Student loan debt is one of the largest problems in dentistry today, and not just for young doctors!

Timothy G. Giroux, DDS

MY DAUGHTER is a second-year dental student at a private dental school in Southern California. Her class members will graduate with an estimated $400,000 debt assuming they also borrowed money for living expenses as well as their dental education.

This is a massive amount of debt to cover before one even discusses normal living expenses after graduation, such as a home, car, children, and undergraduate school debt. The monthly payment on a 10-year loan for $400,000 at 5.5% interest rate is more than $4,300 per month. Since that is basically an after-tax amount, one would need to generate an income of almost $5,400 per month just to pay off the dental school loans!

First, let’s discuss how this affects selling or aging doctors. For those of you who have practices that generate less than $400,000 in yearly revenues, your practice, which has provided such a great lifestyle for you all these years, might not provide enough cash flow for a young dentist, especially if you’re in an area where real estate values are higher than the national average. Some of you might be “coasting along” by referring out many specialty procedures that could be routinely performed in your office.

No matter how large or small your patient base is, there is value in it! The young doctors with debt may need to buy two smaller practices and merge them into one location to ensure the cash flow is adequate to meet their needs. Therefore, the selling doctors of the small practices should get creative with their leases and place themselves in a position to facilitate a possible merger of their patient base in the future. Since mergers yield the best return on investment in practice transitions, there should be no discount in price for a merger opportunity. (That’s a different discussion for another article.)

What is the best path for young dentists to pay off their student debt? Own their own successful practice and use the “profit” to pay off debt.

Older doctors with large practices are now being courted by corporate dentistry to sell their practices, and they are then required to work with the corporation as an associate for at least two years. Large practices are the best vehicle for young dentists to create wealth and get out of debt. I encourage you to consider the real costs of selling to a corporation versus transitioning to a young dentist. Corporate dentistry exists because it extracts approximately 40% of the profit out of the practice. Corporate dentistry is attractive to dentists because it promises to take away most of the management headaches, which allows the dentist to simply practice dentistry.

While this can be true in many cases, what really happens from a financial standpoint when someone works for a corporation? Here is an example. A practice that collects $1 million should have a cash flow of approximately $375,000. Normally $700,000 of the practice is from dentist production and the remainder is from hygiene. With bonuses, a doctor in a corporation would take home about 28% of his or her $700,000 production, or approximately $196,000. An associate capable of that production could use the extra $180,000 of profit per year to pay off his or her debts. An owner/seller required to work essentially the same schedule for two years to “earn out” the entire sales price would earn about $180,000 less per year for the next two years doing the same amount of work. In this example, the sales price to corporate dentistry would need to be approximately $360,000 more than the market asking price for the sale to make sense financially.

Corporate dentistry is a great springboard for young dentists to hone their skills. It is also attractive for parttime dentists because overhead costs in dentistry are high and will probably continue to grow. However, the best path for young dentists primarily concerned with paying off debt is to work full-time in their own busy practice. DE

TIMOTHY G. GIROUX, DDS, graduated from Creighton University in 1983. He established a very successful dental practice in Scottsdale, Arizona, where he and his wife, Mona Chang, DDS, practiced. Dr. Giroux, a member of ADS, is now the owner/broker of Western Practice Sales, a dental practice brokerage firm in the Western US. Contact Dr. Giroux at (800) 641-4179, (888) 419-5590, ext. 530, or

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