@Dr Bhavdeep Ahuja
Before the Costs in Dentistry, we need to understand about the GPM – Gross Profit Margin.
The profit margin of the dental practice you are considering should be at least 60% (not GPM but PM).
A 60% profit margin (or 40% overhead) is close to the average (ideal) profitability of dental practices.
If your practice is below that number, it could be a sign the practice isn’t as well run as it should be.
Considering your prime (direct) costs enables you to lower your fees to remain competitive or raise them to recoup profit that you have been leaving on the table.
Gross profit margin is an underutilized tool in managing profitability and colleagues hardly know about it.
But if they learn deeply about it, gross profit margin can easily be helpful for setting clinic charges for basic and simple procedures but complex ones as well.
Because of this ignorance, colleagues for complex restorative and implant cases, just take an estimate of the lab fee and multiply it by a certain factor to determine a fee for the case.
That calculation does not take into account the direct labour or materials, so it is not an accurate measure of profitability.
A better approach to setting fees is to consider the average fee for a service in your area and weigh that against your own gross profit margins.
A dental clinic down the block might be charging more for a given service, but that doesn’t mean it is more profitable.
Although a dental practice can be incredibly successful, there is no denying that it costs a lot of money to run.
If you are not careful about managing your finances, you could actually find your practice losing money, no matter how good your clinical skills and how long your patient list might be.
Though it can be challenging, reducing overhead by just 10% can make a huge difference in your practice’s profitability.
To learn more – See this wonderful presentation.
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