We ask two experts the same question to give you two different answers on a complex issue
Question: I have been in practice for 15 years. I have an above average operating overhead. I am considering hiring an associate in the hopes that he or she will bring additional revenue to the practice and decrease my overhead percentages. Is this a good idea or bad idea?
By Tom Snyder, DMD, MBA
An associate can definitely help your bottom line if two criteria are met.
First, how many active patients do you have? Is it in excess of 2,000 active patients? If so, you are probably “saturated” and the excess of active patients beyond this range indicates that you can support an associate. For every 200-250 active patients above your patient saturation point, you can support one associate day per week.
Secondly, what is your current overhead picture? If your highest ratio is staff expenses, perhaps you are overstaffed already. The addition of an associate will be beneficial in that you may not need to hire additional staff to support the associate, and reduce your staff overhead ratio due to the higher revenue that will be generated by your new associate.
Since the majority of a dental practice’s expenses are fixed in general, the additional revenue generated by an associate will help lower your overhead. Even though the associate’s compensation will increase your overall expenses, you should be able to sustain a reasonable profit margin for your associate’s efforts. We project that an associate should generate a profit margin between 30 to 35% after all direct costs are allocated (including compensation, staff, supplies, and lab).
If your numbers do not work at this level, you need to take a hard look at all your expenses and get them in line before you consider hiring that associate.
Tom Snyder, DMD, MBA, is the director of transition services for The Snyder Group, a division of Henry Schein. He can be reached at (800) 988-5674 or [email protected].
By Lynne Nelson
There are many questions to be answered before I would introduce an associate to the practice as a solution to reducing overhead. I would analyze carefully exactly where my expenses where high and determine if I could rein them in to create a healthy net. The next question would be is there a demand?
The magic collection number for hiring an associate is around $800,000. Generally speaking you bring on an associate when either the demand for dentistry is greater than you can provide or you are ready to scale back and understand that you will be giving up some production/collections to compensate your new associate while maintaining the current level of productivity.
If you’re not ready to scale back but want to continue growing the practice further, I would ask yourself if you refer out procedures such as root canal therapy, extractions or other items that you could possibly keep in-house with the help of an associate. If your dental software has the capability, run a report that would show you what you have sent out of the practice in the last two years. Are there any new procedures you could add to your services now that you have the help of an associate?
You also need to look at the footprint of the practice and determine if your office space is big enough for another provider and hygiene to support them. If you don’t have a minimum of six to seven treatment rooms then you would need to expand the office hours which would require additional auxiliary staffing, equating to increased overhead expense. If you do have the necessary space then you could start them on a part-time basis with the plan to work them into a full-time position.
Bringing on an associate requires careful practice management and more of your time. It can be very rewarding and taxing at the same time. You might want to seek the advice of your trusted practice management expert, as they know you and your practice style well enough to offer some good insight on what that could look like for your situation.
Lynne Nelson is senior broker at Consani Seims, Ltd. ADS Northwest, and cofounder of Practice Management Associates, LLC. For more information contact her at (866) 348-3849 or [email protected].