Over the past few years you have, no doubt, heard the drum beat that the golden age of dentistry is over. With the rise of the Dental Service Organization (DSO) and the increasing costs of a dental education the belief is that new graduates simply cannot afford to own a practice.
Here are three reasons why private dentistry is here to stay:
One, 100 percent financing is readily available. There are no fewer than 5 banks in the marketplace that will give any buyer with two years of experience and reasonable credit 100 percent financing to purchase a dental practice. Think of that. Banks are so confident of your success that they will finance 100 percent of the practice price and not even bother to get a guarantee from the Small Business Administration. Few industries enjoy that type of lending.
Two, profitability within private practice remains high enabling loans to be paid back. The cost of school has gone up, but it is far easier to pay your loan if you own a practice rather than being an associate for a DSO. Consider the following scenario: If you are a dentist who can produce $50,000 a month of collectable production, than you’ll likely make $180,000 per year at a DSO (30 percent of production). If you owned a practice and you produced the same amount you would likely make at least $340,000. How? Well your hygiene department that would add $250,000 of collectable production to your revenues and if you could merely keep your overhead at a reasonable 60 percent of collections, your take home would subsequently be 40 percent of the $850,000 (or $340,000). In addition to the $160,000 more in income each year, you’re also gaining equity in a valuable practice that you can sell one day.
Three, dentistry benefits from the “buy local” movement and desire for a relationship experience. DSO’s, while efficient and convenient, often lack a personal touch feel and are viewed as more corporate than local. Some patients don’t mind and like the DSO’s for convenience; however, there will always be patients that need a friendly, familiar face to alleviate their fears and provide the best care.
If people are telling you it’s impossible to own you should question their motivations and consider the real facts.
The new ADA Practice Transitions pilot launching in spring 2019 strives to preserve private dental practices. To learn more please visit ADA.org/PracticeTransitions and complete the form if you wish to be contacted when the service launches.
