As I recently pondered how hard it was to get certain things (from a car wash at the weekend to a steak at a local restaurant), I reflected on the strange – and strained – economic climate we’re living in.
For the last four years or so, we’ve found ourselves in a world of shortages, disruption, and rising prices. The reasons for this are manifold, from pandemic closures and furlough to the Russia-Ukraine war pushing energy costs up, to the fallout from Britain leaving the EU. Add in the chaos that’s unfolded from shipping being stuck in the Panama Canal and, in the last month, pirates rampaging on the Red Sea (yes, really), and the result is a comedy of errors in which nobody is laughing.
Unsurprisingly, we’re all feeling the strain. For most of us, this feels like a natural time to cut and question our costs. This makes good financial sense – after all, profit is a simple matter of earning more than you’re spending, so keeping this spending lean can only be a good thing. So, where to begin?
At Hive, we have a unique methodology for knowing where to look first, but if you’re a practice owner doing this yourself, we’d recommend looking at everything. Although it’s time consuming, take a hard, critical look at all your costs. This is an exercise that business owners don’t often have the time to carry out; the ‘law of least mental effort’ dictates that more attention-grabbing tasks (such as the day job) will always draw focus away from other things (like the financials). So, carve out some time to sit down and dig deeper. Are any of your costs unnecessary? Can any be reduced?
For example, with practices persistently increasing in size, this could be a good opportunity to negotiate with your suppliers – you may be spending twice as much as four years ago. Costs such as phone bills have become hyper-inflated, so don’t be afraid to revisit your providers and see if there’s anything they can do to bring that figure down.
Finance agreements are another area causing many of us pain. However, residential mortgage rates have just this week begun to come down, causing predictions that other rates might begin to soften and become more competitive once again. This signals that reviewing your agreements now could be worthwhile.
You might also take a fresh view of your marketing activity and examine whether this is generating a good return on investment. This doesn’t necessarily mean slashing your marketing budget (in fact, we’d advise against that), but it could mean looking at which channels and audience groups have the greatest potential, and strategically focusing on those areas. You may also need to consider whether there’s anything more you could be doing in house, in terms of internal processes, to convert and keep potential new patients.
And finally, if you’re still paying your associates 50%, I’d strongly suggest that you think again. In the modern climate, paying such a high percentage is unsustainable. This may have been passable when running costs were low, but it no longer works for anyone. Owners simply cannot afford to give away half of their income when the daily running cost of opening a surgery can easily be £600+, and when this is ultimately crippling the business, neither can associates. A lower associate rate of 40% allows breathing room for reinvestment in areas such as sales and marketing. In the long run, associates will typically take home more than they did before.
Of course, when it comes to cost saving, we’re very much dealing with a two-sided coin. Yes, you can work to reduce your costs, but it’s just as important to pay attention to improving efficiency, so that you’re getting the best possible result from the hard-earned money you’re paying out.
When wages can account for 40% (or more) of your running costs, staff efficiency is now more important than ever. It’s crucial that while cost-saving you’re not simultaneously leaking valuable money out of the back door. When we consider that the rising National Minimum Wage cost is compressing things further, it becomes a useful area of focus.
One initial area to focus on is whether your staff are as optimised as they possibly can be? In a nutshell, are you as busy as you believe you are? Too many processes, procedures and paradigms exist simply because “that’s how we’ve always done it”. A critical study here, and we run a ‘Staff Analysis’ exercise during our Diagnostics, can uncover remarkable insights. Often, practice owners think that they’re running near full capacity, but when we begin looking into areas such as patient volume and accompanying revenue, it becomes clear that there are massive opportunities.
Across the board, staff motivation levels are also an issue post-pandemic. So, consider whether your staff are well motivated, and whether the environment is right for them. Some businesses are experiencing a culture of team members doing the minimum possible for their time. This can be for many reasons, but fundamentally it’s a toxic behaviour that won’t serve you in the long run (or indeed, in the short term). As set out by Jim Collins in his classic book Good to Great, ‘get the right people on the bus in the right seats’ – as difficult as this may be to face, no practice can afford to carry unmotivated passengers.
It’s also wise to question your own processes and established behaviours. I recently spoke to one practice that allowed an hour for a new patient examination and 40 minutes for a check-up. Though the time needed for these appointments does vary, when your running costs are approaching £100 per hour, it all adds up. With an approach like this, unless you’re charging far more than average, you won’t be able to make ends meet. It’s also worth bearing in mind that long-term success isn’t just about generating huge income figures, but how much profit you’ve made when you’ve paid all your bills and closed your doors at the end of the day.
Fundamentally, when times get tough, the challenges posed can also become opportunities. After all, necessity is the mother of invention. If wages costs are problematic for you right now, are there innovative solutions you could try? Sainsbury’s tackled the rising minimum wage head-on by investing in self-service scanners and checkouts; replacing the work of multiple people. This was a bold move, but a hugely successful one: the customer experience is better for many, and the technology has paid for itself many times over.
With this in mind, there may be chances to make your processes slicker and more efficient, such as moving to iPad check-ins, rather than having this done face to face. And, with lab fees increasing, you might choose to revisit an alternative such as CEREC; even if you’ve considered this previously, a lot has changed in the last few years, and it may be appropriate for your practice now.
As dental sector experts, we really care about helping practice owners and associates succeed. If you’re interested in knowing more, we’re offering a free consultation to help you review your position. Additionally, if there is a need to explore deeper, we’re running a New Year offer for a half-price financial analysis until the end of February to get your practice started on the right track. Just get in touch with us if you’d like to book a call.