Chuck Yenkner

	Ah, the good ‘ole PFM: the staple of fixed prosthetics since the 1960s. Even in this new age of all-ceramic restorations, gold alloys are still used in a significant percentage of the cases done in most labs.

	IdentAlloy/IdentCeram, which certifies materials used in dental restorations, reports that in 2008 high-noble and noble alloy certificates comprised 69% of the certificates shipped by the organization. Final figures for 2009 are not available yet, however early indications are that this figure will be down but not as much as you might think.

	That means even at today’s prices, gold alloys of various compositions are going to be around for a long while, and you will need to cope with the capital expenditures involved. High gold prices impact two main aspects of a laboratory’s operations.

	High gold prices mean the lab requires more operating capital. It costs more to buy and inventory alloys to use in your daily operations. Because laboratories pass the cost of gold on to their dentist clients, it means labs must carry higher accounts receivable. It also means higher costs for work loss and increases the potential for theft.

	Don’t let the current volatility of gold pricing get the best of your business. Follow these 10 steps to ensure the high price of gold doesn’t beat you up.

	1. Order smaller amounts of alloy more frequently

	2. Make sure the credit limit with your alloy supplier or on your credit card is high enough to cover costs

	3. Review accounts receivable for any slow-paying clients

	4. Review pricing structure to accommodate fluctuating alloy prices

	5. Review lab procedures to minimize remakes

	6. Make sure you have a good scrap recovery program in place

	8. Take a look at alternative alloys that may be less expensive and more price stable

	9. Market to clients that you have alternate products to offer if higher invoices are making them nervous

	As the total invoice for each case creeps higher because of increased gold costs, clients may be more susceptible to try another competitor lab. That could lead to a loss of business. This loss sometimes gets hidden if you are only looking at the total sales generated for an individual client. Total dollars may be the same due to the higher gold charges, but in reality that client may actually be sending you fewer cases.

Action: What to do
	1. Aggressively manage your cash.

		Order smaller amounts of alloy more frequently from your alloy supplier, reducing the amount of alloy you inventory.

		Speak with your alloy supplier regarding the credit limit on your account. Be sure it’s high enough to accommodate your needs. If you pay with a credit card, check on that, too. You don’t want late cases because gold shipments are held up. 

		Stay on top of your accounts receivables. The habitually slow payer that was marginally profitable before may be unprofitable now. 

		Review your pricing policy. If your unit price includes gold, review your pricing structure each time you buy alloy. Some labs add a surcharge to cover gold prices over a certain level. However you handle your pricing, be sure you cover all your costs plus an add-in PROFIT. 

		Review your daily lab operations to be sure good procedures are in place to minimize work loss. How close to the unit are sprues cut off? Do you have a tracking system for gold in the lab?

		Be sure you have a good scrap recovery system in place. Most refiners are happy to help you with suggestions for maximizing scrap returns. Send scrap in more frequently to free up cash for the business.

		This is no time to be a stranger to your accounts. If they are getting nervous about invoice totals, encourage them to talk to you about it. Closely track not only dollar sales to each account, but the number of cases or units they send.

		Research alternative products. Palladium, a popular element in dental alloys, is now much less expensive than gold and has remained relatively stable in price. Offering alloys with higher palladium content and lower gold content can significantly lower the cost for the dentist while maintaining many of the physical properties and working characteristics of higher gold alloys.

		Direct your marketing efforts to communicate the fact you have a variety of products available. 

		This is a good time to prospect for new accounts. If your competitor is not coping with the high gold prices as well as you, their accounts may be willing to try you. 

Articles

 Ah, the good ‘ole PFM: the staple of fixed prosthetics since the 1960s. Even in this new age of all-ceramic restorations, gold alloys are still used in a significant percentage of the cases done in most labs.  IdentAlloy/IdentCeram, which certifies materials used in dental restorations, reports that in 2008 high-noble and noble alloy certificates comprised 69% of the certificates shipped by the organization. Final figures for 2009 are not available yet, however early indications are that this figure will be down but not as much as you might think.

Coping with high gold prices

	I recently read an article about a nursery school employee who embezzled more than $150,000 from a private school over a five-year period. The nursery school was a small nonprofit, and the suspect worked there as a trusted bookkeeper for about 30 years. She did this by issuing checks to herself from school accounts for money she was not owed and was able to conceal her actions.

