once you begin to practice, profitability is always a top concern.
Whether you took upon oral medicine out of sheer interest or after carefully seeking out professional gains, a “profitable” dental practice is the only way to keep things afloat. If your practice is not churning profits, there is no point in keeping it running.
Since generating profits is always the goal of a business, let’s help you better understand profitability down to the last detail.
Profitability is the extent to which a business generates profits. A profit is an amount you take back home after paying for all your expenses and overheads like staff salaries and equipment sales.
It is imperative that you understand what counts as profit. The production that you are earning from your patient visits, the dental procedures you perform, and the hygiene production earn you the dollars that count as your profit after deducing expenses like buying equipment, paying electricity bills and staff salaries.
Below is a simple formula for your monthly profit.
Collections – Overheads = Profit
The term collections mean all the production for the month that you expect to collect. A healthy practice should have a collection percentage very close to 100%, but the only way to know your collection percentage is to study your historic information. Once we know this, we can accurately calculate your monthly collections. Next, carefully consider all the expenses (overheads) that your business incurs and subtract those from your collections to get the total amount of profit.
This may look simple at first sight, but one can easily over or underestimate profit. One must be careful in analyzing the true worth of each patient visit and procedure performed. This requires a good understanding of production and collection data for the month and your historic averages.
It is also quite easy to look past potential expenses and wonder why your profit in hand is less than what you estimated. Once again this requires you to look back at your historic information and understand the financial side of your practice.
Therefore we gave you the simple formula above so that you can gain a better understanding of production, collection and overhead, and the effect they can have on your profitability. You will need to spend a good deal of time every month studying the financials of your practice. This will help you understand where you stand and how you can improve profitability. You can also hire a Certified Public Accountant (CPA) like me to help with these business intricacies.
A low profitability rate is not always the result of a profit miscalculation. Sometimes when you hit a low in profit, it may be time to rethink your business strategies. You can add a new life in your business with genius marketing tricks, better organization, building a specialty, and the like.
Below are several effective ways you can up maximize your profits.
1. Establish well-defined goals and educate yourself and
the team about those goals
It is significant to instill a sense of motivation among your employees and better educate them about your business goals. Your team is a vital building block for your profits. Share your business plans with them, give them achievable targets, train them periodically, and make sure they are abiding by the principles of excellent customer service. Make sure your team is giving you its best and is on the same page with you in showcasing the best dental practices.
2. Increase staff productivity via incentives
The best way to charge your employees with motivation is through various incentives. Make sure to give them an assortment of incentives like market-competitive salaries, paid vacation, insurances, and job satisfaction, to name a few. Incentivizing your staff, including your hygienists, can lead to profitability growth.
3. Create an organized marketing plan and utilize clever marketing tricks
Create an organized marketing plan that fits your needs and is executed efficiently and effectively. No business can deny the importance of marketing today. Notably, online marketing has taken the business world by storm. From social media advertising to blogging, and from paid advertisements to competing in organic SEO ranking on search engines such as Google, business owners leave no stone unturned to market their products or services.
If you have some time and are interested, setting up a dental blog can also pay off well. Researchers have estimated that over 40% of people are affected by social media when making health-related decisions.
Also, geo-targeted advertising is on the rise and has also proven to pay high dividends. Geo-targeted advertising refers to showing your advertisements only to a targeted, well-suited audience. For example, if your dental clinic is in Ohio, there is no use of your ad showing up on the newsfeed of a Texan. You may be really good at your craft, but someone will most probably not be as inspired as to fly all over from Texas to get a regular hygiene procedure from you, just by looking at an advertisement.
4. Build a solid reputation
Besides online marketing, you can also earn a reputation for yourself by installing the latest dental equipment at your office and making use of gripping presentations to build an impression. Note that these may be a little heavy on the pocket if you are looking to cut down on budget and are not heavily recommended.
5. Customer Service and Support
Another cost-effective way to build a reputation is through word-of-mouth or client referral. Build a reliable customer service and support, treat your clients like loyalty, satisfy them with the best treatment, listen to their complaints and improve upon them, and regularly reach out to them to schedule appointments and set up reminders. You can also directly ask for a referral from your loyal clients, and they will most often happily oblige.
6. Build a specialty
You can also benefit from specializing in a particular type of procedure to attract patients. Such a step will create an appeal among such patients, but you may lose a big chunk of your patients who were earlier coming up for oral hygiene. So, make sure you specialize in a sought-after procedure if you ever decide to take up specialization.
If applied correctly, these are the strategies that have the potential to increase profits by a high margin. It is not essential to include all the above strategies in your plan; for instance, building a specialty or paying off vast amounts in the name of marketing is not always recommended. However, excellent customer service, motivating staff through incentives, and having a targeted business plan is important to profitability.