Tips to reduce dental practice overhead (without compromising success)
By carefully managing supplies and lab expenses, dentists can add tens of thousands of dollars to their bottom lines.
Gary Radz, DDS
When it comes to saving money, dentists walk a tightrope. Because making changes could hurt your business, it’s hard to cut overhead expenses such as employee salaries, marketing investments, facility costs, and administrative services. You need to maintain these things to keep staff and encourage patients to come through the door.
However, by carefully managing your supplies and lab expenses, you can add tens of thousands of dollars to your bottom line. With that in mind, here are tips for reducing overhead expenses, starting with supply costs.
Evaluate the “true cost” of supplies
Jerry Ritsema, regional sales manager with Burkhart Dental Supply, has recommendations for evaluating the “true cost” of dental supplies. “When thinking about your true supply costs,” he says, “consider hidden expenses like defective product returns, overstocked items held in inventory, and shipping and handling charges.”
Understand that other factors also impact supply costs, including restocking fees, failure to maximize free offers, and not receiving credit for suppliers’ mistakes. Make sure you have a good system in place to track your purchases and inventory.
“Most importantly, hold your supply company responsible to reduce your supply cost,” Ritsema says. “Have them put their promise in writing. If they fail to meet their promise, have them be financially responsible.”
Consolidate your purchases
Many offices spread their supply business among several different distributors, cherry-picking the best prices. They think that by doing so they are pushing costs down. However, this is not always true. If you buy from one distributor, your business warrants 100% of that distributor’s attention. But if you buy from four distributors, you are worth only 25% of your buying power to each.
Think about it: Which company will give you the best service, grant you its full attention, and have the most motivation to keep your costs down? Is it a distributor that has all of your business, or is it one that has a quarter of it?
Choose a distributor that you trust and enjoy working with. Give them the lion’s share of your business. But remember, it never hurts to check the market every so often to make sure your distributor is staying competitive.
Consider house brands carefully
House brands may save you money in the short term, but at what cost? The cheapest brand is not always the least expensive.
Have you ever bought a nice pair of sunglasses instead of the cheap ones? My experience with cheap sunglasses is that they usually break quickly, scratch easily, and never really fit right. They mostly annoy me until I replace them. Over a couple years, I might go through eight different pairs of $15 sunglasses.
Compare this to investing in a pair of $100 sunglasses. They typically fit nicely, perform well, and last longer. I tend to take better care of them because they’re more valuable. The satisfaction from my one pair of nice $100 sunglasses is far greater than the satisfaction from the eight pairs of cheap sunglasses, which cost $120 in total.
The same concept applies to dental products. Buy the cheapest brands of noncritical items, such as cotton rolls and disposable barriers. They probably will not bother you or your patients. But when it comes to anything that helps you diagnose, treat, or restore, save yourself the headaches and get the nice pair of sunglasses.
Loyalty is rewarded
Many companies offer a loyalty or rebate program, so pay attention to what’s out there. Company representatives know all the tricks, so invite them to teach you how to order more effectively. Oftentimes, you can take advantage of special programs and free products.
Keep in mind that none of this will happen automatically. Take the time to learn how to get the most out of what is available.
Skip the dog and pony show
Over and over again you’ll see distributors compete aggressively on the pricing of certain products … only to increase the price of others. Rather than going through the dog and pony show of submitting invoices for price comparison, why not negotiate a flat margin?
Consider asking for a one-page bid for your business. The bid can be as simple as three bullet points: a flat margin on all merchandise, a flat margin on all equipment, and other reasons to do business.
Leverage increased buying power by joining a group
Just as dental support organizations are doing, dentists in private practice are maximizing their purchasing power by working as a collective. Buying groups and franchise groups are a growing trend. Each collective has a unique mix of vendors, so make sure before joining that the companies you trust are vendors.
Mike Maroon, DMD, had this experience: “In 2013 I purchased a second dental practice, and I realized my dream of owning multiple practices. But the reality is that I basically doubled my overhead expenses to make the practices successful.”
At that same time, Maroon joined a franchise dental group, Smile Source. “I had to purchase some equipment for my new location, and my savings on two x-ray units, air compressors, CBCT units, and autoclaves were more than $80,000.”
Lab expenses can easily make up as much as 10% or more of a practice’s overhead. Most consultants recommend that you get this number closer to 6%. But switching labs is tricky business, and you don’t want to work with a subpar lab and jeopardize your cases just to save a few bucks.
There’s good news, however. Thanks to developments in technology, many lab options today offer significant savings and deliver great final products. The dental lab landscape has changed dramatically, with mom-and-pop dental labs being replaced by larger lab networks and national laboratories. Restorations being created overseas are as good or sometimes better than what your local lab can provide—and at a far cheaper price.
Stephanie Bangs, DDS, found that she could save $230 per unit and maintain the same quality by switching from her local lab to a national lab. If a dentist seats, say, 13 crowns a month, that would result in more than $35,000 in savings over the course of a year.
“Better yet, I also get a quarterly rebate on top of that pricing because I am a member of Smile Source,” Dr. Bangs says. It’s clear how these savings can add up quickly to improve your bottom line.
Here are a few tips to ensure success when beginning a relationship with a new dental laboratory, starting with communication.
Communication is key
Before ever sending a case, contact the lab to identify who your contacts will be. Tell the lab how to reach you, including giving them your best email and cell phone number. Also, let the lab know who will be the contact in your office for cases.
Share your personal preferences for restorations with the lab and discuss the specific details of the cases you’ll be submitting. Ask what information the lab requires to ensure a successful result (i.e., models, wax-ups, photos, etc.) Discuss expected turnaround times and shipping costs.
During case fabrications, allow the lab freedom to communicate with you if there are concerns with your impressions, problems reading margins, questions about your selected material, or any other aspect of the case that could compromise the final result. A successful lab partnership requires both parties to have the freedom to speak freely about expectations and results. Make sure to respond to any requests from the lab promptly; otherwise, your due date for the case will be altered based on how long it takes you to respond.
Be a shutterbug
Another tip for success when working with labs is to take photos of every step of your case. Take “before” photos to help the lab technician match shade and contour in the final restoration. Also, photograph the preparation to show the entire prep and shade. This way, the lab technician can see any discrepancies in color that need to be blocked out in the final restoration.
Don’t forget to complete your work
Write up the appropriate lab slip with your preferences and any specific details that you want the lab technician to know. Be sure to send the correct due date and email photos to the lab. Small details like missing shade or material preference are enough to derail your case and cause headaches for both you and your lab technician.
Give quality feedback
Many times dental labs will only get a call if something goes wrong with a case. But don’t forget to share when everything goes right too!
Most dental labs provide a feedback form that is reviewed by the technician who completes your case. Your feedback can help fine-tune your preferences. Better yet, send back photos with your survey. Nothing makes dental technicians happier than seeing before-and-after photos featuring their work.
It’s easy to keep our heads in the sand when it comes to making the hard decision to reduce overhead. As Benjamin Franklin said, “Beware of little expenses. A small leak will sink a great ship.” Hopefully these tips will inspire you to tackle this challenge with confidence.
Gary Radz, DDS, a graduate of the University of North Carolina School of Dentistry, has a private practice in Denver, Colorado. He is an associate clinical professor at the University of Colorado School of Dentistry, a founding member of the Catapult Group, and the director of industry relations for Smile Source, the largest network of private practice dentists in the United States. He can be reached at email@example.com or via his website, downtowndenverdentist.com.