Dr.P.S.

Sree Cumar MDS, MBA, FPFA, FWFO 

Orthodontist & Financial Consultant 

Understanding dentistry in current economic scenario and

alternative ways to grow smart financially

Dentistry was once upon a time considered as one of the lucrative profession. Even today in
many developed countries, it is still celebrated as one of the highly paid profession. But in
countries like ours a similar situation doesn’t exist because of the following reasons.

★ Unmatched demand-Supply ratio:

Population of Tamil Nadu in 2011 was around 7.2 crores which has increased approximately at
the rate of 1.6% p.a. Against the number of Dentists increasing at the rate of around 10% p.a.
(Number of registered Dentists in 2010 was around 12,000 and in 2017 it is around 25,000).
This unmatched supply of Dentist-population ratio leads to an unmatched supply of Dentists to
the population. This of course is not just confined to Dentistry but also in every other field.

★ Saturation in urban cities:

Dentist-population ratio was as high as 1:30000 in 90’s and has now become 1:6000 when it is
calculated for the whole country. But these dentists are not evenly distributed across the
Country. Urban population in India contributes to about only 30% of the population. Because
of multiple factors many dentists prefer to settle in urban cities, the Dentist-population ratio
varies from 1:1000 (Metros) to 1:1,00,000 (Villages) across different parts of our country. This
leads to saturation of Dentists at some parts and scarcity of Dentists across the remaining parts
of the country.

Government could tackle this problem by providing subsidy to setup practice and also tax
exemption for the income earned by Dentists in rural areas to motivate Dentists to set up
practice in these areas.

This saturation is made use of by Corporates by paying less to the dentists. A freshly passed out
dentist in today’s scenario get paid less than Rs.10000 per month and MDS around Rs.35000
working full time. This basic pay is decreasing year by year.

★ Inflation
Inflation is the general increase in prices or a decrease in purchasing power of the money. ​Let us
understand inflation with an example. Suppose you have Rs 5 lakhs in your account and you
want to buy a car, which also costs Rs 5 lakhs currently. Then you changed your mind, deciding
to buy the car next year, and kept your money in the saving account. The bank is giving you a
decent interest of 5% p.a. Now, let us fast forward to the next year. You have gone to the bank
and came home happily with your money that has become Rs 5.25 lakhs now. Then you went to
the car showroom. But boom!!! You got the shock there. The price of that car has now increased
to Rs 5.3 lakhs. The car, which you could have easily bought last year, is now not affordable to
you. That is​ i​ nflation​.

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 Dr.P.S.Sree Cumar MDS, MBA, FPFA, FWFO 
Orthodontist & Financial Consultant 

★ Inflation in Dental practice

Lets understand it with a Dentistry related example. ​If a box of gloves costing Rs.180 now ,it will
be around 265 in 5 years. (This price hike generally correlates with the Inflation of the Country
which is around 8% p.a. Similarly all expenses a dentists undergoes increases by 8% p.a.) So it
becomes important for a Dentist to understand that if treatment charges received are not revised
periodically, it will decrease in the standard of living (As one can’t buy a box of gloves with
Rs.180 five years later which is possible now!!). Other option to escape inflation is to scale up
your practice so that the volume increases.

On the other side a Root Canal Treatment along with a metal crown was charged Rs.2500 in
2002 and today in many clinics it is charged Rs.4500. So in a period of 16 years it has increased
by Rs. 2000, which is inflated at the rate of approx. 3% p.a when calculated by CAGR
compromising the standard of living of the dentists unless and until the practising dentist
realises and revises his treatment charges accordingly in par with the inflation he faces for his
expenses !!!

★ Return on Investment:
Assuming a person investing Rs.100 in a bank will give him a interest of Rs. 3.50 at the end of
one year against Rs.6 to 7 for investing in Fixed Deposit.. This is termed as the Return on
Investment (ROI). So the ROI will be 3.5% and 6 to 7% respectively. These investments are
considered as risk-free investments. Investing in gold in long time gives a return of around 12%
every year when calculated by Compound interest. Investments in land or Apartments have its
own R.O.I based on the growth in that particular place. However, generally it is around 8 to 10%
on an average.

★ Know your Number:

Coming to Dentistry when a Dentist invests Rs.10 Lakhs in a Clinic. Out of 10 , 9 of them don’t
pay attention in knowing their number i.e. Return on Investment. With time because of the
above mentioned factors there is a drastic reduction in the return on Investment which can be
understood with the following example of a Dental Clinic by a Dentist.