	I began thinking about how exposed dental labs could be to this type of crime. Small businesses, like most dental labs, are the most vulnerable to occupational fraud and abuse, according to the Association for Certified Fraud Examiners, which reports that small organizations (100 employees or fewer) suffered higher median losses than large organizations (10,000 employees or more). Small businesses’ losses averaged $127,500, based on a CFE survey.

	Considering the potential losses, it behooves you to make fraud prevention a priority in your business. Though no one wants to feel they employ unscrupulous people, sometimes temptation or personal financial pressures can push even the hardest-working, most-trusted employee into perpetrating fraud.

: The first step in preventing employee fraud is to hire the right employees. Conduct background checks for people handling inventory and money. Check past employment, criminal convictions, references, education, and certifications. Also, conduct drug screenings because employees often steal from a business to support an addiction. Try to avoid putting employees in situations where they could be tempted to do the wrong thing. Remember, however, to always get the written consent of candidates before doing research because many federal and state laws govern the gathering of such information.

 Have controls in place that are meant to make employees accountable. This protects both you and them. An outside independent accountant can help you develop a system of internal controls and come in to check and validate entries to the accounting system on a routine basis. Knowing that an outsider comes in periodically implies that as a business owner you are serious about accountability and fraud prevention.

 You don’t want the same person in the lab placing orders, receiving the goods, and paying the bill (particularly when dealing with precious alloys). Likewise, you don’t want someone who has authority to sign checks balancing the account. Make sure expenditures are approved. For every expense, have a manager or administrator approve it. In a small lab, the owner needs to review expenditures. Check that the expense is valid and that the math is correct.

 Have security cameras monitor activity in the casting room and storage areas where inventory is kept. People are less likely to commit fraud if they know they are being watched.

 Catching an employee off guard could be your best bet in discovering fraud. Have the owner, a key employee such as a department manager, or outside accountant fill the role of auditor. A simple test can be to examine the payment of 100 vendor invoices in detail. Look at the amounts, invoice numbers, to whom payments were made, and when payments were made. Look even deeper into any that look suspicious. There have been cases where an employee creates a phony company, submits invoices to accounting, and has accounting send payment to a P.O. Box. A surprise audit also can uncover duplicate invoice amounts and invoice numbers, both of which can be red flags for possible wrongdoing.

 As a small business owner, make it a policy to personally sign all checks, or require a dual signature. Making two employees responsible reduces the opportunity for one of them to commit fraud. There have been situations where employees have received “kickbacks” from vendors for processing orders for goods and services that may not be needed or at higher-than-usual prices. Make it a point to know your suppliers and lenders and make competitive purchasing a standard policy.

 Research has shown if employees don’t take vacation, it can be a red flag. They may be afraid to go on vacation because someone is going to find out something is not right. Requiring employees to take time off can aid in preventing some frauds.

	It’s difficult enough to operate a profitable dental lab today. Don’t be the victim of an inside job.

 I recently read an article about a nursery school employee who embezzled more than $150,000 from a private school over a five-year period. The nursery school was a small nonprofit, and the suspect worked there as a trusted bookkeeper for about 30 years. She did this by issuing checks to herself from school accounts for money she was not owed and was able to conceal her actions.

Preventing an “inside job”

	CAD/CAM has been a topic of discussion in the dental lab business for a number of years now, and there are numerous opinions about it-examples of many appear in this issue of DLP. Now that we have you thinking about CAD/CAM, I figure this is a good opportunity to get my 2 cents worth out there too.

	I tend to look at things from the business perspective (that’s why the smart folks at DLP title my Competitive Edge column “Business Strategies”), and to me the question seems pretty simple. Does CAD/CAM make the product you produce in your lab faster, better or cheaper? If so, you really have no choice but to strongly consider it.

	What complicates things is the fact that in the highly fragmented dental lab world, there are wide differences between labs in terms of the products they produce, the markets they serve and how they produce. The situation is further complicated by a diverse spectrum of dentist clients with a wide range of expectations. This means every lab has to consider their own unique position and determine which of the many system offerings might be a good fit for them. The decision to acquire CAD/CAM technology becomes an individual decision for each lab.

