Editor's Note: Based on his extensive experience with dentists over the past 30 years, Dr. Roger P. Levin has authored a new book entitled, "The 31 Biggest Mistakes Dentists Make.
Editor's Note: Based on his extensive experience with dentists over the past 30 years, Dr. Roger P. Levin has authored a new book entitled, "The 31 Biggest Mistakes Dentists Make." His premise is simple. As he says in the introduction, “We can learn from our mistakes. But isn’t it better to learn from other people’s mistakes?”
The following is an excerpt from the forthcoming book ...
The biggest mistake regarding the practice budget is not having one at all. If you make spending decisions based on what you think will improve patient care, and what’s in the practice checkbook, rather than on what you’ve budgeted, stop. At a time when practice decline is common (three out of every four practices have experienced declines since the Great Recession, according the Levin Group Data Center™), you need to become more financially disciplined. And that applies to your personal income, too, if you simply take home “whatever’s left.”
Step One: Draft a budget for the practice. If it’s your first time, you can keep it relatively simple by taking the previous year’s expenditures on overhead, assuming they’re not extravagant, and adjusting them slightly for inflation. Also, set up a contingency reserve to allow for the unforeseen.
Step Two: Stick to the budget. Don’t give in to excitement about expensive new technologies or impulsive hiring decisions. Stop and think before making unexpected purchases. If you want to spend more than budgeted in one area, find an equivalent cut you can make in another area. If an expense is not currently budgeted, plan to incorporate it in next year’s budget. Abiding by budgetary limits does not automatically lead to austerity. It just means that you’re controlling spending as part of a broader growth strategy.
Once you have a budget and are accustomed to operating within it, you can begin sharpening your budgeting skills. Working with selected team members and the assistance of a dental-knowledgeable accountant, search for ways to economize on practice spending. Some cuts may be minor, such as those achieved by negotiating a better price on certain supplies or eliminating waste. But other cost-containment strategies can have significant short- and long-term financial impact. For example, by calculating the return on investment in new technology, you may discover approving the expense now will result in considerable gains in the next budget year. In the area of staffing, always a major component of a dental practice’s overhead, you may find that redefining job descriptions or even adding staff, such as a part-time marketing coordinator, will dramatically improve the practice’s financial picture.
Top business leaders understand an operating budget is not merely a set of limitations. It’s actually a tool for building the business. If you look at it that way, creating a budget with an eye toward stimulating growth and not making the mistake of going over budget, your practice, and, ultimately, you, will do better financially.
Note: Watch for "The 31 Biggest Mistakes Dentists Make" to be published this fall.
To find out if you’re making any mistakes and see how you can increase practice income ``by 30–50 percemt in three years, call 888-973-0000 or click here to learn about Levin Group’s Practice Performance Analysis™.