Dental Economics: Navigating the Coronavirus Recession as a Dentist
In June 2020, the New York Times reported that the dental industry is recovering from the shock of the pandemic faster than most industries. It was reported that staff members of 77% of dental practices in the United States have fully returned to work. While this news and numbers may be comforting, the reality is that dental practices - and dentists - still have a long way to go to recover from the financial tow the pandemic has had on them.
The pandemic has led to a global recession. Like many healthcare professionals, dentists must make adjustments to their financial forecasts and pivot as needed. Several dentists have been shedding costs by reducing supplies and wages just to stay afloat. For your dental practice to stay afloat, retain its patients, and survive the recession, you need to assess and make key financial decisions as a professional and business owner.
This article is the first of a series of articles on Connect the Doc’s website that will discuss dental economics. Over the series, we will discuss the measures dentists can take to manage their wealth and achieve their financial goals. In this particular article, you will learn the steps you can take - as a dentist - to navigate the current recession.
In March 2020, eight out of 10 dentists in the United States reported revenues that were less than a quarter of what is typical in their practice. In May 2020, the PPE shortage threatened to delay the reopening of several dental practices in Canada. At the core of these issues is the reality that there is a scarcity of resources needed for the smooth running of dental practices.
Scarcity forces professionals and business owners to make key decisions about how to allocate available resources efficiently to meet basic needs. Although the needs of every dental practice are different, there is a common outcry amongst dentists during this pandemic and recession - and that is the potential financial loss due to low patient volume. Given this reality, there is a need for dentists to reallocate the necessary resources to marketing.
Even in a financial crisis, the essentials of dental marketing and economics still apply. As a business, your dental practice should be recouping 60% to 80% of its revenue from existing patients. This means that, after you have taken stock of your dental practice’s financial situation, the bulk (60% to 80%) of your marketing efforts should be on your existing patients. Since your physical interactions with your patients are limited at the moment, your virtual interactions should be maximized.
Connect with your existing patients virtually by leveraging marketing and communications tools like newsletters, social media and teledentistry. These digital tools are useful for staying in touch with your existing patients and reassuring them of your value proposition as a business. At Connect the Doc, our team will support you during the recession by helping you maximize your email marketing and social media marketing strategy.
After redirecting your marketing resources to your existing patients, you can begin to explore other marketing strategies such as online advertisements and SEO marketing. These external marketing strategies can establish your dental practice as a safe and viable option for patients who may no longer be able to access their usual dental practice.
Due to the recession, some dental practices may be in significant debt. As such, they may not be able to direct adequate resources to their marketing efforts. If this is the case for you, you could consider getting a bank loan. The interest rates of bank loans are low at the moment and, even in a recession, banks regard dental practices at secure services. Banks will have a good economic incentive to support dental practices during this time because dental services don’t typically have a track record of failing under the right economic conditions.
Some dentists may be looking to sell their dental practice and hand over the keys to a dentist who may be more willing to hold the reins. If this is the case for you, you should be aware that, due to the office closures over the past few months, there is a lower appraised value for your practice but the recession could actually work in your favor. Historically, and even as close as the 2008 Great Recession, the selling prices of dental practice grew due to the lack of supply during economic downturns. Essentially, it is difficult to find dental practices for sale during a recession because several dentists are scared to sell their practice at a lower price. However, this reduced supply leads to increasing demand and a resulting increase in selling prices. You may just need to read the room and study the trends well to know when it is a good time to sell.
Irrespective of their financial well being prior to the pandemic, several dental practices have had to toss their financial forecasts in the trash can and account for their losses. As a dentist, you may benefit from looking at your financial losses not as actual losses but as deferrals. Dental practices are projected to bounce back from the shock of the pandemic. Although you may be trying to make sense of things at the moment, you have viable options. You could pivot, take stock of your current financial situation, redirect your limited resources, acquire a bank loan with a low-interest rate, study the market trends and/or sell the practice at a suitable time.
It will take a bit of studying, key decision-making and patience but you and your practice can navigate through and thrive during this recession.
Connect the Doc supports dentists all across North America in their efforts to optimize their marketing strategies during the recession. Contact us to learn more about how we can help you and your dental practice navigate through the recession.