Passive Wealth Accumulation in Dentistry: Why Is There Such a Disparity in Our Profession?

Since the time of G.V. Black and his famous phrase “Extension for Prevention,” dentists in North America have searched for methods to improve the oral health and appearance of their patients.  Along the way, many have achieved financial wealth, whereas others have struggled financially, despite being members of one of the highest paying professions in North America. Why is there such a disparity amongst members of our profession?

Although there are many contributing factors, planning (or lack thereof) is certainly one of the primary considerations. Dentists’ income is either active (income derived when you have your hands in the mouths of your patients) or passive (income derived when somebody else has their hands in the mouths of your patients).  The purpose of this four part series of Tuesdays with Transitions relating to Practice Transitions is to inform you of Passive Methods of Income, leading to Wealth Accumulation which allows you either to retire earlier with your original wealth goals obtained, or to retire as planned with greater wealth accumulation than originally planned.

So, how do members of our profession accumulate wealth passively?

1.    Practice Mergers – through a practice merger, you can receive 15%, 30%, or even greater returns on investment since your fixed expenses remain static, and it is primarily production related expenses that you face. Arguably, practice mergers may be the best form of investment a dentist of any age may make.

2.    Incremental Sales – why wait until you are in your 60’s to sell?  Start in your mid forties, and if planned correctly, you will potentially receive an additional 100% or more for the value of your practice through multiple sales of an incremental nature than you would by waiting to sell 100% at the end of your career. Proper planning which utilizes the concept of selling your practice in increments over 10 or so years rather than waiting many years to sell it in its entirety has many advantages in addition to increased passive wealth accumulation.

3.    Managed Transitions – chaos or control, continuity or ambiguity, stability or instability? For any transitions, management is a critical consideration.  Thus, the results will be more positive if controls are in place, if systems are in place, and if there is a roadmap to success. This can be accomplished by utilization of practice management in conjunction with a practice transition.

–Ron Prokes, DDS