Episode 242 – Metrics: Above & Below the Line

“In dentistry, owner doctors can get weary with the management and love the leadership.” ~Dr. Victoria Peterson

Welcome to the second part of a special four-part series of the Everyday Practices Dental Podcast. This collaboration brings together the expertise and insights of Everyday Practices Dental Podcast co-host Regan Robertson, and Investment Grade Practices host Dr. Victoria Peterson as they marry high-level visionary planning with essential nuts-and-bolts day-to-day practice management. 

In episode 240, Regan and Dr. Victoria discussed the concept of above-the-line vs. below-the-line thinking – a framework that distinguishes between strategic, aspirational planning and the practical, often challenging aspects of implementation. If you missed last week’s episode, you might consider circling back to it, because this week our hosts talk about how this framework applies to metrics. Learn how understanding and leveraging these metrics can transform your practice, from day-to-day management to long-term strategic planning. 

As you listen to this episode, we want you to think about the following questions:

• How well do I understand the metrics that drive my practice?
• Do I have a clear distinction between strategic and operational metrics in my practice?
• Am I using these metrics to inform my decision-making and long-term planning?
• Is my practice equipped to balance leadership and management tasks?

EPISODE TRANSCRIPT

Regan Robertson: Welcome to another exciting, special collaboration with Everyday Practices Dental Podcast. I am your host, Regan Robertson, here with the delightful, the delectable, the talented, the genius, Victoria Peterson, host of the award-winning podcast, Investment Grade Practices. Victoria, welcome today.

Dr. Victoria Peterson: Well, I’m so excited about this series, Regan.

Regan Robertson: It is fantastic. Uh, this week marks our second in this four-part series and we are talking above and below the line. So listeners, if you did not catch last week’s episode, go ahead and go back to above-the-line and below-the-line number one in this series today, we’re going to talk about metrics. So Victoria, can you give our listeners again, a brief overview of what above and below the line means?

Dr. Victoria Peterson: Yeah, so above and below the line is a business term. We first learned this from Skip Miller, uh, award-winning sales coach and author. Um, and above the line means those things that carry us forward. So leadership, strategic planning, the vision, mapping out, uh, you know, SWOT analysis. What, what is the landscape and the context of my business environment? So that’s, that’s fun. Leadership is a dreaming and imagining and watching those larger metrics turn that move the company forward below the line is where management lives. It’s the day-to-day details of executing on all of those big dreams. I, I think sometimes, uh, particularly in dentistry, owner doctors get weary with the management and love the leadership. So making sure that you have a highly skilled, highly trained office manager that can function as a comptroller that looks at production, collections, write-offs, AR, works with your CPA, does those things, probably one of the most helpful things doctors can do.

Regan Robertson: I am particularly passionate about this subject because I think specifically Skip Miller’s above and below-the-line have helped me in my own career, go from an individual contributor to be able to sit in the C suite and have conversations, and really it comes down to an understanding of what’s important to the individual that you’re sitting across the table from and how they view the world and more importantly, how they view the metrics in the business. Victoria, for all of you listening, she has been my CEO for 13 years and has sat with me countless times teaching me how she looks at a P L and what metrics are important to her as a CEO. Back when I was an art director, like in the very, very beginning, she was talking to me about what, uh, how she approaches finance and that really does get us out of the doing and into the thinking and strategizing and, and looking at the efforts that we’re doing today and marrying that with the results at the end of it. So this particular episode, I am very passionate about because we are going above and below the line in our metrics. And I’m telling you, hygienists, support team, administrators, office managers, if you want to communicate great with your doctor, this is the episode to listen to. So Victoria, let’s dive in.

Dr. Victoria Peterson: Yeah, I think the examples are, are really going to be helpful here because you, you do measure the same things. Above and below the line, you’re just looking at a different level of detail. So let, can I just start out and I want to hear very specifically the marketing metrics you look at and maybe I’ll walk through a few financial or operational metrics, uh,

Regan Robertson: Absolutely, yes. So when we talk metrics in the practice, we are talking your financial metrics, that’s your P&L, that’s your revenue top line, your net, your operating costs. We talk marketing metrics. That’s, um, your clinical metrics and your operational metrics. You have even HR metrics, so you can have lots of different metrics. In the practice for everyday practices and because of my background marketing will be where I, I stick and play and, uh, so there is cost of acquisition that we look at. There’s your return on investment. So how much you’re spending, how much you’re getting back in that. There’s your website conversion, your social media engagement, your community presence, your online reputation, and how you’re showing up your, uh, raving fan index, which is a PDA term. So when you are talking about your referrals, how many referrals you’re getting in, those are marketing metrics.

