All of the healthcare providers I’ve known personally have gone into their chosen fields either because of their drive to help people, or a love for science and medicine. In most cases, it’s probably a combination of the two. I don’t think I’ve ever met a doctor or a dentist who did what they do because it seemed like a great business plan, nor is it likely that they studied finance or marketing in their school days. Nonetheless, when you started a medical or dental practice, you went into business, and you’ll need to manage the business aspect if you want your practice to succeed.
OK, so I’m in business. What do I do now? As a business owner, like all other business owners, you need a way to gauge the level of success of your practice, and see where you can make changes so that you can be more successful. You’ll want to track at least some metrics of how well your practice is doing. These metrics are known as Key Performance Indicators (KPI). Here are a few KPI that you may want to monitor:
1. New Patient Conversion Rate
This is really a measure of how successful your marketing program is. (Yes, dentists need to do marketing as well). This KPI is the ratio of New Active Patients compared to Qualified Leads. Of course, you’ll have to determine exactly what you consider to be a qualified lead. Is it someone who responds to your advertisement? Or someone who comes in for an initial consultation? However you look at it, you certainly want this percentage to be as high as possible.
2. Annual Production Per Full Time Employee
Any business needs to be concerned about how efficiently its employees are functioning, and a dental practice is no exception. This KPI is calculated by dividing your total revenue by the number of full time employees. Your result here will also depend on your location, as wages are higher in some areas than others. But generally speaking, a good target for this KPI for a dentist in the U.S. would be around $15,000 per year or more.
3. Accounts Receivable
Like any business, you won’t stay in practice long as a dentist if you don’t get paid for your work. So it’s important to track how promptly your receivables are being paid. It is generally accepted that if you don’t collect on your bills within two months of performing your service, your likelihood of getting paid decreases dramatically. This KPI should be as close to 100% as possible.
4. Percentage of Marketing Expenses
As we said, it’s essential to do marketing to gain new clientele for your dental practice. This KPI gives you an indicator of what that’s costing you. Divide your marketing expenses by your revenue for the same period of time, and turn that into a percentage. Industry standards suggest that a good target for this KPI is around 10%, though that may also vary regionally.