You Don’t Need More Space, You Have an Efficiency Problem (Costing You Big Time)

We challenge the reflex to hire an associate or build more operatories when the real issue is low efficiency and weak utilization. We break down the numbers that reveal the true bottleneck and the practical steps that raise production and profit without adding fixed costs.
• why most “space problems” are really efficiency problems 
• the core rule: do not build a bigger box for a broken system 
• real-world production per operatory examples and why benchmarks can be too low 
• expanding hours as the fastest way to increase utilization 
• the associate trap and how extra providers can reduce profitability 
• the minimal acceptable production floor of $650 per hour and why owners should aim higher 
• identifying constraints: new patient flow, hygiene pipeline, procedure time, scheduling 
• how block scheduling can drive rapid production gains 
• using evening hours to improve access without increasing overhead 
• three questions to answer before expanding: DPH, hygiene coverage, fully utilized hours 
Go to dentalpracticeheroes.com/slash strategy.

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Transcript

Space Problem Or Efficiency Problem

Paul Etchison 0:01

I see this mistake all the time. A dentist says, I need an associate. I'm ready for an associate. Or we're at capacity. We're out of space. We need more operatories. We're going to expand to eight, nine, 10, 11 ops. But then I look at the numbers and I realize very quickly they don't have a space problem. They're not at capacity. They have an efficiency problem. So that's what we're talking about today. How do you know? How can you tell if it's time to focus on your efficiencies and maxing that out, or that it's truly time to bring on an associate or expand your facility? Because dentists are very quick to expand, but I assure you, you can get a lot more bang for your buck by tightening up your systems and maximizing your efficiency. Now you are listening to the Dental Practice Heroes podcast. We are the podcast for practice owners that want to work fewer clinical days, increase your profits, and build a team-driven practice that runs without you. I'm your host, Dr. Paul Edgeson. I'm a coach. I've written two books on dental practice management, and I'm the owner of a multi-doctor practice in the south suburbs of Chicago that I only practice clinically at two days a month. So if you're looking to be an owner of a practice that practically runs without you and doesn't require you to perform clinically day in, day out, you are in the right place. And today we're going to talk about something that can cost you millions over the lifetime of your practice if you get it wrong. Here's the moral of the story: don't build a bigger box for a broken system. Now, as a dental coach, I get to work with a lot of offices. And I can tell you, it frustrates me so much how quickly dentists will jump to hiring an associate or expanding their operatories, or even like the bigger, the most biggest thing you can do with your practice, moving locations and starting over. I don't want you to do any of these things before you've maxed out what you already have. And I'm not talking about maxing out 100% of your potential. I'm talking about a lot of these dentists aren't even at 50, 55, 60% of their potential. You do not need to get to 100% of your potential before expanding your place. But damn, at least get into an area of efficiency that allows you the proper profitability that it makes sense to expand your facility. This is like saying, my car doesn't go fast enough. I must need a bigger garage. No, you got to tune up that engine. Here's what you're doing with your practice when you expand. You know how you get a puppy and they're just crazy as hell, and you leave the house and you put them in the crate. Maybe they'll tear something up in the crate. Or worst case scenario, they do a number two in the crate and they bounce in it and get it all stuck between like the bars of the crate and it's a big pain in the butt to clean. I know there's people out there like, dude, I know what you're talking about, and that totally sucks. But at least it's in the crate, right? So if you've got chaos in your crate, keep it in the crate. Don't give the puppy the full run of the house. Otherwise, you're gonna come home and your couch is gonna be half eaten. That's not what we want. You got to get things running smoothly. You got to get things predictable before you give Mr. Wolfwoof the whole run of the house. All right, so here's the first point today. Most quote, space problems are not truly capacity problems. Let me give you some context. Now, in 2018, five operatories, we did 3.4 million collectible out of five operatories. Now, inflation adjusted for today because it's almost been like 10 years ago. 4.37 million. All right, out of five ops. I just interviewed somebody on my podcast not that long ago. Six ops doing about five million dollars out of six operatories. Now we look at those stats where they say you should be doing 300 to 500,000 per operatory. I don't agree. I think we can double that. We can seriously double that reasonably, and we don't have to do anything crazy. We just have to get intentional. Now, those big numbers out of the five and six operator, we didn't do that because we had extra space, because we had a bunch of chairs or a bunch of providers. We did it because we maximized our hours. We maximized our scheduling, our hygiene capacity, our dollar per hour production. We maximized all the efficiency. And