As with any business, the ability to measure your progress is crucial to achieving success. A healthy dental practice hits its targets and sustains growth by making sound decisions. But the problem is that success isn’t necessarily a quantifiable object. Each business has its definition of success, so how do you ensure your dental practice is on the right track? By using dental practice benchmarks.
Dental practice benchmarks (also known as key performance indicators or KPIs) are firm numbers or measurements that help a practice owner gauge the performance of their business. When you have a solid point of reference, you can identify areas in your practice that need improvement. What gets measured gets done, which is why you want to track your KPIs as much as possible.
In this article, we’ll discuss dental practice benchmarks so that practice owners can stay on top of their business performance.
Why are dental practice benchmarks important to your business?
Dental practice benchmarks do more than just track progress. When you identify the right KPIs, you can develop a strategic approach to your practice’s day-to-day operations. The metrics should provide context based on accurate data gathered from multiple sources. From there, you analyze the data and make adjustments based on how well your business is performing.
Here are a couple of reasons why you need to track dental practice benchmarks:
- Stay focused on your goals – KPIs help practice owners stay locked in towards their goals. You’ll be able to break down your objectives into smaller, actionable steps that will ensure constant growth.
- Hold your staff accountable – As a practice owner, you want your team to do their job and provide value to the business. By using dental practice benchmarks, you can measure employee progress and hold them accountable for their work.
- Make adjustments – KPIs give you a clear picture of what’s working in your practice and what needs to be changed. Businesses that make adjustments are the ones that outperform the competition and improve their bottom line.
- Solve existing problems – Analyzing multiple dental practice benchmarks allow you to identify existing problems and find ways to solve them. You can also use key metrics to tackle opportunities that will lead to practice growth.
- Detect patterns in your business – Detecting patterns enable you to predict the performance of your practice. For example, you can use KPIs to forecast the strongest quarter of your business or vice versa.
What dental practice benchmarks should you track?
Now that you understand the importance of dental practice benchmarks, it’s time to discuss the top metrics that you should track. While there are other key performance indicators for a dental practice, these five are the most crucial part of a dental practice’s growth.
Most dentists will agree that production is the primary indicator of a dental practice’s performance. You want your business to meet production goals to ensure present and future success. A dental practice usually has a high overhead, and when you add in the contractual write-offs, your profits can disappear quickly.
Production generates profit. But the question is, where does it come from? Take a look at your scheduling and inactive patients to find the answers.
You’ll want to plan a schedule where you don’t just fill the calendar with hygiene visits. Ideally, both you and your hygienist should have evenly distributed appointments throughout the week. When you pair cost-effective dental cleanings with more complex, profitable procedures, you can generate enough profit to overcome your ongoing expenses.
Patients who’ve slipped under the radar also need to be considered if you want a healthy practice production. Stay on top of your patients by communicating regularly through email, text, or social media. Your patients will appreciate the effort, and this will bring the wayward clients back into your practice.
While production is key to analyzing business performance, it’s the collection numbers that will dictate your practice’s revenue. The majority of dental practices participate in a dental insurance plan, and the ones with more insurance revenue will need to make bigger adjustments. Fee-for-service (FFS) and Preferred Provider Organization (PPO) are capable models that every practice should understand to improve their collection numbers.
When your practice’s collection increases, so do your bottom line. If your patients are struggling to pay on time, you can consider third-party financing. The advantage is that you get paid immediately for your services while your patients can pay monthly to cover their bills.
Another way to boost your collection rate is to make payments easy for your patients. Electronic billing is one example where patients can log in with their accounts and pay their bills conveniently. You save the front office time, and you encourage patients to pay on schedule.
Profit is a critical dental practice benchmark because it contributes a huge chunk of your practice’s value. As a business owner, it makes sense to build on your practice’s value so that when the time comes to sell it, you get the most money possible.
Good practice owners know how to make smart decisions. If you were to purchase new technology or software, will it drive the value of your practice? Ask yourself from a financial standpoint whether the changes will improve your practice or just contribute to an unnecessary expense. It’s not a matter of how you spend your profit, but how you accumulate it that will impact your dental practice.
Keep in mind that different practices have different expenses. There will be months where you’ll pay taxes and staff bonuses and other months where your expenses are low. If your practice production is doing great, you can expect to see an increase in your profitability by 5-6% in the next three years. You can see how these benchmarks are tied to one another, which is why you need to keep an eye on them as much as possible.
Dentistry has one of the highest overheads in the healthcare industry. With increasingly high levels of competition and lower insurance reimbursements, profit margins are slowly becoming narrow. That’s why it’s important to keep track of your overhead as it gives you a clear picture of your financial standing.
Monitoring overhead shouldn’t be a complicated task. It’s a pretty straightforward process wherein you create a categorized list of expenses and compare them with the average expense of a dental practice.
One example is staff labor percentage. Say your labor percentage is around 32% and the national average is 25%. You’re surrendering 7% of your profit which is huge for any dental practice. The question now is, why is staff labor so high? Is the performance of the practice declining, but the compensation of the staff is increasing? Or are you employing more staff members than you should?
Ultimately, you will have to decide on how you can level your practice’s overhead. As long as the changes don’t impact the performance of your practice, you can make the necessary adjustments. Don’t make the mistake of switching lab vendors at the cost of practice efficiency and performance.
5. Active patients
Your patients are the lifeblood of your practice. Without them, your business will run dry quickly. That’s why your active patient count is a crucial dental practice benchmark, one that needs to be tracked religiously to ensure the health of your business.
Knowing how many active patients you have is only half the challenge. The key is how you define an active patient. In the past, an active patient has had at least one visit to your practice in the past 18 months. But with the way things are now, 18 months is a long timeframe to consider a patient active.
With that in mind, an active patient has a scheduled visit to your practice. Patients that book their appointments in advance are the ones that show commitment to your business, which is why you want to look after them to continue generating profit.
How many of your patients are booked for the next week or month? If you notice the numbers are declining, then you need to take action immediately. Reach out to your inactive patients and create a strategy on how you can get them rescheduled. Establish stronger relationships with both your old and new patients.
When you build a large base of active patients, you sustain the performance of your practice. Just make sure you’re counting each patient as unique and not the appointments they’ve booked in the past week or month.
Dental practice benchmarks are critical to your success. Without them, it can be challenging to achieve goals and thrive in a competitive industry. When you keep track of the right numbers, you can find opportunities for growth and be one step ahead of the competition.
Key performance indicators don’t have to be complex. You just have to analyze them and take action based on what the numbers show. Use these five dental practice benchmarks to gain deeper insights into your business and maintain constant progress.
Does your practice have it’s bookkeeping needs squared away? Are the numbers up to date, accurate and complete? If not, let us know- we’d be happy to chat and see if we can help: