Key Performance Indicators Every Practice Owner Should Track with Mark Costes

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Welcome to How I Grew My Practice, a 15 minute podcast sponsored by NexHealth. My name's Alec Goldman being joined today by Mark Costes, as you all know, founder and CEO of Dental Success Institute. He's here today to talk about key performance indicators every practice owner should track. Mark, how are you doing? Alec, thanks man. I appreciate you having me on the show. I like these little bite-sized chunks. Hopefully I can bring value in that.
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that short amount of time I can get long-winded sometimes. I'll let you know, but I'm so certain you will be able to. Just before, I don't think you're a man who needs many introductions, but just for kind of the viewers who may not know who Mr. Mark Custis is, if you don't mind just giving a bit of an introduction of who you are and kind of how you got to where you are. No, sure, sure. Multiple practice owner, graduated dental school in 2002 from Marquette University.
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Had 16 practices at one time. I am now completely out of the practice ownership realm. My other companies that I have cultivated and grown over the last decade or so are the Dental Success Institute, which is basically a coaching and consulting company with the mission of helping dentists to reach their full potential in their personal lives and in their business lives to become more profitable, more systemized, become better leaders.
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And then the dental success network also is a closed group of dentists, about 1300 strong now. Um, and in, within that community, we have the largest buying group in dentistry. We have over 700 hours of continuing education. Uh, and then we have a large vibrant, um, network. I would, I guess you could say a network of chat rooms in there, anything from IV sedation to all in X to pediatric dentistry, to practice management, to law and ethics within dentistry. So that is a huge vibrant network that's popping 24 hours a day. And then I spent a lot of my time doing my podcast, which has been on for eight years now, 9 million downloads and about 1700 episodes.
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There's just a short period of time in dentistry as I guess the general feedback that we've received. That's really awesome. We're so lucky to have you here today. Thanks, Al. So Mark, I sent you an email saying, hey, you know, we'd love to have you on and gave you a list of things knowing that you have a vast knowledge of tons of different topics across the dentistry landscape. And the first topic that kind of came to mind that, you know, you wanted to speak about here was key performance indicators that every practice owner should track. I mean, before jumping into those KPIs, why was that the number one topic that you wanted to talk about here today?
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Well, I think just, and I don't think we should get so granular that we're like, okay, this one should be this percent. This one should be, I could do that all day long and people could like literally Google search that and that would be a waste of your time and my time. Philosophically speaking, I think what happens to a lot of dentists is we are very clinically minded. That's what we spent our entire journey preparing for, right? Uh, basic sciences. And then we got into the clinical side of things.
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and then it's patient care as it should be. Number one priority should be clinical care, patient care, making sure that we don't harm our patients and we're actually enhancing their lives and making their lives better through our skillset. There are very specific skillset. So most dentists are magnetized towards the clinical realm of dentistry, which I think is very appropriate and it's important. However, there's another side of dentistry, you know, when
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close to 76, 77% of dentists still own a dental practice of practicing dentists or practice owners. There's another side of dentistry that most dentists try to avoid or they are not as sophisticated in as they are on the clinical side. And that's practice management, that's ownership, that's running a small business. So nowadays, Alec, as you know, the average dentist
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graduates dental school with $292,000 in student loan debt. To me, that sounds low because a lot of the associates that I've had are close to 500, sometimes 600, sometimes $700,000 in debt. Additionally to that, after 12 months, if they decide that they wanna go into the practice ownership realm, then you're looking at another $750 to a million in debt to acquire a practice or start one from scratch. So the chips are stacked.
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on the side of needing to know how to run a successful dentist in a dental practice, in addition to being a good clinician. So, you know, the stakes are high for dentists nowadays. We got to learn how to run this thing. And for a lot of dentists out there, they say, as long as my dentistry is good, as long as I have a good reputation in town, everything else will take care of itself. But
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we have found and the reason that I have a coaching and consulting business is because we've never gotten this formal education and you can't figure this stuff out as you go along and the people that try to do it that way, um, end up in a world of hurt. We have found the typical dentist, uh, dental practice has an overhead of 68 to 72%.
