State of the Industry 2000

Charts:

• Coping with inadequate work from dentists and finding competent staff are top problems in the laboratory
• Overall, 63% of respondents had gross sales under $200,000 in 1999. Here's how different size laboratories fared last year
• Problems with dentist-clients' work coming into the lab
• Survey Demographics

Given that the nation is experiencing its strongest economy in 30 years, it's no surprise that laboratory owners and managers responding to LMT's 2000 State of the Industry survey are upbeat about their economic situation and optimistic about the future of our industry.

Eighty percent of the survey respondents are pleased with their economic health; 32% rate it as "excellent," a percentage that has doubled since our 1995 State of the Industry survey. In addition, 48% of the 2000-respondents say the economic well being of their laboratory is "good." Fifteen percent say their business is expanding and one-third describe their workload as satisfactory and aren't looking for more work, a sentiment that is most prevalent among respondents from New England.

Although industry analysts have long predicted the demise of the 10- to 20-person laboratory, our survey results dispute this prediction. More than half the survey respondents in this group rate their economic health as "excellent." They also say their business is steadily increasing and that they are anticipating expansion. "I think the mid-size laboratory is able to maintain high quality control while also being able to offer current, state-of-the-art products," says the owner of a 17-person laboratory.

Another encouraging statistic is that owners' salaries are on the rise, according to a comparison of our 1990, 1995 and 2000 State of the Industry surveys. Although the majority of respondents still earn $40,000 to $80,000 per year, the percentage of owners in the lower salary ranges have decreased while the percentage in the higher salary brackets have increased. For example, half the 1990-respondents made less than $40,000; that percentage decreased to 28% in 2000. At the same time, the percentage of respondents earning $100,000 or more has tripled from 5% to 15% in the past 10 years.

Similar to our 1995 survey, there is a direct correlation between the size of the laboratory and the size of the owner's salary. For example, the majority of 2000-respondents employing less than four technicians earn less than $60,000 per year while three-quarters of those with more than 20 employees make more than $80,000 per year. Not surprisingly, there is also a direct correlation between sales and the owner's salary—the greater the laboratory's sales, the higher the owner's annual income. (See chart: Sales vs. Lab Size)

In addition, owners of larger laboratories are able to take more vacation time. Half the owners of 21-50 employee laboratories take three or more weeks off each year. However, these owners are working as many—if not more—hours during the week than are owners of smaller laboratories. The majority of owners employing 21 to 50 people work 41 to 60 hours per week. In comparison, the majority of owners with no employees work less than 50 hours per week and 25% of them work less than 40 hours per week.

Enjoying the control, independence and freedom that self-employment offers, one-third of our respondents say that no amount of money would entice them to work for someone else instead of running their own laboratory. This die-hard entrepreneurial emotion is the strongest among the owners of larger laboratories—65% of those employing 21-50 employees say that no amount of money would tempt them to give up their ownership status.

Many respondent-owners of family businesses (42%) and home-based laboratories (31%) appreciate the flexibility and opportunities their work situation offers them. "What other business would allow me to work at home, earn a solid six-figure income, employ all family members, earn prestige and recognition in the business world as well as in the local community, take pride in my work and still take four or more vacations a year? Most people would answer that question with 'a dentist;' I answer that question with 'a dental technician,' and proudly so," says respondent Sam Guido, Tri-City Dental Lab, Neffs, Pennsylvania. "I'm encouraging my daughters to learn this business. In fact one daughter is our driver; the other one works at the bench after school. Even my wife gets into the act as our office manager."

However, with regard to encouraging children and grandchildren to pursue a career in dental technology, Guido is in the minority. Fifty-seven percent discourage this career path. "Although I've made a great living for my family, leading my children into this field is not my first choice because it can be demanding and stressful. Looking at the difficulty our industry has in attracting and holding onto skilled labor, I can only assume that there are better careers out there for my children," says respondent Mike Walsh, owner, Walsh Crown and Bridge, Canton, Ohio.

Booming Economy

In 1998, people age 50 and older controlled 50% of the discretionary dollars in the United States and that group spent more than $57 billion on dental care. Statistics like these about the aging baby boomer population and its vast disposable income are the reasons many laboratory owners predict that the industry will continue to flourish.

