Buying a Practice Right After Graduation?

[Dentist19956]

I would like some advice and/or feedback from recent graduates and currently practicing dentists on whether or not buying a practice right after dental school is the best financial option.

A little bit about me:
I am currently a first year dental student in a Midwestern state. I chose to go to my in-state school (the cheapest option for me) and received a small scholarship, essentially making the cost lower, so i expect to graduate with about 275K in loans post interest. I am a female and will be 25 (almost 26) when graduating dental school in ~3 years, so I will have only myself to support (no kids or spouse) and can live on very little income for at least a few more years.

Because I will have only myself to support and am still young enough that I can put off any significant contributions to a retirement account for a few years, I am considering buying an existing practice and becoming the sole owner right out of school. It is to my understanding that sole owners almost always make significantly more than employed dentists and even though I would have both student loans and practice loans to pay off at once, in the long run this would be a better financial option. I plan to work 48+ hours a week upon graduation, even if this means taking a side gig at a corporate office or as an associate so that I can make extra money to put towards my student loans and practice loan. I also plan to refinance my student loans to save on interest and I have been investing excess student loan money in a hedge fund for the past 5 years, so I have a small nest egg to put towards the initial cost of buying the practice.

Recently, from what I've heard through the grapevine, many retiring dentists in the Midwest are having a difficult time selling their practices because apparently no one wants to live in the middle of no where (go figure) so I plan on spending no more than 400K on a practice in a rural area.

I understand I will likely need legal and professional advice before actually buying a practice, but I figured I would post here first (because hey, it's free) to see if I am completely misinformed or if buying a practice right out of school is a horrible idea. Any feedback, positive or negative, is appreciated, thanks.

---

Members don't see this ad.

 

[ysrebob]

Everything about your situation and plan sounds excellent, except for buying straight out of school. You’ll learn SO much about dentistry, practice management, patient management, insurance, and everything else in your first 6 or 12 months in practice, and it would be so much better to learn these things (often by learning from your mistakes) in somebody ELSE’s office with somebody else’s patient pool than in your own.

Unless you happen across a can’t-pass-up practice that you must close on at graduation or lose, I would really recommend even just a half-year or year associating in a solid private office first. If you really want 48h/wk, assoc in two offices and learn twice as much. A brief and well-chosen assoc job sets you up to be a predictably successful owner, especially if you study the management/front office side of a well-run office, and while you are working you can be searching for an office to buy.

A practice transition where you contract to work for a year and then buy out the prior owner would also be good, though in reality for various reasons these agreements often fail to pan out despite all parties’ best intentions.

I would like some advice and/or feedback from recent graduates and currently practicing dentists on whether or not buying a practice right after dental school is the best financial option.

A little bit about me:
I am currently a first year dental student in a Midwestern state. I chose to go to my in-state school (the cheapest option for me) and received a small scholarship, essentially making the cost lower, so i expect to graduate with about 275K in loans post interest. I am a female and will be 25 (almost 26) when graduating dental school in ~3 years, so I will have only myself to support (no kids or spouse) and can live on very little income for at least a few more years.

Because I will have only myself to support and am still young enough that I can put off any significant contributions to a retirement account for a few years, I am considering buying an existing practice and becoming the sole owner right out of school. It is to my understanding that sole owners almost always make significantly more than employed dentists and even though I would have both student loans and practice loans to pay off at once, in the long run this would be a better financial option. I plan to work 48+ hours a week upon graduation, even if this means taking a side gig at a corporate office or as an associate so that I can make extra money to put towards my student loans and practice loan. I also plan to refinance my student loans to save on interest and I have been investing excess student loan money in a hedge fund for the past 5 years, so I have a small nest egg to put towards the initial cost of buying the practice.

Recently, from what I've heard through the grapevine, many retiring dentists in the Midwest are having a difficult time selling their practices because apparently no one wants to live in the middle of no where (go figure) so I plan on spending no more than 400K on a practice in a rural area.

I understand I will likely need legal and professional advice before actually buying a practice, but I figured I would post here first (because hey, it's free) to see if I am completely misinformed or if buying a practice right out of school is a horrible idea. Any feedback, positive or negative, is appreciated, thanks.

 

[Dentist19956]

Everything about your situation and plan sounds excellent, except for buying straight out of school. You’ll learn SO much about dentistry, practice management, patient management, insurance, and everything else in your first 6 or 12 months in practice, and it would be so much better to learn these things (often by learning from your mistakes) in somebody ELSE’s office with somebody else’s patient pool than in your own.

