Ask George - Does Practice Ownership Still Make Sense Today?

(upbeat music) Welcome back to another episode of the Shared Practice is podcast. On this episode, we're gonna be doing one for our aspiring owners. We used to call those pre-owners. So if you're in dental school or you're early out of school or for whatever reason, you might be out of school for a longer period of time as an associate and you have yet to enter into practice ownership. This episode is for you. And really what we're doing is we're asking the question critically, does practice ownership still make sense? You might think like, wow, shared practices is approaching that question. Shared practices has kind of made its name known in dental industry as being very pro-ownership and helping people get into ownership as really a staple behind what we do. And also on the flip side, we started shared practices group which is a dental support organization, a DSO, where we're in the implant space. And we work with dentists and a lot of dentists choose to forgo ownership to work for shared practices group. And so we have a very unique perspective on this question. And I think that the question has evolved a lot over the years in dental. Does ownership still make sense? And what's the future of practice ownership? And so I'm going to take some time on this episode of Ask George to break this topic down and talk through it so that we can all kind of maybe get a newer sense of the understanding of where we're at as an industry. And if ownership still makes sense for you as an aspiring owner. So I think before we even get into if ownership is right for you, let's first talk about some first principles. Right, so a dental career, the goal of that career is that you should enjoy doing what you're doing so that you can sustain it for a longer period of time. Even if you don't plan on practicing forever, just having the concept in mind that you can practice for longer makes a whole lot of sense. So one, what you're doing should be sustainable and enjoyable longer term. Two, you have an income need. I think I'll call it the dentist lifestyle. It's something that I'm now coming up on seven and a half years out of school. So for me, I've watched my lifestyle creep occur from the time that I was a dental student so the time I was a new owner, all the way until multiple years out of school. And you kind of settle into a higher quality of life that obviously has a higher price point attached to it. And so this is what I would call the dentist lifestyle. So you would need an income to allow for the lifestyle that people often associate with being a dentist while also being able to save and be responsible for your retirement. Right, so you need an income that allows you to live the dentist lifestyle plus savings rate. And then the last thing is you need some type of asset or some type of net worth opportunity, some type of practice '01K' if you will. And the practice '01K' is a shared practices term that essentially is like the amount of equity that you have tied up in tied your practice. You know, if you think about it from that perspective, most dentists, they work their whole careers and then at the very end, they sell their practice, they might sell the building as well. And then that's sort of a windfall that takes them into retirement so then they have their retirement savings plus that windfall from the practice '01K' though there's kind of the traditional assets for a typical dentist historically. Now, does practice ownership still make sense? Why are we asking that question? Well, when I entered dental school, there was an interesting statistic that said 85% of dentists own their own practice. And so historically speaking, I entered into a profession where most of the people in the profession, most dentists were self-employed practice owners. And in the time that I've been a dentist, and so if you factor in my dental school, plus also the time I've been out of school, you know, coming up on 12 years in the dental field, there's been a huge shift in consolidation, DSOs. And it causes us to ask the question again. I want to be very candid in my response. So I'll give maybe the very short answer now and then we'll spend the rest of the episode unpacking it. But the short answer is, does practice ownership still make sense? Yes, for the right person. I would say, who is the right person? Is changing a lot with the landscape. So for example, I would say that maybe 15 years ago, 20 years ago, you would say, does practice ownership make sense? And you would say practice ownership makes sense for most dentists. And I think now there's discernment that needs to be given to that answer. Who does practice ownership make sense for? Who does it not make sense for? And I think that for the passive owner, or the one who is not as intentional, as driven as an entrepreneur, doesn't love the business side as much, I think practice ownership continues to make less and less sense. Just very candidly speaking, if you are one of the types of dentists who isn't very interested in the business side, you don't really want to get super involved in the technicalities or the administrative work involved in owning and operating a dental practice. It begins to make less and less sense for you as time goes on. And I'll explain why. If you are one of the dentists who is very driven as an entrepreneur, loves that part of the business and maybe eventually wants to be primarily on the business side and sort of like niche down into the administrative management side, then practice ownership is the vehicle in which that allows you to do that. And so that's kind of like the really big shift that has occurred. And I want to talk about like why has that shift occurred? And there's really two different sources. There's one is that practice ownership has gotten more challenging. And two, DSOs have gotten more compelling. So I think there are like two macro forces that