If it seems like big business is getting bigger, it is. Over the last two decades, the largest U.S. companies have grown faster than the economy as a whole. And it’s the biggest of big businesses that are making up a larger share of the growth.
The news that Verizon intends to acquire AOL for $4.4 billion is just one example among many in this larger pattern. Take Apple’s recent single-quarter earnings of $18 billion as another. Take Amazon’s acquisition of Whole Foods. The big just seem to be getting bigger.
The best list of “big” businesses is the Fortune 500, which ranks the 500 largest U.S. companies by how much money they take in (gross revenues, to use the accounting term). Verizon, for example, ranked 16th on the list. Apple ranked fifth. Amazon came in first.
Researchers have shown that as big business gets bigger, the biggest businesses are growing even faster. The Fortune 100, or the 100 companies with the highest revenue, had seen their proportion of nominal GDP rise from about 33 percent in 1994 to 46 percent in 2013. As a share of all Fortune 500 revenues, revenues for these top 100 companies were up to 63 percent in 2013 from 57 percent in 1994.
“The big getting bigger, faster” is happening in dentistry as well. The biggest players — Henry Schein, Dentsply Sirona, Delta, Heartland, Pacific — are growing faster than any of their competitors.
When you look at the landscape of dental practice, you see that 70 percent of practitioners are flying solo (down from 82 percent), yet the number of dentists is increasing, as is the number of operatories. That means the growth is located now in DSOs, not in solo practice. So the big players — with their large reach, enhanced ability to attract capital, increasing profit margins, and continued mastery of being able to scale — are expanding faster than others in the industry.
Large companies have economies of scale and proportionate cost-saving, gained by an increased level of production and efficiencies — directly increasing their profitability and cash flow. They can do things smaller entities cannot, such as put together recruiting departments, in-house CE programs, mentoring programs, stock offers, profit sharing, and signing bonuses, as well as more leverage in negotiations with builders, vendors, and suppliers. They can also provide professional management and administrative services — and the list goes on.
Whether this is good or bad for dentistry is open to debate, but like most arguments, they have no power to stop what is happening. The continued growth of DSOs, led by the large DSOs, is occurring — and, in fact, it’s increasing.
When I hear solo practitioners complain about the DSOs, I’m reminded of what retailers say about Amazon, or local TV stations about Sinclair, or local radio stations about iHeart. But this is the time in which we live; this is the new context. Merger and acquisition in the dental space will continue to accelerate and the larger the DSO, the faster they can grow. Fortunately, there is still plenty of room left in the dental space for medium and even some small DSOs – at least for a while.
Our company understands this reality. We know you can’t resist change because change will happen anyway. As Alan Watts once said: “The only way to make sense out of change is to plunge into it, move with it, and join the dance.”
Our company is teaching people how to dance.
State of the Company: The DEO as of April 2018
We now have more than 100 members in the DEO and a total aggregated revenue of practices close to half a billion dollars. Although only in existence since 2013, the DEO has become a recognized brand in the dental industry. We have reached a tipping point: 16 percent of dentist entrepreneurs with emerging or small group practices are now DEO members.
The DEO’s purpose is to provide dentist-entrepreneurs training, development, and resources in a peer-to-peer environment. We give them the tools to generate and grow DSOs. Our digital competencies — an exclusive portal, Mastermind calls, accountability groups, and the DEO Facebook group — allows members to stay connected with each other and have direct access to the needed information and people. Our exclusive transformational technologies during Year One result in dentist-entrepreneurs becoming corporate leaders, effective senior executives, and competent directors of for-profit boards.
I’d like to acknowledge the DEO team and the DEO members who have created this incredible outcome in less than 20 months.
— Marc
