Do Not Wait to Buy a Practice
Do Not Wait to Buy a Practice
By Rod Johnston, MBA, CMA
Do you ever sit back and wait for something to happen thinking that if you wait, that
something could turn out perfect? But, then you end up waiting a little too long and you
end up missing your perfect opportunity? Whether that certain thing is a cake that you
think you need to wait a few more minutes to bake and then you end up burning it. Or,
the stock price of a company whose stock is going down and you want to wait a little
longer to let it drop some more and then you wait too long and the price shoots back up.
Or waiting for interest rates to drop and then all of a sudden the Federal Reserve
increases the rate.
For many dentists, acquiring a practice has been like that. You wait for the practice that
has the perfect location. You wait until you know how to do as many procedures as you
can. Or, you wait for the practice that has four operatories, collects $800,000 per year,
on a busy corner street with great visibility and 40,000 cars going by every day. We
know who you are. The problem is, waiting comes at a cost. You only have so many
years on this earth. For every year you wait to begin owning a practice, you may also
be adding another year on the end when you want to retire.
On average, a practice owner earns anywhere from a low of 20% to a high of 40% more
than an associate, depending on the source. All the while you’re owning a practice and
making an average of 30% more than your associate friends, you are building what’s
called equity in your practice. That means, the practice you purchased for $800,000, as
an example, with a 10-year loan is increasing in value to you as you pay the loan down.
So when you retire and sell the practice for $800,000 or more and you have the loan
paid off, you will have $800,000 in cash, less transitions fees, to put towards your
retirement. Your associate, if they never own a practice, will get to put $0 from the sale
of a practice towards their retirement.
To further explain the math, an average associate makes $185,000 per year. If you own
a practice, you would make 30% more on average per year which equates to $55,500
per year. Over a 20-year dental career, if you put that $55,500 into a bank account with
no interest, you would make $1,110,000 MORE than your friend who was an associate
their entire career. That’s on top of the equity of $800,000 from the sale of your
practice. That gives you a total of $1,910,000 over your friend the associate. This is all
assuming you are an average dentist and can learn a few things about practice
management during your tenure as a practice owner.
That all sounds great you say, but I have $500,000 in student loan debt. Even more
reason to get into practice ownership. By making more, you pay the student loan debt
off sooner. Banks are still eagerly lending to dentists on good practices. The failure
rate for dental practice owners is less than .03%! The only business to fail at a lesser
rate than dentists is…….Mortuaries! You literally just need to show up, do a little
dentistry and you will succeed.
But, you add, “I didn’t get into dentistry for the money.” Awesome, you probably got into
dentistry to provide the best standard of care you can. Working for a DSO and even
some solo practice owners may not have the same standard of care that you have.
When you own a practice, you get to determine what that level of care may be. You also
get to determine what procedures you get to offer and perform. In addition, you get to
hire and fire staff, pick which supplies and materials you want to use and even which
scent of soap you want in the patient bathroom. Mahogany wood scent is my choice if
From generation to generation, dentists have owned practices. DSO’s and other dental
owned groups are increasing in number. The American Dentists’ dream should still be to
own their own practice if for nothing else, pride. Pride of ownership and pride of a good
quality of care. Make this year the year you take a step in the right direction and buy a
We’re always here to help in any way we can.