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Breakeven Point Calculation (BEP)

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In order to maintain positive practice growth and cash flow, it is essential to know the economic condition of your practice. Calculating the Break Even Point (BEP) allows you to know the necessary collection and production figures that must be reached in order to meet all expenses, including the doctor’s salary. By knowing the amount of collection necessary to meet all expenses, you can effectively:
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Breakeven Point Calculation (BEP)



In order to maintain positive practice growth and cash flow, it is essential to know the economic condition
of your practice. Calculating the Break Even Point (BEP) allows you to know the necessary collection
and production figures that must be reached in order to meet all expenses, including the doctor’s salary.
By knowing the amount of collection necessary to meet all expenses, you can effectively:

1. Establish annual, monthly, weekly, daily and hourly goals;

2. Track your cash flow and effectively gain control of both receivables and payables; and

3. Set up an employee bonus system based on true profits from newly created profit, not from the
doctor’s salary.


Directions:

Complete the following pages of practice financial data. It is best to calculate the BEP using at least 6
months of data – preferably 12. This will give you an accurate Variable Expense Factor (VEF). Variable
expenses are those that are determined by the amount of dentistry produced (or in the case of marketing…
helps to determine the amount of dentistry produced). The VEF should be updated whenever the type of
material or type of dentistry being produced changes. For example, more lab fees are incurred when the
practice directs itself to more comprehensive treatment plans.

Fixed Expenses are those that are incurred every month even if patients are not seen and dentistry is not
produced. The BEP should be updated quarterly or whenever there is an additional purchase or an
increase or decrease in the following categories:

⇒ The hiring of an additional staff member
⇒ Increase in staff wages and / or benefit package
⇒ Doctor’s salary or benefit package increases
⇒ Rent changes
⇒ Equipment is paid off or an additional purchase is made or leased
⇒ Change in debt service
⇒ Leasehold improvements
⇒ Any of the fixed expenses change






Paragon Management Associates, Inc. © 2008
www.paragonmgt.com
800-448-2523


Fixed Expenses

Name: ___________________________________ Total expenses from ______________ to ______________

Total Revenue collected for the period: $ ______________________________

STAFF COMPENSATION
TOTAL

PERCENTAGE
CATEGORY
OVER /
(Section A)


EXPENSE

OF REVENUE
ACCEPTABLE UNDER




AMOUNT

COLLECTED

RANGE










(Either use your
Staff Gross Salaries

___________________


own goal or use










the maximum
Employee Payroll Taxes
___________________


recommended
& Employer Matches






amount)
Employee Health Insurance
___________________

Employee Pension Cost
___________________

Employee Continuing Education___________________
(not Paragon)
Employee Uniforms/laundry
___________________

Employee other ____________ ___________________


recommended










maximum
Employee other ____________ ___________________


is 25%












TOTAL OF SECTION A
___________________ _______________
__________% _________%


FACILITY (Section B)

Rent



___________________

Utilities


___________________
(water/sewer/gas/electric)
Property Taxes

___________________

Outside Maintenance Service
___________________

Other ___________________ ___________________


recommended










maximum
___________________ ___________________


is 4%












TOTAL OF SECTION B
___________________ _______________
__________% _________%




Paragon Management Associates, Inc. © 2008
www.paragonmgt.com
800-448-2523


Fixed Expenses (continued)

GENERAL EXPENSES
TOTAL

PERCENTAGE
CATEGORY
OVER /
(Section C)


EXPENSE

OF REVENUE
ACCEPTABLE UNDER




AMOUNT

COLLECTED

RANGE










(Either use your
Telephone (with Yellow
___________________


own goal or use
Pages if applicable)






the maximum
Dues and Subscriptions
___________________


recommended










amount)
Internet Access

___________________

Computer Support

___________________

Overhead Insurance

___________________

Professional Liability
___________________
Insurance
Other __________________ ___________________

________________________ ___________________


recommended










maximum
________________________ ___________________


is 5%












TOTAL OF SECTION C
___________________ _______________
__________% _________%


EQUIPMENT LEASES, DEBT SERVICE (Section D)

Equipment Leases:

________________________ ___________________

________________________ ___________________

________________________ ___________________

Debt Service (all loans pertaining to practice):

________________________ ___________________

________________________ ___________________


recommended










maximum
________________________ ___________________


is 4%












TOTAL OF SECTION D
___________________ _______________
__________% _________%

Paragon Management Associates, Inc. © 2008
www.paragonmgt.com
800-448-2523


Fixed Expenses (continued)

PROFESSIONAL SERVICES TOTAL

PERCENTAGE
CATEGORY
OVER /
(Section E)


