For each profit driver , think about what things could help improve the number . Is it new equipment , better systems , more targeted marketing , working with better dental partners ? Then , estimate how much you think you could improve each driver from where you are right now and what that improvement would equate to in terms of dollars .
Example Calculation 1 :
You ’ ll want to start with your current Net Income After income Taxes . Let ’ s call that ( NIAT ). That is basically what ’ s left over for you to take home as your “ taxhome pay .” For this example , let ’ s say that number is $ 150,000 .
Let ’ s look at Profit Driver # 5 . Let ’ s say that you improve that by offering a more thorough diagnosis , more optional services , etc . You estimate that you can increase collections from new patients $ 24,000 per year .
If you then divide that $ 24,000 by $ 150,000 ( NIAT ), you ’ ll find that is a + 16 % change to your bottom line .
$ 24,000 Estimated net increase in bottom line by improving Driver # 5
Divided by
$ 150,000 Current NIAT
( Net Income After Taxes )
= 16 % Percentage increase to NIAT
$ 12,000 Estimated net increase in bottom line by improving Driver # 7
Divided by
$ 150,000 Current NIAT
( Net Income After Taxes )
= 8 % Percentage increase to NIAT
This approach can help you quantify , in real numbers , what will help you the most . Maybe you thought saving 2 % on dental supplies would be the best answer , but in reality , that actually falls in the bottom half of your rankings . Plus , many dental sales reps can actually help you look at other things to increase your bottom line or provide you with additional resources , so consider the value that other dental vendors can bring to you .
For example , what new equipment could help you increase collections from current and new patients ? Not in a way that results in over-diagnosing , but in a way that you can be more accurate in your diagnosis or offer your patients a wider variety of elective procedures ?
Or , how can you get more leads and convert more of those leads to patients ? Is that working with a marketing company , targeting your advertising better – or could having the latest equipment help with new patients as well ?
TIP
Focus on one profit driver per quarter
Be sure to think about all the options to improve each profit driver . It ’ s easy to want to try to do everything . Still , once you assign a percentage change to each profit driver , you can then rank them from the highest percentage change to the lowest percentage change . This can help you determine the one driver that can change your bottom line the most , so that is probably the one you ’ ll want to focus on in your first quarter . Then , next quarter , reanalyze the Profit Drivers to determine what to focus on next .
If you need help estimating an amount for Driver # 9 - Reducing Taxes , I invite you to take the three-minute quiz at www . DentalTaxQuiz . com . With more than 34,400 possible combinations of calculations , we ' ll use your exact situation to give you an estimate of the amount of taxes you are overpaying .
Jeramy Smith is the founder of Jeramy Smith , CPA , PLLC , a boutique CPA firm focusing on serving Texas-based dental practices . With over 25 years as a Texas Certified Public Accountant , he has helped hundreds of clients with business strategies and tax-saving strategic planning . Contact Jeramy at jeramy @ planotaxteam . com .
Example Calculation 2 :
We ’ ll start with the same $ 150,000 for NIAT . This time , let ’ s look at dental supplies , Profit Driver # 7 . Let ’ s say you can shop non-dental vendors and save 2 %, which equals about $ 12,000 per year .
If you then divide that $ 12,000 by $ 150,000 ( NIAT ), you ’ ll find that makes a + 8 % change to your bottom line . www . northtexasdentistry . com | NORTH TEXAS DENTISTRY 25