Howard Speaks: Dental Economy Conservation Efforts by Dr. Howard Farran

During economic downturns, you’ve got to cut dental office costs and expenses

by Howard Farran, DDS, MBA, publisher, Dentaltown magazine

I lived through the craziest bull market from 1994, when Amazon went public, until it all popped in 2000. For those six years, I just rode four stocks: Intel and Microsoft, which they called “Wintel,” and Dell and Cisco, and I swear they’d all double two or three times a year. But I realized that things couldn’t keep such an upward trajectory too much longer and cashed out in November 2000—the only time I’ve made more money from stocks than dentistry. The following March, the whole thing collapsed.

Am I crazy for thinking that’s about to happen again? Tesla’s valued at $578 billion—more than Toyota and Volkswagen, Mercedes-Benz, GM, BMW, Honda, Ford and Suzuki, and I’ll even throw in couple of the Indian car companies. More than pretty much every car company known to man combined, and they try to explain it as saying, “Well, it’s more than a car company,” even though 80% of its revenue comes from selling cars.

In 2017, Microsoft was valued at $600 billion; in 2018, $850 billion; now it’s $1.6 trillion. Meanwhile, the currencies of Europe, Australia, South Korea, China and Japan are all going up against the U.S. dollar.

I think we’re getting ready to switch gears again: Until recently, we were in fourth gear, going 100 miles an hour down the highway, but soon we’re going to have to come to a complete stop, turn it around and go the other way. The people who can do that usually just a month before everyone else tend to come out clean.

What does this mean for you?

It’s time to move your mindset from expansion psychology to contraction psychology.

Almost all the dentists I know live above their wages: They have too much house, they have too much car, they have too much vacation. I’ve talked about this for 40 years! Now, it’s even more important than ever to live below your means. Usually your family goes to Disneyland every year for vacation? This year, maybe staycation instead.

One of the popular threads on Dentaltown’s message boards right now is a stock-picking thread that’s titled “Let’s Gamble Some Money.” But how many dentists are doing this with their life savings right now, instead of just a sliver’s worth of “fun money”? Be conservative and cautious so all your bases are covered!

The owner-operator advantage

Convenience stores and dental offices have more in common than you might think: There are about 150,000 of each in the U.S., and about 65% of them are owner-operated while the other one-third are owned by consolidations.

During the recent expansion period, individual convenience store owners were getting squeezed because chain owners were adding restaurants, wine cellars and bars and the like. But when there’s a contraction and nobody’s going to Circle K to buy a $50 bottle of wine, the owner-operators are going to have to cut costs—and because the easiest dollar earned is a dollar in expenses saved, they’ll likely lay off an employee or two and cover more hours themselves.

Dentists, too, will likely need to think about how they can accomplish what they do, but with fewer people on staff. If you can’t remember the last time you were so busy that you were running behind, you probably can’t afford that extra assistant, no matter how helpful her presence was during busier times.

Leave your comment below under this column! I want to hear your ideas.