	Let’s talk about the three potential benefits I mentioned earlier:

	1. Faster. Making product faster generally lowers your production costs because you can produce more crowns, bridges or dentures in a 40-hour work week with the resources you have. More product to sell should mean more revenues or perhaps require fewer staff to produce what you do sell, thus lowering costs and increasing your profit. That’s called increased productivity, folks, and that’s always good. Faster production may allow you to require less turnaround time for each case, which could be appealing to your dentist clients and may earn you more of their business.

	2. Better. Making a better product enhances your lab’s reputation, attracts new clients and helps retain existing customers. It also could allow you to charge more for your work, and that certainly helps the bottom line.

	3. Cheaper. Making a cheaper product allows you to be more competitive with your prices or more profitable with your current prices. Cheaper and better need to balance with each other. Making a cheaper product with a corresponding drop in quality or service may or may not be a winning strategy. The same or better level of quality made less expensively is a definite winner.

	Evaluating these three concepts requires you to have a good understanding of the current state of your dental lab business. Most lab owners and managers are well equipped to judge the quality aspects of the product they produce. They generally know how long production takes, but many struggle with knowing what their current costs are for a particular product or process. The cost piece of the equation is necessary when you are evaluating CAD/CAM systems. You must have that knowledge to determine how much a system will save you (or cost you).

Remember equipment when calculating costs

	A key aspect of the evaluation process that needs to be considered is the capital cost of the purchased or leased system. Material costs for things like blocks to be milled are pretty straightforward but the system cost, which can run into the hundreds of thousands of dollars, needs to be figured into the cost of the products produced. Historically, capital costs for dental labs have been low, and therefore, many lab owners and managers do not have experience with this. An accountant or business advisor can really help out here.  

	Bottom line, CAD/CAM systems are not for everybody, but they can be good for many labs. Just be sure you evaluate it carefully, and don’t get caught up in emotional buying. Just because the guy across town bought a system, that does not mean it’s right for you!

 CAD/CAM has been a topic of discussion in the dental lab business for a number of years now, and there are numerous opinions about it-examples of many appear in this issue of DLP. Now that we have you thinking about CAD/CAM, I figure this is a good opportunity to get my 2 cents worth out there too.

CAD/CAM: To buy or not to buy?

	I am always amused by the fact that we call ourselves Dental Technicians, our field Dental Technology and yet in some ways many of us are reluctant to use newer technologies to improve the productivity of our dental laboratories. Perhaps an even larger problem is under using technologies.

	Any of you who read my columns or have heard me speak know I’m a big proponent of improving productivity in the dental laboratory. In my opinion it’s the path to surviving and prospering in the decades ahead. Improved productivity allows U.S. labs to compete effectively, not only against other domestic labs but against worldwide competition. Improved productivity allows labs to pay better wages and attract bright, hardworking people to the profession. Perhaps most importantly it can improve profitability of dental lab businesses.

	The big potential benefit of technology in the dental lab world is its ability to eliminate or reduce some of the time consuming, labor intensive activities in the dental lab. I’m speaking not only of the products and tools directly involved in producing crowns and dentures, such as milling machines, but also things like the Internet, communications tools, and software for operating the business.

	Many labs have technologies partially installed but under-used. Simple things like sending statements by e-mail instead of mailing them can save time, paper and postage. Having the lab operating software communicate with the lab financial software can save time entering data and reduce administrative expenses. Pressing ceramic substructures or milling monolithic all-ceramic crowns can replace labor hours with machine time. Things that reduce labor and speed the process allow a lab to produce more units and thus sell more units with the same labor resources. (That’s increasing productivity!)

	The key to evaluating and using technology is focusing on what it can do as opposed to what it can’t. The comments I frequently hear about new technology revolve around how esthetic results aren’t as good or the time involved in getting it working is too long. Sometimes that’s the case and that particular system/product may not be the right one to buy, but don’t make the mistake of writing off the whole idea because one approach isn’t successful. Automobiles as a concept didn’t fail, but steam-powered cars did. No new technology comes to market performing as well as it will down the road as it matures.

