Month: January 2021

January 28, 2021

Your Complete Guide to Hiring a Dental Practice Consultant

dental practice family

You invested time and money into your dental practice, but just because you are an amazing clinician, that doesn’t necessarily mean you are the savviest businessperson. To ensure your practice has everything it needs in place to succeed, it is wise to reach out to a dental practice consultant for complete strategic and business counseling. Here, we break down all you need to know about hiring a dental practice consultant.

Benefits of hiring a dental practice consultant 

The right dental practice consultant can help you develop and execute a successful and thorough dental practice business plan. With expertise in business, leadership, finances and deep knowledge about dental practices, Professional Transition Strategies (PTS) is here to help you every step of the way. Here is just a smattering of our offerings. 

Why use a dental practice consultant

At PTS, we help dentists and specialists throughout the country grow their dental practices, from startups to dental practices that want to increase value to get ready to sell.

A few common reasons our clients seek counseling for their dental practices are that they realize they are not seeing enough patients or they seem to be working more but making less. It is also usual for a practice to seek a dental practice consultant’s help because they realize they don’t have a growth plan in place or their team is no longer engaged and helping grow the practice.

Seeking outside advice to further the success of your practice is often the wisest choice and can help solidify your commitment to changing certain aspects of your practice to make room for progress. The change may be small, such as changing the insurance plans you are in-network with, or the change may be large. The best way to ensure success for your partnership with your consultant and practice is to stay open-minded to the suggestions, as well as the reasoning behind suggestions. The most critical components for your success are listening to the professional advice and being open to change — not just for you, but for the entire staff, as well. In the end, the result should be a more enjoyable and profitable dental practice for you and your team.

While a consultant won’t be able to fix everything in a day, by following the suggestions and new rules implemented, you and your team will be increasing your success and the potential of your practice.

Our proprietary 4-step program for practice success

Analysis of dental practice business procedures

A deep analysis of a doctor’s practice business procedures and value on the market is where we begin. The client will first engage us for an “In-depth Business Analysis.” This analysis includes as many visits as necessary to the practice to collect data and assess the situation first-hand.

The product of this analysis is a written document in booklet form that discusses in detail each and every business aspect of the practice, including effectiveness against potential in production, collections and marketing.

Also included is a full appraisal of the value of the practice in its present state and an assessment of the doctor’s personal retirement planning, if appropriate. The final section includes recommendations for the owner to improve their business operations where advisable and raise the overall value of the practice. These recommendations will be critical in the strategic planning phase.

Strategic planning and best solutions to pursue

From this analysis, we can determine the best courses of action to pursue. We at PTS do not agree with a one-size-fits-all practice solution. Instead, we custom-tailor many options depending on the direction that you want to take your practice.

The solutions will be discussed during our practice solutions meeting in which the physician or doctor will determine where they want their own practice to excel and will budget their time and effort accordingly. This same time budget will be used in the implementation phase of our complete consulting process.

Custom-tailored program

This is the step that most consulting companies miss. They will leave you with nebulous and inapplicable ideas and will not walk through the process with you. But at PTS, our custom-tailored program is designed by the doctor and implemented by our expert professionals working with the doctor and their staff.

PTS becomes a true partner to your office through the yearlong program of implementing the ideas that will help build the practice of your dreams. Whether it is bringing more patients into the office, determining financial arrangements, building a high-quality team or transitioning your practice, we can implement the change and create the perfect strategy for your success.

Managing changes

Consulting is not the process of determining what is wrong, what the solution is or even the implementation of a change. True medical or dental practice consulting includes all those steps but also manages changes over time.

This long-term care is the exact type of care that you give to your patients. PTS will be this consultant to your practice as we have the mature relationships, expertise, drive and partners who will be able to ensure the doctor of the realization of their practice’s goals and growth.

Additional services

Practice lease renegotiation services

If your dental practice has thrived over the past nine years with only one year remaining on your lease, you, your staff and family may feel it is in the practice’s best interest to stay for another five to 10 years. A potential issue is that your office space may have become outdated and needs a significant amount of upgrades to last the remainder of your new lease term. In addition, perhaps your landlord knows you want to stay and won’t cut you a deal for staying another five to 10 years.

PTS will conduct background research to leverage with the landlord by going out into the marketplace to educate you about market lease rates, tenant improvement packages, building expenses and even free rent. PTS will even work directly with your landlord to get you the very best deal in the market so you don’t have to.

Dental practice associate searches and contracts

We specialize in dental office staffing services, in addition to buying, selling, consulting and leasing services. Whether you seeking a new opportunity or looking for a long-term associate, potential partner or potential buyer for your practice, PTS can help. If your practice needs a dental hygienist, dental assistant, practice manager or front desk associate, then you’ve come to the right place.

PTS specializes in locating and placing doctors and staff with independent practices across the country. Our commitment is to match the best medical and dental professionals with the right dental practices. This means we network with hundreds of potential prospects daily. At PTS, we are not in the business of filling medical and dental jobs with just anyone. Our focus is on fulfilling a long-term opportunity for the candidate and medical or dental practice that will be successful for all parties involved.

Work smarter, not harder at your dental practice

Whether you’ve recently purchased a dental practice or are even a few years out from retiring, everyone’s goal should be to work smarter, not harder to avoid potential burnout. Here’s how to make sure you’re getting the most out of the hours in your week, month and year.

Know your numbers

It’s important to note that even though you may own a high-production office, that does not mean you are necessarily successful. Calculating your office overhead will help you understand your bottom line. For example, if you gross $2 million but have 80% overhead, your net profit is only $400K, while conversely, a $1 million practice with only 50% overhead is profiting $500K.

Ask leading questions

Getting to know your patients and their needs can be as easy as asking “What would you like to change about your smile?” The answer is almost always “a whiter smile.” Showing them the shade chart to illustrate where they are now and where they want to be can start the discussion of teeth-whitening options, whether it is in the office, at-home bleach trays, or crowns or veneers. Initiating this brief conversation could generate helpful and easy profit.

Offer a variety of products and services

Give your patients the ability to shop inside your office, such as a few various brands of power toothbrushes as part of a daily care regimen or an oral irrigator for those reluctant to or who need to floss. Additionally, for adults who experience hypersensitivity or a high cavity rate, offer in-office fluoride treatments and xylitol gums and mints at a minimal expense.

Manage your schedule efficiently

A properly trained front staff leads to fewer unfilled appointment blocks that aren’t bringing in any revenue. Appointments should be scheduled from noon backward and prioritized based on the level of care needed and the time required for each patient.
Automate as much of the process as possible by confirming all appointments by text or email and sending messages based on a patient’s individualized care plan. Any last-minute cancellations can be filled by sending out a mass text or email to a patient waitlist, rather than making individualized phone calls.

What’s next?

By hiring a dental practice consultant for complete counseling, you will enjoy a happier and more stable environment from all sides — patients, staff, significant others and your bank account.

Contact the team at PTS for a free consultation to see if you and your practice need a consultant to ensure long-term success.

January 28, 2021

PTS In the News

stack of newspapers

Professional Transition Strategies Welcomes Industry Veterans Brent Anderson, Troy Jones, and Kim McCleskey to Practice Transition Consulting Team

New Practice Transition Consultants Bring Decades of Experience, Client Success Track Records, and Complementary Skillsets to PTS Roles

COLORADO SPRINGS, Colo., Feb. 19, 2020, PRNewswire — Professional Transition Strategies (PTS), a company that represents dental practice buyers and sellers and offers brokerage and practice consulting services, today announced that three industry veterans recently joined the business as practice transition consultants: Brent Anderson, Troy Jones, and Kim McCleskey. With deep practice expertise, significant industry contacts, and a commitment to client success, Anderson, Jones, and McCleskey bring unique skillsets to their new roles.

