Stop Kidding Yourself: Business 101

Okay ladies, raise your hands if you chose a career in dentistry because you loved math, statistics, and spreadsheets and were dying to become entrepreneurs. I’m betting scant few hands are waving. In my years of coaching dentists—male and female—I find that what attracts most people to the profession are the excitement of biomedical issues and clinical procedures, the satisfaction of helping and healing patients, and the precision and dexterity of work on tiny objects—a far cry from the matters of business. My mentor, Dr. Jim Pride, used to ask dentists taking his classes how they would describe themselves. Invariably, everyone would say: “I am a dentist.” After struggling to meet one’s payroll, that answer usually turns into: “I’m a dentist who also needs to be a business person.” However, true freedom to deliver dentistry comes from a third identity: “I’m a business person who happens to be a dentist.” I don’t mean you need to get a Donald Trump haircut. I simply mean that technical perfection comes from first organizing your business so that it does not hold you back. In fact, mastering the business end of dentistry is the means to achieving your highest clinical dreams.

The marrying of business and dentistry can be an uneasy relationship for any dentist. For women, there are additional issues that make business even harder to embrace. Statistical measures of practice success can sometimes be viewed as competitive, filled with sports analogies such as “drop-kicking through the goalpost,” “hitting a home run,” or “huddle-up, people.” Many women feel uncomfortable with the competitiveness often associated with business. In addition, if a woman dentist feels obligated to serve others in Mother Teresa-like fashion, she may have great difficulty pursuing profit.

Many women dentists would rather walk over hot coals than deal with any and all aspects of their businesses. However, it is business that increases cash flow, reduces stress, decreases days worked, funds salary increases and retirement savings, and supports technological advances, office remodeling, CE, and all of the other wonderful things you want in your practice and life. So, are you ready to enroll in Business 101? Read on.

Step Zero: The Vision

Creating a vision is the first step of an entrepreneur—and by the way, when you signed the lease and hired your first employee, you became one. A vision is a compelling, magnetic picture of the future that the entrepreneur passionately wants. It is important to create a vision of what you want your practice to “look like” long-term, then to develop yearly goals to move you closer to your ideal. Your vision can include outcomes concerning patients, staff, systems, profitability/productivity, and personal fulfillment. One of my favorite business quotations is: A task without a vision is a drudgery. Any activity in your practice life that feels like an eat-your-spinach chore is a sign that you’re doing a task with no compelling outcome to gain from it. The bottom-line is: If the entrepreneur is not passionate, at the first sign of any obstacle, the change momentum immediately stops.

The Strategy

The second line of the above quotation is just as important: A vision without a task is but a vacant hope. So, once you have a compelling vision of your ideal practice, you must create a strategy to achieve it. Do you need to change your scheduling system, hire more staff, train the staff in new skills or behaviors, or market for a specific type of patient in order to deliver the kind of care you want to offer? Once your strategy is in place, how will you know if the team’s and your actions are moving you in the direction of your goals? That is where the wonderful world of statistics comes in.

The Statistics

There are only two ways to rule your empire: One way is management by feeling, perception, subjective judgment, gut, wing-and-a-prayer. By this method, one makes decisions based on feelings that may seem very real but have no basis in fact. The only way to avoid management by Tums is to learn how to manage by facts. Statistics are what give you the facts, ma’am, just the facts. They do not lie. Statistical interpretations of success are the black-and-white benchmarks that allow you to measure and quantify your successes and challenges so that you can adjust your strategies to reinforce or change direction.

Statistics are situational flags that point to strengths and challenges in your operating systems (scheduling, financial arrangements, continuing care, etc.). They are the measure of the knowledge, skills, attitudes, and abilities of you and your team. For example, how do you know if your continuing-care system is effective? How about by the percentage of your active patient base that is in continuing-care compliance? Or the number of no shows and cancellations of hygiene appointments? How do you know if a financial coordinator is doing a good or even great job? You could look at collections, accounts-receivable ratio, or other statistics. Knowledge of your numbers gives you the power of choice and control over the next steps for you and your staff to take toward profitability and success. Without this knowledge, all events seem out of your control and make you feel insecure. If you have a good day, you fear it will never happen again. If you have a bad day, you haven’t a clue to what caused it or how to fix the problem. The key to knowledge, power, control, and choice in reaching your vision lies in monitoring and reacting to your statistics.

Six Rules of Thumb for Statistical Management

If you’re convinced that statistics should become part of your practice life, let’s look at how to introduce them to your office. There are six rules of thumb that you need to follow.

1. The doctor must know the numbers. It’s not enough for a bookkeeper or office manager to have this information. The entrepreneur is the quarterback (oops, a sports analogy!) and must know the score to lead the team. Without knowledge of your statistics you will be unable to adjust behaviors to move all players towards the goals.

2. No one number means anything by itself, but every number mean something. Statistics in combination indicate successes and challenges. For example, let’s say that on the first of November you discover that your collections, which normally run 98 percent of production, actually fell to 90 percent in October. Should you be outraged? Not necessarily, because no one number means anything by itself. The next number I’d look at is production. A great way to reduce a collection percentage in any given month is to have unusually high production the month before. Unless you’re a cash-only practice, there will be a lag-time in collections due to insurance processing, internal financial arrangements, or other reasons. Before becoming outraged, look at all relevant numbers.

On the other hand, every number does mean something. How easy it is to excuse a statistic that rattles one’s cage. For example, suppose you are monitoring case acceptance of new patients. You ideal goal is for patients to accept 85 percent of treatment presented, but your actual figure is 50 percent. It is too easy to find rationalizations why one or another patient should not be counted, because of low dental IQ or other reasons. I’ve seen doctors disregard so many of their patients that they ultimately obtain a case acceptance of 110 percent! That won’t help you. The numbers are supposed to open your eyes to trends—good or challenging—so that you have the information to control and change your course for a better result.

