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Dental Lab Products | January 2009
Competitive Edge | Business Strategies

Prospering in a bad economy

How to survive an economic recession.

By Chuck Yenkner

OK it's here. We are officially in a recession economy. No one wanted it; no one likes it; but here we are. The good news is, you have choices. You can either close your eyes and hope it goes away, or you can face reality and take steps to help your business not only survive, but prosper.

Don’t Panic

Recessions are a normal part of the business cycle. We have had them before, and we will, undoubtedly, have them again. Many businesses have survived, and you can, too, if you think clearly and act smartly.

Even in the worst recessions, the vast majority of people have jobs and income; business does not come to a complete halt. The dental industry, as part of the nation’s healthcare infrastructure, is positioned better than most to survive an economic downturn. Historically, we tend to be fairly stable in large part because our client base is stable.

Yes, their patient appointment backlog tends to shrink, but it does not go away completely. I expect high-end discretionary procedures, such as cosmetic veneers and full-mouth rehab cases, to slow significantly. Basic restorative care, such as PFMs and dentures, will still be there.

In my opinion, this downturn will last at least a year, perhaps longer. You need to be prepared to weather the slowdown. The dental healthcare industry tends to be among the last areas of the economy to go into recession and among the last to come out of one.

Keep an Eye on Receivables

One of the first business indicators of growing problems will show up in your receivables balance. Specifically, your accounts receivable will start to age as formerly good-paying accounts start to stretch out payments. This is a problem as credit may not be available to help tide you over if you run short of operating cash. Cash flow is crucial to surviving tough times.

Collections need to become a priority. This would be a good time to remind your accounts of your credit and payment policies. If you don’t already have a credit/payment policy in place, this would be a good starting point toward formulating specific guidelines and policies for credit and payment.

Review all outstanding accounts two times per month and follow up with phone calls to late or overdue clients as soon as they slip past agreed-upon terms. I recommend checking account status upon receipt of new cases. Do you really want to invest labor and materials in a case you won’t be able to collect on? Take action as soon as you see an account start to slide.

Monitor Key Business Indicators

Key Business Indicators help you track the stability of your business. (To review those Key Indicators, click here). Pay particular attention to units and revenue per technician. These indicators will tell you if and when you need to reduce staff or work hours. Labor is typically the largest cost in dental laboratories, and excess staff can quickly drain cash. If your business starts to slip, take action to adjust your costs sooner rather than later.

Also ask yourself two questions about all supply purchases: “Do we need it?” and “Is this the most economical way to buy it?” Excess inventory sucks up cash and tends to grow if sales are slipping.

Review Product Offerings

Are you offering the right mix of products for this market? Products that will be in demand are those that your docs can sell to their patients. For example, a crown and bridge lab may want to offer a composite product in addition to PFMs. A full-service or removable lab may want to add same-day denture repairs to their product offerings. Look for new products that can bring in new accounts and additional business.

Keep Marketing

The fact is you are going to need some new accounts. You will lose a portion of your existing clients to credit issues and/or competition. Those clients you do retain may not be able to supply the same volume of cases they traditionally have sent you.

If you don’t have a marketing program in place, start one now. If you do some type of sales or marketing program, scrutinize what you do to see how it can be done more effectively and increase the time and effort you devote to it. Implement at least one new idea you have not tried previously. Don’t recklessly spend money on marketing, but don’t scrimp either.

Look for Opportunities

Recessions create opportunities for those alert enough to see them. It may be the chance to lure a desired account away from a competitor or to hire a top technician who can bring accounts along with. Look for merger acquisition opportunities that will build and strengthen your business. Keep in mind opportunities that are not necessarily huge. To quote Warren Buffet, “I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.”

The steps you take to manage your business in today’s economic climate will build a stronger, more vibrant company positioned to prosper today and in the future.

Photo: Michael Blann/ Getty Images

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