I’ve been reminded on calls and in meetings and workshops that I’ve held this week that Dental Practices need to make a profit.
You’re not running a charity.
You’re not there to be supporting the other team members and leave yourself to last.
You’re not there in your community to serve them and only them, at the expense and the betterment of yourself, so that they, the community lead a better life and you do not.
That hardly seems logical.
It seems pointless.
And not quite fair.
The purpose of being in business is being able to sell it for a profit.
And also to generate sufficient revenue to allow you the rewards you should gain as a result of all the time, study and financial investments that you have placed upon yourself getting to this point.
And sweat equity.
And this we should never forget.
I know that most Dentists make dreadful businessmen.
Business in dentistry is brushed over, if it’s even spoken about at all, in Dental School.
Most dentists I know tend to run their practices, and once per year, at tax time, they see how much money they made, for a time period that has well and truly passed.
Rather than accounting their income on a daily, weekly and monthly basis.
Most dentists just seem to *hope* that there’s enough money to cover payroll, to cover expenses, and then to live on, somehow.
On a weekly basis.
When really it should be the other way around.
As assistant dentists, we were paid a commission, or percentage, for our efforts.
The remainder amount, which the practice retained, was for practice expenses.
But I find it rare indeed to see a Dentist Practice Owner paying himself a commission first, and leaving a remainder in the business.
Like I said, most dentist business owners I see pay themselves lastly.
And that’s wrong.
So here’s what I’d do as a rough rule of thumb.
Firstly, all money collected by the practice for services rendered by hygienists, associate dentists, product sales and by principal dentists should belong to the practice entity.
Then the practice should pay the dentists, including the principal dentist, a percentage for each of their individual collections.
This payment is for their personal use.
For food, shelter, school fees, holidays, leisure.
And savings and retirement.
Separate bank account.
As a rule of thumb this percentage should be “industry norm”.
In Australia it is forty percent.
The remaining funds collected by the practice should be divided up as follows:
- Twenty percent for salaries for team members.
- Twenty percent for practice overheads.
- Twenty percent for share holder dividends and capital reinvestment for the business.
That’s a total of one hundred percent.
And don’t forget these two key points:
Firstly, as an owner, the principal dentist should consider there needs to be a return on the funds invested.
Whatever the owner has spent purchasing the business, then a market return, just like stock or share purchases, should be paid for the investment.
Were that same amount invested in property, then a market rent would be paid.
A lot of dentist owners forget this amount they should be collecting.
Secondly, as a rule of thumb too, any administrative work performed by the dentist owner, be it payroll, marketing, or HR or just plain bookkeeping should also be remunerated to them *separately* on top of their commission paid for Dental Services.
Because, after all, if someone else performed those roles then they would be paid for doing so, wouldn’t they?
And associate dentists not performing those duties are paid a similar percentage on their services as principal dentists who *ARE* performing those duties.
[A more detailed look at the division of the numbers can be found in my previous articles on this page; http://ultimatepatientexperience.com/2013/01/]
So make sure you pay yourself first.
Make sure you pay yourself for all you should.
And make sure you invest your earnings for yourself, into your own investments.
Omer Reed told me that ninety five percent of Dentists in the USA reaching age sixty-five cannot afford to retire.
I’ll bet it’s because they’ve never remunerated themselves appropriately.
I’ll bet it’s because they’ve paid themselves last…
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