Why OCPSPD can make or break your dental business – do you know what that means?

OCPSPD

Operating cost per surgery per day.

Let me explain (for my fellow non-accountants).

When you look at your audited or management accounts you will see three main sections:

  1. Income/Sales – the money that came through the door;
  2. Cost of sales/variable costs – the money that you have to spend when some dentistry gets done. That includes
    • lab
    • materials
    • pay for the associate/therapist/hygienist
  3.  Fixed costs/operating costs – the money that you have to spend even if no patients arrive. All the running costs of the building, the wages, the utilities, your running costs and your finance payments

So, to calculate OCPSPD you have to look at Fixed Costs/Operating Costs (number 3 above) and divide the total by the number of surgery days either used or available in the year.

Here’s a real example:

Operating cost for the year = £311,954

3 surgeries, open 5 days a week, 48 weeks a year so…

Number of surgery days = 720

OCPSPD = £433.27

So that’s what this client has to make to pay the bills, after they have paid the associate, their share of the lab and the materials.

That would be a break even figure – no profit.

So let’s take a look at Associate A, who is on a 50% contract:

Average daily production = £1,000

Average lab bill = 10% of sales = £100

Average materials usage = 7% of sales = £70

So, calculating the associate’s pay at the end of the month:

Production = £1,000

Lab = £100

Net production = £900

Associates pay = £450

Let’s look at the practice.

Net production = £900

Less associate pay of £450 = £450 left for the practice

Less materials of £70 = £380 left for the practice

So the practice has lost £433.27 minus £380 = £53.27 every day the associate comes in to work.

Over 20 days that is a cumulative loss of £1,065.40.

The associate took home £9,000 and the practice lost £1065.40.

Good business?

I don’t think so.

This isn’t associate bashing. The associate doesn’t know that she is running at a loss – she turns up, does her best and gets paid.

You can start playing around now with different levels of production, percentage, lab and materials and offset them against the OCPSPD – it’s great fun (even though this is a serious issue) and I have a spreadsheet in use regularly to calculate what combination of numbers is going to create a targeted profit.

Think about it again – if your profit target in business is a modest 25% before tax – then the OCPSPD plus profit (in the above example) becomes £433.27 x 1.20 = £541.59.

Bottom line is that most uninformed Principals are losing money every day on the production of most unknowing associates.

Tinkering around with lab, materials or operating costs isn’t going to make that much difference.

In the financially enlightened practice, the solution is a combination of increased production and reduced pay – I’ve written about that before.

Actually – there is another option – stick your head in the sand, keep working and wonder why you aren’t making as much money as you expected.

In the last 7 days, I’ve carried out 4 separate OCPSPD calculations and I’m yet to find even a break even associate, let alone a profitable one.

I wonder what your figures look like?

Published by

Chris Barrow

Chris Barrow has been active as a consultant, trainer and coach to the UK dental profession for over 20 years. As a writer, his blog enjoys a strong following and he is a regular contributor to the dental press. Naturally direct, assertive and determined, he has the ability to reach conclusions quickly, as well as the sharp reflexes and lightness of touch to innovate, change tack and push boundaries. In 2014 he appeared as a “castaway” in the first season of the popular reality TV show “The Island with Bear Grylls”. His main professional focus is as Coach Barrow, providing coaching and mentorship to independent dentistry.

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