Once upon a time, I had recently taken over part ownership of a dental practice when it suddenly struck me that I knew nothing about the financial aspects of running any business (let alone running a dental practice).
That would be a problem.
At the time, I was just earning money hand over fist putting implants into people in a world where not so many people did, and so if there was money left in the bank at the end of the month, I was happy, and I could have that money.
I never really anticipated a situation where there wouldn't be any money left in the bank at the end of the month, so it never really was a problem until it was.
When I first took over the business in a partnership (it was pretty much an expense-sharing partnership), both partners had to invest money in it to develop it in its early stages.
Remember that this was back in about 2009/10, and I was having to put back into the business about £10,000 a month (after tax).
That was a huge and horrible shock because I thought I would just become a partner in a business, pay the money and then start to take the money back to pay back all the money I had already paid to be a business owner.
Not quite as simple as that.
During this process, I decided to try to get a better handle on the financial elements of running a business, even though that is utterly against my character. I do not like finance and never get inspired by anything related to it.
It was a hard graft to do that, but I managed to get a situation where it was possible for me to look back over the previous three months or so to see how the practice had performed.
This is called Retrospective Analysis.
Retrospective analysis is helpful to see trends that occur within your business and to see where you can win and where you can lose, but unfortunately, retrospective analysis is, well, retrospective, and so it doesn't tell you what's happening today.
This is prospective analysis.
Prospective analysis is the ability to press a button and to see how much work is in and how much money is in the bank right now.
It allows you the sanity and security of realising that you're not living in past glories.
I didn't realise that prospective analysis was important, let alone the prospect of accurately forecasting what might come in a year or even two years' time, if that was possible.
It seemed to me that you never understood what money would come in from one month to the next; therefore, there was no point in forecasting or trying to predict the future; all you had to do was get your nose to the grindstone as hard as you possibly could and hope that the drill kept running and the people kept coming.
So, things went well with that format for a period of time, but when we got to 2012, I was running along thinking I was doing quite nicely. So, I decided to take my eye off the business ball. My family and I had the most extraordinary summer at the 2012 Olympics, both a full Olympics and Paralympics, plus other trips plus a bit of training for myself and not turning up too much to work and not paying too much attention to the financial aspects.
When I returned to work in September, I didn't have any work, money, or referrals.
That was, shall we say, a chastening experience.
I remember phone calls to Chris Barrow in a panic at that stage, telling him that I planned to slash my prices to get more patients through the door (for the record, Chris was great, and I didn't slash my prices).
What I realised at that stage is that you need forecasting together with your retrospective and prospective analysis.
If you're like me and you suffer from paralysis by analysis, you need a dashboard. Something you can look at, something that gives you comfort (or otherwise) but at least allows you to take the temperature of your business right now and, ideally, three months from now.
Can your business hack it if you plan to take significant time off work?
Can it handle it? Do you know how to do this?
The first step to success in these things is understanding which things you're going to measure and why.
The beauty of measuring the right things is that they remove the emotional connection to the things you're counting, such as profit and turnover.
It allows you to set budgets for things, so if you decide to spend X amount on your staff budget and you don't spend that, then you're stealing from your staff. Why are you doing that? Do your staff realise that? Do you know why? (Incidentally, in a future blog post, we might talk about non-financial monitoring.)
One of the things we do at The Campbell Clinic is measure a net promoter score for staff well-being and happiness; that is an extraordinary metric which gives us so much insight into how the team are doing).
Once you set your dashboard up, you can start to look at things over time: seasonal changes, the effect of holidays, price increases, and all that type of thing. Once you've done this for a year, you then have a pattern, and then you can predict (it turns out quite astonishingly accurately) what people are going to turn over and what's going to happen in the practice next year.
Ours is a practice that has limited or no capitation payments, so we have no regular income from the NHS and no regular income from patients yet. However, we are still able to predict with astonishing accuracy what our turnover will be like next year.
Does that interest you?
Would you like the sanity of living your life like that?
It takes discipline, particularly discipline, in what you spend on yourself, but once you get to this situation, you can actually push the finances to the side, look at them on a monthly basis and get on with the work of building an extraordinary business.
Blog Post Number - 3966
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