Shoring up these areas of your practice can plug the profit leaks.
Here’s a big question for every dentist: How do you know how much your practice leaks profits?
Practices throughout the country suffer from leaking profits. No area of the practice is immune, and there are many. Here are the 5 biggest areas that typically lose profits:
Let’s go through each of these and, as we do, think about your practice and if you can say beyond a shadow of a doubt that you are following “best practices” in each area. Knowing you’re performing at your highest level versus thinking you’re performing at your highest level makes a world of difference.
On average, recare in a general practice loses about 25% of its profits. Most general practices overestimate their recare effectiveness and, because of that, miss leaks in their profits. And because recare drives not only hygiene production but treatment production, any leakage in production leads to leaky profits.
Treatment Enrollment and Scheduling
Treatment enrollment and scheduling can change everything in a practice, so get these systems aligned well and tuned properly. Doing so can move a practice from being barely profitable to experiencing larger profits.
Patient experience, more than anything else, hides leaky areas in a practice. For example, when a patient doesn’t like an interaction in your practice, they become resistant to treatment plans and may take longer to pay. Often, patients simply walk away and go to a new dentist.
Accounts receivable (AR) leaks money except in the most well-run practices. For example, insurance payment delays and discounts and patient nonpayment or delayed payment clearly reduce on-time collections. To add to that, poor processes and poor leadership, management, and communication all contribute to out-of-control AR situations—and leaky profits.
It turns out these AR areas directly hack away at a doctor’s profits. Therefore, even an AR that’s “a little out of tune” can affect profits severely.
Culture and Leadership
Culture and leadership are undervalued. Both areas tend to be vastly underappreciated by practices, yet they affect profits more than anything else. Culture and leadership affect efficiencies, production, collections, and transition valuation in large ways, making them strategic in nature.
You can put the best processes in place and hire the most skilled people, but if you have a poor culture or leadership, your practice will leak profits like a sieve.
As a side note, did you know that an estimated 60% to 70% of dental practices and 70% of small businesses suffer from embezzlement, with an average take of more than $100,000 over many years? The fraud triangle, comprising mostly cultural and leadership issues and some process issues, defines this highly vulnerable situation in which practices often find themselves.
As management guru Peter Drucker once quipped, “Culture eats strategy for breakfast.” Once you align your culture, the practice turns into a team-driven practice of which most small businesses can only dream. In a well-aligned culture, dental assistants, hygienists, and those at the front desk constantly look to improve the practice. In addition, others hear about your excellent practice and want to come to work for you.
Time to optimize these leaky profit areas
If you successfully optimize these key areas, you have already gone a long way to stopping profits leaking at your practice. At Fortune Management we work with practices every day, from smaller, new practices to larger, more experienced ones looking to grow or transition, and we help them stop leaking profits. If you need some help plugging leaks at your practice, reach out to us. We’d be happy to help.