Ads Thanki explores how being proactive can help dental practices mitigate the impact of inflation and ensure long-term stability.
In June 2020, an article by Sarah Kliff in The New York Times highlighted the significance of dentists as a reliable indicator of economic health, a sentiment echoed by many economists.
This perception is one reason why dental practices are often considered trustworthy candidates for lending by financial institutions.
Dental practices, known for their enduring stability, transcend generations and provide an indispensable service.
The sector is poised for growth, with the UK dental services market projected to reach circa £12 billion by 2027, showcasing an annualised growth rate of 18% between 2024 and 2027, according to Mintel.
Examining the impact of current and future economic trends on dentistry is crucial, considering its role as a barometer for the economy. Various trends will present both opportunities and challenges for dentists in the coming years, necessitating proactive preparation.
Inflation and macroeconomics effects
As we progress into the second half of 2024, dental practices are slowly returning to pre-pandemic production levels, coupled with concerns about inflation, interest rate volatility, economic tightening and potential recession.
This uncertain environment affects dentists in three primary ways:
- Escalating labour costs due to tight job markets
- Increased supply costs for dental materials and laboratory costs
- Higher debt costs resulting from higher interest rates.
Utilising an inflationary playbook, dentists can take proactive measures to counter the impact of inflation on their businesses by:
- Managing revenue and expenses: striving to boost case acceptance and setting realistic budgets for key investments
- Making creative investments in people: focusing on employee retention, offering non-financial benefits, and leveraging technology for efficiency
- Practicing active tax and financial management: protecting the balance sheet through fixed-rate debt, managing cash flow, and frequent scenario planning.
- Monitoring key performance indicators (KPIs): keeping track of critical metrics such as profitability, creditors and debtors, hygiene, new and active patients and production.
Looking ahead
Opportunities for growth while challenges like inflation and high interest rates do exist, and there are also opportunities in the dental space. These include:
- Investing in technology: despite initial costs, cutting-edge technology enhances efficiency, improves case acceptance and supports proactive treatment planning
- Seizing opportunities for both buyers and sellers: practice valuations still remain high, presenting appealing opportunities for sellers, while aspiring dentists have opportunities for ownership
- Considering alternative plan options: membership plans can attract patients not currently registered and patients unable to access NHS dentistry
- Recognising changing demographics: the influence of the underlying growth rate of the economy, structural productivity growth, living standards, savings rates and investment can influence the demand for a specific type of dentistry.
Stay focused on your strategic plan
To navigate economic trends and ensure continual growth, practice owners must prioritise long-term strategic planning, updating it annually to align with the operational plan.
Enlisting the help of a financial planner can provide valuable insights into economic trends, changing tax laws, and optimal decision-making for the practice’s future health.
A professional financial team serves as a guidepost, supporting the practice’s thriving irrespective of economic conditions.
Read more from Ads Thanki:
- Building a strong foundation for business growth
- A guide to launching a dental practice
- When should you start your own dental practice? – part two
- When should you start your own dental practice? – part one
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