Expanding a dental practice is an exciting step for entrepreneurial dentists, but choosing where to grow can be a daunting decision. Should you target a densely populated urban area with a high patient volume, or focus on a spread-out region with less competition?

The decision is rarely a simple choice between one or the other. It requires strategic planning, experienced advisers and a deep understanding of market dynamics, patient needs and operational logistics.

Why You Need Industry Experts When Evaluating Expansion Opportunities

A recent real-world example underscores the importance of working with dental industry specialists. A dentist looking to expand sought advice from a CPA who lacked industry expertise. The CPA discouraged the dentist from purchasing a practice just 15 minutes away, citing concerns about overlapping patient bases.

On the surface, this advice seemed logical. Why risk redundancy between two locations in close proximity? However, the practices had key differences: one focused on general dentistry, while the other specialized in cardiovascular-related periodontal care, offering unique services that complemented rather than competed with the existing practice.

Had the dentist moved forward, this expansion could have provided significant advantages:

• Attracting niche patient demographics within a highly populated market
• Offering comprehensive care across both locations to increase patient retention
• Leveraging population density to sustain both practices
• Gaining tax advantages by operating multiple locations

As a general rule, a minimum of 1,200 patients per dentist in an area provides a solid foundation for multiple practices. In this case, the market easily met this threshold, making the opportunity ideal for expansion. Unfortunately, the dentist passed on the acquisition due to poor guidance from an adviser unfamiliar with dental industry nuances. This example highlights why it’s crucial to consult experts who specialize in dental practice transitions when making expansion decisions.

Market Dynamics: Dense vs. Spread-Out Areas

Expanding into a new market requires evaluating the opportunities and challenges of densely populated versus more spread-out regions. Here’s how they compare:

Advantages and Challenges of Dense Markets

Advantages

• Larger patient pool: High population density increases patient acquisition potential
• Opportunity for specialization: Services like orthodontics or cosmetic dentistry can thrive
• Greater walk-in traffic: Urban locations offer visibility and accessibility

Challenges

• Higher competition: Standing out requires strong branding and marketing
• Premium costs: Real estate, salaries, and operational expenses are significantly higher

Advantages and Challenges of Spread-Out Markets

Advantages

• Less competition: Fewer dental offices create strong market positioning
• Higher patient loyalty: Rural and suburban patients often stay with a provider long-term
• Lower operational costs: Real estate and staffing expenses tend to be more affordable

Challenges

• Smaller patient base: Growth potential may be slower than in urban areas
• Talent acquisition challenges: Attracting specialists can be more difficult

Financial Considerations When Expanding

Cost Factors

• Urban areas: Higher real estate and operating costs, but greater revenue potential
• Rural areas: Lower overhead, but marketing investments may be needed to build awareness
• Acquiring an existing practice: In competitive urban markets, buying an established practice can provide an instant patient base

Staffing Considerations

• Cities offer a larger talent pool, but competition for skilled professionals drives up costs
• Rural areas may struggle to attract specialists, but employees tend to be more loyal, reducing turnover

Valuation & Exit Strategy 

Your expansion decision should align with long-term goals, including practice valuation and future sale potential:

• Urban practices often attract DSOs and private equity due to higher revenue potential
• Rural practices may appeal to independent buyers, but have a smaller market of potential purchasers
• A mixed expansion approach (owning both urban and rural locations) can provide a balanced portfolio, leveraging the revenue potential of urban markets while benefiting from the stability of rural practices

Key Takeaways for Dental Entrepreneurs

• Define your long-term goals – Are you expanding for future resale, steady growth, or diversification?
• Work with experienced advisers – Industry-specific brokers, financial planners, and CPAs can provide informed guidance
• Leverage market insights – Use data-driven strategies to evaluate patient demographics, market saturation and financial feasibility
• Consider both short- and long-term benefits – Expansion isn’t just about immediate revenue; it’s about sustainability and future profitability

Bottom Line: Expansion Requires Strategic Planning

Growing your dental practice requires a nuanced understanding of market conditions, a strong advisory team, and a strategic approach. Whether expanding into a dense urban area or a more spread-out region, working with dental industry experts ensures you make informed decisions that align with your long-term success.

Looking for guidance on expanding your practice? Contact the experts at Professional Transition Strategies today to connect with industry specialists who can help you evaluate opportunities and maximize your practice’s potential.