Anderson joins the team with extensive practice transition experience, having recently led the mergers and acquisitions (M&A) team for the country’s largest dental support organization (DSO). In that role, he participated in more than 300 practice transitions, working closely with dentists to understand their objectives and options while helping them make the right decisions and find the best fit. A graduate of Southern Illinois University, Edwardsville, Anderson is passionate about ensuring client success.

Jones has nearly 20 years of experience in the dental industry. During a career focused primarily on the dental supplier sector and additional experience in healthcare real estate, Jones gained perspective and insight by working one-on-one with thousands of dentists and staff. Over the course of his career, Jones built a strong professional network and learned to quickly assess practice strengths and challenges, skills he is applying in his new role to help clients succeed. Jones is a graduate of the University of Evansville.

McCleskey has worked in the dental sector for decades, managing large practices, overseeing dental groups and specializing in pre- and post-dental practice acquisition at established companies before founding her own firm to focus on practice startups, management and transition consulting. Her experience makes McCleskey uniquely qualified to provide insight through education and to assist dentists who are seeking to buy or sell a practice. McCleskey is a Certified Professional Business Coach.

“I am so lucky to have these three on our growing team,” said Kyle Francis, founder and president of PTS. “Brent is one of the best M&A guys I’ve ever worked with, and his ability to find creative solutions for clients and deep understanding of DSO buyer needs will be instrumental in our success for years to come. Troy was one of my mentors in the dental industry and has vast knowledge that will help our sellers and buyers make great choices. Kim is an amazing consultant at heart whose skill in working through transitions from the team’s perspective has translated perfectly to the care she takes with our transitioning clients and to speaking engagements nationwide. Between them, they cover every base, and I couldn’t be prouder to have them represent PTS and, more importantly, to call them friends!”

All three new team members say that the company’s growth potential and the unique value proposition it offers to clients drew them to the opportunity, citing the organization’s commitment to create win-win situations for both sellers and buyers. PTS conducts extensive practice evaluations without charging customers, doesn’t lock sellers into long-term listing agreements and takes a positive and collaborative approach to service delivery. All three new hires also cited the company’s focus on community and culture.

“Kyle understands how important relationships are in driving successful practice transitions,” Anderson noted. “The aspect I value most in my work with practices and DSOs is the lifetime friendships I’ve made while helping people define what’s most important to them in their work and navigate the options that are in the market today to find the right solution. Whether on the buyer or seller side, clients need the right representation as they make critical career decisions, and PTS truly values those relationships.”

“The industry is changing rapidly, and Kyle has built a company that is truly different in this space,” said Jones. “The culture at PTS is exceptional, with a laser-like focus on client success whether the customer is a buyer or seller. With buyers in the pipeline, PTS gives dentists who are looking to sell their business an opportunity to reach their goals, and we have the skills onboard to find the perfect fit for buyers too. Given PTS’s commitment to making a social impact, the community wins also. Everybody wins.”

“There’s a massive transition within the industry as Baby Boomer-era dentists retire and the DSO landscape evolves,” McCleskey observed. “Dental practices need a transition service that focuses on creating success on dental professionals’ terms, whether they’re buying, selling, relocating or expanding. PTS offers the support and expertise needed to ensure a successful practice transition, and I am thrilled to be a part of a team that is focused on making the right moves for the right reasons.”

About Professional Transition Strategies
Founded in 2006 and headquartered in Colorado Springs, Professional Transition Strategies helps dentists buy, sell or start practices, move to new offices or expand at a current location. The company is committed to client success and provides expert consulting services to help dental professionals improve operations, marketing, accounting and other facets of practice management. PTS donates a percentage of its profits to Give Back a Smile, a cosmetic dentistry charitable foundation that restores the smiles of victims of violence. Find out more about PTS at www.professionaltransition.com.

“Transition services business gets displaced Colorado Springs dentists into new, better office quickly”

Recently, The Gazette, a Colorado Springs publication, wrote an article about how we helped Mike Lovato and Bob Nykaza find a new dental office after a May 2015 fire did extensive damage to the one they shared. The article says,

“[Stanton] Kensinger came up with five or six options for the two dentists, who visited three before agreeing to lease long-vacant space previous occupied by an orthodontics practice a half-mile west of their previous office that could be quickly renovated to get Lovato and Nykaza back into operation. Other dentists allowed Lovato and Nykaza to see patients in their offices so they didn’t lose patients, and they were able to move into their new space five days before their business interruption coverage payments would have stopped, [Kyle] Francis said.

‘Absolutely, hands down, the work Kyle and Stanton did was key to the survival of our practices. They just don’t teach you how to do this in dental school,’ Nykaza said. ‘The new space was like getting a brand-new beautiful car; it was a monster upgrade from the space we had before.’”

The article goes on to address how Stanton Kensinger, who is now an integral part of Professional Transition Strategies, became part of our team.

“The deal prompted Francis to bring Kensinger into his company, Professional Transition Strategies, that since 2006 has helped about 200 dentists in Colorado and surrounding states buy, sell or start practices, move or stay and expand at their current location and help them with operations, marketing, accounting and other details of practice management.

‘In nearly every single transaction I did there was a significant real estate component. My expertise was more in dentistry and the real estate part was difficult to figure out, so I needed an expert to handle that part of the transaction,’ Francis said. ‘This is a needed service because there are no practice brokers in Kansas, New Mexico or Wyoming, just two in Utah and seven in Colorado. In a typical transaction, you need to find a buyer and seller that match up, negotiate a contract, determine a price, come up with asset purchase and employment agreements and renegotiate a lease.’

The two have completed seven transactions in six months with another 20 in process. Francis expects the company’s revenue, about $1 million this year, to double every year for at least the next three years.”

Lastly, the article mentions our work with Mending Kids International, and our plans for involvement with the charity in the future.

“Francis plans to operate the company as a social enterprise, giving 10% of revenue to Mending Kids International, a Burbank, Calif.-based charity that provides surgeries in 57 countries to correct congenital heart defects, orthopedic abnormalities, severe scoliosis, urological defects, and facial deformities.”

What’s next?

Read the entire article here, then contact the experts at Professional Transition Strategies to find out what services are applicable to you.

January 28, 2021

5 Steps to Selling a Dental Practice

dentist office

Are you thinking of selling a dental practice? If so, you’re likely wondering how long it will take. You have put a lot of time, sweat and tears into building a successful practice. The fact that you are considering selling it can take a mental and physical toll. To prepare for your upcoming transition, here are five things you should know.

Start planning your dental practice transition early

One of the best pieces of advice is to start planning early. Planning early allows you more options than if you wait until the year you are ready to move on. These options are not only the type of transition you go with, but also which offers you consider. If you wait until the last minute to transition out of your practice, you may be stuck taking the first offer you receive. By starting early, you can be more discerning about offers that come in and move forward with the one with which you feel most comfortable.

Starting early gives you time to consider different transition styles. If your practice is large enough, you can sell half of your practice to a partner and continue to work for a few more years. When you determine the time is right, you can then sell the other half to either your current partner or someone else.

