3 Reasons why Free Goods aren’t really FREE!
I’ve been asked this question a lot of times. Every time we onboard and train new dental practice this question comes up “How do I track my free goods?”
My concern, they are not FREE!!
There is no Santa Claus. There is no Easter Bunny. There is no such thing as FREE DENTAL PRODUCTS!
Now here are my top 3 reasons why FREE goods are a bad idea to focus on:
Reason 1: Cash is King and Cashflow is the vein system of your Practice!
Buying more than you need is killing your cash flow. Can you imagine Starbucks or McDonalds saying “Let’s buy beans on special and we will use it in the next 6 month”? Let’s apply this example to a specific use case, most of the time and for most practices, you need one box of lidocaine (average cost $30/box). But there’s a special, buy three get one free (theoretically making a unit price of $22.50/box – paid for 3 and divide the total by 4 units). All of a sudden your attention is on buying three items because you’re going to get one box for free.
See what happens here, you are buying three boxes versus one, therefore, you’re spending extra $60 on buying these two additional boxes. Therefore, you spent a lot more money than you should have. On one item it seems minor, only $60, however, this happens across 3-5 items per order, totaling $250-400 in extra spend per ORDER.
3 Problems arise from this reason:
- Expired Products: Typically these items are going to be sitting on the shelf and at some point will get expired.
- Cash should be used on marketing and other revenue producing activities. The business decision that you are making that extra cash flow is going to be sitting on the shelf (in the form of a product) versus producing you the money is terrifying. By the way, as of April 2019, investing an additional $250-$400 a month on Facebook/Instagram marketing can generate significant ROI.
- You are becoming a warehouse. Some offices are willing to turn an operatory room into storage!!!! Please avoid doing this. Most products can be shipped within 3-7 days. There is absolutely no need to stock items for more than 2-4 weeks. Don’t be in the warehouse/logistics business.
Reason 2: Undersupply vs oversupply
I remember being a kid. If I have a jar of cookies for the whole day and let’s just say they’re 10 of them, I’m going to eat the whole 10. But if I have a jar with just the one cookie, I’m probably going to get that one cookie carefully throughout the day. You get the idea! It’s the same mentality in a dental practice. If you’re going to put a stack of bibs, all of them at the same time in front of the team (where your daily stock is), most likely you’re going to use a lot more than if you just put 10 a day and you say this is all we’ve got. Or if we have 30 patients on the schedule, we’re going to put 35 on the shelf and that’s all we got.
I visit practices weekly and it’s very common to see carpules, burrs, composite tips and all sorts of other things laying around on the floor, behind cabinets, and even in the garbage can. From day one, each practice should establish min use or develop a checklist for Lead Assistant to use when restocking the room with exact QTYs.
Reason 3: Most Manufactures also don’t like free goods!
During my meetings with manufacturers and distributors, everyone rolls their eyes on free goods. Then I ask “Why are you still doing it” and the answer is “Well, everyone else is doing it”. The point is it’s an old trick of getting people to buy more. At least at Zen, we are approaching it differently. Set a minimum price for the product and let the customer decide how many they need without forcing them into specials and free goods. Many times when you see a product on special or with a free good, you can purchase it at a lower cost per unit if you ask your rep (or ask your supply rep to get manufacture rep involved) or if you are part of the buying group.
Above are just my very subjective reasons. However, after visiting 15-25 dental practices that consistently run dental supply budget under 4%, I realized the secret is in buying only what you need! End of Story.
“If you look at how to get your practice to 5% overhead on dental supplies or below, it’s not that complicated. 80% of it is managing QTYs and only 20% looking for cheaper alternatives. With a proper inventory system and good discipline, you should be at 5% even using your favorite supplier” – Dr. Benjamin Johnson, AcreWood Dental
P.S. If your budget above 6% it might be budget allocation issues. You can check my interview with Jake Conway where we discuss if Implants or Ortho should be in dental supplies or Laboratory.
What are your thoughts? Let’s discuss this together!
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