As part of The Wealthy Dentist dialogue on dental practice management and marketing, we offer weekly surveys and invite your participation.

In order to understand different perspectives on the dental industry, we have developed surveys to canvas a diverse group of dental practices on their view of the dental industry, what constitutes current good practice in dental marketing and quality care.

The information collected will be used to prepare articles for The Wealthy Dentist readership.

The survey should take no more than 90 seconds to complete -

I've been telling you recently how competitive the health care marketplace has gotten. It's so rough out there that some dentists are putting braces on sale. So what do the big dogs think of the current economic situation? Is there a silver lining?

Corporate giant 3M is finding that healthcare has remained more profitable than many of their other business sectors, accounting for about 20% of the company's total profit. It's the second-largest division at 3M in terms of producing revenue, and sales were actually up by 10% during the third quarter.

"Thank God we've got a healthcare business," joked 3M's Chief Financial Officer Patrick Campbell.

The company expects 2009 to be a tough year. One analyst predicts the company will see sales drop by 10%, but only anticipates a 3% reduction in their healthcare sales.

But 3M execs have singled out dentistry as an area of particular concern. They expect a significant drop in consumer demand for cosmetic dentistry and other discretionary dental expenses. (Interestingly, they expect the US dental market to be tighter than those overseas.) But since cosmetic dental products only account for about 6% of the company's healthcare division, they hope to remain relatively insulated.

But no dental practice is as diversified as 3M. We will live and die by the dental economy…

Read more about 3M

According to the Sageworks study, these were the most profitable industries in 2008:

1. Offices of dentists (17% net profit margin)
2. Accounting, tax preparation, bookkeeping and payroll services (16% net profit margin)
3. Legal services (13% net profit margin)
4. Offices of other health practitioners (12% net profit margin)
5. Support activities for mining (11.9% net profit margin)
6. Offices of physicians (11.9% net profit margin)
7. Outpatient care centers (11.5% net profit margin)

It's hard not to notice that half of these are related to health care. Looking at this data, a consumer might reasonably assume that health care costs have increased so that health professional can keep a healthy profit for themselves. But is that really true?

I can't help but wonder how Sageworks compiles their data. They're only looking at privately-held companies. Are dental offices really that profitable, or are these statistics misleading?

Very few dental practices these days offer their own financing. “We’ve never offered inside financing,” wrote one prosthodontist. “We don’t want to deal with any problems, so we farm the financing out.”

Here are some other things dentists had to say:

• “It is more difficult now for people to afford one more payment that they need to come up with the money for. In this economic climate, if it doesn’t hurt to offer financing if they want to wait.” (Pennsylvania dentist)
• “It really increases production and collections. Patients love the 0% financing.” (California dentist)
• “Outside financing has been a tremendous financial boon for our practice. Relationships stay where they should be when the payment is to a 3rd party.” (Illinois dentist)
• “We use Care Credit.” (California periodontist)
• “We’ve never offered inside financing. Everyone I’ve talked to says DON’T DO IT!” (Ohio prosthodontist)
• “We are surprised by the number of patients who are turned down by the outside agency. In most cases, we would have provided in-house arrangements.” (Ohio oral surgeon)

Read more: Dentists Prefer Outside Dental Financing,/p>

In this survey, the majority of dentists said that their portfolio these days is more chicken bouillon and less gold bullion. Dental practices and stock portfolios are both hurting. "Production is off 50%," said one dentist. "I am very concerned…very concerned!!"

Another doctor begged to differ. "My personal finance portfolio has taken a hit, but my practice is still growing 17%," said a Texas dentist.

Here are some other (pessimistic) comments from dentists:

• "I am just now seeing a slow down in case acceptance, but everyone is talking about the slow economy." (Tennessee dentist)
• "It's slowed down. People aren't wanting to spend." (California dentist)
• "Productivity is the lowest in 15 years of practice." (Alaska dentist)
• "The worst ever." (Florida dentist)

The answer to the above is… your dental practice. Your practice is one of the few things you personally have control over. Think about it. How much control do you have over the stock market? The price of gold? Inflation?

You have total absolute control over your practice… unless you’re a total WUSS. Let’s start with the easy things.

Inflation is running at about 4.9% for 2008. Raise your fees now! How much? For starters, 4.9% x 1.74, or a minimum of 8.52%. The 1.74 is a dental inflation factor put out by the ADA several years ago. If anyone has a more current number, please forward me the data. There are several other factors in setting fees, but this will at least bring you even for the last twelve months.

Next, take a very close look at your outstanding receivables. When I started in dental management twenty years ago, the norm was 1.5 times the average production for the last three months. Today’s norm is 0.7 times your average production. There are two things you have to do to easily achieve this ratio: (1) Sign up with at least two outside financing services, and (2) require that your financial coordinator (upon pain of termination) have each patient sign a financial agreement before treatment begins. I’m putting together a quick video with more details.

Finally, double your marketing. Unless you really want your competitors to kick sand in your face for the next year!

The classic story on this subject is Coke vs. Pepsi. At the end of the Depression and the beginning of WWII, both companies were neck and neck with the American consumer. Times were tough. There was war and depression, no one had any money, and Tojo was aiming for the west coast. Pepsi decided to cut its marketing budget. Coke decided to increase its budget. Coke even went so far as to give US troops free Coca-Cola.