Getting a head start also allows you to consider affiliating with a dental service organization (DSO), which you most likely wouldn’t be able to if you needed to get out immediately. The reason for this is that DSOs tend to request the current doctor stay on for about two years.

By starting early, you can determine if you are happy with the value of the practice or if you need to get more out of it to clear any debts. This knowledge can help guide you when determining if you need a few more years to build up the value of your practice before taking that next step.

A transition period is a period between two transition periods. – George Stigler

Know the facts

Instead of living in the hypothetical, know your reality. Too many times, one can plan for a transition without knowing the facts. “Ignoring facts does not make them go away,” as businessman and Hall of Fame quarterback Fran Tarkenton once said. (1) It’s important to have a prospectus in place when determining the right transition type for you and your practice. By understanding the fair market value of your practice, you will know if your practice is healthy enough to bring on a partner, whether you should consider affiliating with a DSO or if you need to make some drastic changes so your practice is more appealing to a potential buyer.

To take this deep dive into your practice, look to a professional to create a prospectus. The knowledgeable experts at Professional Transition Strategies (PTS) will create a prospectus for you at no cost or obligation to work with us. We do this because we believe it is important to practice what we preach: Know the facts before you make any decisions.

The prospectus includes but is not limited to:

  • Practice demographics
  • Practice location
  • Patient demographics
  • Staff
  • Insurance
  • Facility
  • Equipment
  • Production summary by category
  • Financial analysis
  • Practice valuation
  • Return on investment

Don’t let the value of your dental practice drop

A common mistake made by dentists and dental specialists throughout the country is to let the value of their practice drop leading up to a transition. This honest mistake happens when doctors decide they are ready to scale back but they aren’t ready to “hang up their hat” just yet. By cutting back their schedules, only taking certain cases, reducing their hygienists’ hours, etc., they inevitably see their production and collections decrease.

Considering a practice’s value heavily depends on the average of the last three years. With the most recent year receiving the most weight, this reduction will result in a significant drop in value. As investor Warren Buffett once said, “Price is what you pay. Value is what you get.” (2) As much as one would like the practice’s value to be based on the “potential,” the truth is that a bank won’t lend on the hypothetical. Therefore, it is imperative to consider your plans before cutting back, because “cutting back” can dramatically cut the value of your practice.

Know your transition options

Without knowing all your options, how can you possibly choose the right one? One size does not fit all when you’re selling a dental practice. You cannot know you made the right decision without knowing the available options. Once upon a time, a dentist’s only options when transitioning a practice was to either sell to another doctor or close the doors. Times have changed. A dentist or dental specialist now has several options.

The most common transition types include:

Speak with a dental transition expert to determine the best plan for you and your practice.

How long will it take to sell my dental practice?

The most common question leading up to a transition is, “How long will it take to sell my dental practice?” Many factors can help gauge how long your practice will be on the market. One that will play a major role is the location of your practice. Is your practice in a metropolitan area? Is it in a rural community? Is your practice in a desirable area of the city? While it can’t be said for all practices, the offices positioned in “hot spots” of the country — such as Austin, San Diego or Denver — will move faster than those based in a smaller, more rural area. Sales can be as short as 22 days from the day your practice goes on the market to the day it closes or as long as two to five years.

Another variable that will play a part in how long it takes to sell your practice is your practice size. Practices valued between $750,000 and $1.2 million tend to be a sweet spot for most buyers. Practices collecting less tend to sit on the market longer. The reason is that smaller practices mean less revenue for the incoming doctor. This is especially true if the buyer is still paying off student debt.

What is a dental practice broker?

A dental practice broker has undergone training that makes them an expert in taking you through a dental practice transition. A factor in how long a practice takes to sell is the experience and knowledge of your broker. To ensure you are in the best hands, you should hire a broker who is familiar with practices like yours. This does not mean practices in your city, town or even state. It is more important that your broker has worked with practices of your size and in the transition capacity you are looking for — affiliating with a DSO, partnerships, straight buy-outs or even partnering with a private equity firm.

It’s also important to make sure your broker “pounds the pavement” on your behalf and be active when it comes to finding the right buyer. All too often, practice transition brokers post a marketing description on a few websites, sit back and wait for calls to come in. Work with someone like PTS that takes a proactive approach to finding the right fit for your practice.

What’s next?

If you are considering the possibility of selling a dental practice, contact the team at PTS. We will answer any questions and help prepare you in this exciting new stage of your life.

Resources

January 28, 2021

Who Makes Up an Advisory Team for Your Dental Practice Transition

The first and possibly the most important step for every buyer, especially first-time buyers, is to build your advisory team. It is important not to choose the first person you meet in each category; talk to a few to determine what each company or individual can offer. Decide with whom you feel most comfortable, not necessarily who offers the lowest price for their services. We offer a list of advisors to help get the process of your dental practice transition started.

Banks

There are several types of banks to work with; therefore, do your research and determine which bank is right for you. 

Local banks

  • Regional/national banks
  • Dental-specific banks

Small Business Association (SBA)

  • Equipment loans

Certified public accountant (CPA)/chartered financial analyst (CFA)/attorney/insurance agents

All of these individuals are necessary members of your advisory team. It is recommended to choose people who are dental specific as it will raise your rate of success. It is also advised to use specialists from each industry normally, not from the same firm.

Marketing agency

It is also advised to work with a full-service marketing agency so you only have one single point of contact as they take full responsibility for the success of the project. A full-service agency will be able to offer service bundles that include website development, social media management, digital and print advertising, TV and radio exposure, logo and collateral development, signage, brand analysis, demographic and audience targeting. Of course, while it is possible to find an expert for each job, we only recommend finding a firm that can handle all responsibilities for your convenience. 

Equipment representatives and supply companies

There are multiple options when it comes to supplies and equipment; therefore, it is advised to interview and receive testimonials from current customers to ensure you are making the right decision. Most suppliers’ reps cannot sell every brand of equipment. This interview process will allow you to see the various products each offers.

It is important to note supply reps will be a long-term relationship for you within your career; therefore, make sure they can bring more value than only the supplies you order.

Should you consider an expansion or a new build, equipment reps can streamline the process as well as save you money as most equipment companies have in-house design teams.

Commercial real estate broker

It is important your commercial real estate broker has at least seven years of dental and medical experience. This will not only ensure they are familiar with standard industry needs, but also they are well versed in the area, knows the landlords and can define your value proposition by your location.

Make sure your broker is with a reputable firm — local, regional or national. A good agent will walk you through all your options and discuss what is right for you, be it buying, leasing, expanding, developing or investing.

Above all, it is crucial to find someone who will be your advocate and have your best interest at heart. By having someone on board who has all these traits, you will not only save money, but also time so you can focus on your passion. 

Contractor/architect

It is smart to hire an architect and/or contractor that has dental office experience, especially the architect, since hiring an inexperienced one can cost you thousands of dollars. Many choose to go with a team that works together (contractor, architect and engineer) and knows the ins and outs of the real estate market. Be sure to review their portfolio, receive references from their previous clients, confirm they are familiar with local building code and regulations, and have a good construction team they’ve worked with prior to ensure a smooth process throughout.

Of course, as with most people in the industry, review local business journals and their Better Business Bureau (BBB) rating to read more about them.

Practice consultant

There are many different types of practice consultants, ranging from operational to startup specific to full-service consulting. Essentially, it all comes down to looking at your practice through someone else’s eyes. To ensure you aren’t missing anything, it is key to have a different perspective on your practice.