are making this, which was once maybe an obvious decision is practice ownership right for me. The answer was usually yes, to maybe a more nuanced decision, which is am I the type of person who wants to be a practice owner or am I the type person who wants to find a long term solution as a dentist working with either a platform or a partner or whatever types of other opportunities there are. And I think that when you really break that down, let's go back to the first principles, right? No matter what you do, you should ask yourself the question, does this give me satisfaction going into the office every day? If so, then yes, that's a check. Does what I'm doing provide an income that allows me to have the lifestyle and looking for plus a savings rate that allows me to retire when I want to retire? That's check or not. And then the third one is does this opportunity provide me with a net worth asset that I could potentially in the future, maybe if you're in your 30s, maybe in your 50s or whatever timeframe is appropriate for you, that I can reap that value from that asset, right? So those are sort of some of the basic questions. So in the modern day, what's happening with private practice is it's getting harder to answer those questions for private practice. So for example, am I enjoying what I'm doing every day, right? So there's an increasing number of private practice owners who maybe are not. And then am I making the type of income that allows you to live the lifestyle plus the savings rate? This is the big one that has shifted a lot over the years. So I am constantly surprised now by the number of dentists who I talk to who are in private practice and are making less than they did as an associate. It is not a insignificant number of people. It is actually much more common than I ever would have thought. And so I think that initially shared practices 1.0, season one of the podcast was in order to pay off your student loans. In order to do well financially, you must be in practice ownership. However, I think that that is no longer such a definitive answer because there is this growing group of people who are making less as owners than they did as associates. And I want to like really drill down into why this is. So I'm writing a book, "Dental Money Ball Zero." And it's all about getting into practice ownership and it's about finding the right opportunity to get into practice ownership. And a lot of people who are currently in ownership making less than it is an associate ship, it's usually one of two reasons. The first reason is that they bought a practice without the proper number of patients. So they bought an office that they thought was going to do something. But in fact, it didn't have the amount of patients to really generate the type of collections and production that they were expecting. So then they're in an office where they might be doing 600,000 a year in production collections. And then by the time they pay for their team and they pay themselves and they pay the bank, then they're left with maybe 150, 200,000 a year. Like that's a very common situation nowadays. And so when you tell this person, you say, okay, well, like your path out of this into a higher earning opportunity is an investment in marketing where you're gonna bring in those new patients, right? That can be a challenging thing to do when you're more or less paycheck to paycheck in practice ownership, the amount of money you're making, you're spending in most of it if not all of it. And then you're kind of just stuck in this situation where you don't have enough patients and you also don't have that excess income to go and invest in marketing to get the number of patients you need. So there's a lot of practice owners who are in that messy middle, I'll call it, where they are not making the type of income that they used to make an associate. What a lot of them will say is that some of them are enjoying ownership. They're enjoying the autonomy and the freedom of ownership, but they maybe wish they were making as much as they did when they were an associate. So that's an increasingly common situation. (upbeat music) I'm kind of kind of transitioned to what I talk about in the book in "Dental Money Ball Zero." I talk a lot about this dilemma. And what I say in the book, 'cause it's what I'm gonna say on the podcast, is there's absolutely that whole group of people who are doing exceptionally well in ownership. There's people who are making seven figures. There's people who are making over half a million dollars and everything in between, right? There's people who are making 5,000 a month, 60K a year as an owner. I've chatted with those people who are making 60,000, 80,000 a year as a practicing dentist. And then there's people making 2 million plus. And there's really everything in between. It is not a set rule. And so there are people doing incredibly well and they're seepal that would be doing much better, not as an owner. And so when you kind of look at it from that perspective, you say, "What's the difference?" Well, the big difference I find is in the level of intentionality that goes into owning and operating a dental practice. I find that to be just one of the most important things is that this group of people who is doing really well, they are the types of people who are very intentional. They got into a good ownership situation. They got into an ownership situation of a practice that's ready to grow. And that's Demo Money Ball Zero's we're talking about. It's ready to go practice. How to identify it, how to buy it, how to grow it, all of that. So they got into a practice that was ready to grow and they took advantage of that opportunity and grew it. And then also, I think that there's definitely something to be said about the clinical aspect where people who do better in practice ownership oftentimes are people who are more direct, more aggressive you could call it with their productivity as