Unless you happen across a can’t-pass-up practice that you must close on at graduation or lose, I would really recommend even just a half-year or year associating in a solid private office first. If you really want 48h/wk, assoc in two offices and learn twice as much. A brief and well-chosen assoc job sets you up to be a predictably successful owner, especially if you study the management/front office side of a well-run office, and while you are working you can be searching for an office to buy.

A practice transition where you contract to work for a year and then buy out the prior owner would also be good, though in reality for various reasons these agreements often fail to pan out despite all parties’ best intentions.

Is it possible to get a contract to ensure the last option is a success? if both the practice owner and myself agree upon a deal to sell the practice after the completion of 1 year as an associate, the deal is legally required to go through? Or are there other reasons this typically doesn't work, regardless of contracts or other legal agrements?

 

[321931]

There are literally hundreds of posts on DT about that which you bring up.

To keep it simple: It depends.

The only people that really do well right away buying a practice are students who have been in the dental field (assistant/hygiene/front office) and truly understand the need to be fast in dentistry/while running a business.

Most of my friends worked for about 1-2 years and then bought a practice. In about a year's time you will be up-to-speed in being proficient enough at doing dentistry well...and quick enough.

If your background is not in the dental field and you are just a typical student, I highly recommend working 1 year and then buying a practice. I would have significant concerns with a new dentist with no real world experience taking over a 1 million dollar practice. It would be run to the ground. Banks wouldn't lend that much money to a new graduate. But a 1-2 year out confident graduate would have good outlook.

Regarding contracts, they typically end up in a fall out. So I wouldn't go that route. Like I said, multiple things to learn. What you asked for is equivalent to asking a neurosurgeon to explain neurosurgery on the hypothalmus but you only just started learning human physiology. Nothing wrong with wanting to learn it...but if you don't have the basics, you just won't understand it.

So hopefully that makes sense.

 

[oralcare123]

I wouldn't recommend it. Just not enough experience. Do a year of GPR and maybe 6 months private practice, otherwise you'll ruin your practice and reputation and would have to build it back up. Just too hard

 

[Biffster]

Of course buying a practice right out of school is a good idea! That’s why many of us went into dentistry—to be a business owner. If you like the practice and the location and it’s a fair deal then go for it. You will be way ahead financially compared to doing a year or two as an associate. To help transition into the practice you can hire the seller back as an associate for a year.

If you are going to be in a favorable location in the Midwest you can do really well right out of the gate. There are also many advantages to being a practice owner. Why put off the opportunity to take advantage of those advantages?

You can message me if you need any specific info. I’ve helped many people get started in practice. I don’t mind sharing some of the secrets to success. Dentistry is a wonderful profession—for those who own their own practice either solo or in a group.

You are on the right track so far. Now is not the time to be timid. Go for it!!

 

[Hannah Banana]

Of course buying a practice right out of school is a good idea! That’s why many of us went into dentistry—to be a business owner. If you like the practice and the location and it’s a fair deal then go for it. You will be way ahead financially compared to doing a year or two as an associate. To help transition into the practice you can hire the seller back as an associate for a year.

If you are going to be in a favorable location in the Midwest you can do really well right out of the gate. There are also many advantages to being a practice owner. Why put off the opportunity to take advantage of those advantages?

You can message me if you need any specific info. I’ve helped many people get started in practice. I don’t mind sharing some of the secrets to success. Dentistry is a wonderful profession—for those who own their own practice either solo or in a group.

You are on the right track so far. Now is not the time to be timid. Go for it!!

You are so supportive and uplifting. We need more people like you in this world! 🙂

 

[2TH MVR]

OP: you sound like you have things figured out. Well done.

You need a little real world experience before buying your 1st practice. If I was you .... I would locate a medium practice for sale in your price range. Best scenario is that you work in THAT practice for 6 months as an associate with the 1st right of refusal on purchasing the practice. The price of the practice would be established prior to your 6 month associateship. In that 6 months ... you, with professional help, will be able to CONFIRM that this practice will work for you. This is the only way for you to see what kind of practice the senior doc is selling, allow you time to understand running a small practice, and allow you and the senior doc time to adequately transition the practice.

I did this. Only I bought into a partnership for 18 months with a pre-established price. 18 months later ... I bought the entire practice.

