Volume 7 • 2020 • Issue 5

Cost Leadership Tips Talk to your bankers and accountants. • Give yourself the financial resources necessary to return to your dental practice with the knowledge that you will have less revenue than usual for a while. • Delay all new capital purchases, unless they are necessary to reopening your dental practice. This is not the time to do a major renovation of your office (or your home, for that matter). • Work with your team and advisors to lower your practice expenses. Work with your family to lower your personal expenses. One reason to lower personal expenses is that surveys show stress is most strongly correlated to debt levels, not fast paced work or other factors. The less you need to draw out of your practice, the lower your stress level. Negotiate for lower rent, equipment lease costs, supply costs and discretionary expenses. • Talk to your landlord about lower rent or your bank about lower payments on loans, including mortgages. Asking for a better deal or for help doesn’t cost anything. And it could have very real benefits. • Some provinces have buying groups for dental supplies, including PPEs, or professional services. These can help keep costs lower. Carefully consider the scale of your business. • Large group practices generally have higher costs per patient, but higher volumes of patients. Small, efficient practices see fewer patients and provide fewer procedures, but have higher net incomes than the average practice. The larger the practice, the more complex it is to run efficiently and the more patients it requires to cover overhead. With a “new normal” that includes social distancing and increased infection prevention and control requirements as well as a deep recession and uncertainty in Canada’s economy, a small and efficient practice may be a safer option. Future-Proofing: Cost Leadership Strategies for Dental Offices James Armstrong BSc, MBA, DMD In business strategy, cost leadership refers to the creation of a competitive advantage by having the lowest cost of operation. It’s achieved through efficiency and building a dental practice that has the appropriate size, scale and scope for a given economic situation. In the context of COVID-19 and its impact on the economy, adopting cost leadership strategies will likely be essential to most dental practices in Canada. A dental practice that accomplishes cost leadership cuts down on excesses at every opportunity while providing high quality care to patients. It focuses on savings rather than increasing revenue. For the average dentist, a dollar saved goes straight to the bottom line, but because of overheads you would have to earn $3 to get $1 to your bottom line. Carefully consider the scope of your business. • Consider that in a shared practice, you can share overhead with other dentists. Almost all economies of scale and scope can be captured with 2 to 3 dentists sharing a practice with 3 to 4 chairs. Running a 3 to 4 chair office 6 or 7 days/ week with extended or non-traditional hours of operation (12‑14 hours a day) can reduce your fixed costs and staffing costs by one‑third or more. Make scheduling work for you. • Standardize appointments. During COVID-19, make appointment times longer. Because of social distancing requirements and increased PPE costs, doing more at longer appointments for each patient (such as hygiene where you also add a small filling) makes better use of your time. • Block book with different heuristics: by level of risk and type of service. A dentist can’t easily “pop in” to see a hygienist’s patients. Make high-risk patients the first or last appointment of the day. Block book hygiene days separate from restorative days because you’ll need fewer staff, which makes social distancing easier. You’ll also use less PPE. A tip for new dentists seeking an associateship: offer to be “no risk.” • A “no risk” associateship means that you take on some of the fixed costs of your work, such as staff costs, with the quid pro quo of a larger associate percentage. We still need to provide excellent dental care and good customer service to our patients. In the next while, I expect we’ll see dentistry focused on its core value: no frills, just high‑quality oral health care. The views expressed are those of the author and do not necessarily reflect the opinions or official policies of the Canadian Dental Association. 9 Issue 5 | 2020 | CDA at W ork