Week 2 of Our On Target Tracking Series

Welcome back to Toolbox Tuesday! This week, we continue our deep dive into optimizing your dental practice with Part 2 of our On Target Tracking Series. Today, we’re focusing on evaluating overhead expenses and understanding the importance of establishing everyone’s “why” when setting production goals.

Understanding and Managing Overhead Expenses

One of the critical elements in running a successful dental practice is keenly understanding and managing your overhead expenses. Overhead is more than just a straightforward percentage; it encompasses various elements that can fluctuate based on several factors, including geographical location and team composition.

As we discussed in our latest podcast episode, hiring an associate will naturally increase your overhead expenses, as they will be on payroll and need support team members. Jennifer Paxton pointed out that, “Overhead expenses for team and facility are very high in our area, often much higher than the national average. This disparity means we must get creative in other areas to maintain profitability.”

Dr. Sten Ericson added, “A lot of the percentages taught by consultants and CPAs are actually higher than necessary. Our overhead for some categories is 2-3% lower than the national norm because we’ve implemented efficient strategies and created a productive culture.”

Do not settle for overhead norms; strive for excellence and look for creative ways to improve efficiency. A good benchmark to aim for is an overhead of 45-50%.

Tracking and Adjusting Overhead

A significant tool we use to manage overhead is the Business Health Assessment for our private clients. This helps track and categorize expenses, identify cost-saving opportunities, and gauge overall business health. It’s crucial to understand that overhead is not static; there will be ebbs and flows due to unpredictable expenses such as equipment repairs.

“We emphasize looking at both trailing 12-month numbers and 13-week averages to get a true picture of your expenses,” Jennifer remarked. “This approach helps smooth out the anomalies and gives a better long-term view.”

Dr. Ericson echoed this by noting, “Our admin expenses may be low, but our IT expenses are higher. It’s essential to adjust expectations based on modern needs and technology investments.”

Establishing the “Why” Behind Goals

Understanding and setting production goals isn’t just about hitting numbers. It’s about knowing why these goals are essential for your business and communicating this effectively to your team.

“Too many practices set a number without understanding the purpose behind it,” Jennifer cautioned. “We need to tie these goals to something more significant to ensure sustained motivation and commitment.”

Dr. Ericson underscored this sentiment: “Many single-doctor practices do not pay themselves a percentage of their production, which is a big mistake. It doesn’t provide real-time feedback or motivation.”

Paying yourself as a practitioner ensures you know the true profit of your business. Dr. Ericson warned, “If you can’t operate your practice with a comfortable profit margin, you’ll find yourself in trouble if unforeseen circumstances arise.”

As Jennifer highlighted, “Setting goals aligned with a deeper purpose motivates everyone in the practice. We need to ensure that these are not just numbers but are tied to meaningful outcomes.”

Establish strategic goals backed by a strong “why” and ensure everyone in the team understands and commits to these goals. This alignment is significant in moving towards a common objective and achieving long-term success.

Conclusion

Evaluating overhead expenses and understanding the importance of the “why” behind your goals are two vital steps in running a successful dental practice. By taking a thoughtful and strategic approach, you can manage your practice more effectively, resulting in better financial health and a motivated, cohesive team.

Stay tuned for next week’s Toolbox Tuesday, where we will delve deeper into practical strategies for optimizing your practice’s efficiency!

Call to Action

If you found this valuable, don’t forget to subscribe to our blog and podcast for more insights and actionable advice. Have questions or need personalized guidance? Reach out to us through our email at connect@pathwaydentalsolutions.com or visit our website at pathwaydentalsolutions.com. We’re also active on social media, so follow us for more updates and tips. Stay focused, stay motivated, and let’s achieve our goals together!

Thank you for joining us for Toolbox Tuesday. Until next time, keep your overhead in check and your why in front of you!