 

[oralcare123]

You are so supportive and uplifting. We need more people like you in this world! 🙂

False optimism at someone else's expense?
No amount of optimism is going to compensate for the lack of experience. Patients don't like hesitation, low confidence and longer procedures. Let's not even mention mistakes

 

[321931]

False optimism at someone else's expense?
No amount of optimism is going to compensate for the lack of experience. Patients don't like hesitation, low confidence and longer procedures. Let's not even mention mistakes

+1. I'm all for buying/purchasing a practice, but there is just no way that a new grad can handle a successful or even an average practice unless they have been in the dental field before. When you graduate with "15 crown preps, 30 or so class 2s, 5 endos, and 1-2 surgicals...." you just won't survive the real world. Corporate and associateships give you that experience to learn...

It took me 2 years before I was comfortable with pretty much any scenario. Now its like walking in the park. I could never see myself starting brand new from school straight to ownership.

Dental school probably accounts for maybe...10-20% of what I know today. It honestly barely teaches you anything. In a good practice, you will do more in ONE month then the entire amount of dental school. That's how it is.

 

[Biffster]

The worst thing you can do is run up a huge student loan debt and then get stuck in an associate or corporate employee position for a long period of time. You are on the right track. Stay the course.

The people saying it isn’t doable are ridiculously pessimistic. You can do it. Like I said before, it can work well to hire the owner back to work for 6 months or longer if you like. Or you can have a set associate period with a buy out after. As has been mentioned you want the practice valuation to be based on the years prior to your starting to work there.

I personally know MANY dentists who have either started practices from scratch or bought healthy practices and after a short transition took over. None of these people regret doing so. None. I can see the usefulness of doing a GPR or AEGD or even associating for a year before diving in but it isn’t always necessary. Refer out the tough cases if you need to. That’s what specialists are for. As you gain more experience and find what procedures you like you can keep more of them in house.

Hopefully you attend a school that will have you feeling confident when you graduate and not pessimistic and unsure like some of these posters. Will it be a lot of work? Yes. Is it worth it? Yes.

A few examples I personally know: New grad starts practice from scratch. Does a great job. Within a year needs an associate. 8 years later has two locations and 3 associates. Second example: new grad opens office from scratch in competitive market. Does a great job of putting together an attractive practice. A year and a half later this dentist is as busy as he ever wants to be, now considering an associate. Another new grad buys a huge practice. Transitions over the course of one year with owner working as associate. Maintains production (even grows some) and is doing fantastically well. There are many examples like this that I know of in my little corner of the world. This can’t be impossible because I see it being done all around me. I would be typing all day long if I went through all of the cases like this I know personally.

I know debt burdens and the daunting specter of running a business have made many turn to the “safety” of corporate jobs and open ended associateships. But this is not always needed—especially if you are in a good market in the Midwest. If you want to live in LA and you have a huge debt burden then good kick to you.

When you get to the latter stages of dental school and you are closer to figuring things out if you need some advice I can help you and I can put you in touch with some of these people who have done it successfully. Buying a solid, existing practice is probably the best move overall, including financially.

 

[Biffster]

The successful cases I’m talking about are people who did this recently—between one and 10 years or so ago. Fortunately either nobody explained to them it was impossible or they didn’t choose to believe them.

 

[321931]

You might be in the minority but I def agree with buying a practice within 1 year. Holding out for longer 2-3 is just wasting time. There is nothing wrong with working 1 year to get up to speed.

I’ve worked 2-3 years in associates where we always hired new grads because it was a crappy clinic dentistry. I would never trust any of these guys to hold a hand piece ever. It would be typical 2 hours for fills... bailing them out during surgical extractions... bailing them out doing rcts. But after 6 months-12 months they held their own.

You are telling me that going right away is the best bet towards success? I think that’s the highest risk towards failure. You only have one chance with a patient, screw up that tricky filling and their entire family leaves and your practice just lost 4 patients.

Yeah no. The only successful new grads straight from dent to ownership that I knew where people that has worked in the field before dental assistant hygienist and they did great.

I’m in total agreeable that ownership is the pathway to financial freedom but to mitigate risk get at least 6-12 months under your belt. At least let them see their 6 month recap X-rays and they will be humbled by how their fills look (spoiler: it’s not good aka redos... and I got to redo them and the owner took production off their paycheck and paid me) Just my 2 cents.

 

[Biffster]

Rainee, we don’t disagree all that much. 6 months transition into owning a practice that is up and running—either associate and then own or own and hire seller back as associate. Having a period of transition also helps to hand off the patients so they don’t feel like they were dumped by the original owner. Or start from scratch and grow skills as practice grows.

 

[Biffster]

And yes, bottom line is I agree with Rainee that under normal circumstances the goal should be to become an owner within the first year out. Everyone has different abilities, skills and personal situations, but ownership is where the many of the greatest rewards of being a dentist will be found. The sooner you can get there the better.

