How I analyse a client's accounts according to Extreme Business principles

Put simply, the profit margins in dentistry are in decline and it is mission critical at the moment that you know your numbers inside out.

Failure to pay attention to this may result and the scary prospect of approaching pay-day and wondering where the money is coming from to cover the team's wages.

It's not very nice for anyone when a long-suffering Owner or Manager calls me to share their financial frustrations and/or worries.

To provide a robust analysis of management accounts based on Extreme Business principles, I’ll break down the key components typically examined. The principles focus on profitability, efficiency, sustainability, and strategic growth.

Key Areas for Analysis

1. Revenue Streams

   • Diversity: Are revenues derived from multiple sources (e.g., private, NHS, hygiene, orthodontics)?

   • Growth: Are revenues increasing month-to-month or year-on-year?

   • Focus: Is the practice investing in high-margin treatments?

   Extreme Business principle: Practices should avoid being overly reliant on one revenue source.

   
   

2. Cost Control

   • Staff Costs: Are these within the recommended 20%-25% of revenue?

   • Lab and Material Costs: Are these kept under 10%-15% of revenue?

   • Overheads: Are discretionary expenses (marketing, subscriptions, etc.) providing a measurable return?

   Extreme Business principle: Reduce wasteful spending and maximise ROI on every expense.

   
   

1. Profitability

   • Net Profit Margin: Is the practice achieving at least 25%-30% net profit before Owner's drawings (or 15% in purely associate-led)?

   • Owner's Drawings: Is the principal dentist compensating themselves appropriately while retaining profit for reinvestment?

   • Fee-earner profitability: Is every fee-earner in the business generating a profit for the business?

     Extreme Business principle: Profit isn't just an outcome—it's a benchmark for sustainability and growth.

   
   

   1. Patient Metrics

      • New Patient Acquisition: How effective are marketing efforts?

      • Retention Rates: Are recall systems and ongoing care plans effective?

      • Case Acceptance: Are treatments converting into revenue?

      Extreme Business principle: Focus on building patient relationships over chasing sales targets.

      
      

2. Cash Flow

   • Liquidity: Is the business cash-positive every month?

   • Emergency Reserves: Is there a buffer for 3-6 months of operations?

   • Debt Management: Is borrowing aligned with strategic goals rather than plugging gaps?

     Extreme Business principle: Cash flow is the lifeline of a practice—always know your cash position.

   
   

   1. KPIs (Key Performance Indicators)

      • Lab and Materials

      • Wages;

      • Operating Cost Per Surgery Per Day;

      • Revenue per clinician/hour

      • Revenue per surgery/hour

      • Average patient spend

      • Utilisation rates of chairs and clinicians

      Extreme Business principle: Use data-driven insights to identify inefficiencies and opportunities.

      
      

Once a client shares the specific figures, ratios, or trends from the accounts, I can provide targeted recommendations.

We can then align the numbers with strategic and tactical decisions to improve profitability and long-term success!

Need help understanding your numbers?

Email me on coachbarrow@me.com