Key Performance Indicators: What Dental Practice Owners Should Track

At a glance

• The main takeaway: Tracking the right key performance indicators (KPIs) can significantly enhance the growth and efficiency of your dental practice.
• Impact on your business: When dental practice owners actively monitor their KPIs, they can make informed decisions that contribute to financial stability and growth.
• Next steps:  Aprio’s Dental Team is deeply familiar with the particular challenges and benchmarks specific to dental practices. We are here to guide you through your reports and help make sense of your numbers.

Schedule a consultation

The full story:

Tracking the right key performance indicators (KPIs) can significantly enhance the growth and efficiency of your dental practice. Dental practice owners can better understand your practice’s performance and identify opportunities for improvement by simplifying the data you monitor and focusing on essential metrics, which we will take a deep dive into.

Know your numbers

Many dentists find the concept of tracking performance metrics overwhelming. However, the first step is to keep it simple. Rather than trying to monitor an extensive list of numbers, focus on a few key performance indicators (KPIs) that will give you actionable insights into your practice’s performance. Remember, knowledge is power, and knowing your numbers should be a straightforward process rather than a daunting task.

Practice production indicators

The “Uber number”

The most essential number you should focus on is production. We call it the “Uber number,” which reflects the overall health of your practice. Setting annual production increase goals—aiming for an 18% increase over the next three years—can lead to sustained growth. Additionally, daily production goals are vital. Just as athletes track their performance metrics, dental practice owners should analyze daily successes to assure they’re on track to meet yearly targets.

Production per day

The second number should focus on production per day. It is recommended that dental practice owners have a daily production goal and it should be tracked. Monitoring production per day is essential to knowing the production per year number. We look at production per day so we don’t wait 12 months to find out how the practice did. If the days add up where you’re hitting the production per day, you’ll hit your production per year.

Production per patient

The next number to consider is production per patient, and this is an important one because different practices have different types of volume. High-volume practices can be challenging—as they require a lot of effort—but if managed effectively, they can still yield a good income.

We analyze production per patient to gauge where we stand. If that number is lower than expected, we might aim to increase it by 25%. From there, we can explore various strategies to achieve that goal.

Production per hour

Production per hour is where you’re getting down to the micro changes you can make to enhance performance. If you save just 10 minutes each hour during a four-day workweek, you can add two months of production each year without increasing your workload. If that isn’t impressive enough, this can translate to six extra years of production over a 36-year career, resulting in a 16% increase in overall production without working any harder.

Production per new patient

Lastly, we have production per new patient, which is another important number. Many dentists know that new patients are essential, but they might not understand why. Simply put, a new patient is worth 2 to 3 times more in revenue during their first 12 months compared to an existing patient.

This means new patients can generate 200% to 300% more income, making it essential to attract them and have open appointment slots. Delaying their visits only hinders production. For group practices with multiple providers, evaluating production on a per-provider basis is also vital.

Know how your practice is doing compared to industry standards

Cash flows in and out of your practice, and it directly affects your tax obligations. Focus on measuring cash flow with a specific format to easily compare your practice’s performance against industry standards. This will drive all of your other business decisions and can identify areas of improvement.

We have five main expense buckets to consider:

Staffing

The first major expense to consider is staffing, which typically accounts for the largest portion of a practice’s budget, with industry standards around 30%. It includes costs for your hygiene department, gross wages, payroll taxes, benefits for administrative staff and assistants, and any contract labor. It’s important to note that owner and associate compensation are not included in this percentage, as payment structures vary widely among practices. In staffing, 30% is what we see as industry standard, but may vary with practice needs.

Occupancy

The next bucket is occupancy, which covers all expenses related to your practice’s physical space. For practice owners who own real estate, rent is usually just a transfer from their pockets, whereas practice owners who rent may consider this their largest expense. Occupancy expenses also include cleaning, utilities, repairs, and maintenance. It’s essential to regularly review your lease to know renewal dates and any terms that might affect you financially. Industry standard for this bucket is 8 to 9%, and we recommend that you fully understand the rent that you’re paying for – when’s the last time you looked at your lease? When is it up for renewal?

Direct production cost

The direct production cost bucket is directly correlated with the production you have in your practice. 12 to 14% is the industry standard for this bucket, and it’s the split up between the combination of your supplies and labs. If it gets out of range, consider these factors: Do you need to look at a list of who you are paying? Who are you paying for supplies? Did you try out a new lab? Are you doing some new things inside your practice? Your accounting and financial advisors will discuss these things with you and determine if any changes need to happen. It’s helpful to keep a consistent understanding on where you are from a financial point of view.

Marketing and advertising

Some practice owners might say they don’t spend a lot on marketing and advertising, because word of mouth is their primary method. But for practices that are struggling for their new patient count, they might consider a little more in this bucket. What matters most is the return on investment (ROI). Larger companies typically spend around 10% of their revenue on marketing, but the focus should be on the returns you get, regardless of whether you spend 1%, 5%, or 10%.

Strategies vary per practice style and need. There are a variety of free options (like word of mouth and client referrals), but when considering paid options, be sure to be cautious with signing long-term contracts testing out the concept. In terms of industry standards, once you hit on a marketing strategy that works best for your practice, that’s when you can add another percentage. Remember, the key is testing and understanding the ROI.

Non-operating

This bucket encompasses your normal expenses – any and all additional expenses that you incur of running your practice being a business owner and keeping the doors open. For example, making sure you are aware of what percentage you’re paying in something like merchant fees, professional fees, and any normal business insurance expenses. Typically, we see 8 to 9% as the average, but as with anything, it can vary. Bottomline, it all gets included into that non-operating expense bucket.

The bottom line

These five buckets can determine your total operating expense percentage relative to your collections.

A 60% operating expense leaves you with up to 40% as your operating profit margin. This is what you have available for personal compensation, paying associates, and reinvesting in the practice. Understanding this flow—from income to expenses to profit—is key to successful ownership. These KPIs are what we focus on and regularly analyze even though the percentages can change as the practice may require.

We highly recommend working with a dental CPA and advisory team to fully understand these KPIs and buckets. Connect with your dental CPA more frequently than just once a year to unlock potential for your practice and identify opportunities you may have missed.

Aprio’s Dental Team is deeply familiar with the particular challenges and benchmarks specific to dental practices. We are here to guide you through your reports and help make sense of your numbers.

Related Resources/Assets/Aprio.com articles/pages

• Aprio Dental Service Page