	Using new technology in the lab comes down to a few basics:

	1. Understanding what it currently costs to perform a task or function. Where are the bottlenecks and excess costs in your lab? Does your ceramic department produce a below average number of units per technician? How many administrative staff members do you have? Is it the right number for the size of your lab?

	2. Understanding the potential impact of the technology. How much time could it save or how much could it increase capacity? If you purchase and implement technology without reducing costs (labor or materials), increasing sales, or reducing staff you are NOT increasing productivity.

	3. Understanding the costs of implementation, and that means both time and money. Technology generally costs money, so you need to balance the upfront, one-time cost of the technology plus the ongoing maintenance against the current costs and quality. 

	The bottom line is, purchase and implement technology into your lab if it will help you do things better (improved quality allows you to sell more or increase prices), faster (allows more production, potentially increasing sales), or cheaper (reduces overall costs).

	Don’t fight technology. Learn about it and figure out how to make it benefit your lab.

 I am always amused by the fact that we call ourselves Dental Technicians, our field Dental Technology and yet in some ways many of us are reluctant to use newer technologies to improve the productivity of our dental laboratories. Perhaps an even larger problem is under using technologies.

Don’t fight technology

	Knowing the right material (or materials) for a particular case is part of the equation, but if it’s not the material requested on the prescription, the first step becomes getting the dentist to agree to your recommendation.

	That can be a difficult conversation and it gets me thinking about the whole range of difficult conversations that are sometimes necessary. Materials, proper preparations, impression quality (or lack thereof), bill payment, remake responsibility, are all potentially “hot” topics that need to be discussed at one time or another if you own or manage a dental laboratory business.

	Given the pace of change in our world today I suspect management of clients and difficult conversations will be more frequent than ever going forward. How you handle these difficult discussions can have a tremendous impact on the success of your business.

	After all the dentist is the one with the degree, he or she is the customer, and the customer is always right…right? Well, yes, but to keep your business running smoothly and productively there are just some things you can’t do. Not getting paid comes to mind here, but it also applies to materials and the technical capabilities of your lab, too. If you truly want to serve your client in the best possible manner, that means sharing your knowledge and expertise as well. Having the difficult discussion has one of two outcomes. Either you improve the productivity/efficiency of your lab operations because you remove a problem or you build more profitable business from the client. A successful discussion does both!

	Not only should you communicate with your clients when the topic is uncomfortable, you need to do it sooner rather than later. Deferring or avoiding the discussion just makes things fester and festering problems get worse, not better.
	three keys to a successful discussion

One extremely important key to achieving positive outcomes from that difficult discussion is the relationship you have with the dentist. Sensitive topics are more difficult to discuss if it’s the first time you have talked to them. Think about how much more likely you would be to take recommendations on materials from a manufacturer sales rep you have known for years and who has proven himself knowledgeable.

	Start communicating with new dentist clients from the first case and make a point of continuing contact with your clients. Showing concern, learning about the practice and understanding their needs builds trust and credibility that will be invaluable when discussions get in to sensitive areas. A track record of good performance, solid advice, and familiarity pays dividends. It’s not always possible because of distances, etc., but make a point of meeting your dentists in person. Not that a relationship can’t be built over the phone, it can, but face to face contact moves the process along faster.

 They are the dentists, and they are your customers, so you need to treat them with respect. As a professional yourself and a supplier of needed services you also deserve respect. Keep the discussion away from personal fault or failures and on the subject of solving the problem at hand. “Suggesting” solutions or alternative courses of action shows more respect than simply stating or demanding what needs to happen. It also helps guide the conversation to your desired result. Just as the doctor does not fully understand the dental lab world, you probably don’t completely understand their world either. Be polite but firm in conveying your message. 

 The words and phrases you chose can impact the direction the discussion will go. Try to minimize the use of “I” and maximizes the use of “we.” For example, “Doctor, we could get a much better result on Mr. Smith’s case with a new impression,” works better than, “Doctor, I need a new impression for the Smith case.”

	“We” indicates you view your relationship as a partnership. The use of “Mr. Smith” is a more personalized way of referring to the case (if you can include the patient’s first name that’s even better) and helping both you and the doctor focus on the patient. Start the conversation with questions, particularly open ended ones, to get the dentist talking. “Doctor we were wondering why you prescribed xyz material for Mr. Smith’s six unit anterior case?”

