The Best Strategy to Save the Independent Practice of Dentistry
This email came to one of our Summit Practice Solutions coaches working with a very successful Pediatric Specialist recently.
Can you please ask Dr. Abernathy what he thinks about the future of dentistry? Will it be all corporate soon?? Will private practices be gone in the next decade?? There are so many corporate multi-specialty practices opening around here. In fact, there is one opening close to my home called 365 Dental. They will be open 365 days a year and treat everything under the sun! And take insurance of course. My point being that I do NOT want to miss out on the opportunity to sell my practice and for a good price. If the writing is on the wall, I will want to secure a partner(s) soon.
Corporations are increasing 7% a year and for a lot of them, they are doing better than 95% of independent practices out there. They have better pricing on supplies and equipment, better locations, newer facilities, a wider range of services, higher reimbursement from insurance companies, lower cost on lab bills, better hours, better protocols and systems than most dental practices, etc. So yes, they will rule the world unless: We decide to take what they do well and do it better, while adding the personal touch of an independent dental practice. Unfortunately, few dentists have the skills and fewer still have the engagement to do just that. The clock is ticking and the ball is in our court to either change NOW or allow the independent practice of dentistry to become a thing of the past.
As Dentists, we started this journey the day we graduated from dental school. Since that point in time, we have seen a rapidly changing landscape with more decisions to make and less time to make them. Most doctors find that they have created somewhat of a hole that today they will have to dig themselves out of.
The problem with most dentists is that they never save while continuing to spend on a lifestyle they cannot afford as if there is never going to be a day of reckoning. To actually retire a dentist would have to save 20% of everything they took home for about 40 years to retire with the same income they had as a practitioner. Most doctors will need at least $3,000,000 to $5,000,000 in cash with no debt to insure a comfortable lifestyle where they could spend about 4-5% a year of their savings and never run out of money. In the example above, that would be $12,000 to $20,000 per month and still invest 10% of that.
You have to ask yourself: What is my burn rate, how much have I saved, can I live on that 4-5% if I retired today, and how many more years can I practice? Tough questions; but questions we should have asked when we started out (instead of simply setting the burn rate too high with little or no savings). The really bad news is that for many it is too late. Statistically the average dentist will not pass the age of 65 without experiencing some form of disability (insurance companies won’t even sell disability policies after the age of 64 because they know they will lose).
The scariest part of this whole scenario is that if you sell out, even at top dollar, you will be lucky to get 75% of the last 12 month’s collections. In the case of a $3,000,000 a year practice that would only be 2,100,000 (or even less if your overhead is over 63%) but after taxes it would be another 30% less. It is impossible to overcome poor decisions at the end of your career with just a sale of assets. You will figure out that if you just work a couple of more years, you would end up with the same amount. Plus you wouldn’t have spent any retirement money yet and could still sell at that later date.
Selling to fractional partners means that you need to take another quantum leap in leadership and management to make sure that the addition of another doctor doesn’t erode your earning potential.
In the next installment in this line of thinking, I want to discuss what we should have learned from corporations a decade ago. This is how you Summit.
Mike Abernathy, DDS
PS. If you’d like to get a copy of my book, The Super General Dental Practice, you can download it for free here. Also you can purchase a hard copy of the book by clicking here. It is loaded with strategies that will help you compete in this, or any, economy.