Dr. Victoria Peterson: Well, why don’t we stick with that and which one of those are above the line that I’m looking at as a leader, moving the business forward and what are examples of below-the-line detail?

Regan Robertson: Okay. So I’ll tell you, uh, I’ll tell you, I’ll go all the way back to before I was even with, with PDA. Uh, I used to do email, uh, marketing for, uh, skincare company, super fun. I, it was my job to come up with the fun promotions and so I would say, you know, “Buy 75 in these beauty products and you can receive the, take a spin on the wheel and you can receive the diamond  special, the Ruby special or the Emerald special,” and, and it was really, really fun to see the results come in. So I would gather all that up and I would run over to my C suite back then and say, “Okay, we got this many clicks. on this email, this many people opened it. Uh, this many people took advantage of the diamond special or the emerald special.” So I would get very down below the line and I would, you know, even talk about the languaging that I was using. All of that is great stuff and as an individual contributor, that’s fantastic. They would come back with me and say, “Regan, what’s our cost of acquisition?” I had no idea what that meant. My eyes crossed and I thought, “Oh, I better go back and do some more research. So above the line, people look at cost of acquisition. It is great to get new patients in the door. How much does it really, truly cost us to get that patient in the door? And we can talk about the marketing spend. We should also talk about how much time it took for creative. We should talk about how much time it took to, uh, do phone call conversion training for our team, uh, any staff time available. So when you look at that in totality, that is the cost of acquisition. So an above-the-line discussion would be, um, in a quarterly meeting, our cost of acquisition is 10 percent less than last quarter. This is exciting because this means this looks like we’re being efficient. We are getting more, you know, we’re getting the right amount of new patients in and we’re obviously being efficient with our budget. That’s how an above-the-line conversation goes. The below-the-line individual contributor, and this is why they go together so well, is how did that happen? So the above the line looks at the result and wants to forecast it out. The below the line says, “How did this happen? Why did this happen? What do we need to keep doing right?” So a below-the-line answer to that would be well, our marketing team actually discovered that our 20 Facebook ads that were running, um, was way out performing our Google ads campaign and we were spending 50, uh, per click or whatever it was for our Google ads campaign. So we simply reallocated our budget and saw a huge improvement. Oh, that’s very helpful, right?

Dr. Victoria Peterson: You know, I love that so much and I’m going to, this is where, uh, you and I just meet in the middle because I love marketing so much, but I take it from a very data perspective, right? And you, and you come at it from the creative perspective. So if we were in a conversation if we were in a business meeting and we were looking at marketing just as you laid it out and we were looking at cost of acquisition, conversion rates, things like that, then I might look at it above the line from an operational standpoint, or a let me take it on the clinical standpoint. This is where clinical and operations kind of come together and say our cost of acquisition was 50. Our average patient lifetime value is 585. So I might be watching our patient lifetime value and is that going up? So that’s a way to measure the quality of new patients that we’re getting and, to put this in the bigger context, let’s go into what are some of the problems and we’ll just, we’ll stick with marketing and the pull through, right? So we have awareness and brand and the phone rings and patients come in and we say some stuff and they got some cavities and we wag our finger and they say yes, and then we do the treatment, right? So there’s a full funnel here. Um, so you, you’re focused on volume, how many patients, what’s our cost of acquisition and then once it comes in the practice, we’re looking at quality and the problems that we might be solving through marketing. So this is very top level. This is very big picture above the line is, um, what is, what are our practice collections and how do I improve that 15 percent this year right? So if I’m a 1.5 million practice and I want to grow 300, 000 and go to 1. 8, then I would start going down the line. Right and so the first thing I might look at is revenue cycle management. Are we collecting 100 percent of what we produce? And the answer to that is almost always no, particularly if you’re in a in network insurance, right? So then,

Regan Robertson: Oh, of course.

