April 3, 2023
4 Factors That May Impact Your Dental Practice’s Profitability
Regardless of whether or not you’re looking to sell your dental practice, it’s always in your best interest to know where your business stands financially. What may surprise you is the small changes that can be made to take your dental practice from in the red to profitable. Here are our top suggestions to get your business back on track.
A change in staffing doesn’t necessarily mean layoffs, but it is an opportunity to evaluate employee productivity and see if there is any duplication of effort or if cuts need to be made since payroll accounts for 28% of your standard overhead costs. When owning your own dental practice, it can feel natural to take accounting and legal responsibilities into your own hands. However, dental service organizations (DSOs) have departments that handle payroll service, tax preparation and more without having to involve the owner of the dental practice. Depending on the burdens of the practice you are willing to let go of, there’s a DSO that will pick up those tasks. Say you still want full control of all clinical decisions related to your practice of dentistry but don’t want to deal with payroll — there’s a DSO for that.
Just as you would shop around for any personal or professional products, finding the best deal on office and dental supplies can be as easy as buying in bulk or changing suppliers. Combined with lab work, supplies should account for 15% or lower of your standard overhead costs. Negotiations can even be made with your lab to provide a better pricing schedule, going so far as to examine the clauses that dictate your billing agreements. Using procurement software, such as Method USA, can not only offer real-time pricing so you can make better purchasing decisions, but it will also increase the overall value of your dental practice.
With a constantly fluctuating real estate market, it never hurts to try and renegotiate your lease by researching comparable commercial rentals and examining costs to be covered. Rent should account for 10% or lower of your standard overhead costs. Depending on the remaining time left on the lease of your dental practice, it may be time to renegotiate the terms, which can make financial and practical sense for both the landlord and tenant. The key to a successful renegotiation is to start one to two years before your lease or renewal option comes due in order to weigh all your options in terms of staying or looking at alternative options.
Make a marketing plan
In a competitive environment, it can feel like bigger dental practices have bottomless marketing budgets. If you’re concerned about the amount you’re spending each month on advertising, rather than scaling back on your marketing efforts, staying consistent or expanding your reach will only increase production. Still, marketing should only account for 3% of your standard overhead costs. Personalized marketing and online efforts, including your dental practice’s website, are best left to the pros, rather than a task added to someone’s already-full plate. A well-laid marketing strategy takes time to plan in terms of reach and return on investment specific to your staff and client demographics.
The best place to start when looking to assess the profitability of your dental practice is with a valuation of your business. Contact the experts at Professional Transition Strategies to get the process started.