When you are choosing your consultant, make sure their specialty aligns with the project you need completed. To stay on track and not go outside your financial limit, it is imperative to make sure that results are trackable, and the timeline and budget are understood by everyone involved.

Technology advisor

Make sure your technology advisor is certified with the various dental software and hardware systems you are interested in using. It is common for them to place blame elsewhere if they are not certified with the programs and equipment used. While implementation is important, it is not nearly as important as the servicing on the back end. It is always better to find someone who will implement and service, rather than using two different people.

As always, it is recommended to look at BBB ratings for any advisers you are considering.

Broker

When you are looking to hire a transition broker, it is smart to find someone who will market your abilities to the places you are looking to go. You will want to choose a group that is most knowledgeable about various opportunities available in your desired area. To ensure a smooth process, look for a broker with a good amount of resources and will hold your hand throughout the entire process. 

What’s next?

Contact the experts at Professional Transition Strategies, a full-service broker with more than 10 years of experience working coast to coast. 

January 28, 2021

Dental Practice Leasing vs Buying

man in front of computer

To buy or lease dental space, that is the question. What is your long-term plan? Do you intend on doing a startup? Staying in your existing space? Or relocate in the future? Are you in the position to buy the dental practice, along with the real estate? Do you have an existing exit strategy or retirement plan? Deciding to own a dental practice rather than associate is a big decision. You’ve decided to take the leap and be an owner. Now the question remains: Do I buy the property, or do I lease the space? There are advantages to both, and we present both sides.

The experts at Healthcare Business Today offer this advice: “When making the decision to purchase or lease, don’t decide to purchase simply for the sake of owning real estate. Consider purchasing a space or property only if you would be prepared to lease that same location anyway – if you wouldn’t lease it, why buy it?” (1)

To help ensure you make the right decision, speak with a dental practice consultant who has seen it all. The team at Professional Transition Strategies (PTS) will not only guide you in determining the right path, but with an in-house real estate division, we can also assist with lease negotiations, renegotiations,or with the purchase of the real estate.

Advantages to buying dental office space

There are many “pros” when it comes to building your dental practice.

  • When you own the real estate, you have a significant amount of flexibility in how you want to use your space. You can also manage and control it as you wish. You can control what happens inside and outside the building — not only the landscaping, but the signage, as well. By investing in effective signage, you can capture not only a passerby’s attention, but also make your office easier to find. This results in increasing your patient base.
  • Another perk of buying the real estate is you can determine who your tenants are. Therefore, instead of being next door to the competition, you can lease to businesses that share a similar patient base. For instance, if you are a pediatric dentist, you can lease a space to a martial arts program for children, pediatrician or toy store.
  • A primary benefit of owning the real estate is you are building equity. By acquiring such an asset, this equity tends to appreciate over time. It allows you the ability to borrow against the property if needed. You can also use other tenants’ income to help pay down debt on the property, as well as become another revenue stream. If you’re lucky enough to purchase the property in a flourishing area or during a down market, if would be worth more if or when you decide to sell the property.
  • Can you say triple net leases? While there are variations to triple net leases, the general concept is that as a landlord for a commercial property, you do not have to pay any expenses on your property, as you would with residential real estate. Therefore, in many cases, the lessee will be the one to handle all property expenses, including real estate taxes.
  • You can also expect tax breaks. By owning the real estate for your practice, you can deduct interest, depreciation and non-mortgage-related expenses from your property. Remember you can only deduct the interest portion of your mortgage payment and not expenses associated with your mortgage, such as closing costs or origination fees.

Disadvantages to buying dental office space

While there are many pros when it comes to buying the real estate of your office, there are also several cons, as well.

  • If you own the real estate, it is significantly harder to pick up and move to a different location if needed. If the part of town you are in is declining and your tenants leave, or you need a larger or smaller space, it is easier to relocate if you lease and not the owner. It is also possible for the property to lose value due to market changes, tax increases, interest rate fluctuations and deteriorating location.
  • When you buy both the real estate and dental practice, be prepared to make a larger upfront financial investment. Therefore, it is important to know if you are prequalified to make this sort of commitment. Because you will be tying up significant capital with the purchase of the space, you may not have the finances needed to put toward your practice, such as the purchase of new dental equipment, additional marketing efforts, hiring new staff or building out your practice.
  • Another downfall of owning the real estate of your dental practice is the capital needed to make improvements to the property. While when you are leasing space, you can work it into your lease to have the landlord make the necessary improvements. However, as the landlord yourself, those dollars come out of your pocket.
  • If you decide to buy a larger building and become a landlord to other tenants, be sure to familiarize yourself with your duties and responsibilities. While some may seem obvious, such as collecting rent, marketing available space and making repairs to the building, it is also important to remember a lot more goes in to becoming a landlord. One thing to understand is the time commitment you are making. To truly maximize your return on investment, you cannot be an absentee landlord. With commercial real estate, you are not only dealing with multiple leases, but also annual area maintenance costs that your tenants are typically responsible for. Other considerations are standard maintenance issues and public safety concerns.

Tips when buying office space

Before deciding whether to invest in the real estate for your dental office, make sure to weigh the benefits of owning the space, as well as the downside. One of the most important things when it comes to this large investment is to choose the right team. Most advisors will suggest you keep dental practice and real estate as independent entities. Make sure to consult your real estate professional and accountant to create a lease for yourself.

Advantages to leasing dental office space

Just like owning real estate, there are several pros and cons to leasing, as well.

  • Leasing allows for more flexibility in being able to pick and choose an area you want to start or relocate your practice. You do give up a lot of the freedom of owning real estate, but leasing allows you to move to a property you might not be able to afford in a high-trafficked location. This allows you, the medical professional, to gain retail or office visibility you might not be able to afford otherwise. Leasing also gives you the flexibility to be able to move the location of your practice if the rental rate becomes too expensive or the location deteriorates over time.
  • Depending on the term of your lease, landlords will grant “buy your tenancy” with what is called tenant improvement packages. These packages will give tenants an allowance to help build out their space. This, in effect, will allow you to put those monies toward marketing, equipment or hiring additional staff. Depending on vacancy in the space, the landlord can allow you grow your practice in adjacent space or you can give up space if you don’t need all the square footage.
  • One of the biggest perks to leasing is you’re not responsible for managing the property. Landlords will either manage the property themselves or hire out the services to a third party. These services include, landscaping, snow removal, janitorial, constant maintenance of the building including HVAC, plumbing, roof, elevator, windows cleaning and parking lot repair. If something goes wrong within your space, it is the management companies’ job to fix the problem. This relieves you of the responsibility of repairing ceiling tiles, fixing water leaks or replacing lightbulbs.
  • Another thing to remember is cash is king in the beginning stages of owning a practice. Not only is it significantly less expensive to lease a space than it is to purchase, but it also dramatically decreases your overall business risk. By freeing up this working capital, you can invest in additional marketing, equipment and, ultimately, a prime location for your practice. Compared to buying the real estate, the amount of upfront costs are one-sixth when leasing.
  • While there are tax benefits to buying the property, there are also many advantages when leasing. You can deduct lease payments, property taxes, property insurance, utilities and maintenance. Similarly, unlike when you purchase the real estate, you may deduct the entire amount of your lease payment.

