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09.23.05 Issue #185  
   
Overhead Sending you Overboard?


Sally McKenzie, CEO
The McKenzie Company
sallymck@mckenziemgmt.com

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Overhead. One word, three syllables, serious stress. The thought of it can instantly suck the joy right out of your day. So many great ideas, so many things you should be pursuing, so many improvements that could be made if you only had the money. But more and more of the practice revenues are siphoned off to cover just the day-to-day costs of doing business.

High overhead can affect the doctor at every turn. Many dentists are not making as much money as they believe they could or should be. They worry that they are not saving adequately for retirement. Others keep telling themselves that they will save, eventually, once they get expenses under control and production increases. But the days, months, and years are ticking by.

And it’s not just the dentists who bear the impact of high overhead. It extends to the staff and the patients as well. Too many dental teams struggle to find the resources for continuing education for both doctor and staff. They dream of updating equipment and purchasing state-of-the-art diagnostic tools to better serve patients, but they don’t pursue the investment because they are too worried about the expense. They cringe at the physical appearance of the office, but improvements would take more money than the practice can afford. And to top it all off everyone feels like they are working as hard as humanly possible, but there is no guarantee that the effort will pay off in the form of raises or bonuses. Sheesh! Is it any wonder that the topic alone can make you feel overwhelmed?

But there is a light at the end of the tunnel, and it’s not an oncoming train. There are deliberate steps that you and your team can take to get this situation back on track.

The gold standard for overhead is 55% of revenues. If you are currently at 60-65%, congratulations, you are in the comfortable range for a general practice. If yours is higher, you have plenty of company. Some practices report their overhead as high as 80%. They are making a mere 20 cents on the dollar! While there are several factors that influence overhead, look first at high expenses, inconsistent production, and low collections.  

We’ll start with expenses. Your practice is constantly pouring money into five major areas: Facility (rent/utilities), Staff Salaries (Employee Taxes & Benefits), Dental Supplies, Laboratory, and Miscellaneous “stuff” (Everything that doesn’t fit anywhere else gets dumped in here – dues, subscriptions, legal bills, accountant fees, business taxes, telephone, marketing, goldfish food, and on and on).

To achieve the 55% overhead goal, start by establishing the following budget targets:

  • Dental supplies - 5%
  • Office supplies - 2%
  • Facility - 5%
  • Laboratory - 10%
  • Payroll - 20%
  • Payroll taxes and benefits - 3%
  • Miscellaneous - 10%

Certainly, all of the areas add up but payroll is an expense that packs a particularly powerful punch. Payroll should be between 20-22% of revenues. Tack on an additional 3-5% for payroll taxes and benefits. If your payroll costs are higher than that they are hammering your profits, here’s what may be happening:

  • You have too many employees. More staff does not guarantee an improvement in efficiency or production. It does, however, guarantee an increase in overhead – unless you are hiring a patient coordinator who is going to make sure the schedule is full and production goals can be met.
  • You are giving raises based on longevity rather than productivity/performance. Repeat after me: If production is going down and overhead is going up, payroll cannot be increased. Establish a compensation policy. The policy states that raises will be given based upon employee performance – provided the practice is making a profit.
  • The hygiene department is not meeting the industry standard for production, which is at least 33% of total practice production. If the doctor steps back and takes a closer look at what is happening, he/she will find that the hygienist has far more down time than they should, patient retention is seriously lacking, and periodontal treatment is minimal at best. The recall system, if there even is one, needs immediate attention to ensure that the hygiene schedule is full, the hygienist is scheduled to produce 3x his/her salary, and cancellations are filled.

Next week, day-to-day “routines” that send overhead overboard.

If you would like to see how your overhead matches up – click here.

If you have any question or comments, please email Sally McKenzie at sallymck@mckenziemgmt.com.

Interested in having Sally speak to your dental society or study club? Click Here.

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Do You Know What Your Patient Wants?

