FIVE – The First Lesson: Making Investment and Financial Decisions

FIVE

The First Lesson: Making Investment and Financial Decisions

Rich looked at Joe’s solemn face and asked, “Joe, did I say something to offend you?”

“No, no, Rich. It’s just, I know I’m a skilled dentist, but when it comes to marketing and sales, I’ve always had a problem. Your loan will take the immediate pressure off, which is fantastic. But how am I ever going to repay you guys? If I can’t find a lot more high-value patients, I’ll never get my head above water.”

Rich knew exactly what Joe was talking about. “Most dentists think they do not have enough lucrative business to enable them to enjoy life or sometimes just pay all the bills. The reality I found when working through this issue with more than a dozen practitioners is that they weren’t tracking all of the future work in their practice management software. Some of this work is very lucrative, but not necessarily in per-procedure billing rate. It is lucrative for the overall bottom line.”

Joe, whose mind was still on Rich’s first comment, protested. “I do track every procedure that needs to be sent for preapprovals to insurance companies—that’s more than 50 percent of my business.”

Rich let the interruption pass. “Fine,” he said, undeterred. “But at the same time, are you tracking all other procedures that patients might need? You probably note them in the paper records, but I’d bet you $100 right now that you fail to do so in treatment planning modules. Because of this, you’re missing out on a lot of potential work that takes almost no effort to sell. It’s much easier than trying to find new patients. Joe, don’t you realize that your existing practice is a gold mine just waiting to be harvested?”

Joe shrugged noncommittally, so Rich continued, “Most hygienist recall systems are fundamentally designed to decrease repeated recall business—the opposite of good sales. This is what I call a funnel system. You make the patients fill out a recall card or you issue a recall card when patients come in for prophylaxis. If only 80% of those patients respond, then the next time only that 80% will be contacted. What if the patient doesn’t come in? Over the years, this process is guaranteed to decrease your business. This is just one tiny example.

“For the next few weeks, Joe, are you willing to trust me and try a different path in your practice development? You don’t have to worry about repaying us until your practice is generating enough income—a lot more than you’re bringing in today, OK? I’m willing to take 100% of the risk of getting repaid based on results.”

The deep lines on Joe’s forehead smoothed out, and for the first time that evening, he relaxed a little. “We’re not in competition, Joe. We’re friends, and friends help each other without asking,” Rich said as Joe stood up and hugged him.

Rich suggested that they all relax and socialize for the rest of the evening, then he would gladly devote some time on Saturday to getting Joe started in the new direction. He recommended meeting via webcast once a week until Joe felt he was through the learning curve. Brian insisted on being part of this effort as well since he wanted to pick Rich’s brain and learn as much as he could about the initial actions needed to improve his own practice. Brian wasn’t concerned about Rich covering the same ground he’d already been over since he wasn’t at all sure that he fully understood the implications of what he had discovered about staff shortages. Barb thought that she might also learn something useful for her consulting practice, and Jen felt that she had a huge stake in this new direction as well. They decided to have the first meeting the following night at Joe’s place since he had a theater room set up in his finished basement that would be perfect for an impromptu seminar.

Saturday night turned out to be one of those rainy, cold Grand Forks August nights. A fire crackled in the fireplace in Joe’s cozy theater room, and the group happily snuggled into their comfy swivel chairs. In the lavishly furnished room, Joe had a wall-to-wall whiteboard, which he also used for projection, and his pride and joy—a wet bar with a cappuccino machine.

Joe didn’t know why, but tonight, all of the plush furnishings made him nervous. Maybe he was thinking about how much money he still owed on the credit cards and whether or not he had enough cash flow. Eager to get started on his practice improvement, Joe opened the conversation with a question. “When I hire more staff, which frankly scares the heck out of me, where will I find the time to train them, and how will I afford to pay their salaries and benefits?”

“Not so fast, Joe,” Rich replied. “There are some fundamental concepts you need to accept first, or you’ll be in reactive mode the first time you hit a bump in the road. And I promise you, there will be some bumps. You cannot go into this with the notion that you will hire people and keep them busy all the time. I told Brian last week that I would explain to him the first fundamental rule about staffing and why you can’t plan to use 100% of your staff’s time. In fact, you also should not plan to use 100% of your own available time, but that’s a different principle. Let’s start with the basics.

“In those seminars that you both attended a few months ago, you were told that any idle staff is a waste, correct?”

“Yep,” Brian and Joe responded.

“OK, I’m going to prove to you that this idea is baloney. In fact, the opposite is true. It is absolutely essential that each staff member has spare capacity, which means there will be times every week when someone is not actively working. I’ll begin by trying, on paper, to have just you busy 100% of the time. The more you bill your time, the better the practice does.”

Joe didn’t quite get Rich’s point. “I don’t want to be busy 100% of the time, Rich.”

“No problem,” Rich said, putting his hands up in mock defense. “I’m just making a point about trying to use even one person to 100% capacity and what it would take in a system to support that. But to make sure you don’t obsess on the point, how many hours a week would you like to be billing procedures?”

“Right now,” Joe thought out loud, “I have some lost time to make up and bills to pay. If I could bill close to 32 hours a week, that’s about as much as I could stand.”

Rich continued with the example, using Joe’s figure. “To keep you that busy, there is a chain of processes, linked together, that must all work perfectly in order to generate enough procedures for you to bill 32 hours. Although not always sequential, there is a general direction of work flow.” Rich drew the work flow on the whiteboard.

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“In this example, I’ll start by trying to use you, Joe and Brian, to 100 percent. Assume that 100 percent means four procedures per hour.”

Brian immediately interrupted. “I never do exactly four procedures an hour. That’s not realistic.”

Prepared for this objection, Rich smiled and said, “I understand perfectly. But would you just hold that thought for five minutes? I promise we’ll get to it.” Brian nodded and Rich continued. “To minimize waste, I balanced your processes so that every staff member produces work at the rate of four units of work per hour. The receptionist, resource 1, books just enough appointments to make sure the hygienist performs four procedures per hour. Resource 2, your hygienist, sees just enough patients to generate four procedures for you per hour. Let’s say resource 3 does x-rays and all of your purchasing of supplies and materials, once she knows which appointments are booked, and brings in enough material to cover the four procedures per hour. Resource 5, which comes after you do your work, might be a part-time administrative staff member who files the insurance claims and collects money from patients. Resource 6 could be the staff member who posts checks, deposits money in the bank, sends statements to patients for balance, and follows up on nonpayment for procedures done.

“Now, Brian, I’ll get to your point. What does ‘four procedures per hour’ mean? It is an average rate. To achieve that average, sometimes you perform six procedures per hour, and sometimes you perform one procedure in an hour. Procedures vary. It could be a routine exam after hygienist care, a comprehensive treatment planning session, an ext/>

Jan 4, 2015 | Posted by in General Dentistry | Comments Off on FIVE – The First Lesson: Making Investment and Financial Decisions
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