Dental Practices
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 123,100 dental practices in the US are in the business of providing “oral health,” including hygiene or preventative care, restorative treatments, and oral surgery. 78% of dentists are in general dentistry, while orthodontists represent 5% and oral surgeons and pediatric dentists each represent 4%. The rest are specialty practices, such endodontists or periodontists. About half of dentists are in solo practices.
Weak Economy Lowers Demand
Demand for dental services had been thought to be “recession-proof,” but the past recession and recent pandemic saw a drop in dental appointments and billings.
New Treatment Technologies
Technological advances continue to increase quality, enhance patient comfort, and speed the delivery of dental treatments.
Industry size & Structure
The average dental practice employs about 6-7 workers and generates about $1 million in annual revenue.
- There are about 123,100 dental practices in the US that employ 1,014,900 workers and generate annual revenue of $152 billion.
- Dentists must be licensed by their State to practice. This requires a bachelor's degree, 4 years of dental school, and passing written and practical exams. Specialty licenses typically require another 2-4 years of postgraduate education and up to 2 years of a residency program. These licensing requirements create a significant barrier to entry for the industry.
- 78% of dentists are in general dentistry. Orthodontists represent 5% and oral surgeons and pediatric dentists each represent 4%, with the rest in other specialties (endodontists, periodontists, etc.).
- The average practice has 1-2 dentists and about 2 dental hygienists and 3 dental assistants for each dentist.
Industry Forecast
Dental Practices Industry Growth
Recent Developments
Apr 1, 2024 - Practices Raise Prices
- Dental Practices modestly raised their prices during 2023, according to the US Bureau of Labor Statistics (BLS). Employment increased moderately during the period while average wages for nonsupervisory employees were unchanged, according to the BLS.
- The dental industry is approaching the apex of the consolidation curve, according to Harvard Business Review (HBR). The apex is reached when organizations scale up through mergers and acquisition (M&A) and major players emerge. Many high-value practices have already been acquired. There will always be practices available for purchase but practice availability won't meet investors' appetite for acquisitions in the coming years, according to HBR. Affordable capital also plays a role in consolidation. Free-flowing capital helped drive the pace of M&A in the dental sector, and many investors took a hands-off approach to acquired practices, focusing on M&A to drive growth. Industry players are now looking for new growth vectors because interest rates are up and inventory is shrinking. Even if interest rates decrease, increased competition for practices raises the multiples (estimate of practice value) on a per-practice basis. That in turn increases the pressure on PE to find new ways to grow to reconcile financial outcomes and debt.
- The number of invisible dental support organization (IDSO) partnerships with dental practices increased during 2023, according to Dental Economics. IDSO describes a DSO in which the practice owner sells 51% to 90% of their practice for cash but remains as an owner in either the practice or the parent company and continues to lead the organization with their brand, team, and strategy. The arrangement provides access to the resources of a larger silent partner. A large influx of new IDSO bidders empowered by billions of dollars of fresh global institutional capital drove practice values up in 2023. Investment in dental practice consolidation is not just private equity, but also trillion-dollar sovereign wealth funds and multibillion-dollar family offices which invested billions in IDSO growth in 2022 and 2023.
- The top challenges facing dental practices in 2024 include staffing shortages, insurance issues, and rising overhead costs, according to the Health Policy Institute at the American Dental Association. Low-concern issues are patient payment, competition with other practices, and remaining out of network. Major trends on the patient side for the next several years are shifting practice models, shifting patient expectations, and the artificial intelligence (AI) technology revolution.
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