Executive Summary
In 2024, dental practices face ongoing financial challenges due to rising superannuation contributions and increased minimum wages. The Australian Bureau of Statistics reports that wages have increased by 4.1% as of March 2024. Inflation for May was at 4%, however, the Reserve Bank of Australia expects inflation to moderate, returning to the target range of 2-3% by 2025 and reaching the midpoint in 2026. These economic changes impact dental practices by increasing expenses and affecting patients' ability to afford treatments. Dental practice owners should focus on reducing expenses, improving patient conversion rates, enhancing marketing strategies, and implementing effective pricing plans to navigate these challenges and maintain financial health.
Navigating Financial Challenges in Dental Practices in 2024
In 2024, dental practices continue to face significant financial pressures due to recent economic changes. Employee superannuation contributions have increased again, now standing at 11.5%, and the minimum wage has seen another rise. According to the Australian Bureau of Statistics, wages have risen by 4.1% over the past 12 months. The Reserve Bank of Australia (RBA) stated in February that inflation continues to moderate and is expected to return to the target range of 2-3% in 2025 and reach the midpoint in 2026.
This has a twofold effect on dental practices:
Increase in Expenses: Staffing remains the biggest cost for any small business, and these expenses continue to rise.
Impact on Treatment Uptake: Patients may be less likely to proceed with recommended treatments due to ongoing cost-of-living pressures.
Recommendations for Dental Practice Owners
To navigate these financial challenges, dental practice owners should consider the following strategies:
Reducing Expenses:
Consumables: These are relatively low-cost but have a high turnover. The cost of consumables has risen over the past few years. It is worthwhile to review pricing from suppliers and compare it to competitors to ensure you are getting the best deal.
Lab Fees: While outsourcing to overseas labs can be an option, consider shopping around to other local labs for competitive pricing. Always balance quality with cost.
Improving Conversion Rates:
Understanding Patient Decisions: Investigate why patients may not be taking up recommended treatments. Understanding their concerns can help tailor approaches to improve conversion rates. Remember, treatments often compete with other significant expenses like car payments, school fees, and general living costs.
Boosting New Patient Consultations:
Marketing Strategies: If new patient consultations are down, reassess your marketing strategies and business relationships with referrers. Effective marketing can help attract new patients to your practice.
Adjusting Pricing Strategies:
Incentives: Offer incentives like free whitening at the end of treatment to make your services more attractive.
Payment Plans: Consider introducing or expanding payment plan options. Buy Now Pay Later (BNPL) options such as The Tooth Market, Humm, and Afterpay, along with providers like Denticare, can make treatments more accessible.
Referral Programs: Implement gift card incentives for patients who refer friends. Calculate the cost per lead to determine an appropriate reward amount.
Monitoring Cash Flow:
Cash Flow Forecasting: Create a cash flow forecast for the year and monitor it monthly against actual performance. This helps ensure you are meeting financial goals and can make adjustments as needed.
Building Resilience in Challenging Times
These recommendations aim to improve your practice's performance during challenging times. By analysing and understanding the various factors that impact your business, you can build resilience and sustainability. With my extensive experience, I can help you see your practice from a strategic perspective, identify issues, and provide guidance on improving your bottom line.
Additional Considerations for 2024
In 2024, additional regulatory changes are also impacting dental practices:
HR Reforms: New government regulations may require extra spending on staff wellbeing and managing psychosocial hazards.
Staff Shortages: Many practices are struggling to find qualified staff, exacerbating operational challenges.
Addressing these issues head-on with strategic planning and effective management can help your practice thrive despite the economic pressures.
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This is a personal blog. Any views or opinions represented in this blog are personal and belong solely to the blog owner and do not represent those of people, institutions or organisations that the owner may or may not be associated with in a professional or personal capacity unless explicitly stated. Any views or opinions are not intended to malign any religion, ethnic group, club organisation, company, or individual.
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