Want More Profit?
As a doctor, your first concern is the well-being of your patients. As a practice owner, your first concern is the well-being of your practice. And that means you need to make profit.
Profit is your reward for starting or buying the business, taking all the risks and being personally responsible for its success. To earn the profit you deserve, you must give it your attention.
At some point you may have said, “As long as I’m seeing lots of patients, I don’t worry about my profit.” Yet treating an abundance of patients is no guarantee of a profit increase. As you know, profit is also influenced by fee rates, collection percentages and overhead.
You might have also said, “Profit takes care of itself if I just focus on quality care.” Insurance executives love providers who focus on quality and ignore profit! You make their dreams come true at your expense.
Being a great clinician does not mean you earn a great profit. You have to take action.
Profit is like the final score in the practice-management game. It shows your skill in establishing the practice, making business decisions and providing superior service.
If you fail to track a profit statistic, you don’t know your score. You can’t be sure if you’re winning or losing. If you wait for months before checking your numbers, controlling your profit is difficult, if not impossible.
To win any game, you need to know the score at all times.
Calculate It, Graph It, Compare it
1. The first step to controlling your profit is to add it up, but not like an accountant.
Your accountant’s definition of “profit” is based on IRS rules. It does not include some of your car expenses, your personal retirement account contributions, health insurance and more.
To add up your actual profit, calculate it like a practice broker should calculate it. Include all the personal benefits a buyer can expect.
To do this, take your monthly draw, pay or distributions and add your retirement fund contributions, health insurance, home office reimbursement, pay to family members beyond normal pay, office mortgage payments above reasonable rent, some of your vacation seminars costs and so on. This is your actual profit.
2. Calculate the profit percentage by dividing your profit by gross collections.
Are you earning 50% profit? 65%? 25%? 10%? Is this percentage acceptable to you?
3. Divide your working hours into your profit so you can see your hourly value.
This is valuable for deciding which jobs you should delegate. For example, if you earn $350 per hour, you can actually spend $100 per hour to have someone else clean your parking lot while you treat patients.
4. Next, plot your profit stat on a monthly graph chart to compare it with previous months’ figures.
When compared to the last few months, is your total monthly profit increasing, staying the same or falling? Also, how does it compare to this same time last year?
5. Compare your profit with similar practices.
For example, if both you and a colleague produce $100,000 per month, but his profit is $40,000 while yours is $23,000, you need to make some changes.
Do the math and reap the rewards!
To learn more ways to improve your bottom line, read ExecTech’s free e-booklet, “More Profit, Less Stress.”