Worry now, sell later?
Many dentists worry that if they don't sell their practice soon, there will be no one left to buy it later. In my opinion, this fear is a result of the rapid growth of DSOs and the emphasis commission-based brokers and acquisition professionals have on selling practices to DSOs.
This phenomenon has made dentists wonder about which practice format is best, and which will create more value for its owners. Since Levin Group has clients in solo practice with extremely high production and net income-as well as clients in group practice, associates on commission, partnerships, and even DSO-employed dentists with excellent incomes-I suggest the best format practice for an individual dentist should be based on their career satisfaction. The next thing to consider is pay/one's financial opportunity over the course of their career.
In his best-selling business book, Good to Great, Jim Collins talks about something called the "hedgehog concept." In a nutshell, the hedgehog concept suggests that to genuinely enjoy and benefit from your career, you need three things:
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Something you are passionate about. Most dentists love being dentists, so that one's already covered. Regardless of which style of practice you enter and continue, you will have the opportunity to work in dentistry and maintain your passion for it.
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What you're "the best in the world at." This is not to be taken literally; rather, it suggests that you find what you excel in and have an aptitude for when it comes to dentistry.
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Identify what drives your economic engine. According to Jim Collins, this relates to how you will make money and how much you desire.
Examine the major choices and advantages of different types of dental practice. This may help some dentists evaluate how they want to enter practice and/or work throughout their careers.
Solo practice
Solo practice is the most traditional type of dental practice. Currently, the most recent Dental Economics Levin Group Annual Practice Survey indicated that approximately 37% of practices are still solo. This has been decreasing for many years due to the arrival of new options in practice format.
The advantages of solo practice include:
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The dentist has total control of the practice and all decisions.
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The dentist can create a practice in an image that is desirable and offer only services that the dentist enjoys or feels comfortable offering.
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There are certain tax advantages of having a solo practice and opportunities around finance.
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The dentist has total control over practice hours and schedule for time off.
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The practice does not need as many new patients to "feed the machine"."
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The dentist/owner does not have to coordinate with partners, make compromises, or be subject to decisions that he or she does not like.
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Solo practice creates an opportunity for very high-level incomes if the practice is designed and systemized properly.
Solo practice is still an extremely viable option for the right dentist and personality type.
Partnerships
Dentists working in partnerships have the advantage of interacting with other dentists, working together to improve clinical skills, and assigning certain services to the individual partners who find them more desirable.
The advantages of partnerships include:
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Partnerships create coverage in the event a dentist becomes ill, during vacation times, or for any reason time is missed from the practice.
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Partnerships can allow for expanded hours (although many work the same hours as a solo practice dentist, and expanded hours often attract more patients, which is essential to practice production).
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Different partners enjoy managing different business aspects of the practice, so these responsibilities can be split.
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Having partners to make decisions and collaborate with brings in different viewpoints and other opportunities.
Partnerships can also be very lucrative. However, decision-making may become slow or nonexistent when partners cannot agree. Conversely, there are many extraordinarily successful partnerships where the partners sync up to create all the aforementioned advantages.
Group practices
By group practice, I am referring to having multiple practice locations with one or more owners.
The advantages of a group practice include:
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If the practices in the group are successful, the overall income and profit will be higher.
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Group practices allow for a larger organizational chart with office managers, financial experts, centralized scheduling, insurance coordinators, and others.
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By having a group, the services can be amortized and even centralized, creating higher levels of efficiency and lower overhead.
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Group practices have flexibility and options when not all practices are producing at the same level. There is security and safety in knowing that if one practice is not performing at the right level, other practices can make up the difference financially.
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Group practices can be systemized to be similar and develop the optimal systems for practice performance in the group.
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Group practices can provide a wider array of services as there are more providers within the practice and more patients to take advantage of the services.
Despite these advantages, group practices may struggle due to overhead, large early investments, high staff turnover, and overall stress and chaos. As the group expands, leadership becomes more important.
DSOs
DSOs are an option for dentists who want to be employed, not manage or be responsible for practice growth, and be part of an organization. DSOs vary widely in regard to services provided; many employee dentists focus on clinical dentistry and nothing else, while others purchase practices and provide limited administrative services and hands-on management.
For the purposes of this article, I will focus on DSOs from the perspective of the dentist as an employee. For some younger dentists, DSOs create an opportunity to pay off debt and help them to go into private practice. For others, it is a long-term career choice that can provide a moderate to excellent level of compensation. But remember-there will be no real asset to sell at the end. The employee dentist, like any employee, will need to focus on their annual compensation in regard to lifestyle and long-term savings. For some, being an employee can be desirable because it involves less stress and focus on managing and growing a practice. However, it does have considerable financial limitations.
The advantage of working for a DSO is that the DSO will provide benefits and services. Be certain to check exactly what services are provided and at what level they are being offered by speaking to other dentists employed by the DSO.
So what's best?
It's difficult to summarize and categorize every practice format option available for dentists in one article. To determine what's best for you, look into the future and develop a vision of what you want your career to be like, how you want it to play out, and use that information to decide which option gives you the best chance of achieving your goals.
After all, everything in life has trade-offs, and no single choice is right for everyone. There's only the choice that is best for you.
