770: Dental Overhead Essentials: 2 Aspects You Can't Ignore – Christina Byrne

If you want to make smart business decisions, there's one important thing you need to know. Overhead is the key, and Kirk Behrendt brings back Christina Byrne, ACT’s director of operations and amazing coach, with a framework to help you think better about overhead and maximize profit. Start seeing where your money is going! To learn the best way to track and manage overhead, listen to Episode 770 of The Best Practices Show!

Learn More About Christina:

• Send Christina an email: christina@actdental.com 
• Send Gina an email for ACT’s Roadmap to Practice Profitability and How Money Flows Through Your Business Using Your Three Financial Statements: gina@actdental.com 

Learn More About ACT Dental:

• ACT’s website: https://www.actdental.com
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• ACT’s LinkedIn: https://www.linkedin.com/company/3137520/admin/feed/posts/
• ACT’s Twitter: https://twitter.com/actdental

More Helpful Links for a Better Practice & a Better Life:

• Subscribe to The Best Practices Show: https://the-best-practices-show.captivate.fm/listen
• Join The Best Practices Association: https://www.actdental.com/bpa
• Join ACT’s To The Top Study Club: https://www.actdental.com/ttt
• See the ACT Dental/BPA Live Event Schedule: https://www.actdental.com/event
• Get The Best Practices Magazine for free: https://www.actdental.com/magazine
• Please leave us a review on the podcast: https://podcasts.apple.com/us/podcast/the-best-practices-show-with-kirk-behrendt/id1223838218

Main Takeaways:

• Knowing your overhead gives you more margin.
• Understand what your fixed and variable expenses are.
• Don't make big decisions without understanding overhead.
• Collecting more is the ultimate way to reduce your overhead.
• Be sure to also track your elective write-offs. They can add up.
• Create a budget for dental supplies, then entrust it to your team.
• Have a system for repairs and maintenance that involves your team.
• Give ownership to your team to ask about negotiating a lower lab fee.

Quotes:

“Every decision you make has to be made from a point of knowledge and understanding. If you don't know what the overhead in your practice is, there's no way to make smart business decisions about, ‘Can we hire? Can we buy that new CBCT? Should we drop insurance?’ All of those big decisions that you make as a business owner, if you make them without understanding and knowing what your overhead is, you can get yourself into a lot of trouble.” (1:33—2:06) -Christina

“There are a lot of practices we work with who don't track their elective write-offs. And that's a really important piece to see too because sometimes, ‘Oh, we're going to courtesy this. We're going to courtesy that,’ and at the end of the month, or quarter, or year, that adds up to a lot. So, being aware of what does it actually cost to run this practice, and are we collecting every single dollar that we are entitled to collect?” (6:13—6:40) -Christina

“There are some costs that you're not going to be able to cut. That's what we consider our fixed expenses. But with our variable expenses, you do have a little bit of control over that. Ultimately, in the end, the way you help to manage and control your overhead is to collect as much as you can collect.” (7:27—7:47) -Christina

“There's always the argument, ‘Well, salaries, are they really fixed expenses?’ Yes, they are, for the most part . . . If your team salaries are 33%, your first thought is, ‘Well, I pay people too much.’ No, you probably don't. In most cases, you don't. The fact is your practice doesn't collect enough to support your salary.” (10:06—10:34) -Kirk

“When we become more people-dependent and less systems-dependent, when things go crazy or get a little out of kilter, the first instinct is, ‘We've got to hire somebody else.’ Now, we're adding to that compensation investment or expense, but we're still not efficient. So, it's not great. Some of our most efficient practices are the ones who have really great systems in place. They have limited team members, but the team members know exactly what it is that they need to do. Everybody has their own responsibilities and accountabilities, and they know what they are. They can run a really tight ship, and their team compensation is lower, and they're able to collect more. So, it works out really well. And again, going back to understanding when you need to make those business decisions and say, ‘Hey, you know what? We are getting busier, but our team compensation is low. We're collecting everything we can. I think it is time to add another team member here and see what we can do with that,’ rather than doing it out of emotion and fear.” (11:09—12:24) -Christina

“The worst thing to do is to cut to grow. Like, ‘I've got to trim everyone's salary to create some breathing room.’” (12:59—13:05) -Kirk

“Money is not the goal in anything, but the goal of creating a practice where you understand the overhead is that you have margin. You've got margin to be able to be with patients. And it's the old adage that when you need [a procedure] more than the patient does, they can feel it. So, knowing your overhead is really important, and having enough margin there is really important, and knowing what influences your overhead is really important. That's really key.” (17:09—17:39) -Kirk