Jean Gallienne RDH BS
Hygiene Consultant McKenzie Management

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What would you like to change about your smile? These are powerful words that can have a huge impact on your hygiene department. If you ask a person, “Is there anything you would like to change about your smile?” You are more than likely going to get the answer.. “No”. However, if you specifically ask a person, “ What would you like to change about your smile?”, they will actually take the time to think about their smile and what they would like to change. Yes- no questions should be eliminated. Open-ended questions make patients think.

What about the patient that does want to change their smile? Does your office have financing available through an outside source like Care Credit? If so, does your office promote it to its full potential? Do you as a hygienist know what the financing company offers so you can answer easy questions? Cosmetics used to be thought of as something for the rich. Well, not anymore. More and more people are seeking cosmetic treatment. Just look at how many people are accepting whitening. This is one of the least costly procedures, but many times in order to do whitening old crowns and fillings have to be replaced.

As a hygienist, you need to feel comfortable when it comes to talking about cosmetics with patients, and how to approach people in order to have them tell you what they want. We are not talking about what they need at this time. We are talking about what they want. You will be amazed at how people will come up with the money when they really want something, no matter what the cost.

However, we have to provide what they need in order to get to what they want. But don’t miss out on this valuable opportunity because you were too busy concentrating on what they need. For example, a patient comes in and needs to have maxillary anterior fills. The doctor treatment plans them, the financials are gone over, and the patient returns to have a professional cleaning in your chair and the patient returns to the doctor and has the treatment completed. Great! Oh, but now it is six months later and the patient is back for their recall appointment, and the patient says to you, “I am interested in whitening my teeth. How do I go about getting this done?” Oops! An opportunity missed, and now you probably have an upset patient too. Your patient wanted to whiten their teeth and the fillings are shaded to their existing natural teeth. How many cosmetic cases does your office miss because patients do not know that your doctor provides these services?

In my last article, I talked about keeping track of your numbers and I know many of you have no idea how to get over $1,000 per day in production. Well, selling whitening out of hygiene is just one ancillary product that will help boost your hourly production as a hygienist.

Let’s say you have tried mentioning cosmetics to your patients, and you still just do not feel comfortable. Ask your team members how they approach patients when it comes to cosmetic dentistry and discovering what the patient wants. Use each other as a sounding board during a staff meeting. The conversation needs to be comfortable for both the hygienist and the patient. The last thing you, as a hygienist, want to do is offend a patient with your approach to selling esthetic procedures. For example, I have had great success with Trident Dental Laboratories Extreme Make Over kit, that can help you begin the communication process with your patient whether you are comfortable talking about cosmetics or not.

The kit consists of  “Rate Your Smile” brochures and stand. It is an interactive brochure that enables patients to “rate” their own smile and share results with the clinician. This brochure should be handed to all of your patients. The clinician that is going to see the patient will collect the information. This mini questionnaire gives you the opportunity to educate your patient about the different options available to them regarding improving their smile.

There is even a patient consultation flip chart in the kit that illustrates to the patient on one side what the hygienist is discussing and on the backside helps to coach the clinician on what to ask and discuss. This is a great product in helping new staff members get on board with the correct verbiage and protocol for your office.

The kit also comes with a video, which is a perfect complement to the patient handbook. It offers a continuous presentation with an overview of treatment options. While the dental patient handbook allows patients to readily visualize dramatic before and after photographs and stimulate interest in esthetic treatments.
 
Your hygiene department, before and after pictures of your cosmetic work, and brochures provided to the patient are the best way to promote cosmetics within your office. 

We are here to help improve your hygienists’ communication skills. Thus, increasing the amount of cosmetic treatment plans coming out of your hygiene department.

Jean conducts 2 day Hygiene Performance Enrichment Programs  for The Center for Dental Career Development and McKenzie Management in La Jolla/San Diego, CA. Contact her at Jean@mckenziemgmt.com  or call 1-877-777-6151 for more information on her Advanced Hygiene Training Programs.

