Solo vs. group - one dentist's experience

Is solo or group practice best for you? Dr. John A. Wilde, who has done both, compares the two forms of practice to help you decide the right path for you.

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by John A. Wilde, DDS

There has been considerable smoke, but precious little heat or light, generated by discussions comparing solo and group practices. These dialogues are significantly influenced by people who are not fully informed or who have a personal agenda or bias. (Might as well be politics!)

I devoted my career to a three-segment study that would, once and for all, establish a factual baseline regarding this important issue. (OK, I didn't plan it that way, but, as you'll see, that's how it turned out.)

I began a solo practice from scratch in 1974. In 1985, I added my first full-time associate and practiced in a group environment until 1999, when - in what turned out to be the final 10 months of my professional career - I returned to solo practice.

Many complex social, political, and psychological concerns are involved in solo vs. group comparisons. These are impossible to quantify precisely, and, while important, analysis of such intangibles can hopelessly muddy the waters. But you're in luck! I was raised poor and am an unflinching "net-profit guy." Make no mistake, I practiced dentistry because they paid me to. I will focus here on the documentable, numerical facts in hopes of providing a needed glimpse of clarity into this seemingly opaque topic.

Just the facts, please!

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During 1985, my first year with an associate, our average monthly production increased from the $40,000 of my 1984 solo year to around $60,000. My overhead percentage dropped from 65 percent in 1984 (solo) to 58 percent in 1985 (group). See Figure 1. Overhead percentage declined as fixed costs - rent, insurance, utilities, etc. - remained the same. Production increased by 50 percent. Increased production combined with de creased over head means net profit got a double boost!

I paid my first associate 30 percent of his production ($20,000 production x 30%), for an average of $6,000 per month. As owner of a small group practice, my net became $19,200 per month ($25,200 net - $6,000 associate's cost). This was a $5,200 per month (or $62,400 per year) increase in remuneration - a 37 percent gain in net - while the hours of care delivered and my personal production remained basically unchanged.

Was I stealing money earned by my youthful associate? Most of this additional profit was derived from the 7 percent decrease in overhead ($60,000 production x 7% decrease in overhead = $4,200). Decreasing overhead and enhancing profits are the sweet fruits harvested from the skilled efforts of any well-managed business. In exchange for the remaining $1,000 per month, I supplied my associate with patients, staff, established office systems, equipment, and supplies. I started the practice on my own and certainly would have appreciated the significant value of these assets had they been available to me. This exchange seems more than equitable.

Promising as this first year was, it represented my beginning stage of group practice. With time and effort, we got better. In my last three years of group practice (during which we sometimes had two, often three dentists in the practice), my true office net - with personal expenses such as health insurance, corporate car, etc., removed from the equation - averaged 48 percent. My average daily net during those years was $5,070.

My most profitable year was 1996, when I saw patients during 52 eight-hour days and personally netted $347,000, an average daily net of $6,673. ADA statistics from 1994 stated the average dentist then netted $480 per day. My total daily profit was over 13 times the average! My small-town practice is nothing special, and I'm certainly not one of those "dental wizards" who frequent the lecture circuit. Our result simply reflects the earning potential of a well-managed group.

In 1998, I decided it was time to retire. For reasons I may never comprehend, neither of my associates desired to purchase my office. Both eventually left, and, in August 1999, I returned to full-time (four days per week) solo practice. I sold my practice last May.

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Let's analyze my final three months of solo work to enhance our ongoing comparison. Take a look at Figure 2. My total three-month net was $72,148. My projected net for the year 2000 was $288,592 ($72,148 x 4). My three-month production total was $186,000, with a projected total production for the year of $744,000 ($186,000 x 4). Average daily production was $4,895 ($186,000 ÷ 38 days worked). Projected eight-hour days for 2000 was 152 (38 days worked x 4). My overhead percentage year-to-date was 63 percent.

OK, so what's your point?

Allow me to make some observations, hopefully to moisten these dry statistics:

  • My average net per day was $1,899 ($288,592 projected net ÷ 152 days). This isn't too bad, unless you compare it to the previous three-year average of $5,070 (or, my favorite, 1996's $6,673). I was working much harder and being rewarded with 37 percent of my past average daily net income ($1,899 ÷ $5,070).

As noted during my discussion of the 1984-1985 solo/group example, group practice increases efficiency as the same office facility - with almost identical fixed expenses - creates an enhanced cash flow. Once collected dollars pass a certain point each month, a much higher percentage of the remaining production is retained as profit. (Achieving average overhead, or reaching the break-even point, is commonly referred to in the business world as "making one's nut.")

  • My January net was relatively low, since I had taken a week off to go to a dental meeting (which just "happened" to be held in a ski resort in Park City, Utah). My total January overhead ($31,150) was similar to that of other months, despite my week off. I soon realized it was very expensive for solo practitioners to take vacations! I didn't miss another day of work until I sold the practice! As you can see from the three-month chart, my overhead ran roughly $30,000 per month ("my nut"). Most of what I produced above this figure was profit. I felt I was working too hard to sacrifice the net profit that even one day off cost me.

I'm 53 years old, and dentistry was leaving me very tired at day's end. I wasn't feeling all that peppy by lunchtime! Even nonworking days seemed devoted to recouping my energy so I could perform more dentistry. I'm probably just lazy, but I deeply resented the fact that my life revolved almost completely around my work.

  • During 1999 and 2000, I was unable to find an associate. Six young dentists visited my office and all turned me down, including several I didn't feel met even the minimum requirements. During the previous 15 years, finding an associate had never been a problem. But dental demographics have changed dramatically.
  • I was a very motivated practice seller, especially after a few months of full-time practice! Yet, despite my best efforts and the help of four "practice transition specialists," I had no seriously interested party during the two years I attempted to sell my office! I had given up on selling my practice and had already advised my staff that we would be closing the doors in six weeks ... when at last a buyer appeared.

I gladly sold my practice for about 20 percent of its estimated value, so that six talented staff members were allowed to continue working and so that 4,000-plus active patients retained a familiar setting in which they could still receive dental care. Thankfully, I didn't need money from my practice sale to retire, but I'm very concerned about the fiscal well-being of dentists who are counting on revenue from their practice sale to comprise a major portion of their retirement funding.

The Catch-22 choices available to solo dentists are:

  • Work really hard and make decent money. You can do this if you are focused, dedicated, have developed adequate clinical skills, are a good manager, and excel in interpersonal relations. This may be acceptable for young, energetic dentists or those for whom dentistry is their love and hobby. Unfortunately, dentistry was always hard work for me, and I've long since gotten over being young.
  • Work at a slower pace - shorter and/or fewer days - but understand that overhead won't decline in a manner proportionate to your decreased working hours. Accept a significant drop in net - maybe as much as 50 percent - as the price that must be paid to enjoy your leisure.
  • The third choice lies within group practice. Granted, there are many problems associated with multiple-dentist offices, but, if well-managed, the financial rewards can be significant. Groups allow dentists to enjoy time away from the office, knowing bills are paid, staff members are employed, and patients are receiving needed care. Such freedom was a major benefit to me.

This is the briefest outline of the complex comparison of group vs. solo dentistry. My most recent book deals more extensively with this subject. The facts I've revealed reflect only my personal experience and interpretations. I hope this information will assist motivated dentists in charting their unique and ideal pathway to success, wealth, and joy within dentistry.

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