Over the years, Practice Sale Search has noticed a distinct difference in the levels of interest that buyers have in different socio-economic areas.
If there were two dental practices for sale with identical figures - one in a blue-collar area and another in a white-collar area - there would be more buyers interested in the practice in the higher socio-economic area.
Why is this?
If the revenue and profit figures of the practice are the same, why do dentists care?
There are many (often ill-founded) reasons that buyers give for this difference in preference. Let's look at these reasons one by one and give the counter argument:
1. Lower socio-economic areas will equal lower fees charged per procedure which means that you need to do greater volume to reach the same place financially.
Dental fees are generally set by the competition present in the area, not the socio-economic status. We've seen practices in lower S-E areas with no competition charging close to $400 for a check-up, clean and X-rays. Conversely, there are practices in higher S-E areas with significant competition, charging $99 for the same treatment.
2. Lower socio-economic areas equal a lower chance of treatment plan acceptance.
There are three arguments against this statement:
3. Discretionary spending on services in lower socio-economic areas is more vulnerable if there is economic downturn.
While this may make sense at first glance, anecdotally, what actually happens during an economic downturn seems to be somewhat different.
One of the authors of this article (Dr Nauv Kashyap) has noted that his practices in lower S-E areas experienced more stability and growth than those in higher S-E areas in the face of the GFC and during periods of maximum uncertainty regarding the economic impacts of COVID. Anecdotally, we have heard this counterintuitive consumer behaviour repeated in practices across the country.
Why is this?
There are several possible explanations for this consumer behaviour:
4. Owning a practice in a lower socio-economic area means that most dentists will want to live further away from where they practice. Living further away from a practice means:
There are many reasons given by buyers for why practices for sale in lower S-E areas experience lower demand, but these reasons are usually ill founded. Buyers willing to look deeper at the underlying virtues of these practices will find businesses that are stable and under-appreciated and are thus less contested when they come on the market. This, in turn, should mean that a buyer willing to look past the common objections above have an easier pathway to successful ownership.
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