With the rising costs of doing business, it’s going to be more important than ever to keep a sharp eye on profitability in the coming years. So in this week’s episode, Sabri Blumberg joins Jeff to discuss recent trends in the economic landscape of dentistry and ways to improve profitability going forward.
Topics:
2:00 – Shifting the focus from total collections to the profit margin
12:35 – Assessing your practice’s overhead
22:58 – Taking a fresh look at your fee schedule and insurance participation
29:25 – Getting the most out of the things you’re already paying for
34:22 – Being smarter about how you spend money
Links:
Download the Overhead Worksheet - https://www.mgeonline.com/overhead-materials
Learn more about MGE - https://www.mgeonline.com
Listen to full episode :
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Questions From This Episode
Why does Sabri say dentists need to shift their focus from collections to profit?
She says a few years ago, a doctor doing $100,000 to $150,000 a month could be a genuinely poor manager, not even know what "profit" meant, and still make good money. Rising costs and shrinking insurance reimbursement have eaten into margins so much that doing the same revenue today doesn't guarantee the same profitability, so growth alone no longer solves the problem.
Why does Sabri say raising fees in response to inflation is a one-way decision?
She uses the example of a Coke going from a dollar to $1.25 due to inflation, prices don't drop back down just because inflation cools off, and employees don't offer to take a pay cut once costs stabilize. Her conclusion: if you haven't raised your fees to keep pace with rising costs, you need to, because the increase isn't going to reverse itself later.
What is the first of the four things Sabri recommends to protect profitability?
Actually knowing your real overhead, not your P&L, which only shows what you already spent, but a forward-looking breakdown of what you should be spending on payroll, marketing, labs, and supplies. She recommends working through a detailed overhead worksheet, since new clients often underestimate their true overhead by not accounting for semi-annual expenses like insurance or workers' comp.
Why does Sabri say most practices are leaving money on the table with services they're already paying for?
She points to average phone conversion rates around 23 percent and treatment acceptance rates around 50 percent, meaning a large share of the new patient calls and diagnosed treatment a practice already paid to generate never actually turns into revenue. She says clients often see a $20,000 to $30,000 jump the month after sales training, not from new marketing or staff, but simply from learning to communicate and close more effectively on opportunities that were already there.
What does Sabri say to consider before making a big equipment purchase, like a cone beam machine?
Rather than assuming new equipment will automatically grow the practice, she recommends working out the real numbers first: what you'd charge for the service, how many cases you're currently referring out that you could keep in-house, and what the lease or purchase will actually cost. Her advice is to sequence spending, handling more foundational issues first, so a major purchase becomes the reward for good management rather than a shortcut around it.
Episode Transcript
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Jeff: This episode was actually inspired by a conversation I was having with our Deputy Chief Operating Officer, Sabri Blumberg. Many of you know Sabri, she's been on several episodes of Dental Business Rx, specifically episodes two, five, and six. If you're an MGE client, you definitely know Sabri, she's in charge of all of MGE's technical delivery and has worked with thousands of doctors.
We were discussing business trends in the industry right now, things like larger practices bringing in specialists, the multiple-practice model with smaller offices, and corporate dentistry. She said something I thought was pretty profound, and it defined one of the larger problems dentists in private practice are facing today. Essentially, she said that in the past, dentists used to be very focused on collections, but now that focus has to turn to profit. Margins used to be a lot more forgiving in the dental industry, and they've been dwindling for years, to the point where profitability is becoming a real issue if you don't watch what you're doing.
That's what we're dedicating this episode of Dental Business Rx to: how to manage and maximize profitability in this post-pandemic environment. I'm Jeff Blumberg, and I'm your host, and we'll be joined momentarily by Sabri so you can hear her perspective directly. This will be a bit more of a conversational episode, since we each bring a slightly different viewpoint, and the goal is to give you real ways to increase your profitability, evaluate the decisions you're making in your practice, and identify changes worth making to make sure your practice stays profitable.
Alright, let's start. Paint a picture for me. You brought up this idea that dentists used to be very focused on collections, and now that focus has to shift to profitability.
