How to Decrease Overhead

 

     Like all businesses, dental practices face overhead issues. I’ve read where there ought to be certain percentages allocated to items like payroll, supplies, marketing, utilities, CE, and so on. Recently, a client asked about TOTAL overhead and how to go through each item, line-by-painful-line and review his overhead to see if it was where it should or could be. (NOT the expense account, but each individual expense itself…each vendor and associated item!)

     I do this exercise at least two-times/year and it suits me quite nicely. And, after the first couple of times doing it, it becomes almost like a game and quite fun. Here are the questions I ask myself about each item on my budget and P&L:

     In getting rid of a particular item…

1)     What would be the impact on my clients?

2)     What would be the impact on my staff?

3)     What would be the impact on me?

4)     Do I really need it?

5)     What does IT contribute, if anything, to increasing production?

We recently added a new client whose fees were so low ($450 for a CEREC CROWN for example) and overhead so high, that simply by restructuring fees over the next several months and decreasing overhead, we’ll completely change the financial picture of the office. It’ll go from a losing asset to a winning asset in just 3 months. Obviously it’s not rocket science, but by having an extra set of eyes to look things over, we picked up on it right away.

A word about CEREC III machines and other investments you might be tempted to make…

New technology in your practice will not solve your financial problems. In fact, the investment will likely make it worse! Investing in financial knowledge and marketing WILL improve your situation. In addition, putting SYSTEMS in place to manage your practice will ALSO improve it.

For one client, his investment in his CEREC III will ONLY pay for itself if they do 12-15 Crowns per month. At that point, it’s break even. So if you are not currently doing 15 to 20 crowns per month, it may not be the best decision you could make for your practice right now, but maybe in the future it deserves another look.

It’s hard to NOT accept new technology into your practice, but unless and until the office’s financial picture permits, investments of that magnitude should be given careful planning and much due diligence.

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