The art of molding bad growth into good

March 21, 2012
Ken Schnepf

Issue 9

On the surface, a little growth in your laboratory business may seem like a great thing. However, if you’re like most dental lab owners, who see themselves more as artists than business owners, growth can become a bad thing, unless you quickly cut through the top layer and develop a plan to manage it.

On the surface, a little growth in your laboratory business may seem like a great thing. However, if you’re like most dental lab owners, who see themselves more as artists than business owners, growth can become a bad thing, unless you quickly cut through the top layer and develop a plan to manage it.

Even artists need to consider the cost of their materials, time spent to complete the work and how to market their skills if they want their labs to be a success. These and other factors are essential in setting appropriate prices for services, volume of customers to accept and other critical business management concerns.

While the artistry of your work is what brings customers in the door, it’s your business plan that will keep your lab and you happy and healthy. Here, lab owners, an educator and a small business marketing specialist agree it’s essential to objectively examine how you run things and plan, plan, plan.

Get down to business

“The single universal theme I see in small- and medium-sized labs, is lack of business acumen,” said Mark Murphy, DDS, Vice President of Clinical Education for DTI-Microdental Laboratories, who has looked at hundreds of dental labs over the years.

“I understand it, because we didn’t go to business school. We’ve been on a quest to create a solid business model for 20 to 30 years, and it’s still evolving,” Murphy said. “Remember it’s a business and not a craft. It can be a craft if you have another source of income, but if you don’t, then business principles apply.”

Lee Culp, CDT, Chief Technology Officer for DTI-Microdental Laboratories, is the perfect example of an artist who thoroughly understands the business part of the equation, Murphy said. While making beautiful teeth is very high on his priority list, he doesn’t think it makes sense to spend a lot of money on equipment unless it can pay for itself and then some.

“I think we spend too much time chasing technical, clinical education and not the business end of it,” Murphy said.

Network your workload

“I always say we’re a lot like a restaurant,” said Dena Lanier, president and owner of The Lab 2000 Inc. in Columbus, Ga. “On any given day, we don’t know if we’re going to get one case in or 100 cases in.”

The cost of overtime is a potentially bad side effect of growth, warned Lanier. It’s very important to know how much you are paying in overtime to determine how many customers might be too many.

“You might pay out what you get in overtime,” she said. “You can lose all your profit.”

“When you look at the payroll, and people are in overtime, look at what product is kicking us into overtime and how can you network,” Lanier added. “You can do domestic outsourcing. We do it all the time with milling centers.”

“In this economy, do a lot more networking,” she said. “Work collaboratively with other labs in the area. Find labs that are not as busy and say, ‘Hey, you do a really good product.’ You could make some money and they could make some money.”

“It’s the same thing with new products that come out,” Lanier said. “Rather than buy all the new technology, find someone who has it and you can still offer that product.”

Murphy agreed. “Where a lab owner does find themselves in growth mode, especially unpredictable or unexpected growth, first think, what can I outsource through one of the strategic alliances available to us today,” he said. “The capital expense or HR expense of adding people is far greater. Outsource first, then hire second. Even if those units aren’t as profitable, it’s still far less expensive. It gives you time to plan and prepare and see if growth is continuous or temporary.”

So even if those units are not as profitable, it’s much less expensive for you to pay $50,000 or $60,000 to outsource than to spend $150,000 for the equipment, Murphy said.

Ordering teeth, acrylics and other supplies all factor into the equation, Lanier said. “Sometimes too, if you grow from month-to-month and you’re trying to feed off a bad month, and then you have a good month going, $50,000 comes in to pay the bills, then all of a sudden, you’re swamped,” Lanier said. “You’re paying out a lot, but there’s not as much coming in.”

From a growth strategy perspective of trying to manage under pressure and constraints, look at what processes in your organization can be outsourced- at least until the point in time where you could justify adding staff, said Kris Bovay of Voice Marketing Inc., a firm that helps small business owners build their own business and marketing plans. For example, invoicing, bookkeeping, pickups and deliveries, front office reception, and human resources (including hiring new staff) are all good candidates for outsourcing.

“Does your business have an enterprise-wide management information system?,” Bovay said. “Do you know what the order backlog is on a ‘live’ real-time basis? Do you know what orders are in danger of being late? Do you know your on-time success rate? Do you know who your key customers are? (If you’re going to be late on orders then you need to decide how to manage your most important customers).”

So busy, you go broke

While his father wasn’t in the dental profession, he offered Tom Zaleske, DLP Benchtop Editor and owner of Matrix Dental Laboratory in Crown Point, Ind., this sound business advice: “You can get so busy, you can go broke,” Zaleske said. “With growth comes collections, management of business, etc. Most lab owners don’t even ask for a credit reference. That kind of growth-uncontrolled growth-can hurt you.”

Zaleske has been speaking at seminars across the country for 7 years to help dental labs. He best describes his lab as a niche lab or a laboratory that does comprehensive work.

“I’m fortunate that I get to meet all different types of people with all different types of business models and learn how they do things differently than I do,” Zaleske explained. “I hear the tenor of the profession.”