"I believe that the next 25 years will be the best our industry has ever seen," said Josh Green, owner, Green Dental Laboratories, Heber Springs, Arkansas, during his presentation to the CAL-Lab Group in February in Chicago. "High-end dentistry such as cosmetics, restorative work and implants that is not covered by insurance will increase. We will have more work than we'll be able to handle, we will be able to increase fees and have more control over our businesses."

The downside of this booming economy is that it further exacerbates the employee shortage. As in our 1990 and 1995 surveys, the 2000-respondents rank "finding competent staff" as their number one business challenge. Finding ways to handle the increasingly competitive labor market will be even more imperative in the future. "We have to shift our focus from marketing to recruiting new people into the industry and training them, paying competitive wages and offering enticing benefits packages," says Green.

In fact, our survey shows that this shift away from marketing has already occurred. Across the board, respondents' usage of different marketing strategies has declined in the past five years.

At Green's laboratory, recruiting and training have become a top priority. To educate the public about career opportunities in the field, the laboratory exhibits at job fairs, visits area schools and has developed recruiting brochures and videos. "We promote the laboratory's image in the community and the quality of life in the Heber Springs area, which includes a beautiful lake and has a family-oriented lifestyle," says Green. "We emphasize long-term employment opportunities, offer high starting salaries and try to create a work environment in which technicians have the freedom to excel."

Product innovations

The wealth of new products and systems on the market creates a double-edged sword. On the positive side, three-quarters of the respondents say they've seen a continuous improvement in the quality of products and systems being introduced to the dental laboratory market. In addition, they say that thanks to new products, techniques and systems, they are able to produce restorations more efficiently.

"There have been great improvements in materials, techniques and equipment in the last 15 years," says respondent Bill Fowler, owner, Fowler Dental Lab, Milwaukie, Oregon. "Due to developments in ceramics and alloys, I don't experience as many problems with gassing, bond failures, cracking, greening and breakage as I did in the '70s and early '80s. New investments that set faster and can go into a hot oven allow the technician to complete a casting in 30 minutes. New computerized furnaces for burnout and ceramics, paste opaques, light cure composites and ringless casting systems help me fabricate better crowns, save me time and make my job easier."

However, affording advanced technology and incorporating new techniques into the laboratory's production system while still meeting deadlines and working reasonable hours is challenging. "It is getting hard for the small lab to compete," says a respondent. "All the new systems on the market today are getting more and more expensive and there are a lot of them. Small labs may have to specialize in one of two systems to make money," says respondent Tom Heath, owner, Creation Dental Ceramics, Red Wing, Minnesota.

Problems with clients

Echos from the past can still be heard among our 2000 survey respondents as they continue to express concern about poor work and vague, incomplete prescriptions from dentists. "I think 80% of dentists have inferior skills. I have very little respect for these dentists because what they call 'good dentistry' is not very good," says a respondent. "The trick is to improve your skills through continuing education seminars and find dentist-accounts who appreciate your efforts."

Poor tooth preparations and inadequate impressions are the two most common problems laboratory owners see with the work coming in from their clients. In fact, respondents say that one-third of the impressions they receive are inadequate.

"Lab owners need to demand better impressions from doctors," notes respondent James Bowlin, owner, Bowlin Dental Ceramics, Inc., Hayden, Idaho. "If you can't see the margin, don't do the case. If you can't ask your doctors for a new impression, something is wrong. When you work for dentists with high standards, you as the laboratory owner will also produce a higher standard."

Although half of those who answered our survey say that the quality of impressions hasn't changed in the past five years, one-third note that the quality has improved. Perhaps this improvement is due to the laboratories' efforts to help dentist-clients solve impression-taking problems by recommending a different impression material and/or a different technique.

The majority of laboratory owner respondents say that the level of dental training and the knowledge of laboratory procedures among recent dental school graduates seems to have decreased compared to older graduates. "It seems that when dentistry became less profitable, the dental schools lowered their standards just to keep up enrollment. I think that dental students are graded less on their chairside procedures and more on academics than anything else," says respondent Richard Ong, owner, Creative Dental Arts, Houston, Texas.

