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December 2008 | Dental Lab Products
Buyer's Guide: Purchasing Trends

Charting a course together

Facing uncertain economic seas, labs can turn to their equipment suppliers to help find open water.

By Richard Palmer

Without a doubt, 2008 has been one of the most nerve-racking years financially in recent memory, and 2009 looks to be just as stomach-churning. The small-business owner has seen dwindling profits, slimmer-than-usual margins, and offshore competition nibbling away at their client base all of which have been only exacerbated by the severe economic downturn of Q4. Even the giants of finance were not immune, with long-standing banks and investment houses on the block, but receiving federal assistance to keep them operating. For you dental laboratory operators, where no such life raft was to be found, it became all the more vital to have a shipmate onboard looking out for your business.

Buying big

53.1%

Most labs made major equipment purchases during the past year.

Looking ahead

43.6%

But fewer lab owners are planning on the same for next year.

Steady as she goes

43.9%

Nearly half of U.S. labs report no change in their purchases due to recent economic conditions.

Source: November 2008

DLP Buyers Guide Survey.

“The small labs, even the ones with good credit, are struggling today,” said Bruce Bryen, CPA, a partner with The Snyder Group LLC (www.snydergroup.net), a full-service dental consulting and brokerage firm in Marlton, N.J. “They need every competitive advantage they can possibly get.”

Like the waves on the ocean, the economy flows in cycles, with dizzying crests and nauseating troughs, neither of which seem likely to end. The key is to keep on an even keel and ride it out—if you can—until things start to flow back up.

But you don’t need to sail it alone. Many distributors and dealers of dental equipment, supplies, and materials are in the same boat as the dental laboratory owner in terms of facing uncertain waters, and most also know that in order to keep from going under as well they need to help their customers stay afloat for their own survival.

“The suppliers, especially in times like this, are striving for sales,” said Bryen. “When they show sales, it’s easier for them to get credit.”

Jeff DiBlasi, V.P. of Lincoln Dental Supply Inc. (www.lincolndental.com), sees his business relationship with customers as a symbiotic, mutually necessary partnership. “We listen to the customer’s needs, and we work with them accordingly,” he said. “We want to help them. Their success is our success.” DiBlasi relates that he has seen many small laboratories close in the past year, due mainly to economical factors, but adds that owner retirement and laboratory consolidations also have played a role in the shrinking market.

Michael Harris, Owner of Harris Discount Supply Ltd. (www.harrisdiscount.com), predicts that the industry can expect even rougher seas ahead. “Historically, dentistry is the last to go into a recession, and the last to come out,” he commented. “A lot of labs are going to cease to exist one way or another.”

Survival Strategies

	“The Digital Highway can be a powerful tool for enhancing productivity and efficiency during these tough economic times.” —Rita Acquafredda, Zahn Dental Lab Div.
	“It is still possible to grow during these troubling financial times, just at a slower rate.” —Jim Glidewell, CDT, Glidewell Laboratories
	“The Small labs are struggling. They need every competitive advantage they can get.” —Bruce bryen, CPA, The Snyder Group
“Historically, dentistry is the last to go into a recession, and the last to come out.” —Michael Harris, Harris discount supply

For laboratories faced with potential credit troubles that are struggling to make payments on materials and supplies, distributors of all sizes are an indispensable resource for assistance.

“We’re being a little more lenient with our customers who are past due,” said Brandi Nowak of Nowak Dental Supplies (www.nowakdental.com), a family-owned-and-operated regional dental distributor based in Carriere, Miss., that prides itself on customer service and going beyond order-taking. “We’re not turning them over as fast to collections, but we’re working with more of them to help them get through their economic hardship, because there are a lot of them out there that need our help.” Nowak added that on the occasions laboratory owners do get behind in payments, she will personally call on them to see how she can help.

According to Rita Acquafredda, General Manager of Zahn Dental Lab Div. (www.zahndental.com), the Melville, N.Y.-based supply house giant has followed a similar tack and sent a letter to its customer base recently, offering guidance through the troubled economic situation. The goal of the communication was simple: Help struggling laboratory owners weather the economic storm and help their businesses thrive.

“We stand ready to help our customers,” said Acquafredda. “If they’re going through tough times, the only thing they have to do is call our credit department, and we will work together with them to develop a creative solution to assist them.” She added that the laboratory typically is the last entity in the dental production chain to get paid, which has a profoundly negative effect on the lab’s liquidity.

Harris advises lab owners and managers to keep up on their accounts receivable and to be cautious of new clients who target desperate laboratories. “A customer who does not pay within reasonable terms, may not be a customer at all.”

Next year, Zahn plans to implement a program in which they will work side-by-side with laboratory owners to strengthen their ability to market their services to dentists and enhance the business side of their laboratory.

“Our intent is to be the dental laboratory’s partner in formulating a program that assists them in operating successfully,” said Acquafredda. “Since each laboratory has its own unique needs, we will customize our program on a lab-by-lab basis. Together, we can develop a strategy to help them become more successful.”

Dental Supplies Unlimited (www.dsudental.com), a regional distributor based in Boca Raton, Fla., that specializes in consumable and small equipment, also follows a hands-on, in-person approach to providing financial assistance for its regular customer base of 500-plus laboratories through personal attention. “We go in and go through their supplies and their equipment and look at things that they’re not using, things that they ordered improperly,” said Owner Carol Inman. She said that by going through the lab’s inventory, Inman and the laboratory owner can determine together whether any supplies are unnecessary or unused to their full potential, such as overstocked denture tooth cards for removable laboratories and the porcelain used by crown-and-bridge laboratories. “It’s money that’s tied up for them and hurting their cash flow,” she said.

Beyond talking with suppliers for inventory management advice, laboratory owners should turn to other professional advisors for guidance in advancing their business, something that often is overlooked due to the high demands placed on schedules.”

“My experience with smaller labs is they don’t have the time to think about any financial planning,” said Bryen. “They don’t think the way dentists typically think. They haven’t been trained that way.” He suggests that lab owners should take advantage of continuing education courses that focus on the business side of running a dental laboratory, though he points out that such courses are not as frequent as those aimed at running the dental practice.

Results from the September 2008 DLP Buyers Guide industry survey¹ reflect Bryen’s concerns. Only 11.2% of laboratory owners responded that they consult with an economic advisor when making purchasing decisions, compared to 57.1% who rely on colleague recommendations and 29.6% who involve employees.

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