We’ve talked about various leading and lagging indicators over the past few weeks, including the ultimate lagging indicator and my least favorite KPI: Gross Production. You produce a number, but there’s more to the story than that number. Everyone’s story is different, and yours will tell you how you got to your gross production.
In addition to your Gross Production, your production story will take into account your number of active patients, and your Annual Patient Value (APV). Your APV is a valuable tool, and it is your revenue divided by your number of active patients. It’s truly a magic KPI, because it tells you where your practice falls on the business model spectrum:
- High volume, low profit margin
- Low volume, high profit margin
What these two models tell us is that while you can have two practices with the same gross production, those two practices can look incredibly different. If your APV is low, then you’re likely focused on quantity—seeing a lot of patients every day and always looking to add new patients. If it’s high, however, then you’re likely seeing fewer patients, but collecting more per patient. Your days aren’t as busy, and you’re not worried about adding so many new patients.
Ultimately, how your practice looks is up to you. Many dentists thrive in the fast-paced “churn and burn” model, but a significant number are beginning to see that they don’t need to wear themselves out to reach the same gross production. It’s about finding the right balance of volume and profitability, and that’s completely up to you. Your first step is to pull your number of active patients, and then divide it by your revenue. Then you can play with the dials and ask yourself what would happen if that APV went up—how would your practice and life look? This is your production story, after all, so how do you want to write it?
