Business Strategies for Dental Laboratory Decision-Makers

Trends 2005

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The dental laboratory community is a five-plus billion dollar industry and with 75 million baby boomers in the U.S.—many of whom are prime candidates for dental work—the future looks bright for innovative laboratory owners who know how to take advantage of market trends. Dental laboratory owner/manager respondents to our Trends 2005 survey agree: 32% rate the economic health of their laboratories as “excellent” and another 44% say it’s “good.” In Part I of our report, LMT looks at what’s on the minds of dental laboratory owners and managers across the country and delves into the current and emerging trends in our industry.

Older and Wiser

With age comes wisdom. Almost half of our survey respondents are 55 or older, up from 22% of respondents to our Trends 2000 survey. When asked how their professional lives have changed over the past 10 or 20 years, a number of them indicate that, thanks to greater business acumen, their years of experience and new products and techniques, they are now working smarter and fewer hours and often are earning more money. “I used to run the rat race like everyone else—long hours, burn out, etc. Education has been the key! I’ve focused on occlusion and continuing education that includes the doctor and the technician. This has introduced me to some of the finest doctors in the country and, in turn, has enabled me to charge the prices I feel fairly compensate me. It has allowed me to work a four-day week, spend all the time I wish with my family and make a very good living. The future only looks brighter for my laboratory,” says Daniel O’Rourke, owner, Daniel O’Rourke Dental Studio, Dublin, New Hampshire.

Another respondent notes that he has focused on precision work and raised his fees. “I have less work but have the same income without the hassles of rush cases and remakes. I specialize in making a great crown that takes less time to insert and looks better. The doctor has more chairtime available to him and more profit, and the patient is happy because the restorations look and fit great,” comments Tom Hay, owner of a C&B laboratory in Morgantown, West Virginia.

Comparisons of several LMT surveys reveal some interesting statistics that further corroborate respondents’ assessments:

Interestingly, solo lab owners are working the least number of hours; for example, 48% of them work fewer than 40 hours a week whereas only 22% of owners who manage laboratories with more than nine technicians work less than a 40-hour-week.

Several respondents who work alone comment that downsizing has been the key to easing their workload and reducing headaches. “I downsized my lab, went to the highest quality and started charging a fair price for my work. I gained control of my business and enjoy what I do. I’m proud of myself, my product and my profession,” says a respondent from North Carolina.

David Zielinski, CDT, owner, David’s Dental Lab, West Seneca, New York, concurs. “Now I enjoy what I do. The work is better. I focus on making teeth, not acting as a parent or guardian of employees. I’m semi-retired by choice. I work less, enjoy it more and make just as much money with a lot less stress overall.”

The graying of our industry

However, with the average age of laboratory owners on the rise, the majority planning to retire between the ages of 61 and 70 and the ongoing shortage of new employees coming into the industry, the graying of our industry does raise some concerns about who will operate the dental lab of the future. Although one-third of technician-employees are under 35, the general feeling is that the low pay scales will discourage them from making dental technology their long-term career.

A number of respondents note that the biggest threats to their laboratories are their age, health status and/or injury to themselves. These are potentially legitimate concerns for the 31% of respondents who don’t have an exit plan in place yet and the 22% who plan to just sell off their equipment and shut their doors.

Experts say you should be thinking about how you’ll retire from the moment you open your doors; at the very least, you should begin formulating your plan 10 to 15 years in advance of your expected retirement date. “To truly run a business successfully, it’s vitally important to know what your exit plan is at any moment in time because it impacts everything you do. It’s not a question of getting out. It’s thinking about maximizing the value at whatever time you intend to get out,” writes Peter Engle, author of What’s Your Exit Strategy: Seven Ways to Maximize the Value of the Business You’ve Built. (Click here to read more about exit plans.)

Workloads: who's doing what, when and where?

Survey stat: 60% of the survey respondents subcontract a portion of their work to other laboratories and 5% say they are outsourcing work to an offshore laboratory.

Survey wide, 55% of respondents work 41-60 hours a week, while 32% work less than 40 hours a week. To help handle their workload, 60% of the respondents subcontract a portion—usually between 1-10%—of their work to other laboratories. The larger the laboratory, the more likely it is to subcontract to other labs; for example, 49% of one-person operations subcontract work compared to 89% of labs with more than nine employees.

