KPIs, or key performance indicators, are essential to track the success of any business. They are a good measure of the overall financial health of a company and can pinpoint certain areas that may need improvement. Dental practices specifically focus on a certain set of KPIs that are the most relevant to the industry.
All KPIs are important, but some are more essential than others depending on the needs and objectives of the industry. This blog will outline 3 beneficial KPIs to analyze for dental practices, why they are important for financial success, and how they are tracked. Our accountants at Cooper Norman can help you evaluate these KPIs to help your dental practice reach optimal levels of growth and performance.
1. Revenue Per Patient
Many of the KPIs that are essential for dental practices directly involve the patients. Patients drive the success of a business so it is key to track finances surrounding them. Revenue per patient measures how much revenue each patient brings in given a certain time frame. It is calculated by dividing that revenue by the number of patients within the chosen time frame.
This is an important KPI because it gives you a good understanding of the profitability that the company is receiving from each patient. Because of this, it will help your business offer competitive but reasonable pricing to appeal to clients and maintain good profitability.
2. Overhead Ratio
Another important KPI to track is also linked to profitability. The overhead ratio takes into account the operating expenses in comparison to the overall income of the company. It helps the company evaluate whether it is utilizing expenses efficiently so that it is not wasting money, which could make it more profitable. It is calculated by dividing the operating expenses by the income that the company brings in.
Relevant to a dental practice, some of these overhead costs can include rent, cleaning equipment, dental supplies, insurance, payroll, etc. The company doesn’t have control over fixed costs but can have some control over variable costs. Tracking this KPI can help you understand if these variable costs are being optimized. If not, there are some changes you can make after evaluating.
3. Acquisition and Retention
A key to a successful business is attracting new clients, but also retaining them. Gaining new clients will build momentum for your company, but keeping them shows that you offer exceptional service, resulting in patient satisfaction. This doesn’t just bring in revenue but builds brand awareness, loyalty, and more meaningful relationships. It will provide the company with sustainable growth in the long run.
To measure the retention rate of patients the company is acquiring, divide the number of active patients at the end of the period by the number of patients at the beginning of the period. This will give you a good view of how you are keeping clients over time. A general retention rate of 85% usually entails that your dental practice is on the right track.
Cooper Norman Can Help!
KPIs are an amazing way to analyze the health of your business so you can make smart business decisions for its future success. At Cooper Norman, we understand the finances that go into a dental practice and can help you optimize them as best as possible. If you need help tracking these KPIs and other reports for financial success, we are here to provide that for you.