Corporate Dentistry’s Impact on Practice Sales

In Business by Dental Entrepreneur

By Jonathan S. Carey, D.M.D.

The debate about big corporations taking over dentistry is certainly not a new one. Corporations and dental-management service organizations (DMSO) have been around for decades. The discussions about how these entities will affect dentistry and the sale of dental practices have been going on just as long. I’d like to address the top-four myths that most of these “doom-and-gloom” discussions revolve around.

Myth No. 1: New graduates are in so much debt that their only choice is to join a “dental chain.”

Many new graduates are indeed choosing to work for a “dental chain” for obvious reasons such as: guaranteed salary, benefits, student loan assistance, etc. These are all great reasons. However, many of them choose to leave these jobs to buy their own practice once they’ve gained enough experience and saved enough money to do so. This is because they realize that in the long run they will be far more profitable owning a practice themselves. Fortunately, these jobs can also help them do that in as little as one year! Sounds great, but how do they do that? See the busting of myth No. 2 below.

Myth No. 2: Young dentists can’t get a loan to buy a practice.

There are indeed some young dentists that simply can’t get a loan to buy a practice… yet. However, many of them can now, and with the right amount of time and planning they all can eventually. Dental lenders are still offering 100-percent financing plus additional working capital for practice acquisitions. The size of the practice that a young dentist can afford will obviously vary, but they can still get loans for practices – even large practices.

It just depends on their personal financial situation, productivity and liquid cash assets. Maintaining factors like low rent/mortgage payments and car payments is essential. A young dentist should also eliminate all revolving credit card debt because lenders hate that! Their productivity should come close to matching what the seller is producing or at least what the buyer is expected to produce after accounting for any post-sale seller production. Lastly, while they should make sure all student-loan payments are paid on time, they should focus more on saving cash than on aggressively paying down student loans. Lenders place much more emphasis on liquid cash assets than they do on student loan balances. A good amount of cash to shoot for is 10 percent of the purchase price of the practice, but that’s not necessarily a requirement.

Jobs at dental corporations can help a young dentist achieve all of this by typically paying a good salary plus production bonuses and allowing a young dentist to be very productive right away. After all, they’re usually taking over for another young and productive dentist that just left to buy a practice!

Myth #3: The corporations are taking over.

Dental corporations and dental-management service organizations (DMSOs) aren’t going away any time soon and have certainly gained some market share in dentistry over the years, but they haven’t come close to taking over. In fact, there have been some that have gone out of business because they couldn’t maintain patients for reasons such as high dentist turnover, high staff turnover and poor quality of service.

Myth #4: The solo practice will be a thing of the past in 5-10 years.

I personally think that there will always be a place for the solo and small group practice. Dentistry is a very personal and service-oriented business, and there will always be plenty of patients seeking out and staying with practices that can serve them on a personal level.

The traditional model of buying a dental practice (working as an associate right out of dental school/residency and eventually buying that practice) has certainly changed, and dental corporations and DMSOs have played a part in that. However, there are plenty of great solo practices to buy or small group practices in which to become an equal partner. If you are considering practice ownership, you should consult with a reputable transition company to help you navigate the process. It may not seem easy, but great things rarely are!

Dr. Jonathan Carey is a graduate of Boston University Goldman School of Dental Medicine. He maintains a private general practice in Webster, NY and has been a transition consultant with PARAGON Dental Practice Transitions for 12 years. He is the Senior Transition Consultant for the State of New York and is a 2 time PARAGON Consultant of the Year award winner. Dr. Carey takes great pride in helping his dental colleagues successfully achieve their practice transition goals.