So many times, we hear practice owners say things like “things are a little slow right now, but we’ll be fine” or “we had a good day yesterday, so we are set.” That reasoning tends to be anecdotal and based on feel rather than hard facts. So, how can you tell if your practice is really struggling and in need of some assistance or additional attention? Let’s go through some of the prime reasons.
- You are spending more than you are collecting – This is the most obvious case and requires that you always know where you actually stand financially. Why would I say actually? That’s because way too many practices rely on bits of data rather than a good set of financial statements to help show the full picture. In one recent case, we asked a practice owner for financial results, and they provided a standard practice management system generated report that showed monthly revenue entered. That’s great, but it doesn’t tell us what amounts got deposited into the bank and what expenses are.
An owner should also understand exactly why expenses may have been high over a period of time. If the owner bought a new x-ray machine with cash or pushed in for a new marketing campaign, that’s typically a short-term issue will not reoccur every month. If lab expense or employee costs run consistently high, that requires deeper analysis and problem solving.
2. The practice’s financial metrics are below standards – If you are in the orthodontic profession, we all know about the standard 50% profit margin expectation for mature practices before doctor pay. If the number is below that, the owner should know why. Again, this requires knowing what the number is and the component expenses. This comes with preparing useful financial statements on a regular basis.
3. You are falling behind your peers – Industry journals and reporting agencies provide helpful information to talk about how the general population of practices are performing. For example, in our profession, we’ve seen a industrywide decline overall in new patient activity since the ending of covid-related support programs. If your practice is struggling, it may just be because of difficulties in the larger environment. I would suggest not relying on numbers you overhear at parties or from individuals who might be motivated to paint a certain picture of all practices. In my experience, those numbers tend be inaccurate and overstated.
Worried that your practice might be struggling? We offer a free analysis and game plan to fix what isn’t working. If your information isn’t in the best shape, we can also help build historical profit and loss statements and production comparisons at no charge. Just e-mail us at marshmallow@adbmgmt.com and we’ll get things going for you.