Sabri: It's interesting, because I've noticed it especially in the last nine months or so talking to clients, and I don't even know if they've noticed it themselves. I talk to a lot of newer clients as well as established ones, and with newer clients, the first thing I usually do is get a feel for what they have going on so we can figure out their path, what needs to be implemented to get them to their goals. And the people I've been interviewing lately are different than they used to be.
You always have your smaller practices that want to get bigger, and a few very ambitious doctors doing great who want multiple practices and are building an empire, you always have that. But the younger clients used to typically be doing $60,000 to $70,000 a month and wanting to get to $100,000 to $150,000, that was sort of the normal, stable pattern I'd see. Then the doctors doing $150,000 or so were usually the ambitious ones building multiple practices, a distinctly different kind of doctor.
What I wasn't seeing much of before was doctors already doing $100,000 to $150,000 a month who weren't particularly ambitious, they weren't looking to grab five or ten practices, but they still felt they needed to grow.
Jeff: So who decided they needed to grow?
Sabri: They did, because they weren't making enough money at $100,000 to $150,000. Even three or five years ago, if I had a new client who genuinely didn't know what the word "profit" meant, who had no idea how to figure out their overhead, and was just managing the business off their collections number, at $100,000 to $150,000 a month you could be one of the worst managers on the planet in dentistry and still make money.
Jeff: Interesting. Not anymore.
Sabri: Not today. Today, if you're doing $100,000 to $150,000 without certain checkpoints in place, you're not making money. And the solution, very often in the client's mind, is that they need to make more money, since they're not making enough at $150,000. So the assumed solution is: make more money.
Jeff: Rather than thinking about it as a profitability problem.
Sabri: Exactly, it's not about the amount of money I'm making, it's about my profitability. That's where I started having very different conversations with clients, not just about growth, but about running the business properly so they're actually making money at the level they're already at. Because you can keep throwing money at growth and still end up with nothing to show for it, since we never fixed the underlying problem.
Jeff: So essentially, what used to be a $150,000-a-month doctor ten years ago might be more like $110,000 or $125,000 in today's terms. Even five years ago, if you were doing $150,000, you were making good money, because your margins were still pretty safe, what you were spending on labor, materials, advertising, it wasn't eating up whatever profitability you had.
Sabri: Right, you made a good living. That's changed drastically, because those margins have been slowly, and then much more rapidly over the last year or so, eaten up.
Jeff: Compounded by the fact that a lot of newer clients are heavily in PPOs, and PPOs have actually been lowering their fees in response to everything going on, which I genuinely can't figure out, but that's been their response. I was giving the Finance Seminar yesterday, and one client, you know him, told me how it played out. Apparently it started with Delta, they tried to push a 10 percent fee cut, that didn't fly, so they came back with 8.8 percent instead and used it as an advertising tool to employers, "look how we're saving you money," by paying doctors less. That set a precedent, and other companies followed, MetLife, Cross Blue Shield, MetLife's usually a quick second after Delta.
Sabri: I've talked about this a lot, the inflation issue, the labor cost issue, and now this insurance issue on top of it, it's honestly kind of remarkable. You end up in this strange climate where everything is getting more expensive, but what you're actually getting paid for your services, if you're still sitting in PPOs, is going down. So that profit margin that wasn't great to begin with keeps shrinking, to the point where doctors feel like they're taking home less money than they used to.
The problem is it takes a certain amount of money to run a dental practice. If I add more patients, I need more personnel, more supplies, more lab work, so overhead climbs right alongside production. Increasing the numbers doesn't necessarily fix the profitability problem, especially if those underlying numbers were inadequate to begin with. It takes the same amount of time and effort to do an $800 crown as it does a $1,400 crown, it's the same crown, just a different insurance reimbursement.
Jeff: So that's what spurred all of this thinking, you're having genuinely different conversations than you used to have.
Sabri: Right, that shrinking margin has started pushing people to look for a solution, and the instinct is often to reach for growth, moving from targeting $50,000 to $70,000 a month up to $100,000, $120,000, $150,000, which used to be the number people aspired to reach in the first place.