Disadvantages to leasing dental office space

  • When you lease commercial space, you personally guarantee the terms within lease you signed. When you negotiate your lease, make sure the annual rent increases are at market rates. As time goes, the rent will continue to increase. This may bring additional pressure on you, the clinician, to produce more to afford the monthly rental payment.
  • Ultimately, you may realize you cannot stay in the space forever and may eventually need to relocate. While the reason for your move may be an exciting one — your practice is thriving and expanding — it can also hurt your business. You not only risk a high attrition rate for patients and potentially staff members who may determine they won’t make the commute, but it is also possible equipment can break during the move.
  • When you are in a space that is not truly yours, you don’t have the ability to make improvements and updates when desired. Depending on your lease and the landlord, changing your space to meet your needs is not always an option.
  • If you decide to lease and give up being a decision-maker, you’re at the mercy of the landlord, property manager and commercial leasing agent. You hope the owner of the property is willing to work with you, but your needs may become the landlord’s second or third priority if there is a larger/national tenant in the property that gets preferred status. And if you don’t have exclusivity on the property, the landlord can put a competitor or unattractive use in the property without your input.
  • The biggest disadvantage to leasing is that you are helping to pay down someone else’s mortgage and not building equity for yourself. Many retiring clinicians we work with at PTS complain they could have owned their property two to three times over again after paying rent in the same property for 30 years.
  • You can’t take advantage of the tax benefits in owning commercial real estate. When owning commercial real estate, you’re can reduce your tax bill by depreciating the property over a set period. Commercial real estate owners can depreciate their properties over 39 years. Consult your financial advisor or tax consultant to learn more about the tax advantages.

Tips when leasing dental office space

As with most things in business, remember many leases are negotiable. It is advised to not only evaluate your business needs from the beginning, but to also understand your costs, lease options and termination conditions. Make sure to negotiate your leasehold improvements and check market rates before signing. More importantly, don’t be too quick to sign. Consult your attorney first.

What’s next?

As the leader in dental practice transitions, we not only serve as a dental practice consultant, but we also have an in-house real estate department. The experts at PTS will help you throughout the entire dental transitions process.

We recognize that every individual and every practice is different. We will provide an in-depth analysis and dental practice valuation of your current situation to see if it is in your best interest to lease or purchase a property. While we can provide facts and tips for each side of the coin, it is always advised to speak with your tax attorney for advice on which direction is right for you.

At PTS, we recognize every individual and every practice is different. We will provide an in-depth analysis of your current situation to see if it is in your best interest to lease or purchase a property. Contact us to get the process started.

Resource

January 28, 2021

A Guide to Dental Practice Financing

dentist office

This is it: You found the practice of your dreams. But how are you going to pay for it? If you are like most dentists, you are going to take out a loan to fulfill your dream of owning your own dental practice. Not only is this a large commitment, but it is also going to be one of the biggest decisions you will make since deciding to become a dentist. The experts at Professional Transition Strategies (PTS) are here to give you the guidance needed to help you walk down the dental practice financing path.

When are you ready to buy a dental practice?

You may think you are ready to buy a dental practice as soon as you graduate from dental school, but the banks may have a different idea. Most lenders tend to encourage new dentists to associate for a few years before purchasing or building their own practice. This allows the dentist to gain experience in an office, while at the same time increasing their hand speed and building experience in the production and managerial aspects of the business.

Maybe you think associating is not for you. You are an entrepreneur, and you are ready to go! If you choose not to associate, you are not necessarily disqualified from receiving a dental practice loan. The lender will also take other aspects of the dentist’s experience into consideration: internships, working in family practices in the past and current financial status. While some banks will still lend money to a new dentist, the amount tends to be smaller than for someone with real-world experience.

Dave Thomas, founder of the Wendy’s fast-food chain, has these words of advice: “What do you need to start a business? Three simple things: know your product better than anyone, know your customer, and have a burning desire to succeed.” (1)

The average loan amount for a new dentist is $300,000, so be prepared to make a case about why you need to own immediately rather than associate first. Note: For preferred status, it is recommended to have cash on hand for up to $50,000.

Default rate for dental practice loans is low

How will you get dental practice financing with your high debt in dental school loans?

It may be surprising to know that lenders are not necessarily worried about student debt. The reason is because it is widely acknowledged that dental school graduates have a significant amount of student loans. What the banks will look at is if the doctor can afford the payments on the student loan debt and the practice debt.

Compared to a small-business owner whose average salary is approximately $70,000 a year, as of 2016, the average dentist’s salary is $173,000, the average orthodontist’s salary is $228,000, and the average oral and maxillofacial surgeon’s salary is $233,000. Due to the higher-than-average annual salary and the 0.3% failure rate of dental practices, the dental industry has the lowest default rate and some of the highest cash flow.

While the default rate is low, the bank is still going to be cautious. Lenders will not loan any amount the doctor wishes. They review if the doctor can handle the amount of production. For instance, they likely won’t loan $850,000 to purchase a dental practice if the doctor has minimal production experience.

Low interest rate isn’t the only factor of dental practice financing

The bank you should go with is not always the bank with the lowest interest rate. That’s why it’s important to take everything into consideration. The interest rate is only one part of the overall dental financing package. Here are the top seven details to consider when choosing your bank and your dental practice loan package:

Remember: When you take out your loan, it is common to include the purchase or build-out of the practice, as well as working capital in the amount sought.

Interest rate

Do they offer competitive rates on credit lines, loans and deposits?

Terms

Most lenders will offer 10- or 15-year fixed payment plans. Some will even do 20-year options.

Fees

What are the charges for transactions, account maintenance, etc.?

Security

Is your money safe?

Convenience

Does the bank have an online presence? If so, how simple is the user interface? Are there mobile capabilities?

Knowledge base

How familiar is the bank with dental lending?

References

Talk to friends and brokers about their experience with the considered bank.

Different types of loans available

Dental-specific bankers: Bankers with dental-specific divisions are nearly guaranteed to have the best rates and terms. They also tend to have the fastest underwriting process. When it comes to guarantees, dental-specific bankers typically ask for very little collateral and normally offer 100% financing. Another benefit is that you don’t have to worry about the Small Business Administration (SBA). This rate program is only available to dental and medical professionals because the bank knows the loan will be paid.

  • Standard loan amounts: $5,000 to $5 million.
  • Terms: Five to 25 years.
  • Interest rate: Tends to start at 5.25%.
  • Approval time: Can be as short as a couple of weeks or take as long as several months.

Local conventional: There are many benefits to working with a local banker. One is that a local banker knows the local market and can potentially become a patient of yours (and a referral source!). In addition, they can sometimes give faster decisions on funding and will have fewer hoops for you to jump through because they rarely have excessive layers of management to approve the loan. Last but certainly not least, local bankers also are known for having a better relationship with their borrowers than the regional/national banks.

Regional/national conventional: Regional and national banks tend to have a large presence in many states. These larger companies can typically offer lower interest rates because they have so many loans. Because of the high number of transactions, the process is typically more streamlined than with smaller banks. Another advantage of borrowing from a larger bank is the ease of relocating, should you so wish. This is because you already have the established relationship with the bank and there are multiple branches stretching through the region or country. Finally, this option can also potentially give you a better long-term strategic partner.

SBA (either local, regional or national): The SBA was started to allow banks the leverage and ability to finance businesses (and practices) they would normally turn down. Through these programs, the SBA partners with intermediary lenders to guarantee up to 85% of loans funded to small business (and practice) owners. With federal insurance comes federal guidelines, therefore, do expect a lot of red tape. For instance, compared to the ease of working with a regional/national bank or a dental-specific lender, the process to receive SBA financing is not nearly as simple. Fees are associated with starting this type of loan and the underwriting process can take significantly longer. In short, the SBA loan application tends to be a lot more rigorous and highly selective. With that said, the SBA is a great route to take with real estate purchases. Of note, from 2006 to 2015, the SBA default rate for dentists was 5.2% (including their real estate), while the SBA default rate in general is 17.4%. It is important to know that SBA programs are typically used for the riskiest dental loans.

