Your gross profit percentage is the revenue you have remaining after all your direct costs are paid, and in this sense, it’s essentially the opposite of overhead. This metric plays a huge role in indicating the health of your practice, because profit is the oxygen your practice needs to function. Without it, your practice will suffocate, so learning how to increase that oxygen supply is crucial—the more profit you have, the easier it is to breathe.
As we learned last time, your overhead should be around 60%, which means that ideally, your gross profit should be around 40%. That 40% can be divided further, with 30% going toward the dentist or dentists and 10% going toward the ROI for the entrepreneur. With this percentage, you can afford to pay the dentists a competitive salary while still having revenue available to invest in the practice and to compensate yourself for the entrepreneurial risk of business ownership.
When you start tracking this metric, it will make diagnosing your practice’s health so much easier. You can get started on the journey to more profit today, with a few simple steps:
- Identify your gross profit percentage
- Determine if it’s ideal
- If it’s not, find out which financial gaps are eating into your profits
When you know that your practice is healthy and profitable, it makes everything better. Work is less stressful, life is more enjoyable, and you’re a better person overall. A Better Practice and a Better Life are within your grasp—you just have to understand the numbers and put in the work to get them where they need to be.
Check out the Financial GAPs Calculator to see where your practice is losing money.
