The principal - associate paradox

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The principal - associate paradox is extremely damaging to the health of dental practices and yet so many people have not heard about it, have you?

The paradox exists because of the culture of dentistry as healthcare and whether you are a practice owner or self-employed associate contractor your focus will have been on your patients and improving their dental health.

Unfortunately,  most practices seldom make time to look at the performance of the business or to have conversations with their colleagues. Consequently, no one knows what they don’t know, and the financial problems begin to appear, fester and grow.

“A problem can only be present in the absence of a truth-ful conversation”

The paradox is that associates often believe that their principal is creaming off  50%-65% of their gross income and it is all going in the principals back pocket, instead of investing it in development of the practice, team marketing etc.

However, the principals often feel resentful because they put in so much work and take home less than their associates, and are very aware that if they are away from the practice that the practice income takes a massive hit. They  want t and need their associates to step up and share the financial responsibility for the solvency of the practice

The solution is to look at the practice finances and to have an honest conversation about remuneration packages.

Imagine a 2-surgery practice, with low operational fixed costs of £180, 000 per year. That is the costs incurred before you see a patient.  The practice is open 5 days a week  and the dentists working 46 weeks a year, or 230 days each 460 in total.  The daily operating costs are 180,000 / 460 = £391.30

The associate is on a “standard” 50%  of gross and lab bills contact and generating £800 day.

Lab bills are 10% of gross , £80  and materials 7% gross, £56

For the associate  their earnings are  800/2 – 80/2  =£360 day, £1,8000 a week 7,200 a month and £93,600 a year

Let’s look at it from the practice perspective 

Income to the practice  = 800-360 = 440

After lab fees = £400

After materials £344

After operating costs -47.30

Over a week -£236.52

Over a month -946.09

Over a year -10,880

Can you understand why you are working so hard as a principal to stand still?

Can you now appreciate why you are feeling so burdened by finances?

As an associate how do you feel about not covering your costs to the practice?

If you were to do the calculations on your fixed overheads, lab fees, materials costs and associate productivity, what would your figures show?

What can you do about it?

·      Reducing expenses

·      Increasing associate gross

·      Altering associate percentages

Whatever you do, you need to have a truth-ful conversation with your associate, sharing the figures, so they can understand the costs to the practice that they don’t currently see.

If you are a principal or associate  and would like to use our Associate Cost Calculator that lets you compare various remuneration packages, please call 07989 757 884.