17 Jun The Fear of Ownership

WHY? This is the question we ask young dentists who do not own their own dental practices. The responses vary somewhat, but with a little probing we discover that the reason virtually all of them don’t own a practice is simply because of a FEAR OF OWNERSHIP!

Unfortunately, these fears are generally based on groundless myths rather than facts. These myths, perpetuated for decades, are the topics of many a conversation among new graduates and others who do not fully understand practice ownership (professors, fellow students, recent graduates, etc.).

Myth #1: “Practices are too expensive. I could never afford it.”

This is the most common myth regarding practice ownership. First of all, the purchase of a practice is an investment, not an expense. The acquisition cost of a practice is really not important. What is important is the net cash flow the practice produces after deducting all operating expenses and annual debt service on the acquisition. Another important calculation is the net income percentage that you will be receiving on YOUR individual production. For example, an associate generally makes 30% to 35% of his or her annual collected production. Conversely, a practice owner can easily make 50% to 60% or more of his or her personal production (after all expense and debt service payments). Assuming this is true (and I assure you that it is very true), you can’t afford not to own a practice!

Myth #2: “I don’t know how to operate a dental practice.”

Operating a dental practice is the staff’s responsibility. Your job is to produce income and monitor staff activity. A new practice owner, however, can greatly benefit from the advent of computer technology, which simplifies such details as monitoring production and collections, bookkeeping, payroll, and scheduling. The novice manager can also utilize the services of a management consultant specializing in dentistry. Consultants can counsel the new practice owner in the essential task of hiring and retaining quality personnel; consultants can also provide a strategy for effective accountability and quality control. And finally, an experienced staff will teach you a lot about practice management because, quite frankly, their jobs depend on it! This is another factor that justifies purchasing a successful practice because it would not be successful without a quality staff.

Myth #3: “I don’t have the money to buy a practice and I owe too much already to qualify for financing.”

This myth is left over from the 1980’s when lender credit policies were quite strict and interest rates were extremely high. Today we have a number of national lenders that are anxious to finance practice acquisitions. These lenders have discovered that a dental practice is far less likely to fail than other small businesses. Dental acquisition  loans are now viewed among the safest risk types and are readily obtainable.

Myth #4: “The practices for sale are too old and have outdated dental equipment.”

This myth is quite common and typically the most difficult of all to dispel for the apprehensive buyer. First, all practices for sale do not fall into this category. We often have sellers in their late 40’s and early 50’s with modern facilities and equipment. But even with the older practices, outdated equipment should be a minor concern. Even if you think the equipment is outdated, it has been adequate enough to produce the income the practice has historically been producing year after year. A  purchaser should realize that the real benefit of purchasing an established practice is not in the equipment anyway, but rather in its solid patient base. It is much easier to upgrade older equipment with a solid annual cash flow than it is to start out with brand new equipment and not have enough patients to produce a positive cash flow. Some purchasers like to add new equipment as a part of the acquisition. This can easily be financed in the total deal, but we would always recommend taking it slow and easy with the new equipment purchases if the older equipment will do fine for a while.

These are just a few of the myths we encounter. The truth is that there are numerous reasons to own your own practice and very few, if any, good excuses why you should not own a practice. The lost income opportunity is tremendous. One year after selling a practice to a dentist, I asked him if he had any regrets. “Yes,” he replied, “I regret that I did not buy the practice sooner.”

Contact PARAGON today for a complimentary consultation to discuss your career options. No obligation, just a very worthwhile education!


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