Business Acumen

Propel your dental laboratory to growth

Daniel Alter, MSc, MDT, CDT

For decades, dental laboratories have operated by utilizing established, viable business models, but now our business marketplace is changing. Multiple factors have affected the way we do business, and where laboratory owners and managers previously may have relied primarily upon technical knowledge, they must now develop a keen business acumen to propel their dental laboratory businesses forward. Business acumen may come easier to some than others; nevertheless, it is both beneficial and important for all laboratory owners to understand what is driving their laboratory—and what is hurting it—so that they can determine the next steps and build a strong business strategy to bring out the best in their organization. David Lampert, MBA, Vice-President and Business Manager for Town and Country Dental Studios in Freeport, New York, says, "Business acumen is a valid and important aspect for any laboratory to pursue. Whether you are a one- to four-person laboratory or a 100-person laboratory, it is prudent to operate under fundamental business principles and recognize how they can help run and grow your company."

Ultimately, it comes down to providing service and recognizing organizational skill sets. Even though the fabrication of the prosthesis is critically important, so is understanding business fundamentals and principles that will allow the laboratory to prosper. Trey Ford from Design Dental in Lancaster, Ohio, shared his laboratory's experience: "We are a second-generation laboratory that my father opened in 1986. We began as a small crown-and-bridge laboratory in southern Ohio that serviced our local community." However, as Trey joined the business, it began to evolve in both technology and business principles. "Now, we generate four times the revenue of just a few years ago," he says. "Much of that has come from utilizing digital technology, and we were able to grow that much without increasing our staff."

Attaining Business Acumen

The quest to educate oneself can take many forms, whether formally, individually, and/or collaboratively as part of a group effort among similarly minded professionals. With today's widespread access to the internet, there are many available avenues to learn business acumen. Lampert has reaped the benefits of each of those forms, having received a traditional brick-and-mortar Master of Business Administration degree, as well as gaining additional business acumen from his laboratory's membership in the TEREC Group, a consortium of independently owned and regionally located laboratories. "The TEREC group has been a great revelation and benefit to our company's growing business acumen," Lampert says. "Engaging with laboratories that are of similar sizes but geographically different to learn from their experiences can be very beneficial and impactful. You can bring new ideas back to your laboratory or learn from problems they have already solved." Lampert shares a personal experience: "One simple but powerful tool that we have found through conversations with the group is the installation of video cameras at our receiving department, positioned to capture our technicians opening every case. A daily challenge is dentists claiming to have sent items that went missing, but now with the cameras, we can send them the video of the case opening." It was a simple solution for a complex challenge—one that he might never have considered if not for speaking with counterparts at other laboratories.

Similarly, Ford found tremendous benefits in both personal and group learning experiences. "I listen to books and podcasts to gain as much business acumen as possible," he says. "We are also part of a small co-op group of similarly aged laboratory professionals who have scaled their businesses in great ways. We communicate often and work through our challenges together." This creates a level of mentorship among like-minded individuals who help one another accomplish much more than they could achieve individually.

Regular internal meetings are also essential to share information and observations, allowing the laboratory's team to understand current trends and pivot as necessary to meet them. Andy Case, Laboratory Manager at Mitch Dental Laboratory - a MicroDental Laboratory, in Muncie, Indiana, shared that, "We usually have weekly meetings to discuss technical issues, to get on the same page, and to deal with any problems that may come up, so that we provide our customers with the best care. We also have monthly meetings with our business unit to discuss marketing, innovations, etc."

The Basics

Business acumen covers an extremely broad sphere of knowledge, and those who are new to running a business may find themselves overwhelmed when embarking on a self-motivated journey of education. However, there are several basic paths that can be explored in order to start building a store of business know-how, and it is important for even seasoned business owners to review their knowledge and make sure they are not overlooking any vital areas.

Building a Knowledgeable Team

Training your laboratory's team, whether by sharing knowledge internally or by bringing in a guest educator, benefits the organization and is an essential part of making good business decisions. An investment in education keeps your team on the cutting edge of the industry and allows your laboratory to take advantage of new innovations—as well as steer clear of technologies that might not be quite ready. Careful analysis of this balance will create the most profitable business strategy.

For example, Ford says his laboratory has expanded due to an investment in digital dentures and bite splints and has seen significant growth in both removables and fixed. It is now moving to a larger facility closer to a major city and predicting steady growth over the next 5 years. Ford's laboratory's pivot point was when he leased a high-end 3D printer for the purpose of offering 3D printed digital dentures. Word spread in the region that the laboratory was making use of digitally inclined workflows—and for that immediate area, there were no other laboratories providing 3D printed digital dentures. "Because of that," Ford says, "we were able to foster relationships with scanner companies, and we collaborated on educational events where they showed their scanners and we talked about the digital dentures we offer. We are now working on expanding these relationships."

Case finds a similar pattern: "A lot of dentists with whom we have been working for years perform dentistry the conventional way," he says, "but now we are seeing a younger generation of dentists who are digitally inclined and are more comfortable and familiar with digital workflows. Many dentists never go back to analog once they make the change."

"A lightbulb moment for me," Ford says, "was when I recognized the willingness of dentists to adopt innovations and new technology into their workflows. When we first acquired the 3D printer near the beginning of the pandemic, it was very scary. Since then, however, it has provided us with greater growth than we ever anticipated."

Some laboratory owners may balk at the costs associated with building a highly skilled and knowledgeable team that can make the best use of new technology and innovations. A highly trained and experienced technician may demand more in terms of salary and benefits, whereas a less experienced technician will require a greater investment in time and training. However, the importance of this investment cannot be understated.