Let's consider a Dentist investing 10 Lakhs in today’s scenario to setup a single chair practice.
Assuming that the Dentist paid Rs. 15 Lakhs as Fees during his college to develop this skill. Let's
assume a salary of Rs. 20000 (which of course is very less for the money and time spent).
Assuming a total collection of Rs. 1,50,000 then the total take home of the Dentist will be.

Investment : Rs. 10 Lakhs (Rs.20000 per month will be accounted for principal repayment
and interest-even if invested from own fund)

Rent: Rs.10,000 (Even if its own place it has to accounted because otherwise the office space
would have fetched the same income)

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 Dr.P.S.Sree Cumar MDS, MBA, FPFA, FWFO 
Orthodontist & Financial Consultant 

Staff Salary :​ Rs.7000

Electricity :​ Rs.3000

Other expenses:​ 5000

Consumables + Lab charges:​ 15000

Consultant Charges:​ Approx. 30,000 (Assuming 20% of the cases are done by Consultants)

(Kindly note other expenses like software, marketing expenses if any and other
expenses are not included)

First 15000(underlined) in expenses in below calculation is accounted for 1% of college fees (for
ease of understanding)

Net Profit:
So the net profit will be​ Rs.15000
1,25,000 - (​15000​+20000+10000+7000+3000+5000+5000+30000+15000).

Of course the take home of that Dentist will be Rs. 35000 if he considers the salary accounted
also (Which is the mistake most of us do!!). For people who deny to account for their College
fees need to understand that if a Driver earns Rs.10000 he does so without investing his time
and money for developing his skill. So with this understanding if we precisely calculate for our
Dental Clinic gives it gives less than 1% per month or 12% per annum (If ideally calculated
including Clinic investment, fees paid earlier and other expenses one might come across) or 25%
(if calculated only for investment made which of course does not account for your fees paid) for
a small clinic generally without considering any other additional expenses. However this
number may increase to 20 to 25% for multi-chaired practice or upto 30% for Corporates.

Reaching a turnover (Total collection) of Rs.1,50,000 per month on an average takes 4 to 5 years
for a single chaired practice. So one needs to understand this calculation holds good at that
point, before which the net profit is lesser than that. Knowing this number (Return on
Investment) is very essential to understand where we stand!!!

★ Investment:
Assuming that a Dentist saves Rs.2,00,000 after his expenses it has to be invested in good
investment option which at least appreciates 10% to combat inflation failing to which the
purchasing value of the money decreases (Thanks to Inflation). If one fails to find the best
investment option then it is as same as earning less today.

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 Dr.P.S.Sree Cumar MDS, MBA, FPFA, FWFO 
Orthodontist & Financial Consultant 

★ Risk return trade-off:

The return a investment appreciates is related to the risk involved. For example investing in
Savings account involves minimal risk against investing in Share market. However the risk
taking potential varies from individual to individual and also with age. That is the reason
generally young age group invest in high risk investment option and as age advances people
prefer a low risk-low return investment.

Share Market and Commodities Market

A ​stock market​, ​equity market or ​share market is the aggregation of buyers and sellers (a
loose network of economic transactions, not a physical facility or discrete entity) of ​stocks (also
called shares), which represent ownership which claims on businesses; these may include
securities​ listed on a public stock exchange as well as those only traded privately.

A commodity market is a physical or virtual marketplace for buying, selling and trading raw or
primary products​. ​A ​commodity market is a market that trades in primary ​economic sector
rather than did products. Soft commodities are agricultural products such as wheat, coffee,
cocoa, fruit and sugar. Hard commodities are mined, such as gold and oil. Investors access about
50 major commodity markets worldwide with purely financial transactions increasingly
outnumbering physical trades in which goods are delivered.

Mutual Funds

A mutual fund is a professionally managed investment fund that pools money from many
investors to purchase securities. These investors may be retail or institutional in nature.

Mutual funds have advantages and disadvantages compared to direct investing in individual
securities. The primary advantages of mutual funds are that they provide economies of scale, a
higher level of diversification, they provide liquidity, and they are managed by professional
investors. On the negative side, investors in a mutual fund must pay various fees and expenses.
These mutual funds can be divided based on risk involved or based on size of company in which
funds are invested. An average risk mutual funds gives a return of approx. 13 to 15% p.a. Based
on the size of the company in which the funds are invested, the mutual funds may be classified
as small cap, mid cap and large cap mutual funds. Basic understanding of these ensures a person
to get better returns for the risk one takes.