	Like most businesses, at its heart, the dental lab business is all about people. When people are involved there are always going to be issues that come up. Good communication enables you to successfully handle the difficult client discussion and turn mediocre or good clients into great ones.

 Knowing the right material (or materials) for a particular case is part of the equation, but if it’s not the material requested on the prescription, the first step becomes getting the dentist to agree to your recommendation.

Managing the client

	The more time I spend working with my consulting clients and analyzing the dental laboratory business, the more convinced I become that productivity is the most important contributor to profitability. Right now, you are probably thinking “OK Chuck, that’s cool, but what exactly are you talking about?” Fortunately, the good folks at DLP give me a whole page to explain it.

	Let’s start with the premise that for most laboratories labor is the largest single cost item, typically running between 45% and 60% of revenues. The dictionary defines productivity as: “The rate at which goods or services are produced especially output per unit of labor.”

	It stands to reason then that the more finished units (crowns, bridges, or dentures) your technicians produce per hour, the more revenue you will generate, and the percent of revenue spent on labor goes down. The savings you realize land on your bottom line-otherwise known as PROFIT.

	Keep this important concept in mind. Increasing the productivity of your technicians is not just the number of units you ship to clients. It requires increasing output without increasing the time the technicians spend working. If they build 40 units of porcelain in a 40-hour week, building 50 units in a 50-hour week is not increased productivity. It’s actually worse because you are now paying overtime. Increasing productivity requires producing 45 units in that 40-hour week.

 It is very difficult to manage anything you can’t measure. If you don’t do this already, set up systems in your lab to measure and track what each technician produces.
	If you are a crown and bridge lab, your goal should be to produce 3.75 complete finished units per technician per day. Removable labs should shoot for 3.25 units. A five-technician crown and bridge lab should average 18.75 per day.

	This is an easy calculation in a one-person lab, but it gets more complicated in a larger operation. It breaks down into different numbers for each technician in multiple-person labs because the total production is the sum of multiple production steps. Don’t worry too much about what your number is today; focus on making it better next month and the month after that.

. Keep your staff members informed regarding their production (or lack thereof). Explain why it’s important along with quality. Producing units that have to be remade reduces productivity big time. Make productivity a part of job performance reviews and pay levels. After all, the more team members produce, the more you can afford to pay them.

You should have the number of technicians needed to produce 10% below your peak demand times. Use overtime to cover the really busy times, but overtime should not be needed constantly, and management needs to approve it. Cross-training can really help in this area.

 How does the work flow through your lab? Is your lab layout set up so staff can efficiently move between work stations? Do the technicians have the proper tools and equipment to work efficiently? Constantly look to eliminate wasted time and process inefficiencies.

 Buy equipment that reduces labor whether it is a scanner with CAD software for outsourcing some of the work, or a complete CAD/CAM system, or even automated dispensers for gypsum and investment liquid and powder mixing to eliminate hand pouring and measuring.

 Technicians who have higher skill levels are going to be more productive than those who don’t. Your material suppliers are good sources of support. Ask them what’s available. As a lab manger you need to devote a percentage of your time working with staff members to improve their skills. Encourage them to learn from each other and exchange ideas and tips gained from their experience.

	After my presentation last January at the NADL Vision 21 meeting, Dave Brown, President of National Dentex, commented, “You nailed it Chuck. It’s all about the labor.”

	In addition to improving your profits, improved productivity can allow you to pay your staff more, which both boost morale and provides more flexibility to compete with low-cost competitors. Overall it strengthens your business.

	I urge you to focus on your technical staff’s productivity. It will give you the “Competitive Edge.”

 The more time I spend working with my consulting clients and analyzing the dental laboratory business, the more convinced I become that productivity is the most important contributor to profitability. Right now, you are probably thinking “OK Chuck, that’s cool, but what exactly are you talking about?” Fortunately, the good folks at DLP give me a whole page to explain it.