The rest is marketing history. Pepsi has spent the last sixty years in second place while Coke continues to kick sand in their face.

How do you want to spend the rest of your dental career? Double your marketing!

See you next week with a report on what your dental practice can expect from our new President.

This is not rocket science. It’s solely based on over 20 years of financial planning advice she has given to dentists, many of whom are now fat and happily retired. Mixed with that is my 40 years of personal experience watching economic cycles.

Let’s be clear: These are just my own thoughts and opinions, not guaranteed financial advice. In other words, take all this with grain of salt.

First money maker: Buy stocks at below 8,500 on the Dow. The market has been testing bottom for the last two weeks. Every time it approaches or hits 8,000, it bounces up as the “Professionals” buy in. It is impossible to time a market buy at the very bottom. Don’t worry about it. Just be prepared to hold the stocks for at least threeto five years.

Will the market go lower than 8,000? Quite possibly. So what? The market will rebound… eventually. This economic situation is not a 9/11 event. It is a media-driven panic that is the result of a too-complex set of financial interactions. The real problem is that no one in government understands or has the intellectual capability to regulate it a meaningful way. But I digress…

Second money maker: If you absolutely need cash for immediate needs, cash that is currently tied up in a losing stock portfolio (think kids’ college education costs), don’t panic: there may be a significant market bounce immediately following the presidential election. This has happened before, with reasonable consistency.

It makes no difference who wins. Neither candidate will have any power over the economy. But hope springs eternal in America’s cultural heart.

If this scenario comes to be, don’t expect to be made whole. If your back is really against the wall, half a loaf is just fine. Sell the biggest gainers at a Dow of 10,000… if such a blessing should come to pass.

Third money maker: Buy gold and/or silver. Do not exceed 10% of your investment portfolio. Gold has dropped over $200 an ounce in the last few weeks. It is a relatively good buy. Gold coins are in extremely short supply. Gold bars are still available.

Silver is currently undervalued. It is also hard to store. Think big and heavy.

Why am I saying this? Just one word – INFLATION! Remember the 1980's under Jimmy Carter? His Nobel Prize was not for economics. The government admitted to 12-14% annual inflation. Real inflation was closer to 18-20%!

Let's start counting up government spending:

1. A $50 billion economic stimulus package earlier this year. I’m still waiting for my tax refund check.
2. A $700 billion Wall Street and banking bailout, plus another $150 billion in earmarks to bribe the appropriate congressmen.
3. A second $300 billion is now in the works for immediate passage after the election.

Where did this Trillion-Plus Dollars come from? Government printing presses. We are already at an annualized inflation rate of 4.9% for this year. In about 18 months, these chickens will be fully hatched and running.

Gold reached $900 in the 80′s under Jimmy C. It has an inflation-adjusted value today of close to $2,000. However, it is still trading in a range of $730 to $950. Are you getting the picture?

Next week I will start to discuss how all of this will affect your dental practice. In the meantime, feel free to comment on this in the blog. However, don’t expect me to be answering questions or arguing points. The market is at 8,378 as I write this. I’m going to be buying stocks that have fallen below their corporate liquidation value.

Oh! And there’s one more small reason to buy metals. If there should be a major international incident (like the Israelis taking out Iran’s nuke program), gold and silver will spike. Sell gold at anything approaching $1,000. Don’t get greedy and try to time the high point. Sell and buy back when it readjusts to the 700′s. See you next week.

Currently dentistry is caught in a three part downward spiral. Each part is conspiring to make your business just a little slower…

The first spiral is the presidential election cycle. Every four years, people postpone making decisions about just about anything, including dentistry, until they see who is going to win next presidential election. This is not rational. People are just anxious about change.

The second spiral is the mortgage debacle and the resulting meltdown on Wall Street. There have been about 1,300,000 mortgage defaults so far, and another 1,000,000 are expected in the next year. Once again, people are unsure about the future. They do not want to make major decisions about dentistry or anything else until they feel more secure.

The final downward spiral is the recession. Dentistry is always the bell cow for economic downturns. We saw this coming last November when searches on the Internet for key dental terms (cosmetics, implants, etc.) started to drop dramatically. The recession is here.

The good news is that the election will be decided within the next two weeks. People will begin to adjust to the fact that the winner may not be the anti-Christ they had been lead to believe. The Washington political pendulum will continue to swing, and the bureaucrats will still control most of what goes on.

The bad news is that that we are still left with the mortgage collapse, which will run through until the third quarter of next year, and the recession, which could last through all of 2009.

Now that I’ve made your day, there are steps you can take to safeguard your practice and personal financial security. I will continue with those in next week’s newsletter.

Jim

A German dentist recently handled an unpaid bill in one of the worst ways imaginable: by tearing the dental work right out of the patient's mouth. (After he had broken into her house and tied her up.)

Since neither the woman nor her insurance company had paid the £320 bill, the dentist decided he would simply repossess the dental bridge in question.

He's now facing possible criminal charges for assault and is being investigated by the dental association.

Read more