For the following few business blogs in the coming weeks, I would like to take the chance to go into a little bit more detail about some small specific subjects which are fundamental to dental business.
Some of these concepts are very particular to dental business themselves, and some of them are suitable to be applied to generic business overall, but they are common nonetheless, critical points of action and consideration in trying to achieve balance and success in the dental business world.
For the first of these, I would like to return to finance (and I will also do this next week with average daily yield discussions), and I would like to discuss the concept of operating surgery cost per day (or more likely per hour).
The concept of operating surgery costs per day was introduced to me by Chris Barrow approximately 15 years ago when he emphasised the real importance of understanding what the fixed costs were for opening a surgery before a patient had entered the building before a dentist had done any work before any lab bills or component costs had been spent.
Basically, this is the fixed cost of the business divided by the number of surgeries that are running on that day or at that time, as the costs of the fixed element of the business are spread around the surgeries.
Basically, as soon as you open the door on a Monday morning, you are incurring costs known as fixed costs or operational costs and these costs are incurred and rack up whether or not any business is performed.
Think of the costs of the mortgage or the rent on the building, the heating, the business rates, the cost of the reception team, the nurses, all of these people who are attending, whether a patient has turned up or not, all of the wages that you will have to pay at the end of the month, all of your insurance charges, all of your regulatory charges, all of these hidden, seemingly useless charges that you pay, which don't relate directly to the provision of dentistry in a patient's mouth.
Once you have had the opportunity to create a detailed and structured management account spreadsheet, you're then in a position to break out your operational surgery costs quite easily and quite effectively and apportion those per surgery.
If you take the time to break these down into operating surgery costs per hour, then you can apply these regardless of your opening hours because you'll understand that different treatment rooms are open on different days, and you will be able to use the concept towards this.
One of the most fundamental things we do on all of our business courses is to provide people with a baseline template for their spreadsheet for their managerial accounting and allows them the opportunity to build these key metrics into their work and life.
Fundamentally, though, once you have established operating surgery costs per hour, you can then very easily start to figure out whether or not the room is profiting. Obviously, this is totally fundamental.
Around this time, many principals realise that some of their associates are actually losing money and being subsidised by the principal's earning power alone. This is indeed a sanguine moment for people to realise that the people that they like working with are actually dragging money out of the business, but it allows you to step up and make fundamental changes in your business to allow you to get to a better and brighter place.
Operating surgery costs per day (per hour) was the fundamental key performance metric that catapulted our business forward 10 to 15 years ago.
If you're interested in learning more about this and how to apply operating surgery costs per day to your business, then why not think about the Digital Dental Entrepreneurial Program or our Dental Bootcamp?
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