‘How do I increase profits and ensure my business is reaching its full financial potential?’, is a question most practice owners will have asked themselves. For Andy McDougall, owner of Spot On Business Planning, the answer is already in front of you…you just need to dig into your accounts to find it.
Not only can the information you find in your accounts help you to increase your profits, Andy says it can actually help you to double them in just three years. Below, he explains how…
Just looking at your accounts at the end of the financial year is not enough to help you analyse what those numbers are telling you, and use them to make the next set of results even better.
There are two aspects of your accounts that are particularly worth digging into – profit by treatment, and profit by clinician. And, while many practice owners know whether a treatment or clinician gives a gross profit, they don’t necessarily know whether it gives a net profit. To figure that out, we use a technique that looks at a specific treatment or clinician and allocates all the fixed and variable costs it has, in order to work out whether they are profitable or not.
It’s an efficiency-led methodology that allows you to examine the ratios between costs, such as labs, materials and associates, and sales. By refining the ratios between those costs in relation to sales we find that practices don’t need to get the same level of sales in order to achieve the same level of profit.
Doing that financial analysis is stage one of the process, but we also look at other aspects such as competitor analysis and mystery shopping. With all of that information you can create a strategic plan to figure out how to get to where you want to be as a business.
The hardest part of this process is implementing the changes needed to get you from where you are to where you want to be. You can fix nearly any business as long as you’re prepared to deliver the change, otherwise all you will have is a pretty spreadsheet that tells you how life could be.
It’s a big claim to say you’ll double someone’s net profits every three years but we have hundreds of clients who can give testimony to that. The key is change management: embracing the changes and following through on decisions is key, invariably anyone prepared to make the change(s) required will get the results that we’ve specified.
If you did want to start thinking about how you can do this on a relatively basic level, a good place to begin is to ask yourself about the very simple metrics, for example how much you are spending on marketing and working out whether it’s actually giving you a good return. You can also begin trying to figure out the profitability of your treatments or associates.
And if they’re not, what are you going to do about it? Having the information is one thing, the art is in knowing what to do with it, and that can be where expert support is most helpful.
Andy will be part of a ‘Maximise the Value of Your Practice’ panel discussion, alongside Lis Hughes and Sarah Jarvis, at the British Dental Conference and Dentistry Show. The discussion will take place in ‘The BIG Questions’ at The Dental Business Theatre, which is programmed by Practice Plan and sponsored by Wesleyan Bank, on Saturday 18th May, 3.45pm – 4.30pm.
During the event there will be various other panel discussions taking place in the theatre including ‘The Future of Dentistry’, ‘HR and Employment Law’, and ‘What Next for NHS Dentistry?’ For more information click here.