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Preparing Your Practice (or Business) for a Recession

Some of the most disconcerting things a dentist will encounter in their careers are the surprise effects of recessions for which we were unprepared for. This is often a surprise for us as healthcare professionals since we have been historically regarded as having “recession-proof” jobs. However, due to the unprecedented growth in the number of healthcare providers, there are areas of practice (physical location and services offered) that have incredible overlap and density of providers that make competition and susceptibility to market forces undeniable. Healthcare is one of those industries that have characteristics of necessities and commodities at the same time and rather than dwelling on it being susceptible to market forces, we can leverage this duality to protect the business to a certain degree from contraction during a down market. Two goals of recession preparation should be 1) reduce fluctuations in income for the business and for employees, and 2) reduce or eliminate loss of employees due to budget shortfalls or income reduction for them during lean times. Here are 5 ideas to implement now before the next recession:

  1. Make retained earnings over the next year a priority to increase the total amount to 6 months of operating expenses at a minimum. Look at this as an emergency fund/savings for your business. Make it a separate expense on your balance sheet, this will make your overhead higher and will reduce the amount you take out for profit sharing, but this will also get you used to a leaner income. 
  2. Shift emphasis on elective treatment to necessary treatment. This means gearing marketing towards treating pain and infection in lieu of emphasizing esthetic treatment. Obviously do whatever comes through the door, but try to attract new patients by accommodating urgent needs.
  3. Be respectful of patients’ fears about cost and ability to pay for services. This is often the real underlying “fear of the dentist.” We’ve been conditioned to treat according to our best judgment not according to finances and this remains true. However, simply considering that this may be an issue creates an environment where concerns about payment are respected. Even people with the means to pay for treatment with no problem are still less comfortable spending during a recession. 
  4. Offer “mini-quadrants” as a treatment option. Although this is less production during each visit, it spreads the production over a longer period of time, which is exactly what you want to do. You want consistent revenue over the entirety of the recession so you have to create the long tail, not just always going after the short tail. 
  5. Reduce post-op complications. This will be a future post on its own, but this is important because the easiest way to reduce expenses and increase referral rate is by reducing complications. This reduces unproductive chair time and increases patient satisfaction. 

Being strategic about weathering recession is a distinguishing characteristic that can set your business apart from others that are less prepared. The best result of the strategic planning and preparation for recession is that it removes the scent of desperation. It stinks and it doesn’t belong in a well-respected business. 

Don't fear the bear (market)!
-DOF
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