"While there is certainly a monetary investment in the compensation and title of the technician, I have found that establishing and training a team of skilled technicians has been a valuable endeavor," Case says. "It is best to have a conversation about goals with them early on. There must be a commitment by the technician, myself, and the company." While some employees may eventually move on to other positions, the consequences of a lack of trained technicians far outweigh the risks of investing in employees. Educating oneself about best practices for hiring is crucial, as well as having clear goals for the team and for the business. Case says, "It is critical to ensure that the end goal is shared. The technician needs to have the desire to grow and be willing to put in the time."

Establishing Matrices and Pricing

Laboratories can and should establish their dental restorative solutions' pricing by looking at all costs and matrices—including the real material costs, labor, overhead, delivery, and more—and then add in the desired profit margin. However, it is important to carefully consider that profit margin and its ramifications. "The inherent need for maximization of profit may not always be in the best interest of a dental laboratory looking to satisfy the needs of their clients," Lampert says. "It is always challenging to set up an absolute price for our products. You need to really dig in and take multiple variables into consideration. That being said, sometimes you may need to spend more in materials and labor, and you will always be adapting to real-life issues."

The pandemic was a perfect example of real-life issues. Employees called out sick, which then necessitated extra work on the part of the remaining technicians in order to fulfill clients' prescriptions. The laboratory then needed to pay overtime to those technicians. "That is what we needed to do to service our dental clientele, and a laboratory owner should be aware of and comfortable with the possibility of these circumstances," Lampert says.

When it comes to pricing, Ford has a different outlook: "We tried going cheaper, but quickly realized that it would never work. Any client who is prioritizing a low price will always find another option, and that's not a strategy we wanted to pursue. We instead positioned ourselves as experts in a niche, rather than a laboratory to which a dentist can send every case. This has helped our growth and profitability." A laboratory should similarly assess the clientele they serve and try to identify clients who, for various reasons, end up becoming unprofitable; if that cannot be corrected quickly, it may behoove the laboratory to forgo servicing that client. As the old saying goes, not every laboratory is for every dentist, and not every dentist is for every laboratory.

When assessing the financial health of the laboratory, looking at the business from several vantage points may provide a clearer picture. "When we go macro," Lampert says, "sales are important matrices as they pertain to the day, the week, and the month. Compare them to your historical data from the same time frame, as well as your projections, which will indicate whether you are on track to match previous results and/or your goals and projections." These results will arm the owner or manager with the ability to make informed decisions about whether to pivot or maintain course. This is something that should be monitored regularly and used as a powerful tool to control the path on which your company is progressing.

Keeping the Cash Flowing

A steady, balanced cash flow is the foundation of a stable business. Routine analysis should be done to ensure that the correct amount of cash is flowing into the business to keep it profitable, and that no cash flowing out of the business is going to waste.

"Accounts receivable should be regularly assessed by the owner or management; if ignored, it creates significant problems for the business," Lampert says. "A business can find itself in considerable financial stress and possibly go bankrupt. Terms should be conveyed with every account and enforced to make sure you always have positive cash flow to run your company."

At the same time, expenditures need to be assessed, and unnecessary ones should be reduced or eliminated. For example, every laboratory should monitor its remake counts because they significantly affect the overall business. "Remaking a crown incurs duplicate costs for delivery, labor, and materials from which no further revenue is generated—and additionally, the opportunity to make a new crown for sale with that same labor, materials, etc, is lost," Lampert says. If you are not regularly assessing remake counts, they could potentially become very costly over time. "Keep in mind," Lampert says, "that remakes also cost the dentist in chair time, so most want to avoid them. We find most of our clients are open to feedback that can help reduce remakes."

Case adds, "Communication is key, first with the dentist and then internally to find out what went wrong and where it went wrong. Then steps must be taken to fix the problem so it does not happen again."

Marketing Your Brand

A laboratory cannot grow if no one knows it exists. Ford views marketing as a critical process in growing the laboratory. "Our marketing has been consistent for the niche we carved out, keeping digital dentures and digital dentistry front and center," he says. "We do conventional mailers, but many people compliment our website, which remains a work in progress. Our website makes it evident that we are very digitally oriented, which sets us apart immediately. Our focus in the near future is on creating a strong social media campaign."

Lampert shares that his laboratory's marketing strategy emphasizes repetition. "A dental laboratory must engage with their dental clients and prospects at some level all the time," he says. "We believe it is a repetitious endeavor. Simplify your marketing efforts and repeat." Ford agrees that maximal exposure is key: "Name recognition in marketing is critical, as is having a recognizable logo that is visible as much as possible," Ford says. "Everything that comes from us will have our name all over it."

A Promising Future

Operating a successful dental laboratory is a continuous endeavor, but one that is very rewarding when done right. "The dental laboratory industry is in a great position going forward," Lampert says. "Dental laboratories have the opportunity to excel, no matter their focus or price. It is a very positive time for the industry, and laboratories need to recognize that they bring a tremendous value to clinicians and their patients."

Making sure to keep our eye on our passions and offerings is critical as well. "We are constantly looking at how our business is going to adapt to future trends," Ford says, "such as offices becoming more digital or the possible development of direct-to-consumer business models. We are always looking at how we can partner with our clients beyond the fabrication of restorations and become more service oriented. That will make us nimble and allow us to fill in the voids as needed."

Increase Your Own Business Acumen

Inside Dental Technology's online library of articles includes a robust archive of content in the Business Management category. From human resources to marketing to communication with dentists, find it all here—and keep an eye out for much more in IDT's annual Business Review this August!