Posted Mar 05, 2013 in LMT Surveys
Nearly half of respondents to LMT's latest How's Business survey say they saw a decrease in sales and profits from 2011 to 2012 due to slower workloads and pricing pressure. "To compete with the constant barrage of solicitations my customers receive, I had to reduce my fees by 10% to 20%; this was essentially most of my profit margin," says a Washington laboratory owner. "I resisted the race to the bottom, but felt I had to be part of the solution that my customers were looking for considering the reduction in reimbursement from insurance companies."
On the other hand, 19% of respondents say business remained level from 2011 to 2012 and one third even saw an uptick in business and profitability. "I feel we found the bottom of this thing around the middle of last year and, over the last few months, there have been indicators of an increase in confidence and spending," says Sandra Stuart, President, First Impressions Dental Lab, a small laboratory in Mount Vernon, WA. "We're now regularly seeing multiple-unit cases, something that hadn't been happening over the past four and a half years."
Regarding respondents' outlook for 2013, there's a noticeable distinction between laboratory sizes: 68% of larger laboratories are optimistic about this year, compared to only 42% of labs with five or fewer employees. With fewer resources to invest in marketing and new technology, many of these smaller laboratories are having a hard time rebounding from the economic fallout. Only one quarter report an upswing in sales in 2012, versus 55% of larger laboratories.
Given the ongoing uncertainty, the majority of survey participants have altered or delayed plans they had made for their businesses. Many said they put off purchases of scanners or in-house milling systems, while others opted not to expand, renovate or hire technicians.
However, 20% of respondents say the economic conditions have necessitated that they accelerate plans they had for their laboratories. For example, Joe Sofinski recently decided to expand his services and overhaul his marketing efforts, and spent more than $8,000 to redesign his logo, launch a direct mail campaign and develop a new website. "The idea is to strike while the iron is hot and while everyone else is tightening their belts," says, Sofinski, Owner of AFX Dental Technologies, Dewitt, NY. "It's too soon to gauge overall results but we've created a little buzz out there and our monthly promotions have gotten some bites. We went all in but, as they say, you have to spend money to make money."
In another forward-thinking approach, Jerry Robinson, CDT, accelerated plans to open a new denture department when the economy began to decline. "As a wholesale chrome lab, I knew we were going to get hit hard, so we added the department just prior to the housing crisis in 2008," says Robinson, President, ChromeWorks, Inc., Chico, CA. "The expansion has kept our numbers growing through the recession, and I think opportunities in this area will expand with the continual attrition of removable technicians."
Sometimes, in an economy like this, you also use strategies you wouldn't even consider under "normal" conditions. For example, Sandra Stuart recently opted to rent half of her laboratory space to a competing C&B laboratory. The two owners worked for six months to negotiate a 10-page rental agreement, allowing them to share overhead while each maintaining their own accounts. "It sounds unusual because we're competitors and it's true that the trust factor was a hurdle," says Stuart. "But isn't survival a bit more important than a rivalry?"
The arrangement saves Stuart between $3,000 and $4,000 a month, but the benefits are more than just financial. The two labs often share staff and—if one lab has more work than the other—technicians simply punch out their time card from one lab and punch into the other. They each also benefit from the strengths of the other's employees; for example, one technician loves fixing equipment and another does beautiful anterior work.
"It's a give-and-take, symbiotic relationship," says Stuart. "And we're constantly working to respect each other's ways of operating our individual labs. But each day, it just seems to morph a little more into something extremely beneficial."
Laboratory Owner-Respondents to LMT's 2013 How's Business Survey sound off on the state of their businesses.
Many doctors are putting off retirement which is good for my business, but they're nowhere as busy as they once were. I would have preferred to keep the lab growing with more accounts and technicians but that won't be happening for at least four more years. In the meantime, I continue to trim the fat: I went from having a few employees to doing all the work myself and also moved to lower my rent. I've also encouraged my accounts to use e.max instead of a high noble PFM where possible. ~Small C&B lab in California
Although I don't think the overall economic outlook is very promising for the next four years, I believe our continued growth in implants and investment in digital technology will keep our lab growing and profitable. We've also gotten heavily involved in sponsoring continuing education so we can be a resource for our dentist-clients. ~Medium-sized C&B lab in New Mexico
The downward pressure from dentists to lower prices is eroding any profits. We're a small lab and it's getting tough competing with labs that continue to offer cheaper, offshore products. We still pride ourselves on providing American-made restorations! ~Small, full service lab in Michigan
The year is starting out better with current accounts producing more. Prospective customers also seem more receptive to talk to a new lab, especially about all-ceramic products. ~Small C&B lab in Colorado
Although the economy is not great, people seem ready and more willing to spend the money for their dental work that they have been putting off, and often they're paying for it without insurance. I'd like to expand more but the government's lack of leadership and fiscal responsibility scare me. I am uncertain about the economy and fear another recession that will be worse. ~Small C&B lab in Arizona
In January, our gross sales were up 20% compared to January 2012. We've been marketing and offering in-house CE courses and have three full-time sales people pounding the pavement to bring in new accounts. ~Large, full service lab in Maryland
We saw good growth in implants, porcelain-fused-to-gold and e.max. The economy's not really getting any better, it's just that people have waited as long as they could and need to get that dental work done. ~Small C&B lab in California
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