The failure rate for dental practices is very low, but when it happens, it can be a life-defining disaster, both professionally and personally. In the past, one could build a practice from scratch and have a booked schedule of patients before opening for business. This is rarely the case today. As soon as your mind is made up to become your own boss, start exploring the unknowns that lie ahead. Talk with current practice owners about what challenges they faced, what they did to prevail, and what (if anything) they would do differently today. Once you’re comfortable with the challenges you’re likely to face, you’re ready to move on to tip No. 2.
Starting on the day you decide to start a practice, you’ll meet many people. As you filter through all the advice and various relationships you’ll establish, it is important to team yourself with industry-specific advisers who will help you with the many crucial decisions you’ll make. Your team of trusted advisers should include:
As your business grows, you are likely to meet other dental industry advisers who can help you make key business decisions. You may have a need for a dental-focused attorney, for example, or a practice management consultant who can help you become and stay efficient as your practice grows. A practice management consultant can also be an excellent source in your practice-planning stage for insights on establishing internal control systems and making personnel decisions.
While there is no shortage of banks wanting to lend to dentists, you may find that your local bank and others are unfamiliar with the cost and funding allocation requirements for a start-up practice. But many major lenders are familiar with your needs and can provide you with the required funds. Also, be sure not to base your loan decision solely on interest rate. Although the rate is important in keeping your payments lower, it should only be one factor in your decision-making process. Here are some other loan features to consider:
As a dentist, you understand the importance of specific, comprehensive treatment plans for your patients. You’ll need a similar plan for the running your new business; in fact, a solid business plan is instrumental to your success. You can get a business plan template from the ADA Resource Center, from a lender who specializes in working with dental practices or possibly from your state dental association.
Many dental school graduates mention what they feel is a lack of business curriculum in dental school. With this in mind, from the moment you graduate and become licensed, it is wise to make a commitment to learning the business side of dentistry. Speak to experienced dentists who run successful practices. Explore what type of business model and practice philosophy you would like to incorporate in your practice. You may be surprised by a colleague or school alum who once had the same anxiety you have about starting a practice and are now willing to share advice. These contacts already live the dream of practice ownership and can help you save time and money as you begin your journey. Other suggestions include attending practice management seminars in your area and downloading articles on the business of dentistry. Dentaltown, the interactive healthcare community, is an excellent way to learn from others and provides peer-to-peer guidance.
This tip is no secret — hopefully you already know how important your credit score is to you, both professionally and personally. A negative or low credit score can have a significant impact on your qualifying for a practice loan. The amount you may qualify for and the interest rate you receive may all be tied into your credit score. If you aren’t sure what’s currently reflected in your credit file and would like to obtain your credit score, you can visit myfico.com or you can obtain a free copy of your credit report at www.annualcreditreport.com. To inquire about a reported creditor, contact one of the major three reporting credit bureaus:
Chat with colleagues or visit the next dental trade show and you’ll hear buzz about the latest dental technology. You may hear from the equipment companies about how this technology will generate revenue in your practice and why you can’t live without it. Be careful not to acquire equipment before you can justify the cost. New technology can be very expensive – and a burden on your cash flow if you’re not ready to optimize its use for immediate revenue or expense savings. This is also true with equipping all your operatories right from the start. Typically a 1,500-square-foot office has room for four operatories, but many dentists equip only two at first, then outfit the others when the practice can support them.
We have seen new dental start-up total cost range from $250,000 to $500,000, with an average cost of just under $400,000. The total amount includes your landlord allowance (some landlords provide an allowance towards the build out); your construction costs (for a leased space); your equipment needs, including dental and office hardware and software; dental and office supplies; and working capital of typically $75,000 to support your expenses while you see new patients and await insurance reimbursements. Once a lender approves you and your project begins, it is crucial to finish your project within budget. It may be helpful to apply for a little more than you may be forecasting to allow for any unforeseen overruns that may occur while your office is being built. Lenders may accept a slight overage, but an overrun of 10% or higher of your original amount may create concern from the lender, so try to stay on track.
Goals can be short-term, moderate-term or long-term, and are really just targets that are achievable and measurable. Once you establish a goal, the measureable component will help you stay focused and force you to adjust and reinvent ways to achieve it. Professional goals can set the bar for a certain number of new patients per week or month, the number of hygiene appointments, a dollar amount for monthly production or collections, and so on. Be disciplined, as only you are responsible for the overall performance of your business. A simple tool of having specific goals for you and your team may make the difference of success or challenges.
No one is more familiar with your debt load than you. Between your student loan debt, your car loan, your home mortgage (or rent) payment and now your practice debt, the numbers can seem enormous. It’s important to maintain guaranteed, predictable income after you open your practice and while you’re building practice revenue. Once you open for business, we have found that maintaining an outside associate position for two to three days per week helps you better predict cash flow and pay your bills while you add patients to your new practice. You may consider associating for up to three days per week and reduce your associating days as you add days to your own practice.
To learn more about how we can help you with your practice purchase, call 800.497.6076 to speak with a Practice Specialist