3. When the statistics are favorable, capture the recipe. A major cause of the staff and dentist’s anxiety over statistics is that they rarely see the cup as half full. Spurred by perfectionist traits, the dentist too often views the cup as half empty, which is a fundamental disservice to the vision and everyone’s valid efforts to attain it. If you’re only using statistics to see challenges, it’s like rolling up the newspaper for puppy training. The biggest bang lies in discovering what you are doing right, analyzing it, and reinforcing it, so you can repeat the formula. For example, how many of you, after having a great production period, begin the next day worrying about whether you can ever repeat it? A basic business rule is that what gets acknowledged gets repeated. This means congratulating the staff on a good performance, then determining how the result happened so that you can repeat it.

4. Discover the reasons behind a downward trend and do something to change it. Every Pride consultant has heard dentists say, “We don’t talk about the numbers any more because the staff got frustrated when we didn’t make our goals.” If you don’t make your goals, and all you do is have a moment of silence for your lost vision, then everyone will understandably become frustrated. Without doing something about the poor result to change it in the future, you’re doomed to repeat it. Use huddles and staff meetings to reverse downward trends:

A common failure-path to avoid is looking for the perfect way out of a downward spiral. Many dentists get trapped in what we call “analysis paralysis,” which means they cannot decide what is absolutely best to do, so nothing changes. Any solution is better than no solution and will ultimately lead you to improvement.

5. Share your numbers with your team. Okay, folks, hold onto your courage. Put aside your fears of being disliked by your staff and adopt what is called “open book management.” Your staff cannot possibly judge how well they are doing without knowing the numbers. Without this knowledge, they will always feel out of control. I know what you’re thinking: If I share the numbers, will my staff know how much I make? I have news for you. Your staff thinks they already know how much you make, and it’s your production number. (Actually, we don’t advise sharing anyone’s salary figures, only the overall salary percentage as an expense of the practice.) A knowledgeable staff makes informed decisions. If you have an employee who would use statistics in a negative way, then that person may be a mismatch for the job. I trust dental teams. The many teams I’ve worked with desire personal excellence and practice success and deserve to know the truth about their potential.

6. Celebrate successes, big and small. One of the worse diseases that dentists can contract is “Yeah, but-itis.” This occurs when the doctor says something such as: “Yeah, we hit record-high production, but we should have done it two years ago.” Or, “Yeah, that’s good, but this would have been better.” That attitude of “it’s never enough” is tantamount to placing your team in a race without a finish line. It is vitally important to celebrate the successes on the journey toward your vision. I don’t mean you must throw a party each time you hit your production goal. A significant part of the celebration of excellent outcomes consists of analyzing and acknowledging them, as well as understanding the behaviors that led to them. Afterwards, certainly a reward of Krispy Kreme Doughnuts® wouldn’t hurt.

Which Statistics are Important?
If you’re willing to follow the six rules of thumb, then you will be able to solve operational problems with statistics, paving the way toward your vision. The next step lies in deciding which statistics are important. The answer is: All statistics are important; however, there are certain key numbers that you must have.

The first key statistic is number of patients in your active patient base. This statistic tells us the number of operatories needed, hygiene days required, possible need for an associate, production range that is possible, and number of new patients required monthly to support the practice strategy. When doctors ask me questions such as: “Is my staff sufficient?” “Do I need to expand?” “Can I afford a new building?” “Should I invest in an ad program?” or “How much can I increase my production?” the first thing I ask for is the size of the active patient base.

By “active patient base” I mean the total number of patients seen at least once in the last 18 months. This is not the number of patient visits, but the number of bodies. This number can tell you, for example, whether you have sufficient hygiene days to support your base. Every 200 active patients requires one hygiene day per week (averaging eight to12 patients per day in 50- to 60-minute visits). If you have 1,000 active patients, divide by 200; you arrive at five hygiene days needed per week.

Other key statistical indicators are more traditional: production, collections, number of new patients, case acceptance percentage, continuing-care compliance, and—let’s not forget—expenses. One of our favorite statistics in expense management is called “EBOC,” earnings before owner’s compensation. Once you have paid all of your expenses, what is left is EBOC, i.e., your compensation, cash and non-cash. This, of course, is a very important statistic to know and monitor. (As an aside, it sure would be nice to go to a dental meeting and hear people talking about EBOC instead of production numbers, because production without profit is an ego trip.)

One final caveat in managing by the numbers: Do not focus directly on profit, but on the values and goals you want to achieve, and then profit will result. As author Ichak Adizes puts it: “Managing only for profit is like playing tennis with your eye on the scoreboard not on the ball.” Do not interpret your needing statistics as implying that you are only interested in dentistry to make money. People who harbor that misguided notion have their eye on scoreboard. The true talent of entrepreneurial management lies in letting the numbers make you feel secure, successful, and unstressed, so that you can focus on your work, staff, and patients.

This article only scratches the surface in revealing the unbelievable power and control over your practice that entrepreneurial management makes possible. If you want to deliver exceptional care with state-of-the-art technology and a professional, happy, productive team, you must be profitable. Each of you deserves success. All it takes is coming to grips with the fact that you are a business person who happens to be a dentist. I believe you’re good enough, smart enough, and gosh darn it, people like you enough for you to go ahead and be an entrepreneur. With the best tools, I trust you to do it right.

Amy Morgan is CEO and lead trainer of Pride Institute.

Originally published in Woman Dentist Journal , October 2006