Interested in having Jean speak to your dental group? Email us at info@mckenziemgmt.com or call 1-877-777-6151

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Buyer Be Aware


Tom Snyder, DMD, MBA

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The prospect of establishing your own dental practice is about as big a decision - in terms of its long term impact - as your decision to go to dental school was. If you’ve decided to purchase a dental practice as opposed to starting a practice, there are several key factors to consider to ensure you make the very best investment for both your current needs as well as your future opportunities. 

Location, Location, Location. From the community as a whole, to the actual site of the office, to the type of dentistry you wish to provide, location is key. Take a look at the demographics.  Is it a diversified economy? Is it a growing community in terms of new housing starts, condo and apartment complex construction? Does it offer a quality school system?  Take time to tour the area you are considering. Look at the shopping malls and the types of stores in the area. The retail establishments give you an indication of the population that surrounds the area you are considering. 

Is the office under consideration conveniently located?  Is it on a busy thoroughfare?  Is there adequate parking that is free and convenient?  Is the facility handicapped accessible? If not, OSHA laws will likely require you to make it accessible.  If the practice is located on a second or third floor, is there an elevator?  Is there prominent signage? 

Consider the type of the location. If the practice is in a mixed professional office, for example, it may include a dental practice and other primary care providers such as internists, cardiologists, dermatologists, etc. Downtown high-rise practices often are in commercial properties with many dentists in the building, and parking can become an issue, while a converted residence typically will house an older practice that requires updating.

Consider the type of practice and the clinical services you want to provide. Purchasing an insurance-based practice requires that you study the plans and contracts carefully to clearly understand the economics of the arrangements you’ll be taking on.  If you seek a fee for service practice, a suburban area may offer greater opportunity to develop this model, particularly if the residents in the area are white collar professionals. In addition, consider if you want to establish a family practice that serves a broad age range or if you want to focus on restorative dentistry and aesthetics, which tends to attract more mature patients.

Examine the fees. Fee structure is important to determine where fees may be relative to other dentists in the area.  Purchasing a practice with a lower fee structure allows you to gradually increase fees.  Conversely, if you purchase a fee for service practice and fees are considered highest in the area, you may have difficulty charging the same fees as your predecessor who could command that level based on his/her skills and experience.

Evaluate the infrastructure. Many practices need substantial financial investments in new equipment, leasehold improvements, and technology.  While the market price may be lower, consider the additional investment required. Be careful not to restrict your ability to grow the practice. If there are only three operatories and no room for expansion you may force yourself into a costly move down the road. Practices with unused space, plumbed operatories, as well as plenty of workspace in the business area may make better long-term financial investments.

Conduct a chart audit to determine the number of active patients – those individuals that have visited the practice for at least one recare appointment in the last 12 months. The number of new patients per month is also a key indicator of patient activity, and looking at age distribution of the patients will give you a snapshot of the type of dentistry you will be providing.  In addition, the zip code analysis can reveal how many patients are driving long distances to see the selling dentist. Once he/ she is gone, those patients may switch to a more conveniently located practice. 

Consider the staff. Although, you may not want to keep the employees long-term, if the seller departs shortly after the sale, it can be beneficial for the hygienist, in particular, to remain, since she/he has a relationship with the patients. If the staff members are well trained and likeable, they will be an asset even though the market value may be higher in terms of their salary rates. 

Purchasing a dental practice is the foundation for your professional future doing so effectively will ensure your long-term financial freedom.

Dr. Tom Snyder and Sally McKenzie are co-founder’s of The Dentist’s Transition and Financial Network. Dr. Snyder is Managing Partner of The Snyder Group of Marlton, New Jersey, and a popular author, lecturer and consultant in dental practice management and transitions. He can be reached at 800-988-5674 or www.snydergroup.net.

For more information on buying a practice, email info@mckenziemgmt.com

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