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THINKING BUSINESS
a blog by Chris Barrow

What's the most important number in the business of dentistry?



OCPSPD


Operating cost per surgery per day.


That does NOT include "variable costs":


  • Lab bills;

  • Material costs;

  • Implant components;

  • Remuneration to fee-earners - hygienists/therapists/dentists (unless they are on PAYE).


It DOES include "operating costs":


  • All the day to running running costs of your business;

  • Including PAYE payroll;

  • Including all debt servicing.


And the total of your running costs for the year must be divided by the number of occupied surgery days you offer per year to arrive at the number we seek.


It's the most important number in dentistry because it determines, after calculating:


Gross revenue minus variable costs minus OCPSPD


Whether or not you are making a profit on the room.


Would it come as any surprise to hear that:


  • The majority of dental business owners/managers/team members have no idea what their OCPSPD is?

  • The majority of self-employed fee-earners the same?

  • Over my 30 years in dentistry, a significant proportion of rooms are NOT making a profit and are being subsidised by the earnings of the owners?


Which may well be why you are working like a dog and have no cash flow at the moment.


You have to establish OCPSPD for your rooms and then set average daily production targets for each fee-earner.


By the way, in answer to a recent client question:


"I agree that counting “sessions” (half-days) is an accurate way of doing it.


OCPSPD is about the costs of opening the room - all the operating costs including payroll - and I always make the point that if a surgery is empty for half a day, there is no point in including that in the divisor to calculate.


We could say OCPUSPD


Operating cost per utilised surgery per day - is actually the more accurate definition.


To take this a step further:


OCPUSPS


Operating cost per utilised surgery per session."


I'm writing a lot about financial issues here in the blog and in other dental publications.


That's because my email inbox is full of questions about fee-earner profitability and cash flow (or should I say, the lack of either).


You have to get your head around the numbers - right now.


Let me know if I can help - coachbarrow@me.com




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