Jeff: That makes sense as a general pattern. So with this new environment, margins being eaten up, we've talked at length about getting out of PPOs, about inflation, about rising costs, lab costs specifically, I just talked to a lab the other day whose fees went up 14 percent. This is what's happening, and since we can't predict whether inflation continues or stalls out, you still need to make changes to how you manage your business regardless.
I don't want to lose the thread here, since you and I can go on forever, we used to livestream two hours a day at the height of the pandemic for months, but I did want to mention something on this inflation point before we move into what to actually do about profitability. The January inflation numbers came in at 7.5 percent year over year, meaning something that cost a dollar in January 2021 cost a dollar seven and a half cents in 2022, obviously that varies by category, gas cost more than 7.5 percent more, for instance.
We've talked to a lot of clients about raising their fees, they have to raise their fees, get out of PPOs, but raise fees regardless. I surveyed some seminar audiences, especially newer clients, and not as many as I'd hoped, maybe 40 to 45 percent, had actually raised their fees. Others were in the process, but it wasn't happening as quickly or as broadly as it should have. Some of the hesitation I've run into is people asking, "what if I raise my fees and then inflation stops?"
Well, here's the thing. Say a Coke is a dollar, I remember it being a quarter, and I'm sure someone listening remembers it being a nickel, anyway. Say it goes up to a dollar twenty-five because of inflation, and then inflation cools off to 2 percent, or 1.8 percent, or basically nothing. I seriously doubt that Coke is going back down to a dollar. It's going to stay at a dollar twenty-five. And your employees aren't going to say, "oh, inflation stopped, give me less money now, I'll go back to what I was making before." That's not going to happen. If prices have gone up, they stay up. So if you haven't done a fee increase in the face of all this, you absolutely have to, and we started recommending that well over a year ago.
Sabri: Right, definitely.
Jeff: So we've got this new focus, you're hearing things you weren't hearing before. Let's look at how you actually sort this out. Say I'm a newer client, and I come to you and say, "I need to make more money, so my plan is to produce more." There's nothing wrong with wanting to grow and produce more, but how do I do that in a way that actually maximizes profitability, given that margins work very differently now than they used to?
Sabri: I think there are really four simple things I go over with clients. They're almost like bandaids, but they get the job done.
Jeff: Alright, hit me with the four.
Sabri: The first is really figuring out what your actual overhead is. A business owner has to know exactly how much they should be spending on personnel, on marketing, on labs and supplies. Your overhead is not your P&L, your P&L just tells you how much money you actually spent, it's forensic, after the fact. You being my husband know that how much money I spend on the podcast has nothing to do with how much money we actually need to spend to keep our household running. How much you're spending versus how much you should be spending are two entirely different things. So your overhead is really a breakdown of what expenses you have and what you should be spending on. A lot of doctors think they don't have enough budget for marketing, when really they just don't have a clear budget at all.
One of the first things we have a new client do is complete our overhead sheet, which is pretty intensely thorough. We created it years ago because we'd ask a client what their overhead was, they'd say $40,000, and then we'd actually sit down and work it out and find it was really $50,000, because they were misestimating payroll, or not accounting for semi-annual expenses like liability insurance or workers' comp, expenses were just missing. So we built a really thorough overhead and expense worksheet, we have it both digitally and on paper. I'll put a link on the episode webpage if you'd like to download a copy and work through it for your own practice.
Jeff: The funny part of that sheet, one of the line items under telecom is "pager service," which Sabri has been lobbying to remove, and I'm not going to do it. I've still got that picture of me in the nineties with a pager clipped on. Anyway, sorry, go ahead, you were talking about overhead.
Sabri: Right, so you need to know what your overhead is. If you're going to spend beyond that, buy something that isn't budgeted for, you need to check that you actually have the money to do it before you spend it. So the first thing is knowing what's part of your overhead versus what's discretionary spending, and then knowing exactly where you stand on collections before spending discretionarily. It's usually not the one big expense that kills you at the end of the month, it's the hundred dollars here, two hundred dollars there, "oh, that's not a big deal," and when you add it all up, that's where your profit actually went.
