What’s Next?

Iremember many years ago what was going through my mind at this time of my senior year in dental school. “What will I do next?” was the burning question. My first plan was to start a new practice with a classmate. That plan

fell through when my friend decided to open his own practice in another town. That left me with the option of opening my own solo practice.

I went through the process of choosing a space, designing the office, picking equipment and so on, but those plans hit a brick wall when I could not find financing for my start-up. That was probably a good thing, as I could have been drafted into the military, leaving my new start-up practice unattended and payments still due. Then I applied to the military. The Navy and Air Force had their quota of dentists, but the Army was accepting new patients and new dentists. And that is how, quite by elimination, I started my dental career. Looking back, I have to say that those Army years were excellent in preparing me for my eventual civilian private practice, at least in honing my clinical skills. At that time though, nothing could have prepared me for the business part of private practice other than just taking the plunge.

But enough about me, how are your plans coming along? When I lecture to senior dental students about their options after graduation, most students tell me that they plan on becoming associates. There are a number of students planning

on going into residencies, and only a few people plan on going into their own practice. The greatest majority of students say that they eventually want to own their own practice, but have chosen to postpone that step.

production declined and even resulted in associates being terminated. In my current experience, I am seeing less demand for associates by practitioners since there is still more economic recovery to be made before there is enough excess treatment which would require hiring associates again. This is closely analogous to American business at large, which is still cautious about hiring new employees. These circumstances cause me to wonder how the majority of new graduates will

The decision of most students to become associates is of concern to me. Since the economic downturn of four years ago, many practices have stagnated or declined in revenues. Many practices with associates saw that their associates’

find successful positions to join.

There is an alternate source of associate positions that has been recently growing. These are the dental management companies that own multiple practices. The growth of these companies has resulted in many opportunities for dentists seeking associate positions, and the best of the companies offer many opportunities for continued professional, clinical and educational growth.

The military still represents a source of positions for dentists and can provide residencies and other opportunities for professional growth. My military experience provided me with a wealth of dental experience, pilot licenses and a three-year tour of Europe.

I am most gratified, however, by the students who do choose to make practice ownership their first step. I do have a strong bias in that I believe this step should be in the form of buying an existing practice rather than starting a new practice. There are many challenges in entering into one’s own practice, and I believe in minimizing the number and impact of them. The advantages of buying a practice over a start-up are numerous.

The first advantage of buying a practice, which did not exist when I got out of the Army and bought my practice, consists of the dental specific professionals who can analyze practices for buyers. Dental practice brokers, dental-specific accountants and attorneys, and dentalspecific lenders can examine prospective practices for buyers and ensure that buyers understand each opportunity fully. They can point out the strengths and any weaknesses that need correcting and how to correct them. Risky ventures will be exposed, thus protecting buyers as much as possible from getting into a bad situation. See examples of practice descriptions and how critical data is presented at www.adssouth.com.

An extremely valuable benefit of a practice purchase is the instant cash flow, so buyers can start making an income from the first month, rather than spending more than they collect for a number of months, as in a start-up. There is an existing patient base to treat and to stimulate for referrals. Rather than starting with no patients, there may be a base of 600-1,000 patients. One of the best benefits to practice purchase is that in the great majority of practices that I examine, the profit from the hygiene department – after paying the hygienist salary – will equal or exceed the loan payments for buying the practice. This rarely happens, if ever, in practice start-ups.

early years. In the event of a death or disability or other need to dispose of the start-up, it may be impossible to sell it for anything near what is owed, whereas a purchased practice could be sold for very close to what the owner owes for it.

There are some disadvantages to purchasing a practice, though. A buyer cannot always find exactly what kind of practice they want, or where they want to be, or when they are ready to buy. Compromises may need to be made in identifying and acquiring a practice. Equipment may not be what the buyer would like to have, and systems and software may need updating. Some staff members may need further training or even replacing. Office lease terms or sale terms may pose a problem, as would the presence of associates or partners in the practice. Sellers may want unrealistic transition periods which could impact the buyer’s cash flow, or not be available when their presence may be required for maintaining productivity.

A very important advantage of purchasing a practice is the presence of a trained, experienced staff that knows how to make the practice run efficiently, and very importantly, knows the patients personally. The staff and the existing management systems result in a huge advantage over a start-up situation in which the owner must establish management systems and hire and train a new staff, while the start-up dentist may not even have the information or the skills to perform these tasks.

Another benefit of a practice purchase is the seller themself. The seller is a great source of knowledge, skill, and experience that the buyer can benefit from. From questions about the equipment, the patients, the staff, marketing, computers, treatment plans, insurance companies and much more, the seller can help the buyer work efficiently through the ownership process and avoid the many mistakes a start-up dentist could make.

In my experience though, dentists who own their own practices are the happiest and most financially successful. They control their own destiny and the profit they make and the growth they bring about is theirs and not someone else’s. Owners enjoy the tax benefits that come from a purchase and greater flexibility in deductible expenses than an associate would have. Today’s environment is more supportive of practice purchases than in previous years, with interest for loans at an all-time low, excellent availability of financing, excellent tax benefits, access to professionals who can help in every aspect of the practice, and the opportunity to acquire a practice that should grow as the economy is recovering. What are you waiting for? ■

Another resource for new owners is the availability of management consultants. These resources did not exist when I went into practice, so I had to try to figure out how to run and manage my practice by myself. New owners can benefit greatly from consultants who can teach and even implement management, marketing, treatment plan acceptance, scheduling, hiring and terminating staff, and other critical areas of practice management. They bring proven principles to their clients and invariably pay for themselves in a few months from the increased revenues that they bring about.

Another important benefit, although hopefully it is not needed, is that the value of a purchased practice is pretty much the same after the purchase as before. Contrast this to a start-up which usually carries much more debt than the practice could possibly be sold for in its