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A Path Towards Owning A Dental Practice

January 6, 2020

Filed under: Uncategorized — Tags: — tntadmin @ 8:24 pm

As a buyers’ representative and business coach, I talk to hundreds of doctors a year.  Many themes emerge from these conversations, but the one that pains me the most is hearing how dentists delay considering practice ownership early in their career.  Many desire ownership and watch as friends become owners with a thought of maybe someday. But, for themselves, they hope and wait till the “perfect” situation presents itself, if it ever does. My hope is that more doctors get off the bench and into the game.  The time for ownership is right now.  Here is why.

#1 MONEY is Cheap

As once a dental specific banker, I can tell you interest rates have never been lower. With rates as low as sub 4% on 15 year practice loans, the cost of money is cheap for buyers. What does this mean?  Lower payments equal more cash flow.  Even with practices being priced higher than historical averages, lower payments offset the cost to make the purchase affordable. The lower payments also allow buyers to invest in new equipment, stronger marketing, and consulting services to set them up for success.  These types of investments help buyers confidently take the leap into ownership!

#2 The Market is Primed

For over a decade, industry experts have predicted a slowdown of practice sales. Fortunately for the 25,000+ graduating dentists every year, this has not been the case.  I predict that in 2020 more dentists will put their practices up for sale than ever before.  Here’s why. 

In 2020, the average age of the baby boomer generation will hit 65 and they become eligible for Normal Retirement Age (NRA) benefits.  As their retirement benefits start to roll in, many will consider selling their successful practices.

Secondly, the stock market is at an all-time high. Last month the market hit another peak, as investors focus on the progress of the U.S.-China trade talks. Overall the Federal Reserve is upbeat and continues to keep interest rates low. For those retiring baby boomers, this means they can comfortably retire with the nest egg they have, not feel pressured to keep working.

#3 TIME is valuable

It’s not a secret that small investments over the long term will yield more than large investments over the short term.  In short, time is on your side.  Working as an associate definitely has some benefits. The corporates make sure of that. With that said, the ownership opportunity dentists have in front of them is difficult to quantify. Just like a mutual fund or a piece of property, dental offices have real value.  When my clients choose ownership, they are not only benefiting paycheck to paycheck, but they are also building real value in an asset to sell in the future.

I recently had coffee with a dentist and an old friend. In 2012, when I first met her, she was considering buying an office. I remember the first practice she looked at: it was in a desirable location, the equipment was in good shape and the financials were average.  Despite my recommendation to buy, she ultimately passed on the opportunity.

When we sat down, she was so excited to tell me that she just received news of an accepted letter of intent to purchase her first practice.  While I’m excited for her, the delay of 8 years got me thinking.  If she had purchased in 2012, by now her initial loan would have likely been paid off and her business would most likely have surpassed a million in revenue.  Eight years of lost income and equity over trying to find “the perfect practice.”

It’s time to take your career into your own hands. The average associate struggles to make ends meet, juggling two to three associate positions. For all that hard work, their income ranges anywhere from $120,000 to $150,000 per year and they have less than $25,000 dollars in savings.  Yes, becoming an owner is daunting, but the statistics speak for themselves.  Default rates remain lower than ever in this industry. The money is right, the market is primed, and time is ticking. 

Make the decision in 2020 and invest in yourself!

Michael Dinsio, MBA
Founder of Next Level Consultants