The most prevalent business model in the industry is the one-to-three-man laboratory, Zaleske said, which is much like his own lab. “I speak for that with a caveat. We are not a boutique laboratory. We don’t do hair and we don’t sell clothing. What we do is fill a niche. If I had to call myself something, it would be a niche lab or a laboratory that offers comprehensive fabrication.”

Identify the causes

“The first step is to identify the root cause of your issue-define, measure, analyze, improve and control (DMAIC, used in Six Sigma business management strategy),” Bovay said. “If defining the problem points to growth as the cause of your business challenges then you need to understand and deal with the ‘hot spots’ first. Make sure you talk to your key customers as part of this process; listen to the voice of the customer in building a stronger organization.”

For example, if your issue is that you don’t make your promise dates on time, talk to your customers and find out if there is a way to improve the workflow between the dentist’s office and your dental laboratory, she said. Then examine your internal workflow and find out where the bottlenecks are; work on eliminating those bottlenecks and improving productivity.

“By including your customers in the problem solving process, they will understand that you are working to resolve the issue and improve service-that will move your growth issue from being negative toward being a positive and learning solution,” Bovay said.

Get a plan

There’s no question that having a plan is the most important part of keeping a little growth from becoming a bad thing as well as providing a clear path of where your business is headed.

“If you are at capacity, you have no desires to grow the physical plant and you are both at manpower and physical facility capacity, you may not be able to assist core clients as well as you could,” said Murphy, who added that with a plan, “you really could figure out a way to grow.”

Most dental labs don’t bother with a strategic vision plan, but they need one, Murphy said. They tend to think they’re too busy because the phone is ringing and they spend most of their days with a firehose in their hands instead of a magic marker and a business plan.

“The best way to proceed and not strike out and go back to the drawing board is to decide who it is that you want to be and what for,” Murphy said. “Picture what your situation will look like in 3, 5, 10, 15, or 20 years and develop a business plan to handle it. Revisit the drawing board and have a business model to support it.”

Every fall, DTI-Microdental Laboratories helps each of its managers write a strategic business and spending plan for the coming year, Murphy said. They plot and plan what resources they need. Will they need equipment? More technicians? Then a budget plan is developed around those needs.

“Then you don’t get forced into making decisions willy-nilly or emotionally,” Murphy said. “We create some structure and discipline.”

Laboratories don’t look at their numbers because they don’t keep track of one day to the next day, Lanier said. “Keep score. Every time a unit comes in, we keep score. Then I know how to gauge.”

Thanksgiving is a busy time for the laboratory industry because patients stay close to home and they may need a crown if they are going to see their families for the holidays, Lanier said. Other busy times of the year can include in January when people file their tax returns and get their refunds and have the money for dental work. Electronic filing has changed that trend from April to January. The end of the year when patients are trying to use up the deductibles on their health care plans is another predictably busy time.

Have short- and long-term plans. For the immediate short-term, “Focus resources on the problem area or areas,” Bovay recommended. “For example, hire temporary workers, look at overtime, and/or outsource some functions. Additionally, reach out to your customers as quickly as possible and tell them you understand that they are unhappy and explain what actions you’ve taken to immediately resolve the issues.”

From a longer-term perspective, “Build a plan that focuses on overcoming the constraints in your processes, improving your productivity and service by reducing ‘touch points,’ and increasing quality,” she suggested. “And make sure you communicate your plans and your progress with customers, employees and other stakeholders.”

Choose your customers

“When I first started out, I’d get calls from multiple doctor practices,” Zaleske said. “Suddenly, every doctor wanted me to do their work. But I didn’t want that because then that would constitute too great a percentage of my work. I just didn’t want to lose control of my business, which is especially important if you are a 1-to-3-man lab. They can dictate when things are done. Be extremely careful not to be at the mercy of that practice. Be more selective about those who you take on.”

Define parameters and profiles for specific types of doctors who you want to work for, he suggested. Create a wish list of what you want to charge, the demographics of the practices you want to work for, age of the doctor, type of practice, what area of the country they are located in. Any specific that matters to you as a business owner.

“I like to bass fish. I watch fishing tournaments. It’s like a bass limit,” Zaleske said. “You can only catch so much. Once I have plenty of fish on my boat, I’m culling. Take out the ones who maybe are not so good to work with.”

“It’s a constant culling process,” he added. “Are you accepting new doctors? Well, it depends on the doctor.”

Having set fee and policy schedules to provide up front will eliminate a lot of the problem customers from the start, Zaleske said.

“Everybody has to choose what is a better fit for their business model, and then target market that demographic,” said Zaleske, who prefers working with second generation doctors because he does removable prosthetics.

“I have to be extremely comfortable with who I’m doing business with,” Zaleske said. He wants to know he can work with a dentist without modifying the way they each work.

Instead of immediately sending a fee schedule, Zaleske recommends sending a policy schedule to clients. Include how much time you need to complete the work, shipping and receiving policies and always include beautiful pictures of your work. Zaleske puts his images on a CD or sends them electronically in a Dropbox folder.

