Have A Plan Before You Relocate
Dr. Stan Marks – Case Study #411
Does this sound familiar to you? “I only have to sell one more crown to pay for this widget.” Then a couple of months later, you want to purchase something else so you say to yourself, “I only have to sell one more crown to pay for this widget”. However, you forgot that this crown was already allocated to the first widget and that because your overhead is 61%, you only have 39 cents on the dollar to go towards the “new widget.”
This is the trap that Dr. Marks found himself in. He was experiencing the stress of too much month and not enough money and was expecting his practice to “pick up the slack” to cover his indebtedness when he relocated his practice. I am not an accountant and do not offer accounting advice. However, it is my job to help dentists understand what their practice expectations should be and see if I can uncover lost revenue to assist them with meeting their financial obligations. Sometimes the findings are not good.
Dr. Marks’ practice statistics:
Standards in the Industry
When he relocated, he added an additional treatment room so he hired another hygienist to put in the room. By adding her gross wages to his existing employee overhead, his gross wages is now 27% of his overhead. Standard in the industry is less than 23%.
No Game Plan – Reality Hit Home Hard
Then reality set in to his “make-shift” business plan. When he added a Friday morning to his Monday – Thursday schedule, he discovered that instead of increasing his monthly production, all that was happening was a reduction in his daily production – his monthly production never increased! His new hygienist was doing very well for the first two months until she was “caught up” with all the patients that were waiting to be seen sooner. Now she was idle.
Solutions for Dr. Marks
Dr. Marks needed to increase the number of new patients that he was seeing in order to step-up his daily production and potentially be able to profitably work an additional half-day. Unfortunately, it was necessary to terminate his new hygienist. The formula used to determine the # of hygiene days needed revealed that, until he reactivates the past due recall patients and improves his patient retention, he will not need additional hygiene days. When he does, he will add the days as needed by the calculations.
Learn from his experience if you are considering relocation. Understand how much your monthly expenses are going to be so you will know how much you need to produce and collect to keep your overhead in line and affordable.
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