Cliff's Notes

The Business of Dentistry

Defensive Business Strategy

Cliff’s Notes for January 3, 2010
…..E-Blast…..

Cliff Marsh, Henry Schein ……Cell: 201-321-7494……Fax: 201-262-2210…..E-mail cliff.marsh@henryschein.com
http://www.clifsnotesblog,wordpress.com

“In a time of universal deceit, telling the truth is a revolutionary act.”
George Orwell

In This Issue
* Defense Wins Games, Offence Sells Tickets!
* ARUBA Software Advisory.
* Did Snap-On-Smile Get a Bad Rap?
* A Blog-Radio Event! Hey Marketing Genius!

Defense Wins Games, Offense Sells Tickets!………………………………………………..
For the last 10 months I’ve been talking about marketing & advertizing. I guess you would consider that the offensive side of the game plan and we do have a plan, don’t we. It is true that the best defense is a strong offense, but as the great Vince Lombardi once said, defense wins games. If by this time you haven’t engaged in a coordinated marketing campaign, you left thousands of dollars on the table, just over the last several months, and there is nothing more I can say to get you started except, call me! So, let’s start focusing, again, on defensive strategies.

To understand the concept of offense and defense you need to recognize that all business, in one aspect, do the same thing. They buy and sell goods and services. Henry Schein buys and sells goods and services (widgets) and so do you. We do it very well and enjoy sharing our knowledge and experiences with our clients. After all, we both service the same end user. Why try to re-invent the wheel? We understand that our success directly depends on yours.

The “sale” strategy is the offensive game plan, and when executed correctly, it can generate quite a bit of revenue. The defensive game plan, when coordinated correctly, will maximize the “retained earnings”. The concept is not rocket science, however, it does take time to discuss, plan and implement and I do suggest that you consult with professionals before attempting it on your own.

If you want to increase your future retained earnings, you need to start today. There has not been one dental office that I ever walked into that didn’t have thousands of dollars a year leaking out the holes. Most of the offices with the biggest leaks are the ones that worry about paying $1.20 instead of $0.99 for a gross of matrix bands. Now don’t get me wrong, cost is a major factor in a defensive strategy considering the defense includes supplies, rent, utilities, employees, accounting, insurance and any other expense that you incur that is necessary for you to deliver your goods or services. If the defense is strong, the offence has more time ($$) to do its thing, generate new revenue.

Inventory control affects about 15% of your annual P&L (profit & loss statement). That is based on an expense overhead of 65.6% (ADA survey). This year that percentage may increase a little do to the economy, but your inventory liability will or should remain at about 15% of your gross. Before we can control inventory, we need to define it.

Main Entry: 1in•ven•to•ry
Pronunciation: \ˈin-vən-ˌtȯr-ē\
Function: noun
Inflected Form(s): plural in•ven•to•ries
Etymology: Middle English inventarie, inventorie, from Anglo-French inventaire, inventorie, from Latin inventarium, from inventum thing found, topic, neuter of inventus
Date: 15th century
1: a / an itemized list of current assets: as (1): a catalog of the property of an individual or estate (2) : a list of goods on hand b : a survey of natural resources c : a list of traits, preferences, attitudes, interests, or abilities used to evaluate personal characteristics or skills
2: SURVEY, SUMMARY
3: the quantity of goods or materials on hand: STOCK
4: the act or process of taking an inventory

To simplify it, your inventory is everything you own. However, for the purpose of this commentary, we’ll confine it to the 15% of gross production. The percentage is broken out (according to ADA surveys) as 7.2% for lab (fluid inventory), 6.2% for dental supplies (sustained inventory) and 2% for office supplies (sustained inventory). We’ll discuss the other 50% of the office expenses as we move through 2010.

Fluid inventory is the most profitable. Example: you can get paid for a PFM before the bill is due to the lab. Great cash flow, quick inventory turn. Sustained inventory is the day by day “widgets” you need to conduct business. This is what needs to be focused on to maximize its value.

When implementing an inventory control program, you have to concern your self with “carrying costs”. It is the hidden expense. An old friend once told me “don’t fall in love with your inventory”. Every day, everything you own costs you money. For consumable product to produce the greatest ROI (inventory is an investment) it needs to turn over rapidly. This is called “inventory turns”. All business strive to have an average12 inventory turns per fiscal year. Due to the usage levels all product won’t be used up that quickly but remember, we looking at an average and (12) is a goal. If you can average 6 turns, you have good control for a small business.

