Fee Setting
The single most important aspect of ensuring profitability in a dental practice is sufficient collected income to cover expenses, and to allow for a return on investment, provide income as needed for the proprietor, provide a decent level of superannuation and make allowances for payment of taxes. That is worth repeating - cover expenses (including loan redemption), allow for a return on investment, pay the proprietor and superannuation, and pay taxes. It might come as surprise to you that many do not set fees with a view to doing all of that. Unfortunately many of us operate a practice as a magical cash flow machine (and they can seem that way) and instead never give much thought to the bigger picture and the accrual position ( or the accounting bigger picture) . The single largest barrier to charging what you need to is your and your team's preconceptions and an incorrect understanding (to be frank) of how and why people buy from dental practitioners. How much should the proprietor be paid ? As a bare minimum, 40% of fees billed, plus a return on investment (capital invested that would otherwise be available for investment in simple terms) of perhaps 10%, plus 15% super and some administration compensation. That is the minimum. Now, it is worth looking at last years draft profit and loss which you should be getting back soon and seeing if you add up all of that and see if you are getting that as a return. Are you ? Even better is to calculate what you individually need to earn from the practice and then make the practice produce that for you. It can be done. Even if that is too much trouble, once you know how much you have to nett (because it is better to take lab costs out of the equation and project and establish targets nett of lab fees), all you have to do is work out how many hours you are going to need to work and at what rate. ' So lets assume you want six weeks off and work a four day week, and another week off for continuing education, we have 45 weeks of 4 x 8 hour days ( it really is easier if you just use the spreadsheet!) and a total of 45 x 32 hours = 1440 hours. That is actual working hours. So if you need to gross say $1 million dollars, then you need to nett (charge and receipt after lab bills) $694.40 each hour you work. Now take it from me that if you want to charge $1 million dollars at $700 an hour, your productive hourly target needs to be $800 per hour as a minimum, to make up for examinations, emergencies and no fee work on occasion, or for the times things just don't go to plan. Once you know this amount - $800 per hour - then you start setting your fees - and not before. Now the easy way to do this is to take a deep breath - a very deep breath for many of us - and treatment plan everything at $800 an hour. If a crown takes 60 minutes to prepare and 30 minutes to insert, then the fee should be $1200 plus lab bill. Now, if the lab bill is likely to be $450, then the charge for a normal crown is to be $1650. Did the distributed list of what someone else charges get considered at all ? No. Why ? Because - and this is important- dental fees are inelastic, and you should be able to charge what you need to - not what a distorted set of statistics might suggest. Now, you can then set similar fees for restorative, endo, implants and all of your productive procedures, working with treatment times and fees until you can meet these targets. Two large difficult restorations that might take an hour - remember that $800 is the target. Quality of course has to be maintained, but you can either reduce treatment time or increase fees (or both). You will be surprised how much can be done for no real effort, beyond thinking about how you use your time effectively and managing the actual work flow and systematising it. Of course, in a single page we cannot cover all eventualities but this does give you a different way to think about fee setting. If you actually work out what you need personally, then bring that into the profitability for the practice, you will really be in control and need not fear early July and August ever again. And that, is a nice feeling.