While Mount Everest currently holds the record for highest elevation on earth, the planet’s highest point may actually have been a bit closer to home at one time. Some 400 million years ago, when the African plate slammed up against North America, it formed the supercontinent known as Pangea. The massive collision caused a geological upheaval that resulted in the formation of a chain of mountains. Today, we call the remnants the Appalachians. It might be hard to fathom, but they would have likely towered over the Rocky Mountains today if it weren’t for one inevitability—erosion.1
Over time, even the tallest mountains succumb to relentless wind, snow, and ice. In fact, the taller the mountain, the quicker the process. North Carolina’s Mount Mitchell is the tallest point in eastern North America.2 At less than 7,000 feet, however, this former behemoth stands 3,000 feet shorter than the lowest point in all of Tibet, the current highest region in the world and home to Mount Everest.3 Today we may admire the grandiose Himalayan summit but make no mistake; it too will surrender its title within the next 100 million years.
Mountains and today’s business owners
While mountains take eons to erode, today’s business owners must contend with a similar but much more immediate threat—the erosion of their wealth from inflation. It’s the word on everyone’s lips in today’s economic climate. While the consumer price index generally increases between 2% and 3% in any given year, last year it increased an astounding 7%. Everyone feels the acute pinch of rising costs. Mountains of wealth amassed over decades will rapidly diminish if stakeholders ignore the reality of reduced buying power.
The reasons behind inflation are nuanced and inconsequential compared to the steps you as a private practitioner must consider if you hope to survive these economic conditions. With the right guidance, you might find it possible to actually thrive.
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As a financial advisor, one of the first steps I encourage clients to take revolves around debt refinance. For the time being, interest rates remain at historic lows. Rising interest rates are a tool used by the Federal Reserve to stem the tide of rampant inflation. Assume that higher interest rates are on the horizon. If you haven’t locked into these advantageously low rates, it makes sense to do so as quickly as possible. There is no simpler hedge against inflation than a steady payment on a debt secured at a low interest rate. Inflation could go through the roof, yet your monthly installments don’t increase a cent.
Securing low interest rates isn't a panacea. As long as the inflationary grip squeezes the dollar’s potency, your day-to-day costs will steadily rise. When times are good and you’re flush with income, it’s easy to take on liabilities. Feasts make us temporarily blind to future famine. But it’s time for the chopping block. Any routine expenses that don’t make you money will in time cost you dearly, so get rid of them.
The many factors of success
On the flipside, proper staffing is as essential as ever. For as long as you have steady clientele, a dedicated team is of paramount importance. Let’s assume staff salaries are competitive and you’re not at immediate risk of losing your employees to any rivals. Your goal now is to keep them satisfied without having to constantly award pay raises. Here’s where creativity comes into play in the form of deferred remuneration. As long as your business is growing, you can make your employees partners in your business. It can be as simple as a structured bonus or as complex as the issuance of private stock. The goal is the same. When employees become stakeholders, they not only have an incentive to stay, but also a reason to ensure the success and growth of the business.
As costs increase, it’s fair to pass them onto patients by raising prices. Naturally, we all share the burden of a weakened dollar, and adjusting your fees to match inflation is a simple process with regard to cash-paying customers. But when it comes to insurance, it’s a slightly different ball game. Thankfully, insurers know about inflation. Their business accounts for it, which means you have the right to negotiate higher fees when the time comes. The companies expect negotiation, but you might need some leverage on your side. Consider working with a firm that can advocate on your behalf. I recommend Practice Quotient to my clients. The company’s expertise goes a long way toward making sure you receive appropriate payment from insurers for services rendered.
So far so good, right? You’ve trimmed unnecessary expenses, cultivated a loyal staff, and secured adequate fee schedules, all while continuing to build your clientele. If you made it this far, then this next piece of wisdom might be what propels you to new heights.
While residential real estate prices soar, commercial real estate remains mostly stable. In some instances, it has even decreased. With more remote workers, businesses demand less space. As a private practitioner who depends on a brick-and-mortar establishment, you could benefit substantially simply by becoming your own landlord, especially if you can secure a loan at the current low rates. While rents hinge on inflation, fixed loan payments stay exactly the same. In short, even if you don’t see immediate monthly savings, you can rest assured that your payments will not increase for as long as you own the land. Most importantly, your business could be worth exponentially more when the time comes to sell.
At this point, you’re either excited or scared; perhaps a little of both. It’s great to have ideas, and it’s even better to have a plan. Nevertheless, it would be highly irresponsible of me not to stress the importance of having the right financial advisory team to assist in drawing up those plans, especially in this volatile economy. While change remains the most steadfast constant, the patterns embedded within change stay nearly as consistent. A consultant who specializes in navigating change will ensure your success more than any other single investment. Regardless of how great you are at what you do, sound guidance will help you succeed and ultimately grow in any conditions.
If you don’t grow, you shrink. Inflation ensures it. Thankfully, unlike the erosion of mountains, you have a say in the matter. A weakened dollar doesn’t have to undermine your business. On the contrary, let it be the impetus that launches you to even greater heights.
If you would like to further explore the ideas presented here, rest assured that my staff and I are eager to hear from you. You may call us directly at (973) 422-9140 or send an email to [email protected].
Editor's note: This article appeared in the June 2022 print edition of Dental Economics magazine. Dentists in North America are eligible for a complimentary print subscription. Sign up here.
Reference
- Fold Mountain. National Geographic. https://www.nationalgeographic.org/encyclopedia/fold-mountain/
- Mount Mitchell. National Park Service. https://www.nps.gov/places/mount-mitchell.htm
- How high is Tibet? Altitude of different places in Tibet. Tibet Travel. https://www.tibettravel.org/tibet-travel-guide/tibet-altitude-list.html
