Financial takeaways for dentists from the last three years: Being adaptable is key
Whether your practice goes belly up or your profits go through the roof depends on one important aspect: preparedness. The pandemic shone a spotlight on both the nimble and the undexterous. In one fell swoop, fortunes were either created or erased.
What was the main determining factor of which side you landed on? It was whether you felt paralyzed, or whether you were willing to adjust the way you manage your operations. Seemingly overnight, the world changed the way it conducts business. Those who couldn’t adjust were left behind.
Thankfully, business as usual has resumed for the most part, and savvy leaders know a lot more now about the nature of disruption than they did three years ago. The carousel of change dictates that advancement is the only constant. Standing still essentially means you’re going backward. For those moving forward, your team must understand the role they play. Practice doesn’t make perfect. Consistent, perfect practice makes perfect. Amateurs practice until they get it right. Professionals practice until they can’t get it wrong.
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I don’t want to sound like there’s no room for forgiveness. We learn as we go. However, I coach all my clients to be nimble. I tell them to always be on the lookout for greater efficiency and effectiveness. The worst reason for keeping a policy or procedure in place is because you’ve “always done it that way.”
If you ever catch yourself resorting to that thought, pause a moment. If you can’t deduce a better reason, the odds of unwittingly shooting yourself in the foot increase tenfold. Worse yet, if you ever offer an employee that lame excuse, you’re asking for it. When a member of your staff questions a course of action, that’s a clue. Often, there may be a better way.
How does this translate into running a private dental practice? The same way it does in any other business. Every system you have in place must revolve around greater efficiency or superior customer satisfaction. Every employee must comprehend how the system works and their role within it. Understanding is key.
No system is fail-proof on its own. Computers go down, assistants call in sick, and supplies arrive late. Good business leaders anticipate these pitfalls and more, as do their staff members. It’s no big deal. Or rather, it should never be a big deal, not if both you and your employees know the ins and outs of managing the business. Hiccups don’t throw good leaders off their game. In fact, the opposite is true. Every speed bump you and your staff encounter should serve to reinforce your innate ability to hold steady and carry on.
These principles are easy to grasp and digest. I expect everyone reading this to nod in agreement. Nothing presented so far is contrary to any known business fundamentals on record. However, much of it (or all of it) goes out the window the moment there’s a shakeup. It’s easy to keep a level head when things are calm. Only when the storm rages do we discover our true nature. The thunder and lightning separate the true masters from the wishful thinkers.
Now for some good news
You don't need to be perfect, at least not all the time. What’s required is that you understand not only your weaknesses, but also how to steadily improve upon them through your natural evolution as a skilled business owner. You’ve got to give yourself the same permission to improve your overall acumen that you extend to all your employees. Think of adroitness as a journey rather than a destination. You’ll never reach a point where you’re forever deemed ready. There’s no certificate for deftness. It’s a state of being, and you either are or you aren’t deft in any given moment.
It’s my intent to inspire a sense of greater preparedness in you. More important, however, is your own financial wherewithal. A willing attitude will get you far, but a willing attitude coupled with a healthy balance sheet will get you substantially farther. Nothing cripples a business more than significant debt. Debt and shackles go hand-in-hand. It’s practically impossible to be nimble when your income can barely keep up with your expenses. Throw a mountain of debt into the mix, and now you’re on life-support.
What dentists have learned along the way
I’ve witnessed an unmistakable pattern during the three decades I’ve been an advisor. When times are good, unwise business owners take on unnecessary and frivolous expenditures, failing to see the inevitable famine on the horizon. They seem prosperous until reality sets in and the gravy train comes to a halt. Unfortunately, their debts linger long after the temporary abundance vanishes.
You never have to find yourself at the mercy of your creditors if you see a feast for what it is: an opportunity to increase your reserves rather than your expenses. Think twice before purchasing new televisions for your office. Do your homework before upgrading to the latest technology—make certain that your business requires it. Technology is often one of the best investments a private practitioner can make, but sound judgment is a must.
Smart business leaders don’t gamble; they know. More importantly, they make sure they have enough liquidity in reserve before expanding their business. Purchasing new equipment in the hopes that it will eventually funnel the requisite cash into your bank account is putting the cart before the horse. Save first, then research, then spend.
Many who think they can do the opposite using borrowed money are currently learning a hard lesson in adjustable interest rates. Borrowing at a 2.5% adjustable rate suddenly became a lot more expensive when those same loans reset at 6.5%. If you’re in this predicament, you aren’t automatically doomed, but you’re constrained and likely uncomfortable. If there’s a silver lining (and there is), it’s that we all now have the shared benefit of learning from the experience.
Another feast is bound to come. It might be just around the corner, or it could be a few years away. No one knows the exact timing, but another boom will come. When it does, take a breath and allow your liquidity to increase. Think long and hard before allocating your precious funds elsewhere. Your flexibility is at stake, and along with it is your ability to adjust and prosper.
Author’s note: If you’d like more specific guidance regarding your practice, contact us at (973) 422-9140 or [email protected].
Editor's note: This article appeared in the October 2023 print edition of Dental Economics magazine. Dentists in North America are eligible for a complimentary print subscription. Sign up here.
