Take a balanced approach

March 21, 2012

Many lab owners start their dental lab with visions of “growing” the business. Everyone’s idea of what constitutes growth is different, and unfortunately, many lab owners don’t have a specific plan for how to go about it. A simple look around the industry illustrates that there are dozens if not hundreds of ways to do it. So the question becomes, what’s the best way for you?

Many lab owners start their dental lab with visions of “growing” the business. Everyone’s idea of what constitutes growth is different, and unfortunately, many lab owners don’t have a specific plan for how to go about it. A simple look around the industry illustrates that there are dozens if not hundreds of ways to do it. So the question becomes, what’s the best way for you?

I am really pleased that this issue of DLP is focused on the various ways one can grow, such as buying new technology, developing marketing programs or adding staff. But to be successful with any program, the basics have to be in place.

How not to do it

Many labs take one of two approaches to growth. The most common one I see is where the lab cranks up an aggressive sales or marketing campaign that successfully brings in lots of new accounts, causing sales to soar.

The lab doesn’t have the staff or resources to handle the increased business and resorts to quickly hiring less than ideal employees and working long overtime hours to get the work out. Quality suffers and prescriptions are not followed carefully. Cases are late, clients are lost and sales levels return to what they were prior to the “growth” campaign, or even lower.

In the second approach, the lab expands the facility, buys new equipment, hires and trains staff to handle the anticipated growth and proceeds to lose money while waiting for the new business to materialize. 

My advice to lab owners and managers seeking PROFITABLE growth is to take a balanced approach. What I mean by this is to plan and grow all aspects of the lab at roughly the same rate. Expand your facility and production capability to match the growth in sales. I’ll admit right here that this is much easier for me to talk about than it is to do, but it can be done.

The keys to managing PROFITABLE growth

Here’s my advice to help you grow your lab successfully.

1. Understand your current business both operationally and financially. Correct current deficiencies before you undertake growth. Be sure you have the skill you need to effectively manage a larger operation. Problems you have now generally do not go away as you grow, they just get bigger.

If you have cash flow issues at your current size, get your finances in order before you try to grow. If you don’t know business basics such as how to read a P&L, it’s time to learn. If you are chronically late getting cases to clients, solve that problem before taking on more clients.

2. Plan, Plan, Plan. Set up annual forecasts for sales and budgets for expenses so you have some idea how many units will be coming in and the operational capacity needed to produce them. Planning will give you an idea of how long it will take to recoup the investment in a new piece of equipment or how many new staff you will need to produce the new incoming work.

Planning helps you look at your whole business and will help you focus on which part of your business is the current choke point preventing profitable growth.

3. Focus on your staff members. Evaluate them, train them and communicate with them. Doing everything yourself inhibits growth possibilities, and the larger the lab becomes, the truer this is. The growth of many labs stalls at a particular size because the owner/manager reaches maximum capacity  to what he or she can physically do.

If the owner has to QC every case, production capacity and the size of the lab is limited by how many cases he or she can handle. Delegation of tasks and responsibilities is one of the things lab owners, especially entrepreneurial types with strong technical backgrounds, struggle with. Having the right staff, with the necessary skills, and the right attitude is crucial to successful growth. 

Follow my keys and put yourself not only on a growth track but a PROFITABLE growth track.