No business can run without them. Monitors serve as a sort of thermometer which measures the health and well-being of the enterprise. They serve as the first line of communication which informs management what is going on. Failure to monitor, which helps to control a practice, is one of the most costly financial mistakes you can make.

THE "BARE BONES OF THE BUSINESS"
With the "numbers," you get a sense of the general health of your practice, the productivity of the providers, and where the problem areas are. Until you have this data, you can't start asking questions. Your entire reporting system should be based upon the "Early Warning System" supported by your monitors. You want "no surprises." As soon as you discover something amiss, or going amiss, you throw every means and every effort into solving your problems, fixing your trouble spots, and become innovative for a changing marketplace. As a result, you will now feel like you are in control. The unexpected shocks and surprises that accost everyone in business become manageable for you.

STEP 1 - SET YOUR LIFESTYLE FIRST
This step requires that you sit down with your spouse. Both of you must share your deepest innermost thoughts about your personal goals whereby you can develop a vision of what you both would like your lifestyle to be. You are getting answers to the question, "What do you want your life to look like?"

The successful dentists that I know have balance in their lives. How you feel about yourself 1) physically, 2) emotionally, 3) spiritually, and 4) mentally, definitely affects your work, which in turn affects your family life. It is important that everyone make supreme efforts to keep their life in balance and that you understand the priorities of your life and let nothing get in the way of maintaining this prioritized balance.

STEP 2 - FAMILY IS WHAT COUNTS
It takes more nobility of character -- more humility, courage, and strength -- to build or rebuild and maintain those relationships that count -- family -- than it would to continue putting in many hours into the practice to serve all your patients. People often find themselves achieving successes that are empty successes. Success has come at the expense of family relationships they suddenly realize were far more valuable to them. Doctors often struggle to achieve a higher income, more recognition or a certain degree of professional competence, only to find that their drive to achieve their goal blinded them to that which really mattered most and now are gone.

STEP 3 - DETERMINE THE COST OF LIFESTYLE
Once you have set your lifestyle, now you must determine how much money it will cost to maintain the planned lifestyle. When this number has been determined (the doctor's take home salary), then you can revert to your practice to determine what the practice must do to produce this salary. Doctor's salary (general practitioners) should not be less than 25 percent of practice collected dollars. Specialists will be higher. Until you determine the cost of your lifestyle you will be unable to determine the total dollars your practice must produce to maintain that lifestyle. Example: Cost of living expenses (post tax) $80,000 (pre-tax) $80,000 + $22,000 taxes. Total dollars $102,000 needed to support doctor and spouse lifestyle.

STEP 4 - SAVE 10% OF WHAT YOU EARN -- LIVE ON 90%
It is imperative that your #1 financial goal be to fund future retirement. You should save and invest 50% of your money in a qualified retirement plan. To fund this plan, the dollars must come from the practice. The other 50% should be dollars that are saved and invested personally. Also, both the doctor and the spouse would have an Individual Retirement Account (IRA). You can never start too early to plan for retirement.

STEP 5 - DETERMINE THE PRACTICE BOTTOM LINE
Following is a simple three-sentence course on business management: 1. You read a book from the beginning to the end. 2. You run a business the opposite way. 3. You start with end (BOTTOM LINE) and then you do everything you must to reach it.

STEP 6 - FORECAST
Forecasting is a method that projects your collections (expectations) for the coming year. A growth rate of 5-10 percent a year represents what you call a "Stretch Target." Last Year Annual Gross Production - $370,000 x 9% = $32,000 + $370,000 = $402,000 The New Annual Gross Production - $402,000 x 25% = $102,000 - Doctor's Salary

STEP 7 - PERCENTAGE BUDGETING
After forecasting your expectations, you now make up a budget for the coming year. The budget is nothing more than putting down on paper a series of expense items expressed in percentages. They include the whole gamut of costs of doing business . . . (i.e., Supplies - 7%; Staff Salaries and Benefits - 25%; Laboratory - 10%; Occupancy - 6%, etc.) These budgeted percentages are based individually against anticipated income from collections.

STEP 8 - MONITOR RESULTS
When all the expense items are pulled together from the forecast and a budget for the year is produced, a similar or parallel set of monitors flows into the practice representing the day-to-day operations of the practice. These are the actual results of the collection of real dollars. The numbers (monitors) are gathered, collated, and then reported on a weekly, monthly and quarterly basis. Thus, the actual costs, the actual sales, the actual profit margins and earnings can be compared with the budget forecasts. The question you ask, "Does one set of monitors match the other?"

STEP 9 - KNOW THE KEY MONITORS:

1. Production Per Hour
One of the most important monitors in your practice is the Production Per Hour. You determine Production Per Hour by dividing the annual gross projected dollars ($408,000) by the number of days worked, divided by the daily working hours.

For example: $408,000 divided by 200 days = $2,040 (daily goal) divided by 8 hours = $255 Production Per Hour (PPH). The doctor should produce 80% and hygiene 20% of this number. Therefore, the doctor must produce $204 (PPH) and the hygienist $51 (PPH).

2. Collection Ratio
This number is determined by dividing the dollars collected by the dollars produced. This number should never go below 98%.

3. Overhead
If your overhead is 67% or greater, you will be unable to save for future financial goals such as retirement, college education, etc. The practice goal for overhead should be 60% or lower.

WHAT GETS MEASURED, GETS DONE
I cannot stress this point too strongly. Every important goal needs to be accompanied with a way to keep score so that you and your staff can measure the progress toward the results you are trying to achieve.

Additionally, keeping score and letting people know how well they are doing is a tremendous motivational tool -- called feedback. How much do you think people would enjoy playing golf, tennis, baseball, basketball, football, video games or Monopoly if there wasn't any way to keep score?

Almost anything can be measured in either dollars, percentages, or units in a given period. When deciding which monitors to use as a performance measure, keep these points in mind: Do not let anybody "con you" into believing that you can't measure what is done. If what they are doing cannot be measured, they are not contributing.