How To Decode Dental Metrics For a Thriving Dental Practice
Running a dental practice is more than meets the eye (or should we say tooth?). While the day-to-day operations focus on delivering top-notch care, there’s also a business to run. And running a successful business means understanding the numbers. By the end of this read, you’ll not just understand the what and why of key […]
Running a dental practice is more than meets the eye (or should we say tooth?). While the day-to-day operations focus on delivering top-notch care, there’s also a business to run. And running a successful business means understanding the numbers. By the end of this read, you’ll not just understand the what and why of key dental metrics but also the how-to.
We recently sat down with David Goodman, a partner and Dental Practice Leader of PKF O’Connor Davies. David is a dental industry expert with years of experience in studying metrics crucial for a dental practice. Bringing us the highly-respected annual report “Dental Practices by the Numbers,” David offers evidence-based insights that can turn virtually any dental practice into a thriving business.
In this blog, we dive into some of the analytics behind a successful dental practice in today’s economy, guided by David’s expert insights. From prioritizing the right metrics to implementing data-driven strategies and tech solutions, this is your quick guide to numbers-driven practice growth.
Here’s what we’ll cover:
- Why dental metrics should be a priority
- The key metrics that every practice should focus on
- How to calculate these essential metrics and strategies for improving them.
- How to leverage metrics for decision-making
- The technology that can make your life easier
Why Dental Metrics Matter
You wouldn’t treat a patient without a proper diagnosis, right? Similarly, running your dental practice without understanding your key metrics is akin to flying blind. Metrics act as a diagnostic tool for the health of your practice, helping you make informed decisions.
Here are a few reasons why metrics should be your best friend as a dentist:
- They help gauge your success
- They help you better understand your patients
- You can keep an eye on finances
- They help you make informed decisions
- They allow you to stay competitive
“Dental Practices by the Numbers”
Understanding the value of metrics is one thing, but applying this knowledge to your practice is another. That’s where resources like ‘Dental Practices by the Numbers’ come in handy. This annual report offers a comprehensive look at financial data and key performance indicators in the dental industry, giving you a more concrete foundation for your own metrics-driven strategies.
Now, let’s dive into the specific metrics that can help you better manage and grow your dental practice.
Key Dental Metrics Every Practice Should Track
The beauty of metrics lies in their ability to tell a story, but not all metrics are created equal. Some have a more immediate impact on your practice’s growth and efficiency. David’s insights help us focus on three crucial ones: Patient Retention Rate, Patient Acquisition Cost, and Lifetime Value of a Patient.
1. Patient Retention Rate
The patient retention rate measures how many of your patients continue to seek your services over a certain period. A high retention rate usually indicates patient satisfaction, quality care, and, ultimately, a stable income stream.
How to Calculate it
First, decide on a specific time frame for your analysis. It could be monthly, quarterly, or annually, based on what makes the most sense for your practice. Next, count the patients who visited your practice at least once before the start of your chosen period and have returned during that period.
Then, count the patients who have been to your practice at least once before the beginning of your chosen period, whether they returned during this period or not.
Then use this formula:
(# of Returning Patients / Total # of Active Patients ) x 100 = Patient Retention Rate
Ways to Improve Your Patient Retention Rate
- Regular communication: Contact patients to remind them about upcoming appointments or check-ups.
- Conduct patient satisfaction surveys to understand areas of improvement.
- Introduce loyalty programs or special offers for repeat visits.
- Ensure excellent customer service, from appointment setting to post-visit follow-ups.
2. Patient Acquisition Cost
Understanding how much you spend to acquire a new patient helps you evaluate the efficiency of your marketing strategies. The lower your acquisition cost, the higher your return on investment. Therefore, continuously measuring this metric can lead to more budget-friendly campaigns.
How to Calculate it
Add up the costs associated with your marketing efforts over a specific time period (including salaries for marketing staff, marketing materials, etc.) Then, track the number of new patients who visited your practice for the first time during the same period you’re measuring your marketing expenses. Then simply divide the two numbers:
Total Marketing Expenses / # of New Patients = Patient Acquisition
Strategies for Lowering the Cost
- Leverage word-of-mouth through patient referrals.
- SEO: A well-optimized website attracts more organic traffic.
- Use social media and PPC advertising to target potential patients more effectively.
- Conduct regular audits of your marketing channels to identify underperforming areas.
Lifetime Value of a Patient
This comprehensive metric goes beyond just the revenue from an initial consultation or treatment. It encompasses the total financial contributions a patient makes over the course of their relationship with your practice, accounting for repeat visits, referrals, and any treatments or services they may opt for.
How to Calculate it
This one is a bit more complex, but well worth knowing how much you can afford to spend on acquiring new patients and retaining existing ones.
