How To Get Supply And Lab Bills Less Than 10% Of Revenue

Welcome to Part 2 of Aligned Dental Partners three-part educational series to help dentists and group dental practice owners run a more profitable and valuable business.

Part 1 – “Hygiene is not a Loss Leader”

Part 2 – “How to get supply and lab bills to account for less than 10% of revenue”

Part 3 – “What is the value of my practice?”

Aligned Dental Partners’ Approach

As a leading consulting firm to dentists and group dental practice owners, Aligned Dental Partners can help identify and improveoverhead costs eroding away the net profit of your practice. Other than labor costs, dental supplies and labs are typically the next highest expense to the dental office. Too often we seedental supplies, labs and office supplies are running higher than 10% of practice revenue and most owner doctors don’t know how to fix the problem. There is a solution! Instead of having a team member “shopping around” and making purchases for the same supplies from various companies or attempting to negotiate discounts with your local labs, Aligned Dental Partners can help you develop a systematic approach to purchasing that will make the process, easy, predictable and cost-effective. Most importantly, you can save $50k-$100k per practice/year for each million dollars of dentistry that you generate.

How do we do it?

Monitoring expenses and purchasing is a critical component to maintaining profitability and controlling costs for your office or group. It all starts with creating a “shopping list” and setting a budget for practice expenses without compromising quality. (This assumes the practice has clean and detailed financial statements which show monthly expenses as a percentage of revenue). Appointing a Procurement Director within your company to spearhead these efforts will drastically help with accountability and adherence to this system. The procurement director and lead doctors need to work with their supply companies to develop a formulary which focuses to create a list of items to order for best quality and pricing to be received on the consolidated list. Instead of using the “whole catalog” to overshop and purchase your supplies, a formulary will provide a list of items that give you the ability to negotiate down for best pricing.

Most of Aligned Dental Partners’ offices dental supplies and labs combined do not exceed more than 8% of revenue (depending on the amount of crown and bridge, orthodontics, implants, etc.). When looking at the lab costs, the owner doctor will select a list of the best laboratories which will provide competitive pricing and support dentists can utilize for their lab work. Of course, the procurement of goods and services for dental companies spans more than the just supplies and labs, but these are typically the two largest buckets when looking at Cost of Goods Sold (COGS). The larger the company gets, the more buying power it holds to leverage best pricing with vendors. This becomes very important for groups as the spend begins to scale up with each additional location; the dollars really start to add up and with a proper system in place, there is a lot of money to be saved!Less sophisticated groups fail to capitalize on these economies of scale through leveraged purchasing and give up significant value when looking to monetize their business.

Aligned Dental Partners has the tools and resources to help your practice be more profitable and efficient, develop your formulary, and drastically reduce your spend on supplies and labs. For help with your practice, and a free one-hour consultation on how to better control your dental supply and lab costs…

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