January 18, 2024

Too Much Student Debt to Buy a Dental Practice?

By Ben Stone, Director of Business Development

As dentists graduate from school with ever greater student loan debt, some may come to the false conclusion that buying a practice isn’t a realistic option. The fact is, if you’d like a career where you own your practice and work for yourself, it’s entirely doable and well within reach.

For 12 years I worked in the industry as a dental-specific lender, and based on my experience, I have some insight into what matters to lenders and what doesn’t. As you think about your future, here are a few points to keep in mind.

It’s Okay to Have Student Loan Debt – You Just Have to Manage It

We all know dental school isn’t cheap, and that most young dentists carry what would appear to be a crippling level of student loan debt. The good news is that lenders who specialize in working with dentists understand the situation. In my experience, if you want to buy a practice, lenders are willing to tolerate high student loan debt so long as you take steps to manage your debt properly. While savvy lenders won’t automatically be scared away by high student loan debt, they will look at your monthly student loan payments and evaluate how that amount factors into the cash flow necessary to buy and run a practice.

Focus on Productivity

Lenders are very interested in your production level. In fact, it’s one of the most important factors when they consider a loan. If you want to buy a practice that’s currently generating $1 million in annual revenue, you’ll need to demonstrate you can handle the productivity necessary to maintain that level of revenue.

It’s about Dental Skills not Business Acumen

You don’t need to be Mark Cuban to run a successful dental practice. You do need to be a skilled dentist. As a proficient dentist, there is a template you can follow to build a successful dental practice. With the support of a good team and a proper platform, your business will largely run itself.

Employee vs. Owner

If you choose a career working as a salaried associate at a DSO, you can make a very good living without the added responsibility that comes with running a practice. It’s a great choice for some dentists. As a dental practice owner, you have more responsibilities, but that comes with the freedom to create a business that reflects your interests and values. In addition to calling all the shots, you also have more opportunities to build wealth.

  • Income – Across all years of experience, owners of dental practices earn an average of $100,000 more annually and are more likely to receive pay increases than employee dentists.
  • Retirement – Dental practice owners have many more options to save for retirement compared to dentists who are employed. Practice owners can customize plans, take advantage of higher contribution limits, and reap associated tax benefits. Salaried dentists are limited to whatever options their employers offer.
  • Taxes – Practice owners have a variety of ways to lower their tax liability, such as deducting business expenses, depreciating assets, retirement planning, pass-through deductions, and more.

Explore Your Options

Whether you’re a dental student or a newly minted dentist, you owe it to yourself to think about all your options. I often meet with dental students and recent graduates who are curious about owning a practice. Here are some of the questions we help them answer as they consider their future:

  • What is the real cost of ownership for a dental practice?
  • How do I know what my production should be and how do I reach that level?
  • What does a good team look like and how do I assemble one?
  • If I’m thinking about buying a practice, what should I do now to lay the groundwork?

The main message here is that as a dentist, you have good choices, whether it’s owning a practice or pursuing a career as an employee. Student loan debt has not put you in a box. You can have the career you want, whatever that looks like.

To explore your options and learn more about what’s involved in owning a practice, contact our team at Engage Advisors. Whether you’re a new graduate, or you’re still in school, we’re here to help dentists achieve the bright future they’ve earned.