DEBRA MILLER | DIRECTOR OF COACHING
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daily production lost / planned annual production
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$8,000 / ($8,000 x 160)
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$8,000 / $1,280,000
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625%
Now consider if your practice has a 50% expense overhead, with 42% of that fixed and 8% of that variable for supplies and other production-dependent costs. When you cancel a day, you don’t cancel any of those fixed costs and you only avoid the variable costs (8% of production).
That means 92% of the lost production comes directly from your year-end profits. The loss of one day (as a percentage) on your expected gross profits equals:
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(daily production - variable costs) / planned gross profits
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($8,000 - $640) / ($1,280,000 - 50% overhead)
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$7,360 / $640,000
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1.15%
So, in this example, the true cost of an unplanned day off has nearly two times the impact on the bottom line than it does on production. A couple of these days in a year and you may seem a little short on production compared to goal, but your take-home will significantly underperform your goal.
No one likes surprises at the end of the year. For this reason, it’s essential that any unplanned days off are made up for by adding days back into the schedule as soon as possible.