Carrying costs can be as high as 1% per month. A product sitting on your shelf for 30 days past it payment due date is costing you money. It doesn’t matter if its carbide burs or copy paper, you paid for it, and your money is in someone else’s bank account. At the end of January, the 10% you saved is now down to 9% and let’s not forget that the saving is considered taxable income on your P&L. Example: you purchase $500.00 worth of product (it doesn’t matter if it is copy paper or burs) that will last you 3 months. You saved 10% ($50.00). After 90 days, the cost of the deal would be realized at about $510.00 due to carrying costs and your tax liability on the deal will be about $15.00 (You saved $50.00 from your expenses and that shows as taxable profit). In the end, the 10% deal turned into a 5% deal, not taking into account the time it took to shop and make the purchase. You invested $500.00 for 90 days to save $25.00 or better yet, $8.33 / month, or $0.41 / day. Also, we did not take into account the time it took to facilitate the purchase or the accounting expenses involved. This is not how to make money! Ask your “dental” accountant.

Automation will give you the tools to move towards a “Just-In-Time” inventory. There is a reason Wall Mart embraced the concept. You are running a business. You’ve been to all the lectures about selling dentistry and generating revenue. How you address those suggestions is your decision and part of your standard of care, however, controlling your defensive expenses (inventory, work flow, liabilities & staff) is the common thread that all business has. Unfortunately, most dental offices don’t take advantage of the experts because it may require a change in thinking or worst, some money. I say, if it works don’t fix it, however, never stop trying to make it better! By the way, most dental offices don’t even know it’s broken and if they do, they don’t know how to fix it or are embarrassed to ask. There is no shame in asking. That’s why God created specialists.

If you have a $500k practice, your inventory exposure is about $75,000.00 per year. Who guides that investment, your assistant, hygienist, office manager or you? Do you have checks & balances? Is your inventory showing up on E-Bay? Have you discussed inventory exposure with your accountant and insurance adviser? Inventory control software is available from Henry Schein at no cost. Lunch & learn sessions are available to discuss concepts and provide training. I conduct those sessions personally.

The bottom line of any defensive program is cash flow and retained earnings. As a side note, inventory control software will also manage the required MSD Sheets and Chemical Inventory Lists that are required by O.S.H.A.

Aruba Inventory Control Software – User Advisory………………………………………..
Those offices using ARUBA Software should run the following reports to help facilitate a 2010 budget.
1. 2009 free goods Proof of Purchase report.
2. 2009 monthly detail purchase report.
3. 2009 category expense report.
If you have difficulty in printing any of the reports available, please contact me at any time.

Note: All manufacturer 2010 Q1 national promotions will be available on ARUBA, for viewing, by January 15, 2010.

Did Snap-On-Smile Get a Bad Rap?………………………………………………………………………..
I have been hearing some complaints about Snap-On-Smile. After researching some of the issues, it appears that most failures are with cases that are not ideal candidates for the prosthetic. Snap-On-Smile can be an excellent alternative to expensive cosmetics and can serve as temps for prolonged cases. The key words are “can be”. You need to be case selective. The following video may help better understand when the appliance can be most successful. For more information, please feel free to contact me directly, at any time.

For Immediate Release a Blog-Radio Event…………………………………………………
Jackie Doyle, Managing Partner of High Performance Dental, to be featured as Guest on Verasoni’s Web Radio Show, “Hey Marketing Genius”.

Little Falls, New Jersey. December 30, 2009. Jackie Doyle, of High Performance Dental will be featured as a guest on the popular web talk radio show, “Hey Marketing Genius” on Monday January 11, at 11:00am.

Ms. Doyle and host Abe Kasbo, CEO of Verasoni Worldwide, will discuss effective internal and external dental marketing. The discussion will focus on marketing strategies that will help dentists help promote and grow their practices effectively.

“This is a radically different business environment for dentists, and those dentists who recognize and capitalize on the new realities are inevitably going to do better,” said Abe Kasbo CEO of Verasoni Worldwide. “My discussion with Jackie Doyle will deliver meaningful strategies to our listeners to help them grow their practice,” continued Mr. Kasbo.

“Hey Marketing Genius” is hosted by Abe Kasbo CEO of Verasoni Worldwide. Verasoni Worldwide, along with its medical and dental group, Cambridge MedCom, is a fiercely independent Marketing and Public Relations Firm. The radio show delivers and discusses real world marketing communications strategies to help practices of all sizes thrive.

To tune into the show visit http://www.blogtalkradio.com/heymarketinggenius or call in to 347-539-5243 on Mondays at 11:00 AM.

To learn more about Verasoni Worldwide visit http://www.verasoni.com

Sunday, January 3, 2010………………………………………………………………………
Enjoy the day, tomorrow morning the starting gun will be fired for the race through 2010. It will be a good year to grow. The best time to grow a business is when the economy is down. It forces us out of our comfort zones and we begin, once again, to focus and be creative. As always, I am available at any time to address any of your questions or concerns.

Cliff Marsh
Henry Schein Dental
P.O. Box 663, 45 Rt. 46 East, Suite 605
Pine Brook, NJ 07058
tel. 201-321-7494
fax.201-262-2210
e-mail. cliff.marsh@henryschein.com
http://www.cliffsnotesblog.wordpress.com

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January 3, 2010 - Posted by | 1

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