By Christy Ratcliff, Partner
Not all transitions follow the same path, and not all lead to the same outcomes. A practice’s specialty can have a major influence on the transition process, especially in endodontics, where the dynamics differ from other dental practices.
With relatively low startup costs, manageable overhead, and a referral-driven business model, this specialty can present compelling opportunities for both practice owners and prospective buyers. Here’s what sets endodontic practices apart and how endodontists can capitalize on the unique opportunities available in this specialty.
Endodontic Practices Offer Compelling Startup Potential
In general, startup practices carry significant risks because they begin without the existing patient base and cash flow that a practice acquisition can provide. So, while we would generally dissuade a startup in most circumstances, endodontic practices can offer great opportunity for a startup.
The reasons for this include:
- Endodontists are in high demand. The general population of endodontists is aging, and there is a shortage of endodontists to take their place. There’s also an increase in patients preferring to preserve their natural teeth, keeping practices busy.
- Endodontic practices can typically have smaller, simpler offices. Practices can be successful with just 1,500 square feet, three or four chairs, and minimal finish out. Practicality is more important than a large physical footprint and beautiful finishing touches, which can also mean lower build-out costs.
- Endodontic practices generally have low startup costs. It may only cost $450K-$700K to get the practice up and running due to size and what is needed within the space. These costs are on the lower end compared to other dental practices.
A key point to keep in mind is that endodontics is a referral-driven business model. Any doctor who chooses the startup route must be willing to build a referral base by marketing themselves and creating relationships with doctors, businesses, and organizations in the community.
TAKE NOTE:
If you’re looking to purchase an existing practice, know that there is goodwill in referral-based practices. While it may be cheaper to start up a practice, an established practice will already have the referrals and patients coming in to make money right away. It’s critical to do your due diligence and assess the specific individuals driving those referrals, the strength of those relationships, and the number of active referral sources.
Low Operating Costs Give Endodontic Practices a Distinct Advantage
Endodontic practices tend to have some of the lowest costs in dentistry. Among the main expense categories, these are the average percentages of total costs, according to the Cain Watters & Associates How Does Your Practice Compare Report.
- Team: 14% or less
- Supplies: 6%
- Rent: 4% or less
- Overhead: 45% or less
What this means for a future practice transition: With relatively low overhead, practice owners have a strong opportunity to increase their profitability and overall practice value. As a result, when the time comes to transition, the owner will be better positioned to attract buyers and maximize their equity.
Endodontic Associates or Partnerships Can Unlock Opportunities
Adding a new doctor can offer opportunities for practice growth, distribution of business responsibilities, work-life balance, and a smooth transition for retiring owners. Not only that, but in a specialty as efficient as endodontics, adding an associate or partner can amplify those efficiencies even further.
Here are a few considerations to note before bringing in a new doctor.
Because endodontists are in high demand, associate doctor compensation can be high. It’s important for owners to be aware of this and strategically prepare their practice before bringing in another doctor.
The practice needs to have an established patient base with a steady flow of new patients, strong referral relationships, physical space for the doctor, and a vision for this doctor. With these factors in place, the owner has a strong case for bringing in a new doctor, positioning the practice for long-term growth.
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Your Transition Path Is Unique
The path and outcome of a practice transition can vary considerably based on many factors. The team at NDP is equipped to educate and guide you through your transition, whether you’re buying in, selling, or pursuing another route unique to you. Reach out to us for a complimentary call.
Christy Ratcliff
Managing Partner
Christy plays a key role in the ongoing evolution of NDP’s valuation and consulting service lines, helping healthcare professionals navigate complex practice transitions with clarity and confidence. Christy holds a BBA and MS in Accounting from Texas A&M University and is both a Certified Public Accountant (CPA) and Certified Valuation Analyst (CVA). Read more about Christy.