Surviving the Current Economy

An analysis of the dental recession of 1979-1983

by Mike Farley

Recession … There, I said it! Depending on your definition, we're already in a recession or certainly very close to one. With tens of thousands of workers being laid off, the stock market still in the doldrums and consumer debt at its historic high -- there is no reason to think that an economic turnaround is anywhere in the near future.

With all this in mind, we have received many telephone calls from dentists asking us if we are seeing any signs of the recession within dentistry. Our answer has been consistent -- at this point, we see little economic effect on most dental practices.

Should we be concerned that the ripple effect of the economic downturn will ultimately reach dentistry? My answer is YES!

Many of the dentists who are currently in practice were not yet in the profession during the devastating recession of 1979-1983. Consequently, for many practitioners, their experience in the business of dentistry has only been within the past 18 years -- a period of time considered by many to be the Golden Age of dentistry. Even many dentists who were in practice during that painful period of 1979-1983 have long since forgotten those extremely stressful times.

In the mid-to-late 1980's, I spent a considerable amount of time reviewing my own files and other national data attempting to reconstruct what had really happened to dentistry during the period from 1979-1983. After a while, I developed the following theory…

My intense review of dental practices indicated that in good economic times, 80% of dental practices were ABOVE the "pain line." All of them were enjoying economic success, from moderate to spectacular. But even in good economic times, the other 20% of practices were BELOW the "pain line" and were struggling to attain a reasonable level of profitability.

Then, during the recession of 1979-1983 an interesting situation occurred. Even in that severe economic downturn, the TOP 20% of practices continued to be quite successful! However, the other 60% of practices, which in good economic times had been successful, ultimately dropped below the "pain line" and began to suffer economically. They then joined the bottom 20% of practices that had been financially unsuccessful in even good economic times.

So, simply put, my opinion is that the top 20% of dental practices have been quite successful in any economic condition -- and the bottom 20% have been un-successful in any economic condition. However, the middle 60% have fluctuated between successful and un-successful depending on the economy.

In other words, a good economy allowed the middle 60% to be successful in spite of themselves. Their success was not due to any superb management skills. In fact, a lack of sound fiscal and practice management caused them to rapidly slide into financial distress once the economy changed.

So, if the threat of a recession reaching into dentistry is real -- and I think it is -- how do you recession-proof your practice? I think the answer is that you must be pro-active. Even if you are already successful, you must strive to become even more so. You must not rest on your laurels, but strive to manage your practice in such a way that you attain and remain in the top 10% of dentists nationwide.

That means you must build trust with your patients, educate them, strengthen your internal marketing program, improve your "corporate image" and become a better leader

Because, in the end, the secret to being successful in tough economic times is to be successful even before those times occur!