This week I am sharing with you a template that has evolved over 15 years and has probably caused more controversy than any other.
The Associate Profitability Calculator.
Associate Profitability
It takes some explaining and getting used to.
The most frequently asked question is “what do you mean by predictable annual overheads?”
By that, we mean the costs of running your business EXCLUDING:
- payments to self-employed fee-earners (associates/therapists/hygienists)
- lab
- materials
Everything else is operating cost and payable whether or not clinicians and/or patients show up.
Once you can nail that number and calculate the all-important OPERATING COST PER SURGERY PER DAY, the rest of the spreadsheet should be self-explanatory.
Over 80% of the time I use this with clients, we discover that, at best, their associates are breaking even (that means making the business no money) or losing the business money every day they show up.
I’ve heard all the arguments about the other reasons why you would hire associates:
- cover for holidays
- seeing the patients you don’t want to see
- succession planning
- emergency cover
- specialist skills
And whilst I understand them all, this spreadsheet convinced me 15 years ago that the 50% contract was largely unprofitable. As a result of that we designed the sliding scale.
Nowadays, of course, associate remuneration has reduced – but it is still worth conducting the exercise as the individual productivity of the associate will affect your bottom line.
Before I am accused of associate-bashing (and see the p.s. below), my purpose in using this spreadsheet is often to engage the associate in a conversation about how they can improve their communications skills, so as to increase ethical production.
The main point I make to Principals every week is that the alternative to lose:win is not win:lose (there is no point in announcing a drop in earnings).
The solution is win:win – how do we work together to secure and increase your income and make a realistic profit for the business?
Have fun with this – please email if you have questions.
It’s a Pandora’s Box. Be careful when and how you open it.
p.s. some time ago I elected to be remunerated monthly by 7connections based on my own coaching fee income and by reference to the same sliding scale – same numbers – same percentages. My “lab and material costs” are travel and accommodation and are deducted before the sliding scale kicks in.
I love it because every month I get paid exactly what I am worth and I know I am a profit-centre within the business.
Consequently I just love it when somebody tells me that “it can’t be done”.
