5 Steps To Cut Your Costs With A Buying Group

By Mario Santiago, CPA, CFP®

Recently, I was on a coaching call with one of our tax and business planning clients, and he explained how he had cut his largest practice overhead expenses without changing how he treats patients. While corporate groups negotiate deep volume discounts on aligners, scanners, brackets, supplies, and lab fees, many independent orthodontists pay much higher retail prices. The good news, as our client discovered, is that you can reap similar benefits as a corporate shop by joining a buying group.

A buying group pools the purchasing volume of hundreds of independent practices and negotiates pricing that none of them could command alone. This permits each member to maintain full independence and clinical control with the purchasing power of a group ten times its size. Previously, our orthodontic client had tried to negotiate with the aligner company on his own, stuck at the second of seven aligner discount tiers and paying roughly $1,500 per full case. Reaching the next tier alone would have required him to more than double his volume, and to reach the top tier, 25 times his volume. However, after he joined, the buying group placed him at the top tier immediately, so he now pays about $1,039 per case, generating over $450 in savings on every case he starts.

A buying group is one of the few tools you can use to fight back against corporate with equal purchasing power while remaining independent. Use the five steps below to determine how much it can help your practice:

1. Review your top vendor spending categories. Gather your last twelve months of purchasing and rank your largest spending categories, including aligners, lab, scanners, brackets, and supplies.
2. Match the group vendor list to what you buy. A group is only worth joining if it discounts the products you already use. So compare its partner vendors against your own vendor list before signing up.
3. Model the full-year impact. Look past the headline discount rates to calculate the net benefit over a full year. Then, reduce the expected savings by the buying club membership fee, since that’s where the savings become real, repeatable profit.
4. Calculate the real membership math. Most groups charge a joining fee plus a recurring annual fee, so your real savings begin only after those costs are covered. So you’ll want to calculate a clear breakeven point before committing. Our client saw his scanner support cost drop from $360 to $180 a month, saving more than $2,000 a year, and his clear bracket cost fall from $16.50 to $10.50 each, so his first-year membership cost ($1,200) paid for itself many times over.
5. Read the contract before you sign. These buying club membership agreements often carry exclusivity, confidentiality, auto-renewal, and non-disparagement provisions. Make sure you understand exactly what you’re agreeing to, because a clause you overlook could prove expensive later on.

This client now enjoys top-tier pricing on the products that drive his largest overhead expenses, allowing him to keep more of every dollar he produces. His fatter bottom line increases his enjoyment of practicing as an independent orthodontist with full control!

Invest the time to explore different orthodontic buying groups such as POP (Premier Orthodontic Practices) or Mari’s List.

As always, we do not receive compensation from any companies mentioned in our newsletter. We simply learn from our clients which products and services work for them and introduce them to you, hoping you realize the same benefit.