Dental Practices: The New Year’s Checklist for a Successful 2023
January 5, 2023
By: Roger P. Levin, DDS
CEO, Levin Group, Inc.
There are certain fundamental business principles that every dental practice can follow to increase the odds of having a successful year. Each year, we are full of hope and optimism that the new year will be better than the one before (even if the year before was excellent.) The following checklist will detail steps dentists can take to help make their goals a reality.
The New Year’s Checklist
1. Develop a 12-month strategic plan.
Every dentist should take time in early December to evaluate potential new strategies for their practice in the coming year. There are many strategic planning methods and techniques, but one of the best is to outline three key strategies that you can implement in the practice over the next 12 months. Practices that focus on a few important and powerful strategies are the ones that typically sustain growth. Examples of key strategies include adding a new service to the practice and implementing an internal marketing program to support it; upgrading a significant technology in the practice; and introducing home care productsfor sale through the hygiene program.
2. Set 10 goals.
Levin Group recommends that every dental practice set 10 goals each year. Identify three large goals, three medium goals and three small goals. We refer to the tenth goal as a “BHAG,” which stands for “big, hairy, audacious goal.” BHAG was coined in the 1980s and is an actual business term that refers to the big-stretch goal that is particularly challenging and hard for a business to accomplish. By breaking up your goals into these categories, your practice will be more likely to improve performance in major and minor areas with one identified stretch goal to work toward. You should attach bonuses to some goals to incentivize team members to achieve them. One practice, for example, set a large goal of having 96% of all active patients scheduled within six months, a medium goal of reducing no-shows by 2% and a small goal of ending the day on time 95% of the days. They also set a BHAG based on 18% production growth.
3. Identify areas of improvement in the new year.
Total Quality Management (TQM) is a business concept created by Dr. W. Edwards Deming, a preeminent business scholar and thought leader. The basis of TQM is continual ongoing improvement. Following the principles of TQM, dental practices should identify five key areas that they will commit to improving in the new year, with the goal of enhancing performance. Some examples include adding value to the new patient phone call through scripting; filing more appeals to dental insurers who turn down cases; organizing the storage area and removing all out-of-date and unused products; lowering materials and supply costs by 10%; and reading a dental practice management book as a team with follow-up discussions at monthly staff meetings.
4. Set an annual production goal.
At Levin Group, we consider this goal mandatory. Every practice should determine the production goal that it would like to achieve in the new year. The best way to approach this is to look at the last three years of annual production; determine if there is a trend of growth, plateau or decline; and then apply a challenging but achievable production goal for the next year. One interesting data point from Levin Group is that almost all practices have a 30%–50% growth potential over about three years. We suggest that many practices target 15%–18% growth in each of the next three years. This can be higher or lower depending on economic conditions, insurance, reimbursements and other financial factors. One practice laid out a five-year strategic production plan of growing by 21% the first year, 18% the second year, 16% the third year, 13% the fourth year and 9% the fifth year.
5. Establish a daily production goal and work toward it every day.
Once you have set the annual production goal, you can mathematically calculate the daily production goal for most days of the year. It’s not enough to simply identify your daily production goal; you have to build your schedule and scheduling system around achieving that goal. Take time to review the schedule and determine if it has the capacity to allow for achieving the daily production goal by being within 90% of the goal 90% of those days. Practices that work toward achieving a daily production goal are much more likely to achieve their annual production goal. However, as an important note, we have seen many practices set aggressive increases in production goals without realizing that they have not built a schedule that will allow the practice to hit those goals. You may have to revise your scheduling system using production blocks (or power cells) to ensure that you can achieve the daily production goal. Create several mock schedules that will allow you to make this determination.
6. Re-evaluate practice overhead.
Practice overhead is critical. A 1% decrease in overhead is the same as achieving a 1% increase in profit. We’ve discovered that most practices are 4%–6% too high in overhead due to the staffing shortage and increases in labor costs and other areas of inflation. A 4% increase in overhead represents a loss of $32,000 of bottom-line income on an $800,000 gross revenue practice. By working with your accounting firm, you can receive excellent feedback on how your overhead compares to the national average; this is an important exercise. One practice that we know of set a goal of reducing overhead by 6%. They started by bidding out their top 10 annual expenses so that they could understand what the different market rates would be and how they might be able to adjust certain relationships to reduce costs. As a note, they had worked with the same supplier for 20 years, and the supplier was able to reduce supply costs by 10% once they understood that the practice was focused on decreasing overhead in that area. Sometimes all you need to do is ask.
7. Establish cash reserves.
Prior to the pandemic, very few dental practices were worried about cash. If there wasn’t enough money left in the checkbook at the end of the month, doctors could always take less. This is a classic mistake. We recommend that all doctors put themselves on a regular salary so that they know immediately if cash becomes tight. However, the real message is that practices should accumulate some level of cash reserves over time. Levin Group recommends having at least three months of cash and talking with your CPA because you’ll most likely have to pay taxes on that cash annually depending on the legal corporate entity you have established. Nonetheless, it is important to have cash reserves at a time when dentistry is going through so many changes. In the business world, it is well-established that the single most crucial factor for keeping any company healthy is cash, and when companies get in trouble, not having enough cash is typically the main reason. One practice set a goal of accumulating six weeks of cash in the first year, adding an additional six weeks in the second year and placing all of it in a separate reserve fund, where it would be available if needed. The doctors also understood that if they never had to use the cash, then it would become future income.
Of course, there are several other checklist items practices should consider, including continuing education; planning; staff training; improvement planning; major practice purchases; vacation schedules; scheduling monthly staff meetings; and setting standard meetings with attorneys, insurance agents or accountants, among others.
By following the recommendations in this article, your dental practice will have an excellent list of ideas for what it would like to achieve in the new year and be able to create a fun, enjoyable culture.
ROGER P. LEVIN, DDS
Roger P. Levin, DDS, is the CEO and Founder of Levin Group, a leading practice management consulting firm that has worked with over 30,000 practices to increase production. A recognized expert on dental practice management and marketing, he has written 67 books and over 4,000 articles and regularly presents seminars in the U.S. and around the world.