Dentists have been highly impacted by the COVID-19 shutdown. What was thought of as one of the most stable businesses took a hit. According to a recent ADA survey of 11,000 dentists affected by the shutdown, 76% of dental offices were closed except for emergencies and 19% were closed and not seeing anyone.
Income change among student loan borrowers
Here at Student Loan Planner, we did a survey in April to see how our readers were impacted by the shutdown. From the more than 3,100 readers, dentists were of the hardest hit of graduate-level professionals.
Income Went Away Completely
Only 19% of dentists said they had no change in income, while 56% lost their income altogether. Only optometrists were slightly worse off.
In light of the current pandemic and financial crisis, does practice ownership still make sense?
Becoming a dental practice owner has created some huge financial rewards for dentists in the past.
An American Dental Association and Health Policy Institute study in 2018 showed the difference in income between associate dentists and practice owners: Associate general dentists earned $160,110 on average versus $187,810 for a solo practice-owning dentist and $235,720 for a practice owner with more than one dentist in their office.
Those are 17% and 47% increases in income, respectively.
Specialists saw similar results. An employee specialist earned $257,282 versus $340,250 for a solo practice-owning specialist and $378,230 for those practice owners with more than one specialist in the office. Those are 32% and 47% increases in income, respectively.
Why do practice owners have a higher income than associates? Many of the associate dentists our Student Loan Planner experts have worked with earn 30% of production. Compare that to the average profit margin for a dental practice of 40% to 50%. That means that the practice owner earns $0.40 to $0.50 for every $1 of all production in the office.
Dentistry has provided a fairly steady and safe income for members of the field. A great indicator is that dental practice loans are some of the most secure and highly coveted loans by banks. Only 0.5% of those loans are defaulted on, which is among the lowest percentages of loan defaults anywhere else.
Historically, practice ownership has resulted in steady and stable earnings above what associates make. It has been a no-brainer for dentists who want to build their income and net worth.
COVID-19’s impact on dentists
As mentioned earlier, dentists have been hit particularly hard during the coronavirus pandemic and related economic downturn. Routine cleanings had stopped in just about all cases as mandatory shutdowns affected most businesses, and many people put off having other procedures performed due to the potential health risk of coming into contact with other people.
Associate production is way down, in particular. Practice owners needed to cut costs, and there wasn’t enough to spread around. Because of these circumstances, many associates weren’t in the office, and the practice owners were doing as many procedures as they could on their own so they could make it through the difficult time.
Many of the associate dentists we’ve talked with are still getting their base salary, but they are anticipating a loss of income from their production payout.
The government and banks have stepped in to help these practices, which has helped both the practice owners and the associate dentists. The Paycheck Protection Program (PPP) as part of the CARES Act offered forgivable loans as long as borrowers used them to cover salaries and related expenses for employees.
This program resulted in a cash infusion to keep businesses afloat. Banks have also been accommodating to dentists because these are some of the best loans in the banks’ portfolios.
It has been a tough time in many ways, but dental practices have been taking steps to make it through and have had other resources available to help.
Things are starting to pick back up. Personally, I had a routine dentist appointment scheduled for the end of March. It was canceled because they had to close their office, but I was able to get in at the end of May when the restrictions eased a bit.
When I went in for my visit, the entire staff and visitors, including myself, were wearing masks. I was asked health screening questions, the hygienists and dentists all had their personal protective equipment, and there were new sanitization procedures in place.
The hygienists did go back to using old-fashioned scalers. They had been using the ultrasonic scalers before COVID-19 but they wanted to keep the spray out of the air. But they are buying some new equipment that will suck it out of the air to keep the dentists and hygienists safe.
It will be a different world, and dental practices will need to spend more on this type of equipment to keep their employees and patients protected. But every chair looked full at 7:30 a.m. When my dentist came in, he was hopeful about their practice because their schedule was filling back up.
This description is just one dental practice, but even with the closures nationwide, people who had been delaying procedures like fillings, crowns, tooth extraction, restoration, and cosmetic procedures will eventually need to get those procedures done. There could be a two- to three-month shift in routine cleanings, but that could just mean a temporary blip in income.
It could take one to two years, but we see dental practices going back to their normal and stable patient flow and income.
Should dentists still look to own a practice?
Yes, owning a dental practice should still be in the plans — and, in fact, prioritized — for those interested in pursuing it.
Current economic conditions might seem horrible, but this situation is also an anomaly. Most other recessions haven’t had a major effect on dentistry because they never had to shut down completely.
Even during the dot-com bubble burst in 2000-2002 and the Great Recession in 2008, dentistry weathered those economic downturns without much of a hiccup. Although COVID-19 did require dental practices to shut down, practice owners had many levers to pull to keep things going.
Not only is practice ownership still a great option for dentists, but I’d go as far to say that COVID-19 shows that owning a dental practice is even more valuable for long-term financial health. Practice owners maintain greater control of their income than associates.
Prepare your finances for practice ownership
Yes, practice ownership is a great path for dentists, but the coronavirus pandemic shows us that it is even more important to be financially prepared going forward. As we’ve found out, anything can happen. A solid financial position can mitigate a lot of risk and help get you through future storms.
Dentists looking to buy a practice should have a 12-month emergency fund in cash. They also need to be even more diligent and work with experts to identify and analyze potential buying opportunities and fully understand if and how they will finance the purchase. For more tips, read my article on dental practice financial planning.
Moreover, student debt shouldn’t stop a dentist from becoming a practice owner. Dentists do need to have a solid student loan plan designed around their career goals and aspirations, however.
We have advised on more than $1,000,000,000 — yes, a billion dollars’ worth — of student debt through individual consults and have worked with hundreds of dentists. If you want to get a solid loan repayment strategy that supports your goals of buying a dental practice, learn more about our consultation process.
COVID-19 shouldn’t change your plans to own a practice. In fact, it can help you take control of your career path to better manage your circumstances even in uncertain times like these.
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