Information only helps when it’s used well
Information only helps when it’s used well
Business owners dismiss EBIT sometimes, just like we dismiss information that doesn’t conform to what’s happening in our lives.

If you’ve ever had an intractable argument about, say, politics, did you notice that information simply didn’t matter to you or the other person? Sometimes no amount of evidence can change our minds because we really believe and feel something to be true.

It happens in business too. A practice owner intent on growing their business might be focusing on their new patient numbers, which look healthy, and feel that their growth plan is on track. But perhaps their EBIT (earnings before interest and tax) tells a different story. Yes, the business is growing but it is haemorrhaging money at an unsustainable rate. The owner, in reality, should reassess their business model and costings immediately otherwise the business will grow from £1m to £2m turnover with no profit growth.

Business owners dismiss EBIT sometimes, just like we all like to dismiss information that doesn’t conform to our take on what’s happening in our lives. It’s hard to stay open minded, and business owners who have either a dearth or an overload of information can fall prey to the same errors of judgement.

The dearth happens a lot in dentistry because many principals still behave like sole traders, working by the bank account and not paying themselves properly. Overload happens when a principal or business manager prepares a vast array of business data every month or week. Sometimes this is worse than no information because it encourages a false sense of confidence in their decision making. A feeling that they have all the information at hand and so they must be right.

This is a problem with focus. Yes, the information does contain the right answers but the valuable bit is knowing where to look. Weekly and monthly figures are interesting as part of trends over quarterly periods and longer. Staring at granular information close up is helpful once you have identified a trend and are investigating it. It’s not where you start. You begin by stepping back and looking for trends. You base your decisions on the trends.

The best way to spot trends is to use a business information dashboard like the six Hive KPIs. Then you can drill down into the detail and ask things like why is there more patient attrition than usual, is there a problem with a particular clinician? If you were focusing on weekly or monthly figures in isolation you wouldn’t be able to do this. The Hive KPI dashboard gives you:

  • Net practice growth
  • New patient value
  • New patient treatment plan take-up
  • Average patient value
  • Average daily yield
  • Profit

Our KPIs don’t come on their own, we contribute our thoughts and recommendations with them too. Being able to spot trends across these six areas is particularly useful if your business is in a period of transition.

For instance, if you are a few years into owning a practice and have built your list up while not paying yourself properly, it might be time to enter a second phase and begin running the business as a commercial entity. This is a more sophisticated skill set, and while many entrepreneurial principals have a taste for growing their practice, adapting business systems in line with profit margins can be more challenging.

Get in touch if you’d like to know more about our KPIs, call 01872 300232 or email us at [email protected].

Hayley Robins
By Hayley Robins Senior Accountant
If you have any questions or comments about this article, please get in touch.