First, you want to find your average value of a single visit. This is usually the total revenue for a given period divided by the number of patient visits in that period.
Total Revenue in Time Period / # of Patient Visits in Time Period = Average Value of a Visit
Next, you’ll calculate the annual value of a patient. To do so, determine, on average, how often a patient typically visits your practice in a year. Then, multiply that number by the average value of a visit you calculated previously.
Average Value of a Visit × Average Number of Visits Per Year = Annual Value of a Patient
Then, determine the patient lifespan at your practice by estimating the average number of years a patient continues to visit your practice. Industry averages can be a good starting point, but the more specific you can be to your practice, the better.
Take your estimated patient lifespan and multiply it by the annual value of a patient you determined in the previous step to find the Lifetime Value of a Patient:
Annual Value of a Patient × Patient Lifespan = Lifetime Value of a Patient
Ways to Enhance it
- Diversify your services to encourage more frequent visits.
- Implement a referral program to encourage existing patients to bring in their friends and family.
- Offer comprehensive dental care plans.
- Upsell or cross-sell treatments when appropriate.
- Create a follow-up system for regular check-ups and dental cleanings.
Leveraging Dental Metrics for Decision-Making
Think of metrics as signposts guiding you toward a more successful dental practice. David offers nuanced insights into how to make these metrics work for you in the real world. By tuning into these elements, you’ll not only meet your immediate targets but also align with your practice’s overarching goals.
Short Term Goals
Most dental practices often have short-term goals, such as filling appointment slots for the upcoming week or month. For such objectives, closely watching metrics like patient acquisition cost can provide immediate feedback. If you see that your cost per new patient has suddenly spiked, this could mean a particular marketing strategy is not working as well as you’d hoped. Consequently, you can quickly switch gears, optimizing your marketing budget more effectively.
Long Term Vision
David also underscores the significance of aligning your metrics with the long-term vision of your practice. Are you aiming to specialize in orthodontics or cosmetic dentistry? Tailor your key performance indicators (KPIs) around that focus. For instance, if cosmetic dentistry is your target, track the average revenue generated from these procedures and aim to see a steady increase over time.
The dental industry isn’t immune to seasonal fluctuations. Monitoring metrics seasonally, rather than just annually, can give you more actionable insights. For instance, you might notice that patient retention rates dip around the holiday season, prompting you to roll out a special offer or a reactivation campaign.
David wisely advises using metrics as a risk management tool. For example, if you notice a decreasing trend in new patient acquisitions or an increase in patient churn, this can serve as an early warning system. Immediate corrective action can be taken before it spirals into a bigger issue, safeguarding the future of your practice.
The Role of Technology in Dental Metrics Tracking
Embracing the right technology is essential for effective metrics tracking. Gone are the days when you had to rely solely on spreadsheets or manual calculations. With specialized software tailored for the dental industry, not only can you monitor real-time data but also automate many aspects of data analysis.
Dental Practice Management Software
One of the most impactful technological tools you can employ is a dental practice management software. This software allows you to easily track key performance indicators like patient retention rates, patient acquisition costs, and the lifetime value of a patient. With the click of a button, you can generate reports that give you a snapshot of your practice’s health.
Business Intelligence Tools
David suggests that practices can benefit from business intelligence tools that can compile data from various sources, offering a more comprehensive overview. These tools can even create visual dashboards, making it easier for you to understand the data at a glance. If you’re looking to drill down further into your numbers, these tools often come with features that allow for a deeper analysis.
The power of the cloud should not be underestimated, especially for practices with multiple locations. Cloud-based solutions enable you to access your metrics from anywhere, at any time, ensuring that you are always in the loop. This is particularly helpful for those who are constantly on the go but want to keep a close eye on their practice’s performance.
Wrapping Up: Key Takeaways For Your Dental Practice
Metrics are more than just numbers; they’re the heartbeat of your practice. And when you have experts like David Goodman providing annual reports like “Dental Practices by the Numbers,” you’re better equipped to take your practice to the next level.
Here’s a quick recap:
- Key metrics to focus on include Patient Retention Rate, Patient Acquisition Cost, and Lifetime Value of a Patient.
- Use metrics to guide both your short-term objectives and long-term vision, making necessary adjustments along the way.
- Seasonal adjustments and risk management are advanced uses of metrics that can give you actionable insights and safeguard your practice’s future.
- Technology can be your ally in metrics tracking, making data collection and analysis more streamlined and effective.
A Bite of Dental Marketing
Hungry for more? Catch our full conversation with David Goodman on our podcast, “Bite-Sized Dental Marketing.” Hosted by our own Eric Hubbard, each episode serves up a hearty helping of industry insights from leading experts.