**Rising Costs: Are You Doing Enough?**

As owners, we’re all aware of rising costs in our industry. It’s important to understand that it’s not just our industry but across the entire economy.

Staff wages, cost of goods (materials and equipment) are the main culprits contributing to rising prices.

Recently, I’ve joined business groups outside of dentistry and have engaged with many owners of large businesses. The insights have been fascinating and I’ve already written about operational transparency. Recently our management and ownership team attended a seminar on AI from an American expert in the field and its applications in the business of dentistry (not the clinical), are astounding. Huge efficiencies and cost savings to be had. Anyway, I digress.

Speaking to business owners across the country and internationally, one thing has really stood out to me. As business owners in the field of dentistry, we are very much behind the times in terms of efficiency and streamlining our businesses. For example, speaking to a pharmacy owner of a large group of pharmacies, it was fascinating to hear how much data they collect on the buying habits of their customers and how they then apply this data to maximise customer spend. Obviously we are not a retail business but neither was pharmacy. Competition and other factors meant they had to innovate. This particular owner recounted to me how they have data on the positioning of product A in particular aisles, then the positioning height. They even then have data comparing the positioning of product B (separate but associated product) to product A and how this impacts the average customer basket size. They are doing everything they can to increase the average basket size from say $30.25 to $30.80. This is a reflection of the maturity and knowledge of business owners but also the industry conditions. A good pharmacy runs on 7-8% net profit on turnover. Many run on just 3-4%.

Speaking to businesses in other industries and the story is the same. There is remarkable efficiency, innovation and strategy in the way they do business. One group of similar businesses in a region, even got together and discussed what they can do about staffing issues faced by their industry. They then devised a system of a staffing pool! Each company contributed a number of staff that that were happy to work in another company (even a competitor’s) and the staffing pool also hired dedicated staff for just the pool. This helped the entire group of companies that participated, solve their staffing issues. Imagine 10-15 smaller surgeries in an area getting together, hiring say 3-4 full time staff who were able to be accessed by any of the 10-15 surgeries to cover staff shortfalls. Bigger groups are already doing this internally.

I compare these other businesses to us in dentistry and because of the relative lack of competition, high prices we charge our patients, profit numbers, we are lazy. We don’t thoroughly examine our systems, our supplier prices or our efficiency generally. Consulting/coaching groups do a lot to try and helps us increase revenue but what about cost savings and efficiencies?

One thing that I embarked on quite a few years ago now was doing everything I can, to bring down my own costs. Especially for the more complex procedures. We obviously own a commercial lab but that lab has to run at a profit. So deals between my businesses and the lab needs to make sense for both businesses. However, bringing lab work in house through the use of cadcam and then bringing down the cost of procedures by efficient systems, processes and allocation of specific roles to staff has been a big focus.

Our buying volume, when combined with friends and other large owners in the industry has meant that we can go direct to the overseas manufacturer on some items, invest in the TGA process and bring down key costs massively.

I’ll be writing another post in the coming weeks regarding implant costs specifically, but this is another easy area for a win in terms of cost savings.

At a time when costs are rising, as a business owner, we must think differently and be aware that our customers are becoming more and more price conscious. This presents a difficult conundrum when our own costs are rising but the answer is definitely in finding efficiencies, refining processes, vertically integrating where you can and aggressively seeking cost savings.