Do you know your running cost?
Knowing your running cost per hour helps you plan, set fees and allocate resources.
There is a figure that I think all dentists should be aware of — the per hour cost of running their office.
Let’s say that last year the total running cost for your office was $600,000. That included everything (staff, telephone, internet, advertising, power, equipment, materials, rates, rent etc. etc.) except dentist wages.
Let’s also say that the office worked 200 days. That means your per day running cost is $3,000 or $375 per hour.
That gives you a new way of seeing things
For example:
Let’s say you employ a dentist to work in the office and you pay them 35% of collections. The mathematics says that unless they generate $576 per hour, they are costing you money. Do you really want to be cross-subsidising dentist employees?
When a patient no-shows an hour appointment they just cost you $375. That puts failed appointments in a whole new light! I visited an office a while ago where one patient had failed 14 appointment over a two year period.
If you spend a couple of hours a day chatting with people about the weather, fishing or your holidays that has cost you $750. By all means do that if you love it, but be aware of the cost.
You might struggle to gross $375 per hour if you are checking a lot of children’s teeth. Maybe you want to dial back the number of children you see?
If you take 30 minutes to explain a simple treatment plan to patients that has cost you $187. Maybe you should hone your communication skills and do the explanation in 2 minutes?
New graduates typically won’t make the hourly rate for the first couple of years. By the time they start producing reliably many of them move on. Do you want to be the one who does the training, if every time they become productive, they leave?
The hourly running cost of your office is not the only figure you should look at but it certainly provides you with lots to think about.
There are no definite answers but plenty to ponder.
