Small laboratories—those with one to three people—are the backbone of our industry, representing more than 50% of the U.S. market. LMT's Small Lab Survey offers an overview of who they are, how they work and their outlook for the future of their own businesses as well as their market segment as a whole.
For years, we've been hearing about the decline in the number of small labs and yet, to date, LMT's circulation data shows little attrition; the percentage of one- to three-person laboratories has remained relatively consistent during our 28-year history. However, more than 60% of the respondents to LMT's Small Lab Survey are over 55 years old. While a number of them comment they will "die at the bench," more than half plan to retire within the next 10 years; in other words, there will be a substantial shift in demographics in the near future. (For survey demographics, please see below.)
When you ask small laboratory operators about the future of their own businesses, 66% are enthusiastic, calling it "good" or "great." But when it comes to the fate of small laboratories as a whole, it's another story: only 34% believe the outlook for their market segment is "good" or "great. Another 44% say they are uncertain about the long-term prospects for the small laboratory.
That uncertainty isn't surprising given the economic situation of the past few years and the growth of offshore outsourcing. Both have taken their toll, leaving many feeling the pinch of price erosion. Some respondents noted that price cutting among laboratories and pricing pressure from dentist-clients are at an all-time high, constricting the fees they can charge and their ability to maintain a viable profit margin.
Many small laboratories have a small but long-established client base; on average, they service nine clients on a regular basis. Although happy for the customer loyalty, they're facing the added pressure of having an aging base of clients, many of whom are also nearing retirement age.
While all size laboratories face these market conditions to some extent, they leave the smaller operations particularly vulnerable.
Going Digital: Do or Don't
Another enormous challenge for small laboratories is competing in the increasingly digital world. Some owners feel the technology is too expensive or they're too old to get involved and predict the small laboratory will go the "way of the dinosaur," squeezed out of business by larger laboratories that can more easily afford the capital investment and have larger marketing budgets. Others have made a conscious decision to not go digital, saying the restorations don't measure up to hand-crafted work.
Survey participants who have incorporated digital technology either via outsourcing or by purchasing equipment—14% have a scanner, 6% have a milling unit—are among the most optimistic about their future. They credit CAD/CAM and rapid prototyping technology with improving their efficiency, saving time, enabling them to meet client demand for zirconia restorations and boosting their profit margins. For many, it has also reinvigorated their interest in their work.
"I was starting to think about retirement but now I don't want to anymore. The digital world is a wonderful place—I'm loving it! We're set and ready for the changes in our industry," says Doug Horton, CDT, President, Precision Dental Arts, Inc., Tigard, OR. He purchased a scanner and milling unit six years ago after analyzing his outsourcing costs and realizing it was financially advantageous to buy equipment rather than continue to send the work to another lab. Today, 85% of his work is fabricated using digital technology.
Also upbeat are the removable laboratory owners who are feeling good about their specialty, thankful their services and talents are in demand. "The denture field has a bright future since it's hard to outsource to another state, let alone to another country, due to the number of visits needed before the final product is delivered; plus, there are fewer skilled denture technicians," says the owner of a removable laboratory in the Pacific region.
Strategies to Compete
Establishing a level of trust and building strong relationships based on teamwork and mutual respect are what many small laboratory owners feel give them an advantage over their larger competitors and offshore laboratories. With 80% of our respondents' clients within a 50-mile radius of their laboratories, they're making the most of their proximity and touting "local" as their strength.
Many say this personalized service is key to their success. By focusing on one-on-one contact, chairside assistance, after-hours availability, being a resource to their clients and offering a consistent, quality product, they're holding their own in the rapidly changing marketplace.
Those small lab owners who have carved out a technical niche—whether it be boutique-level quality, orthodontia or highly esthetic anterior crowns--also feel they have a leg up on their larger competitors who may offer more comprehensive services. "A wise man told me years ago that if you're the best at what you do, you will always have work," says William Fenell, Owner, Shore Center Dental Lab, a removable lab in South Euclid, OH.
By focusing on these strengths, the more optimistic respondents say there will always be a need for the services of a small laboratory and therefore the entrepreneurial spirit is still alive and well in this segment of the market. "The future looks bright since there are always options that allow us to grow and expand. Each year I set particular objectives and if I accomplish them, great; if not, I reevaluate and make adjustments," says Vernice Griffin, CDT, CEO and Owner, Griffin Dental Laboratories, Louisville, KY. "You're only limited by your imagination and the goals you set for yourself."
See the graphs here:
[Respondents' Outlook for the Future (/pdfs/RespondentsOutlookfortheFuture.pdf)
[64% of Small Lab Owners Outsource Work: Here's Where They Send It](/pdfs/OutsourceWork HeresWhereTheySendIt.pdf)
For survey respondents' comments about the future of our industry, see The Future Looks
LMT received 402 Small Lab Surveys--an 8% response rate--from an accurate demographic cross-section of the industry.
New England (ME, NH, VT, MA, RI, CT)________________________________ 7%
Middle Atlantic (NY, NJ, PA)__________________________________________ 10%
East North Central (OH, IN, IL, MI, WI)_________________________________ 17%
West North Central (MN, IA, MO, ND, SD, NE, KS) ______________________ 7%
South Atlantic (DE, MD, DC, VA, WV, NC, SC, GA, FL)___________________ 14%
East South Central (KY, TN, AL, MS)__________________________________ 5%
West South Central (AR, LA, OK, TX)__________________________________ 6%
Mountain (MT, ID, WY, CO, NM, AZ, UT, NV)___________________________ 12%
Pacific (AK, WA, OR, CA, HI)_________________________________________ 22%
Denture/Partial ___________________ 24%
Full Service______________________ 7%
Respondent has been in the Profession:
3-5 years_______________________ 1%
6-9 years_______________________ 1%
10-20 years_____________________ 7%
21-30 years_____________________ 22%
Over 30 years___________________ 69%
Lab has been in Business:
1-2 years_______________________ 3%
3-5 years_______________________ 7%
6-9 years_______________________ 8%
10-20 years_____________________ 19%
21-30 years_____________________ 27%
Over 30 years___________________ 36%
Lab Owner's Age:
Over 70________________________ 10%