A high percentage of dentists across the U.S. manage their own practices, but while this offers certain freedoms not afforded to dental contractors, it also brings with it a great deal of financial responsibility.
Increasing profit margins as a dental practice owner is a constant challenge, and without seasoned guidance from dental accounting in Coral Springs, it becomes increasingly difficult to make smart decisions, fine-tune your prices, and grow your business.
Let’s begin by looking at whether your dental practice is within a normal range in terms of profit margin:
What is considered as a healthy profit margin?
A profit margin of between 30% and 40% is generally considered healthy for a dental practice, but it’s not uncommon for fluctuations to have an impact on this, such as certain times of the year being busier or slower than others.
For dental practices that are just starting out, lower profit margins are often seen initially, and this is mainly due to the costs of starting the business and not having yet established a solid patient base. As practices develop and mature, revenue typically increases, helping provide balance for those initial expenses.
That said, if you own an established practice and your profit margin is below 30%, there might be some issues at play that warrant further investigation.
Increasing dental practice profit margins
Below are some simple tips for helping practice’s increase their profit margins:
- Offering a wider range of services
By offering a more diverse range of services and investing in learning so that you can carry out more complex, costlier dental procedures, you can encourage revenue to rise.
- Enhance relationships with patients
Your clinic wouldn’t have any revenue if it weren’t for your patients, so it simply makes good business sense to take care of them as best you can.
- Review your prices
While you can’t keep your prices too low compared to other practices in the region, you can’t make them too high, either. Achieving the right balance between value for patients, and revenue for you, is best achieved followed a detailed analysis of your existing price structure.
- Monitor the cost of supplies
Where possible, cost-controlling measures such as ordering and storing only optimal amounts, should be put in place. For instance, observing patient trends and keeping levels of stock relatively low during quieter periods for the practice, and then increasing them as and when patient numbers go up.
- Invest in professional help
Working closely with an experienced dental bookkeeper and accountant can help you keep on top of your books, while investing in tax planning for dentists in Coral Springs, can help you stay tax compliant while reducing your liability. This in turn, will help you further boost your profit margin.
Profit margin limitations
Although the profit margin is a solid measure of performance, it’s important to remember that it doesn’t represent the actual cashflow of your practice, since with accrual accounting, income and expenses are recognized when earned and incurred, and not when cash is paid or received.
For dental practices with a below average profit margin, immediate action is required to determine the exact cause. The best way to tackle this should it be a problem for you and your practice, is to consult with a specialist dental accountant, who can help you get your profit margin back up and into the safe zone.