Last week, on the business blog I wrote about the subject of balance sheets, you can read it here - https://www.campbellacademy.co.uk/business-blog/on-the-subject-of-balance-sheets .
Moving on from balance sheets.
One thing we need to understand is how to have the ability to boost or build our balance sheets of the assets in our business, to make us more sound and secure and robust.
In small businesses, this seems extremely difficult because what you're trying to do all the time is just make money to live and this is where the discipline of finance comes in so importantly, at the start of building a business. Developing the philosophy and understanding that ‘not all the business's money is your money`. It's critical if your goal in the long term is to build a bigger and better and more robust business.
One of the purposes of your business is to build reserves, (for when it's difficult or for when you want to invest), and this is in effect what your balance sheet is for.
The balance sheet measures the money in the bank, the profit, the premises, the assets. The things that you could borrow off or spend in order to invest in your business or to protect it from catastrophe.
The way you build your balance sheet is to make a profit from the activities that you provide and then take part of that profit, (the excess) and put it somewhere safe.
Examples of building your balance sheet as follows:
- investing the money in a fund
- keeping the money in cash that you're agile and ready to spend
- paying down the mortgage on your building if you have one
- paying off the finance of your kit
Once you've done this, you have assets that you own, and in the worst-case scenario you can potentially sell some of the assets or borrow against them, but in the best-case scenario, you can use some of the money to take opportunities where other people don't have this.
In this situation then, we're now looking closely at capacity and the ability to do the work which generates the profit to build your balance sheet.
There are 2 issues related to capacity in terms of dental practice or any other business:
- Production capacity
- Marketing capacity
If you are a single-handed practitioner who has opened a squat practice and half of your book is empty, you have a marketing problem. If you're a multi-purpose practice with 6 treatment rooms, and all of those rooms are full all of the time. You have a production problem.
As I've said many times in these blogs before, you either have a production problem or a marketing problem. You never have both, and you never have neither.
Understanding that filling gaps in books is a marketing problem and reducing waiting times is a production problem, allows you to build a better business, to kick off profit, to build your balance sheet, to build a better business, and so the cycle continues (apart from the inevitable catastrophes that your balance sheet protects you from).
Understanding production and marketing capacities and then having strategies to work these, however small your business is. Is a place of peace and a place of comfort that allows you the opportunity at times to sit back and steer the direction of your business in the way you wish to go.
Building a balance sheet that you can use in times of crisis, but more importantly in times of potential growth, allows you to react when others can't, allows you to take opportunities that come across your path, to build you into a better and bigger and more robust business (if that is your goal).
As dentists inevitably we celebrate a waiting list because it feels like it's safe. But a waiting list does not sit on your balance sheet and a waiting list is not profit collected. It's much better to flip the mindset when you have a waiting list to increase the production capacity.
Increasing production capacity can be done by increasing the actual production facility (adding another surgery or another machine).
It can be increased in efficiency and effectiveness i.e., getting quicker or sharper or better.
And it can be increased with the use of technology.
Next week on the business blog, we'll talk about the use of technology to increase your production capacity and why this is probably the most important topic in the dentistry moving forward.
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