The other piece is that your staff needs some idea of how much money the practice actually needs to make.
Jeff: So say I know my overhead is $50,000 a month. Would I tell the staff, "it costs $50,000 to run this place"? Or would I tell them something a bit higher?
Sabri: You'd want to build in reserves. So I wouldn't say $50,000, I'd want to save money too, so let's call it $60,000. You need to have accounted for taxes and things like that. So when you communicate this to your staff, you need a genuinely clear idea of what it actually costs to run the business and keep it financially secure.
Actually, if I can speak to that for a second, I'm right in the middle of teaching the Financial Planning and Profitability Center right now, well, not right this second, I'm doing the podcast, but I was teaching it yesterday, and tomorrow we go over bonus plans. When we cover calculating overhead in detail in that seminar, one of the points we make is that this overhead figure is also the basis for any bonus plan you might build. You could have the coolest, best staff ever assembled, but if you sit them down and say, "look, our overhead is $100,000, and we did $150,000 this month, so we have an extra $50,000, what do you think I should do with it," please don't do this, I'm telling you not to, but you could, if you're feeling masochistic. They're going to want to spend it. We need a new Cavitron, we need this, the cone beam's been acting up, we need branded toothbrushes, we need more marketing, they're going to try to do something with that money.
They're just not in a position to be directing the office's money or thinking about the long-term prospects of the practice, and that's not a knock on them. Part of that surplus might need to go toward expansion, retiring debt, buying another practice, adding an operatory, money you need so you're not taking on crazy loans down the road later.
So the point here is sharing your overhead concept with your staff, and to be crystal clear, I don't mean handing them your actual completed overhead sheet.
Jeff: Right, "wait, you're making that much money?"
Sabri: Exactly. What I mean is: if, in order to do everything you want to do with this business, reserve money for expansion, pay your taxes, pay yourself, which is part of the reward of ownership, you need $100,000 a month, and you're consistently collecting $95,000, your staff needs to know, "in order for us to do what we want to do with this business, pay you, pay bonuses, bring in lunches, cover the overhead, we need to hit $100,000." That hundred thousand is the minimum number, and your staff needs to know what that minimum number is every month for the business to stay stable.
I saw this a few weeks ago with a client who's consistently coming in $5,000 to $10,000 under his own overhead every month. I asked him, does your staff know how much you actually need to make? He could survive, he was just taking a smaller paycheck himself, meaning he couldn't fund his own retirement. He wasn't going broke exactly, but he'd genuinely make more money working for a corporate chain at that point, and that's not why you own your own business. I asked if his staff even knew, and he said no, they had no idea. I told him he needed to let them know, because they'd likely push a little harder, go the extra mile, instead of patting themselves on the back for doing almost $100,000 a month, thinking that's great, when it doesn't actually cover the bills, and they have no idea. Five years ago, $100,000 a month was genuinely great. This particular practice is only six years old.
Jeff: So to summarize: you absolutely have to know your actual overhead. And if you're going to explain it to the team, remember, even the coolest group of staff isn't who you'd put in charge of your money, not because there's anything wrong with them, that's just the nature of it. So say my actual overhead is $80,000. For bonus purposes, I'd build in a cushion in case of a slow period or shutdown, and once I'm covering debt and everything else, I'd probably set the bonus threshold and start pushing the team toward, say, $100,000.
Sabri: Absolutely, and if this isn't actually an issue for a given practice, there's no need to bring it up with staff at all. But if you're consistently producing close to your overhead, you should definitely inform them. It's just a fact of life, you don't have to get into the specific numerical details, but the team should generally know what the office actually needs to hit.
Jeff: Good, that's overhead. Again, the link to download the MGE overhead sheet will be on the episode webpage, and if you want help with it, you can always email us. So that's one. What's number two?
