By Erick Cutler
Setting up a dental practice is an excellent idea for entrepreneurial dentists looking to build their dream business. There’s none of the baggage that comes from buying a pre-existing practice, and start-up costs are often lower since you’re not paying for goodwill.
While the positives are evident, opening a practice is never going to be easy. Your primary objective during the early years is to implement sound systems, manage cash flow and make the solid purchasing decisions that allow you to reach your goals.
Here are various strategies to help make your dental practice start-up a success.
Write Your Business Plan
Many online resources are available to assist you in developing a business plan. Before you rush in with the technical details, however, consider the most critical question — who are your patients? What type of service are these people after and, more importantly, what are the barriers to them taking up your services? Consider the three “Cs” for your patients – Care, Customer Service, and Convenience – as these will inform mission-critical decisions such as practice location, facilities, staffing, and operating procedures.
Detail on paper what you want to achieve, as this will greatly help with strategy. Other suggestions include speaking to peers who run successful practices and getting support from the Small Business Administration.
Cash Flow (and Getting the Dough)
Budget projections require meticulous planning and accounting; otherwise, there’s a risk that you’ll overestimate revenue or underestimate expenses — a situation that could spell disaster for your practice. Building costs, furniture and fittings, dental equipment and the like may run upwards of $500,000, and you’ll also need working capital to support your staff and administration expenses while you begin to generate revenues.
To understand precisely how much money you will need, hire a dental accountant to determine what your income is likely to be going forward, versus operating expenses such as staff costs, lab costs, advertising, loan interest, and rent. A trusted CPA is crucial for monitoring the financial health of your practice and making sure you have the malpractice and liability insurance you need to protect your business.
Banks will look at your credit and earnings history as a dental associate, your ability to repay the loan, and your financial models before making a lending decision. They will want to know if your profit projections are realistic. Talk to different banks and get a feel for their willingness to lend based on your business plan and forecasts. A dental-specific mortgage broker can help you get the best deal.
Find the Perfect Location
You probably have a good idea of where you want to locate your practice based on where you live and how far you’re willing to travel. However, most areas have different pockets — pockets of wealth, pockets of deprivation, pockets of families, etc. Be sure to identify the locations that work within the framework of your business plan.
When dissecting the options, consider how much space you need for exam rooms, sterilization rooms, reception areas, etc. How many people do you plan on hiring over the next five years? If you can afford it, it’s generally more cost effective to take a long-term view.
Consider also the potential for walk-ins. Ground floor clinics on busy streets are more expensive than upper-level floor clinics tucked away on side streets, but you will attract more passing trade. An experienced dental real estate broker can help to negotiate the best deal and secure landlord incentives to help with construction costs.
Invest in Core Dental Equipment
Dental equipment and technology, such as medical billing and call tracking systems, form a significant part of your upfront expenditure. Be wary of selecting the trendiest, state-of-the-art equipment; your cash flow will be severely disrupted if the investment doesn’t result in immediate revenue or expense savings.
Early in the process, find a reputable salesperson who can source quality, affordable equipment that won’t blow the bank. When choosing technology and software, it’s a good idea to read online reviews and test out any programs you’re considering.
The tax implications of equipment/technology purchases are also significant, so involve your CPA in the decision-making process.
Hire Exceptional Staff
You can’t do everything on your own, so think about hiring the right people sooner rather than later. The number of dental assistants and support staff you need, and the market salary for each position, will feed into your business plan and ultimately determine your financial projections.
If your budget can stretch to it, consider hiring a practice administrator. This role touches on every practice function — record-keeping, making collection calls, managing staff and the hundreds of decisions you need to make each day, leaving you free to grow your business.
Get Patients Through the Door
The cheapest and easiest method of attracting patients is online. An informative website and social media accounts are low-cost and straightforward to manage; strong signage is also crucial, and strategic advertising campaigns can be highly effective, too. Consider hiring an online marketing firm to “brand” your practice and bring patients through the door.
Don’t delay in creating a marketing plan. It can take several months to begin seeing the results of a marketing campaign, so kick things off at least six months before the grand opening.
Starting a new dental practice is a lot of work, and it’s easy to pour money down the drain if you don’t know what you’re doing. Success comes from having a clearly articulated business plan, tight control over the financials, a trusted team of professional advisors and a passion for delivering exceptional service to your patients. Get the fundamentals right, and you stand a far better chance of building a profitable business.
Goldin Peiser & Peiser has extensive experience in working with dentists in the start-up phase of their practice. Contact GPP today!
Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.