Setting the standard

In our experience at Samera Ltd, we have found that the majority of dentists focus only on the clinical aspects and day-to-day operations of their practice, with little or no awareness of the bigger picture. By that I mean the practice’s overall performance, of which financial status plays a major role.

In light of the ongoing changes in UK dentistry, dentists simply can’t afford to ignore this aspect. I believe the introduction of the new NHS contract will eventually lead to the emergence of two dominant business models in the industry:

1. Low cost, low investment, necessity-driven NHS dentistry

2. High cost, high investment, highly competitive private dentistry.

You’ll find very successful dentists under both these models and they will have one thing in common – sound business and financial knowledge about their practice’s overall performance. In order to run an efficient and competitive practice, you need to develop this skill to some extent in addition to your clinical expertise.

In this article I will discuss how you can incorporate the concept of benchmarking into the practice analysis and performance measurement tools that I introduced in previous articles. By assessing your performance in comparison with similar practices, ideally the best, you’ll be able to identify areas where further improvement is required. This will encourage you to investigate certain aspects of your business and develop ways of doing things differently.

In order to perform a benchmarking study you need monthly, quarterly or annual financial results which can be compared with the best in your sector. If your accountant is NASDA (National Association of Specialist Dental Accountants) registered, you should be able to obtain a copy of its latest statistics.

This data, published by NASDA, covers different categories such as NHS, private and mixed practices and also associates. Although these figures are essentially averages for the sectors concerned, you can still use them to compare your practice’s financial performance with the industry averages of the relevant area.

You can compare practice performance line-by-line, starting with your gross fees to net profit. This breakdown will tell you whether your gross fee, gross profit margin and net profit margins are below or above the industry average.

Depending on the outcome of this analysis, you can delve into finer details such as comparison of your practice’s materials, lab and employee cost (as a percentage of the gross fees) with the industry averages.

This approach will help you take any necessary action in respect of revenue and cost management. For example, such a benchmarking exercise could reveal that although your gross profit margin is in line with the industry average, the net profit margin is lower than the industry average. This implies that your practice overheads such as admin and staff costs are higher, and will in turn encourage you to manage those outgoings better.

This research will enable you to improve your practice’s overall financial performance in the long run. It will encourage you to achieve results which are equal to or better than that of similar practices.

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