Sabri: Number two is your fees. Obviously your fees dictate how much money you're going to make. We started recommending 10 percent increases about a year ago. What I find, Jeff, is that there are very few dentists I talk to whose private fee is even normal for their area, it tends to be on the low end. And some people don't even understand this concept at all. If you've been practicing at least ten years, you've probably heard of something like the Wasserman Guide, they publish both a medical and a dental version, and generally run a fee survey across the US.
Jeff: Since we've all heard about "usual and customary fees" from insurance companies. What the Wasserman Guide does is establish, by zip code, what percentile your fee for a specific procedure falls into.
Sabri: Meaning what percentage of dentists in your area charge less than you do.
Jeff: So if you're in the 30th percentile, that means 70 percent of the market charges more than you.
Sabri: That's right, and they run from the 30th percentile up to the 90th. You can look up a specific procedure code, an adult prophy, say, and see where your fee actually falls.
Jeff: I know you and I tend to think the sweet spot is somewhere around the 60th to 70th percentile.
Sabri: That's right. So that was the primer for anyone who wasn't familiar with this. I've actually run into younger audience members recently who have no idea what the Wasserman Guide even is.
Jeff: That happens to me more and more as the years go by too. I think it's less that we've just been doing this a long time, and more that we're paying attention to things that barely came up as issues ten years ago.
Sabri: Right, it was never that big a deal before, because the overriding factor was always, it doesn't matter because they're making money anyway, unless their fees were truly, horrifically low.
Jeff: And obviously the goal is still to increase collections and grow.
Sabri: Of course, but as I've said, you don't want that growth to mean working six days a week because your margins are so thin that you need the extra volume just to maintain a lifestyle, which at that point stops being a lifestyle at all. You want to be able to control how much money you actually make, your profit margin, as you grow. That's part of the reward of owning your business. If business ownership and getting a dental degree were both easy, everybody would have a dental practice.
Jeff: There's only, what, 250,000 dentists in the US?
Sabri: A little over 200,000, including specialists and instructors.
Jeff: Fewer than I thought. Still, it tells you not many people went through the hardship of earning a dental license and then opening their own business.
Sabri: Well, not all of those own practices, but there's still real reward attached to the suffering it took to get there. If you run your business poorly enough that there's no real profit left, that reward, not the only reward, but a real part of it, disappears. And then what was the point of going through all of it?
Jeff: So going back to where you started, you were talking about newer clients whose full private fee, not their insurance fee, wasn't even in the low end of the percentile.
Sabri: Right. I think doing real research on what your fees should actually be in your area is one of the first steps. If I owned a dental practice, I would have raised my fees by at least 10 percent since COVID started, especially once everyone reopened.
Jeff: And then the problem becomes, if you're still stuck in PPO plans, you can't raise your fees, because the insurance company is lowering theirs, that's no longer your call to make.
Sabri: Right, so something that might have been a dream, getting out of PPOs, becomes a necessity at that point.
Jeff: A dream materializing faster because it's now a necessity, that's kind of funny, but true. Getting out of PPOs is a lot easier than most people think, they've been sort of brainwashed to believe their entire business will disappear and every patient will flee the moment they drop a plan. That's not what happens. It just takes a little courage and a little know-how, and we can help. Do you mind if I let people who want help figuring out how to get out of PPOs reach out to you directly?
Sabri: Not at all, they can email me.
Jeff: I'll put Sabri's email on the episode webpage. It's Sabri, S-A-B-R-I, B as in boy, at mgeonline.com.
Sabri: And I'll just add, getting out of PPOs is genuinely situational, the plan I'd give you depends entirely on your specific circumstances, so don't expect a one-size-fits-all answer back, I may email you back asking for more detail. If someone's at 85 percent PPO patients making up 90 percent of their revenue, that's obviously not a "you're out tomorrow" situation, but there's always a way to do it, it just depends on your circumstances, and you have to address both your fees and your revenue mix to get there.
Jeff: That's number two. What's number three?
Sabri: Number three has to do with actually using what you're already paying for. We're putting money into personnel, into marketing to make sure the phone rings, into having a patient sit in front of us who potentially needs treatment and should be paying for a treatment plan. All those things we're already paying for, we need to make sure we're actually getting what we paid for.
