25 May What is my Career Income Potential?
Most doctors will practice dentistry an average of thirty-five years throughout their career. The number of years a doctor ultimately practices times the average annual income he or she earns over that period equals that doctor’s “Career Income.” A dentist’s Career Income Potential is greatly affected by the decisions the dentist makes along their career path. Decisions such as joining a practice as an associate, buying a practice, entering the military or public health and starting a practice from scratch all have a lasting impact on a dentist’s Career Income. It’s probably not possible to make all the right decisions along the way, but an informed dentist can certainly minimize the negative financial impact of decisions thus maximizing their Career Income Potential.
For example, let’s say a doctor purchases an existing practice that produces an average pre-tax net cash flow (after all expenses and after annual debt service of the acquisition) of $225,000 each year (not a particularly large practice by today’s standards). Under this scenario and based on practicing for 35 years, that doctor’s Career Income Potential would be $7,875,000 ($225,000 x 35 years).
Let’s suppose another doctor decides to work as an associate instead of purchasing a practice. This young doctor will discover that an associate’s annual income typically ranges from $90,000 to $110,000 a year (not a bad annual income but certainly less than practice ownership would yield). Once the doctor determines that there is no ownership future in the associateship arrangement (this occurs more than 90% of the time), the doctor leaves that practice and starts all over again (many times making the exact same mistake again). Those peak energy years were spent averaging $90,000 to $110,000 a year instead of the $225,000 or more annual net income a practice acquisition would have created. Thus, 5 years of an associateship at an average annual income of $100,000 will cost a doctor approximately $625,000 in Career Income ($225,000 less $100,000, or $125,000 x 5 years).
Unfortunately many doctors enter such associateships… and the lost Career Income can never be recovered! It’s not that associateships can’t work; it’s just that many of these young doctors never get started on the right track. There is rarely a contract spelling out exactly how the relationship will unfold thus these “dead-end” relationships typically end up negatively affecting their Career Income Potential.
Compare the previous two doctors to yet another doctor who really gambles his future income potential by setting up a new practice from scratch. This doctor incurs tremendous debt for new equipment and signs a long term lease for a practice location only to find that he doesn’t have enough patients in his chair each month to fully pay his monthly bills, much less, enjoy a substantial personal income. If this doctor is successful in surviving those first few years (many have not) on the minimal income afforded by a new practice start-up, the doctor’s Career Income Potential has most likely been permanently affected by millions of dollars.
It is a time-tested and proven fact that the absolute best way to maximize your Career Income Potential is to purchase an established practice. An established practice offers the single most important asset that you will ever own in your career… PATIENTS. New equipment is nice but secondary, a modern facility is attractive but also secondary, your staff is extremely important, but also secondary to a quality patient base. Think about it. Without patients, you really have no income stream and don’t even need the other assets.
Not too many years ago we worked with a new graduate who purchased a practice with more than 2,000 active fee-for-service patients (patients treated in the past 24 months). This new graduate earned over $250,000 his very first year out of dental school! At the beginning of the young dentist’s third year in practice he purchased and merged in a second practice with another 1,800 active patients. The dentist also hired two associates to help him work the vast number of patients. Only five years into this dentist’s career, his annual net income was already greater than $350,000. If he practices 35 years at this pace, his Career Income will exceed $12,000,000. Not a bad start for a new graduate!
Futures are not found… futures are made! All that is required is getting started in the right direction early in your career. Having access to the necessary information to make intelligent and wise decisions and some basic common sense is paramount.
It is your future, and yes, millions of dollars are at stake. How will you get started in your dental career? Or, if you have already started in the wrong direction, how long will you wait to “cut your losses” and get your career headed in the right direction?
Contact PARAGON today for a complimentary consultation to discuss your career options. No obligation, just a very worthwhile education!