When maximizing profits, a lot of attention is paid to increasing revenue. While that is important, we can’t lose sight of our expenses while doing so. Getting expenses under control is a great way to increase profitability instantaneously and without needing to attract any additional patients to your practice.
If your expenses are getting out of control and you can’t make the take-home income you want no matter how productive your practice is, it’s time to hone in on two types of expenses. To help practices get their expenses out of control, we invited Glenn Vo, of Nifty Thrifty Dentists to be our office overhead coach to the practice leaders and team members who have invested in the Delivering WOW Platinum Coaching Program.
Glenn works with practices to control—and cut—overhead without sacrificing patient care and quality. In doing so, he helps practice leaders create calm from all the chaos, understand the two types of expenses every practice has, and how to control each of them to simplify operations and increase profits.
Fixed expenses are expenses that are a set amount each month. It doesn’t matter how productive you are, fixed expenses don’t change. Typically, these are expenses you’ve negotiated and can’t change quickly, such as rent, mortgage payments, and practice loans.
Sometimes, however, fixed expenses can be reduced or eliminated, especially with monthly recurring software costs. For example, you could change phone providers to find a better, lower-priced option.
Other times, fixed expenses eventually disappear, such as practice loans. If you have significant time left on long-term commitments, you could attempt to refinance or extend contracts to get better terms. You could refinance a loan to lower an interest rate or free up cash flow. You do have options.
Often, the fixed expense you have the least control over is rent. Generally, only in rare cases can you negotiate rent decreases. Generally speaking, you’re stuck with rent rates until the end of the term. It’s very important to have help from qualified people to help you negotiate terms on fixed expenses, especially things like rent that are difficult or expensive to reduce once set.
Variable expenses are often seen as good expenses because they increase when production increases. Variable expenses include things like supplies and staff wages.
But rising variable expenses are not always positive. If you see variable expenses rising without production rising, it’s possible your supplier increased prices or scheduling is inefficient.
Variable expenses are often much easier to reduce than fixed expenses. If supply costs rise, you could shop around for new suppliers, find less expensive alternatives, or participate in group buying programs to take advantage of favorable rates. If staff costs are rising and inefficient, you could cut back on staffing to better fit the anticipated production needs.
Either way, within a matter of weeks, you could see a noticeable reduction in variable expenses.
Are You in Control of These Two Expenses?
While some expenses are difficult to control, we have options with the vast majority of expenses. In Glenn’s experience, every practice has some inefficiencies. They are not always the same for each practice. But every practice has some fixed or variable expenses that can be reduced.
Are your fixed expenses high? Look at your real estate costs, practice loans, and other monthly expenses that do not vary.
Do you have a long-t Once you understand your expenses, When it comes to fixed expenses, by finding a company that will help you negotiate your lease to a cost that isn’t out of control for you. Be careful about taking out loans, too. When it comes to variable expenses, make sure you aren’t offsetting costs if they are increased.
If you want to learn more about controlling these two expenses, sign up for our Delivering WOW Platinum Coaching Program where our financial mastermind, Glenn Vo, can help you take control of these two expenses.