Sales seasonality in dentistry
Sales seasonality is the technical term for the fact that some months, from a business revenue perspective, are simply better than others, all other things being equal. At an extreme end, sales seasonality explains why a whopping 23.8 percent of jewelry stores sales and 15.3 percent of national chain department stores sales are in December (Source: www.NRF.com).
New dentists should know that general dentistry and orthodontics may be similarly affected by sales seasonality. Unlike retail, however, the high and low months in dentistry aren’t as obvious as the Christmas season being a boon. And while admittedly this case study is based on a small sample of dental and orthodontic practices, we felt that sharing the limited data we have available may help you to better predict seasonality in your own dental practice.
As a credit card processor for a number of dentists and orthodontists (a specialty I chose to explore because I help support my wife’s orthodontic practice), one can see sales seasonality relatively consistent across the dentists’ and orthodontists’ practices whose data was included. By aggregating the sales data of multiple practices, as we’ve done for this article, we have reduced some of the sales volume fluctuations which are due to unique characteristics of the specific dental practices which served as sources.
Disclaimer: It should be noted that the sample size presented here, both for dental practices and orthodontic practices, is small, therefore one can’t confidently say that these practices are representative of the entire industry.
Why is knowing your industry’s seasonality useful?
Seasonality directly affects revenue, and has an outsized effect on profit margin. If you’re going to run your business effectively you need to be able to project what your practice’s revenue will be in the coming months. Knowledge about seasonality informs whether the uptick in your revenue that you saw this month will be there next month, or whether your revenues are likely to revert back to the mean in a month. This knowledge in turn enables you make smarter decisions about when to undertake hiring or capital improvements to your practice.
What is the sales seasonality cycle for orthodontic and dental practices?
Although adult orthodontics is a growing market in the orthodontic practices referenced in our data set, the practices’ revenues were still largely driven by adolescent patients. And that means that the sales seasonality tended to follow the school calendar.
- Summer is Hot!
May and June may be slow. That’s because students are finishing up the school year and parents are reticent to schedule orthodontic appointments not to mention undergo new exams. And as soon as summer hits, however, watch out, because business may pick up dramatically. Based on our data, July and August are the biggest months in the orthodontic revenue calendar, with a 100 percent increase in business over the May and June figures, and up 50 percent over an average month.
- End of Year Insurance Bump
Orthodontic revenues then seem to settle down until December and January when there’s another significant uptick. December ends up looking like an average month from an overall revenue perspective because most offices we reviewed are closed for at least a week, but there’s a definite increase in new patient starts per day, due to patients trying to take advantage of expiring insurance benefits. That carries through to January. Practices are typically open all month, and it ends up about 25 percent over an average month, due in large part to patients trying to take advantage of new orthodontic insurance benefits.
For general dentistry sales it appears, based on our limited data set, that seasonality is a bit more muddled than in orthodontics, insofar as there may be different seasons for different types of patients.
- The Summer of New Patients
According to our data, new patients are most likely to join the practice at the end of summer. As families get settled in for the next school year large numbers make checkup and cleaning appointments with general dentists and many end up joining the practice for the long term. This is offset by a slow month in September as families start their school year. Finally, there is also a notable uptick in production in April, although the explanation isn’t as clear.
- End of Year for Bridges and Crowns
In general dentistry, unlike in orthodontics, revenues do not directly mirror new patient flow, but more closely track production of large ticket procedures such as crowns and bridges, according to our findings. Here, insurance benefits dominate seasonality. With these high ticket items, patients cluster around December (for those looking to use expiring benefits), January and February (for those looking to use new insurance benefits). Thus, while August is a big month for cleanings and checkups, it is December and January which based on our limited data set delivered the highest revenue.
How do I use this seasonality data?
Understanding sales seasonality has implications on every part of your dental or orthodontic practice. On the sales and marketing side, knowing that a big August is likely to be followed by a slow September might dictate that you should hold off on hiring a new dental assistant in late August to cope with your newfound additional patient flow. Or on the expense side, knowing that December and January are likely to be your biggest months might encourage you to save up capital expenses like new equipment for those months. And on the psychological side, knowing that it’s not just your practice that is having a bad September may help ease some anxiety.
Is this data going to match my individual practice?
The short answer is we don’t know. Obviously, every individual dental practice is unique. So, if there are unique characteristics to your practice that dramatically affect patient flow, the sales seasonality modeled here will not perfectly match. For example, a practice located in a summer vacation area may see a spike, for example, in business simply related to the fact that the population surrounding the practice swells dramatically during summer each year. Similarly, unique dominating characteristics about the finances of the area can affect sales seasonality in a way not captured in the data above. For example, a dental practice located in a town dominated by a single major employer will see its sales fluctuate as the employer’s dental insurance benefits renew and change.
A Quick Thank You
A special thanks to Thousand Oaks Dental, Timber Springs Dental, Pedlar Cosmetic and Family Dentistry, Texas Orthodontic Specialists, and Kingwood Orthodontics for providing the underlying data for this study. And thanks to AC Partners for compiling the raw data into a form that it could be used for this article.
Rich McIver is a New Dentist Now guest blogger and the founder of Soar Payments a merchant services provider that provides ACH, credit card and gift card processing solutions for dentists. Additionally, he helps support his wife, Dr. Holly McIver at her orthodontic practice, Kingwood Orthodontics.
Note: The purpose of this article is to promote awareness of issues that may affect dentists and dental practices, and is not intended to provide professional advice. Dentists are urged to consult directly with a properly qualified professional for appropriate professional advice.