How Can a Dental Practice Stay Profitable When Costs Keep Rising?

I hear it from dentists all the time. They're working harder than ever. They're producing more than they ever have. And they're taking home less.

I built a dental practice from a single location into a $150 million organization, and today I coach practice owners through DEO. Here's what I'm seeing in the economy right now, and what you can do about it so your practice keeps growing and you take home more.

How can a dental practice stay profitable when costs keep rising?

Get intensely focused on your highest-ROI work, then run those workflows through AI. Labor and supply costs are going to keep climbing while reimbursements stay flat, so you can't afford a team spread across ten half-finished projects. The practices that win will focus on what brings the biggest return, automate the redundant work, and put the time they get back into the patient experience.

Why are dental practice owners taking home less?

It starts with something called M2 money supply, which is what happens when the government prints more money.

Picture 20 of us in a room. We represent the entire market, and everybody has $100. Because we're all limited to $100, the price of a house, food, or a car stays in a range where all of us can get what we need.

Now imagine I give everyone $1,000. The economics change. That's inflation.

Up until 2007, the US had printed about $7 trillion. From 2007 to 2019, it printed another $8 trillion, more than it had printed in the entire history of the US market. Then COVID hit, and it printed another $8 trillion.

Combine that with a declining birth rate and stricter immigration, and the talent pool starts to squeeze. The people in that pool also need more money to pay for rent, housing, and food.

You've already felt this. Your team needs more. Your supply costs need more. Meanwhile, your reimbursement rates are staying flat.

When revenue holds flat and costs keep rising, margins compress. You take home less. If you're not sure how much you're really taking home, start by learning how to calculate your dental practice's free cash flow.

The answer: an intense focus on your highest-ROI activities

I don't have enough money to work on 10 things at once. Neither do you. And I can't afford a team that's inefficient because we're chasing a bunch of random ideas.

You have to be organized and clear enough to know which activities will bring the highest return on investment. You also have to be disciplined enough that your team isn't working on projects partway, only to have them drop off.

Once you have that focus, there's a much bigger opportunity. I think it's going to be the boom that takes dentistry to another level for the practices that know the formula: taking those high-ROI workflows and feeding them through AI systems.

Will AI replace your dental team?

Humans have always reached the next level through better technology. Still, a lot of team members are nervous that AI is going to replace their job.

That's just not going to happen. Humans are too ambitious. Once someone can deliver something to my house, the next question is whether they can deliver it within a week. Then in two days. Then tomorrow.

You've heard the saying: AI will not replace your job, but someone using AI will replace someone who doesn't. We already see this play out. You would never hire someone who told you, "There are two things I don't do. I don't use a computer and I don't use a cell phone."

So start thinking about it this way. When you integrate AI with your team, you can get them to executive-level performance. They can do things they never had the resources, the time, or the capability to do before.

Here are a few examples of what that looks like in a dental practice:

• Financials: At DEO, we have tools that take financials that aren't organized well and benchmark the whole chart of accounts against the rest of the industry, so you can see exactly where the opportunities for improvement are.
• Hiring: Tell AI what you're trying to accomplish with a role and have it help you write a better job description, one the Indeed algorithm will like and that calls for the capabilities you need. It can even give you feedback on whether the description is appropriate.
• Marketing: Feed in your current marketing and ask how you could make it better.
• Front desk scripting: Record what your team is currently saying and ask what you would change to upgrade it.

Work that used to feel like a huge mental load for your front desk, your office manager, and you can now go to an AI executive that all of you can lean on.

Automate the redundant so you can customize the patient experience

Probably more important, there are a lot of activities in your practice that patients see as zero value, but they're still important for you to do. Insurance verifications, claim processing, schedule optimization, patient reminders, documentation, doctor notes. This is where we have to start leveraging our time.

Sometimes people get nervous. If we automate this work, what are the humans going to do? Will it take away from the custom touch of the practice?

Here's the reality. If you automate the redundant, you can customize the patient experience. I've never heard a patient say, "I came to your office because your insurance verification was amazing."

Picture two practices. In the first, the team does all of that tedious work perfectly. Even if they're fabulous, think about how little they have left over for patients and for team engagement.

In the second, the team has organized its work, maybe even automated it, and has the support and leverage of AI. All that extra energy goes into the patient experience.

Why the patient experience is your real competitive advantage

Patients aren't experts in whether you're part of a DSO or what systems and processes you run on the back end. They don't even know clinical very well, beyond whether a bite feels okay. They don't understand margins or materials.

What they are experts on is how they felt.

The practices that can hyperfocus on taking care of the patient are going to have a real advantage. Combine that with a team performing at a higher level, and you start building a talent advantage too.

One thing I can promise you is that the government is going to keep printing money. That means labor and supply costs will keep moving up. If you want to pay your best team members more in the future, you have to free up those dollars, and that means automating anywhere you can.

The future belongs to the early adopters. Some of you have tried an AI tool and it was terrible. Here's what I can promise you: everything you look at today is the worst it will ever be. If something doesn't work for you today, it might work for you tomorrow, so keep tracking it.

Technology is only as good as the hands using it

There is a catch with all of this. AI is less about roles and more about specific workflows.

As leaders, most of us have been pretty poor at designing how our workflows should run. We hire someone, and the onboarding is kind of terrible. To get AI to the next level, you have to understand every workflow, system, and process it touches.

