Taking control is part one of a series of six articles
designed to get your practice working
efficiently and effectively.
Fixed versus Variable Expenses:
You have probably seen the figures before. Employee wages should be between 24-28% of total overhead. Supplies 5-7% and rent no more than 8%. Can a practice even hope to stay within these guidelines? The answer is a resounding yes! The real issue most times is not that your rent is too high, or you pay your team too much, although that can be an issue, the real concern is that you may be under-producing for your overhead.
As your practice grows, it is natural that you should see a decline in the percentage of overhead. Produce more and your overhead drops effortlessly. Employees are generally your largest expense, but also they have the ability to be your greatest asset. Utilize them to their fullest. You’ve probably heard the saying, if you don’t know where you’re going, any road will take you there. Make sure your team knows the goals and what they are striving for. Then track your production daily. When teams have a sense of ownership, they make things happen. It they know the practice is shy of attaining the goal for the day and a patient cancels they are much more apt to work to retain the patient or to immediately contact someone else to take that appointment time when they feel their efforts are noticed.
So where do you find those employees that will take ownership? You actually create them yourself. Do this by evaluating and reviewing your employees at least twice a year. Evaluations and reviews are a time to discuss what is working and what is not with the employee’s behavior. It is not a time to evaluate compensation. I find that most dentists feel if they sit down with their employee to discuss how they are doing, the employee will expect a raise. Employees will not have any expectation of a raise if you set the stage and inform them that raises and monetary compensation of any kind will not be discussed, only how they are doing in their job performance. So how does an employee receive a raise? Whenever I’m informed that an employee wants a raise, I encourage them to submit a request in writing, citing how they have improved the practice since their last wage increase.
What about performance bonuses? While wages are part of your fixed expenses, bonuses are considered part of your variable expenses. Team bonuses are a great way to give raises when the office can afford it and, at the same time, keep overhead in check. Think easy. Two percent of net collections – minus refunds – each month goal is produced. You may consider doubling that if goal is made three months in a row. Remember, you are the one that sets the goal. Choose a number that allows for bonuses and it will be a win-win.
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This article was originally published by Tri-County Dental Society Bulletin