"Only A Few Degrees" - 6 Steps to Successful Goal Setting for Today's Dental Practice

Posted by Weston Lunsford on Jul 26, 2019 1:17:00 PM
Weston Lunsford

In business, as in life, small changes today—only a few degrees—have the potential to create drastic changes in the future. That’s not just some nice-sounding advice we throw around casually here at Dental Intel. For us, it’s an empowering belief. It means that accomplishing our goals, no matter how big they may seem, doesn’t require some single grand show of effort. To get where we want to go we just have to do the little things right, one day at a time. It’s one of our core beliefs, something we try to live every day. 

But the opposite is just as true—failing to do the little things can have disastrous consequences over the long term. There was an extreme and tragic example of this in 1979 when a large passenger jet with 257 people on board left New Zealand on a roundtrip sightseeing flight to Antarctica. Unknown to the pilots, their flight coordinates were off by a mere two degrees. 

Two degrees may not seem like a lot, but let’s check in with the math: at a distance of one foot, two degrees is less than a half-inch. At one mile, two degrees puts you off course by 60 yards. At 1,300 miles—the distance from New Zealand to Antarcticea—a two-degree error put the sightseeing plane 28 miles off course. 

As the plane approached Antarctica (28 miles east of the intended path), the pilots descended to a lower altitude to give the passengers a better look at the landscape. Although both were experienced pilots, without the advanced indicators and gauges now found in all modern planes, they had no way of knowing that the incorrect coordinates had placed them directly in the path of Mount Erebus, an active volcano that rises from the frozen landscape to a height of more than 12,000 feet. The result was tragedy, brought on by a mistake of only a few degrees. 

Successful Goal Setting

When you set a goal, you’ve set a destination. But successfully reaching that destination and achieving your goal requires more than just hoping you’re headed in the right direction. People who regularly achieve their goals do two very important things:

  1. They set goals based on data 
  2. They constantly use data to evaluate and adjust their progress 

These principles work in all aspects of life, including building and eventually selling a successful dental practice. There are a lot of ways to set your practice up for success, but we’ve put together a six-step process that we’re confident in: 

Step 1: Create a Practice Vision

Each practice will have a unique set of goals based on the dentist’s vision. Everyone wants to feel they are part of something meaningful. To be an effective leader, the dentist must define the vision for the practice so that the staff feels their work is more meaningful. This will transform the culture of your practice.

Setting goals and defining the vision for the practice are related activities but serve different purposes. Once the vision has been identified and it feels like something all could work for even if you were not making money, then you’re ready to begin setting goals.

 

Step 2: Answer some baseline questions to help identify performance goals

Below are a series of questions every dentist should be asking themselves.

  1. How many hours a week do you want to work?
  2. How much money do you want to earn each year?
  3. When do you want to retire?
  4. How much money do you need in order to retire? (Avg. monthly spend DOES NOT REDUCE when you retire. This is a common but mistaken belief.)

Step 3: Review Financial Status-Quo

  1. What is the overall financial health of your practice?

FINANCIAL STATEMENT RATIOS

TARGET RANGE 

Variable Costs to Collections

13% to 17%

Dental Drugs & Supplies*

5% to 7%

Lab Fees to Collections*

8% to 10%

Payroll Expenses to Collections

20% to 26%

Hygiene Wages to Collections

8% to 10%

Assistant Wages to Collections

5% to 7%

Admin Staff Wages to Collections

7% to 9%

Facility Costs to Collections

6% to 8%

Business Expenses to Collections

5% to 7%

Marketing Expenses to Collections

2% to 4%

TOTAL OVERHEAD

46% to 62%

  1. What immediate adjustments can be made to improve the financial health of the practice? Remember, cutting costs does not necessarily lead to improvement – therefore, it’s important to identify what actually needs to be done to strengthen the health of the practice.

Step 4: Review Performance Status-Quo

  1. Is the production per active patient optimized? ($ 850.00+)
  2. Is production per patient visits optimized for this specific type of practice?
  3. Is the practice adding enough New Patients to support at least a 10% Patient Growth rate? (Only account for a 5% attrition. Meaning they need to add at least 15%)
  4. Does the practice have less than a 5% Patient Attrition Rate?
  5. Is Hygiene production at least 25% of the overall production?
  6. Does the practice get 95% of their Hygiene Visits Rescheduled BEFORE the patient leaves the office?
  7. Is there any type of Recall System in place with associated goals?
  8. Does the practice have a healthy AR Policy?
    1. 90 Day Net Collection % (Should be above 95%)
    2. Average AR Days (Less than 35)
    3. AR Ratio (Less than 1)
  9. Are broken appointments less than 10% of the total appointments?

