For many dental practice owners, the word ‘budget’ is about as appealing as the word ‘diet’. It seems to imply what you will go without, rather than what you will achieve. We get it. In fact in the midst of widespread rising costs, you may intuitively think that budgeting is primarily a tool for reducing expenditures.
However, to the successful dental practice owner, the word ‘budget’ has a very different meaning. It’s more like a map than a diet. It’s an outline of where you want to take the practice, and what you need to achieve to get there. Running a dental practice without a budget is like a ship’s captain setting off on a voyage without a map. Sounds ridiculous, doesn’t it. Who would do that?
Yet this is, figuratively speaking, what many dental practices do.
Successful practices, on the other hand, not only set clear targets and budgets each year, but they also monitor them closely each month, even each week, and adjust them as they go throughout the year.
Here are 3 compelling reasons your dental practice needs a budget, now.
NUMBER 1: If you don’t know where your practice is going, how do you know you’re not already there?
If you’re not satisfied with how your practice is performing, unless you set clear goals for where you want to take it, it’s probably as good as it is ever going to get. At best, it will just wander along, subject to the whims and quirks of the economy and general market conditions.
The good news is that your practice doesn’t need to wander along.
The first step in charting a clear course for growing and developing your dental practice is proactively measuring ‘where it’s at’ right now. And the numbers do tell a story. For some, they act as a wakeup call. For others, they just confirm the journey’s starting point.
It’s paradoxical that a large part of the value in a business budget is not in the numbers themselves. It’s in the realization and acceptance of where you are and where you want to be. The numbers are just the signposts for the journey. A factual look at the numbers that describe where your practice is right now takes away all the subjectivity, opinions and ‘reasons’ (often excuses, disguised as reasons).
This is the naked truth.
In fact, it is like standing on the scales, naked, looking at yourself in a full-length mirror. That may or may not be a pretty sight! For your practice, these factual numbers are the production revenue, the variable costs, the margins, the overheads, and, lastly, the profit. After all your work, this is the reward you’re left with.
Then comes the first of a series of ‘hard questions’…
- Are you happy with that profit?
- Is it worth it? Or are you dissatisfied? Then …
- What do you want those figures to look like?
Answer those questions, and you’ve just described where you want to be. Congratulations! You have charted your course, which is the first step to ensuring the financial success of your practice.
NUMBER 2: What’s more important to treat? Symptoms or causes?
As you well know, practice revenue doesn’t just magically appear. Costs don’t drop just because you want them to. Revenue and costs are a result of other underlying factors. Put another way, they are symptoms of causes.
The business budgeting process quantifies the symptoms, and by asking a series of ‘What leads to this number?’ questions, it also identifies the underlying causes.
For example, underlying factors contributing to a revenue figure could include:
- the number of active patients,
- the number of Hygiene re-appointments,
- the percentage of pre-appointments,
- the dollar value of the average production per visit, or simply
- where your marketing is targeted.
These are all called drivers. The revenue figure is simply a result of these drivers.
Costs are no different. For example, the advertising paid may be a result of a new marketing strategy. Staff wages may be blowing out as a result of overtime paid but underlying that there may be inefficient staff. Or a lack of clear processes. Or both.
So what came first was not the revenue or the cost, but their underlying drivers. The budgeting process forces you to name and to quantify these underlying drivers. That’s one of the most valuable aspects of preparing your practice’s budget. Not the budget itself, per se, but identifying your business’ drivers.
Why? Because then you can focus on improving them.
That’s what will produce improved results in your business. Not focusing on last quarter’s figures. That’s history. It’s more fun to create history. And that is, in essence, what you are doing when you are in your own business. You are captain of your own destiny, and you can steer it in any direction you want.
Note that word … direction. A key point is to have one. You will enjoy how effectively the budgeting and planning process will get you crystal clear on your direction.
NUMBER 3: Budgeting is not about accounting. It’s about being accountable.
Once you are clear on the handful of drivers that creates your business’ results, the next question is…
What are you going to do about it?
While your budget won’t just give you a monthly revenue target, for example, it will help you quantify the drivers that will produce the result.
For example, if next month’s sales target is $200,000, that end-result should not be your focus (at least not on a day-to-day basis). Instead focusing on you underlying drivers should be the day-to-day focus. For example:
- 25 patients per day (Driver No.1)
- At 80% Hygiene re-appointment rate (Driver No.2), with
- An average of $500 in Production per Patient Visit (Driver No. 3).
NOW you and your staff have a clear focus and are 100% accountable. That’s good for them, and good for you and your business.
People in a business want a clear scoreboard and a ‘game to play’ so they know whether they are winning. Research has found that a lack of measurement in a job is demotivating to a staff member.
Knowing these drivers, and quantifying a target for each you can then ask questions like:
- Have the 25 re-appointment follow-ups been made today? If not, why not? Is the target realistic?
- Does the team need training?
- Do they need better telephone equipment or dialing software?
- Or just more focus?
- Or guidance on what their task priorities should be?
- Or a combination of these?
- Are we being effective and converting 80% of the calls?
- Again, if not, why not?
You can then decide to improve skills, or systems, or attitude, or all three!
As you can see, the power of the budget is in the process of preparing it, and then the budget itself is a tool to hold you accountable to the measurable indicators you’ve chosen.
An added layer of accountability is… us – Our Team at STAC Bizness Solutions. We focus exclusively on helping dental practices thrive!
We work with a number of practices where, on either a monthly or quarterly basis, we act as a sounding board and independent party to ask you the hard questions about the drivers and the results. This focuses your mind, allows you to form a clear Action Plan to improve results, and then increases your chances of success because you know you need to report to us next time.
It’s a powerful process that you’ll enjoy due to the focus it creates and, in turn, the results that focus achieves in your business.
To take more control of your business and its performance, get in touch to make a time to see us. Depending on the size of your practice, we might work out that a quarterly process works best (and be the most feasible, cost-wise), or your practice might be at a point where monthly or even weekly guidance would be ideal.
Either way, we’ll outline your options and costs so you know precisely what’s involved.
We look forward to helping you chart your course, helping to get a clear direction, and then keeping you and your business on course.
After all, you won’t end up at the ideal destination by drifting.
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7 Key Financial Practices That Separate Thriving, Growing Practices From The Rest.
There’s no denying it. Creating a thriving practice is about much more than practicing medicine!
Topping the list of “other” priorities is your practice’s financial management. In this short guide, the experts at STAC Bizness Solutions outline 7 financial best practices that differentiate struggling practices from those which are highly profitable and experiencing healthy levels of growth.