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	Profitable Associate Marketing Fallacies

Thomas L. Snyder, DMD, MBA
Managing Partner,
The Snyder Group LLC
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The Profitable Associate – Determining Return on Investment

Some dentists believe that an associate is a loss leader — a necessary evil in the growth of any dental practice. They may even assert that generating a profit from an associate is next to impossible. Fortunately, nothing can be further from the truth. In fact, earning a 30 to 35 percent profit margin on the revenue generated by an associate is entirely achievable. However, before one hires an associate, one should perform a cost-benefit analysis to determine the likelihood of profitability, as well as to gauge the non-monetary benefits, such as improved quality of life, which may be equally important. The following steps will help you analyze the economic sense of hiring an associate, and will help you set realistic expectations about the return on investment you are likely to attain.

Step 1: Determine Production Goals: Your associate’s skills and experience will affect anticipated production goals. Additionally, your fee schedule, as well as the services provided, will influence overall possible production. To estimate annual production, choose a daily production goal, and multiply by the number of days per year that your associate will work. (Depending on your practice’s services, geographical region, and fee schedule, typical daily production in the beginning may range from $950 to $1,750 per day.)

Next, determine your practice’s overall collection production ratio. For example, if your projected gross production is $800,000 and you historically collect 95% of your gross production, the anticipated revenue would then be $760,000. Next, multiply your collection production ratio by the associate’s estimated annual production goal to establish the anticipated revenue from your associate.

Step 2: Assign Direct Expenses to the Associate: Allocate all direct expenses to the associate to get a better handle on the investment you are making. For example, if your associate will require a new dental assistant, list the dental assistant’s salary and fringe benefits as a viable expense. Additionally, figure the cost of administrative staff that may be added due to increased associate office hours. Next, estimate the associate’s dental supply costs by multiplying your own overhead ratio for dental supplies and multiplying it by the associate’s anticipated revenue. Next, estimate the associate’s lab expense. For a quick calculation of lab expense, multiply the associate’s anticipated revenue by 8 percent. As an alternative, if you can project the number of lab related procedures your associate can produce annually, multiply that number by your average unit lab cost. If you will be purchasing additional equipment or adding an operatory for your associate, include these costs as well. Finally, write down the associate’s annual compensation and any fringe benefits that may be provided. Annual compensation should be within the regional compensation averages for your area.

Step 3: Apply the Formula and Get the Answer: To forecast the likely profit margin on an associate, apply the formula using your specific numbers. While the profitability of an associate is measured in pure financial terms, the advantages of hiring an associate often include benefits that defy measurement. If your calculations indicate that profit margins are less than the 30 to 35 percent goal, be sure to gauge the intangible value of increased family time, improved quality of life, or better access to care for your patients. Remember that the addition of an associate can provide not only economic sense, but also common sense, when it comes to your personal and professional goals.

Associate Profit Analysis Summary
(Assume 95% Collection /Production Ratio on Daily Production Goal of $1000)	Daily Collection	$ 950
	# Days Worked Per Year	X 196
	Projected Annual Revenue	$ 186,200

(Assume 34% Collections)	Associate Compensation	$ 63,608
	Associate Payroll Taxes	$ 4,843
(8% Lab Expenses)	Associate Lab Expense	$ 14,896
(6% Dental Supplies)	Associate Supplies	$ 11,172
	Assistant Salary (inc P/R tax)	$ 21,620
	Uniforms	$ 200
	CDE Allowance	$ + 1,100
	TOTAL EXPENSES	$ 117,439

	Projected Annual Revenue	$ 186,200
	Less TOTAL EXPENSES	– 117,439
	Associate Profit	$ 68,761
	PROFIT MARGIN	37%
	($68,761 PROFIT / $186,200 ANNUAL REVENUE)

Next Steps After the Math

Contracts

Once you’ve assured yourself that the economics make sense for your associate, proper planning is key. The first step is to discuss all the terms and conditions of your associate’s potential employment and then have an employment contract prepared. Make sure you have an attorney who has dental experience and/or a consulting firm who can recommend the nuances that an associate contract should contain. For example, should a restrictive covenant be in force from the first day of employment or should it be graduated over time? Should your associate be prohibited from soliciting your patients as well as your staff? Should you place restrictions on the lab selection? If your associate leaves after a few months, on their own volition, after investing thousands of dollars in marketing, should you be reimbursed?

These are just a few of the key questions that need to be addressed in your associate employment agreement. “Off the shelf” documents will not do justice to these key areas, only properly prepared contracts will.

Consultant Assistance

Finally, we found it very helpful for you to engage a consultant to assist in preparing your practice for the associate. Marketing your new associate is a key ingredient to success and it starts with proper communication. Staff verbal skills are needed to properly introduce the new associate as well as get an existing patient to accept the new doctor. Additionally, to make sure that the associate meets his/her production goals, utilizing scheduling templates insure that the associate will meet target goals.

