Dentaltown September 2022 - 7

howard speaks
column
How Will Infl ation Affect Dentistry?
I'm old enough that I've lived through the previous
era of real infl ation in the United States: 1970-1982.
When I was a kid, my father owned a slew of Sonic
drive-in restaurants, and one of my jobs was to scrape
prices off the menu boards with a razor blade and replace
them with new, higher prices. Every week, things would
creep up a nickel. As a consumer during those times,
infl ation got so bad that it felt like if you got paid on
a Friday, you needed to go cash that check ASAP and
buy whatever you needed that same day, because the
price was going to go up Saturday, Sunday or Monday.
In the late 1970s, in an attempt to crush that
surge of infl ation, U.S. Federal Reserve chairman Paul
Volcker raised the federal interest rate into double
digits-sometimes up to 20%!-in his attempt to
crush that surge of infl ation. And it worked. Anyone
who grew up during the next 40 years or so hasn't lived
through a period of true infl ation.
Exercise caution ...
Earlier this year, current Fed chairman Jerome
Powell raised the federal funds interest rate another
0.75%, to a benchmark of 2.25%-2.5%, and while
that rate mostly affects what banks charge each other
for long-term loans, it also affects consumer products
like adjustable mortgages and credit cards. The halcyon
days when auto dealers were offering 0% fi nancing for
purchases are mostly over, for now.
There's a chance the Fed could raise the interest
rate more over the next year, too. So it's important to
make sure all your loans are fi xed-rate ones; the people
I know who got wiped out the worst during the earlier
infl ationary period had fl oating interest rates.
This is also not a time to be picking up extra " toys " ;
if it fl ies or fl oats, you don't buy it, you sell
it. Take a good look at how you've been
living: It may be time to downsize that
lifestyle to match what you see going on
in the practice that funds that lifestyle.
Earlier this year, for example, I realized
I was an empty-nester in a giant house,
most of which I never spent time in. I
sold it a few months ago and moved to a
smaller place-and the timing couldn't
have been more perfect because real estate
by Howard Farran, DDS, MBA, founder and CEO
8 SEPTEMBER 2022 // dentaltown.com
prices in Phoenix have begun to drop slightly, so I got
out at what might've been the top of the market.
... but don't panic just yet
Over the past few years, we've seen the airline and
food service industries lay off staff members when times
were tough but struggle to fi nd employees willing to
fi ll those same positions once business starts to pick up.
Those employees found similar-paying jobs in other
industries, which often included an enticing element
like fl exible scheduling.
Dental practices have already been having problems
fi nding good people to fi ll available positions, so take
into account that if you consider reducing the size of
your team even further, you need to be comfortable
with the idea that your practice will remain that small
for a very long time.
I've been saying forever that general dentists shouldn't
rest their practices on a high-volume, low-margin model,
and that's particularly true now. PPO reimbursements
don't increase throughout the year just because the
dentist's costs do. So dentists who refer out high-margin
work such as root canals and implants are denying
themselves the opportunity to earn more. At that point,
if you're just doing general dentistry, why bother with
the costs and stress related with an offi ce? Go work at
a DSO and save yourself the grief.
Conclusion
We don't know for sure what's going to happen
next-anyone who says they do is a palm reader. But
now more than ever, it's time to reduce your costs and
keep your cash! And please share your thoughts and
suggestions for readers in the comments section under
this article online at dentaltown.com/magazine. ■
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Dentaltown September 2022

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