Inflation is here, and it’s real. Even if it improves, it isn’t likely that inflation rates will return to the extremely low levels of 2012 to 2021 for a while. Every 1% increase in cost to the practice represents a 1% decrease in practice profit.
This effect can have a short- and long-term effect not only on practice profitability, but on the ability of dentists to retire at a reasonable age. The good news is that there are effective strategies that can be used to offset inflation.
Increase fees annually. When economic times become challenging, many dentists are afraid to increase their fees. We suggest increases take place in slow increments. Either increase fees each year by 3% or 4%, or increase fees 1% every 90 days until you reach that level. Increasing fees is one of the most effective ways to offset inflation.
Don’t forget to reduce no-shows. How can no-shows offset inflation? No-shows represent unused chair time that can never be recovered and therefore it does not generate any fees. By reducing no-shows and maximizing chair time, the practice makes a greater contribution toward covering overhead. If you don’t have that contribution toward covering overhead, then overall practice profit margins will decline.
Dr. Roger P. Levin is CEO of Levin Group, a leading practice management and marketing consulting firm. To contact him or to join the 40,000 dental professionals who receive his Practice Production Tip of the Day, visit LevinGroup.com or email [email protected].
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