Benchmarking for dental practice owners: Why context is key

This article was originally published 12 August 2019. 

Benchmarks are invaluable tools for any business wanting to improve. However, in the dental industry, benchmarking tends to be ad hoc at best. This is because it can be difficult to access data outside of a practice's own community. Why should dental practice owners benchmark, and how can they do so effectively?

Why benchmark?

A benchmark allows a business to see how it's performing across several key areas. Once an owner understands their benchmarks, they can find out which areas to improve, set specific goals around these, and then invest the right amount of time and money into each one. Benchmarks also help to increase accountability, because an owner can look at the objectives they've set and hold people responsible for meeting those targets.

What areas should dental practices benchmark?

BDO works with many dental clients, and internally benchmarks all of them to find a solid foundation for a broad industry overview. Our industry reach into financiers, lawyers and other consultants allows us to stress test in the market to ensure our figures are accurate. We benchmark six essential areas, which are all based on gross patient fees. For a general dental clinic, they are as follows:

  1. Dentist/clinical staffing costs (35-40%)
  2. Lab fees (2-4%)
  3. Consumables (6-8%)
  4. Advertising (3-6%)
  5. Rent (5-10%)
  6. Non-clinical wages (17-22%)

These six areas all relate to the key parts of a dental business, so if a practice owner can control these benchmarks, they will have a profitable practice.
However, the above numbers are very high-level benchmarks based on all of our clients and industry knowledge. These benchmarks aren't broken down into geography or other individual circumstances of each dental practice. This is where we get into the caveats of benchmarking.

Benchmarking: A word of caution

As with any number taken in isolation, if you don't have context, experience or expertise surrounding a particular benchmark, it's very easy to go down the wrong path. A benchmark by itself doesn't necessarily tie into an holistic conversation about what improvements a business owner can make.

For example, dentists tend to buy consumables in bulk in order to get a discount. This means that their consumables benchmark is going to increase significantly in one or two months, and then drop dramatically later. If taken in isolation, a dentist may try to put more pressure on suppliers to decrease that number, thus damaging relationships in the process and having a negative impact on their practice.

Advertising is another example of a commonly misinterpreted benchmark. A practice owner may look at their advertising costs and see that they are not correlating with an increase in patient fees. The advertisements may be leading to potential customers ringing in, but if your reception or internal marketing process is poor, these actions may not translate to a revenue increase.

In addition, it's important to consider how a particular number has come about. Most benchmarks will be based on accounting information, so if a business doesn't have strong data, it's unlikely its benchmarks will be accurate.

Benchmarking with BDO

BDO provides a full range of benchmarking services to ensure your dental business is on track. In addition, if you are looking to purchase a new practice, we can help assess whether it is a worthwhile investment by reviewing the figures and determining where there is room for improvement and where the practice may be suffering irreparably.

We also hold regular client check-ins to review the figures and check progress towards specific goals, helping them get to the bottom of specific numbers and find areas to improve.

For more information about benchmarking with BDO, please reach out to the team today.