4 Steps to Controlling Dental Supply Costs

While building a dental practice that helps you achieve personal and financial independence, it’s critical that you focus on controlling your costs, and not only focus on marketing and increasing your revenue.

Setting budgets and key cost metrics for expenses you incur on a regular basis helps protect your profits so you don’t end up losing money on services you perform. That helps you increase profits by eliminating services that aren’t profitable in the short or long term and using the time you’d normally spend performing those services to perform more profitable services.

Although your fixed costs like rent, mortgage, practice debt, and student loans are often locked in for a period of time, variable costs like dental supply costs can generally be reduced without sacrificing the quality of the services you provide.

One reason for that is because many dental offices don’t set budgets or metrics for their dental supplies. Without a budget or metric to measure the cost of supplies, dentists often order too little or too much supplies. This can cause you to run out of supplies needed and be forced to order a small quantity with rush delivery charges to serve patients. It can also cause supplies to sit too long and expire.

To avoid that, it’s critical that you set a budget for your dental supply costs as well as a system for ordering them. By controlling your costs and setting a budget for supply costs, you empower yourself to negotiate with your suppliers to lower the costs of supplies that would render the related service unprofitable.

Here are four steps to start controlling your supply costs today.

1. Assess how much you spend.

If you haven’t paid attention to your supply costs, you might be surprised at how high they are. Task a team member with determining how much your practice has spent on dental supplies for the past three months.

If this is your first time doing this, you may want to ask them to also determine how much your practice has spent in the past six months and one year to account for any bulk orders you may have made for supplies you’re still working through.

2. Compare your supply costs to your revenue for the same time period.

When your team member calculates how much you’ve been spending on dental supplies, compare it to your gross revenue for the same time period.

In my practice, we keep our dental costs between five percent and eight percent of our gross revenue. If your percentage is significantly above or below that, consider why that’s the case. If your percentage is much higher than eight percent, you could be ordering too much or too little of something, you might need to negotiate, you might need to find an alternative product or distributor, or you might need to reassess whether there’s a service that’s not profitable for you.

3. Commit to a percentage or amount and systematize you ordering.

When you have a goal and a reason for that goal, it’s much easier to change. For example, if your cost for supplies is fifteen percent, you may set a goal to get down to ten percent within two months and between five and eight percent within four months. That gives you motivation to look for ways to reduce those costs as well as a reason and the confidence to ask your team members to press your distributors or suppliers for lower prices or other ways they can help reduce your costs.

Once you know your targets, systematize your ordering so your team knows the budget for supplies and everyone works from one shared spreadsheet or inventory management system to ensure everyone’s on the same page. If you’re utilizing multiple distributors, you may want to document a process where your team member gets pricing from each distributor and then places an order based on those quotes. You should also make sure you're checking costs on a regular basis, because prices can fluctuate over time, and the source of the best price might not be the same place this year as it was last year.

Finally, if you’re using a software solution for reducing supply costs, such as Zen Supplies, make sure to train each of your teammates who will have access to the information. If you’ve never heard of Zen Supplies, listen to my interview with Tiger Safarov where he talks about their software solution.

Tiger also did a video demonstration of the software and gave an exclusive and significant recurring discount to their software for members of WOW U. In fact, the discount is even greater than the cost of a WOW U membership, so if you’d like to use their software to reduce your supply costs, be sure to sign up for WOW U first!

4. Evaluate and adjust.

As with any new process, it’s important that you evaluate your progress on a regular basis and adjust as needed.

That can help you improve your costs even more over time and reduce the time you and your team will need to spend on costs. Also, because the costs of specific supplies can vary over time and across suppliers, it’s important that you don’t just find the best option at the beginning and then order that way every time.

Do you know your dental supply costs? What is your range?

If you haven’t calculated your dental supply costs as a percentage of your gross revenue in a while (or ever), it’s time to start!

Whether you implement an internal system or utilize software like Zen Supplies, taking control of your costs can have an immediate positive impact on your personal and professional life!