The Apex360 Thought Leadership Series presents commentary by leaders in the dental industry on topics affecting dental clinicians and industry professionals. In this article, Drew Hinrichs, CPA, of Hinrichs+Pesavento discusses how dentists must adapt to today's reality: rising expenses and diminishing reimbursements.
The sky is falling! The sky is falling! Well, at least it was in Chandler's 1840 version of the Remarkable Story of Chicken Little. But is the sky falling for dentists?
It is my opinion that dentists—or more specifically, their businesses—are far from doomed. However, it is true that we live in a world of inflating costs. Expenses are always vying with collected revenue, while insurance companies in some states have decreased reimbursements.
The bottom line is this: Rising expenses and decreasing reimbursements have resulted in a tighter squeeze on dental profits. So where does this leave dentists?
In today’s world, you must protect your profit
My kids love the Disney movie Big Hero 6. (Therefore, I've seen it a few times too.) I've found that there is one thing every person on earth can take away from it: When you have a problem that's hard to solve, you have to look at it from a different angle. You have to shake things up a bit.
If these two trends—rising expenses and decreasing reimbursements—are creating problem for you that results in decreased profits, consider turning the equation on its head: Build your business around the profit.
In today's world, you must increase your efficiency, and you must negotiate with insurance companies and vendors. Because you are a business owner, you must protect your profit.
3 steps toward becoming a certified black-belt profit protector
By now you must be wondering, "How do I do this?" There are entire coaching and consulting programs dedicated to this topic. Prepare yourself for a never-ending quest to become a certified black-belt profit protector. To get you started on this journey, consider these three steps.
Step 1:Choose a tool and specific metrics to measure within your dental practice
The theory is simple: what is measured is improved. Your measuring tool can be as simple as a Google Sheet or as awesome and in-depth as an online dashboard. There are many online tools, such as BlueIQ, dedicated to helping you succeed as a business owner who is intentionally measuring the successes (and failures) of your dental practice. Pick 2–3 key items you want to measure. Dedicate yourself to understanding these items and seeing how you can use them to better forecast the health of your dental practice.
For instance, perhaps your most important measurement is new patients. The new patient metric alone has many other metrics to consider along with it. Each of these related metrics are important to understanding what drives the number of new patients in your practice to increase (see goo.gl/IiJQQD).
Step 2:Set your goals to drive improvement
Consider setting goals tied to each of your 2–3 chosen metrics. For example, you must monitor your practice's marketing effectiveness. You can monitor web traffic, unique visitors, and raw new patient numbers on a week-to-week basis. Change your Google ad spend based on the results of progress toward this goal.
Perhaps you will want to set a goal for your dental supply costs. Direct your best assistant to spend no more than 6% of your total weekly collections on dental supplies. Or, focus on hygiene. You can set a goal for your hygienists to preappoint 85% of their patients for their next hygiene visits.
Here's a bonus for your organizational health: All of these goals are objective measurements. They can help provide team members clear direction by which their performances are evaluated.
Step 3: Celebrate your wins
You and your team work hard each week, each month, and each quarter to obtain results. Remember to celebrate your achievements together! Celebrating your team’s wins reinforces doing the right things to make your business healthy. It also unites your team toward a common goal. Believe me, your team desperately wants to be a part of something larger—they want to be a part of your vision.
Rinse and repeat
Once you've mastered your first set of measurables, rinse, repeat, and enjoy.
Andrew Hinrichs, CPA, is a partner at Hinrichs+Pesavento (H+P), a dental-focused CPA firm. Located in the suburbs of Chicago and Kansas City, H+P works with dentists around the country. H+P is growing, thanks to its extensive knowledge of the dental industry, focused client service, and ability to help dentists make educated decisions in every financial area of their practices. H+P uses its collective knowledge of hundreds of dental practices to help clients analyze fee schedules and insurance choices. Tax planning opportunities, practice growth, and creative retirement planning are key focus areas. Find out more about H+P on their website, Facebook, or LinkedIn.
ALSO BY ANDREW HINRICHS, CPA:
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Editor's note:
This article first appeared in the Apex360 e-newsletter. Apex360is a DentistryIQ partner publication for dental practitioners and members of the dental industry. Its goal is to provide timely dental information and present it in meaningful context, empowering those in the dental space to make better business decisions. Visit the Apex360 home page here, and subscribe to the Apex360 e-newsletter here.
MORE THOUGHT LEADERSHIP ARTICLES:
Same-day dentistry: Making the transition | By Bete Johnson
Growing personal wealth as a dentist: The big picture | By Rob Ziliak, CFP
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