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In part one I told you about Juha and measuring the CBCT machines.

Part two is about an insight into dental practice business that came in the middle of our Senior Leadership Meeting like the proverbial lightbulb on top of our heads.

In a few small places we have become renowned to the extent and sophisticate with which we measure the numbers of dental business.

We have effectively built a Year Long Business Course around some of the concepts related to that.

Mostly, when people see how we measure, what we measure and the insights that gives us into our business, they are nothing short of staggered.

It doesn’t stop this though, the development of this and the majority of the innovation in this subject is absolutely related to Charlotte Harrison who is our extraordinary Finance Manager (one time Practice Manager) and formerly of Capital One bank who is now almost fully trained as an AAT by the practice.

Of late Charlotte has been investigating associate profitability and I would like to think that this has been led by me and an example that I have shown to the business by removing myself as an associate form the business and paying myself a regular income for the work that I do.

At the present time the rest of that is left in the business for reinvestment for the projects that are coming forwards. And so Charlotte took it upon herself to investigate the productivity of the rest of the associates within the business.

She has developed a number a little bit like the factor of merit that I discussed in the previous blog, where CBCT scans can be assessed for their ‘bang for buck’ impact.

The new metric for us for associate profitability is a percentage profit number that the associate applies back into the business.

It might not sound like much but Charlotte calculated that number without first realising the true significance of it which only came to light during the SLT meeting on Thursday morning.

As a business we are targeted at 28% profit (our financial strategy is to retain 10% profit after dividends and tax)

This may not sound a lot to you but that’s probably because you’re running your business a little bit like a corner shop where you can try to extrapolate profits of 50 – 60% and congratulate yourself that you’re a great business person which, the likelihood is, you aren’t.

But here’s the thing that we realised, which might seem ridiculously simple but in fact has taken us almost 10 years to come to.

When you apply the calculator of associate profitability (and that is a little bit complicated and I’m afraid you’d have to come on the business course to find out how) they need to hit 28%. If the business is targeted at 28% and an associate is hitting less they’re eating the business.

If an associate is making more then they’re a linchpin to the business and should be protected and looked after.

The big news is that all associates should know this number.

You get to choose what your target profit is, that’s part of the strategy of your business and part of your responsibility of being a business owner. You get to set and place the measurement tools top see what’s going on, to decide how much of a percentage your staff get, how much of a percentage your charities get, how much of a percentage your associates get and therefore how much they give back.

You may have other means within your business of generating profit but the sensible thing to do would be to make sure that everything you have that is a profit centre within your business is hitting on or above your anticipated profit margin.

This will go for miles and miles now because you can do it for individual patient treatments too. You might make a decision that some of your treatments are ‘loss leaders’ but be really careful about that because that can just be cowardice in the face of ridiculous price setting.

You might make the decision that some of your associates are ‘loss leaders’ but that would be senseless.

Blog Post Number: 1812