  • Standard loan amounts: $10,000 to $1 million.
  • Terms: Six months to 20 years.
  • Interest rate: Ranges between 6% and 12%.
  • Approval time: Banks normally quote 60-day approval periods, but in our experience, it can easily take three or four months to approve.

Equipment loan: From lights and chairs, to electric handpieces and Panos, dental practice equipment represents a substantial portion of startup costs. For this reason, equipment loans tend to be common among many dentists.

You can choose to use your banker or supplier for this type of loan. You will most likely find exceptional rates with equipment loans because lenders want you to purchase the equipment instead of leasing, such a car loan. There is never a personal guarantee on an equipment loan because the only collateral is the actual purchased equipment.

  • Standard loan amounts: The standard loan amount differs based on the cost of the equipment and the lender.
  • Terms: Six months to five years (five years being the most standard).
  • Interest rate: Tends to start at 6%.
  • Approval time: One of the fastest approval times – can be as short as one business day.

Some of the information a bank will request

  • Multiple years of tax returns.
  • Copy of dental license.
  • CV.
  • Production reports.
  • Bank-provided application package.
  • Personal financial statements (retirement accounts, if applicable).
  • Demographic information about the practice.
  • Practice’s financial information.
  • Balance sheet.
  • Projections.
  • Marketing plans.
  • Practice staff explanation.

What’s next?

Contact the team at Professional Transition Strategies for any assistance you need regarding a dental practice loan. Our many bank and private equity contacts make the process of practice refinancing a smooth process. The necessity of maintaining adequate cash flow is an ongoing challenge for every independent practice. Let us help simplify your finances and ultimately give you greater control.

Our business refinance program consolidates your business term debt into one simple payment, often lowering your payment and improving your cash flow. The program is especially valuable for doctors who want to allocate more funds to other practice endeavors, including retirement plan funding.

  • Consolidate business term loans, leases and lines of credit into one convenient monthly payment.
  • Reduce monthly payments.
  • Free up resources to invest in your practice and your future.

Resource

January 28, 2021

How Quarterly Reviews and Employment Contracts Can Contribute to Dental Practice Success

smile written on rock

We know that many doctors want input on the health of their dental practice, but in most cases they are not willing to pay the tens of thousands of dollars most consulting firms charge. Much like a medical or dental checkup, the experts at Professional Transition Strategies have found many practices would benefit greatly from a quarterly confidential practice performance survey. These surveys indicate strengths and weaknesses of the practice, and compares the practice to local peers and colleagues.

Because PTS works closely with hundreds of local medical and dental practices, we see what the top performing offices are doing to be successful. We offer suggestions and a plan to improve the performance of the practice. We perform this service without a contract or large financial outlay. Here’s how quarterly reviews and employee contracts can contribute to the success of your dental practice.

What is a quarterly performance review?

The key indicators our reviews and audits focus on include:

  • Production, adjustments, collections and accounts receivable (A/R).
  • Overhead and margin.
  • Production/hour and margin/hour.
  • Visits, new patients, production/visit and margin/visit.
  • Hygiene performance and efficiency.
  • Income.
  • Confidential local fee survey.
  • Confidential local salary survey.

From this data and analysis, we can find opportunities for improvement in:

  • Practice and production growth.
  • Case acceptance.
  • Hygiene department.
  • Profit.

Why are performance reviews so important?

Ultimately, dental practice performance reviews and audits are important because they help the doctor understand their practice better and help them become a stronger leader. Strong financial performance leads to improved annual income and a higher selling price when it comes time to consider transitioning the practice.

A recent survey done by Deloitte, a multinational professional services network, highlights that business audits help improve business performance. (1)

What are employment contracts

Upon graduation, new dentists looking for employment in the private sector will encounter a situation with which they are not very well familiar or informed about: They will be asked to sign a contract.

Many new doctors entering the field of dentistry believe a contract may not be necessary or that it only serves to protect the employer. Nothing could be further from the truth. A contract can and should protect the employee, as well as the employer. A signed agreement should be in place prior to any commencement of employment. In fact, at PTS, we insist every physician and doctor should have a signed contract/agreement in place before starting a position. Without one, they may have no legal recourse if something goes awry.

The Law Depot explains an employment contract is what employers and employees use to spell out the rights, responsibilities and obligations of the parties during the work period. It may include information about compensation (pay/wage), vacation time, the job description and duties, probationary periods, duties of confidentiality, termination procedures, and information about both the employee and employer. (1)

What’s next?

PTS representatives have the expertise to prepare and execute contracts that will empower both sides and allow a win/win situation to occur. Contact us for more information.

Resources

January 28, 2021

Why Relocating a Dental Practice Needs a Strategy

dental tools

Whether you are relocating your dental practice across the street or country, it is important to have a relocation strategy in place before the big day. There are many reasons why one may decide to move their practice. Maybe the landlord sold the building, forcing you to move. Or you are looking to expand your practice and the current location doesn’t allow for growth. You could be looking for lower rent rates, moving to a larger area to gain more new patients, upgrading your space or looking for a better work-life balance. No matter the reason for the relocation of your dental practice, we help you get started by laying out a strategy. 

Before signing a contract

Make sure your relocation strategy considers all aspects of the new location. Following are a few major points to think about before signing on the dotted line.

  • Demographics of the area: What is the average income level of residents within a five-mile radius of your potential new location? What is the age of the residents near you? Is the area growing with new homes and businesses, or is it declining or staying stagnant? How is the traffic volume? For easy marketing, you ideally want to be in a high-traffic area with great visibility that allows good signage for the practice.
  • Competition: As with any business, it is important to analyze the competition around you before making the move. Be sure to figure out if there are competing dental practices near the location you are considering. If you are relocating to an area with competition nearby, consider what your unique value proposition is and what will help you stand out among the crowd. Also, keep in mind the dentist-to-patient ratio. How many other dentists are in the area? Is the dentist to patient ratio high or low?
  • Location: Because you already have an established practice with patients and staff, it is important to minimize as much patient and staff attrition as possible. To do this, try to stay as close to your current location as you can. If your current area is not ideal, you may want to move to a better area where your practice has more potential to grow.
  • Building: When relocating your business, you will need review all aspects of the new building. Consider the accessibility of the practice for your patients. Is parking adequate for patients and staff? How is the signage situation? Is there opportunity for expansion if you choose to grow?
  • New patients: Use this opportunity to grow your patient base in your new neighborhood. To do this, become immersed in the area and market to the community. Make sure to get your name and your brand out in front of all potential clients.

Preparing for the move

As with any big change, it is important to prepare properly to achieve a good outcome. This is the same with all business relocations. To best prepare yourself for the move, be sure to analyze the terms of your current lease. It is important to have little to no dark time between your move. Every day your office is closed, the larger the loss of revenue. By reviewing your lease, you can ensure you are able to stay in your current location until your new office is up and running.

