I am often asked by dental students, “What factors should I focus on when buying a practice?” My answer is very simple: buy a dental practice that is recession proof. In other words, purchase a practice with lots of patients.
I was recently in Columbus having dinner with a Wall Street banker from New York, and during our conversation he reminded me that the economic cycle runs into a recession nearly every seven years. We are now in year eight. Most financial experts believe the economy will experience another major drop. We are facing a further decline in income, fall in buyer confidence, and a possible collapse among financial institutions.
According to Dental Economics, the dental industry still has not recovered fully from the 2008 financial crisis. The dental expenditures per person have dropped, financing by public programs has increased, and the average net income among dentists has dropped by over 13%.
So how does this affect new dentists moving forward? What happens when the next crash is at your door? If a dentist buys a practice with less than 1000-1500 active patients, filling a daily or weekly schedule may become very difficult. If a dentist loses 20% -25% of their patients in a recession, due to loss of insurance or loss of employment among patients, only those practices with 2000-3000+ patients can truly weather the next storm.
Understanding that the next recession is around the corner is key. The time to buy a recession proof dental practice is not when the market is on its way down and patients are staying home. Rather, buy when the economy is stable and the dental chairs are full. Becoming a successful dentist is not by accident. Remember my advice: “Buy a practice with lots and lots of patients.” You will never regret this decision.
By Chris Vandiford