Most importantly, if this associate is a candidate for your long term transition plans, make sure that you properly think about your exit strategy so that once you begin interviewing candidates you spell out your vision for a successful relationship.

Dr. Thomas L. Snyder, is Managing Partner of The Snyder Group, LLC, a nationwide practice transition and financial management consulting firm. With over 75 years of experience in the field, The Snyder Group can provide you a full range of services relating to practice transition matters and retirement planning. They can also be reached directly at 1-800-988-5674.

If you would like additional help regarding implementing an associate into your practice Email Dr. Snyder at Drsnyder@thedentistsnetwork.net.

Interested in having Dr. Snyder speak to your dental society or study club? Click Here.

Joel Harris CEO
Intelligent Dental Marketing, Inc.
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Five Dental Marketing Fallacies

I have found over the past several years, that dental professionals share many of the same negative feelings and misconceptions when it comes to marketing a dental practice. Although there are some others that could be added to the list, I’ve included the seven that are most prevalent and widespread. Unfortunately these marketing fallacies are just that – fallacies. As you read this short article, I think you’ll agree with me that these issues are huge obstacles for many dentists. If you’ve ever found any of these issues fogging-up your marketing glasses, hopefully I can provide some focus.

#1 Marketing makes me look desperate.

The largest companies in the world, spend billions on complex marketing campaigns, because they know that being the biggest and the best today may change tomorrow. The leaders of these mega corporations are far from desperate. They’re not begging for business and they don’t apologize for pitching their products and services. Dentists who intelligently market their practices are not desperate. They are shrewd business people who understand the necessity of creating continual awareness for their services.

#2 I didn’t go to dental school to be a sales person.

I either hear this phrase word for word, or I see it in the eyes of too many dentists. In one form or another, I have been a salesman all of my life. I don’t wear a plaid sport coat and I don’t use tacky sales pitches. I am proud to be a good salesman and have found success in my life because of it. Some of the most influential people in the world are some of the world’s best sales people. Bill Gates didn’t build Microsoft because he’s a talented nerd. He built Microsoft because he is a brilliant salesman and marketing genius. Sam Walton, the founder of Wal-Mart, Walt Disney, Henry Ford, Thomas Edison and the other great founders of business empires were all great salespeople. They weren’t famous for being pushy. They were famous for being able to sell.

All of the successful dentists I have met over the years are all very accomplished salespeople. They didn’t build thriving practices behind a mask with their hands in a patient’s mouth. They built their practices because they learned how to communicate with their patients. They learned how to build relationships and they learned how to get their patients to say “yes”—all talents of a good salesperson.

#3 I can’t afford a professional.

A good dental marketing professional is worth every penny. When a marketing plan is properly executed it won’t cost you anything. It will only make money. I tell dentists every day that marketing doesn’t have to be seen as a long-term investment. It works quickly and in many cases the return is so rapid, that the initial expense of the campaign is back in the bank within the first few days. Hiring an experienced professional can get you these kinds of results. When you need legal help, hire an attorney. When you need accounting help, hire an accountant. When you need marketing help, hire a pro.

#4 When I need patients, I’ll start marketing.

Marketing should be seen as preventative medicine not just a cure for your problem. Wise dentists, like all wise business owners, are always marketing. They don’t wait until the well is dry to solve the problem. Even if you think you’ve got plenty of patients, you should use marketing to improve the quality of your patient base. I don’t know a dentist who couldn’t use some help displacing some of his/her current patients who may not pay on time or can’t afford treatment with more viable patients.

#5 I have plenty of patients.

I need to be very careful how I explain my philosophy with regard to this section, so here goes. Unless a patient is in your office he or she is not yours. Any patient is fair game anytime they are not on their back with their mouth open in your chair.

I have always found it suspicious when a dentist gives me his/her official “patient count.” I am especially suspect of these head counts, because I am in the business of helping dentists grow their practices. I accomplish this by luring so-called “patients” away from other dentists to grow my client's practices. In almost every practice, there is a core of active patients that make up the bulk of the business. Take care of these patients like gold, because they are. Be willing to admit that a patient who hasn’t been in your office in two years, may very well be visiting another dentist and somewhere along the way you lost that patient’s loyalty. It doesn’t mean you are a bad dentist, it only goes to show you that some dentist out there out-marketed you. It may have been through something as subtle as location or as aggressive as a free offer from a new kid on the block. Either way you lost, and to ensure that it doesn’t affect your profitability next time, make sure you implement your own marketing plan.

Joel Harris, is CEO and Co-Founder of Inrtelligent Dental Marketing one of the Nation’s leading Dental Marketing companies focused exclusively on dental practices. Intelligent Dental Marketing provides powerful marketing tools to help dentists grow their patient base, increase their profit and improve their image. He can also be reached directly at 877.942.8855

Interested in speaking to Joel about your marketing concerns? Email him at Joel@thedentistsnetwork.net

Interested in having Joel speak to your dental society or study club? Click Here