After a pent-up demand for orthodontics, it is clear the economy is shifting, and we are entering tough economic times. With rising inflation, lower consumer confidence, and rising expenses, we expect a difficult road ahead. Add to that challenges of hiring talent and continuing issues with logistics, and it is no wonder that the average orthodontic practice has declined in the past few months.
An economic downturn can lead to a reduction in production, and we can prepare for several of these anticipated risks. We can’t mitigate external factors, but there are several areas we can control within the practice to help us build a resilient business. When McKinsey & Company looked at leading companies who showed more significant recovery during the last economic downturn, they saw what separated resilient companies from those who lacked resilience. In these companies, the large differentiator was their response in earnings, not in revenues.
Here are steps orthodontic practices can take to thrive during challenging times and build a resilient business.
Clean up your balance sheet
Cash flow and cash reserves are critical components of a healthy business. Cash is the lifeblood of any company. If you can restructure debt and create cash reserves during these times, you can prepare for better opportunities. Work towards a budget that builds cash reserves. Apply for a line of credit from your bank, and buffer your balance sheet. Hopefully, you took the opportunity to restructure debt and take advantage of the lower interest rates available last year. The cost of money has shifted, and rising interest rates will likely continue.
Run lean
Now we have a great opportunity to look at spending and cut deep into expenditures that don’t add value. Resilient companies focus on operational effectiveness and reduce costs on items and services that do not add significant value. Purging allows a better review of expenses and can regain the necessary cash flow for the costs that lead to the greatest returns.
The challenges in hiring talent have affected almost all industries. A deep dive into your workflow and productivity can offer opportunities to reduce your workforce and higher expense. The challenge is you don’t want to overwork those who remain in your team, affecting morale and leading to burnout. But today’s orthodontic practice can implement digital orthodontics to reduce treatment length, decrease office visits, and deploy remote teams to run leaner. Virtual assistants, remote monitoring, clear aligner therapy, and many other topics we cover on OrthoMasterClass are great opportunities to grow. In addition, they are opportunities to run lean while maintaining the highest clinical outcomes.
Focus on growth
Although reducing costs can help earnings and cash flow, some expenses are vital to growth. Focus on growing the top line through marketing and keeping team-building and marketing investments critical to creating resilience. These measures do incur costs, but the upside in maintaining a healthy orthodontic practice outweighs the cost. Focusing on growth despite a downturn prepares for a faster recovery and can soften the blow of external factors affecting new patient numbers. It is common for orthodontic practices to cut costs across the board. Still, you must invest in marketing that delivers results and support your team. As a result, your conversions from the call to the exam will be at their highest conversion possible.
