Approximately 30 years ago, universities throughout the United States perceived that dental schools, as part of the post-graduate programs offered, would attract students, generate income and alumni support for the university, and provide much needed professionals for the community at large.
Dental schools graduated thousands of dentists in the 1960s and 70s, before some schools began to close—the result of which created a glut of dentists in the 1970s, 80s, and early 90s. The increased number of dentists in the population contributed to a highly competitive market in which advertising was introduced, discount dentistry was offered, clinics and chains of dental offices were opened, insurance companies entered the dental marketplace, and Wall Street consolidators tried to skim the profits from the dental profession.
Those dentists who graduated in the 60s, 70s, and 80s—the “Baby Boomers”—are now nearing retirement, and the number of retiring dentists is approaching or exceeding the number of graduating dentists. In addition, it is estimated that up to 50% of the dental students graduating will be female and are expected to work—throughout their career—between 30% and 50% less than their male counterparts, many not purchasing practices, but remaining employees or independent contractors.
What does this change in the dentist:patient ratio mean for dentistry? First, it is probably one of the best things that could happen for the dental profession! The law of Supply and Demand will prevail. For the first time in many years dentists are, and will continue to be, able to charge what they should for their services. Discount dentistry is quickly becoming a thing of the past and managed care will most likely disappear.
That is the good news! The bad news is that this demographic shift is moving the practice sales market from a “Sellers market” to a “Buyers market.” As the Baby Boomer generation begins to retire and sell their practices, the shift is causing the value of dental practices to fall—because there are more options to choose from and it is easier to start a practice from scratch with less competition. This is particularly true in the specialties, as the output of specialists remains fairly constant and specialists make up a portion of the Baby Boomers that are retiring.
As this trend continues, unless a dental practice is an optimum practice (well managed with all its systems functioning well, no reduced fee dentistry, high gross and net incomes, state-of-the art equipment, etc.), it will be very hard to sell. Someone will come in next-door, start up the kind of practice they have dreamed about, and succeed. The good quality practice will always be marketable and command a fair price because it generates a profit with little or no risk to the purchaser, but a mediocre or less-than-mediocre practice will have less and less value as more and more dentists retire.