Dentaltown December 2020 - 12

howard speaks
column

Money Talks
Global competition could make practice ownership more of a " must "
The estimated average total startup cost for a
McDonald's franchise in the U.S. ranges from $1
million to $2.1 million, depending on where it's located.
Let's compare that to dentistry for a moment. That
dental office you're thinking about buying-$750,000
is the average liquid practice selling price these days,
and I'd say it's trending upward toward a million ...
which is still, basically, the low end of a McDonald's.
The estimated average annual profit of a McDonald's
is $150,000, and I'm shocked how many dentists hear
that and say, " I can't believe it costs so much to buy, but
you make only $150,000 a year. " That $150,000 number
represents pure profit: Profit dollars are not production
dollars. You weren't in the kitchen slaving away, making
Big Macs; you earned that just owning the business.
Health care people have an abnormal view of accounting.
Profit is from having capital deployed. Let's say I
decided instead to put my money to work in a savings
account: To earn $150,000 a year with today's interest
rates of around 0.7%, I would need to have more than
$21.4 million sitting in the bank. One-year Treasury

rates are 0.1% right now,
compared to 1.53% last year.
When the Federal Reserve
testifies before Congress that its goal
for the United States is 2% inflation,
what sort of moron would put their
money to work buying a bond or in a
savings account, when they're losing
money? It's a scam that's not going
to go away soon.

Financial risk has a new meaning
I think the U.S. economy is on a house of cards right
now-not because of the recent election but because
we're at a rare historic crossroads where one superpower
is getting ready to take the No. 1 leadership role. This
is never a peaceful transition, because everyone wants
to be the same thing-the alpha dog.
China, just by its population size alone, has four
scientists for every American one. They've already
developed technology where you can store currency
in your phone digitally, go to a store, transfer a stored
digital currency of your dollar to the store and you're
good. There doesn't need to be a bank, there doesn't
need to be a Federal Reserve, there doesn't need to be an
exchange rate based on the U.S. dollar. So I think the
end of the U.S. dollar is more probable than ever before.
I'm sitting here with four kids and six grandchildren,
taking a historical perspective, saying you need to
see the big picture and be prepared for what could
be a normalization of economic history. When that
happens, I'd much rather own the land, the building
and the dental office. I'd want to own my means
of production!
Even during a downturn, people are still
going to need root canals, extractions and the
like. (We saw that earlier this year, during the
first wave of the coronavirus pandemic, with the
emergency dentisty patients we were allowed to
treat. What kept other patients out of our offices
wasn't their lack of need, but caution about the
virus's contagiousness.)
And if I didn't want to do the actual dentistry
anymore, I'd hire a dentist who doesn't have the
inclination or resources to own their own means of
production-see last month's column for more about
that!-and pay them to do the work. If you're making
$150,000 a year off a million-dollar dental office while
staying home and not working, you should have a grin
on your face that's so big I couldn't remove it with a
crowbar. ■

by Howard Farran, DDS, MBA, publisher, Dentaltown magazine

12

DECEMBER 2020 // dentaltown.com

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Dentaltown December 2020

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