I have been a dental practice broker over 20 years now after owning a large successful practice for 17 years with my wife and dentist. My daughter graduated from dental school 4 years ago and married a classmate, so the husband-and-wife dentist team structure continues for another generation.
The landscape of dentistry has changed dramatically since my wife and I graduated from dental school around 1984. Back then, only about 10% of the class was female. Today about 50% of the dental school’s enrollments are female. As a member and past president of ADS Transitions, I have been fortunate to stay abreast of the business issues of dentistry from a national viewpoint. My company has been involved in around 100 dental transitions a year since I took over as President in 2002. Upon review of my last 250 transitions in Northern California, where the vast majority of my transitions occur, approximately 47% of my buyers were female dentists. However, I understand that this is not the case across the country.
Current and past demographics of the dental profession.
As luck would have it, 1983, the year I graduated from dental school, was the year in which dental graduates peaked in the United States. For about 10 years after that, many dental schools closed. I remember our instructors telling us they felt sorry for us as they believed the golden years of dentistry were over.
That prognostication could not have been more wrong.
I believe I witnessed the golden years of dentistry. Keep that in mind with any prognostication, i.e., private practice is over as the DSOs will take over dentistry. Then starting in the mid-2000s or so, the powers that be realized that we needed more dentists, and the trend was to build for-profit dental schools across the United States.
In 2017, the number of dental graduates surpassed the number of graduates in 1983. As a dental transition specialist, one would conclude that the current climate for practice transitions would be at its greatest levels. After all, the baby boomers are retiring now, and we have even more young graduates coming into the profession.
The reality of the current situation in practice transitions is that while the current inventory is the highest its ever been, as expected by the demographics of retiring baby boomers, we are currently experiencing a shortage of buyers.
Is the decrease in buyers of dental practices due to the increase in female dental graduates?
My experience in Northern California has been that nearly 50% of the buyers purchasing any of my listed dental practice opportunities are currently female. Having said that, I can also attest that I am experiencing an incredible shortage of buyers for dental practice opportunities across the board.
I would estimate that in the 22 years I have been a dental practice broker, that the interest level for practices is down by at least 50% compared to 15 years ago.
However, when I was researching articles to post on my updated website, I came across an article I wrote in 2018 that was titled “Hey Dental Practice Buyers, Where Have You Gone?” Therefore, the current shortage of dental practice buyers has been going on for at least 5 years.
The true cause of the shortage of dental practice buyers.
The current shortage of dental practice buyers is due to several factors. The millennials definitely are not as motivated to take on the headaches of practice ownership. They have determined that being an associate will be better for their work/life balance.
New graduates are leaving dental school with debt as high as $500K if they went to a private dental school. That debt combined with the podcasts and Google searches available to them has created a fear that was never experienced in my generation of dentists. That’s with the exception of that first “Risk Management” course I attended just out of dental school that had me wanting to enter a different profession. They are being told in school that they need to have a “team” of advisors to make a decision.
While I don’t disagree with that approach, the result of this “team” approach is producing more “analysis by paralysis” than the ability to discern information to make a logical decision. In my humble opinion, they’re not being empowered to make a decision. Instead, they are filled with fear.
The DSO’s (large corporate practices) are also present in many dental schools recruiting them for associate positions and then convincing them to purchase minority interests with them. This is essentially binding them with golden handcuffs to stay with their system as long as possible. The young grads become convinced that this is the best way to pay off their student loans.
Dental practice ownership: The best way to pay off your student loans and enjoy the fruits of your profession
Associates will take home less than owners for the same amount of production, whether the economy is strong or week. 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 pay off debt and feed their family better if they took home that extra profit themselves. Here are the top three pieces of advice I can give you as a broker:
1) The best way to pay off student loan debt is to own your own practice.
As soon as you are producing $2,000 to $3,000 a day on a normal fee schedule, you should be able to take home almost twice the money as an owner than an associate. Student loan debt should not be looked at same as dental school debt or other debts. It should be looked at a “return on investment”. The average increase in take home pay producing the same amount of dentistry is about two-fold as an owner compared to an associate when the profits from the hygiene department and the tax savings are factored in.
2) 100% financing plus working capital is available.
While rates are currently rising, they are quite low compared to the 15% interest rate I had to pay when I entered dentistry after graduation. Even at new rates, the smart “return on investment” is to buy a practice that covers your financial needs as the greater profits translate into the best return on investment. Of course, the greater the profits, the more the practice will cost, but your take-home amount after debt service will be more with the larger practice.
3) Don’t get caught up in the “price” of the practice.
Your “million-dollar question” in your due diligence is “how much do I think I can produce with the patient base in this practice.” Your due diligence should reveal whether you may be able to increase revenues, or perhaps won’t be able to match what the seller produced.
We all have different skill sets. No matter what your “team of advisors” might tell you, ONLY YOU know how you compare to any dentist you are replacing. Your debt service differential is nominal compared to your own skill set with any patient base. Meaning the price is nominal compared to what you could produce in a practice.
Based on your skill sets compared to the seller’s skill sets, you will find practices that you might double when you take over, and other practices where you might be lucky to produce half of what the seller did. Guess what, they will both be priced at market metrics for gross receipts and cash flow for the current doctor’s skill sets.
Getting a “steal” on a practice where you cannot replicate the seller’s production for whatever reason could be a disaster. Additionally, “over-paying” for a practice where you increase revenues could be the real steal even in a practice where the buyer might have to take the Delta fee reduction.
What does all this mean for women in dentistry?
Every situation is different. I don’t think it can be denied that female dentists that want kids have more issues to resolve in being a practice owner. But I firmly believe gender is not even close to the reasons given above for the decrease of buyers in the transition space. If a women desires to be in the healthcare arena, I believe dentistry is the best professional choice. My wife and daughter definitely had an advantage with dentist spouses, but there are many options available for women in dentistry to own a practice and still have that life/work balance. In fact, my daughter and son-in-law look at the millennial mindset and their conclusion is they are excited to own multiple practices and provide associateships for all their classmates that don’t choose to be owners for whatever reason.
One prominent dental attorney I know specializes in partnership for women who are both interested in raising families. Our society is perfectly fine with men staying home more if needed to help raise a family.
1) Dentistry is the best healthcare profession for women as it provides the most choices.
2) Ownership of a practice provides the best professional, personal and financial satisfaction compared to being an associate.
About the Author
Dr. Tim Giroux established his own dental practice in Scottsdale, Arizona, upon graduation from Creighton University, School of Dentistry in 1983. Relocating to Northern California upon selling his highly successful practice after 15 years, Dr. Giroux brings a unique perspective and personal experience in dental associateships, practice start-up, sales, and work-back situations to serve and assist you during your exciting transition! He especially enjoys guiding young dentists and helping them fulfill their dreams when they purchase their own dental practice.
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