October 2014
Volume 5, Issue 10

From Outside In

For those standing outside the industry, dentistry is an appealing investment that shows resiliency, high profit margins, and stronger than average growth. Consider two recent 2014 IbisWorld market reports1,2 on the economic health of the dental industry. On our side of the chair, the research summary describes this segment of the dental industry as one that is “in the growth state of its life cycle.” Pointing to two major factors—the burgeoning elderly population and growing awareness of the link between healthy teeth and general health—the report projects the $5 billion dental laboratory industry will contribute to the GDP at an annualized rate of 3.1% over the next decade. Citing the use of technologies and lower costs to handle and deliver the increased demand for restorative services, the report was bullish on the long-term market success of the dental technology industry.

On the clinical side, the market report was equally bullish on its collective financial future—with some caveats. The report hinted at dentistry “starting a new chapter” due to the barriers of entry into the profession. The research pointed to the rapid growth of practice management organizations as a result of the soaring costs of dental education, graduating debt load, and the rising expense of equipping a new technologically relevant practice—all of which represent serious financial barriers for new graduates wanting to establish a solo practice. In addition, it stated that even established practice owners increasingly are opting to join existing dental practice groups and large practice organizations, presumably to gain economies of scale for purchasing materials and supplies as well as profiting from back office support and ensuring a potential exit strategy. With more dental school graduates opting for the group or large practice business model, consolidators are realizing there is considerable room in the dental industry to squeeze margins to maintain the industry’s high profitability.

With no single business in either segment of dentistry controlling a dominant market share, outsiders looking in on such a fragmented industry envision the opportunity for the formation of a larger, monolithic business structure on both sides of the equation. As the profession struggles with its own day-to-day economic realities, the question becomes, “Will dentistry succumb to these economic forces or write its own chapter in the history of healthcare?”

Pam Johnson
Editor-in-Chief
pjohnson@aegiscomm.com

References

1. Dental Laboratories in the US: Market Research Report. IBISWorld. http://www.ibisworld.com/industry/dental-laboratories.html. Published February 2014. Accessed September 8, 2014.

2. Dentists in the US: Market Research Report. IBISWorld. http://www.ibisworld.com/industry/dental-laboratories.html. Published July 2014. Accessed September 8, 2014.

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