Guest Author: Erick De La Fuente
So you’ve been in business for some time now and all of your hopes and dreams about being a successful and rich tooth doctor have been fulfilled.
If not, then pay attention as there’s likely a few things you’re probably overlooking when it comes to increasing the profitability of your practice.
Maybe you’re not a businessperson, and all you want to do is improve the oral health of your patients, but at the end of the day, you have to make a living too. And the more successful your practice is, the more patients you can help.
Let’s start with a simple formula called: “The Way to Wealth”.
When most people think about the profitability of their business, they think in terms of revenue, or income, and expenses. But what if I told you there were 6 “levers” you could focus on to increase profitability?
Here’s the formula:
Leads x Conversion Rate = Patients
Patients x Average Price Per Patient x Average Sales Per Period = Revenue
Revenue – Cost of Goods Sold = Gross Margin
Gross Margin – Operating Costs = Net Income (for the sake of this example we’ll exclude interest, taxes, etc.)
Most people tend to focus on what comes after the equals sign when they try to improve their businesses. They say, “I need more revenue!” or “I need more paying patients!”
But if I asked you how many leads you had last month, meaning how many people went to your website and filled out a form, or how many walked through the door, or how many called the office… could you tell me?
And if you knew, do you know what percentage of those “leads” became patients?
If you’re one of the few practice owners that can answer these questions without having to go back and look at your systems – congrats, you’re miles ahead. But even if you could access your systems to see this information, that’s still a good thing.
If you have no way of knowing these things… well that’s probably the first step you’ll have to take before focusing on how to be more profitable.
At the end of the day, you have at least SIX levers to pull on to increase your profitability: leads, conversion rate, average sales price per patient, average sales per patient per period, COGS, and operating expenses.
Increase (or decrease if it’s an expense) ONE of those by 2% and you’ve become more profitable. Increase (decrease) ALL of them by 2% and they compound; FAST.
Profitability doesn’t seem so hard anymore, does it?
Let’s take your average sales per patient for example. For the sake of easy math, maybe you charge $100 for a cleaning. Over the course of a year, maybe you see that patient two times for cleanings. Assuming no other services, that’s $200 per patient per year.
Obviously, cleanings aren’t your money maker, and you’re trying to find cavities, sell mouthguards, teeth fillings, etc.
But do you think about things that you can offer ALL your patients? In a sense, how you can increase the average sales price per patient from $200 to $500, to $1,000, to more (if you took all the services you provide an average patient in a year, what is that revenue number?)?
I’ve been helping service-based businesses increase their revenue, predictably, for over a decade, and one of the easiest ways to do this is to sell subscriptions – services that add monthly or annual recurring revenue to your income.
An easy example is for teeth whitening. Most people you talk to (at least in the US), want whiter teeth. And brushing more just isn’t getting your teeth whiter. So offer your patients something like Celebrity Smiles Club, which is a patient reward system that uses teeth whitening to inspire, motivate and reward patients for keeping their dental appointments.
3 things happen when you implement Celebrity Smiles Club:
- Quality & Increased Production
- You get to offer another quality product which increases your production dollars per patient. This can be used as a great New Patient appointment incentive.
- Cost savings & Improve Overhead Costs
- Celebrity Smiles Club is less expensive than what your current teeth whitening costs which lowers your costs of goods sold. Dentists get wholesale pricing for the product.
- Save time. Less Chair Time
- The latest technology – Celebrity Smiles teeth whitening system does not require impressions, pouring up models and making trays. You’re not paying an employee for teeth whitening but this is another profit center in your practice.
- Your patient takes the whitening kit home with them that day. No office time needed! Lastly, maybe most importantly, it gives your patients more reason to come back and stick to their appointments.
All of these things together can increase your revenue positively, potentially decrease some costs (of product and missed appointments) and increase your profitability.
What are you waiting for?
If you want to hear more about how you can impact the other 5 levers of your business to increase profitability, tune in next time for more information or reach out to the writer on LinkedIn, Facebook, or via email at email@example.com
About the Author
Erick De La Fuente is a business coach and consultant specializing in helping private practice owners in healthcare create predictable patient acquisition systems, implement scalable systems to increase operational throughput, and attract, hire, and lead high performing teams.
When he’s not helping practice and clinic owners become more profitable he enjoys playing tennis, Paddle, and pickleball, hanging with his silver lab, Zeus, or visiting new countries and traveling like a local.