Buying a Practice or Starting Your Own?
There’s a lot to consider when becoming a practice owner. From hiring, to software, to waiting room furniture, getting started can be daunting. Here are 10 things to consider before opening your doors.
Do Your Due Diligence
Before you take the big steps like signing a lease or hiring employees, familiarize yourself with what running a dental practice really entails. Research everything and make sure you’re fully prepared. It might help to speak to people who own their own practice. Learn from their mistakes and successes.
Next, think about your goals as a business owner. Consider what you want to be known for. Will you specialize? Will you focus on families? It’s also important to consider how you want the business to grow. Do you want to own multiple practices eventually? Do you want to expand your services over time? These are all important questions that will shape your practice.
Determine the Size, Space, & Location
Before you start estimating your costs, you need to think about what your practice will look like. This is already decided for you if you’re buying an existing practice, but it’s essential to consider if you’re starting a new practice.
Think about where you want to open your practice. This will change depending on which type of patients you want to focus on. It’s also important to consider how many dental practices are in the area and how much competition you’ll have. Once you know the general area, you can start thinking about how big your practice needs to be and what kind of space you’re looking for.
Know Your Start-Up Costs
Budget as accurately as you can, especially considering that it can cost upwards of $250,000 to open a new practice. That number is for office space, equipment, and furnishings alone, and doesn’t include expenses like labor.
Estimate first, and start planning how and if you’ll borrow money. The vast majority of new practice owners will need to borrow money, regardless of whether you’re buying an existing practice or starting a new business. While you might not have to buy as much equipment if you’re taking over an established practice, buying a practice is usually more expensive.
Have a Business Plan
Whether you’re buying a practice or starting your own, it’s crucial that you have business plan. Your business plan should cover all aspects of your business, including:
- Detailed description (services, specialties, patients, etc.)
- Financial plan (debt, expenses)
- Growth plans or strategies (new patients)
- Marketing plan
- Pricing structure and payment policies
- Comparison to practices in the area
Even if you’re buying an existing practice, you will likely need to update the business plan, especially if you’re taking out a loan.
Chances are you’ll need to borrow money when starting your practice. When you apply for a loan, have your business plan ready and be prepared to answer questions about:
- Your history or the practice’s history
- How many patients the practice serves or will serve
- Financial information like outstanding debt
- Staffing model
If you’re buying a practice, the bank will also want to know if the existing owner will be staying on for a period of time to help with the transition.
Depending on how much you need to borrow, think about the term of loan, or how long you want to keep the debt. It’s important to note that there is usually a separate loan for your office space and that real estate loans typically have longer terms (often around 20 years).
Also, consider that it’s common for practice owners to have a line of credit in addition to other loans and mortgages. A line of credit is a pre-determined amount that will help you cover the costs of daily expenses.
Regardless of how much you need to borrow, involve your lender or bank early on in the process. Your lender can help you understand what you need, and some banks even have loans specific to dental practices.
Legal considerations are also something you want to get a head start on. It can take months to get the necessary paperwork, so make sure you start early. You’ll need the necessary credentials, registration, and insurance, including:
- State or provincial license
- Provider number, certification, and licensure
- Tax number
- DEA or provincial drug registration
- Business type/legal structure
It’s often a good idea to work with a lawyer who specializes in dentistry or healthcare to make sure you have everything necessary to start your practice.
Your Associate’s Contract
Assuming you work at an existing practice, review your associate’s contract before starting your own practice. Better yet, think about whether you eventually want to start your own practice before signing an associate’s contract.
Some associate’s contracts have a non-compete clause. A non-compete clause can restrict where you’re able to open a practice or how long you have to wait before you do. It’s especially important to review your associate’s contract if you plan on working as an associate while you start your practice.
Before your practice is ready to see patients, you need to think about staffing. Your business plan should outline how many staff you need and estimates of expenses like salaries, benefits, and vacation time.
Give yourself enough time to hire the right staff. A bad hire can cost you almost $15,000, so make sure you have the time to do it right. You will likely need to have your staff start before the practice opens to do training and get the practice ready. Plan how you will pay wages during this time.
Any business has a number of variable and non-variable costs. The costs for your practice may vary, but it’s important not to forget about them. Even the little costs can add up over time.
Some important fees to remember are laboratory fees and license renewal fees. License renewal fees can vary and so can laboratory fees. For laboratory fees, budget about 10% of revenue.
Patient Management & Growth
Your practice relies on its patients, so you need to have a strategy for acquiring and maintaining patients. A patient management and recall software is an essential part of this.
It can even help save your practice money by reducing the staff-hours spent on patient management. The right software will help you manage your patients and keep them coming back. Look for software that is made specifically for dental practices. A dental-specific software will already have the features your practice needs built-in.