Higher Productivity = Bigger Profits

	The likelihood of large companies and organizations not having an annual budget and business plan is fairly remote. To succeed, they need to plan on a formal basis what the expectations of future periods will be, and how they will react to changes. Additionally, during the period they will track their performance against this budget and analyze changes that occur.

	On the other hand, many owners of dental laboratory businesses do not routinely create a budget, let alone a business plan. There are reasons large organizations use these tools and they can help you, too.

	A budget projects for a period of time-normally one or more years-the estimated income and expenses for the business, the cash flow for that period and other key financial information such as balance sheets, capital expenditures, financing options, etc.

	A business plan includes the budget, but is more comprehensive. It includes more information regarding the company, its products and services, the competition it faces, the markets it serves, its human resources, and the basis of its assumptions and projections. But, importantly, a business plan also includes how the company will be affected if its assumptions do not ­actually happen, and what will be done in such cases.

	In most cases, a business plan is prepared when a company is seeking financing from a bank or other lender. Lenders want to understand the company’s history, its expectations and the thinking underlying those expectations. In fact, the assumptions and management’s plans are as important as the actual financial projections, if not more so.

	Particularly in these uncertain economic times, many dental lab companies could significantly benefit by preparing a full business plan, challenging themselves to identify things that could go wrong, and how the companies would react to those events is healthy. It is the process itself that helps a company and its management focus attention on opportunities and risks, and helps guide necessary adjustments.

	A good business plan also should identify items that will make a positive impact and that will lead to the lab’s success. Include things such as new products, new sales programs, cost saving ideas and employee ­training plans, too.

	One key element of any business plan is a description and analysis of the market the lab serves. This needs to be an ­honest, critical description and analysis. The market for a company should be very specific and clearly define what the lab will offer and how it will differentiate itself from competitors.

	Does the lab intend to sell its existing products into a new market? What is the lab doing to be sure the products meet current and future demands? One thing for sure is that the pace of change in today’s dental lab market is faster than it ever has been.

	But don’t just rely on your gut feelings about the marketplace and trends that will impact it. Be sure your plan contains some kind of third-party evidence to support the assumptions made about the future.

Planning around costs, prices and cash flow

	Another element of a business plan relates to the cost to produce the products. Does the lab have a good and realistic understanding of production costs, costs of financing and prices products can be sold for? Will these items provide an acceptable gross margin? What is the competition selling these for? How will a price reduction by domestic or offshore competition affect the ­profitability of the business?

	Cash flow is perhaps the most important part of a company’s life, but many companies do not routinely make projections of cash needs. What will happen if dentist clients delay payments? Can the lab absorb a slowdown in sales due to changes in product demand or a slow economy?

	How will expansion or upgrading to new technologies be financed? Many great plans never succeeded because of a lack of resources, both cash and human.

	I know what you are probably thinking right now, “Come on, Chuck, I can’t think of everything.”

	You might be right, but it is important to think of as many of the critical items as you can ahead of time, and it is very important to include your management team in the process. I can’t stress the point enough that including your trusted managers in the process reinforces that you have a team and helps them become stakeholders.

	The point is to get management to consider the impact of negative and positive occurrences, and then to consider how the company would react to those situations…it’s like a role-playing exercise to make you better prepared when reality hits.

	And remember, this is a living document that is routinely updated for current conditions and new opportunities. Properly done and managed it becomes the recipe for success.

 The likelihood of large companies and organizations not having an annual budget and business plan is fairly remote. To succeed, they need to plan on a formal basis what the expectations of future periods will be, and how they will react to changes. Additionally, during the period they will track their performance against this budget and analyze changes that occur.  On the other hand, many owners of dental laboratory businesses do not routinely create a budget, let alone a business plan. There are reasons large organizations use these tools and they can help you, too.

Plotting your course

	Many lab owners start their dental lab with visions of “growing” the business. Everyone’s idea of what constitutes growth is different, and unfortunately, many lab owners don’t have a specific plan for how to go about it. A simple look around the industry illustrates that there are dozens if not hundreds of ways to do it. So the question becomes, what’s the best way for you?

	I am really pleased that this issue of DLP is focused on the various ways one can grow, such as buying new technology, developing marketing programs or adding staff. But to be successful with any program, the basics have to be in place.