that was before I ever expanded my operatories. We eventually got there. We eventually expanded from five to 11. But before you ever expand your facility, you can always expand your hours. You can always add additional days, evenings, longer days, maybe additional days. A lot of people are closed on Fridays. Let's face it, adding square footage, it increases your fixed costs. Adding team members, that increases your payroll. But opening evenings, I mean, that just increases the utilization of the existing assets you already have in your practice. You don't need more equipment. You don't need more chairs, you don't need more fixed costs. It's a big difference. So let's talk about the associate trap. This one's even bigger and a little bit more frustrating. I worked with clients who, when I start with, I give them this questionnaire and I ask them a bunch of questions. And some of them are like, I already have an associate. I'm like, awesome, cool. You've already got past that hardest stage of expansion and scaling, which is bringing on that first associate. That, in my opinion, is the most difficult transition for a practice to make. Second associate, not that big a deal. Third associate, piece of cake. Bringing on specialists, no big deal when you've got a lot of associates to feed them. A lot of things come easier down the line after you have the bigger team, things are running on systems. But the most challenging is bringing on that first associate. And then I look at their numbers and I see an office between one and two million dollars or the low twos. And I say, How is this a two-doctor practice? I don't understand. So I'm thinking of one person I worked with where we looked at the dollar per hour and we saw that both doctors were doing roughly about$400 per hour. They were both working four days a week. Okay. So if we do the math there, we got two doctors doing 32 hours a week and$400 an hour. That's about$25,000 in production a week. Now, here's what I would rather see. I would rather see one doctor working three days a week. Okay, not four, three days a week, 24 hours. One doctor working three days a week, doing about$1,000 an hour is the same result. But guess what? We didn't need more space, we didn't need more hours, we didn't need more chairs, we didn't need additional assistance, everything. We didn't need all these things, all this additional payroll because we were open extra hours, because we didn't have enough chairs to have two doctors. All these things are they're unnecessary and they lead to low profitability. Because here's the thing associates are a trap. If you add associates and they don't hit what I call the minimal acceptable production floor, they will not be profitable and they will lose you money. And that production floor for me, it's$650 an hour. I don't know why. I'm sure there's math behind it, but I'm just telling you, if you can get every doctor in your practice to do at least$650 per hour, you will be profitable. Now that doesn't mean associates are bad. That doesn't mean that that person's bad for hiring them. It just means their system wasn't ready. They were looking at their practice, feeling like they had a capacity issue. They're feeling like the next logical step is to add an associate. Now it's all awesome. Now I can take vacations and not have to close my practice. I get it, but the system wasn't ready. They didn't max out their efficiency. They didn't get all intentional with their scheduling. They didn't make sure the production per hour for every provider was on point. They didn't make sure that they had the right hygiene pipeline to even support two doctors. So when you add that second associate, you're just spreading that inefficiency across two people. And now instead of having one underperforming provider, you've got two. So that's wrong. We want our associates to be leveraged, not a crutch for us. So if your personal dollar per hour is low, fix that first. Maximize what you already have. Look at dollar per hour, the great equalizer, dollar per hour collectible,$650 or more. So if you're not performing there, you've got to look and identify what is the real constraint here? What is the bottleneck? It typically is one of these. It's new patient flow. You don't have enough new patients. Or your hygiene flow is not really matching the amount of doctors you have or the doctor time. You're using too much time for procedure. You don't have the efficiencies. Maybe your scheduling is not there. That's a big one for people. DPH block scheduling. When I teach this to coaching clients, they typically see a 35 to 50% increase in their production overnight from just changing to DPH block scheduling. So it could be any of those things. And that's what we do with coaching. All these things are related. We always want to point out it's just this one thing, but it's always a little bit of all things. And that's what we do in our seven-phase omnipractice program that we take our clients through. If you're interested in that, go to dentalpracticeheroes.com/slash strategy, set up a strategy call with me. Happy to talk to you about what's possible. But look at everything at your practice and identify what the real constraint is, the real one, not the emotional one, the mathematical one. Do the math. You need to be at at least$650 per hour. And if you're the owner doc, I'd rather see you at about$1,000 per hour. I want to see you fully booked on your doctor side, out like three, four weeks fully booked. I want to see you holding space for new patients and looking out six months from now and saying we