As doctors and healthcare professionals, one burning question often consumes our minds: What are the most critical factors in controlling overhead?

After all, overhead is the difference between collections and profit, making it essential for us to find ways to lower costs or increase revenue. Managing a business involves complex considerations, but by evaluating key aspects of your overhead, you can make informed decisions to optimize the relationship between costs and profitability.

Here are some crucial factors to consider:

1. Embrace the 80/20 Rule to effectively manage your practice. For every 32 hours of patient services scheduled per week, allocate 6-8 hours for dedicated business activities. This time should be divided between approximately 4 hours for business management and 4 hours for team training. This approach allows you to work both "on the business" and "in the business" consistently, fostering growth and efficiency.

2. Analyze Key Expense Categories to gauge your practice's financial health. Here are a few categories to keep a close eye on:

Rent: Aim for rent costs to be around 7% of collections. For example, if your rent is $7,000, your collections should ideally be around $100,000. If this ratio seems disproportionate, and rent reduction is not feasible, you may need to accept a slightly higher overhead in this area or focus on increasing collections to mitigate the percentage.

Dental Supplies: Similar to rent, dental supplies should generally amount to around 7% of collections, excluding expensive items like implant supplies and bone grafting materials. Apply the same analysis as with rent to ensure alignment between costs and collections.

Employee Expenses: Wages, salaries, and payroll taxes should ideally fall between 20% (without including hygiene services) and 26% (if hygiene services are included). If your numbers range from 25% to 30%, it could indicate that your practice is overstaffed during a growth phase. Consider making adjustments by either downsizing the staff or focusing on increasing collections.

Discretionary Spending: Examine areas of excess discretionary spending, such as equipment, excessive continuing education for the doctor, travel, or redundant material systems. Sometimes, a temporary spending moratorium is necessary. Involve your staff in the decision-making process, questioning the necessity of such expenses.

3. The Power of Increasing Collections in most cases, the real challenge lies not in overhead itself but rather in finding ways to increase collections. Here are some strategies to enhance revenue:

Increase Production Efficiency: Optimize your workflow by identifying bottlenecks and streamlining processes. Look for opportunities to improve productivity without compromising quality.

Adjust Fee Schedule: If contractual constraints are not a concern, consider adjusting your fee schedule to reflect the value and quality of your services. Evaluate the market rates and make necessary adjustments to align with industry standards.

Focus on High-Value Dentistry: Emphasize comprehensive treatments and educate patients on the long-term benefits of optimal oral health. Encourage acceptance of treatment plans that provide maximum value to patients.

Enhance Patient Enrollment Skills: Train your team to effectively communicate the importance of preventive care and treatment options to patients. Improved patient enrollment skills can result in increased case acceptance and revenue growth.

Finding the right balance between controlling overhead, increasing collections, and maximizing profit requires finding the right balance between various factors. Regularly assess your practice's financial performance, keeping in mind the key aspects discussed above. By closely monitoring and managing these elements, you can navigate the complexities of running a successful practice and steer it toward sustainable growth.

Remember, while controlling overhead is crucial, it's equally essential to provide exceptional patient care and maintain a thriving team. By integrating these strategies into your practice management approach, you can achieve a harmonious balance between overhead, collections, and profit, ensuring the long-term success of your dental practice.