Once upon a time the marketplace dictated that young dentists had to set up new practices from scratch. Then the marketplace changed and virtually all young dentists became associates. Today the marketplace is wide open. The retiring baby boomers have made it easier to buy good starter practices with lots of upside potential. In certain areas of the country, explosive housing growth has once again made new start-ups a viable option. Associates are in great demand and the option of partnering with a senior dentist is becoming an attractive way to purchase a practice while eliminating the risk of a straight purchase. So let’s look at the options and what they offer to a young dentist.
Associating
Becoming an associate allows you to build some post-degree confidence and experience. Taking on two or more associateships at the same time gives you an opportunity to experience a variety of management and operational styles. Currently, there is a strong demand for associates — particularly outside of large metropolitan areas. But, while working as an associate, you are not building any equity.
Buying
The retiring baby boomers are providing lots of good purchasing opportunities. Many of these practices are underutilized with significant upside potential. Buying a practice allows you to build equity right away. You should have the practice totally paid for within three to five years. However, there is a risk that you will lose some patients. You also may not have developed the skills or experience to run your own business. Using the services of accountants and consultants who know dentistry can help you avoid expensive mistakes.
Transitioning
Transitioning occurs when a younger dentist starts out as an associate or partners with a senior dentist. He or she gradually buys out the original owner over a set period of time. Essentially, you are combining an associateship and a purchase. You are building equity as a part owner and you have a mentor. Buying a practice one piece at a time will make it easier to finance. Patient attrition is often eliminated. But a transition is usually more expensive to execute than a straight purchase.
Setting up a new office
Local housing booms in many areas have made setting up a practice from scratch a very viable alternative. It’s a good strategy for dentists that “want to do it their way” and would not be happy working for someone else. Finding the right location might be tricky. Be aware of the hidden costs of initial negative cash flow — when you have all your expenses but low initial gross revenues. Try to buy only what you really need and grow into the rest. Finding a good dental sales representative, who specializes in office set-ups, and an accountant, who has lots of dental clients, is very beneficial.
When all is said and done there really is no “best” choice. Any of the above options and a few others like residencies, hospital positions and public health, will work well for the right individual. If you know what you want, go for it. If you don’t, find an advisor or mentor who can help you sort through the exciting options that await you.