A policy packet establishes a working relationship up front, Zaleske said. Also include your policy for collections. Standard business practice is 30 days from the statement.

Market all the time

“You’ve got to market in good times and bad times,” Lanier said. “If you constantly have your name out there all the time, then they’re (the dentists) going to send you work.”

She sends out postcards to dental practices on a regular basis. One says, “Hot, hot, hot: buy 5 e.max, get the 6th free.” The postcards were personally delivered locally by Lanier along with a bottle of hot sauce, Red Hots candy and Hot Dorritos with the items all put together in a box.

Last year, Lanier purchased plastic bowls for $1 at Target, filled them full of ice and delivered cups of ice cream to local practices. “It’s just to let you know I’m here and thinking of you,” she said. “It’s very simple and it cost less than $5 to do.”

For Halloween, it was postcards that said, “It’s spooky to send your work to anyone else,” and “Mummy says send your work to us.”

September means the start of football season and school, so Lanier will theme her marketing around those events.

Consistency is the most important part of marketing, Lanier said. Drop off chocolate chip cookies at a practice you want to do business with one week. Then, the next week, bring coffee at the very same time. Keep that up for as long as eight weeks, and you’ll get new customers.

“We can’t market to the general public, but there’s 150,000 dentists we can market to,” she said.

The problem with small laboratories is they get a ton of accounts and then they stop soliciting for business, Zaleske said. “That doesn’t work real well because then the doctor retires, changes practices, closes up his practice or moves on. It’s better to have a lot of food on the table and wrap it up, put in the refrigerator and save it for later than to be scraping for crumbs.”

You can always keep taking calls from potential new clients, but you may not necessarily be taking them on, Zaleske said.

“Everybody has to choose, select who is better for them and then do target marketing,” he said.

Be involved

Participate in your industry association and ask them for information on best practices-learn from others, Bovay recommended. Also develop a network with non-competing dental labs from other geographic areas. For example, build a peer network of about 6 or 7 other labs from different cities. Share information on how you’ve managed growth, customers, employees, new technology, etc. You can introduce efficiencies in your operation much more quickly if others have already tested them.

“Join or build a peer group or network either within your industry (but in non-competing locations) or outside of your industry,” Bovay said. “Make contact directly or work with your local dental association and ask them to help you get in touch with other labs. You can learn a lot from others.”

Consider working with a business consultant; to build your growth plan and to help you manage your growth, she added. Look for a specialist in business development.

Don’t fire the doctor

“I think lab technicians take great pride in bragging that they fired their doctor,” Zaleske said. “I think it’s really bad to fire clients. Let them make their own decisions.”

On the occasion when you might have a difficult client, put in some extra time to work with them, Zaleske suggested. If a doctor isn’t adhering to time allocation or timely payment practices, take the time to reinforce what’s in your policy packet and avoid creating an adversarial relationship.

“Be discerning about who you do or don’t want to work with,” Zaleske said.

Hire the right people

The importance of having the right people working for you is key to successful small business growth, Bovay said. Make sure you hire people with the right attitude and behavior to work in your organization.

“Build your business to support a learning culture and environment,” she said.

So in the end, the art of molding a little bad growth into good means applying sound business management practices to your dental laboratory.  

About the experts

Kris Bovay, of Voice Marketing Inc., has worked with small, medium and large businesses for more than 25 years. Her work experience includes a number of management positions in large Forest Industry companies; the Director of North American Specification Sales for a large multi-national paper manufacturer; General Manager of a mid-size printing industry company; and owner of a business and marketing services company. Kris has a MBA, with a specialty in communications, from Royal Roads University in Victoria, B.C. She works with small business owners to improve processes, to develop and implement business and marketing plans, and to build successful businesses. You can e-mail her with questions at: mailto:kris@more-for-small-business.comkris@more-for-small-business.com.

Dena Lanier started her business in dentures and partials in 1980. She later went to work for her husband, Dennis, as office manager and director of sales. After offering her advice on how she would run a lab, her husband suggested, “Why don’t you get your own lab and leave me alone,” she said. So, that’s exactly what she did. Today, The Lab 2000 boasts 27 technicians. Dentists from Maine to Texas use the company’s services. She is President of the GDLA, State Component leader for NADL, and also serves on the business committee for NADL and is President-Elect for the Southeastern Conference of Dental Labs. Additionally, Lanier was recently named one of Dental Products Report’s “Top 25 Women in Dentistry” for 2011.

Mark T. Murphy, DDS, serves as Vice President of Clinical Education for DTI-Microdental Labs where he oversees sales, marketing and clinical education for 18 dental laboratories across the country. He is the lead faculty for Mercer Advisors and serves on the Board of Directors of the Pankey Institute, IdentAlloy Council and the Foundation for Dental Laboratory Technology.

Tom Zaleske, owner of Matrix Dental Laboratory, Crown Point, Ind., has more than 25 years of experience in removable prosthetics and regularly lectures on providing high quality service to dentists and their patients. He also is Benchtop Editor for Dental Lab Products. He can be reached at matrixdental@comcast.net.