	Many labs take one of two approaches to growth. The most common one I see is where the lab cranks up an aggressive sales or marketing campaign that successfully brings in lots of new accounts, causing sales to soar.

	The lab doesn’t have the staff or resources to handle the increased business and resorts to quickly hiring less than ideal employees and working long overtime hours to get the work out. Quality suffers and prescriptions are not followed carefully. Cases are late, clients are lost and sales levels return to what they were prior to the “growth” campaign, or even lower.

	In the second approach, the lab expands the facility, buys new equipment, hires and trains staff to handle the anticipated growth and proceeds to lose money while waiting for the new business to materialize. 

	My advice to lab owners and managers seeking PROFITABLE growth is to take a balanced approach. What I mean by this is to plan and grow all aspects of the lab at roughly the same rate. Expand your facility and production capability to match the growth in sales. I’ll admit right here that this is much easier for me to talk about than it is to do, but it can be done.

	Here’s my advice to help you grow your lab successfully.

1. Understand your current business both operationally and financially.

 Correct current deficiencies before you undertake growth. Be sure you have the skill you need to effectively manage a larger operation. Problems you have now generally do not go away as you grow, they just get bigger.

	If you have cash flow issues at your current size, get your finances in order before you try to grow. If you don’t know business basics such as how to read a P&L, it’s time to learn. If you are chronically late getting cases to clients, solve that problem before taking on more clients.

 Set up annual forecasts for sales and budgets for expenses so you have some idea how many units will be coming in and the operational capacity needed to produce them. Planning will give you an idea of how long it will take to recoup the investment in a new piece of equipment or how many new staff you will need to produce the new incoming work.

	Planning helps you look at your whole business and will help you focus on which part of your business is the current choke point preventing profitable growth.

 Evaluate them, train them and communicate with them. Doing everything yourself inhibits growth possibilities, and the larger the lab becomes, the truer this is. The growth of many labs stalls at a particular size because the owner/manager reaches maximum capacity  to what he or she can physically do.

	If the owner has to QC every case, production capacity and the size of the lab is limited by how many cases he or she can handle. Delegation of tasks and responsibilities is one of the things lab owners, especially entrepreneurial types with strong technical backgrounds, struggle with. Having the right staff, with the necessary skills, and the right attitude is crucial to successful growth. 

	Follow my keys and put yourself not only on a growth track but a PROFITABLE growth track.

 Many lab owners start their dental lab with visions of “growing” the business. Everyone’s idea of what constitutes growth is different, and unfortunately, many lab owners don’t have a specific plan for how to go about it. A simple look around the industry illustrates that there are dozens if not hundreds of ways to do it. So the question becomes, what’s the best way for you?

Take a balanced approach

	In today’s economy businesses of all types in many industries are being squeezed by increased costs and their inability or reluctance to pass the costs along via increased prices. No one likes higher prices. Customers resist and higher prices make selling more volume that much more difficult. The situation really heats up when not only can the business not pass along price increases, but the business is pressured for price reductions.

	Many lab owners and managers are getting calls from dentists who want to discuss prices. Unfortunately, not many are calling to say the prices are too low. Sometimes subtly and sometimes bluntly, they are looking for a better price than they have been paying. Sometimes implied and sometimes directly-there is the threat of taking their business elsewhere. It’s usually a stressful conversation and how you handle it can make a big difference in the outcome.

	This is a very good time to keep calm and keep your emotions in check. Let the client talk and explain what is going on. He or she is probably experiencing the same pressures on their business as you are, so that gives you some common ground.

	Ask questions that convey your concern for their problem, and demonstrate a willingness to understand the situation.
	You also can point out the similar problems you both have. Sometimes, what the client really wants to do is vent.

	Finally, ask for some time to study the situation and develop some possible solutions.

	This is where your business skills come in. You need to evaluate several things:

How much are they worth to you? What volume do they do? What products do they buy? How is their payment history and remake level? What is their potential?

	The goal here is to establish an idea of their real value because that will help you determine how much time, effort and money you should spend to respond.

 You need to have a handle on the cost to produce the various products the particular client currently buys (or could buy) from your lab. The productivity of your lab can play a big part in the prices you can charge. You need to know how to calculate your costs before you can make a rational judgment about what to charge.