Most of that work is staying in the U.S. but 5% of respondents say they are subcontracting work to an offshore laboratory. Of that 5%, the majority send their work overseas via a U.S.-based broker rather than sending it directly to the foreign lab. (For more information on sending work overseas, click here for Offshore Outsourcing: Shopping in a Global Market.)

Although offshore subcontracting is not new to our industry, the topic still stirs up a lot of emotion. A number of respondents voiced concerns about the quality of work being produced overseas; one-third of them feel that it is bad business, un-American and unfair to their employees. “For years, technicians have been their own worst enemy. Global economy or not, outsourcing outside the country is simply shooting ourselves in the foot once again. When we send dollars offshore, we’re financing our own demise,” says Robert Mann, owner, Alpha Syromill Dental Lab, Hagerstown, Maryland.

Another third—who are not currently outsourcing overseas—feel that outsourcing is a part of the globalization of our economy and 13% may consider offshore outsourcing in the future. “FedEx and the Internet have made the world smaller. I would have no problem exporting work as long as those countries’ markets are open to our business sector as well,” comments Albert Tassi, owner, Dental Studio Ltd., Elmhurst, Illinois.

Laboratory President Chuck Jesse, J Dent Prosthetics in Fairfax, Virginia, concurs. “Every one of us benefits from the outsourcing of most mass-produced goods such as cars, clothing and appliances. That it should be occurring with custom-made goods should be no surprise. It’s happening more and more and it’s not going away, so deal with it.”

Product development praise

Almost 70% of respondents “agree” or “strongly agree” that, thanks to new products and technological advances, life in the laboratory is easier, the dentist’s job is simpler and the patient is receiving better quality dental care. “Better quality materials have made production easier and restorations more lifelike. High-tech equipment, though expensive, has increased our productivity and quality,” says C&B Lab Owner Ronald Stewart, Dental Designs, Sugar Grove, North Carolina.

Our survey respondents credit pressable ceramics and furnaces, CAD/CAM systems, microscopes, microwaveable and light-cured acrylics, laser welders, electroforming systems, computerized porcelain furnaces, fast-fire investments and digital shade-taking devices with having had the greatest impact on their ability to produce quality restorations in the past five years. (Click here to see the Restorative Systems and Tools most used by respondents.)

The 85% of respondents who use computers in their labs agree that they have enhanced their business efficiency. In particular, they praise software for case tracking and scheduling, client management and invoicing and monitoring sales and production. A comparison of our 2000 and 2005 Trends surveys shows that respondents’ use of case tracking/bar coding software has jumped from 3% to 15%, computer imaging has increased from 8% to 21% and website development has risen from 12% to 20%. The vast majority (86%) has access to the Internet and most often use it to obtain product and troubleshooting information from manufacturer websites, order products and read industry-specific news or journals.

However, not all technological advances are necessarily welcome by labs. About a quarter of the respondents say chairside CAD/CAM has had a negative effect on their business, especially their inlay, onlay and single-unit posterior restorations.

Media momentum

Say what you will about reality television, but it’s a boon for our industry. Fifty percent of our respondents agree that makeover shows like Extreme Makeover, The Swan and A Makeover Story are enhancing the esthetic consciousness of the dental consumer and, as a result, having a positive impact on their business.

C&B labs report an increased demand for all-ceramic restorations, both pressable and CAD/CAM-fabricated; bleaching trays; and A1 shades (also see AACD Survey: Dramatic Five-Year Growth in Cosmetic Dentistry below.) Denture departments are getting numerous requests for lighter shades of denture teeth. Orthodontic labs, which are also deriving an added benefit of Invisalign television advertising, note an increase in appliances for minor tooth movement for adult patients. “The ‘quick fix’ dental procedures featured on many of the popular beauty reality television shows rarely, if ever, involve true orthodontics. But the overall awareness of improved smiles trickles down to the orthodontic industry as a whole,” says lab President Andrea Haas, Summit Orthodontic Services, Inc., Munroe Falls, Ohio.

Many respondents—larger, full service lab owners in particular—also comment that demand for implants is on the rise thanks to lower prices, easier techniques and greater consumer knowledge. “Dentists and the general public are more aware of the esthetics and permanence of implants,” says a full service lab owner from Nebraska. About two-thirds of respondents do some type of implant-related work but it makes up less than 10% of their workload.