dentists. You know, I think forever and O is a practice owner, dentist has the advantage of producing their way out of their problems. So people who are successful in practice ownership, they have that skill oftentimes of being able to produce themselves out of a tight window. So like, let's just say you get into a little bit of a financial bind as a practice owner. Like you have that ability to convert same-day dentistry, be very productive clinically, have productive exams, that baseline skill of being a productive dentist is something that people who are successful in ownership have very often. Because if you're unsuccessful in ownership and you're making, you know, between 60,000 and 150 to 200,000, like kind of in that, I would call that less than associate range, right? Because you can find associates shifts where you would make more than that. So if you're an owner making less than you would as an associate, then the easiest way out is that like productive dentist, right? Be the productive dentist, increase your margins through your own output and productivity and then reinvest that money into developing your business so that you don't have to do that long term. I find that the ones that are sort of stuck, oftentimes are the ones that don't do emergency procedures or refer out a lot of care, or they're maybe timid to upset patients because they don't have enough patients so they might not be very forthright with all the diagnosis that might be there, right? So there's like this whole slew of things that happen when somebody is in one of those more constrained situations and that's going to lead to ultimately not being able to get yourself out of the income problem if you're more timid and not able to produce your way out of your problems. Now, there's a second type of person who's maybe making less as an associate than they were as an owner. And I would call this like the persistent reinvestor. There's this group of people that when they buy their practice, they want to change the floors, they want to get the office to be digital, they want to invest in better equipment, they want to like they have the whole long list of things that they want to take care of in the office. And what happens is they end up diverting a huge portion of their profits towards these growth and upgrading initiatives, right? So it's like I want to do the floors, I want to get new equipment, I want to put in new computers, I want to get a combi, I want to do some renovations on the building, I want to do like, you know, there's this like kind of endless list of things that you can think of that you can do to improve the practice. And that's going to be kind of the other source of people was like they're actually are generating an income higher than if they were an associate, but was an associate, they just take it home, they don't invest their income back into the practice, but as an owner, they're choosing to electively put that money back into the practice so that it can grow and improve and they can see that return. And I don't necessarily think that's a wrong thing to do, but I just kind of want to state that like that person, there's an end date to those improvements often, like one to two years and then they're typically kind of like in more of a steady state where they have the nicer practice that they've invested in, and now they're going to take home the larger income. But one area where maybe that doesn't necessarily happen is if they're investing in staff, right? If you're taking your income and you're growing a team, then you kind of need to practice to grow, to dilute that team cost or else it won't turn into a larger income one day. So those are kind of some of the basic reasons that I would say somebody is maybe not earning as much as an owner, as the data is an associate, which I think is kind of counterintuitive, right? Because most people think that if I'm an associate, I don't have the obligation or the responsibility of ownership, then if I go take on practice ownership, like I should be compensated more because I have that additional responsibility I'm taking on debt, I think that's a big reason why we really believe in our buyer's representation services because we believe at shared practices that if you are going to take that step and you are going to take on the debt and you're going to get into practice ownership that it needs to be fruitful for you. You should absolutely be making more as an associate than you would as an owner. And so 100%, like that is absolutely something that should be part of the picture. But the reality is, and the reason why I'm writing Dental Money Ball Zero and the reason why shared practices exists in our buyer's representation services are well attended to is that it's not so obvious to a dentist when they're looking at a practice for sale, this is going to be one that's going to grow or if this is going to be one that's going to create that stress and they're actually going to be making less than they did as an associate, as an owner. No one wants that situation. Like I mentioned at the beginning, the dentists who do well in practice ownership are the ones who are intentional. They're intentional about the decisions they make. They're very intentional about their planning and their thought process and they make very high quality decisions. That's how they get into practice ownership in a way that is profitable, more profitable than it was in the past. So now I kind of want to talk about maybe some of the challenges that dentistry is facing. So I've talked about the importance of being intentional. I've talked about how dentists sometimes make less as practice owners than they do as associates, which maybe for the shared practices, podcasts is a newer concept. It's a newer thing in our industry and I think what we saw is post COVID, there was a very big change that occurred. So with COVID, there is a large exodus of high genists and dental assistants