Roger Levin, DDS, MBA
Understanding business is complicated for many people. Eight out of 10 new businesses go bankrupt within the first year. The ninth goes bankrupt in the second year. The one that makes it has only a 20 percent chance of being around five years later.
Why does this happen? Because very few people totally understand business. People launch businesses for many reasons. Many times, they launch a business that relates to something they enjoy doing.
For example, examine dentistry. How many of us went to dental school because we wanted to run businesses? How many of us went to dental school because we had an incredible entrepreneurial drive and wanted to work six days a week, 12 hours a day, and build our practices into national entities? How many of us had any business training?
The profit factor
The truth is that dentistry is like any other business in some ways. In addition to the quality owed to every patient, the only thing that counts in running the dental business is profitability. Without profitability, we cannot invest in the best supplies and equipment, invest and grow the best team, attend the best continuing-education courses, or pay ourselves enough to even think about retiring, which is one of my current concerns for many dentists.
The fact is that it does not matter how many patients you have in the practice, how many chairs are in your office, or how large of an office you have established.
In fact, it is not even your revenue.
More practices have gotten into trouble by believing that revenue, the number of new patients, the number of chairs, or that a new triple-size office is the key factor.
None of the factors mentioned above are necessarily right or wrong - they must be measured through their impact on profit. A healthy practice has increasing profits. At The Levin Group, we like our clients to increase their profits by at least 15 percent per year. A dental practice can do this on an ongoing basis.
We must pay attention to the profit - the take-home - what is left after all bills and expenses are paid.
The profit model
As you are reading this, you may be saying that this seems like common sense. Unfortunately, this is exactly why so many businesses and practices get into trouble. All decisions made for the practice should be made through a profit model. You must know the profit return on every investment. Whether you are expanding, adding staff, adding an associate, buying a new composite kit, etc., everything that you do in business has a positive or negative impact on profit.
This is not a column about how to maximize your profit, retire early or become really wealthy. It is about how to maintain a healthy practice that allows you to have a wonderful career, decrease financial stress, provide high quality care for your patients using the best of everything, and achieve tremendous satisfaction.
Think of profit like cholesterol: If your numbers are not right, you may have a problem.
Dr. Roger Levin is founder and president of The Levin Group, a national, dental-management and marketing-consulting firm. He can be reached at (410) 654-1234.