What is the target in your dental business for net profit before tax (and before owner’s drawings)?
In my experience, you should be aiming at the following:
£500,000 in sales = 30%
£1,000,000 in sales = 25%
£2,000,000 in sales = 20%
£3,000,000 in sales (and above) = 17.5%
Why does the profit margin decline, the bigger you are?
More people – middle managers – are needed to run the organisation.
How would you like to be able to guarantee that profit margin, come what may?
Easy – once you know how.
It requires the application of a simple formula to everything you do:
Operating costs + variable costs + target profit margin = price to patient.
How simple is that?
So why don’t dental principals apply that formula to everything that is sold, from a consumable sale, through preventative maintenance and into treatment planning?
Answer – because they get distracted by other historic and often irrelevant issues:
- a competitor’s prices
- fixed percentage contracts for hygienists, therapists and associates (most often too high)
- hourly rates
- poorly measured Return on Investment from marketing activities
- low daily production from fee-earners
- ignorance of operating costs per surgery per day
- no monitoring of Key Performance Indicators
- lack of market research on materials and supply costs
- uncontrolled use of discounts and patient-finance options
- wastage and over-ordering
Perhaps all of this could be summarised by a lack of time and passion invested in “understanding the numbers” and monitoring very carefully every penny in and out of the business.
It doesn’t take much:
- good monthly management accounts
- KPI’s
- average daily production figures
- marketing ROI’s
- new patient conversion statistics
and you are on your way to improved and guaranteed profitability.
Oh – and an investment of an hour a week in reviewing the numbers and taking action.
Profit doesn’t pour out of your business – it seeps out of the cracks in your leaky ship – drip, drip, drip – day after day.
You work damned hard for your money don’t you?
Why don’t you invest more time in looking after it?
People you need:
- a good book-keeper who can produce management accounts every month
- a pro-active accountant who can show you how to legitimately reduce tax and give you business structuring tips
- a no-nonsense business coach who can tell you where you are going wrong and what to do about it
- the hard-ball version of YOU
A team of trusted advisors who can pay for themselves in no time at all.
Its a false economy to think you can do all of this yourself and run the business and do the lion’s share of the dentistry.
Come on – wake up – you are better than that.
Why not guarantee your profit every year?
