Is Student Debt Affecting the Future of Practice Ownership?

We have previously reported on student debt load and how it affects the future of practice ownership. In short, while the numbers continue to be staggering, we are finding that these costs are actually not detrimental to the opportunity to own and operate a solo practice.

As an update, the American Dental Education Association (ADEA) has recently published its “Snapshot of Dental Education 2017-2018.” Amongst the interesting data points are that while 39% of dental students are graduating with over $300,000 in combined educational debt (before and during dental school), a nearly equal number carry debt less than $300,000 and 16% are carrying no debt at all. While we surmise that a significant number of the “no debt” group could be foreign trained dentists relocating to the States, the category is most certainly mixed.

Additional data shows that just over 51% of students enter private practice as an employee or independent contractor – a majority of which are joining a private practice with a sole proprietor as the employer. Surprisingly, only about 15% of all graduates are entering some sort of multi-location practice, with half (7.3%) associating in a “corporate” practice.

For Specialists, we see tightness in the transitions market. Enrollment for the 2016- 2017 academic year in all specialties was just over 1,700. While there is demand for the advanced specialty training (42,000+ applications), limited class space means fewer available candidates for future practice transitions. Orthodontics and pediatrics see the most applications and accepted students, respectively, with oral and maxillofacial surgery close thereafter. For other specialties such as endodontics, periodontics and prosthodontics, the number of applications and graduates is significantly lower. If evenly spread, that’s just three to nine new specialists per state per year but we know that some states may get a few more while some states see no growth at all (if not a net loss of specialists as compared to those with those transitioning out).

What’s the takeaway? With 5,957 graduates in the 2016-2017 class, the market of potential future purchasers is still outpacing the number of practitioners retiring year over year. That said, the monetary need by many purchasers will continue to require general practitioners to “dial it up” and operate a strong, consistent, and stable-to-growing practice with reasonable to low overhead. This will generally result in you, as an owner, being in a seller’s market.

For larger practices, corporate purchasers are still searching for acquisitions, but be sure to conduct careful analysis to ensure it’s the right path for you. For smaller practices, you’re likely not a corporate acquisition target, but there are many opportunities with solo practitioners, mergers and acquisitions and, possibly, those interested in satellite locations.

In all, we strongly encourage starting with a practice valuation which will allow you the peace of mind to know where you and your practice are (it’s likely your most valuable asset) and the opportunity for us to have a conversation about where you may fit in the local market and what you can do to improve.

Henry Schein Professional Practice Transitions, Inc. is a national leader in dental practice transitions. A subsidiary of Henry Schein, Inc. they provide expert guidance for selling and buying dental practices, dental practice fees and management, assessing partnership and associate-ship opportunities, and performing dental practice appraisals and valuations.