Step 5: Set Performance Goals

  1. Start with Gross Production. Why Gross Production and not Net Production? Your Scheduled Production is tied directly to the patient or provider’s fee schedule, which is generally based off of the gross fee for that particular procedure. If your fee schedules are already adjusted for Net Production, then your Gross Production and Net Production should have very few insurance write-offs.

When looking at production, you should work backward from what the dentist is wanting to make, taking into numerous considerations including: Variable Costs (Gross Profit Margin), Fixed Cost, Average Collection Percentage, Average Net Production Percentage, and the practice’s capacity (Chairs, Providers by hours available).

  1. Once your overall production goal is determined, you can be developing a plan that will help the practice quickly reach your production objectives. Goals could be based on how well the providers are diagnosing, presenting and treating patients; they could be focused on how often the practice is getting hygiene patients scheduled for their cleanings; they could be focused on acquiring new patients; they could focus around reducing broken appointments; or they could be a combination of these and other performance areas that have opportunity for improvement. This will require an in-depth, analytical approach to identifying what areas of focus should take priority in your practice so as to help you achieve an optimized production level.
  1. When reviewing where the practice performance metrics are in relationship to where they should be, it’s important to not discourage the dentist or their team. No-one wants to hear their baby is ugly. You and the dentist will know where each metric should ultimately be in order to achieve production goals, but strategically working your way towards these performance goals is okay. For example, let’s say that the Hygiene Production per Visit is less than $100. Obviously, we would like to get the hygienists performing in the top 10% around $171, but we should first strive to simply get them to average around $112 per visit. Each month your goals should be reviewed and adjusted accordingly.

Step 6: Start Making Changes

  1. Numbers don’t lie! Through the use of business intelligence, you can immediately see where the practice is performing well and where the practice needs to make changes. Once you’ve identified the needed changes in order to reach optimal performance levels, start making those changes. Sometimes the need for change is obvious, but the nature of what should change isn’t. This requires continuous discovery and discussion. For example, let’s say that your office is only rescheduling 75% of your hygiene visits for their next hygiene cleaning before they leave your office. Knowing that you should be rescheduling over 90%, (which absolutely helps with attrition and administrative headache from trying to reschedule those patients) at first glance you can’t identify why you’re so low. It’s a policy that each patient who has a hygiene cleaning should have their next scheduled visit before they leave, so why isn’t this percentage higher? By using Dental Intel’s dashboard to measure and monitor, you’ll now have a tool that identifies the problem before it affects the financial health of your practice - but you have to do something about the problem. Now, as you use the metric to discover and discuss, you might find one of your hygienists feels that most patients don’t want to reschedule their appointment 6 months out, so instead of being assumptive, she asks “Would you like to schedule your next cleaning?” Once goals are established and committed to, she might instead say “Let’s go ahead and get your next cleaning scheduled so we make sure we don’t miss it. Do mornings, afternoons or evenings work best for you and your family?” Discover and discuss – then make changes!
  1. Measure & Report daily, weekly, monthly and quarterly. Depending on your goals and needed changes, it’s important that the dentist, an office manager, and the entire dental practice team knows that their performance is being measured and reported on a daily basis. They should have full access to see their performance and to know what the dentists and the OM are looking at to gauge their performance on a regular basis. Without exception, when performance is measured, performance improves, and when performance is reported back to the one being measured, the rate of improvement accelerates!

A Matter of Only a Few Degrees

As the pilots flying to Antarctica continued onward, the white of the snow and ice covering the volcano blended with the white of the clouds above, making it appear as though they were flying over flat ground. By the time the instruments they had available to them sounded the warning that the ground was rising fast toward them, it was too late. The airplane crashed into the side of the volcano, killing everyone on board.

It was a terrible tragedy brought on by a minor error—a matter of only a few degrees. There is a powerful lesson in this story for each of us. You can take control starting today. Take the things that you have learned, apply them to your practice and personal life, and then plan for things to improve.

No matter how off-course you are or how good your practice is currently running, there is a way for you to have a clear and certain path that will improve the culture, team performance and overall value of your practice.

If you want to quickly see where you are in relationship to where you want to be, please contact Dental Intelligence for a no-cost free Snap-Shot look at your practice. In just five minutes, DI’s automated, intelligent dashboard can show you exactly how your practice is performing - areas of strengths and celebration as well as areas of opportunity and focus.

 



Topics: Business of Dentistry