Think about a farmer with a horse and plow working 10 acres. Give that farmer the latest tractor, and they could probably work 1,000 acres. Give me that same tractor, and you wouldn't get a potato out of it, because I don't understand the workflows.

Technology is only as good as the hands that are using it.

That should be exciting news for anyone who has spent years working in dental practices. The more you understand the workflows, the more leverage the technology gives you. You'll know when it's on track and when it's off track. You'll know how to prompt it better and how to configure it better.

The more you surround yourself with people who understand the workflows, the more you can get out of the technology.

How we're putting AI to work at DEO

We're leaning into this at DEO. We have over 30 playbooks full of workflows, and we're loading them into AI and building the prompts, skills, and projects that help our coaches support members with fractional CFO work, COO work, marketing strategy, recruiting, and more.

We also have 700 entrepreneurs testing this technology and talking with each other about what works. Instead of one owner trying a tool alone and wondering whether it really worked, you get the network effect of 700 owners comparing notes on which tools work in which situations, and what's better than it used to be.

When you combine battle-tested entrepreneurs and operators with AI-powered tools, you get a 10x impact. That's what we're building toward: the first virtual DSO. Imagine having the same executive team a billion-dollar DSO has, while you keep all the equity and all the control.

The winning combination is bringing in technology, leaning on a community that shares what's working, learning from experienced people, and bringing in people who are further ahead than you. The playing field is flipping, and I think it's going to benefit every dentist.

How do you decide which projects deserve your focus?

This all comes back to focusing on your highest return on investment, and to the constraints that get in the way. I simplify it into three things you have to solve for: what, how, and who.

1. What to work on

Most of you have more ideas than you can act on, and those ideas are being led by your dopamine and your cortisol. Dopamine is the shiny, exciting idea you picked up at a recent conference. Cortisol is whatever ticks you off, like what the team missed this week.

Neither one understands which project has the most cash flow attached to it. One tells you an idea seems fun, and the other tells you something makes you upset. There's no prioritization around return on investment.

At DEO, we use a system called iDOPE. Every idea gets documented, organized, prioritized, and then executed.

When you organize your ideas, ask questions like these:

• If we solved this problem, how much more would it add to the top line?
• Would it decrease expenses?
• Are we doing it because it's a compliance requirement?
• Is there something special it would improve in our culture?

Now you can prioritize the projects with the highest return, and stop switching from one idea to the next and only doing things halfway. I call the best one your golden what.

2. How to solve it

Once you're clear on what to work on, the next question is how. This one is actually the easiest. There are lots of resources for the how. At DEO, that's our 60 coaches, our playbooks, our community chat rooms, and our weekly trainings. If you know the right questions, you could ask AI or your network too.

What we find is that when you take the time to get the what clear, the how goes pretty fast.

3. Who will do it

Then you run into the third one: who. You only have so many choices.

You could do it yourself, but if you're in the chair five days a week, that's going to be tough. A team member could do it, but if it's your office manager who's already responsible for everything else, this project might keep getting pushed to the back burner.

When you organize your projects and look at the return on each one, add a column for who is going to work on it. If it says Suzie, Suzie, Suzie, you know you have a resource constraint.

From there, you decide whether to bring in a vendor or a fractional service or coach to help get it done. There are only so many options. You can either spend time or spend dollars.

At DEO, we use a Project and Prioritization Worksheet so every idea gets documented, organized, prioritized, and then executed. If you aren't writing anything down, you're doing drive-by delegation. And if you're hoping your team will magically be effective that way, it's not going to happen. You need a more formal process.

What to do this week

Write down every project and idea floating around your practice right now. Next to each one, note whether it would add to the top line, cut expenses, cover a compliance requirement, or improve your culture, and add a column for who would own it.

Circle the one with the highest return. That's your golden what. Then look at your who column and count how many times the same name shows up.

FAQ

Why are dental practices taking home less even when production is up?

Labor and supply costs keep rising as more money is printed and the talent pool tightens, while reimbursement rates stay flat. When revenue holds flat and costs rise, margins compress, so owners take home less even when they're producing more.

Will AI replace dental team members?

No. Humans are too ambitious, and there will always be a next level to reach. The real shift is that someone using AI will replace someone who doesn't, and team members who use AI can reach executive-level performance.

What should a dental practice automate first?

Start with the work patients see as zero value but that still has to get done, like insurance verifications, claim processing, schedule optimization, patient reminders, documentation, and doctor notes. Automating that work frees your team to put more energy into the patient experience.

Do you need to understand your workflows before using AI?

Yes. AI works at the level of specific workflows, not whole roles, so you need to know how each workflow, system, and process should run. The more experience your team has with those workflows, the more leverage the technology gives you.

What is the iDOPE framework?

iDOPE is the system DEO uses to manage ideas and projects: every idea gets documented, organized, prioritized, and then executed. Organizing means weighing each idea by its return, such as added revenue, lower expenses, compliance, or culture, so you work on the highest-ROI project first.

Find your highest-ROI move

The cost of labor and supplies isn't going back down. But with a clear focus on your highest return on investment, smart use of technology, and the right people on each project, you can build a practice with real profitability and passive income flowing to you.

If you want help figuring out your golden what, and who should own it, schedule a Growth Accelerator Call with our team.

Adapted from Emmet's YouTube video, Even in a Bad Economy, a Dental Practice Can Scale by Doing THIS.

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