For years Reynolds “Renny” Challoner has watched the dental laboratory industry - first as a laboratory owner and later as the founder of NEW Paradigm Advisors LLC. What heís discovered is that the business climate is heating up. Here are a few of his thoughts about the business future of the industry.

Newer dentists are more accepting of change and will want to use laboratories that feel the same. These dentists want to have a variety of services available to their patients. Capital and training requirements for new technologies means smaller laboratories will not be able to offer the breadth of services that the new dentist will require. So those dentists will look to larger laboratories with the exception of the highly profitable small laboratories that are highly specialized and what they provide often is highly esthetic.

The number of technicians will stay pretty static for next year and the following year but you’re going to see a slow decline. There may be a slight decline in the number of technicians because productivity has gone up so much in laboratories due to advances in technology such as CAD/CAM and rapid prototyping. Now with the shortage of denture technicians and denture laboratories, dentures are becoming profitable due to the law of supply and demand.

Most laboratories are providing more and better services and aren’t afraid to ask for the value provided by their services. If owners really understand the services they provide and price their products accordingly, the laboratory industry can be very profitable especially with the new technology systems that take labor out.

Laboratory owners are planning to increase capital outlays because of all of the new technology. Laboratories are getting more profitable because of the efficiency increases and quality/fit improvements due to technology. Also, more laboratories are reaching out to rural dentists through direct mail to increase laboratory volume to help pay for new technology.

Consumer spending on dentistry hasn’t dropped yet because people have less discretionary income, but it could. When that does happen, the laboratory industry is going to see that decrease to a lesser degree than most other industries because of the nature of dentistry.

Most laboratory owners expect higher sales. Part of it is going to be in price increases in part because of value-added services such as dentist case consultation. The “value” equation has moved to the laboratories because of dentists’ knowledge base decrease in the areas of materials and dental technology due to dental school curriculum changes.

The long-term concern is that the number of dentists out there doing a number of procedures creates the laboratory’s demand and the number of dentists is shrinking. The consumer side is going to be there and now it’s going to be about the supply of dentists being able to meet that consumer demand for prosthetics. That could be a restraining thing in the future, probably 5-7 years out if dentistry productivity and practice models don’t change.

Laboratories need to beware of how they take on new technologies. There has to be a fit with your marketplace. It’s fascinating to see CAD/CAM. It’s fascinating to see rapid prototyping. It’s fascinating to see laser welders. It’s fascinating to see a lot of these new technologies. The thing is laboratory owners must plan for it and decide what they’re going to sell and to whom they are going to sell it. What is the price? What’s the volume? What’s the incremental margin considering product mix changes and any cannibalization of existing product’s margins? New technology should provide a return on investment of 20-25 percent - including the dollars spent for the equipment, outlay for materials and the time it takes to develop the market, to train employees and internally to ramp up your production.