The past two years have forced many of us in the dental profession to transform our lives and businesses. There is no understating the impact the pandemic has had on the field, our patients, the economy, and society. Though there have been plenty of challenges to grapple with, many dentists saw the pandemic as an opportunity to embrace changes that will positively affect their practices over the long term and to plan proactively for the future.
If you’re among the many who are planning and asking yourself what’s next, then you should know that when it comes to your future in the profession, one size does not fit all. Regardless of where you are in your practice’s life cycle, there is no shortage of options you can choose from to guide your next steps. It starts with knowing exactly how those options apply to your current path in dentistry.
Here I’ll help you lay a blueprint for your future by exploring various strategic pathways for your practice, from startup dentiststo midcareer professionals to practitioners nearing retirement.
Understand the current state
To plan for thenext phase of your practice successfully, it’s important to understand the current state of the market and how the dynamics may affectthe future landscape. Rising complexities in the economic environment, new competition, and private equity involvement mean thathaving a plan is more important than ever. But before you move forward, here are three key factors to note:
- Practice structure makes a difference: The way your practice is structured will play a role in your planning, especially when it comes to your retirement and succession plan. For instance, if you operate within a corporate dental practice as opposed to a private practice or employ a team of associates versus operating the practice on your own, you may have more options as they relate to potential successors and contingency plans. The same goes for those who practice in a dental partnership instead of as a sole owner. A team of financial or transition-focused professionals who specialize in dentistry can be beneficial in helping you craft a custom strategic plan that fits your practice’s unique situation.
- Inflation is rising rapidly: Consumer prices are increasing at the fastest rate since the early ‘80s. This means your employees and your patients are seeing dramatic increases in their cost of living, which may impact your wages and service prices. Rising inflation also affects your retirement nest egg and withdrawal strategy. If you’re not properly counteracting inflation within your practice and your retirement planning, you might cut yourself short, as well as the people who keep your practice afloat.
- Proper protection is paramount: For decades, financial planners have referred to retirement planning as a “three-legged stool”: Social Security, retirement savings, and personal savings. Focusing on those “legs” of your retirement planning strategy may be a good start, but at Aprio, we remind clients that dentists need to prioritize a fourth “leg”: themselves. Your license to conduct dentistry is one of your most valuable financial assets. As you think about the future, it’s important to protect that asset with proper planning and insurance coverage.
Current marketplace dynamics and practice characteristics will affect your financial, retirement, and strategic planning processes for 2022. Of course, how and when these variables will affect your practice depends on several factors that are unique to your situation, including where you are in your dental practice’s life cycle.
Startup and early career practitioners
When we have long-term planning discussions with young dentists and practice owners, we hear many variations of the same response: “I just started my business. Isn’t it too early to think about retirement planning?” “What about my student loan and practice debt?” Arguably, the earlier you’re in your dental career, the smoother the long-term planning process will go.
To develop a solid foundation for your financial, retirement, and strategic plans, it’s important to understand your debt structure. This is a crucial piece of the savings puzzle and will help you build the base for your retirement plan. There’s no denying that the debt conversation can feel difficult or daunting for young dentists. The average dental student graduates from school with more than $200,000 in debt, according to the American Student Dental Association. The gravity of that number can prompt many young dentists to pour all their earnings into reducing that debt, which may not be the best strategy.
In fact, focusing on reducing student loan debt at the expense of saving for retirement can be detrimental over the long term. We educate many of our young dental clients that not all debt (think student loan debt) is bad debt. Aside from student loans, taking out debt to fund practice enhancements that may lead to a greater return on investment, such as investments in new technology or tools to provide better patient care, can pay great dividends over time.
If you find yourself in the middle of your dental career and planning for what’s next, now may be the time to start thinking about your eventual succession and exit strategy. For solo practitioners, this could mean hiring a dental associate to round out their patient care team. Aside from having a potential successor to take the reins when you retire, the benefits of having extra hands are endless. Increased production and patient support during paid time off periods are just two of many.
However, hiring a new associate comes with complications as well as other factors that require some extra due diligence.