The Business Side Of Vacation: How to Financially Plan for Taking Time Off
June 5, 2023
How to Plan for a Vacation without Breaking the Bank
Planning for a vacation involves more than just choosing the perfect destination and making travel arrangements. It's crucial to consider the financial aspect and ensure that your time off doesn't create a financial strain. In this blog post, we'll discuss the importance of financial planning for vacations and provide practical strategies to mitigate revenue losses while maintaining a healthy work-life balance.
Accounting for Revenue Loss
One common oversight in vacation planning is failing to account for the revenue loss caused by the absence of clinical staff. Many offices set revenue goals using patient management software, but they often overlook the impact of staff vacations. It's essential to be intentional about the amount of time off you plan and understand its financial implications.
Consider Your Revenue Goals
As a dental practice owner, your revenue generation directly correlates with the time you spend chairside. This revenue is vital for maintaining a healthy profit margin. However, achieving a work-life balance is equally important. To strike the right balance, it's crucial to incorporate financial planning into your vacation plans. Let's illustrate this with an example: Suppose your net revenue is $5,000 per day, and you plan to take three weeks of vacation throughout the year on non-holiday weeks. In this case, you can expect a net revenue loss of $60,000.
To create a realistic profit margin, you need to distribute the expected net loss over a 12-month period. In our example, the monthly average loss would be$5,000 ($60,000 divided by 12 months). A recommended strategy to offset this loss is to pick up one additional workday per month, helping to compensate for the revenue shortfall.
The hygiene department often faces challenges in finding substitutes or having other team members cover shifts during vacation periods. If you have two full-time hygienists working four days a week, and they each have two weeks of paid vacation, it's important to plan for the income loss. Let's say a hygienist earns $40.00 per hour, and a substitute charges a similar rate. This means you would need to allocate around $1,000 per day to cover a standard eight-hour workday. Consequently, if you have 16 planned vacation days that require substitute coverage or office closure, you will experience an estimated revenue loss of $16,000.
Accounting for Office Closure
Depending on state regulations and associate coverage, you may need to close your office during vacation periods. This necessitates accounting for a complete closure rate, along with any vacation time for your staff. For instance, if your office generates $7,000 in revenue per day, a week-long closure will result in a revenue loss of $35,000, including weekly wages.
Taking all these scenarios into account, let's consider a practice that operates four days a week for 52 weeks. With three weeks of closure, the projected annual collections would be $1,456,000 compared to $1,372,000 with the closure. It's important to incorporate these projections into your profit and loss calculations for a more accurate financial outlook.
Balancing Work and Life
When contemplating time off, it's crucial to consider your desired lifestyle and the amount of time you want to spend away from the office. We advocate for a "life first, work second" approach and recommend planning for three weeks of vacation for practice owners. When combined with holidays, this results in one month off per year with a four-day work week. Remember, the more you rest and rejuvenate, the more energy and focus you can bring to your practice when you return.
So, take that well-deserved vacation without financial worries by implementing these practical strategies. Your dental practice and personal well-being will thank you for it! Please feel free to book a free consultation tailored to your unique needs if you need support.