Ask the Expert: How do I become a practice owner in the evolving dental landscape?
Dear Dr. Jerkins: I’m two years out of dental school and an associate at a group practice of 15 dentists in three locations. I love my practice, but I’d like to someday have more of a say in management decisions. The buy-in amount is a lot of money, and I already have a significant amount of debt from dental school. I’m stressed about how to accomplish my goal of getting on a partnership track. What options do I have?
— Prospective Partner
Dear Prospective Partner: Great question and one we hear all the time. There are viable paths forward that can provide opportunities to both build wealth and lead your practice.
Many group practices or dental support organizations offer associates an opportunity to buy minority ownership into the organization. This is attractive as it offers you more say in the operations, scratches your entrepreneurial itch and provides benefits from the scale of a larger organization.
We advise dentists looking at a buy-in opportunity to complete proper due diligence first. This usually involves a good certified public accountant or attorney. You need answers to questions like: What does the financial outlook of the entity look like? What is the valuation of the entity based on? How is income distributed among partners? Are there opportunities to get more ownership over time?
Once the due diligence is complete, the next step is finding a way to pay for the buy-in, and there are a few options we see: pay for it with money you have saved up, pay for it over time or take out a loan to finance the cost of the buy-in.
If you go to a lender for a buy-in loan, they will want to understand how much monthly income you make and monthly debt payments you have. This brings up the issue of student loans. We know (and data show) many dentists have large student loan burdens, and managing the debt correctly can be an important aspect of navigating practice ownership options.
For instance, you may consider an income-driven repayment option for your federal student loans that can offer lower monthly payments (and more flexibility with repayment) or refinancing them to a longer term that could result in lower monthly payments. These lower payments may improve your chances to take advantage of practice ownership opportunities as they become available.
As a doctor-founded bank, Panacea exists to support dentists navigating this changing landscape.
Our practice finance options not only support a solo dentist opening or buying a single practice but also give dentists opportunities to gain minority ownership in larger groups or practices through practice buy-in or a chance to expand their group practice with additional locations.
Panacea is proud to support dentists in every practice ownership situation, and we are dedicated to making sure dentists stay in the forefront of decision making and leading dentistry as it continues to evolve. Patients are depending on it.
Dr. Jerkins is the president and co-founder of Panacea Financial and a practicing physician in Little Rock, Arkansas. Panacea focuses on providing world-class financial services for dentists, physicians and veterinarians through all stages of their training and practice. It offers a full suite of banking and technology solutions specifically built for doctors, by doctors. Panacea is endorsed by ADA Member Advantage as the exclusive provider of practice financing, which includes partnership buy-ins. To learn more, visit panaceafinancial.com/ada.
