“Goldman Sachs raised its forecast for 2021 US gross-domestic product growth to 6.8% from 6.6%” 1
“Small Businesses Finally See Positive Outlook for Economic Recovery in 2021” 2
“The Economy Is Improving Faster Than Expected, the U.S. Budget Office Says” 3
U.S. Economy Is Expected to Reach Pre-Pandemic Peak by Mid-2021 4
We had the best economy with the lowest unemployment OF ALL TIME prior to this virus. Most economists are confident that the stimulus package will result in several years of better-than-average growth in the US economy.
I personally have had private conversations with DSO/corporate executives that are
bullish on dental revenues for 2021. Most were able to weather the pandemic storm
through PPP loans and managing their expenses. Sometimes that meant putting their
associate dentists on furlough. When all is said and done, I believe long-standing
practice owners will emerge from this pandemic better off than any associate dentist.
Dentistry has always been one of the best small businesses during times of economic downturn and especially during the times when a slow economy bounces back. Fortunately, most of the revenue “lost” during the pandemic was not really lost, but deferred. Except for perhaps hygiene revenue, all deferred dental treatment will need to be done, and unfortunately for many patients, some of that deferred treatment might lead to more extensive treatment. We all hope our favorite restaurants will re-open to full scale, but unfortunately all their lost revenue is truly lost! Not so, for dentists!
The mandatory shutdowns have forced many businesses to rethink their current business models, as they have discovered that their employees working from home can be more efficient than the costs of renting large office space. Obviously, dentistry cannot be done remotely, but the shutdowns have triggered an event that many of us have been expecting for several years.
1983 (the year this author graduated from dental school) was the year that the baby boomer generation produced the most dental school graduates of all time. Baby boomers are those that were born between 1946 and 1964. Many of the older boomers delayed their retirement after the 2009 economic downturn. The pandemic, combined with record stock market numbers, has spurred all boomers to consider retirement. I am personally seeing a 30% increase in the number of listings in my inventory, and this number is 50% higher than the 2010 levels of practices on the market. The basic supply/demand economic balance is getting weighted on the supply side, which historically will pressure pricing downward.
Since the mid-2000s, many dental schools have opened up across the country. And, since 2017, we are producing more dentists than the number that graduated in 1983. While that sounds encouraging as far as numbers go, the demand for dental practices has waned since the 2009 economic downturn for many reasons:
Associates will take home less than owners for the same amount of production, whether the economy is strong or weak. Large practices that employ associate dentists, do so for the profit potential. There is nothing wrong with this, but it should be common sense that a productive associate is making money for the “house” and would be able to retire, make debt payments, and feed their family better if they took home that extra profit.
Sellers: Be patient as the best is yet to come this year, even with the uptick in supply.
Buyers: You have more choices now at the lowest interest rates in the history of the modern economy. Choose wisely, employ good staff and you will eventually pay off your debts, live more comfortably and be able to afford more time away from work, as your staff should be able to help relieve you of the burden of ownership headaches.