Save, Invest, and Grow
“Compound interest is the eighth wonder of the world,” Albert Einstein once said, “he who understands it, earns it; he who doesn't, pays it.”
The same principle applies to your dental practice. You want to make your hard-earned dollars work for you.
Cutting costs is the first step, but the real value comes when you reinvest those savings to help your dental practice grow. For instance, if you can save $50,000, reinvest it into your dental practice, you could go on to generate $1 million in additional revenue for your practice.
How exactly to save that $50,000? In this article, we’ll outline how to cut unnecessary costs and exactly where to reinvest that extra cash in people, training, and systems to generate more revenue for your dental practice.
For Dentists, saving $1 is the same as earning $2.92.
Why?
Because money saved is money directly available. When you spend time working to increase production, the cash on hand is delayed. It often takes one to three months before you receive it.
That’s why saving and investing that money now is so powerful. It gets you on your growth path now, not later. When you cut spend from your budget, you now have that cash on hand, rather than having it go back out the door for some expense or another.
The question is, how quickly can you save money? If it takes too long to realize your savings, it’s hard to invest that money into something that could benefit your team right away.
Dental supplies typically account for 6-7% of a dental practice’s overhead. Reducing that by even 1% can free up thousands of dollars. A lot of the dental practices use software to help them order and manage the costs of dental supplies.
Dental practice owners using Method, a dental procurement software, can reduce their supply costs to the 4-5% range, instantly saving them 2-3% annually. You can cut supply costs without cutting corners. You can get high quality supplies at fair prices by using a marketplace that showcases all the most affordable prices for your supplies.
We recently spoke with Managing Partner Austin Moffat from DSO CFO, an advisory group for dental practices. Here’s how they put it, “Supplies should be around 6-7% of overhead, and even a 1% savings can make a significant difference. The bigger you get, the harder it is to maintain EBITDA. You have to focus on what you can control.”
The best way to control your dental supply spend is monitoring it with a dental procurement software like Method. But there’s only so much you can cut before it affects patient care and team morale.
“Cutting costs is easier than driving revenue…” the advisor went on to say, “but at some point, you can’t cut costs anymore. The real question isn’t how much you can save, it’s what you can do with the money you free up.”
Remember what Einstein said: it’s not about earning money right now. It’s about earning exponentially more money later. You can invest your savings in your practice in any of these three areas: your people, training, or systems to see that exponential growth in your firm. If you have a lot of cash on hand, you can invest in all three.
According to DSO CFO, they follow this mantra: Right people, right training, and right systems.
Take this real-life example of a dental practice that was a DSO CFO client.
This dental practice wanted to generate more than $5 million per year. They were doing well but couldn’t figure out how to break past that barrier. The practice had three doctors and multiple hygienists. Their team was well built, but they didn’t know what was missing. When DSO CFO looked into it, they found that the three doctors met their production goals. But none of the hygienists hit their targets.
When discussing this with the partners of the practice, they suggested they invest in training the hygienist on how to hit their production goals without sacrificing patient care quality. To invest in this training, the dental practice had to find ways to cut costs, save money, and reinvest it into their staff. By following the suggestion of DSO CFO, this dental practice could be on its way to making $6+ million a year.
So can you.
Ultimately it comes down to investing your savings in people, training, and systems.
You can’t run a practice without your team. They need you. You need them. Especially if you have hopes of growing beyond the average $1 million per year practice earnings. Few practices get there without investing in their people.
With 1-2% of revenue freed up, that’s $100,000 for the $5M practice, they could:
A well-trained office manager alone can drive $1M+ in additional revenue by optimizing scheduling, team efficiency, and collections.
People will always be your greatest asset as a dental practice. If you invest more into them, they'll produce more for you. Use your savings to invest in your people and they’ll make it worth your while.
A lack of training is one of the biggest hidden costs in a dental practice.
Let’s say you run a $3.5 million practice and invest $20,000 in advanced training for your hygienists and front office staff. If that training helps increase efficiency and reduces cancellations by just 5%, you could add an extra $150,000-$200,000 in revenue over the next year.
Key training areas to focus on:
Training is often overlooked but offers some of the highest returns in a dental practice. By improving the skillset of your staff, you increase revenue potential. In other words, the more knowledgeable your team, the more efficient and profitable your practice becomes.
If your practice grows from $1.5M to $4M+, you can’t afford to run operations the same way you did before. Without the right systems in place, patient care declines, billing errors increase, and growth slows down.
Many practices struggle with this because they want to balance standardization and autonomy of staff to care for patients how they please. However, the solution is simple. Separate business operations from clinical decisions. They're not the same. They're very, very different. You can't run a business as a clinician or you risk losing out on money now and in the future. You can't run your practice like a business or you risk losing that personal touch your patients have come to love.
Meanwhile, allow your doctors autonomy in patient care and clinical decisions. This balance ensures efficiency without sacrificing quality.
The purpose of savings is to reinvest them into long-term growth. Don’t just save for savings sake. Save for a purpose. Every dollar you free up should be directed to areas that generate more revenue for your dental practice such as people, training, and systems.
Done correctly, a $50,000 savings can help your dental practice generate an additional $1 million in revenue. Turn your pennies into millions by investing them back into your dental practice.
If you don’t know where to start to see savings like this, don’t worry. Method and DSO CFO can help you out.
You can learn more about DSO CFO and what they offer by visiting their website dsocfo.com
