Many dentists believe that if they just increase the number of patients seen they will have financial success. Dentists have been told that bigger practices will produce more money for them. But, this production model assumes that the dentist’s fixed costs are indeed “fixed” and quality time spent with patients will not become a problem.
Fixed costs aren’t really fixed, just constant. Dentists soon realize that they must add staff, increase office space, or keep more materials on hand to handle a larger practice. But when fixed costs increase, the overhead percentage increases and net profit decreases.
Most dentists are not aware that their introduction to marketing and management of their practice was influenced by research of manufacturing. This manufacturing/production model doesn’t apply to dentistry or other service industries.
Those dentists who believed in this model now find themselves spending more time managing the business side of the practice and less time with their patients. As the pressure increases to produce more business, neglected patients go to another dentist who cares about them. Eventually, dentists realize that they can’t produce their way out of the “bigger is better” trap.
What do they do then? Some dentists sell their businesses to a management firm and become a paid employee of “their” practice. Others file bankruptcy or use consultants for a “quick fix.” Most continue to struggle day to day, looking for a way out. Let’s look at a model that does reflect what actually happens in a dental practice.
Costs are very high at the start up of a new practice and decrease as the practice grows. At some point, the dentist will be faced with a decision to hire more staff, increase office space and buy more materials. When this happens, “fixed costs” per unit and the overhead will increase.
Revenue per patient seen is very low at the beginning of a new practice and increases significantly as the practice grows. At some point, however, the dentists will see less return on investment with every additional patient. Efficiency is lost due to the limitation of the dental practice. As the practice grows larger, dentists are forced to spend more time in managing the business of the practice or pay someone to control the practice. There is a point where more patients means more money but a diminishing profit margin.
What this Means to You… Since 1978, Dr. Michael Schuster’s Center for Professional Development has helped thousands of dentists identify and reach their optimal profit zone. In fact, 97% of the dentists who have learned and applied his strategies and methods have achieved or exceeded their practice goals within the first year. If you’d like to learn where your optimal Profit Zone is, contact us to schedule a complimentary assessment.