from the workforce. So you have now a situation where you have more high genists and assistants who are demanding higher wages because there's shortages of those positions. So that is going to make it more costly for you to staff your office appropriately. So that's one thing that will ultimately lead to dentists making less money. The other thing is you're going to have increasing competition in certain markets. I would say that it's very rare that I talk to a dentist in a secondary tertiary rural area who is in this situation where they are not necessarily earning what they'd like to earn or they're struggling. It's more like California, bigger cities, the more competitive areas, the historically competitive areas. Those are the places where you see this more often. And so that's like going to places where you're not needed. And if you're buying a practice, you want to go somewhere where either you're needed, right? Where there's a strong dentist-apopulation ratio that is making it seem like this community is maybe slightly underserved. You're going to have a lot of new patients coming to you. But potentially you could be going to an area that is not that way. And then that's where the marketing costs go up. But that is all based on the number of patients in your practice, how much you need marketing. So if you wanted to live in a very competitive area, and you said, I understand that these competitive areas are very desirable, right? Where it's like it's next to a major airport. This is where my family lives, my wife has a job here. This is where I want to live. And I'm going to make it work in that place. Great. If that's your mentality, then what needs to happen is your selection of which practice you buy needs to be very strategic and intentional. But you need to buy a practice that has the number of patients you need to be successful so that you don't have to go get those patients as new patients. Then you're not affected as much by the competition. Think of a dentists in California, for example, Southern California is a very common market. I think there's a lot of practice owners in Southern California who are making less than higher earning associates. And they have the burden of practice ownership. They have the stress of the team. They have the debt with the bank. And they also have a lower income. And they're also in a place where it's very hard to get new patients. That can make it quite challenging. The purpose of this episode is not to discourage anybody. It is to say that it is 100% possible, but you need to be intentional about it. Practice ownership is no longer for those who don't care or don't want to be very involved in the business side. Practice ownership is now for the ones who want to be business people. It's for the type of dentists that wants to be an entrepreneur. And I would say that for the solo dentist, that's the person who I think is going to be increasingly stressed out of practice ownership. I'll call it that, right? You have higher costs. You have insurance reimbursements not necessarily catching up. And you have more competition now. And so like, who does that really affect? It really affects the solo practitioner who isn't so passionate about the ownership side of the business and doesn't have the bare makings of that productive dentist. I really think that's the person that is going to own less and less moving forward because the incentive to do so is just not there anymore. I think for that type of dentist, that's very ambitious and very hungry clinically. It's going to be very productive. Practice ownership can continue to make a lot of sense because you can produce your way past your team costs and your fixed costs. And you can earn a compelling income that makes practice ownership attractive. But for that person that maybe doesn't have that productive mentality, it can get increasingly complicated and maybe stressful to own a practice. I think that this may be a good time to kind of introduce the alternative side, right? DSOs have changed quite a bit. And I think the thing about DSOs that has changed is DSOs now understand that they are in the business of doctor development and retention, right? So I think maybe DSOs at the past or some of the larger ones maybe don't provide the best work environment, maybe haven't been the most dentist friendly organizations, I'll call it that. But nowadays DSOs are essentially making their mark on getting younger dentists. And the younger dentists are now asking DSOs. They're not just saying like, I want to work at a place where I have good benefits and I have a stable income and all of that. They're also coming to a DSO saying, I want you to grow me clinically and professionally. And so now DSOs are tasked with providing dentists with strong incomes, some type of ownership opportunity, some type of net worth opportunity, and also clinical development and growth. And so that DSO package as dentists evolve and as private practice evolves through the years, those DSO packages are going to be compelling to that group of dentists that are making undesirable incomes in practice ownership. It's just the reality of it is that if you cannot have that burden of ownership or that stress of ownership, and you can make more than you did as a struggling owner, it's going to be attractive. So I think that that's really the growing edge for the DSO industry is they're providing dentists with higher incomes and they're providing dentists with ownership opportunities and they're growing dentists. And that's kind of the newer wave of DSOs is doing that. And so it does change the math a bit. What it's really doing is it's taking that dentist who maybe was on the fence about practice ownership. Like yeah, I kind of do it because everyone does it. I'm owning a practice because that's just what people do. That type of person will no longer succeed more in private practice than they would with a group that does the DSO has a