Your running cost
There’s a figure that I think all dentists should know: the per hour cost to run their office. It’s quite easy to calculate.
Let’s say that last year your total office running expenses were $800,000. That included everything (staff, telephone, internet, advertising, power, equipment, materials, rates, rent etc. etc.) except dentist wages.
If the office worked 200 8-hour days last year, that means your per day running cost is $4,000 which equates to $500 per hour.
That gives you an interesting new way of seeing things.
Here are just a few examples:
If a patient no-shows a 30-minute appointment they’ve cost you $250. That puts no-shows in a new light. I visited an office where one patient had no-showed 14 appointment over a two year period. The office would have been better off to pay the patient $500 to go elsewhere after the first no-show.
If you spend a couple of hours a day chatting with people about the weather, fishing or your holidays that has cost you $1,000. By all means do that if you love it, but be aware of the cost.
Some procedures may not cover your running cost. When doing checkups for children you might struggle to gross $500 per hour. My family-oriented practice was always least profitable during school holidays. Maybe you want to reduce the number of children you see or see none at all?
If you take 30 minutes to explain a treatment plan to patients it has cost you $250. Maybe you should hone your communication skills and do the explanation in 1 minute?
Let’s say you want a day off. You employ a dentist to work in the office and you pay them 40% of collections. The mathematics says that unless the dentist generates $3,333 for the day, they’re costing you money. Do you want to be cross-subsidising dentist employees?
New graduates typically won’t make the hourly rate for the first couple of years. By the time they start producing at a good rate many of them move on. Do you want to be the one who does the training, if every time they start to become productive, they leave?
The hourly running cost of your office is provides you with lots to think about.
