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985: Metric Mondays: Overhead – Operations Percentage – Miranda Beeson

You buy cheaper cotton rolls and the cheapest gloves. But your operational overhead is still too high! In this episode, Kirk Behrendt brings back Miranda Beeson, ACT’s director of education, to continue the series on overhead and break down operations percentage. Buying cheap supplies won't help your practice! To learn about the hidden costs that are impacting your overhead, listen to Episode 985 of The Best Practices Show!

Learn More About Miranda:

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Episode Resources:

Main Takeaways:

  • Your operational overhead should be around 8%.
  • It’s not just about reducing your spending. Close your effort gap!
  • When operational costs aren't monitored, they can slowly creep up.
  • If possible, look into negotiating and lowering your bank or merchant fees.
  • Regularly audit subscriptions, software, and service contracts for unused tools.
  • Review your spending. Is everything critical for patient care and revenue support?
  • Look for supply waste, redundant subscriptions, unmanaged vendor costs, blind spots.

Quotes:

“We want our benchmark for our operations percentage, that bucket within overhead, to be around 8%. Operational costs can quietly creep up on us if we're not monitoring them. And a lot of us do receive that report or that P&L from our accountant, or maybe we're doing that ourselves through QuickBooks and running a P&L report. Do we truly know every element of what falls within this bucket? Are we categorizing everything appropriately? It can really creep up if we're not paying close attention. While some of the expenses in the operations percent are fixed expenses, there are some that are, to some degree, variable in that there's a little room for negotiation or strategic oversight to ensure that it doesn't get out of hand.” (4:16—5:04) -Miranda

“[Operations percentage] is one of those things where if you don't pay attention to it — I love what you said — it creeps up on you. I think Benjamin Franklin said, ‘Beware of little expenses. A small leak will sink a great ship.’ So, you want to be careful about this.” (5:06—5:22) -Kirk

“A healthy operations percent is going to reflect disciplined spending, strategic purchasing, and well-managed systems. You usually have somebody accountable for aspects of, for example, office ordering and things like that where we can minimize spending as much as possible . . . This doesn't mean we're reusing gloves. Or maybe you don't want to get the cheap Post-it notes because they don't stick to the wall during our team meetings; they fall off. That's okay. You just have to be strategic and plan and budget for it.” (5:28—6:02) -Miranda

“When the [operations percentage] gets a little too high, it generally signals there's a bit of supply waste and redundant subscriptions, possibly. How many of us don't even know all of the subscriptions that we're currently signed up for because we did a free trial and we never canceled it? There might be unmanaged vendor costs or even supply blind spots. So, if you review your P&L, there are things that are lumped together. For example, that happens a lot when we're working with coaching clients. We help them fill out our GAPs Scorecard. Our coaching clients all use a GAPs Scorecard where we track and look at where the money is leaving your practice so we can really evaluate true profitability. One of the things that we do is reference the P&L. On a lot of P&Ls, there's a category that's “miscellaneous” or something that's lumped together, which can be sometimes $6,000 or $9,000. When you stop and ask the doctor, ‘What's in that, exactly?’ a lot of them don't know. And it's not really the fault of their own. It may just be that, ‘This hasn't been a focus for me because I did a startup, and I am a recent grad, and I've been really focused on improving my clinical skills and building a team and, gosh, I never really dug into these small elements of my P&L.’ But as soon as you see that, it's important to start looking at some of these factors so that you can improve what you can.” (6:03—7:26) -Miranda

“The biggest change, if your overhead percent is high on operations or any of your buckets, is going to be improving your effort gap and collecting more. Any time we can collect more, this is going to automatically go down, even if we do nothing else. But there are some very tiny micro changes that we can make within this bucket of operations that can also positively impact that percentage.” (7:26—7:50) -Miranda

“One of my frustrations is when a dentist is so worried about getting cheap gloves and cheaper cotton rolls and complaining about every tiny, little thing when they're writing off 42%. Like, your focus is on the wrong place. Let's collect more money instead of worrying about cotton rolls and gloves.” (7:57—8:19) -Kirk

