Business Models Change After Pandemic

For dental laboratories, the issue started with their clientele-dentists. The virus caused dentists to lose a large amount of patient business, and in some cases, dental offices closed for good.  There were office consolidations, formations of DSOs, and other reductions in personnel and office hours during the early days of COVID-19. Because dental offices were scaling back, the amount of work being sent to laboratories was also being reduced.

Some parts of the country struggled to return to whatever normal may become, but many dentists gradually opened their offices for more hours and made sure that patients knew of the enormous infection control efforts that they were providing. Many dental practices were able to increase their business and, in fact, outperform their expectations. As this was taking place, laboratories were able to recapture more business and have personnel return to work.

This revival has led many laboratory owners to brighten their outlooks on what their businesses will be over the short and long term. Many have resumed investing in both expensive equipment and education for their employees. Technology has helped laboratories reinforce their role, using the increased speed and accuracy to make believers of dentists who might have once aspired to eliminate or substantially reduce their laboratory bills by bringing work in-house. Many dentists have already experienced the struggles associated with trying to fabricate restorations chairside, and have soured on ever considering it again, so the ability to continue pushing the limits of technology is supremely important for laboratories.

As some dental offices were closing for good, some laboratories also closed rather than attempt to overcome the economic hardships they were facing with the loss of business and personnel while the pandemic surged. Others consolidated just like the dental offices in attempting to reduce their overhead and rely less on personnel. Those remaining are probably much stronger financially, less dependent on unskilled personnel, and operating with significantly reduced overhead.

In the longer term, this experience was an eye opener for laboratory owners, and in many respects, the lasting impact may be positive. Laboratory owners now know that utilizing technology and fewer but more highly skilled personnel-along with a sanitized, protective floor plan-will produce more profits. It can also ensure better working conditions, compensation, and benefits for those highly skilled personnel, and a much brighter future for the laboratories as a whole.

Even though technology is changing rapidly, the purchasing or leasing of new equipment to better satisfy dentists' needs is becoming much easier. Lenders understand the strategic approach as well as the overhaul that many laboratories have undergone because of the pandemic. The lenders see the expense reductions and the business plans-including personnel and skill sets- that they now have, and are satisfied with the transition to this type of dental laboratory model.

This approach is not for survival but for expansion and potentially the acquisition of other laboratories. As more laboratories adopt this model, there will probably be more consolidations, but from positions of strength. Dental laboratories, like the dentists' DSOs, will be much more competitive and profitable by offering efficiency, accuracy, and a quicker response for production and delivery to dentists and patients.

Bruce Bryen, CPA, CVAis the principal in the firm of Baratz CPA and Associates in Fort Washington, Pennsylvania.