Residents’ Skewed View of the Orthodontic Industry

Chris Bentson had the opportunity to spend some extended time with the first and second year residents attending two Mid-western programs a while back. Prior to the visit, he requested each resident complete a basic questionnaire regarding general information for U.S. orthodontic practices. Here is a list of the resident questions:

1. Approximately how many private orthodontic practices exist in the U.S.?
2. What is the average annual collections of a single doctor practice in the U.S.?
3. What is the average overhead of a private practice in the U.S.?
4. What percentage of practices in the U.S. are using Invisalign?
5. Name a ratio of revenue of collections per full time employee in the orthodontic industry.
6. Name some common rules of thumb used to express a practice value.
7. How much money will a lender loan to purchase or start-up a practice?
8. What are the expectations of income for a first year, full-time associate?
9. Would you consider using a practice management consultant in the first two years of practice ownership or start-up? Why or why not?
10. Name some considerations that need to be examined when considering a long term partnership.

It was fun to compare the residents’ responses before and after the presentation. Chris compiled answers to all the questions given prior to the lecture. Using the extreme answers, below is a radical, fictional description of the U.S Orthodontic market from the mouths of residents:

There are 1,000 practices in the U.S., having average annual collections of $300,000 and an overhead of 75%. One-hundred percent of the practices in the U.S. currently use Invisalign. The average revenue per employee is approximately $50,000, and I’m planning to employ six employees in my practice that grosses $300,000 per year. I will pay about 30% of annual collections to purchase an orthodontic practice. A lender will loan up to $2,000,000, and I expect to take home $250,000 within my first year of practice. I would consider hiring a consultant because they only cost about $100 per day and probably have some good ideas. If I go into a partnership arrangement, my biggest concern is tracking vacation time.

Obviously everyone in the orthodontic industry has a lot of work to do when it comes to residents’ knowledge of the industry.

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