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that's excluding doctor compensation. So if you had 30% of doctor compensation and onto that 68 to 72%, you're looking at a practice that's 2% profitable to negative 2% profitable. And for all the risk that we have to take as practice owners, all the debt that we have to take out, all the lives that are counting on our ability to run a successful practice, meaning our staff and all of their families and our own personal family, the stakes, like I said earlier, are pretty high.
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it makes sense to be able to know how to read a PNL, the difference between a PNL and a cashflow statement. And those are some of the basics things that a lot of dentists never learn how to do. Yeah. Mark, I mean, when you started with your own practice, my guess is you were not aware.
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different things of what it would take to actually go from just focusing on patient care to really running a successful business. How did you teach yourself that? What were some of the outlets that you were going to to actually decide what are the different KPIs that you need to be tracking ultimately? How did you get to the place where you really know this is a science? Awesome question, Alec. I was lucky enough to not get into dental school the first try, or the second, or the 15th, or the 20th.
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It actually took me three years and 21 tries to get into dental school. And during that three year period of time, I applied for the executive MBA program at the university of San Diego, and I bought my first business, which was a catering truck. So while I was driving the catering truck during the day, I'd go to executive MBA courses at night, and if you're to ask me, what was a more valuable experience, the MBA program or the catering truck?
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entrepreneurial venture, I would say 10 times out of 10, I would say the catering truck was much more valuable because it was in the trenches that I learned how to manage employees. I learned about marketing. I learned that the owner is the last person to get paid. I learned how to balance payroll and I learned how to read financial reports like a balance sheet and a profit loss statement and cash flow statement. That was probably the most valuable experience.
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And it set the stage for me being able to go into practice ownership. However, when you get into a practice and you are wearing all of these hats, not only in most cases, are you the primary driver of revenue in your practice? You're the main provider. You're also the manager of your team. You're also the chief marketing officer. You're usually the bookkeeper. Sometimes you're the office manager in addition to that.
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So you're expected to wear all these hats. It's very difficult to focus on gaining the knowledge necessary to run a successful dental practice and to have the ability to run the practice successfully in addition to wearing all these other hats, right? So I was lucky enough that because I started late in dentistry, three years behind most of my classmates, I didn't, I didn't.
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feel like I had time to go to an AGD or a GPR or to specialize. I wanted to get right out and start making money. So I took an associateship for the first 12 months. And I considered that my clinical associateship, it was a Medicaid office. So I was working really fast and I was, I was expected to produce a certain amount of money and to have a certain standard of clinical care, which it was great for that because it was very, very high volume. And I learned, you know, trial by fire.
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to become faster with very high quality. Additionally, I looked at it as my financial residency as well. So I would follow the office manager around during the day and pick her brain and at night I would stay after work. And I learned everything about how to manage a dental practice, exactly how to place claims with the insurance companies, how to enter.
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patients into the practice management software, how to do complex treatment plans, taking insurance into account. All of those things I learned how to do my first year of associateship, which I called my clinical and financial residency. So that gave me a huge head start on a lot of people that I think that go cold into practice ownership and never really earn their chops as a sophisticated business owner.
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Mark, what were, first off, so fascinating, I had no idea about the catering business before, but what are some of the big similarities and takeaways that you had in running a catering business to running a dental practice? Yeah, that's a great question. So business is business is business. So I will tell you that. I have had the fortunate, I've been very fortunate in that I've owned
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businesses outside of dentistry, businesses that are adjacent to dentistry, but aren't dental practices, and practices or businesses that are completely separate, like a car wash and a gym franchise and a catering truck. I'll go back to that same thing that business is business. Profitability is calculated the same way for a gym as it is for
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dental practice, all of the leadership aspects to being at the helm in charge of a team, all exactly the same. All the, all the basic elements are basically the same, marketing to get more butts and seats and eyeballs on your logo and, and to get people to recognize your brand name, all the same, no matter what business you're in. But I will tell you.
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The one place where we are very, very lucky in say dentistry versus a car wash or dentistry versus a gym membership or dentistry versus a burrito in my, in my catering truck is that we have the ability to pay or to charge a very high amount for our skillset. So what we could do in 25 minutes, prep a crowd in most practices, you can charge between, you know, a thousand and $1,500 for.
