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You must have ROBUST financial structures within your business to maintain stable finances.
As healthcare practitioners, financial distress will affect our judgement. If you find that you are treating patients and providing treatment plans for them to protect your finances and financial management, it will have a seriously detrimental impact on your business and the trust of your patients and customers.
"Your work exists to give you the life that you want."
As you set up your financial model, it is essential to consider how much you expect to be paid (be realistic), how much you want to be paid, how much you want to pay your team and what you want your business to make.
The financial model is part of the structure of everything else we do. It ties in, particularly with your business's 'why,' so you can frame it against the financial model you set when setting your 'why'.
Dental practice finance is NOT accountancy. You cannot rely on balance sheets and profit and loss statements to measure your financial health daily—you need a separate system that will feed that more extensive system, but it is NOT that system.
Profit is the oxygen of your business (Essential for life but not the meaning of life). Profit is not the meaning of your business, but is necessary for its continued life. Once you see profit as a tool for reinvestment and development, it changes and frames how your finances are built.
Understand the difference (and importance of) retrospective analysis, prospective analysis, and forecasting. Retrospective analysis is historical; you must never celebrate retrospective analysis; it's done. The prospective analysis is what's happening today; seeing what is happening in real-time is much more critical. Forecasting is future scoping. It's never accurate, but improving your ability to forecast is essential.
Turnover is vanity; profit is sanity. You are safe if your turnover drops but your profit increases in real terms. If your turnover increases exponentially and you make no money, your business will die.
Profit is NOT yours… it's the businesses. Designate your salary (realistically). Set your salary realistically as part of your business model.
Do we have enough money? Setting up a financial dashboard is the fundamental basis of a good business. It lets you make the right decisions for your patients, team, and investments.
Download our Free Video Lecture: At the bottom of this page, you'll find an option to download a free video lecture taken from The Campbell Academy's ITI Digital Dental Entrepreneurial Program, detailing:
✅ The Key Financial Metrics and Definitions for Dental Business Owners
✅ How to Influence these Financial Metrics
✅ How to Forecast your Financial Future
Key metrics are based on accurate data and provide a true picture of your business performance. If you fail to measure and track these key metrics, you are operating mindlessly without the benefit of early warning signs or indications of declining business performance.
The key metrics discussed here are in your Chart of Accounts, where your business's financial transactions are recorded in your Profit and Loss sheet.
Revenue is the total income generated by the sale of goods and services.
Sometimes, revenue is mistaken for profit, but that correlation is inaccurate. It is best to think of revenue as 'sales.'
There are other terms sometimes used for revenue, such as income, sales, and turnover.
Sales: All the money collected for the dentistry we provide.
Expenditure is all costs the business incurs.
Businesses incur two types of costs:
Cash flow is the money that flows in and out of your business.
Cash refers to the amount of money currently or soon to be available. It's the money coming into the business which serves as the resource to pay expenses.
A positive cash flow enables the company to settle debts, reinvest in its business, pay expenses and provide a buffer against future financial challenges.
Profit is the amount left over after all expenses have been paid, the difference between the amount earned and the amount spent.
Capacity is the hours available for the delivery of fee-earning work.
At The Campbell Clinic, we measure capacity by:
Number of operating hours available - Facility Capacity.
Clinicians hours available to deliver work - Clinician Capacity.
Example of Capacity per Week:
Occupancy measures how much capacity (work diary) was utilised to generate sales.
Financial forecasting is predicting a company's financial future. It is essential as it informs business decision-making regarding hiring, budgeting, sales forecasting, and strategic planning. It also helps maintain a forward-focused mindset.
The financial forecasting process includes the analysis of past business performance, current business trends and other relevant factors.
How to influence Sales:
EXAMPLE: The Campbell Clinic March 2022
How to influence Fixed Costs:
EXAMPLE: The Campbell Clinic March 2022
Waiting time for New Patient Appointments.
How to influence Demand:
EXAMPLE: The Campbell Clinic March 2022
How to influence Cost of Sales:
EXAMPLE: The Campbell Clinic March 2022
These levers—Sales, Fixed Costs, Demand, and Costs of Sales—can increase the profit margin.
An increase in sales and a new level of spending control can significantly impact overall profit.
Sharing your financial numbers with your staff allows the broader team within your business to feel valued that such a sensitive and “taboo” subject would be disclosed to them.
Our team usually spends the money, so it is in our interest to share these financial numbers with them. If we do not, they may create their narrative about where and how they think the money is being spent.
Sharing the finances with our team creates trust and engagement.
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Here are some examples of how we’ve shared our finances with our team:
For example:
Sharing your financial numbers with your team allows actual, shared ownership, which can lead to a noticeable reduction in unnecessary spending.
Understanding the Return on Investment (ROI) is crucial for any practice to enhance its operations and deliver better services.
Evaluating ROI through the continuously evolving world of technology and its advantages—from increased efficiency and reduced costs to improved quality and enhanced customer experiences—provides a clear picture of these investments' value.
We have four of these at The Campbell Clinic and, therefore, had to previously assess the worth of this investment against the above criteria.
In providing different aspects of care within our practices, we can look at this category of products we utilise and ask, "If we invest in the technology to provide these products, will it make money, and is it a reasonable option for us to undertake?"
We will not avoid the expansion of technology within our practices; it moves faster than we can imagine. Therefore, understanding the return on investment, when to invest, and what might come back is critical.
If you feel you are designing your business's systems and structures before opening a new practice, you would first want to explore your vision, values, and mission for the next three years.
Once your vision, values, and missions are set, you should start building your financial model based on what you want to achieve within your business.
At the start of your business, you can define your financial model—will it be subscription-based for patients every month? Will there be a fee per item as they pay for the treatment? Will it be a combination?
At the highest level, what you are essentially trying to do with your startup is build a startup from the ground up.
Your brand then exists to be built both internally and externally, the external version of your brand is the promise that you make to your customers and you must know what those promises are. You will spend much more on marketing in the initial stage of your practice development to raise awareness and bring people to your business.
Your brand then exists internally, as well as in your vision and in your team's behaviour, commitment, and attitude.
Building a team based on a vision that does not yet exist and that they cannot yet see can be one of the most challenging things to do. Finding the right people who match the vision and values you need to build your brand takes time, and you must sell your vision to them and reward them appropriately as you move forward.
You need to embrace the concept that we are all selling all the time.
Know your products inside out (their features, benefits, what materials you might need and how they will be sold) and create the opportunity to solve the problems of the people in your developing tribe.
Decide where your business fits in the world and how it can contribute.
At The Campbell Clinic, we believe businesses have a greater purpose than money; they exist in society to build a better society.
You can decide how to do that through social legacy and engagement in your community, all of which will help you through the 'J Curve'.
Please follow the link below to download our Free Video Lecture from The Campbell Academy's ITI Digital Dental Entrepreneurial Program. This Video details:
✅ The Key Financial Metrics and Definitions for Dental Business Owners
✅ How to Influence these Financial Metrics for effective management, strategic planning, and long-term success
✅ How to analyse past business performance and current business trends to Forecast your Financial Future
Thank you for reading our Guide!
In conclusion, developing a comprehensive financial model for your dental practice is about increasing profits and creating a sustainable model for financial growth alongside patient and team satisfaction. By establishing solid financial structures, setting transparent budgets, and keeping your staff and team members up to date with your business's financial position, you can foster an environment of trust and engagement. Remember to regularly assess your strategies, adapt to changes, and strive to improve patient care and experience.
If you have any questions, please just let us know 😀