Sally McKenzie, CEO
McKenzie Management
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4 Reasons Your Overhead is Skyrocketing (And How to Get It Under Control)
By Sally McKenzie, CEO

It’s painfully clear high overhead costs have become a problem in your practice. Instead of investing in new equipment or updates to the office, you’re constantly worried about how you’re going to pay all your bills each month. To say it’s stressful is an understatement.

Overhead woes plague many dental practices, leaving dentists feeling frustrated and uncertain about the future. There are different reasons your overhead costs may be skyrocketing – you just need to determine the culprit in your practice, then make the necessary changes to take back control.

The thought of that is overwhelming I know, but that’s what I’m here for. I’ve outlined four common reasons practice overhead is holding you back, and the corrections you can make to start moving forward.

1. You’ve hired too many people. If a practice is struggling, chances are certain tasks aren’t getting done each day. When that happens, many dentists (often with encouragement from their team members) decide they need to hire a new employee. They think that once they do, their practice will be more efficient and team members will be happier. Unfortunately, that usually isn’t the case. Dentists end up spending more money than they were before, but practice efficiencies don’t improve. 

Before you place that help-wanted ad, take a step back and determine why tasks aren’t getting done. It could be because team members don’t have the training or tools they need to adequately perform their jobs. If that’s the case, it’s time to provide them with the guidance they crave – not add more team members into the mix.

This guidance comes in the form of detailed job descriptions, proper training and continual feedback. Once you make this a priority, you’ll find team members are more efficient and more productive, which will help reduce practice overhead.

2. Team members get raises every year whether they earned them or not. This is a biggie. I’ve worked with countless doctors who give their employees raises every year like clockwork, regardless of how they performed. Dentists want to keep their team members happy and loyal to the practice, and most figure annual bumps in pay represent a great way to do that. The problem is, these raises, even though they might be small, cost you big.

Think about it. If your team members know they’ll get the same raise no matter how bad or good they are at their job, what motivation do they have to improve? Not much. So employees who are underperforming never change their ways—yet they still get more money in their paycheck every year. This sends overhead costs soaring and leaves you struggling to make ends meet. 

Your payroll costs should be between 20-22% of your revenue, with an additional 3-5% to cover payroll taxes and benefits. If you’re giving out raises without any increase to your revenues, I can guarantee your payroll costs are well beyond that benchmark.

If you want to take control of practice overhead, I suggest you stop giving out raises just because a year has gone by, or because a loyal employee asked for a bump in pay. Make it clear to employees that all raises have to be earned, and let them know exactly what they need to do to earn them. Team members will be motivated to excel in their roles, and that translates into a more efficient practice and robust bottom line.

3. Recall is nonexistent. Most dentists ignore this system, but the truth is, it represents thousands of dollars in potential revenue for your practice. Investing in recall will help you get more patients in the chair, reducing overhead costs.

How can you revamp recall? I suggest you empower your Patient Coordinator to take over this vital system. Train this person to contact a certain number of overdue patients each day and get those patients back in the chair. This is much more effective than sending generic postcard reminders and will help you put a serious dent in those overwhelming overhead expenses.

4. You haven’t raised your fees in years. I know, I know. You’re afraid raising your fees will cost you patients – but it won’t. Patients expect the price of dentistry to go up from time to time. Raising your fees is one of the fastest ways to grow practice profits and reduce overhead.

How can you make this work for your practice? Establish a fee schedule that’s fair to you and your patients. Do your research, base your fees on solid data, and let patients know about any changes.

Skyrocketing overhead expenses can keep you from reaching your full potential. Follow these tips to take your practice back, and don’t hesitate to contact me if you need more help.

Sally McKenzie is CEO of McKenzie Management, a nationwide dental management, practice development and educational consulting firm providing knowledge, guidance and personalized solutions that have propelled thousands of general and specialty practices to realize their potential.

Interested in speaking to Sally about your practice concerns? Email her at sallymck@mckenziemgmt.com or call 1.877.777.6151.

Interested in having McKenzie Management Seminars speak to your dental society or study club? Click here

Hear Sally’s FREE podcasts at The Dentist’s Network - HERE

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