From: [email protected]
Hello Marc,
I read your books a year ago, and I appreciated your vision and communication style.
I have a nice practice, with an associate 1.25 days a week, collecting $2.2 million, with higher-than-average profitability. My only PPO is Delta Dental Premier. I am financially secure at 55 years old.
I am not ready to retire, but I do not want to “hang on” too long, either. I am not interested in managing several practices as a DSO owner, and I have difficulty envisioning myself “working for” a DSO for three years. I am a high-quality clinician — many of my colleagues and their families are patients in my practice.
What are you suggesting for a clinician in my situation?
Thank you for your reply, if you choose to do so.
Warm regards,
Joseph S——, DDS
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Joe:
You can’t stop change. DSOs will dominate the market. My predictions are their growth will continue at 20% per year, while the loss of solo practices will continue at 7% to 10% per year. I believe these trends are irreversible. By the time you hit 60-plus years of age, my prediction is DSOs will be at around 40% to 50% of how much of dentistry gets delivered.
Dentistry is moving away from solo dental practices
Add to this that dentistry is moving away from dentistry as an individual art, to dentistry as a data-driven business. Data-driven not only in business analytics, but also in the clinical delivery of care. With the advancement of AI and robotics, diagnostic and treatment-planning software, cloud computing, and the dominance of insurance companies in reimbursement, dentistry — including clinical care — is becoming data-driven. Individual decisions about what to do, what materials to use, and even the preparation of teeth will be data-driven. The solo practice will simply become the single practice, because all of dentistry will be practiced under the domination of data. So how you do dentistry now will not be the way it is practiced a decade from now — or sooner.
If you are counting on your associate buying the “shop,” given the expense, that most likely won’t happen. Unless you set the price before he or she came in, you signed an LOI for future purchase at some point near the beginning of their tenure, got a non-refundable deposit, and given you’ll be well over $2.5 million in five years, the associate will need to come up with a large amount of money. Or, you’ll need to sell 50% to a second associate, which now puts you on the path of a group practice.
Breaking it down by the numbers
At $2.5 million, with living expenses and student debt, as well as how banks will be setting the bar for lending to new dentists, it seems the sale price of the practice will be too high to be affordable. So, don’t count on the sale of your practice as a solo practice for your retirement. An asset that isn’t transferable is a liability.
In my view you have five choices:
- Do nothing, sock away money, and don’t depend on the sale of your practice contributing to your retirement. Gift it to your associate(s) or take a piece of the profits for perpetuity.
- Sell the practice at a tremendous discount and/or co-sign the note for someone who can buy an independent practice at $2.5 million. Most likely, you’ll need to hold some of the note so the bank will lend the individual money. The bank will want your skin in the game.
- Try to find a DSO that is willing to buy your practice, but you will need to stay to have the stock convertible to cash. (By the way, there are some really good DSOs out there.)
- Partner with like-minded dentists and form some kind of network DSO.
- Some things I’m sure I haven’t thought of.
It is inevitable that DSOs will dominate the dental market, just as Amazon, Apple, Intel, and Starbucks dominate their markets. Solo dental practices are on the downhill side, and the vertical descent is getting stepper.
I can’t tell you what to do. Your choices depend on your values, life situation, career aspirations, and many other contributing factors. The future is DSOs — that’s inevitable. You need to make some hard choices and then make them happen. There is no “easy out” of your situation.
I can recommend two intermediate action steps to get yourself clear on your choices. Start going to meetings with DSOs. Meet people; see if your experiences matches what you have heard. I think you’ll be surprised.
Second, get a good coach. Someone highly knowledgeable in the industry as well as trained as a life and business coach. A coach will push you to confront the reality of the future and press you to make choices that best fit you.
You can’t avoid the changes that will take place, and the only thing you have control over is yourself. You can’t change the world, so you need to think about changing yourself. The bottom line is you either choose to change or you choose not to. That is the first choice you need to make.
— Marc
