There are many compelling benefits of owning a dental practice and ensuring maximum earning potential, professional growth, and financial and scheduling autonomy.
As the dental industry experiences shifts, particularly with the rise of Dental Service Organizations (DSOs), it’s essential for practitioners to weigh the advantages of ownership against the perceived stability offered by traditional employment models like taking an associate position.
In this article, we’ll explore the benefits of dental practice ownership, and why taking control of your professional destiny might be the key to achieving both financial success and personal fulfillment in dentistry.
A Dentist’s Success Story
Here’s a story about one smart endodontist right out of residency! Let’s call him Dr. A. In 2016, he completed residency and knew that he wanted to take charge of his career, so what did he do? He purchased a dental practice.
Here’s how things have gone for him:
Dr. A wanted to be near family and knew the area he wanted to practice in. Sadly, we did not have a dental practice right where he wanted to be, but we did have one close enough to his family to be worth consideration to him.
The practice was about an hour outside of a major metropolitan area. This put him not in the city center, yet only an hour and fifteen minutes from an international airport.
The benefits to this location: lower expenses, including lower employee costs and better reimbursement rates than the city. Win/win!
The practice Dr. A was considering is like many practices; the seller had slowed down production. From 2012-2016, the selling endodontist had decreased his collections by almost 20% during this period. The seller was merely having his staff answer the phone and was treating whoever showed up.
It’s quite common to see a retiring dental practice owner with declining collections as they are just slowing down and they do not put any emphasis on growth, nor maintain what was done the prior year.
Collections doubled: Dr. A purchased this dental practice with collections of $880,000 in 2016, and in five years, his collections were $1,700,000. The overhead expenses in the practice were also lower, down around 34%.
Lucrative Options for Dentists
Dr. A has many options at this point. Does he want to bring in an associate to help him with his collections and grow further? Does he want to continue to work at the pace he’s working? Either option is very lucrative for him. If he chooses to bring in an associate and sell half of his practice, he can now sell half of his practice for an amount greater than he purchased the entire practice for. Offering an associate position paying 42% would allow Dr. A to earn 24% off every dollar the associate produces. He can now grow the practice while he’s making significant income off of the associate doctor.
Difference in Earnings Over 20 Years
Since Dr. A opted to purchase this practice, his earnings percentage is 66% of his collections as opposed to the 42% he would have earned working as an associate. Which means he earned $1,122,000 as an owner compared to $714,000 as an associate. The incremental owner income of $408,000 adds up to more than $8 million of additional income in the first 20 years. Plus, as an associate, would Dr. A have been allowed to treat $1,700,000? Likely not, which would have cost Dr. A considerably more than is reflected here.
Dental Practice Ownership Makes It Easy to Control Your Own Schedule and Make More Money
Dr. A not only benefited financially far beyond any other choice he could have made, but dental practice ownership allowed him the ability to schedule his practice around his life.
He can leave early on Tuesdays for t-ball practice for his son. He chooses which insurance schedules to accept. He has control over what he does and when he does it.
Not to mention, this was during the Covid closures and Dr. A had complete control of what he wanted to do. He wasn’t in a position that someone was telling him that there was no work for him; rather, he stayed busy during the entire pandemic and took home an extra $408,000 as an owner over being an associate. And this is assuming that he would have been able to continue to work as an associate during the closures.
How DSOs Have Impacted Dental Practice Ownership
DSOs, or Dental Service Organizations, have transformed dental practice ownership by offering an alternative to traditional solo ownership. They provide support in administrative tasks, marketing, and purchasing power, allowing dentists to focus more on patient care. However, DSO’s often reduce autonomy and control for dentists as they operate within a larger corporate structure.
After comparing associate wages versus owner wages, it should be no surprise to anyone why there are so many different DSOs wanting to own dental practices. Owners make money and Wall Street has figured that out. They want to own, and they want you to work.
What Option is the Best for You?
If you choose to buy a dental practice, only purchase a practice where you can do all the production yourself.
If you are purchasing more than you can produce, ensure the seller stays on to cover the patients you are unable to see. It does not make sense to buy a dental practice where the production goes to waste.
Ready to make the right choice for your dental career? ADS dental brokers provide expert guidance and personalized insights to determine the best path—whether it’s dental practice ownership or pursuing an associateship.
About the Author
Lisa is the managing partner, and also the current president, for Radman, White & Associates, inc. She has assisted hundreds of both practicing endodontists and residents in the matters of securing associateships, buy/ins and buy/outs, valuation, and other transition issues. Lisa lectures extensively to residents and practicing endodontists across the country at the AAE meetings and at resident venues on transition issues. With 25 years of transition experience, the goal for Lisa is to treat others as she would like to be treated.
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