5.19.17 Issue #793 info@mckenziemgmt.com 1-877-777-6151 Forward This Newsletter

The Top Reasons Overhead Costs are Out of Control
By Sally McKenzie, CEO

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No matter how hard you try, you just can’t seem to get ahead. The long hours you put in each day are taking their toll, and you’re not sure how much longer you can keep up the pace. You’re starting to think you’ll never reach your financial goals, and it’s clear your team members are worried too. Out-of-control overhead is holding you back, both professionally and personally.

This is a stressful situation, and sadly one I see in many practices. Dentists and their team members work tirelessly, yet high overhead costs keep them from making any progress. They pay bill after bill each month, and rarely have any money left to invest in their practice or their retirement fund. These dentists are frustrated, overwhelmed and aren’t sure how to dig themselves out of this financial hole. 

If this describes you, I want to help you take back control of your practice. That means getting overhead costs down to no more than 65% of collections. Seem impossible? It isn’t. First, you need to figure out why your overhead costs are so high. Read on for some of the top culprits and how you can squash them in your practice.

1. You give employees raises when they’re not earned. I know so many dentists who give out raises every year no matter what. They want to keep their team members happy, after all, and they think a bump in pay will motivate them to improve their performance. Unfortunately, the opposite is true. When team members receive a raise, they think they must be doing something right. They have no reason to improve, so they don’t.

That’s why it’s so important to only give out raises when they’re earned, not just because a loyal team member asked for more money or because a year has gone by. Create job descriptions with clear performance measurements that outline how raises can be earned and when they can be discussed. Make it clear raises only will be given if they’re earned. Trust me, this will motivate team members to meet and even exceed your expectations.

Remember, payroll costs should be between 20-22% of your revenue, with an additional 3-5% to cover payroll taxes and benefits. Anything over that will contribute to skyrocketing overhead costs.

2. You never raise your fees. I know, I know. Raising your fees makes you uncomfortable. But if you don’t raise your fees from time to time, it will hurt your practice.

Many dentists worry they’ll lose patients if the cost of dentistry goes up, but if you’re providing top-notch service and exceptional patient care, patients will stay loyal. In fact, most patients expect fee increases. 

Bottom line: Raising your fees is the fastest and easiest way to grow profits. To make it work for your practice, I suggest you establish a solid fee schedule that’s fair to both you and your patients. Base the increases on actual data and make sure your rates align with other practices in the area. This will help alleviate your overhead woes and get your practice back on track.

3. You have too many employees. When tasks aren’t getting done and team members start asking for more help, many dentists think that means it’s time to hire another employee. They have visions of this new person improving practice efficiencies and production. Sounds good, but that isn’t always how it works out. Often, nothing really changes – except your payroll costs, or course.

I find that training and coaching existing staff is more cost effective. When team members are properly trained, they become more confident in their skills and better at their jobs. They’re happier, more productive and more efficient, and that ultimately helps reduce high overhead costs.

Ok, so how do you know when you actually do need to hire a new employee? Look at how much time patients spend at the front desk. Let me break it down for you. Every patient takes about 10 minutes to check in and check out. There are 480 minutes in an eight hour work day, so if you have 15 to 22 patients a day, the front desk spends 150-220 minutes seeing patients. One front desk person can easily handle that work load.

If the practice works a normal 8-hour day and one front office person spends more than 240 minutes with patients, then it’s time to hire a new team member.

Now let’s focus on assistants. If procedures are streamlined, including room set up, seating and dismissing patients and clean up, one assistant can efficiently see 13-14 patients a day while maintaining two treatment rooms and using two operatories. If you see more patients a day, not counting hygiene exams, then you can justify hiring a second assistant.

If you’re experiencing high overhead costs, it’s doing nothing but holding your practice back and it’s time to consider making changes. With a little guidance, you can finally start meeting your true potential and reap the benefits of a thriving practice. Contact me and I’ll help you get started.

Next week: Follow these tips to reduce overhead and grow your practice

For additional information on this topic and more, visit my blog: The Lighter Side

Interested in speaking to me about your practice concerns? Email sallymck@mckenziemgmt.com
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