It’s impossible to grow your dental business without tracking the right Key Performance Indicators (KPIs). By monitoring these specific metrics, the dentist is able to get a better perspective of the practice’s performance, identifying its strengths and weaknesses and measuring progress towards its goals. Other than that, KPIs provide objective data that can be used to make informed decisions. This is much more effective than relying on intuition or anecdotal evidence.
To help you on your mission, we’ve put together a list of 10 critical KPIs that a dental practice owner should always keep an eye on:
1. Average revenue per client
The average revenue per client measures the average amount of revenue generated per patient visit. It is calculated by dividing the total revenue earned by the practice over a certain period of time by the total number of patients or clients seen during that same period of time.
This data can help identify areas where the practice can increase revenue, such as by offering additional services or promoting higher-end treatments. A higher ARPC can be an indication of the practice’s ability to provide high-quality dental services and attract clients who are willing to pay more for those services. It can also indicate that the practice is doing a good job of upselling additional services to clients, such as teeth whitening or orthodontics.
On the other hand, a lower ARPC may indicate that the practice is struggling to attract high-paying clients or is not effectively promoting additional services to clients. It can even be necessary to make sure you’re establishing the right prices for your services. It must be necessary to review the types of services offered, the pricing of those services, and the marketing efforts to attract new patients.
To help you track this KPI, we recommend you set up a system to record all patient transactions. You can use a dental software program that allows you to input and track patient visits, treatments, and fees.
2. Overhead percentage
The Overhead Percentage helps dental practices track and manage their expenses. This measures the percentage of revenue that is spent on overhead expenses such as rent, salaries, insurance, and supplies. These expenses can add up quickly and eat into a practice’s revenue, so you need to track them closely. To calculate this KPI, you will divide the total overhead expenses by the total production revenue and multiply the result by 100.
A high overhead percentage may indicate that the practice is spending too much on non-essential items or that there is room for improvement in areas like supply management or staffing. A low overhead percentage, on the other hand, suggests that the practice is running lean and may be able to invest more in areas that can drive growth and improve patient care. You need to reach the middle term.
In general, a good benchmark for the KPI Overhead percentage in a dental practice is around 50%, although this can vary depending on the size of the practice, the geographic location, and other factors.
To improve the KPI Overhead percentage, dental practices can focus on reducing unnecessary expenses, negotiating better rates with suppliers, optimizing their staffing levels, and improving their billing and collections processes to ensure they are getting paid for all the services they provide.
3. Cash
If you read our blog posts, you’ll realize this is a critical topic for a successful financial strategy. You need to measure the amount of cash that your practice has on hand at a given time. This helps you ensure that the practice has enough funds available to cover expenses and to invest in growth opportunities.
The KPI can be calculated by adding up all of the cash equivalents that a dental practice has on hand, including cash in the register, money in the bank, and short-term investments.
In order to be effective, it is important to track this KPI over time and compare it to industry benchmarks. This can help dental practice owners to identify trends and to make adjustments as needed to ensure that the practice remains financially healthy.
To help you track and keep growing this KPI, we recommend you record all cash transactions and reconcile cash on a regular basis. It’s also important to implement internal controls, such as separating cash handling duties, limiting access to cash, and requiring receipts for all transactions. This will help you minimize the risk of theft or fraud.
4. Profit
This is a financial indicator that measures the amount of money a dental practice earns after all expenses are deducted from the revenue. It’s an essential metric that reflects the overall health and success of a business.
It’s also a major factor of practice value. Ultimately, any efforts that add value to your practice are likely to increase profits in the long run. After all, profit is the bottom line of all Key Performance Indicators (KPIs). Even practices with high production can improve profitability by a significant percentage by increasing production by 30-50% over the next few years.
A positive profit indicates that the practice is generating more revenue than it is spending on operating expenses, while a negative profit indicates that the practice is losing money, and you’ll probably need to see if there are any unnecessary costs that can be cut or reduced.
The profit helps to determine the amount of money that can be reinvested into the practice for growth and expansion, such as hiring new staff, purchasing new equipment, or increasing marketing efforts. Additionally, a healthy profit margin can also improve a practice’s ability to secure financing or attract potential investors.
5. Active patients
The KPI “active patients” refers to the number of patients who have had a visit to the dental practice within a specific time period, usually within the last 12 months and have their next scheduled appointment soon. This data is important because it helps you determine how many patients are actually using your services and how many of them are returning for regular checkups and treatments.
Having a high number of active patients can be an indication of patient satisfaction and loyalty since patients who are satisfied with their experience are more likely to return for future appointments. Besides, medical practices that have a sufficient number of patients are more likely to perform well and generate income that can support doctors’ lifestyles and retirement funds.
On the other hand, practices with an insufficient number of active patients are likely to face significant challenges and may struggle to thrive unless they can establish a formula that enables them to build a large base of active patients. You must be thinking about how you can do that; we have a few suggestions. You can improve your marketing strategies by developing a strong online presence, offering incentives to existing patients, using email and text marketing, and others.
But most of all, you should pay attention to inactive patients and try to reactivate them. It is essential for every practice to develop a plan to reach out to them to get them scheduled for appointments. To do that, practices should not rely solely on text messages; texting can be part of the plan, but phone calls help patients feel more confident and build an intimate relationship with the practice.
6. Number of new patients
By tracking this KPI, dental practices can identify trends and patterns in new patient acquisition and identify the sources of new patients. This information can help practices adjust their marketing strategies, focus on their most effective marketing channels, and identify areas where they can improve their patient experience.
To attract new patients, you can use some strategies, such as referral programs, to encourage your current patients to refer friends and family members to your practice by offering incentives like discounts or other rewards.
You can also participate in community events and sponsor local organizations to build your reputation and attract new patients. These events are also good for building partnerships with local businesses that can refer their employees or clients to your practice.
Another great strategy is using paid media to promote your dental practice. There are many advertising platforms available, such as Google Ads, Facebook Ads, and Instagram Ads. Choose the platform that your target audience is most likely to use, a budget, and create a compelling ad content.
Last but not least, you should always encourage your satisfied patients to leave positive reviews on your website or other review sites. Positive reviews can attract new patients and build trust in your practice.
Now, it’s time to take action. There are several indicators you can track, but it’s necessary to pick the most important ones and focus on collecting the data consistently. It’s crucial to monitor these KPIs regularly to ensure they are meeting your goals and making progress toward long-term success.
To help you in this mission, you can hire practice management software or even contact an expert in the dental business, such as a dental CPA.
If you’re interested in having a meeting with our experts today to improve your dental practice KPIs, click here.