The logistics of the move

It is important to get everything in order before the big day. A few key aspects to remember are:

  • Figure out a date of the move.
  • Notify your landlord that you are terminating your lease or wish to not extend.
  • Create an inventory of your office contents.
  • Create a diagram of the office and where you want all equipment and furniture to go.
  • Choose a moving company that has experience moving large and fragile equipment, such as X-ray machines.
  • Get moving insurance since renters’ insurance does not always cover damage to furniture or equipment during a move, and moving companies always legally responsible for property damage. Typically, they only cover minimal responsibility for damaged goods and are not required to reimburse the entire cost. For these reasons, it is smart to get moving insurance through third-party insurance companies.
  • Delegate responsibilities among your staff.
  • Use this opportunity to declutter your office and get rid of anything you no longer use or need. In addition, use this time to update your patient records — remove inactive patients, call patients due for an appointment and schedule them and advise them on the new location.
  • Plan to be at the office the entire day of the move to oversee the entire process, including placement and handling of equipment and furniture.

Notify your patients

Be sure to notify your patients of the upcoming move. Following are a few ways to keep your patients aware that your practice is moving:

  • Display a “We Are Moving” sign in your waiting room.
  • Notify patients by updating your website’s homepage to include a “We Are Moving” banner.
  • Send out a mass letter to all patients detailing your move. Be sure to include the new address, date of opening and the highlights of your new location. It is important to sound upbeat in the letter.
  • Familiarize patients with the new location by including a map on the website. It is also wise to display a map in the waiting room showing the faster route from your current location to your new location at least six months before you move.
  • Have your staff emphasize the move to all patients. They should mention it to every patient that comes into the office from today until the day you move.
  • Get your patients excited about the new location by throwing an “office warming” party and allow all patients to check out the new office before they sit in the chair.

Budgeting

As with any move, make sure to budget appropriately. Not only is the cost of a move expensive, but the new location can also skew your current budget. Your new space could potentially have a higher lease rate, especially if you move to a more desirable area, or a larger space.

Marketing

You have a new address and want to make sure your patients know where to find you. It is not as simple as notifying the U.S. Postal Service (USPS) and moving on. You also need to update your digital footprint and your print marketing.

Digital

  • Website: Update your website’s footer and contact page to reflect the new address. Scour the rest of the site to ensure your old address is not mentioned – this includes images of a map with driving directions or landmarks noted. Make sure the meta descriptions do not reference your old address or neighborhood.
  • Email: Be sure to update all email signatures if they include your practice’s address.
  • Social: Promote your new location on all social media sites. Try to turn this into a lead-generation opportunity. Don’t forget to update all contact information on your social pages to include the new address, hours and contact information.
  • Google: Be sure Google knows about your move. This includes both Google Maps and Google My Business. Upload a new photo of the outside of your office and request a new Google My Business mailer to verify your new address. Please note this can take up to five days.
  • Professional associations: Contact all agencies and associations you are a member of, including the Better Business Bureau (BBB), local study clubs and your state dental association to make them aware of your new location.
  • Online directories: Most dental practices are included in more than 30 online directories, in addition to your website. Almost all include your address. For this reason, be sure to update all directory listings, such as Yelp, Manta, Yellowpages.com and Bing.

Print

  • Update all printed marketing material. Because printed materials have a longer lead time, be sure to give all designers, printers and publishers enough time to make the changes. This includes brochures, business cards, print ads and other marketing collateral.
  • If you come across any existing collateral, such as brochures and business cards, be sure to pick them up and replace with new collateral.

Other change-of-address notifications

Notify suppliers of your new address and the date of the move:

  • Payroll processing company.
  • Insurance companies.
  • U.S. Postal Service (USPS).
  • Electronic claims processors.
  • U.S. Drug Enforcement Agency (DEA).
  • Your accountant and attorney.

What’s next?

A lot of work goes into any business relocation. If you need guidance on this big decision or assistance with all the logistics, contact the team at PTS.

January 28, 2021

How to Successfully Start a Dental Practice

dental practice family

There are two parts to starting a dental or medical practice: industry knowledge and business knowledge. You have spent several years studying with professors and doctors that have years of experience in teaching medicine and dentistry. Professional Transition Strategies (PTS) is your knowledge source for the business side of your new practice. We know because we have been there. We share our top tips for successfully starting a dental practice.

The experts at PTS will help you with decisions, such as:

  • Finding the best financing option for your office and equipment.
  • Calculating how much money you will need to get started.
  • Finding a prime office location.
  • Hiring knowledgeable architects and contractors to help you transform your space to maximize profitability.
  • Working with the right equipment and supply specialists to give you the best value and service.
  • Recommending the best technical support for phone and computer systems to meet your needs and your budget.
  • Offering assistance in hiring and training a productive and self-motivating staff.
  • Recommending branding and marketing strategies that will create active patient flow from the beginning.

By building on our years of experience, you will save time and money getting your business on track. Our goal is to help you succeed.

We realize everyone has different short- and long-term goals. We will use our expertise to help you create a strategic plan to build your practice to meet your goals.

Starting a dental practice from scratch

You are forging your own path. You are an entrepreneur. Or simply … you want to own a dental practice and you can’t find an existing dental office that appeals to you. Whatever the reason you have decided on starting a dental practice from scratch, it is important to have an actionable plan in place to get you where you want to go.

Starting a dental practice checklist

Like many others, you ask, “Where do I even begin?” Following is a summary of starting a dental practice checklist, but we recommend you speak to a professional dental practice consultant, such as the team at PTS, to guide you through the process.

Steps to starting a dental practice

  • Meet with a bank to get prequalified.
  • Form a business entity, whether it is a LLC, C-corp or S-corp. It is advised you work with a CPA or attorney on this. This registration is needed to get a Tax ID, which you will need when you are signing a bank loan.
  • Through this preapproval process, you will be able to create a budget.
  • Work with a commercial real estate agent who has experience with dental and medical offices to find a location. Narrow your search to two to three locations, and begin the negotiation process.
  • Before signing a lease, speak with dental contractors. It is recommended to speak to two to three contractors and have them see the space in person first. By understanding the construction costs prior to signing a lease, you will be able to negotiate this expense with the landlord.
  • Design the office with the dental contractors before signing the final contract. This will ensure you receive proper bids.
  • Meet with design firms or dental supply companies that offer design services.
  • Once build-out is in the works, begin thinking about how you are going to outfit the office. Research all pieces of equipment, including patient chairs, x-rays, IT, etc.

Have the right team in place

Along with your checklist, it is important to ensure you have the right team in place. Your team should include:

  • Certified public accountant (CPA).
  • Chartered financial analyst (CFA).
  • Attorney.
  • Banker.
  • Broker.
  • Marketing agency.
  • Equipment and supply reps.
  • Technology advisor.
  • Commercial real estate agent.
  • Contractors, architects and practice consultant (situation depending).

Dental practice financing from scratch

Starting up a dental practice from scratch is not only an investment in your future, it is also a large financial undertaking. The average cost for a startup range between $350,000 and $550,000. This amount includes:

  • Equipment.
  • Leasehold improvements.
  • Working capital.

External factors will also contribute to your startup cost, such as the region you choose. For instance, the difference between building in a low-cost area compared to a high cost-of-living region is 20%. That is not to say it is advised to practice in a rural area. Just be sure to choose your region properly, as your cost to acquire new patients will be lower.

While the region will contribute to your startup cost, the office you choose will also play a part. When choosing your building, it is important to keep square footage at the top of mind. Make sure your office size matches your vision. You will save money by building a smaller space, but that can also prevent your ability for growth. If your financial goals and vision for the practice require you to have five operatories within the next five years, don’t give in to the desire to save money on the frontend that will prevent you from making it on the backend.

