Dental software can be one of the best investments for your dental practice, but it can also be an unprofitable investment if you select a system that doesnâ€™t deliver enough value. How can you tell if your software has a positive ROI (Return on Investment) for your dental practice?
There is more to calculating your software's ROI than meets the eye.
At first glance, the formula to calculate ROI seems straightforward:
ROI = (Value Added - Price Paid) / (Price Paid)
However, calculating this is surprisingly difficult because there are several factors that must be considered — some of which are easily quantifiable, and some that are more qualitative.
Calculating the price of your software
When calculating the ROI of your software system, it’s important to first understand what the price is. The price includes the monthly fee of the system (or the one-time license fee), setup fees, support fees, and the price of any additional hardware or servers that might be required.
Many server-based systems charge a one-time license fee (which is often thousands of dollars), and will also charge you for software upgrades. In this case, you’ll want to estimate how much you’ll spend on the software license and any subsequent software upgrades over the next X years, and translate this to dollars spent per month.
Another cost to tack on is the time it takes to train your staff to use the system and any downtime that might occur as a result. Every system has a learning curve, which means that you and your employees will likely be less productive than usual while learning how to use the new system. It’s also possible that you’ll make some mistakes when onboarding, which can incur a (hopefully small) cost.
Certain types of software systems, such as patient communication software, are designed to help reduce no-shows and improve patient recall. These are examples of quantifiable metrics that shed some light on the value that these systems provide. For example, if you’ve noticed that the system has reduced X number of no-shows per month, you can multiply X by your average production per appointment in order to estimate how much value this particular feature is adding.
Most dental software systems are designed to save you and your staff time, either by making certain processes more efficient or by completely automating certain mundane tasks (such as appointment reminders). Though it’s a bit harder to assign a dollar amount to the time that software has saved your staff, it’s an important factor that must be considered when evaluating a system’s ROI. To account for this, you can estimate how many hours per month the system saves your staff, and multiply it by their hourly wage.
Quantifiable metrics, such as a reduction in no-shows, are some of the most obvious ways that software can help you save money, but they’re only part of the equation.
Software can also help provide a better patient experience, but it’s tough to put a price tag on the value added in this area. For example, online appointment scheduling systems enable patients to book appointments without having to call your practice. This is important, since it reduces the overhead in scheduling appointments, and offers your patients an additional level of convenience, especially for anyone who is not able to set aside time to call your practice and schedule an appointment during business hours.
To truly understand the value of these intangible benefits, consider the following thought experiment: What would your practice be like without the software? If your practice would become more hectic, and your patients would be less satisfied with their experience, then there’s a good chance that the software offers a substantial level of intangible benefits.
Is your software it?
Ultimately, you’ll want to take into account all the factors we discussed above. Though it can be difficult to precisely calculate how much value your practice management software provides, these factors provide a solid foundation to help you determine whether or not the system delivers a positive ROI, and can help give you the confidence that the software you’ve selected is a worthwhile investment.
Brian Quinn is a cofounder of ValuePenguin Software, which provides in-depth product reviews and resources to help business owners make well-informed decisions. From highlighting industry-specific trends to delivering extensive software guides, ValuePenguin Software helps businesses select the best software for their needs.
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