have nowhere to put our existing patients. You don't need more space. You need more intentionality. So when we're at an office that's less than eight operatories, meaning that it's very difficult for us to have two doctors there at the same time, we have a little bit of a problem. Now I see sometimes where people will say, Well, it's cool. I've got six chairs. So I'll have two doctors and they will share three chairs, and then I'll have three hygienists. It doesn't work like that. You need to have enough hygiene to keep the doctors busy. I've seen offices try to do two doctors with two hygienists, and then they're wondering why they are producing so low? Why do they have so much open time in their schedule? It's because the patient pipeline is not big enough to support two doctors. So then you say, Well, I can't have two doctors there at once. I need to expand so I can get to eight chairs so I can have two doctors with four hygienists. And I disagree. I think there's a lot of opportunity in evenings. And I always hear it: my team won't do evenings. They haven't done evenings. We've never done it before. They're not going to go for it. I don't even want to ask. I don't even want to bring it up. But, you know, maybe you're right, but maybe not. Have you asked? I mean, evenings offer way better access for our patients, a way more marketable thing to get new patients. And it's one of those things that really maximizes our facility. We don't take on any additional fixed costs when we open up evenings. So we can get our office to a level where those fixed costs get so low that we hit this profit center where we're like, whoa, okay, I like how much money this is generating for me as the owner, versus expanding our operatories, buying a bunch of more equipment, taking on higher rents, taking on higher payroll, taking on a bigger loan, things like that. So, how do you do evenings? Well, you talk to your team about it. You talk to them about how it is kind of nice to have evenings. You can run errands during the day. It works for a lot of people. And the fact of the matter is, is that in most offices, you can be open every evening of the week, and your employees shouldn't have to work more than one or two evenings a week. Some people, it makes a lot more sense to have the evenings. But for the people it doesn't make sense for, you're only asking them to do it one or two days a week. How do you transition into this? Well, you start with one evening a week, regardless of whether or not you have an associate. You have one evening a week. So then if you decide to bring on another associate, you can maybe add that second evening. But I promise you, it's not as bad as you think. And once you get your team to just try it out, it's not, they're not going to complain about it as much as you think. But at the heart of this matter, it's your practice. You're the one who went to dental school. You're the one who put your name on the dotted line for the loans. You're the one taking all the risk. Do not let one negative attitude or one very rigid, unchangeable person keep you from adding evenings. If you add evenings and your team has such a big problem with it, they will move on and that's okay. You want to keep them, you want to keep everybody happy. But if in your vision for this practice is evening hours and maxing out your existing facility, your existing operatories, your existing square footage, don't let that one person keep you from doing it. You will find people who want to be part of that machine that you're building, who want to take care of patients in a way that is after hours, who are willing to stay late maybe one night a week, two nights a week. So here we are. The hard and difficult truth expansion. Whoo, baby, it is sexy. Adding associates. Ooh, yeah, that is nice. It sounds good, it feels good. It feels like we're scaling bigger buildings, more employees. It feels like success. But profitability, it is built on utilization, efficiency, dollar per hour, and managing your existing capacity, not on square footage. So before you hire an associate, before you build more ops or move your location, I want you to ask yourself these three questions. Is my dollar per hour where it should be? Am I at the point where the amount of hygienists I have is exceeding the ability to check those hygiene chairs? For example, do you have too many hygienists for the doctors? And three, are my current hours fully utilized? Are they as efficient as they can be? Which kind of comes back to dollar per hour. If the answer is no, fix that first, then expand. So in closing, growth should not be ego driven. Do not build a bigger box for broken systems, maximize what you have, engineer that efficiency, then scale. When do you expand? When you're ready, when you've maximized what you already have. And guess what? You might get there and decide you don't want to expand anyway. You'll do it because it's the right thing to do, because you're free to do it, and you've maxed out what you already have. And if you're looking for someone to help you with your practice, create the systems and the processes that grow and teach you how to manage and inspire your practice in a way that it feels good, that you do the right things for the patients for the right reasons. Please reach out to us and talk to us about our coaching options. Go to dentalpracticeheroes.com/slash strategy. Happy to have a call with you. No charge, no pressure. Just talk about what's possible. Thank you so much for listening today. I want you to have a great day at the office, and we'll talk to you next time.