Dr. Victoria Peterson: Yeah, I would want to operationally, if I wanted to grow 300, 000, if that’s where I’m going above the line, then one of my economic objectives might be to reduce, uh, 50 percent this year and like really take a hard look at that and then my second economic objective might be increase new patients, uh,  from blank to blank. So if I knew I was going to reduce by 500 patients in my practice, I would want to activate a marketing plan to replace those 500 and if I knew that on a PPO plan, My patient value was 585, but my fee for service patients, my average value was a thousand dollars, well, I don’t have to replace one for one. So this is where above-the-line strategic planning really helps. So you could say, “I want to get my cost of acquisitions down. I want to increase the quality of what I’m doing and can we do those things simultaneously?” Sometimes those things work together, sometimes they don’t. You might, then you start anchoring and weighing the, the strategy, um, towards what problem am I solving.

Regan Robertson: Yes.

Dr. Victoria Peterson: If your practice is saturated, you feel like I’ve used every chair I can use, my, my chair utilization is, you know, optimized, but I still need to and want to grow, well, then you start looking at the quality of revenues. And then you start looking at marketing and the volume. And I loved how you explain the above-the-line would be things like cost of acquisition. It would be reach, uh, you know, what’s our radius. Do we attract from a three-mile radius, a 10-mile radius, a 50-mile radius? I know your team at the Phoenix Dental Agency, is nuts. Um, average patients drive 20 to 50 miles because of the marketing and because of the service mix. So then below the line is how many phone calls did we get? How many did we convert from those? How many came in from those who came in? How many rescheduled for their next visit? So the, the neat thing is with tools like dental Intel and some of the, um, dashboards that we put together here at PDA, it’s so much easier to measure this than it was back in the day when we had pencils and paper and abacuses.

Regan Robertson: I went, I went below, below, below the line. So I went into the engineer thinking, which is another, you know, if you’re, if your area of expertise is, uh, for example, hygiene, you’re going to, you’re going to go all the way down into the science of it. So when I hear you say the lifetime patient value switching from PPO into fee for service. You’ve got to look very carefully at where your ideal patients are. So I was thinking immediately, okay, we’ve got to run a demographic map. We’ve got to get the psychographics of, of everybody. So we’ve got the coolest software that we use at Phoenix, and I will immediately go into a community and we will start finding where those particular patients live, where they shop, what kind of cars they drive, what kind of music they listen to, what kind of community events they like to start to build out and be smart about the marketing plan that’s put together. So it is, it is a philosophy of inside out. So making sure that you are efficient and strong in your internal marketing and what are you doing for your internal marketing? Do you even know what internal marketing is doctor? And if not, that’s a really great area where you can increase that cost of acquisition and have a higher conversion rate with far less dollars put in the bank. So I start thinking about all the ways that we can make that happen and, and I don’t know that a lot of marketing agencies even look at lifetime patient value. That’s been something new, um, to me, uh, since PDA.

Dr. Victoria Peterson: Well, and it’s, uh, again, you need to have big data. Analytics to be able to look at that. You could, um, there are other ways to get it. It’s just harder but this is, I just love that to build an investment grade practice. You do have to have these management pieces put in place. Um, listeners, dear listeners, you do not have to understand patient demographics and consumer behavior at the depth that Regan does. That’s why you hire great agencies to do that work. Um, we, we run on a bunch of Esri softwares and different things, uh, behind the scenes to, to get those kinds of values, but, um, it’s, it’s more exciting than ever, um, as a solo practitioner or a small group owner, you can be competitive with the big DSOs just by understanding a few key metrics, understanding how your business grows and a PDA. We always say that you take care of your patients, create a wow experience for them, create a thriving ecosystem for your team and the numbers take care of themselves and that’s true but it is also really true that you need to know which numbers to pay attention to. So profitability is number one, and then you work backwards from there. So what are my overall revenues and profits? Is there any way I can optimize my spending? Are there methods to accelerate my debt, you know, in the tax planning part of it? Then you go into if I, if I, maximized my budgets if I’ve optimized that, then to gain more revenue, I have to increase production and so then the metrics just keep going backwards from there. So I think, uh, while I say above the line is looking out, once, and you know where you want to be, let’s say I want to be able to sell my practice in five years and I would like to get you know, I, I’d like to have 500, 000 in EBITDA so that I’ve maximized my

Regan Robertson: There’s that number.