“You know, as a clinician, that you have certain materials or certain things that really work well for what you're trying to provide. Every element of your practice has that. I mean, don't even threaten a hygienist team to switch prophy paste brands or a 2x2 when we're used to a certain type. It's not those teeny nitpicky things that we're looking at . . . You can make these micro changes, but you're totally right that we always have to think like an entrepreneur and a leader and have the bigger mindset being, I wouldn't even have to be worried about all this little stuff if this effort gap was improved, if I wasn't writing off half of my year to insurance and courtesies and adjustments. So, that's number one when we talk about how can we improve or impact this, is what can we do to reduce that difference between our gross production or net production, and then to be able to collect more.” (8:44—9:46) -Miranda

“If we want to look at, ‘Okay, great. I'm going to make a plan in the next few months. I'm going to maybe drop an insurance or two, but I've got to do something today,’ there are a few little things that you and your team can do, for sure, within this bucket. One of them is super simple, just auditing what's in your P&L, looking at the software, the subscriptions, and making sure that what's within those contracts or what you are subscribed to is still relevant.” (9:47—10:12) -Miranda

“Sometimes, we have duplicate tools. So, you may have Dental Intelligence or Pearl for your AI X-ray software, but you don't even know that Pearl also does insurance verification, and it also has an element that supports your administrative team. So, maybe you have two or three other technology platforms that you're paying hefty subscriptions for when you could just pay an add-on to Dental Intel, or you could just pay a smaller add-on to Pearl. So, I think evaluating what you're investing in around software subscriptions and things like that can be really helpful.” (11:55—12:29) -Miranda

“When it comes to supplies and the front office, dental supplies — like, clinical supplies have their own bucket . . . There are office supplies that exist within your operational. I mean, printer ink. We don't think about it, but that's really expensive. Sometimes, it's cheaper to just get a new printer. But things like that can add up as well. So, you really want to have a budget and one person who has the Amazon login for the practice — not everyone on the admin team. If you have four or five admin team members and they can all log in and order off of Amazon or OfficeMax, that's going to give you more leeway for problems than if there's a list that people can add things to when we run out of something, we check the inventory, and we have one person accountable for going into Amazon. They know the budget. They know what that budget is that we can spend on a regular basis to stay within a reasonable realm.” (12:29—13:27) -Miranda

“We can also talk to bank and merchant fees. Sometimes, we can negotiate those down. Even if it's just a tiny bit, when you look at a year's worth of those fees, it can really add up over time. And if your operations are high, review your spending with a fine-tooth comb. If you have a bunch of things in one bucket and you're not exactly sure what's in there, ask your CPA. Or if you're doing your bookkeeping, you might have to get a little more granular. And it can't just be like “credit card charge”. We have to actually pull out what some of those individual elements are so that you can really look through those with a fine-tooth comb. Is everything in that bucket, everything on those particular expenses that are relative to operations, critical to patient care and revenue support? Ask yourself that question. If the answer is yes, at the end of the day, and you've done all these things, you're going to go back up and you're going to look at your effort gap and your collections gap again.” (13:27—14:23) -Miranda

Snippets:

0:00 Introduction.

1:06 Operations percentage, explained.

2:49 How this percentage impacts your practice.

8:28 What you can do to impact this metric.

15:15 Last thoughts.

Miranda Beeson, MS, BSDH Bio:

Miranda Beeson has over 25 years of clinical dental hygiene, front office, practice administration, and speaking experience. She is enthusiastic about communication and loves helping others find the power that words can bring to their patient interactions and practice dynamics. As a Lead Practice Coach, she is driven to create opportunities to find value in experiences and cultivate new approaches.

Miranda graduated from Old Dominion University, and enjoys spending time with her husband, Chuck, and her children, Trent, Mallory, and Cassidy. Family time is the best time, and is often spent on a golf course, a volleyball court, or spending the day boating at the beach.
ACT Dental Team

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