The case for private practice

Jan. 16, 2017
The advice shared with today's dental students and new graduates has changed from years past, from encouraging them to purchase a private practice, to advising that they start their careers with a corporate company. Here's the case for starting your own practice.

The advice shared with today's dental students and new graduates has changed from years past, from encouraging them to purchase a private practice, to advising that they start their careers with a corporate company. Dental schools are encouraging students with $350K or more debt to work for a corporation, as they're told this is the only way they can pay their student loans and be debt free.

To back up the professors' claims, corporate dental chains are present in many dental schools and follow students throughout their four years. These corporate advisors become students' friends and encourage corporate employment. There is often no one representing flourishing private practices in dental schools. As an enthusiast of private practices, I believe professors are giving risk-adverse advice to their students.

When my father, Dr. Bill Blatchford, graduated dental school in 1970, it was in an all-male class. With the exception of military service, general practice residency, and specialty training, all were heading into private practice. My father started from scratch in a college town of 40,000 people with 55 dentists, and he made it.

RELATED ARTICLE:Why are private equity and venture capital groups interested in dental practices?

Because most dental students rely on student loans for their four years of education, they're missing the opportunity to gain experience in business while a student. Any opportunity to engage in private practice, even with small remuneration, could be of great significance. It could be as a part-time dental assistant, dental laboratory worker, or a marketing person for a practice. Students could help a practice become paperless, or even work in a hospital.

I suggest we look at the numbers to see if a young graduate has to work for a corporation to pay back his or her student loans. To make this easy, let's say the student loan debt is a conservative $300K, with an average balance of $150K at 8% interest. This means $12K annual interest, and the student's payment would be $30K a year, for a total repayment of $42K a year. If someone works for a corporation or a private practice, their student loan debt is paid at the same rate.i

RELATED ARTICLE:It's a phenomenal time to be a practice owner

If someone works for a corporation or as an associate at $150K per year with $50K going to income tax, that leaves an income of $100K. The student loan payment with interest is $42K, which leaves the new doctor $48K on which to live, After 10 years, the student loan is paid, but the doctor has no equity in a practice.

Another scenario for 10 years could be if the new doctor were to purchase a practice that is collecting $1M while netting $300K. The practice has a purchase price of $600K at 5% interest. Here's what will happen. The doctor will pay $100K in tax, leaving him or her $200K. The interest and principal payment would be $75K annually. The student loan is still $42K a year, which makes a net of $83K after tax. The beauty of this is that in 10 years, the doctor accumulates equity of $1M in a practice.

Because the doctor has a private practice, he or she is the owner and makes the decisions. Imagine the doctor has a one-time fee of $60K for business coaching, and from that the doctor nearly doubles his or her net. Let's examine the figures. If the annual net could be increased to $400K, up $100K, there would be an additional tax of $30K. Therefore, $70K plus the $83K is $156K net. Over 10 years, the doctor has had a $1M-plus increase in net income for wealth accumulation and spending.

Compare the 10 years to the corporate environment, where the doctor's student loans are paid but there is no equity accumulation. In the above scenario, there is a $2M difference in earnings and equity. Therefore, that is the biggest difference in working corporate and purchasing a practice.

Bankers are currently very willing to loan money for dental practice purchases, even to those carrying large student debt. By owning their own dental practices, dentists are increasing their debt, but it is the kind of debt that allows them to pay it all back in 10 years, including their student debt.

By owning their own practices, dentists can choose the days they work or take continuing education. They can work three days a week and enjoy more time off, even while paying off debt. With this information, who wouldn't choose to purchase their own practice instead of working for someone else?

Note

i. Interest rates on student loans are often higher than interest rates on a practice purchase.

Christina Blatchford, DMD, and her father, Bill Blatchford, DDS, are America's premier dental business leaders. They have a wildly successful coaching program to help dentists increase net while having more time away from the office, and to help them fall in love with dentistry again. Drs. Blatchford say the balance they have found is greatly appreciated by their families. Their latest book, Bringing Your A Game 2.0, is available on blatchford.com, or by calling (888) 977-4600.

Sponsored Recommendations

Clinical Study: OraCare Reduced Probing Depths 4450% Better than Brushing Alone

Good oral hygiene is essential to preserving gum health. In this study the improvements seen were statistically superior at reducing pocket depth than brushing alone (control ...

Clincial Study: OraCare Proven to Improve Gingival Health by 604% in just a 6 Week Period

A new clinical study reveals how OraCare showed improvement in the whole mouth as bleeding, plaque reduction, interproximal sites, and probing depths were all evaluated. All areas...

Chlorine Dioxide Efficacy Against Pathogens and How it Compares to Chlorhexidine

Explore our library of studies to learn about the historical application of chlorine dioxide, efficacy against pathogens, how it compares to chlorhexidine and more.

Whitepaper: The Blueprint for Practice Growth

With just a few changes, you can significantly boost revenue and grow your practice. In this white paper, Dr. Katz covers: Establishing consistent diagnosis protocols, Addressing...