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in a 25 minute procedure. And the beauty is you can also do that simultaneously in two other rooms at the same time, depending on how hard you wanna work. So dentistry is very forgiving as far as the amount of revenue that comes in. And we are able to take a minimum if we're running at least a decent practice to pay ourselves a percentage of that, usually 30% at least for the amount that we're producing. So.
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we can have a comfortable living even if there's zero profit in the practice, right? Where things get really, really sexy is when you start running a very sophisticated business. And instead of having 2% profit to negative 2% profit, you get to 20, 25% profit. In addition to what you're produced, the percentage that you're producing. So you could potentially be taking 50 to 55% home of all revenue that comes in to your practice.
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as the practice owner versus just 30% if you're an associate or if you're not running a tight profitable practice. So that's why we have such a huge benefit in dentistry. But that goes two ways. The fact that we can charge a lot for our services means that we could still make a decent living, a very good living, a couple hundred thousand, 250,000, can still make a very good living just off the proceeds of our production without even counting profit into that.
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So that breeds a lot of laziness. I believe in dentistry because a lot of people, once they're comfortable, they don't look for that extra edge. They don't look for that extra percentage point or 20 that comes from running a sophisticated business.
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Yeah, that makes a ton of sense.
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You mentioned before that in the role of CEO, dentist, not only are you the CEO and the dentist, but you are also founder, CMO, COO. You're managing the entire team, you're HR, PR, right? So there's so many ways for you to think about growing the business and also keeping it lean and efficient. And I guess, you're seeing hundreds and thousands of people who are coming to you for advice on.
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how to be a successful business person, let alone, you know, somebody who's practicing dentistry. How do you go about helping them prioritize? And I guess even before prioritize, what are the most common problems that you see people are doing today, you know, 2023, where you have a slew of technology to run lots of different parts of your business. But what are the major, I guess, what are the major problems that you see that new, new coming dentist running into and they're opening up their practice?
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Yeah, that's good insight. And when we are dentists out in the field and we own our own practice, it's pretty isolating. We are, a lot of times we feel like a silo or an island all by ourselves. Usually the confidants that we can count on talking to about things are actually people within our area. And like it or not, those are your competitors, right? There's a finite number of
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people in your community, there's a finite number of potential patients. So people aren't really sharing everything, right? So it can be very isolating. It could be very lonely. It could be very difficult to get the right answers, particularly if you're hanging out with, you know, um, a negative lot of dentists, which is unfortunately more common than not. So people don't recognize or realize.
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I have a very unique perspective because like you alluded to Alec, I have the privilege of being able to speak to hundreds of dentists every month, thousands per year. And I look behind the scenes and I look at P&Ls and I interview everybody about where they feel like they are and where they feel like they want to go. And we try to reverse engineer that gap between where they are now and where they want to go. So...
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I have a very unique perspective and I will tell you that it all comes down to a certain number of general areas where people are experiencing challenges, obstacles, and difficulties. A lot of times it's because they haven't defined their foundational principles. They haven't defined what their vision is for their dental practice. Their mission, vision, core values is off or non-existent. Then we're looking at patient experience. How
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does the patient feel as they're going through the process of all the touch points within your dental practice, from the initial phone call to when they check in, to when they're transitioned from the front to the back, from when they are introduced to the doctor, all of that stuff, how well are we executing every single touch point, right? And then you alluded to this, marketing, like internal marketing versus external marketing, what type of external marketing? And if we are going to spend a percentage, say 5%,
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of our gross revenue on external marketing? How are we going to determine whether or not that's an effective investment? Like when I send a dollar of marketing money out into the world, I should be getting a minimum of four times back, a minimum. Okay, so marketing, like you said, human resources. How am I going to recruit the right people? How I'm gonna retain the right people and...
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At what point do I let them go after I recognize that they're not a good fit for my organization after, you know, after doing my very best to retain them. And then there's cashflow and overhead control, which is our secret sauce. Cashflow and overhead control is something that most consulting companies don't even talk about. They want to talk about all the things that I've talked about before, marketing, patient experience, mission, vision, core values, leadership.