passion for that practice management non-clinical side of the business, right? That's their whole business. And so it does make sense for the person and the dentist that doesn't want to take on that responsibility to no longer take it on. And I think that maybe when I started dental school, they said 85% of dentists own the realm practice. I would imagine out of that 85%, maybe half of them enjoyed the process of owning their own practice and the other half did not, right? So I think what is happening with consolidation is it's really weeding out the dentists that do not like practice ownership and do not want to get involved in the business side. But when I talk to dentists, they're still that group of dentists that really, really impress me on the younger generation. Like, you know, they're in dental school, maybe they're new grads and they're very sharp. They love the business side. They've been listening to this podcast for years. And I would say to that person, practice ownership is still the best place for you because it's the place where you have that autonomy to build what you want. And you have the ability to grow practice, the ability to buy a practice and grow it. And then you have that ability if you want in the future to bring on associates and have them work underneath you, right? So there's gonna be this growing trend amongst dentists who are gonna be for going practice ownership for better opportunities. Well, if you are an entrepreneurial dentist and you want to take the business side very intentionally, then you have that ability to grow your practice or have maybe two or three offices where you then have that type of dentist who would have owned a practice in the past, but now will likely work for an organization who provides them good opportunities. So you can provide dentists the opportunity to earn a high income, have their lifestyle and savings goals met and also provide them some skin in the game or some type of asset that makes sense for them to stay. And so I think that the landscape is changing pretty drastically. And that's why I took it upon myself to write dental money ball zero, which I'm in the process of writing right now, where we're gonna essentially look at that question and we're gonna say, okay, the book is for that group of people who want to own a practice. They want to continue to take that risk to get into practice ownership and they want to have that autonomy that comes with that. Right, so for that person, this book is gonna be a very in-depth guide to how to be intentional about it, how to make sure that you end up on the right side of it. And the thing that I'll say to somewhat conclude my thoughts is that practice ownership will always be advantageous for the dentist that can be a very productive dentist to produce your way out of your challenges, right? Because then you always have that ability to get back in the chair if you've taken some days off and you're more admin days and you have less clinical days. And then you run into a rough patch financially or you need for whatever reason you have to pay for maybe your income goals aren't being met. You always have that ability to add clinical days and produce. And that is sort of the heartbeat of financial health as a dentist. Is can I produce, can I step into the chair and be very productive? And if you can, then you've given yourself that option always. And so I think that that's more or less my thoughts for this episode and it can be confusing, right? It can be confusing to be a dental student and to be hearing your faculty say, practice ownership is not a viable path anymore. It is absolutely viable. But I also don't want to sit here and be an idealistic podcast that isn't acknowledging reality. And the reality is things have changed. There is really no doubt about it that things have changed. Things have changed and I think that the way that they've changed is they've changed to require more intentionality and more intentionality and more control over the business side. So for the dentist that choose practice ownership today and for the dentist that choose practice ownership for the next five to 10 years, my hope is that it will skew towards the group of people who are the most driven and the most interested in ownership because those are the types of dentists that will continue to thrive in practice ownership. But for the dentist, like I know a lot of these dentists, like I went to class, I went to school with a lot of them. They maybe weren't as interested in practice management in school. They were much more focused clinically and they just kind of wanted to be passive. They just wanted to like kind of go in, be a dentist, leave. That's just no longer, practice ownership is no longer the best place for that person because it requires a lot of guidance and requires a lot of effort for your practice to perform in a good way financially. It requires team leadership and processes and patient flow and oversight management on going managing payroll and handling your employees HR concerns and hiring and firing and training and onboarding. And there's all of these things that come with practice ownership and I'm a very practice management interested dentist. And so I love all of this stuff. I want that stuff. And for a lot of dentists that I know, especially the ones in our community that are very involved in shared practices, they love that. This is why they've been listening to hundreds of hours of the podcast is because it's all about the practice management side of dentistry. And so for those people, if you are somebody who's been listening to the podcast for hundreds of hours, right? Or if you're somebody who's listened to the podcast extensively at all in any amount of hours, that's a clue that you're probably very interested in the business side. So that's a clue that practice ownership still makes sense for you, right? But then if you're one of those people that's like, yeah, you