Dr. Victoria Peterson: There’s that number, which is not an accounting term. That’s a finance merger and acquisition term. It’s just invaded dentistry. So if I have a 2 million practice and I know I would like to exit with two and a half million, something like that, you know, I might, I might need three, four, 500, 000 in EBITDA. So you work with your planners on that. That’s a big, that’s a signpost. That’s an anchor and you should be looking five years out. That’s what above-the-line strategy is all about and then you work it backwards. You know, how much would my growth rate have to be? What would we have to do internally to hit that growth rate? And it really does. It goes. profits, revenue, production, the efficiency of that production, like write-offs and adjustments, then it goes diagnostic skills, diagnostic acceptance, then it goes to patient flow, and patient flow goes back to number of traffic on the website. You know, all of these numbers are attached, and it’s really difficult to pull out just one.

Regan Robertson: Well, everything is connected and that’s, that’s the truth. Everything impacts something else. I’m, I’m very pleased that you brought up EBITDA because I think every practice owner has at least seen a P&L and I know that, that I personally have experienced doctors that take their  P&L. It’s like printed for them once a quarter and they shove it in a drawer and they never look at it again versus doctors that have it, um, you know, uh, in real-time on their phone so they can get the monthly P&L and they can look at it immediately and they have metrics pulled out that matter to them and one of the most important things that I find with investment grade practices is that time and time again, I do not hear about doctors understanding what EBITDA stands for and that’s earnings before interest, taxes, depreciation, and amortization and that, that number is often used. Um, you know, as the, as the anchor point, right for your multiple, when you are going into being, being bought out and, um, and I don’t think that, that many know about that or even know how to look at it. They understand how to look at their net. They know what to look at when everything is said and done at the end, what they get to take home as profit. And so understanding just that little difference to me seems to make a very powerful impact on where your life is going to go, how you plan and the way that you see your goals. So in summary, for me, it really comes down to understanding the big ones, but then how to communicate it and how to communicate it up to the practice owner or practice owners, how to communicate that down in a way that your team can make effective change. So, well, doctor, I know you really don’t care how many monthly visitors you have to your website, because that doesn’t necessarily equal how many new patients are in your chair. That is a metric that means something to your website team. So if you say to them, you know, “We only got 20 new patients this month, and I was really expecting 50,” that can let the marketing team know that they need to go and look at those types of metrics. How many visitors went to that specific landing page? What was the conversion rate of that? What was the heat mapping? So we can, I don’t know about other marketing agencies, but I know in ours, you know, we can see where eyeballs fall on a page. Did we not hook them immediately and pull them down the page?

Dr. Victoria Peterson: I don’t think there’s a doctor out there that needs to know all of this.

Regan Robertson: No, no, no and, and that’s, I, I think that’s the example

Dr. Victoria Peterson: We nerd out like, doctors nerd out on titanium in their, in their implants. Yes that is very below the line

Regan Robertson:  And that’s where everything is connected, right? That’s where everything is connected. You don’t, you don’t explain every single thing that you’re doing when you’re in a patient’s mouth or when you’re even presenting treatment, but you let them know their own above the line. What is the problem? What is the result after you go through treatment? What is the long term benefit? Which is interesting because that’s kind of like patient lifetime value in a whole different way. Uh, different way. Yes. Well, there’s some great examples of metrics and how you can flow above and below the line.

Dr. Victoria Peterson: Thank you so much, Reagan. You’re, you’re inspiring me to, uh, bring back the webinars and the, um, courses that we have,  the virtual courses that we had on business planning. So, uh, wouldn’t be surprised if, uh, IGP foundations comes back in this fall.

Regan Robertson: Oh, that would be exciting. That’s a teaser.

Dr. Victoria Peterson: Yeah.

Regan Robertson: Well, thank you so much, Victoria and Investment Grade Practices, uh, Regan Robertson here signing off for Everyday Practices Dental Podcast, and we will see you back for number three. Do we have our topic for number three?

Dr. Victoria Peterson: We do.

Regan Robertson: Let me see if

Dr. Victoria Peterson: It’s the one, it’s one of your favorites.

Regan Robertson: What’s our number three?

Dr. Victoria Peterson: It’s all about,

Regan Robertson: Oh, the cadence.

Dr. Victoria Peterson: Yes.

Regan Robertson: Thanks, the cadence of above and below the line. Stay tuned and thank you for listening.