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but you got to get into the basics of here's a profit and loss. Here's how you analyze it. Here's how you categorize everything. Here are the levers that I need to push and pull in order to increase my profitability and decrease my overhead. That's something that needs a lot of focus. And then last, but certainly not least is systemization. How systemized is your dental practice? Like, do we have...
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a process for everything that happens within the practice. I had my first three dental practices were wildly successful. And I thought that I was God's gift to entrepreneurship and practice ownership because you know, three out of three times it felt like I had aced it. But slowly as the years went on, I recognized that when I lost certain key team members, certain associates, the practices were nothing without them.
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with those key people when they left, so did the processes. So did all the history of how things were successful in that dental practice. And it was at that point that I realized that I have to be more systemized. I have to download their brains and make these, standard operating procedure in all of my practices. So that's another huge point. So those main tenants, those main pillars, the vast majority of
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our, what we would call brain damage happens because we haven't figured out how to manipulate each of those pillars and haven't mastered each of those main points. I would say 95%, 98% of all issues that keep dentists up at nightfall into one of those main categories. The one that you started off with being brand mission and value.
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I feel like it's something that could go so easily overlooked. It almost feels like fluff of a company. Can you explain a little bit why that's so fundamentally important for a dental practice to nail before going into the other pillars? Yeah. I mean, if you think about it, even though we are highly trained and we're specialized in something that is very valuable, a lot of the general public thinks of us as a commodity, right? So if we are a commodity to the general public, then advertising becomes
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a race to the bottom. Like if we want to charge $1,500 for a crown, because we know that we're the best at producing this crown, we're going to use the best material. It's going to be the best patient experience and $1,500 is a fair price. You don't have a good brand and you don't have a good reputation and you don't have to convey that to the world. Then it's going to be a race to the bottom. So this $1,500 crown, well, as far as the general public goes, a $600 crown is the same exact thing as a $1,500 crown.
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I'm going to go with the $600 crown until the next guy says, well, I'm going to, I'm going to do it for $325. And then somebody of course is going to do it for $275. So unless you nail that message, that brand and what we would call your blue ocean, your differentiating factor, uh, between the rest of the commoditized dental practices, it's always going to be about price. It's always going to be about commoditization.
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Again, kind of leaning into the fact that you've spoken with so many dentists, thousands of them. And if you go to most practices and you ask them, what is your core differentiation? I swear to you, the answer I always hear is the team. Right? How does that actually play out? How do you make, if you say that your team is a differentiation, what does that actually mean from an output perspective? Because the team is two words that mean so much.
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and everybody uses their differentiation, what is their actual strategy to create your differentiation? Yeah, I mean, human capital is the most valuable thing that we have at our disposal. I would challenge anybody to say that team is probably the single most important factor to your success. And being able to find a herd of unicorns is not easy. People that
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have five years of solid dental experience, people that have a pleasant personality, people that understand how to get along with other people, people that are empathetic and compassionate with the patient base, people that communicate well with you. That is a unicorn and we're expected to stack our team with five or 10 or 15 or 30 of these people. Very, very difficult to do. It all comes down to, you know,
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that those foundational principles that I talked about, mission, vision, core values. Core values are the heart of what you're talking about here. Core values are in direct relation to the culture of the dental practice. This is how we treat one another here. Here's what's acceptable, here's what's expected, here's why we're different from the general public. All those things need to be very, very defined and carefully considered. Once you get
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a strong set of core values, you need to embody those core values as the example to which the team can follow. For instance, like if one of your core values is open and honest communication, and every chance you get, you're talking about one employee behind their back to another employee, then you're not embodying that particular core value. So if you can get everybody on page, on the same page and say, here's our defined core values, we're going to commit to these and
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you have to have some sort of accountability mechanism that's constantly assessing them in comparison to what the ideal core values are, then you'll have a very, very strong culture. And having a strong culture doesn't mean you have to be a pushover as far as leader goes. It just means that you have to have very clear expectations. You have to have accountabilities in place. You have to be able to have uncomfortable conversations when somebody's straying from those core values. You have to be a strong leader in that situation.
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So once that happens and you're taking all of that into account, then you build a strong culture. That culture actually is very, very energetically felt by the patient base. Every time people come in, they will experience something that is almost indescribable. They'll just feel good about being in your practice.