	At this point you can formulate some alternative courses of action. Maybe this particular client is just not worth pursuing and your response is a phone call or visit to tell him or her that while you value their business, you just don’t have anything you can do to help them.

	Other options might include a price concession if the client warrants it and your cost structure allows it. The key here, however, is to negotiate. Don’t make a concession without getting something in return.

	For example, you could offer a lower price in return for more volume:

“Doctor, I can offer you a lower price on PFMs if you can send more crowns or send your denture work to us.”

	They get a better price, you gain volume and a possible reduction in delivery costs because there probably will be more cases per pick up. Or consider this…

“Doctor, I can offer a lower price on our dentures if we can have an extra three days of lab time or if you can pay for the case on delivery.”

	These types of concessions from the doctor can help reduce your costs, thus maintaining your profitability in spite of a lower selling price.

	Use your technical knowledge to offer alternative products that will lower the costs without lowering your margin. All Ceramic in place of a PFM for example. Dentures with less expensive teeth may be a possibility. Understanding production costs and pricing appropriately will allow you to offer a product that costs you less to make at a lower cost to the dentist, thus creating a win-win situation.

	Throughout this process you need to point out to your clients the benefits they enjoy in doing business with you.

	Are you always on time with delivering cases? Do your cases fit without adjustments, saving chair time for the doctor? Do you help him as a resource on materials and techniques or handle rush cases? Those things add extra value to your product and service, so make sure to promote them.

	Lastly, if it’s an account you want to keep and grow, stay in touch even if they leave you. It’s a common occurrence for clients to return when the lower priced lab does not meet all their expectations. Make it easy and comfortable for them to return.

 In today’s economy businesses of all types in many industries are being squeezed by increased costs and their inability or reluctance to pass the costs along via increased prices. No one likes higher prices. Customers resist and higher prices make selling more volume that much more difficult. The situation really heats up when not only can the business not pass along price increases, but the business is pressured for price reductions.

Discussing price with clients

	There is no doubt that operating a dental laboratory in today’s environment has gotten more complex. New technology, competition and ever more demanding customers seem to place ever increasing demands on the lab owner/manager’s time and skill. One side effect of this has been the need to pay more attention to the business side of your lab. Making the best crown or producing the best denture is no longer a sure-fire formula for success.

	The financial structure of your business is key to making sure you have the resources to invest in new technology and handle the everyday ups and downs of cash flow. A sound financial structure allows you to pay bills on time, take advantage of discounts, meet payroll demands and support the growth of the business. If you are investing in a new milling system, for example, a loan from your bank may be a better way to go than financing from the equipment supplier. Owning your lab facility has proven to be a financial benefit for many labs compared with renting or leasing space.

	Your banker can help with all these things, but they don’t hand out cash to just anyone at the drive-through. They need to know you and feel good about your prospects. Here are some things you can do to establish a good relationship and tap into the resources your bank can offer.

 Like most things in life the most important thing is to “show up.” Meet face-to-face with your banker on a regular basis. Start doing this right away BEFORE you need something from the bank! I recommend meeting at least annually, but twice a year is better. The idea is to be sure he or she knows you as an individual and becomes familiar with your business.

 Invite him or her to visit the lab so he or she can see what you do and better understand the business.

 Discuss the services the bank currently provides and ask if there are others that may be of interest or benefit to you. They can be helpful with cash management services such as a bank box so clients send payments directly to the bank and you get access to the funds sooner.

 Provide the bank with copies of your financial statements (P&L and Balance sheet) at least annually, and be prepared to discuss what is going well and any problems you may be experiencing.

 If you have a written business plan, share that with the bank as well. If you don’t have one, consider preparing one.

 It may make sense to discuss bundling your checking, credit card processing, etc. together to make you a more attractive customer.

 Request establishment of a line of credit for your business. This is an agreed-upon amount that you can draw upon should you need it. You will pay interest on any amount you draw against it, but if you don’t use it you don’t pay. It’s a good safety reserve to have should you need cash quickly for some reason.

	Conventional wisdom right now says that “Banks” are not lending because of the recession. Not true! They do have money to lend and will lend to small businesses when it makes sense. Bond with your banker and see how it can help your business.