Coincidentally, Dr. William Dickerson, DDS, FAACD, addressed this inadequate level of training during his presentation at the NADL's Vision 21 Business Management Meeting in Las Vegas in early March. He attributes the decrease in training to a declining interest in dental school enrollment and the failure of dental boards and schools to keep up with the times.

"In 1974, 21,000 college students took the Dental Aptitude Test; that number has decreased to an average of 9,000 per year during the past seven years. In my opinion, state dental boards haven't changed in 35 years because they don't test students' knowledge of progressive procedures. To maintain their accreditation, dental schools have to teach the topics that enable students to pass their state dental board and, as a result, students are well behind the times when they graduate," says Dickerson, director of the Las Vegas Institute for Advanced Dental Studies, Las Vegas, Nevada.

Opportunity knocks

Although frustrating, this decline in dental training provides an opportunity for laboratory owners and managers to educate their clients. Eighty-five percent of respondents say their dentist-clients consult them about the pros and cons of new technology; of that percentage, the majority feel that being in this role gives them a competitive edge and is a valuable relationship builder.

To stay abreast of new products and techniques both for themselves and their dentist-clients, the majority of respondents attend one to three continuing education courses each year. "I see a direct ratio between the amount of continuing education I take and the amount of fun I have at the bench day to day. I love the technical challenges of my work," says respondent Lee Scullin, CDT, owner, Scullin Dental Lab, Westlake, Ohio. To further enhance their product knowledge, three-quarters of the respondents attend one to three trade shows a year and almost one-third are members of a laboratory study club.

Industry trends

• Mirroring the general population, the percentage of laboratory owners and managers using a computer to help them manage their businesses has increased tremendously in the past decade. In 2000, 79% of respondents use a computer in their laboratories, up from 37% in 1990. The most common uses for the computer include invoicing, accounts payable, creating promotion pieces and sales letters, tracking inventory, scheduling production and using the Internet. Respondents most often surf the web to obtain product information, order laboratory products and network with other technicians.
• The majority also carry a cellular phone and have a fax machine in their laboratory. One-third have a voice mail system in their labs and 24% have a beeper/pager. Of those who use the Internet, fax machines, beepers/pagers, cell phones and voice mail systems in their laboratories, the majority have purchased these tools in the past five years.
• With regard to restorative trends, laboratory owners have seen an increase in the demand for CAD-CAM fabricated restorations, implants, flexible dentures and partials during the past five years. The metal-free fixed prosthetic market is thriving. Demand for all-composite restorations is increasing while requests for composite-to-metal units are waning. In addition, more than three-quarters of the respondents note an increase in all-ceramic C&B. However, almost half still view PFM as their bread and butter and don't think all-ceramic C&B will overtake PFM in the next 10 years.
• Although 69% of survey respondents don't feel pressured to lower their fees for dentists who treat managed care clients, the majority are philosophically opposed to the concept of managed dental care. Some respondents say they believe that managed care does have a place in dentistry, however, many are concerned about how it will impact the industry and believe that it will cause "moderate" or "serious" problems for both dentists and laboratories. Many feel that managed care is only good for the insurance companies and, since they aren't willing to lower their fees, they are concerned about quality of work and the level of patient care. "Managed care has driven quality in both workmanship and materials to new lows," says respondent Michael DiPaulo, CDT, Springfield, Pennsylvania. "Managed care is a disservice to patients. It provides only minimal care to the patient and compromises his freedom of choice," says another respondent.

Positive outlook

Of course, our survey responses contain the ever-present complaints about dentist-clients, price cutters, fluctuations in workflow, desire for greater respect and public awareness and the need for some type of regulation. However, it is encouraging to note the number of positive comments about the bright future of our industry, increasing salaries, product developments that enhance efficiency, a sense of commitment to the industry and the level of satisfaction that many lab owners and managers derive from the business. One respondent sums it up by saying, "I love being a dental technician and that is why I stay in the industry. It seems most of us who stay in the industry do so because we love what we do."