EXPENSE

OF REVENUE
ACCEPTABLE UNDER




AMOUNT

COLLECTED

RANGE










(Either use your
Accounting


___________________


own goal or use






the maximum
Paragon Service Fee

___________________


recommended










amount)
Other __________________ ___________________

________________________ ___________________


recommended










maximum
________________________ ___________________


is 5%












TOTAL OF SECTION E
___________________ _______________
__________% _________%


MISCELLANEOUS (Section F)

Outstanding Fixed Debt
___________________

IRS


___________________

LAB


___________________

Supplies

___________________

Other _____________ ___________________

__________________ ___________________

__________________ ___________________

__________________ ___________________


recommended










maximum
Small Equipment Purchases
___________________


is 2%












TOTAL OF SECTION F
___________________ _______________
__________% _________%











recommended










maximum










is 45%











TOTAL FIXED COSTS
SECTIONS A+B+C+D+E+F
___________________ _______________
__________% _________%
Paragon Management Associates, Inc. © 2008
www.paragonmgt.com
800-448-2523


Variable Expenses


TOTAL

PERCENTAGE
CATEGORY
OVER /

EXPENSE

OF REVENUE
ACCEPTABLE UNDER




AMOUNT

COLLECTED

RANGE











Lab Fees


__________________ _______________
10%

_________%

Dental Supplies

__________________ _______________
5%

_________%
(not including small equipment)
Office Supplies

__________________ _______________
1%

_________%
(including computer supplies)
Promotion / Marketing
__________________ _______________
1.5%
_________%

Repairs / Maintenance
__________________ _______________


_________%
(equipment)
Repairs / Maintenance (cont.)
__________________ _______________
.5%

_________%
(facility)
Travel & Entertainment
__________________ _______________
1%

_________%

Staff Bonus


__________________ _______________


_________%

Bank Service Charges
__________________ _______________


_________%
(including MC/VISA %)
Temporary Labor

__________________ _______________


_________%
(contract services)

Other


__________________ _______________


_________%

Other


__________________ _______________


_________%

Other


__________________ _______________


_________%

Other


__________________ _______________


_________%

Other


__________________ _______________
1%

_________%












recommended










maximum










is 20%












TOTAL Variable Costs
___________________ _______________
__________% _________%


Paragon Management Associates, Inc. © 2008
www.paragonmgt.com
800-448-2523


Doctor’s Compensation


TOTAL

PERCENTAGE
CATEGORY
OVER /

EXPENSE

OF REVENUE
ACCEPTABLE UNDER




AMOUNT

COLLECTED

RANGE












Doctor Gross Salary

__________________

Doctor Payroll Taxes
__________________

Doctor Benefits

__________________

Auto Expense

__________________

Doctor Uniform expense
__________________

Doctor Pension Portion
__________________

Doctor Disability Insurance __________________

Doctor Life Insurance
__________________

Doctor Health Insurance
__________________

Accelerated Debt Reduction __________________

Other __________________
__________________










recommended










minimum










is 33%












Total Doctor Compensation
___________________ _______________
__________% _________%
(including salary & benefits)



Paragon Management Associates, Inc. © 2008
www.paragonmgt.com
800-448-2523


Break Even Point (BEP) for the Practice


Total Revenue for the period = ____________________________________




Variable Expense Factor:



Total Variable Costs ÷ Total Revenue Collected = Variable Expense Factor Percentage





________________ ÷ ____________________ = ________________________%





Fixed Expense Factor:


Total Fixed Costs ÷ Total Revenue Collected = Fixed Expense Factor Percentage

(including Dr.

compensation)



________________ ÷ ____________________ = ________________________%





Total Fixed Cost Expenses including Doctor’s Compensation = $_________________________

Variable Expense Factor (VEF) Percentage =


_________________________%

1.00 - VEF (e.g. 1.00 - .25 [25%] = .75 [or 75%]) =

_________________________%


BEP formula:
Total Fixed Costs ÷ (1.00 - VEF) =
BEP for period

Enter your figures:
__________________ ÷ ____________ =
$_____________________




BEP Annually =
$____________________________



BEP Monthly =
$____________________________



BEP Daily =
$____________________________



BEP Hourly =
$____________________________
Paragon Management Associates, Inc. © 2008
www.paragonmgt.com
800-448-2523


Expense Reduction Action Plan



List the categories calculated in your Breakeven Point (BEP) that were too high:

1. ______________________________________________________________________________

2. ______________________________________________________________________________

3. ______________________________________________________________________________

4. ______________________________________________________________________________

5. ______________________________________________________________________________


List the steps you are taking to reduce these expenses:


1. ______________________________________________________________________________

2. ______________________________________________________________________________

3. ______________________________________________________________________________

4. ______________________________________________________________________________

5. ______________________________________________________________________________



Thank you for taking the time and effort to complete Paragon’s Client Profile. The information you have
provided is an essential tool that will allow us to help you increase the profits of your practice.










The Paragon Staff








Paragon Management Associates, Inc. © 2008
www.paragonmgt.com
800-448-2523


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