“It is not the ship so much as the skillful sailing that assures the prosperous voyage.”
~George Wiliam Curtis
Is my mom like your mom?
The lessons she taught me about work. Mostly because we really needed to get the rent paid. Often just to put gas in the car.
Before I was even out of high school (1982) I was earning $11.42 an hour working almost 40 hours a week after high school at the Superstore (grocery store chain in Canada). Pretty good for a 15 year old that had to go right from school and take public transit to downtown Winnipeg, transfer and get off 5 minutes to 5 at the McDonalds across the street from work. Wolf down a Big Mac and fries then run like a freak on a leash all sweaty with his smock on and get right at it!
My mom fed me a continual diet of brain food. Think and Grow Rich. The greatest Salesman. She was a stream of optimistic psychotic cheering that you always get when you are starving and start in a multi-level business. The kind that keeps everyone pumped up enough to over pay for soap because they believe this will be their salvation.....
Yup that was me.
I have never stopped reading these books. It’s been my high school, my university, my life.
A few decades and hundreds of books and a billion dollars of dentistry later....here I am.
I am here to tell you a few important things. The kind of things I am always willing to debate, and maybe I am wrong....or maybe it’s why we are watching so many people develop bad attitudes about what IS STILL a fantastic career. Dentistry.
These ideas may seem counter-intuitive to what many industry pundits are preaching.
FIRST - this shift to DSO and Corporate dentistry. It’s only come because we have not paid enough attention to paradigms. Dentistry has ALWAYS been a good opportunity! Why? Because a price book has been offered that is always based on last years outdated and inefficient technologies which is priced to offer average dentistry a fair opportunity to make a living.
-Apply these serve up these delicious principals in an area that is starving and people can’t get enough to eat. An area where the overhead is low, and the talent is high. You can use the price book to your great advantage. You will not deviate from this price book, as there is no real competition for the food you are serving.
SECOND - Blaming everyone else for the failed business plan. Did YOU consider how many other stores were selling the exact same thing as you do in the same neighborhood? Maybe you were wise enough to be the first to recognize the opportunity = but did you create a product that was outstanding in order to keep those customers coming to your door? Continually improving? Extending your scope of business, offering higher quality and better service? Continue to grow your business instead of allowing competitors to set up a block away and eat a piece of your pie?
THIRD - F*** the business of dentistry - you went to school to learn health care not numbers. Were you able to consult with people who maybe knew a little more than you did about building or buying that clinic - or did you sit down with a napkin and hammer it out the way you just knew it had to be done. If you did consult, were you able to identify the people that actually had your best interest at heart...or were you gobbled up by the many goblins that prey on dentists?
At this point, I want to offer an olive branch.
It’s my opinion that those full service dealers have not worked hard enough and LISTENED to what our partners in business were asking for!!
DO WE actually have the same goals in mind?
To me, it’s providing an ever improving level of health care to the people who need it the most. Which is generally the people who can afford it the least....and how much have we actually done to improve this situation?
F*** the business of dentistry.
We really need to focus on improving efficiency. The DSO who are buying you out are focused on telling you they can afford to buy dental practices from all the efficiency they receive on dental supplies, accounting, legal, etc.
FOR SURE there is efficiency in reducing costs. Improving work flow. In the “business” aspect.
But MOST of the MONEY to pay for this comes from.....
The profit from a $1,000,000 is NOT reliant on the $10,000 reduction in expenses from $100,000 of variable expenses. Its a part, but not the major part. The PROFIT is generated by you. By your team.
I keep running into grumpy people (reps and docs) that seem to be on different sides of the fence. The DOCTORS blaming the dental suppliers for ridiculous costs on materials - these materials that compromise at the high end 8% of the cost of manufacturing their product and at the low end 4%. The median being 6%
Everyone seems to have an illusion that the fixed fee of about $300 for an MOD is compromised of $150 of materials...actually it is likely about $15 - $18.
This would be a fantastic return for any manufacturer. A set price and 15X the cost of the product for markup.
We all know there is WAY MORE cost involved to provide an excellent product. You must use excellent materials. Provide an excellent experience. That also costs money.
How about the manufacturer of these materials that compromise 6% on average of your manufacturing costs? They have similar overhead, and larger risks.
That little microbrush you love so much cost close to $1,000,000 to develop and bring to market, patent, and actually get people to use. Now it’s been knocked off and anyone can make it. It costs only .01 to make the damn thing. How much is a fair price for the people buying this?
What if they want to make the same return as tooth reconstruction manufacturer? They would take that .01 and multiply by 15. That would cover their other costs.
Somewhere along the line comes a company that will retail the product that has a lot of overhead and special people to help educate the public on the product. This company will commit shelf space, pay for purchase orders, pay to educate their workforce. They will distribute and pay FOB the factory to have it shipped and in turn pay to ship it to the end user. They will compete on the open market against a dozen other retailers vying for the same business.....
The gross profit is likely in the range of 30%.
So the little stick thing, that cost .01 to make and has markup similar to a tooth reconstruction manufacturer (15X) now has to take a percentage out for the distributor. The big volume dental supply house.
Because there are 10 other places to buy this - the product sells to all dealers at the same price with a suggested retail of about $15 for 100. Since it’s highly desirable the open market price might be $12.75 for the product. As high as $15 and reasonable at $12.75.
Out of that average gross profit margin someone is paying to ship it around, handle it several times, take it back if its faulty or shipped wrong. Many of the items will expire. Have to be licensed by the government. Spend years being researched and criticized. Often need to pay a “GURU” to rate the item (costs money) and then hopefully...just hopefully it’s a hit and isn’t replaced in about a year by the new and improved product.
We spend WAAAAAAY too much time worried about this aspect of the business. Every day there are products that are reasonably priced that can DRAMATICALLY improve the real bottom line...labour.
The full service dealers who make a public record 30% GP average on the products are not way out of whack compared to other retail, full service types of businesses. As a matter of fact - it may be on the lower end.
In return for the 6% of your manufacturing costs you possibly get a lifetime team member. Someone who has a business degree. The well networked and connected member that can help you find your first associate position. Someone that doesn’t charge any more for their services other than the difference between 6% and 5% overhead on manufacturing costs.
These are the people who bring you that something you needed when you ran out and had a patient scheduled. The one who knew EXACTLY who to call when you had that computer problem. The one who had a service technician on your doorstep Friday night so you could work on the weekend and make a few extra bucks.
The people who SHOULD be working HARD to get your overhead lower with INCREDIBLE knowledge of 190,000 different products that can not only reduce your supply costs but more importantly - increase your efficiency on that biggest ASSETT to your practice.....
F*** the business of dentistry. Leave that up to the people who wrote the book on it, and focus on patient care. Good patient care. My end will continue to help REDUCE the manufacturing costs - it’s relative, and it’s business. Some of us are good at it. Some of us deserve to get fired from it.
Get your costs in line then focus on the important aspect....