Tips to minimize dental debt

It is always advised to minimize your debt from dental practice loans when and where you can. A few ways to reduce your loan amount is on equipment and office improvements.

  • Equipment: Instead of buying every piece of equipment your heart desires, buy only the equipment you actually need to get started. Once your doors are open and your practice is running smoothly and successfully, then consider making the investment in other desirable pieces of equipment (i.e., digital impression system, crown mill, etc.) The list of necessities includes:
  • Leasehold improvements: Another way to minimize your debt is by employing various strategies for any leasehold improvements. These include:
    • Finding a space with a vacated dental practice; therefore, the plumbing for the operatories is already taken care of.
    • Exploring space-share opportunities with other medical professionals or dental specialists.
    • Finding a landlord who will be motivated to make you happy and will pay for all or most of your improvements.
    • Keeping your office design simple at first and upgrade once your cash flows allows.

Establish goals for your dental practice

Whether you are one who wants to “visualize” your goals or simply write it down, it is important to establish them at the beginning. Don’t be vague. Be sure to include details when you come up with your goals. By considering the following at the beginning, you will be ahead of the game when making decisions with your startup dental office.

  • What are your production goals and cash flow projection?
  • Will you be able to service your debt?
  • What services do you want to offer in your practice? Do you want to place implants, as well as restore them? Do you want to offer clear correctors? Or do you want to start with a bread-and-butter practice and refer out specialty work?
  • How many operatories will you need to accomplish your goals?
  • What is your long-term goal?

Inc.com explained why it’s important for a business to set goals: “It is incredibly important to remember that setting business goals will not ensure success for any organization. However, there’s also a lot to be said for not flying by the seat of your pants.” (1)

Location, location, location

You can change many things about your dental practice once your doors are open. Location, however, is not one of them. Therefore, it is imperative to pick the right location from the beginning, even if it means you must be patient.

Many dentists become too focused on lease numbers and overlook critical factors that attribute to the success of a location. Consider the following when choosing the ultimate placement for your practice:

  • Is the location centrally located and easily accessible for your patients? Are you near major intersections or busy streets?
  • Does the office have good visibility? Do you have access to outdoor signage? With outdoor signage, you will have the perk of free advertising from street traffic.
  • Is the building accessible for all your patients? How easy will it be for patients to park or turn into your lot from the street? Is it handicap accessible for patients with disabilities?
  • Are you located in a position to reach your target market? For instance, if you will be a fee-for-service (FFS) practice only or plan to practice high-end cosmetic dentistry, are you located in an affluent area? If you are a pediatric dentist, are you located in a young community with future expansion?
  • Do you have a non-compete with a previous clinic with which you worked? If so, evaluate the proximity of your new desired location, as well as the terms of your agreement to stay within any legal constraints.
  • Are you located near your competition? It is advised to get a visual of all local competition by looking at an online map. If you you don’t mind not being the only game in town, ensure that you have a unique value proposition to separate you from the others.

Unique value proposition gives you a competitive advantage

Develop your own unique value proposition, something that gives you a competitive advantage. Don’t go head-to-head with the competition. Find a way to stand out among the crowd. Find something that cuts through the noise and gives your patients a reason to see you over someone else in the area.

  • Figure out who your patients are. Are they older or younger? Will they be impressed by fancy equipment and a beautiful designed office, or will they be fine with someone simple and standard?
  • Solve their pain points and not just oral pain. If you don’t plan to accept insurance and plan to run a cash-only practice, consider offering a simple and easy payment plan option. If your patients don’t have time to come to the office for multiple visits in a short amount of time, consider offering a fast-acting anesthesia.

Create a business plan

A business plan is a critical tool when starting your practice because it provides a blueprint for how your dental clinic will become successful. It will also be a requested document for most lenders. They want to ensure you have researched and considered all necessary elements of starting your practice. When creating your business plan, be sure to include the following:

  • Lending plans.
  • Growth strategy.
  • Profit and loss projections.
  • Demographics strategy.
  • Mission statement.
  • Vision statement.
  • Plan for hiring both administrative and clinical staff.
  • Marketing plan (be sure to devote 5% to 7% of collections on marketing for the first three to five years).

Marketing your business

Marketing is essential for your dental practice, especially in the beginning stages. Not only does it bring in new patients, but it can also strengthen the relationships you have with existing patients. Therefore, to see your practice thrive within the first few years, you need a marketing plan in place.

According to the Small Business Administration (SBA), “One of the best ways to stay on schedule and on budget is to make a marketing plan. It describes the actions you’ll take to persuade potential customers to buy your products or services.” (2)

The most common elements to include in your marketing plan are:

  • Online presence:
    • User-friendly website.
    • Offer value with content marketing.
    • Google My Business.
    • Social media presence.
    • AdWords and SEO.
  • Word of mouth (consider giving discounts to patients for referring a friend or family member).
  • Network in the community.
  • Appointment reminders.
  • Remarketing campaigns.
  • Dental patient marketing.

Pros versus cons for startups

You know what is involved when starting your own practice from scratch, but you still can’t decide if it is the right move. Consider the upside and downside of making this commitment.

  • Pros: When you start your practice from scratch, you can make it what you want from the beginning. If design and aesthetics are important, you can choose them from the start. You can choose your location and be exactly where you want to be. This will allow you to tailor your practice based on the type of patients and procedures you want. You can also scale your practice based on your skill set — as you get faster, the more successful you will become. While your debt rate may be high and scary, it is important to remember the success rate is also unbelievably high. Most importantly, you have full control.
  • Cons: As previously mentioned, the initial financial investment average is $350,000 to $500,000. Therefore, if you are already in debt from school, you can be anywhere between $700,000 and $1 million in debt before you see your first patient. Expect a couple of lean years. It can take a while to get to the revenue you would be at if you bought an existing practice.

Resources

January 25, 2021

How and Why to Increase Supply Chain Efficiency at Your Dental Practice

With 2021 already in full swing, now is the time to take literal stock of your dental practice. The impact of the COVID-19 pandemic and consequential shutdowns caused the industry to step back and reevaluate every aspect of your business, including your supply chain efficiency. Here’s how and why you can increase supply chain management and efficiency at your dental practice in the new year.

Online ordering

If you weren’t already doing it, an increase in ordering all your supplies online has been a direct correlation from the pandemic for the better. Ordering supplies online is not only convenient in terms of delivery, but it’s also efficient to be able to view and compare purchase options on various sites in minimal time. The technology and platforms exist to provide supply cost-comparisons.

Networking

In addition to your standard ordering processes, supply chain issues can be avoided by accessing available supplier networks. Supplier networks offer cost savings that wouldn’t otherwise be afforded to individual dental practices, leaving room for more savings and better pricing options.

Teledentistry

In addition to the many trends that have emerged as a result of the pandemic, teledentistry has cut down on the number of in-person visits to your dental office. While it might not be here to stay, in-office visits are still being spaced out to accommodate social-distancing rules, leaving room to reevaluate everyday office supplies.

Buying power

No doubt expenses had to be shifted in 2020, which is why now is a good time to leverage your buying power, especially when it comes to bulk goods like personal protective equipment (PPE) that wasn’t as in demand in the past. Funds that may have been allocated toward commercial real estate can be redistributed in other now-necessary areas.

What’s next?

Contact the experts at Professional Transition Strategies to learn more ways to increase efficiency and your bottom line at your dental practice.