Like many business owners, you might be worried right now about a possible economic downturn. Are we going to experience another recession soon? A recession occurs when there are at least two consecutive quarters of economic decline. Economists stress a recession hasn’t happened yet, but now is the time to prepare. That’s why your dental industry experts at Bryant Consultants composed this guide to ready your practice for the next recession.
Step 1) Improve cash flow
No matter what the general state of the economy is, cash is king. When there is a recession, and your revenue might decline, you still have expenses to cover and bills to pay. Take steps now to improve your cash flow by looking at aspects of your practice, such as accounts receivable and insurance claims to increase cash flow.
Step 2) Re-evaluate your PPOs
Most dental insurance plans are part of a preferred provider organization (or PPO). Under a PPO, an insurance provider establishes a network of dentists who provide services to policyholders. Now, before a recession begins, look at your current PPO deals. Are any of them negatively impacting your cash flow and profit margin? If so, you may want to drop out of that PPO network. Consider offering a membership program to help patients that don’t have insurance.
Step 3) Consider a membership program
We’ve written before about the advantages of a membership program. This is an in-house alternative to dental insurance, where patients pay a monthly or yearly fee and, in return, they receive access to benefits and discounts that are not available to patients who do not subscribe. A membership plan provides a steady flow of revenue that is recession-proof.
Step 4) Don’t cut marketing
In anticipation of a recession, you will look at your budget and identify areas you can cut. Marketing may seem like an easy place to cut, but you can’t afford to eliminate it entirely from your budget. Instead, examine your return on investment from your current marketing. Remember that marketing is the engine that keeps running to help your practice grow and reach new clientele. Plus, in times of economic downtown, major online advertisers such as Google and Facebook may lower their rates.
Step 5) Go to a percentage-based budget
This makes it easy to identify where your money is going and how much to allocate to each area. Let’s say your practice is generating $100,000 of revenue each month. Allocate a certain percentage to a savings account as profit and a different percentage to savings to start building a reserve of cash—after all, remember, cash is king. We recommend setting aside 30% of revenue for profit and 10% for cash reserves, but you can start with whatever percentages for each category that make sense for you and the current state of your practice and then try to increase to those recommended allocations.
Financial consulting for dental practices
At Bryant Consultants, our dental industry experts offer consulting services for every aspect of your practice: patient care, leadership, team training, finances, and much more. Make sure now that you’re preparing your practice for the next recession. We can help. To that end, we currently offer a free one-hour consultation to practicing dentists like you. Find out more by calling (877) 768-4799 to schedule your consultation today.
