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Understanding the math

By Chris Barrow on 28 April 2010

maths.EGG03fEtgXan Understanding the math

Question from a client this morning:

“My lab fees are 14% of sales and I’m pretty sure I am his biggest customer – should I be asking for a discount?”

My response:

Your overall net profit before tax is 37% (by the way – this a bloody good result).

So, for every £1000 of dentistry you deliver, the lab makes £140 and your business makes £370.

Call a meeting with your technician.

Tell him you want a 5% discount for volume and loyalty.

  • he is stressed and completely pissed off
  • his lab fee is now £133 per thousand
  • assume he has a 20% net profit margin
  • his net profit is down from £28 to £26.60 per thousand
  • he is taking a 5% reduction in net profit – his life
  • you are now making £377 per thousand
  • your net profit is up 1.89%

Big deal for him – small deal for you.

Wouldn’t you rather have a technician who loves you, does his best work and jumps every time the phone rings from your practice?

Maybe a conversation that agrees a target for production OVER which you enjoy a reduced price – that way, your technician doesn’t see his income dropping – he sees an opportunity for extra business.

Win-Win.

Understand the math.

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About the Author

Chris Barrow

28 April 2010 by Chris Barrow

Chris Barrow is co-founder of Barrow Kwong Hing Group of Companies, a private dental corporate active in independent and retail dentistry and post-graduate dental education, operating in the UK and Canada. Chris has been active as a consultant, trainer and coach to the UK dental profession for over 15 years. As a speaker he is dynamic, energetic and charismatic. In 1993 Chris moved into business coaching and became one of the first UK students at Coach University, from where he graduated as a certified coach. In 1997, he created The Dental Business School (DBS) and the development of a 12-month business coaching programme for dental practice owners and their teams, delivered to over 400 UK dental practices in the following 10 years.

 In the last 5 years Chris has acted as a Non-Executive Director, Director and Consultant to a number of dental corporates, whilst maintaining his freelance activity as a dental business coach for independent practice owners. BKH is the culmination of his past experience in the business of UK dentistry

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3 responses to “Understanding the math”

  1. james hamill
    james hamill 28 April 2010 at 10:14 am | | Reply

    I love this reply. Why is it that dentists always want to nail the one person whom they rely on every day of their working lives to the mast.
    Yes it needs to be a fair relationship but if you are doing that much labwork then your technician being on the ball and happy is a vital element to success.

  2. Chas Lister
    Chas Lister 28 April 2010 at 12:28 pm | | Reply

    UIAVMM assuming that overheads remain unchanged a 5% gross income reduction on the labtech who has a 20% profit margin actually translates to a 25% reduction in take home income. Understand the maths.

  3. David Coates
    David Coates 28 April 2010 at 1:51 pm | | Reply

    I am assuming the dentist is private.

    Further options if the dentist is loyal to the laboratory and likes the relationship and quality of the work.
    1. Increase your patient fees on private lab work by up to 5%
    2. Have a meeting with your laboratory, ask them to contribute towards your advertising costs
    3. Focus your advertising on laboratory products, veneers, crowns, tooth whitening, dentures etc

    Win Win Partnership

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