Unfortunately, we find that most young dentists have some assumptions about how they need to practice in order to be successful. They set up their practice to follow those assumptions, but then down the road, they find themselves working harder and harder while not making as much as they feel they should be. We hear the comment, “I thought it would be better than this,” all the time, which is why we are now teaching something we call the Financial GAPS Method. The truth is there are four gaps in every practice where money is leaving and most dentists aren’t aware of those gaps or how to calculate them. This is unfortunate because it is easy. One of the most important gaps is what we call the effort gap, which is the difference between your gross production and your net production, and when you ignore it, you find yourself working too many days for free. Kirk likes to say “Time is the new rich,” because as we progress through life, time becomes more important than money, and when you’re working for free, that’s time that you’re wasting. The second gap is the collection gap, it’s the gap between your net production and your actual collections.
Calculate Your Effort Quotient
All change processes start with telling the truth, and that means figuring out your numbers. It’s simple to learn how many days you’re working for free each month when you use ACT’s Effort Quotient equation. It’s just a matter of pulling four dollar values:
- How much did you write off to your PPOs? This is the difference between your master fee and the contracted fee.
- How much did you write off electively? These include pro bono, guaranteed dentistry, or work on your uncle that you write off.
- How much are you not collecting? What is the difference between your net production and your collections?
- What is your gross production per day?
Add the first three dollar amounts together, and then divide them by your gross production per day—the result is effectively showing how many days you worked for free.
Analyze the Results
When you know how many days you’re working for free, you have to ask yourself an important question: “Am I okay with that number?” If your number is four and you work a four-day workweek, that means you’re working the first week of every month before your business is even able to start generating revenue on your true production. Note that your number really shouldn’t be zero because there are always some write-offs. However, if you feel you are working hard and not realizing the profitability you should, my guess is your quotient is higher than you ever would have guessed. If so, is it time to do something about it?
Start Making Changes
If you’re unhappy with the number of days you’re working for free, don’t stay there—implement changes to shrink your effort gap:
- Download the ACT PPO Roadmap and use it to analyze your PPO contracts.
- Improve your collections with ACT’s free checklist.
- Increase the number of patients paying your full master fee.
As you make progress, more money will come to the bottom line, which will make both you and your team feel better.
It’s not about flipping a switch and getting an immediate result—this is something that you’ll work on incrementally, doing a little bit each day. It’s also something that you don’t have to do on your own—reach out to us and let our expert coaches help you achieve a Better Practice and a Better Life!
Dr. Barrett Straub is the CEO of ACT Dental