know, I listen to this because I have to, or I listen to this because I tell myself that it would help, but like I'm not inherently that interested, I don't have that passion for it. I would say that practice ownership may make less sense as time goes on. Because, twofold, it's getting more challenging, just very objectively speaking, practice ownership is more challenging today than it was 10 years ago. Because of the insurance reimbursements, the environment, the competition, and also the wage inflation. Like it's just, the game is a little harder now than it used to be. And so you will run into those difficulties more so than you would have before. But for the very driven entrepreneurial dentist who wants to succeed and thrive and loves the game of it and loves the competition and loves that growth pursuit of always trying to get better, it's still as good of a time as any because now you have more tools, you have technology, you have cone beams, you have AI, you have clinical training, you also have a growing workforce of non-owning dentists. Like there is a growing population of dentists who will not own a practice. And every year that graduates, that's a new cohort of people that may never enter ownership, which means that if you are an entrepreneurial dentist, that's a larger pool of associates. And so I think that the dynamics are changing very candidly. And you know, on shared practices, the podcast, what I really want to provide, is just an objective view. I mean, we are very much involved in all aspects of dentistry, right? So like shared practices group, we come very face to face with the dentists that have clinical passion. They want to pursue their clinical interests of implants and all on four. And they don't want the administrative side where they want to just focus on the clinical side and get deeper and deeper clinically and something that they find very fun. And that allows them to have the lifestyle they like, doing the dentistry they like, have the income that is much higher than they would have, you know, if they were owning a GP practice, and also have the net worth that comes with the package that we offer, right? So like I can speak firsthand to that value proposition and the group of dentists that see the value in that. And then on our coaching side, we help a lot of people, buyers, representation service, we help people get into ownership. We help people grow. And like year over a year, we help people grow over 30% on average. And so like we also have a great perspective on this group of people who love practice ownership and practice ownership is right for them. And owning and operating their GP practice has allowed them financial opportunities that they're very thankful for. And so it's no longer such a clear answer. And I think the way to answer this question is this practice ownership still makes sense for me, is are you somebody who wants to take the business side very seriously? Are you somebody who wants to be very intentional about the business side? Are you somebody who wants to dedicate as much effort to the business as they do to the clinical aspect of the practice? If so, then practice ownership still makes sense for you. There are still opportunities out there. And you just have to be a little bit more attentional. It's a little bit more challenging than it was in the past, but there's also more tools that you can use to become successful. And then there's the other group of people who answer that question, no. And I would say, well, then maybe it doesn't make sense. Curious to hear your thoughts? I think that maybe this episode is a little bit more controversial. You know, maybe the easy thing for me to do would be to come up here and just say, hey, practice ownership makes sense for everybody. Here are the advantages and everyone should do it. And I just don't think the answer is so clear anymore. I think it really comes down to each dentist looking in the mirror and figuring out what's best for them. And understanding that at the end of the day, the industry now has better options than ever before. And also practice ownership is more challenging than it ever has been before. And that's why shared practices, solutions, we like to really pride ourselves on helping people navigate those challenges, whether that be by-orship presentation services, helping a dentist identify the right practice, helping them avoid going into a situation where they're going to be in ownership, making less than they did as an associate, or shared practice as law firm, helping them go through the process of actually negotiating that deal. Maybe negotiating an associate ship with shared practices law firm. Shared practice law firm helps dentists in many different ways. And then shared practice coaching, kind of our flagship product, is the ability to help you grow your practice alongside a coach. A coach will work with you in your practice, will help you understand your growth opportunities, set priorities, help you with team training, and really help take the opportunities that are in your practice and help you realize those opportunities. And so those are some of the things that we are doing at shared practices to help that group of people who still want that challenge of practice ownership still want to invest in themselves on the business side, and want to have that autonomy that practice ownership allows for. So hope that you enjoyed this episode of the shared practice podcast. Keep coming back, and we're going to kind of continue to give you guys the content that you're looking for. If there's something that you want to hear on the podcast, you can reach out to us at [email protected] with the episode that you'd like, and we'll make sure to prioritize that in our content lineup for a future episode. Thanks for listening to another episode of the Shared Practices podcast. We'll see you next time. [MUSIC PLAYING] This podcast was edited by Resonate Recordings.