Cliff's Notes

The Business of Dentistry

What’s Over Your Head is Your Overhead!

Cliff’s Notes for September 14, 2015

Cliff Marsh, Henry Schein ……Cell: 201-321-7494……Fax: 201-262-2210


image001  I said it before and I will say it again, if you want to keep your business moving forward you cannot reduce overhead. You can only control it’s footprint on your gross production. By increasing production, your overhead will also rise, but at a much slower rate (economies of scale) hence a smaller foot print.

Understanding your overhead is critical when running a business. Without knowing your operating costs you cannot budget for growth. Start with a close look at your P&L statements for the last 3 years along with the current years quarterly report. If you haven’t looked closely at these numbers that were prepared by your accountant, then you don’t have control of your overhead. Ask your accountant for a pie chart of your P&L. Find out what your largest business expense is and look for ways to secure it as a constant and predictable expense. If it involves the office team, you may need to streamline so the same resources can generate increased production.

When implementing overhead control you need to analyze the value of all goods & services your organization relies on. Separate the fixed and variable expenses and understand their value to your production, but also understand they are all related and effect each others performance. Here is an example: How much do you pay front office personnel to call patients confirming appointments? How much time do they spend doing it? Let’s say it totals 2 hour throughout the day. An hour cost you $20.00 and you do it 4 days a week. That equals $640.00/month and what are the results? Voice Mail… Why aren’t you using automated services that interact with the patient’s world? Text & e-mail… You would be reducing telephone time by 50% with better results and redirecting resources for a better return on investment.

Overhead is the cost of doing business. It involves hard and soft assets and in most cases dental practices focus on the soft asset because they are easier to address. I could never understand why a dental practice owner would change accountants because of cost. Now if it was because they lost that warm fuzzy feeling, OK, but cost? Let’s be real, how much dentistry do you have to do to maintain a quality financial advisor?

Clinical supplies amount to 5%-7% of production and business office supplies run 2%-3%. Those investment varies with production but according to the ADA, the percentages of GP hasn’t changed for 60 years. Now lets look at the remaining 90% of your investments. Rent/mortgage, wages, insurance, WRITE-OFFS, etc. Those investments amount to real money and need to be controlled and budgeted.

The magic of inventory control is understanding the individual value of the investments you have in your assets and what they return to your organization. What’s the ROI?


September 14, 2015 - Posted by | Uncategorized

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