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And that's that X factor where team comes in. I think that clinical stuff can all be trained. I think that good culture is something that you need to embody yourself and needs to be cultivated over time. It takes a good period of time and a lot of effort. Yeah, that's an awesome answer. Mark, can you just continuing on brand mission vision, how does software...
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become an extension of brand mission vision is the first part of the question. And then second, what is your philosophy on picking vendors to work with? That's a great one. So software to me is what's happened with software since I graduated in 2002 is an absolute revolution. So you have software that encourages and facilitates greater clinical care.
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more efficient clinical care when we're talking about milling units and, you know, scanners, 3D printers, etc. So that sort of software, that sort of technology has been groundbreaking in the last 21 years since I graduated. It's absolutely crazy. And what people are able to do with this technology as far as training this next generation of dentists in a non-formal
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the biggest thing that's happened to our profession since I graduated and probably the entire history of the profession. As far as software from a practice management perspective, it's limitless how much it can aid the patient experience and the efficiency of your dental practice. We're talking about anything from online scheduling to automated confirmations to the incredible practice management softwares that we have nowadays.
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The average practice management software is actually better than the most superior practice management software in past generations. We have AI now that's helping dentists to detect undiagnosed treatment. It's helping in treatment planning and case acceptance with artificial intelligence.
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The ability to track phone calls and to pick up keywords that are being inadvertently spoken to incoming callers. AI can help with that as well. There's so much stuff that can help a practice to run more in a more sophisticated manner, which eventually if used correctly, if the technology is used correctly, can really affect the bottom line in a positive way.
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And given that there are so many software companies, I know NexHealth is certainly one of them, but there are, I mean, if you take a look out there, you know, hundreds, I'm sure, if not thousands of these companies. So lots of choice for dental practices. What is kind of your way of thinking about selecting technology vendors, specifically as it relates back to kind of dental practices brand mission vision? Yeah.
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Yeah, good stuff. Um, I think that any software company that you, that you decide to work with has to have high level of customer service. They have to be reachable. They have to be accountable for, for what they committed to when you signed up for their service. Also believe that they should easily be able to demonstrate their return on investment if something costs $200 a month, they must be able to show me that they're going to return four to $600 a month.
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for my $200 investment. I also think that the software has to be user-friendly, not just to the patient base, if it's patient forward, it has to be very user-friendly to the team that's utilizing it as well. And in relation to that, there has to be a vibrant and effective onboarding slash training module associated with any technology that you're integrating into the practice.
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Oh, Mark, we're coming up at time. I want to just make sure. Are there any last thoughts before we wrap up here? Yeah. I mean, I, I mean, I could beat this drum and I have been since, since I started coaching, geez, 12, 13 years ago. Uh, and the drum is this, if it's not me, if it's not, um, the internet, if it's not a podcast, that's going to get you the information that you need, you must go seek that information. First of all, you have to.
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educate yourself to the level that you now know what it is that you don't know. Right. It's like, uh, first you have to understand what it is you don't know. Then you have to be humble enough to go out and seek that information from a credible source. Um, there are so many resources in existence now that were not in existence when I was on come up. Right. Uh, there's, there was no such thing as podcasts. There was no YouTube. There was no, uh, free information like there is nowadays.
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Go out there, search for it and find it. But some of the things that you have to be able to figure out is how to read a financial report, how to calculate your overhead, how to categorize a P&L, those sorts of things from a financial perspective, very, very important. You have to take some advanced leadership training as well. Being able to lead that team of human beings, that human capital, that most valuable resource within your dental practice.
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besides understanding that the basics of business is probably right up there as one of the most important things. And that doesn't mean that you have to be charismatic and a great public speaker, none of that. It just means that you have to be clear with your expectations. You have to be kind, yet firm with your management style. And you have to hold your team accountable for what they commit to. So I would say, having a good idea of how a sophisticated...
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business works and evolving into a more sophisticated business person and evolving into a more effective leader. If you can couple those two things together, there's nothing that's going to be able to stop you as far as running a wildly successful dental practice. Mark, thank you so much for joining us today. I'm so certain our audience is going to be so happy that you were able to join. Awesome, Alec. I appreciate your time today as well. We'll have you back soon. Thanks, Mark.