“Something you can do immediately is create a budget for your dental supplies. Way back when I first started with ACT, our budget for dental supplies was four percent. We've had to increase that to five as a recommendation because we know that things are more expensive now. So, basically, what you would do is you would look at your previous month’s collections — net collections. What did we actually, literally take into the practice — and five percent of that should go to supplies. So, I say that as a guide. I don't want anybody running out of anything. But what you want to do is put somebody in the office in charge of that. We love giving autonomy and accountability to team members. You will be surprised when you say to Susie, ‘Susie, this is what we're going to do. We need to make sure that we run a profitable business, and one of the things we need to do is make sure that our supplies are on track.’ Most of the time, Susie is going to be really excited about that extra responsibility — and they will often watch your money better than you might. So, have them really take ownership of that. You'll be surprised at how well they can do with that. Then, you have a quick meeting with Susie once a month and go over it. She can come to you and say, ‘Hey, Doc. Five percent of last month's collections was this. This is what I plan to spend on supplies this month. Is that okay?’ Then, you give approval. If it's over, that's okay too, as long as she comes to you and lets you know that we have to go over because we are completely out of prophy angles. Giving somebody that freedom and that autonomy is really helpful.” (17:47—19:41) -Christina

“Obviously, doctors are very tied to their lab. If you have a lab that you love, I don't want anybody to go to an inferior lab just to save money. But you can also talk to the lab and see if there's any way that you can work together and see, ‘Is there something we can do differently?’ Again, making sure that we're getting the quality that we want, and also going to them and seeing if there's anything that they can do. Again, putting somebody in charge of that is another great way to give somebody else ownership of that so you're not the one worrying about it all the time.” (21:04—21:45) -Christina

“You have to look and see where people's strengths are in the office. So, just because something falls apart doesn't mean we have to immediately call our service representative. What can we fix on our own? There's got to be somebody in your office who's MacGyver and can work really well with a paper clip and a piece of tape. My sister is like that. She is totally MacGyver. She could take her car door off and fix the window all by herself because she watched a YouTube video. So, do that first. See if we can fix stuff in-house first.” (24:06—24:40) -Christina

“Another thing to consider as far as repair, it's the same in your practice as it is for your home — it's to schedule regular maintenance. Some people are too cheap to do that. Like, if you don't do maintenance on your furnace, you know what's going to happen, and it's going to be costly. So, something you might want to consider to reduce your expenses is a master checklist of things that have to be done once a week, once a month, once a year, or once every other year, and making sure that those things are done, and that'll eliminate that.” (25:38—26:09) -Kirk

“The ways that we can reduce our overhead really is about collecting more, and collecting more of what you produce than writing off so much. So, again, even if you're fee-for-service, pay attention to your write-offs. What are you giving away? If you want to give away dentistry, that's amazing. That's another thing you can have a budget for. So, once a year, we say, ‘Okay, this is what we're going to give away to patients in need,’ and then put a system in place.” (26:48—27:19) -Christina

“Someday, you're going to transition. The easiest practices to sell or transition in the United States are the profitable ones. The hardest ones are, there's no profit and the overhead is super high. As you can imagine, there are a lot of reasons for that. And then, ultimately, if you're a dentist listening, you're going to want to retire, at some point. So, retaining some of the margin instead of just living on what's left over and investing that into your investment portfolio is going to be really important. The thing to remember is that depending on who you are, there's going to probably be between $4 million and $25 million that's going to go through your hands if you own a dental practice for more than 20 years. You're going to have millions of dollars come into your business and out, and it's important to lower the overhead, create enough margin, and save a little bit of that along the way so that you can say, ‘Hey, I'm good,’ when it's all said and done.” (28:46—29:41) -Kirk

Snippets:

0:00 Introduction.

1:27 Why this is an important topic.

2:54 Overhead, explained.

7:56 Fixed expenses, explained.

13:30 Variable expenses, explained.

17:40 Create a budget for your dental supplies.

21:00 Negotiate your lab fees.

24:00 Have a system for repairs and maintenance.

26:35 Be intentional with write-offs.

28:00 Last thoughts.

Christina Byrne Bio:

Christina Byrne has been involved in dentistry since 1985. Over the years, she has held many positions on the dental team, including dental assistant, business office, and dental hygienist. Christina’s extensive knowledge of the front office and clinical procedures is a great asset, and she loves to impart her knowledge to guide dental teams do the best they can to achieve a Better Practice, Better Life!