A: Thank you for the question! And let me start by saying that there is A LOT to know about overhead control. For the nitty-gritty details of overhead management, I highly suggest watching our video series from our COO, Jeff Blumberg, and downloading our free overhead calculation spreadsheet and recommended overhead percentage guidelines. You can download them here.
Now, to answer your question, let’s look at where to start when you begin your overhead management journey!
Normally, when I meet with a new client, and they ask the same question you asked above, their question is accompanied by P&Ls, etc., and they’ll show me how they’ve been trying to cut various costs. And while cutting costs is important – it’s not the first place you would start unless there is an obvious, outrageous monthly expense or expenses that could be immediately cut – for example, we had a client with overhead issues who was spending $10K a month on fresh flowers. Well – that was an easy fix, buy fake plants! I wish it was always that easy – but it’s not. Overhead management begins actually with INCOME management. Why?
In most cases, no amount of “cost-cutting” will significantly turn around an unprofitable practice.
If you look at our overhead guidelines, you’ll see that we use percentages. Expense categories (payroll, labs, etc), should be under a certain percentage.
If they’re over the recommended percentage, you need to figure out if you’re overspending on that category or if the percentage just seems high because you’re under-collecting. Much of the time, under-collecting is the real culprit.
Most dental practices I’ve seen could easily collect an additional $20-40,000 per month by changing the way they do things internally—without adding any significant expenses.
On the flip side, I’ve almost never seen a practice that could easily cut $20-40,000 out of their monthly expenses.
So, the most effective way to “lower” your overhead is to get more out of the things you’re already paying for.
Instead of focusing on cutting costs, focus on getting more out of what you already have.
The biggest source of waste I see in a dental practice is under-utilizing what you are already paying for.
Two of the larger expenses for dental practices are Staff (payroll) and Patient Acquisition (marketing, advertising, purchasing charts, etc).
So the dentist is already paying for these things, but there are some problems that are choking their potential production/collections:
- Not training the staff properly.
- Lack of policy, guidance, infrastructure, and coordination.
- Staff don’t truly understand what you want them to accomplish, so they end up doing assorted tasks without achieving the result you want for practice growth.
- Wasting time in the back because you don’t have a workable scheduling system.
- Answering the phone incorrectly, so a low percentage of new patient inquiries convert into appointments (this is the biggest killer of marketing return-on-investment).
- Failing to get patients’ family members scheduled and do simple things like ask, “Do you have anyone else in the house that could use an appointment?” when scheduling a patient.
- Not maintaining continual contact with your existing patients and effectively retaining them in a recall program.
- Failing to complete treatment plans or doing compromised/phased treatment plans because you couldn’t get the patient to accept and pay for the ideal treatment plan.
Then the practice income goes up and your overhead is lower as a percentage.
This is a routine experience with new clients when they start with MGE: they are initially worried about the $30,000/month expenses, but then they quickly double their collections up to $90,000/month, and now suddenly their overhead isn’t a problem anymore.
You may be thinking, “Well, if I could just wave a wand to make more money, I would have done it already!” but I’m telling you, look at the points I listed above honestly. Fixing those issues can be easy and significantly increase practice production.
It can help to get an outside perspective on things because we all tend to go a little blind to things we see every day. This is why we offer a free Practice Assessment to help you figure out where you’re underproducing and how to fix it. Request a free Practice Assessment here.
Once the income is under control, then you’d go ahead and clean up expenses and maximize savings.
So in summary, the biggest profitability killer is failing to do basic things to maximize the return from the expenses you’re already paying for. Of course we can help you line-by-line through your expenses and cut costs, but you’ll find that increasing your productivity and collections will make a much bigger difference in the long run.
I hope this helps! If you have a question for me, email me at SabriB@mgeonline.com.