Jeff: That's an interesting way to frame it.
Sabri: We don't have money to waste anymore. It used to be that you could over-buy groceries and just toss some of it out afterward, now, we paid for a certain amount of food, we need to actually eat all of it. That means running a tighter ship: your skills at converting treatment plans and getting patients committed to actually getting healthy, how your chair time is being used, how well you're training your staff, making sure they know how to turn a phone call into an actual patient in the chair. What's the average conversion rate in the US, something like 23 percent? You covered this in detail in episode two, going through exactly how a receptionist should handle phone calls, if you haven't heard that one, it's worth a listen.
If your conversion rate is that low, three out of four phone calls are essentially wasted, but you paid for those calls regardless. Same thing with your treatment acceptance rate, your sales closing percentage. If it's 50 percent, that means half of the potential income sitting in your practice is never actually realized.
Jeff: But I'm still paying for the staff, the facility, I paid to get that patient sitting in front of me, and I'm not using it.
Sabri: Here's the funny part, and I've seen this happen constantly: clients come to the MGE Communication and Sales Seminars, the A, B, and C series, and we always start the morning with wins, that's a tradition Dr. Winteregg started years ago. Someone shares, "I collected an extra $30,000 last month," and first-time attendees in the audience genuinely wonder if we paid that person to say it, the change is that dramatic. But it's completely true. It's not unusual for someone to attend one of their first Sales and Communication Seminars and collect an extra $20,000 to $30,000 the very next month.
Here's the funny thing though, they didn't hire more staff, they didn't run more marketing, or if they did, it hadn't had time to take effect yet. All they learned to do was sell better, communicate more effectively. Which also means that money was always there. It's always been sitting in the practice, they just finally realized how to access it.
Jeff: Same idea with recall.
Sabri: Exactly, how many clients do we take on where the first thing we do is rebuild their recall system? They've got a stack of patients with outstanding treatment plans who aren't even coming in for hygiene, patients we already have the opportunity to represent a case to, and instead they're chasing new patients, saying "but we already paid for those other patients," they're just letting them sit there unused. Start using what you've already paid for. There's a lot more we could dig into here, sales opportunities, recall systems, we could talk about this for hours.
Jeff: We probably shouldn't, this was supposed to be 30 minutes or less. Alright, let's move to the fourth point. Some of what we've covered so far might take a bit of work to implement fully, and clients may not know how to do all of it perfectly right away, but even doing it a little better than before is going to move the needle on profit.
Sabri: Agreed, just start doing something. The fourth point is how you're spending money in your business.
Jeff: If you need a new piece of equipment, is it actually going to make you money? If you're cutting marketing to save money, is that going to cost you more in the long run?
Sabri: It really comes down to how thoughtfully you spend the money you have in order to make more. I don't think that process gets thought through carefully enough most of the time. I've seen someone buy a CEREC machine while only doing four crowns a month, their lease payment ends up higher than their entire lab bill. It just doesn't make sense.
Jeff: And it gets worse, we've both seen this, you'll get a postcard in the mail from a local dentist advertising that they have a CEREC, as if the average patient even knows what that is.
Sabri: You'd be surprised, actually, I was talking to Jeff Santone about this the other day, he'll run into people who aren't even MGE clients who genuinely believe buying a new piece of equipment, two extra chairs, a laser, whatever it is, is going to blow their practice through the roof on its own.
Jeff: You just touched on something interesting, doctors adding a new operatory. You wouldn't believe how often I hear that when the doctor is already personally working 40 hours out of two operatories, with the other two staffed by hygienists. How is a third or fourth operatory going to help if you're already maxed out on your own hours? You can't physically be in three places at once.
Sabri: Right, so I don't think that gets thought through as often as it should. What about how much you're referring out? Maybe that's something you could bring in-house, or if you don't want a specialist doing it and want to handle it yourself, take an implant course and invest there instead, if you're clinically inclined to.
