The dental industry is experiencing a mass migration and consolidation of dental practices as a generation leaves the workforce. It is predicted that 20,000 practices will be vacated in the next two to three years.
I recently read an article about the restaurant industry that outlined some impending changes to the market. There is a claim that a bubble is about to burst in the food industry that will cause seismic shifts in how consumers dine.1 The author shares a bleak future for the traditional restaurateur: if the owner doesn’t adjust to the social movement of eating healthy, clean, often organic, and farm-to-table options, common staples and chains could die a sudden death.
I draw a similar parallel to the dental industry. We are experiencing a mass migration and consolidation of practices as a generation leaves the workforce. Ten years ago, as the baby boomer generation started to enter retirement age, the financial crash delayed those retirements. But over the last several years, most markets have recovered and dentists are revisiting their retirement plans. With no end in sight to the huge burden of dental school debt for current grads, buyers are in limited supply in the traditional market, leaving a multitude of practices available.
It is predicted that 20,000 practices will be vacated in the next two to three years. A mere 6,500 or so dental students graduate each year. Compound this impact with a growing population and increased awareness of the importance of dental care, and we have a gap in providers of at least 8,000 just to sustain the current dentist-to-patient ratio. While many dentists are buying up multiple practices, they must consider how those businesses will remain viable when the selling producers exit. Increased competition and decreased reimbursement necessitate a new model to maintain solvency and, ultimately, success.
The time to take action isn’t in five or 10 years - the time is now.
When business owners evaluate their options for the future, they must first be clear about two things - what their current state of business is, and what they hope to shape this business into during the next few years. Forecasting beyond that window could help craft a vision for the business, but it will not aid in creating the strategic goals and waypoints to propel a business toward that vision.
While the trend to consolidate in dentistry is prevalent, several different models are used to merge, acquire, and build. There are even alternative models that just support dentistry rather than deliver care.
That being said, when the exodus of the boomers is complete and the industry is left with fewer practitioners, this will not mean the days of the solo practitioner are over. It will mean they need to play by a new set of rules where optimization, efficiency, and improved standards are the ante to the game. It will mean dentists co-op or outsource certain elements of their business so they can focus on what they do best to stay ahead of the market. It will mean they need to keep a closer pulse on market conditions as new ways of operating dental businesses arise. The business acumen needed now and in the future is real. A clear understanding of EBITDA and how to grow it in business may be one of the most fundamental elements dentists must master.
Without risk, there is no reward. Without reward, there is no loss. Without loss, there is no fear. Without fear, there is no motivation. Without motivation, there is no change. Without change, there is no adventure. Without adventure, there is no life. Without life, there is no purpose.
I encourage you to find your purpose. The future of the industry is incredibly bright for those who are paying attention and adjusting to the market forces.
No business is perfect. However, your honesty, integrity, and loyalty will align your path to success.
To develop your business vision and strategic plan, attend the Henry Schein Dental Business Institute. To learn more or register for an upcoming program, visit henryscheindbi.com.
1 Alexander K. There’s a massive restaurant industry bubble, and it’s about to burst. Thrillist website. https://www.thrillist.com/eat/nation/american-restaurant-industry-bubble-burst. Published December 20, 2016. Accessed March 1, 2017.
Eric Nuss, MBA, leads the Business Solutions department of Henry Schein Dental. He developed and now leads the department’s Dental Business Institute, an educational program for dentists. You can contact him at (414) 290-2542 or [email protected].