As I come to a time in my life where I am going to be the boss and I am going to have an associate under me, so many questions arise. I do not have a practice that is bursting at the seams, but I have one that, when firing on all cylinders, can handle two dentists without a problem.
I have told you about Wayne before, but let me update you. I have been working with my dad since I graduated from dental school in 1995. We are 50/50 partners and he plans on retiring in 20 months. At the present time, he and I are working out a buyout of the building and the other 50% of the practice. But that is beside the point.
I have been thinking of Wayne (the guy that is going to join me in about 18 months). Wayne is a young man that has grown up in our practice, shadowed me in high school, and in college began thinking he wanted to be a dentist. He now is a 3rd year dental student (at the best school in the world — the University of Florida). We both have agreed that he is going to be the heir apparent here.
Anyway, I was thinking of Wayne and brainstorming a bit about the future. He tells me he is going to be $200,000 in debt coming out of school. Man, when you think about that, it is a HUGE number. I think nowadays they amortize this over 30 years but…
He is going to come out of school with a house attached to him for the next 30 years. This is kind of a burden on me because I realize he has needs. When I got out, I had $38,000 in school loans. My payment was $280 each month. This is not earth-shattering. This is not "change the way you practice" money. But with $200k to pay back, there is so much pressure on him right out of school to perform.
As I think about this, I wonder what how much a new dentist makes. I made $300 a day for about the first year out. I imagine it went higher than that and now might actually be coming down again. I am assuming that there are not a lot of great jobs out there. If you want to do corporate dentistry, there are probably a bunch of jobs out there. And this could be good, especially for a young dentist who wants to improve his speed and see a bunch of stuff, but the associate job where you are mentored and learn to be part of a team? I think this kind of job is hard to find.
Let’s say the per day salary is somewhere around $400. That is a good living in any job. I think he is going to work 250 days each year. That is $100k his first year out. Does that sound high? Let’s just say $100k.
But after taxes that $100k becomes more like $80k. Then he has to pay all his insurances, loans, etc. Now he is done to $40k. Then he has to live somewhere and pay for gas, which brings him down to $20k. So he basically has $1,500 a month to live on (food, electric, Gator games, clothes, furniture). That is doable, but that is living like he lives now (like he is in college).
One of the things that a new dentist can get sucked into is all the expectations of what a professional is supposed to have. Nice clothes, cars, house, watches, the list goes on. I can't tell you how many of my classmates got out of school and bought a sweet ride THAT WEEK, because they deserved it. I bit into that poison apple too (but not that bad). Rolexes, Ruth's Chris, and designer jeans. You know, champagne and caviar. So then this new dentist starts using credit cards to manage his lifestyle.
What does that look like in 3 years when he wants to buy in? Let’s just say I have a $1.5million practice, and the going rate is 60-70% of production to buy. Conservatively, to buy 50% of this office, he is going to need to come up with $420,000. Wow!!!
So, three years after practicing (okay, maybe 5 years), add $450,000 to his debt. I don't know for sure, but I think this is basically an unsecured loan and would be at a higher rate than if he bought a house. Welcome to the real world, bro.
I don't know how a new guy can handle all this. What if he wants to settle down with his new wife? No bank is going to give a guy a home loan that has $650k in unsecured debt. They used to loan money on potential, but nowadays it is much harder. I just shake my head. Then kids, minivan, tuition....arghhh.
The mentoring has to start early. Wayne is a pretty down-to-earth guy. He is not really self-centered; just last week he asked if I wanted to go on a mission trip with him. But his expectations of what a professional looks like have to be real. And his work ethic is important. You eat what you kill out in real life.
I have to tell him that competition is fierce and that the squeaky wheel definitely gets the grease. You have to work at YOUR business. It isn’t going to come to you. And whatever you do, don't live beyond your means because that changes everything. You come to work having to make a certain amount.
I don't know. I am just running off at the typewriter today. Any thoughts? Are you in a world of debt? Tell me about it.
See you Friday,