Dentistry is a wonderful profession, but to do really well you do have to take some risks as a business owner and put yourself out there. If you are in a good market in the Midwest then those risks are quite small, however. So go for it!

 

[Biffster]

What about starting up right after graduation but until the office gets busy working for a corporate for ~6mo? Isn't that the best of both worlds in terms of time to ownership while gaining some experience and speed?

Good idea. Working corporate for 6-12 months while getting your own practice going could be a great way to do it, depending on what’s available in your area. The key is to get into ownership early on and put your best effort into building a great practice. Side gig could really help with cash flow and additional experience.

Ideally you would also want to own your own building rather than lease if you can.

Leverage ownership to expense appropriate things through the business, set up retirement plans that fit you best at each stage of your career, assemble a well trained staff, put family on payroll as appropriate for expensing and additional retirement plan contributions...the list goes on.

 

[ysrebob]

I guess Biffster is softening his initial advice to the contrary, but I can't help hammering what I already said about giving yourself a little time before owning. In no business except dentistry would anyone contemplate opening or buying a business in a field in which they had NO practical working experience. Recipe for immediate failure, in most businesses. Dentistry is a protected enough field (barriers to entry) that you can actually do this, muddle through and ultimately succeed despite yourself, but that doesn't make it a good idea. If you buy, coming in without a little experience mostly makes you extremely dependent on your front office people, whose jobs you don't even understand going in. Not a great position for the boss to be in.

Nobody here is advocating being a lifelong associate. I did a startup myself. It is efficient, well run, and was highly profitable almost instantly -- in part because I understood every aspect of operating the business from the beginning, knew how I needed each job to be done, and could manage employees rather than being dependent on them. It would have gone differently immediately out of school.

All this speaks to the business side. On a clinical level, I will add that being a dentist in a small town (as I am and as you plan to be) is an unforgiving environment. Depending on how rural you are, you may find people don't want to be referred to the city to see an OMFS or endo or peds. Are you ready to confidently and quickly extract that broken down #19, RCT #3, or SSC #S? (Did you know not to try the MO fill on #S and go straight to SSC instead because a filling on the mesial of lower 1st primaries will abscess almost every time, since the mesial pulp horn is so close to the surface on that tooth? Unless your dental school is better than mine was, these are the little lessons you learn the hard way.) Far more so than in a city or suburb, in a small town any failures or missteps will be talked about and will hurt you for years to come. As much as possible, you want to come in with your "A" game.

None of the young working dentists who have posted on here are trying to pour cold water on you or be pessimistic. The reason people get back on SDN after graduating is to give back, to offer advice they wish they'd been given themselves a few years ago. I for one would never have even figured out how to get into dental school without this forum, and remain very grateful. We just want to see you do really well, and from what you wrote you're a person who WILL... sometimes, though, success means walking a bit before you run - even if it's only for a year.

 

[schmoob]

I wouldn't open a restaurant immediately after graduating from culinary school. I think it's a comparable scenario.

 

[321931]

not even close. the market is completely different.

He has a point though. Most people like to think they will be the outlier in any range of statistics whether it's income or gpa or going straight from dental school to ownership. Look at the forums. There are a lot of "it won't happen to me because of x,y,z speculations when they haven't even finished year 1 in dental school." Yeah sure.

The truth is that statistics give an average. I still hold my stance that ownership straight from dental school is the highest risk for failure. Not only are there clinical aspects that one cannot manage, the market (staff, brokers, lawyers) will eat you alive.

If you had experience before school and know how to truly manage a clinic, then by all means go for it. There's a lot of positivity in threads saying to go for it, but truly executing it successfully is a different story. There are many startups with seasoned docs that fail. There are many acquisitions with seasoned docs that become stagnant or worse fail. Do yourself the favor and make the odds on your side. Hint the odds aren't when you have only done 30 fillings, 2 Invisalign cases, 5 surgicals. For the first 1-2 years of my career, I worked with seasoned docs on cases from surgicals, to third molars, to difficult fills, to patient management, to root canals. There is something to learn from your colleagues that have been doing this for decades...or in some cases...longer than you having been alive.

But anyways, there are success stories out there as referenced by some posters above. Maybe I'm the outlier and they are the average... Who knows.

 

[schmoob]

not even close. the market is completely different.

It's literally identical. It involves all the same components. School, money, business, people, mouths.

Joking aside, the point is that having entry level technical competence does not necessarily translate to ability to manage a business right out of school.

 

[Dentist19956]

Thank you everyone for the advice on both sides of the debate! I feel this post has given me a lot of options to think about and I appreciate the past experiences and anecdotes you have all shared.