On personnel, I'd be very hesitant to start cutting staff to save money. Productive personnel are worth their weight in gold, they're the ones bringing patients in, helping close treatment plans, running your marketing follow-up, keeping recall full and patients showing up. Good personnel make you money, so you don't casually cut staff to save a little, unless that person genuinely isn't productive, and you've already done what you're supposed to do to try to get them there. If you're paying someone unproductive after real effort to fix that, there's no reason to keep holding on, though that's really its own separate discussion.
Marketing is another one I see cut constantly, doctors running a tiny sliver of their overhead toward marketing while desperately wanting new patients. That's just not a smart move. Put your money into things that are actually going to make you more money, and think it through. Obviously if something's needed for quality of patient care, you're going to need it regardless.
I've seen this a lot with cone beam machines specifically. Someone wants one, but I'd really want to analyze the impact first, what are you going to charge for the scan, how many cases are you currently referring out that you could keep in-house, what's it actually going to cost to lease the machine. I'm not saying don't get one, plenty of doctors genuinely need one, and it's convenient, but convenience shouldn't outweigh reality. If you're excited about getting more implant cases, would it really be so bad to build up that case volume first, and get the cone beam after?
Jeff: There's a sequence to all of this.
Sabri: Exactly. If you're genuinely excited about a cone beam but your overhead doesn't comfortably support it right now, give yourself a game plan, handle the things that sequentially should come first if you're being a responsible business owner, and the cone beam becomes the reward at the end of it. That doesn't have to take a year, it could take three months or less.
Jeff: Same as it doesn't take that long to get out of PPOs, or to properly train your staff.
Sabri: Exactly right. I think the underlying idea is that anything you're spending money on in the business should be doing something to either sustain the business or make it more productive, whether that's personnel, marketing, and if your marketing "isn't working," the real question is why. Is it that your staff isn't handling the inquiries well? Why isn't it converting into revenue? This is something people often don't think all the way through with marketing. The way we evaluate a marketing effort is: how many responses did it generate, did we convert those responses into something, and were those patients upsold appropriately from there.
For a dentist, say you send out a postcard for a discounted cleaning. The patient calls in, how many of those calls actually get scheduled? Say a hundred calls come in and eighty get scheduled, that's genuinely good. Those patients come in, you do new patient exams, and they need a certain amount of treatment. How many of them actually move forward with that treatment?
Jeff: So the marketing can work great at the first two stages, strong call volume, good scheduling conversion, but if you can't close the treatment, the whole effort gets torpedoed right there.
Sabri: And worse, it can actually cost the business money, since you used hygiene chair time on a discounted cleaning, which can crash your production for that slot. But if you use that discounted cleaning to identify $5,000 to $6,000 of needed treatment and you close it, it worked out great for everyone. You have to make sure you're solving the right problem.
Jeff: Which is kind of why companies like ours exist in the first place.
Sabri: It genuinely is. We teach the business side of things. I can't do dentistry.
Jeff: Right, but I didn't go open a dental practice, they did, and they opened a business, so they should understand a bit about business too.
Sabri: I agree completely.
Jeff: Alright, I think that was well over 30 minutes, but under an hour, which is pretty good for us. Any last thoughts before we wrap up?
Sabri: Just that we're heading into a new era of dentistry, post-COVID, where doctors are going to have to pay a lot more attention to actually running a business.
Jeff: I agree completely. We just wrote an article on this and we're putting together a presentation on it soon, essentially that private dentistry in the 2020s, for the average doctor operating the way the average doctor operates today, heavily in PPOs, thin margins, is going to be rough. There are a few things worth starting on right now so you make it through this decade not just intact, but thriving. People will absolutely still pay for good dentistry, because it matters.
Sabri: Agreed, a hundred percent.
Jeff: Sabri, thank you so much for joining me.
Sabri: Always a pleasure.
Jeff: And folks, that about does it for this week. Have a great week, and if you have a chance, take a minute to follow or subscribe to the podcast wherever you're listening. If you have questions about MGE, you can find us at mgeonline.com or call us at (800) 640-1140. I'll have links on the episode webpage for the overhead sheet we talked about, as well as Sabri's email if you'd like to reach out about getting out of PPOs. Otherwise, we'll see you at the next episode.