25 May What is the “Bloody Nose” of Dentistry?
Having completed thousands of successful dental practice acquisitions with young practitioners and talked with thousands of dental students through the years, we have amassed a wealth of both interesting stories and fascinating facts.
Even though the acquisition of a dental practice is proven to position the young dentist a minimum of 10 years ahead financially of colleagues who do not acquire a practice, it is still amazing to us that only 1 out of every 83 new graduates we consult with will acquire a practice within the first 12 months after graduation!
It used to be that a vast majority of new graduates would enter into some sort of associateship arrangement. This is still a popular choice, however, we are also now seeing a trend of new graduates setting up practices from scratch. We credit the dental supply houses with this increasing tendency as they have done an excellent job marketing their new equipment and making financing for such purchases easier to obtain. But are these bold new graduates really making a wise career choice?
PARAGON does not think so! In fact, even though we know from experience that very few graduates will follow our advice, PARAGON continues to talk with as many dental students as we can and continues to conduct dozens of educational seminars at dental schools across the country year after year! So, why do we bother? Because of the Bloody Nose!
New equipment does not a practice make! New equipment or older equipment, the fact is that financially successful dental practices have but one single common denominator… a high quality, fee-for-service (“FFS”) patient base! An adequate high-quality FFS patient base takes years to accumulate (typically a minimum of 10 to 12 years)… unless, of course, you acquire a practice that already has a quality FFS patient base.
So, why don’t more new graduates jump-start their careers by acquiring a practice instead of entering into dead-end associateships or going deeper into debt to start a practice from scratch that has no patients? The most probable answers are simply FEAR and TRUST. These young professionals are getting so much conflicting advice from “experts” that they truly don’t know who to trust and they fear the consequences of making the wrong decision!
Frankly, we can advise all we want, but these young professionals have been warned to stay clear of the “fee-hungry practice broker.” They hear that people like us are only interested in making a buck and really could not care less if they are a success or not. This, of course, is totally false. In fact, we care a great deal if our purchasers are a success or not. Our business is built on satisfied client referrals and successful transactions. This is obvious because of the vast number of PARAGON’s successful clients that acquire multiple practices for merger throughout their career!
Let’s explain the Bloody Nose. The reason we spend so much time and effort trying to educate these young professionals is because we know that statistically, they will make major financial mistakes coming out of dental school. They will soon discover that high-quality FFS patients are indeed the key to financial success. They will soon discover that without such patients, it is virtually impossible to pay the overhead of the practice or to take home enough money to live a comfortable lifestyle. They will soon learn that the debt incurred to start a practice and acquire new equipment is extremely hard to service without the income derived from an established patient base. They will soon discover that building such a quality FFS patient base is very difficult and takes much longer than they anticipated. They will soon discover that managed care and capitation patients are not at all the same as FFS patients that appreciate and accept the quality of dental care the doctor once envisioned providing. In short, many of these young professionals will have got their noses bloodied before they will listen and believe what we are saying!
PARAGON will always be here to stop the bleeding. Many of our practice sales are to doctors who already own a practice. These doctors often purchase a practice for the merger because their current practice is simply not providing enough income because of the mistake they made by starting a practice from scratch. They finally realize that growth that would normally take 8 to 10 more years to achieve can be achieved overnight (literally) by acquiring a practice for the merger!
Would it have been better if these merger purchasers had acquired a practice immediately upon graduation? Of course, it would have been infinitely better. But is it too late if you make the common mistakes that most young doctors make? No, it is never too late to correct this mistake. In fact, we have had merger buyers as old as 56… It just takes some people longer to wake up than others.
We keep talking to a young professional who generally does not listen because we hope that they will remember us when their noses do get bloodied. While only 1 of every 83 of the new graduates we talk with actually acquire a practice, 3 of every 4 two-year career doctors we consult with about a merger acquire a practice!
Remember PARAGON when you have a Bloody Nose and need to stop the bleeding… we will always be here to help!