AACD Survey: dramatic five-year growth in cosmetic dentistry

Fueled by TV makeover shows, patient inquiries and doctors’ desires to better serve patients while growing their practices, cosmetic dentistry has experienced explosive growth in recent years. Dentists queried in a 2004 year-end American Academy of Cosmetic Dentistry survey of 9,000 U.S. practices said the esthetic/cosmetic services they provided grew an average of 12.5% in the past five years, with some doctors experiencing close to a 40% increase. Whitening remains the most-requested cosmetic dental service.

Key questions answered by the dentist survey respondents include:

Who is the typical cosmetic dental patient? 70.2% of those inquiring about cosmetic dentistry aren’t the young and the beautiful or even the baby boomers with all that disposable income. They’re everyone in-between: 31-50 year olds. That means they’re people in the workforce or stay-at-home parents who just want to look and feel better about themselves and, by association, their jobs and personal lives.

What is the typical cosmetic dental practice? 56.6% of cosmetic dental practices are found in suburban America. That ties in with those busy 31-50 year olds who often live in the suburbs and commute into the city every morning.

Is cosmetic dentistry really booming? Absolutely. 48.3% of dental practices report annual production of more than $700,000 each year; survey-wide, respondents’ average annual production is $661,000. At the same time, a third of all practices report they have more than 2,000 active patients who spend, on average, more than $400 per visit. In the past five years, nearly 40% of responding practices report growth of over 15% in the number of cosmetic dental procedures performed.

Is there any difference in what procedures are requested by patients and which ones are actually performed by dentists? Yes—and a pretty big one. While whitening was the most commonly requested procedure by patients (29%), it makes up only 6.5% of procedures performed in the cosmetic dental practice.

Are there any factors keeping people away from cosmetic dentistry? Cost is the key. A third of all respondents list cost as keeping patients away from a full smile makeover. But, never fear—patient financing is here! Over three-quarters of respondents combat the cost issue with open communication with the patient and information on how to finance that new smile. Eighty-one percent of respondents do indeed offer outside financing services.

Why the boom? 41.1% list media coverage of cosmetic dentistry as the engine behind the boom. 31.1% say it is simply “baby boomers wanting to look better.”

Personnel shortage continues to plague the industry

Like laboratory owners, the population of laboratory employees is graying as well: 68% of technicians are over 35 years old. Given this statistic, it’s no surprise that survey respondents are concerned about the ongoing personnel crisis, as the relatively low entry-level wages, lack of public awareness of dental technology as a career path and the declining number of schools continue to fuel the staffing and training challenges in our industry. Survey respondents comment that they have ample work but not enough staff, which is affecting both their day-to-day operations as well as their long-term ability to grow and expand their businesses. “Lack of personnel has had a negative effect on both my business and personal life. It’s a real nightmare for the small lab,” says a C&B lab owner in California.

Keeping it all in the family is one effective recruitment strategy. In fact, 52% of the survey respondents work with family members in their laboratories; this figure has increased 10% since our Trends 2000 survey (click here for Succession is Sweet at Artisan Dental Lab, a profile in LMT’s family business series). While word of mouth is still the most commonly used recruitment effort, respondents have also had success using classified ads, attending job fairs and soliciting local high school and art school graduates.

The dwindling numbers of dental technology schools—currently there are 23 two-year, ADA-accredited programs—is putting a further strain on lab owners’ training resources. While over-the-shoulder is still by far the most common form of in-house training in the laboratory, almost half of our respondents augment it with videos, CDs or DVDs. “Let DVDs and videos do what you can’t,” says Steve Geib, owner of Dental Prosthetics Solutions in Monterey, California. “Technicians need classroom time now more than ever. In an era that sees our training centers diminishing, the burden is squarely on each of us to spawn career techs and only the smartest will survive.”

Fortunately the manufacturers and suppliers have stepped up to fill the educational void. More than three-quarters of the respondents “agree” or “strongly agree” that they have become the driving force behind continuing education in our industry. They praise manufacturer-sponsored clinics and seminars for their valuable technical and product information and say they are a good value given that they are usually free or relatively inexpensive. And respondents are taking advantage of these opportunities—30% say they’ve increased the number of seminars and courses they’ve taken over the past 10 years. “The level of education that is available is fantastic. This alone has had the most impact on my life and allowed me to work with very fine dentists. Education is the difference between respect and no respect from doctors. It’s all up to us,” says Daniel O’Rourke, owner, Daniel O’Rourke Dental Studio, Dublin, New Hampshire.

Copyright © 2005 LMT Communications, Inc. All rights reserved. Cannot be reprinted without permission from LMT. Call 203-459-2888.