Measuring Key Performance Indicators for MMG members

Guest Contributor: Chris Barrow
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Our quarterly meeting is just around the corner and I have today emailed the members, asking them to update their KPI's for the financial conversation.

So what's a KPI and why is important?

With a group made up of dental practice owners, what we want to identify are the most important financials that can be used as a diagnostic:

1. How do they compare with each other?
2. How do they compare with the market as a whole?

It's also significant to note that I’m not an accountant - and I don't want to understand double-entry book-keeping - so the numbers have to be in a format that the members will find easy to collate and that the group will find easy to understand and discuss.

This is where the experienced-based knowledge of the group comes in handy.

After much deliberation we have settled on the following KPI's - all of which are expressed as a percentage of sales:

a. Owners' profit (before tax);
b. Dental material costs;
c. Dental laboratory fees;
d. Payroll for salaried team members;
e. Average daily gross sales per income producer;
f. Associate dentist fees as a percentage of total fees;
g. Hygienist fees as a percentage of overall fees;
h. Secured debt;
i. Non-secured debt.

It still amazes clients that I can look at these numbers and give a pretty good account of the "shape" a dental practice is in - within a few moments.

More importantly, the MMG members find it useful to compare, contrast and monitor their own progress over time.

Oh - and by the way - how good is that you can demonstrate that your clients' finances are in better shape than the market average?

Let me share a secret with you - the most important KPI of all is....

Average daily gross sales per income producer.

Without exception - if that figure drops the business is in all kinds of trouble.

So part of my responsibility as the MMG facilitator is to make sure that the members submit their updated numbers - and to help them understand what messages they are getting from the numbers - and what to do about it.