If starting a dental practice from scratch is your goal, but you’re wondering if it’s really feasible in today’s environment, you’re not alone. has wreaked havoc across the globe, causing financial hardship and economic fallout. When the economy faces financial turmoil, we see Government bailouts, relief packages and lower interest rates. All of which are appealing to investors. So, at the end of the day, this could in fact be a great time to consider buying a dental practice.
Let’s explore why this may be the right time to invest.
The first known case of COVID-19 in the United States was in December of 2019. Many Americans would remain blissfully unaware of just what was to come however, until February of 2020 when the stock market started showing signs of crashing. After that, it was only a matter of time before the virus was declared a global pandemic. By mid-March, schools across the nation were closing their doors, businesses were being forced shut and citizens were being essentially quarantined in their homes to ride out the worst of the pandemic.
Many states began reopening in phases by late May. Though the small victory of plateauing and decreasing hospitalizations and fatality rates would be short-lived as by July many states began seeing a resurgence of the virus. With spikes in positive cases, hospitalizations and fatalities as a result of COVID-19, there remains an air of uncertainty on what may happen next.
History can teach us quite a bit…
While America is in the grips of a , there are some key differences between the 2020 recession and the 2008 recession. The 2008 recession was brought on by the subprime mortgage crisis and lax lending standards, causing the mortgage industry to collapse. The 2020 recession was not caused by the financial industry, but rather a public health crisis. Formally deemed a pandemic on March 11th, COVID-19 (the novel coronavirus) is still rearing its ugly head.
In 2008, the subprime mortgage crisis was financially detrimental to the U.S., but how did it impact dental practices? The truth is many dental practices only saw on revenue and earnings. Dentistry is a remarkably well-positioned industry; Resilient to say the least. History shows that the dental industry will have far less impact than other industries. For most dental practices, it’s not a matter of if they will bounce back, but rather when.
It is the when practices will bounce back that has some dental practice owners making the decision to sell.
The valuation of dental practices was at an all-time high pre-COVID-19 as a result of supply and demand. What about post-COVID-19? A large part of the appraisal process for dental practices comes down to collections. If collections are down, and collections are a major part of the practice’s value, so too will the value of the practice come appraisal time. This may be enough for some practice owners to push the pause button on selling, but there are still some unicorns out there.
If you’re lucky enough to find a practice for sale who is currently valued lower, it would be strongly encouraged to consider the opportunity. Interest rates are at an all-time low, making this an even easier decision.
Just like in 2008, the Government responded to the recession by offering bailouts, stimulus packages, and lower interest rates.
It has been a long few months in quarantine during which time real estate was almost at a standstill. As a way of stimulating the economy, interest rates were reduced, and other stimulus and relief efforts put into play. Real estate prices have been at a low recently as the industry tries to regain their footing. Consumers are at an advantage as well, with lower interest rates offering an even bigger incentive.