Systematic Investment Plan (SIP)

An SIP or a Systematic Investment Plan allows an investor to invest a fixed amount regularly in
a mutual fund scheme, typically an equity mutual fund scheme.

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 Dr.P.S.Sree Cumar MDS, MBA, FPFA, FWFO 
Orthodontist & Financial Consultant 

Why should you choose SIP?

One, it imparts financial discipline to your life. Two, it helps you to invest regularly without
wrestling with market mood, index level, etc. For example, if you are supposed to put a fixed
amount every month in a mutual fund scheme, you need to find time to do it. When you have the
time, you might be worried about market conditions and think of postponing your investments.
Or you might be thinking of investing more if the mood is optimistic. SIP puts an end to all these
predicaments. The money is automatically invested regularly in a scheme without any effort on
your part.

What are the other benefits of SIPs?

SIPs help you to average your purchase cost and maximise returns. When you invest regularly
over a period irrespective of the market conditions, you would get more units when the market is
low and less units when the market is high. This averages out the purchase cost of your mutual
fund units. Another benefit, called the eighth wonder of the world by some, is the power of
compounding. When you invest over a long period and earn returns on the returns earned by
your investment, your money would start compounding. This helps you to build a large corpus
that help you to achieve your long-term financial goals with regular small investments.

Here are reasons why one should invest in the above mentioned alternative options.

1.​ ​To keep pace with inflation

The inflation in India for last few years has been around 4-5%. The return on saving on the
saving account (Interest rate) is around 4-6% per annum. Hence, a saving account cannot beat
the inflation. Overall, if you want to beat the inflation, you have to invest your money
intelligently. And stock market is the best place for intelligent investors. If you buy stocks of
decent companies, you can easily get a return of between 10-25% depending on how good the
stock is and how much time you invested in choosing the stock. Therefore, investing is stock
market is a great option if you want to keep pace with the rising inflation.

2.​ ​Most growth potential

Weather it is bonds or commodities like gold, silver, petroleum etc. stock market has always
been able to outperform all these investments with the best returns on the investments. Hence,
with the tremendous growth potential in the stock market, it is always advisable to invest in
stocks.

3.​ ​Stock Investing takes as little amount as buying a burger

There is a common misconception among many people that they need a huge sum to start
investing in the stock market. However, that is not true. You can start investing with as little
money as required to buy a burger. There are a number of stocks whose price is less than Rs 100.
You can invest even very small amount of money and start getting good returns. This option is
not available in other forms of investments like gold or real estate. In addition, remember, a
little bit of things everyday adds up to a big result.

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 Dr.P.S.Sree Cumar MDS, MBA, FPFA, FWFO 
Orthodontist & Financial Consultant 

4.​ ​You do not need to be a genius to invest in stock market

‘​If you can understand 5th standard maths, then you can understand stock
market’​. You do not need to be a mastermind to invest in stock market. Unlike starting a
business or start-ups, stock market requires only a little money, math, time and interest.

5.​ ​Stock investing is a lot easier now

It is easy to invest on stocks in India now and hardly requires any expertise to buy stocks online.
Trading with the online brokerage account is a lot simpler now. Moreover, with the increase in
financial websites and apps; finding and selecting stocks is also easy now.

6.​ ​Tax benefits from the government

There are a number of tax benefits in investing in the stock market. India has the provisions of
tax-free return from equity (conventional share market), in case share is holded for more than 1
year. The long-term capital gains tax in India is 10% now, which was zero till last financial year.
That’s why there is a popular quote- ‘​The rich pays less tax’​.

7.​ ​To create a secondary source of income

We should always have a backup. For public in India, stocks help to create this additional source
of income. Most of the people are entirely busy in office for their entire life. For those people,
Investing in stock market can be their second source of income.

8.​ ​The power of compound interest

The famous scientist Albert Einstein once said- ​“Compounding is the eighth wonder of
the world”. The world’s greatest investor, Warren Buffett, is known to have a compounded
return of around 22% for the last 5 decades. Moreover, this compounded return for a long time
has made him one of the richest man on earth.

Conclusion​:
A disciplined approach backed by solid knowledge with realistic expectation and patience can
yield a good returns i.e. 25 to 30% p.a. and can definitely be considered as a good option to
invest considering other available options. However once needs to decide upon the amount of
risk one might be interested to undertake.

Dr.P.S.Sree Cumar
MDS, MBA, FPFA, FWFO
Orthodontist & Financial Consultant
Coimbatore.