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THINKING BUSINESS
a blog by Chris Barrow

Associate percentages - maths or drama?



Associate to Principal: "I've been speaking to some of my contemporaries and they tell me that they are on 50% - can we have a chat about my percentage please?"


Over the last 12 months, the debates about "percentages" have reappeared.


Back in the late 90's, when I arrived in dentistry, pretty much every associate was on 50% - both private and NHS.


Over the next 20 years:


  • Along came the UDA system, allowing associate pay to be camouflaged by offering a UDA rate to the associate, whilst keeping the gross UDA rate paid to the practice confidential. That allowed many corporates to push the equivalent percentage down to the mid-30% mark;

  • Even back in the 50% days, my early explorations into associate profitability spreadsheets demonstrated that, based on average levels of daily production, most associates should have been paid 35% in order to generate any decent profit for the practice where they worked;

  • As my career took me overseas, I noticed that everywhere I travelled other than the UK and Eire, most associates floated around the 35% mark - the situation back here was an anomaly;

  • Along with UDAs came the growing influence of corporates and they gently pushed associate remuneration back down to more profitable levels - I remember back in the day that Oasis were averaging around 42.50%, more recently the "45% less 55% of lab" formula has been common;

  • Owners selling to corporates were obliged to introduce these new, lower levels of associate remuneration, the associates grudgingly required to accept;


So what has happened in the post-Covid, post-Truss economic climate?


  • Associates wanting to work fewer days per week;

  • A labour shortage for both non-clinical and clinical team members;

  • A cost of living increase;

  • Interest rate rises;

  • Dental corporates tightening their belts;

  • Fewer practices being sold.


And yet I return to my opening paragraph - I'm getting lots of questions from around the dental landscape on how to handle the growing number of requests for upward-only percentage reviews.


Let me give you two choices on how to deal with this:


  • Drama

  • Maths


Drama.


The Principal's Drama:


  • Victim - "I cannot believe you are asking me for a percentage increase - my operating costs and payroll have gone through the roof and we are having to work harder to attract new patients;"

  • Rescuer - "After everything I've done for you by recruiting a great team - FOH, TCO, RDN, IOS and lots of lovely patients, as well as lovely surroundings and equipment;"

  • Persecutor - "So I'm going to have to call your bluff - if you want to earn more, produce more."


The Associate's Drama:


  • Victim - "I cannot believe you are only paying me 45% when all my mates are on 50%;"

  • Rescuer - "After all the ways I try to help you - on the emergency rota, seeing the patients you don't want, going on courses at my own expense, coming to meetings;"

  • Persecutor - "I'm going to have to look around."


Put simply - drama gets us nowhere until a bluff is called - and after that, all we have left is bad feelings.


Maths


"Let's sit down with Chris Barrow's Associate Profitability Calculator and work out exactly what we have to do to make earnings a win:win - good for me and good for you."


Maths doesn't do Drama and the good news is that there is always a way to create a win:win.


I still hold that 50% is rarely going to work - only ever for "racehorse" producers - broad brush says those producing in excess of £1,500 - £1,750 a day and higher (it depends on the practice operating costs).


However, there are always ways to make a lower percentage generate an attractive income - albeit by the associate and the team getting their act together.


My clients get this reminded of this every week of my life - and "doing the maths" is a first step for all members of The Extreme Business community.


Maths or Drama? Make your choice.





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