After Dental School: Owner, Employee, or Associate?

The graduates of dental school are faced with a unique quandary: what is their next step in starting their career as a practicing dentist? They invariably have a tremendous amount of debt accumulated through paying tuition all the way through dental school, and thus liquid assets may be minimized in value. The options are basically threefold: 1. They can scrape up enough money and additional loans to start a practice on their own 2. They can try to pay off their debt faster through working as a salaried dentist. 3. They can find a position with another dentist as an associate with an option to buy into ownership at a later date.

Ownership of a dental practice has great long-term benefits and possibilities of high income for many years. Yet the two major obstacles to ownership for new graduates are not having enough capital and not having an initial patient base. Even smaller practices cost about $300,000-$400,000 to start or buy, either by starting from scratch or buying out completely an existing practice. Some banks will take a risk on financing a dental practice just because of the foreseeable stability of that kind of small business, and even provide cash-flow for a limited period.

If there is buy-out completely of an existing practice, the problems of a already made patient base are lessened somewhat. If it is completely a start up, then the new dentist has to have a significant network of contacts to obtain the starting patient base, as well as a keen sense of marketing and the business world.

More and more new dentists are finding employment as a salaried dentist, or a salary plus incentive position as a way to pay down debt fast.   Corporate dental practices, some of which are now large national chains, employ dozens if not hundreds of dentists.   While growing in number, these chains are coming under increasing attack not only from consumers who feel that the practice’s sole goal is making a profit on their dentistry, but from dental boards which see the intrusion on the personalized dentist-patient relationship as having negative impacts on the practice of dentistry.   When the profit motive interferes with the quality of care, lawsuits have resulted against corporate dental practices.

Beginning dentists, however can pay off their debts so much quicker through employment with corporate dental practices that it is an attractive alternative right out of dental school. It is important, then, to be careful in analyzing the positives and negatives of using such a path towards beginning a career as a dentist.   The dentist-employee who takes patients as they are given to him or her by the ownership or management, and does not maintain their own patient base, is losing out on the tremendous equity potential of probably the most valuable part of an older dentists’ assets: good will built up with a patient base. That good will makes up almost 80% of the value of a practice when it is sold.

Looking at the employment agreement closely to find out whether there are steep production requirements since dental chains are notorious for giving their dentists as much profitable work as they can physically take on. Exit clauses that allow for resigning if new opportunities or disenchantment with the practice occurs should be present, as well as non-competition clauses that are not burdensome enough to prevent carrying some patient base to the next step in a career.

The third alternative, becoming an associate with an established dentist or smaller practice, with an option to buy into ownership is often considered the best alternative for long-term career and income growth. Finding the right practice or older dentist to sign an associate agreement with is a challenge, but may be well worth it in the long-run.   Options to buy in can be structured in five year plans for instance, with opt-in or opt-out points after two to three years to make sure the associate and practice/owner are a good match.   There is a ready patient base to build on, with good will that can grow with the individual associate’s success with patients who remain loyal.

So, the start of a dental career is also a major decision making time, but the right move can solidify a satisfying and financially rewarding career.

 

 



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