The past dozen years have impacted the prices of dental practices without parallel. Time was that the new dentist looked for a practice to purchase with the hope that he or she could find something older - yet salvageable - grossing $100,000 to $200,000 per year. The hope was to build the practice up gradually to a satisfactory level of productivity. Practices producing $75,000 to $250,000 were sought out and rather quickly purchased as they came to market. Not so today!
Inflation has eroded the purchasing power of the dollar, contributing to a significantly higher cost of dental education whic causes, in part, more well-qualified potential dental students to forego dentistry for other more accessible fields. This, in part, has led to the decline in the annual number of dental school graduates.
This isn't the only reason for the declining enrollments in dental school, but it certainly is a major factor. Consider this: The newly trained general dentist begins searching for his or her own solo practice.
The solo practices in greatest demand today are those producing $400,000 to $700,000 annually, netting 40 percent or more. Today's buyer rarely looks at the practices grossing $100,000 to $300,000. Why? These practices can't generate enough income.
With rare exceptions, today's dental school graduate usually has $150,000 to $250,000 in student-loan indebtedness the day he or she graduates. The loan must be paid back with interest. As you can see from the example in the chart, this graduate really needs to purchase a practice with a higher gross/net and probably will not buy anything grossing less than $600,000.
