According to 1999 data from the Royal College of Dental Surgeons of Ontario (RCDSO) detailing the distribution of dentists in Ontario by area and age groups, the greatest number of dentists (2,071, nearly one-third) are 41 to 50 years old. This article is directed towards those practitioners: ones who have been in practice 15 to 20 years and may be experiencing a loss of enthusiasm and/or motivation towards their practices and dentistry.
If you set up a new practice years ago, you should be proud, for you have built a successful practice from scratch, found a location, secured a premise lease, designed, built and equipped the office, hired and trained staff and financed it. Plus, you have rendered thousands of hours of service to your patients. You have accomplished a great deal – but are you a little burned out?
The responsibilities of owning a practice can be demanding. Perhaps you find you need a longer rest than your standard one or two weeks; a sabbatical or just a chance to rejuvenate and return to your practice invigorated. Practically speaking, this is difficult to accomplish when you consider the need to find a suitable locum, trust your patients to another dentist, live on a reduced income for a while and accept all the other unknown risks and concerns when taking a leave from your practice. The idea of time away is very appealing yet it presents a personal and/or financial problem for many.
There are several options to consider. Selling your practice and retiring to pursue other interests or business opportunities is a temptation for many. However, it is practical only for those who have the courage to give up the highly predictable income that their dental practice currently delivers. After consulting with hundreds of dentists about this dilemma, and when the final results are tallied, my recommendation is to invest your time and capital into your dental practice and not into an investment scheme that you know little about. Such a project can have many benefits for you, your staff and your patients (interest breeds interest). Half the battle is to commit to it.
After all, the smartest investment is the one about which you know the most. Your facility, equipment, systems and decor may need refurbishing and you understand them well. You spend 30 to 40 hours per week at the office and at this stage of your career you deserve an attractive, well-equipped place to practice your profession. New technology offers many opportunities for exciting clinical applications such as lasers, air abrasion and implantology equipment. Patients education techniques are far superior today with intraoral cameras, CD-ROM programs and other computer-generated imaging, for example. Purchasing a new charting system will introduce new ways to gather data and integrate it into a computer system for better patient marketing (newsletters) and recall/recare effectiveness.
There are many reputable seminars that can introduce you to these concepts at minimal cost. Why not take a look first hand and then decide?
Whatever you choose, your plan should be customized for your practice – not every practice can support or justify some new technologies. The gross fees, size of the office, location, quantity and profile of your patients are all important factors. Another issue to consider is timing of your premise lease renewal. Perhaps there may be some extra space adjoining your suite. For example, a new location could be considered; high visibility and ample parking can attract new patients.
| Chart A Three Plans to Invest Your Practice |
Gross | Investment |
| A. Same location, size and staff. Add a new operatory and redecorate. | $300,000 | $40,000 |
| B. Same location, expand by 300 sq. ft., add a new operatory and redecorate. | $400,000 | $60,000 |
| C. New location of 1,000 sq. ft., 2 new operatories, furniture and décor. | $500,000 | $150,000 |
| Chart B Capital Investment Plan |
A | B | C |
| New operatory(s) | $30,000 | $30,000 | $60,000 |
| Central clinical equipment | 0 | 10,000 | 10,000 |
| Office furniture and equipment | 4,000 | 5,000 | 20,000 |
| Interior decorating | 6,000 | 8,000 | 20,000 |
| Leasehold improvements (minimum) | 0 | 7,000 | 40,000 |
| TOTAL | $40,000 | $60,000 | $150,000 |
| Chart C PLAN |
A | B | C |
| Term of Financing at 7.0% Principal Amount: |
5 years $40,000 |
5 years $60,000 |
10 years $150,000 |
| Monthly principal and interest | 729 | 1,188 | 1,743 |
| Annual payments | 9,508 | 14,263 | 20,916 |
| Total payment over term | $47,540 | $71,316 | $209,160 |
| Chart D INCOME TAX EFFECT |
A | B | C |
| Investment Amount | $40,000 | $60,000 | $150,000 |
| Your current annual gross | 300,000 | 400,000 | 500,000 |
| Current annual expenses (60%) | 180,000 | 240,000 | 300,000 |
| Current net before tax (40%) | 120,000 | 160,000 | 200,000 |
| Taxes payable on current net income | 41,000 | 61,000 | 80,000 |
| Current net income after taxes | 79,000 | 99,000 | 120,000 |
| Net after tax with investment deductions | 76,000 | 93,000 | 108,000 |
| Projected net with a 5% increase in gross | 80,000 | 98,000 | 113,000 |
| Projected net with a 10% increase in gross | $85,000 | $109,000 | $117,000 |
Notes: Federal and Provincial taxes 1999; marginal rate: 48.75 per cent. These estimates assume $10,000 of personal deductions is claimed. Estimates include the interest, depreciation, increased rents and salaries required in each plan.
Because you have an established patient base the risk is considerably less when compared to starting from scratch. In nearly every situation, the government will pay for about one-half (50 per cent) of your total investment through tax deductions (depreciation, CCA and amortization). Charts A, B and C contain example plans based on current gross revenues, estimated investment, financing costs; Chart D shows the resulting tax effect. In most instances, interest paid is 100 per cent tax deductible that year (principal is not deductible).
However, the cost of assets are 100 per cent deductible over an allowed schedule on a reducing scale (equipment and furniture: 10 per cent in year one and 20 per cent each year thereafter). Leasehold are deducted over the first term and first renewal contained in the lease. For example a 5+5-year premise lease means 10 per cent per year.
The challenge of a worthy project can stimulate your interest in dentistry. It has been said many times that the best motivation is self-motivation. Involvement in the planning and investigating the latest equipment and furnishings can heighten your interest to improve yourself and your practice. The benefits you personally receive are rewarding for yourself, your family, staff and patients, with the after-tax dollars being well spent. The investment can also increase the value of your practice because:
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Whatever you choose to do, appraisers, brokers and consultants can assist you in determining the most appropriate actions to take.
Co-authored by Roy Brown
Ontario Dentist – October 2000