January 28, 2021
Tips To Successfully Starting a Dental Practice
There are two parts to starting a dental practice or a medical practice: medical or dental knowledge and business knowledge. You have just spent several years studying with professors and doctors that have years of experience in teaching medicine and dentistry. Professional Transition Strategies is your knowledge source for the business side of your new practice. We know because we have been there!
The experts at Professional Transition Strategies 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 that everyone has different short term 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 Professional Transition Strategies, to guide you through the process.
Steps to Starting a Dental Practice
- Meet with a bank to get pre-qualified.
- Form a business entity, whether it is a LLC, C-corp or S-corp. It is advised that 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 pre-approval 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 2-3 locations and begin the negotiation process.
- Before signing a lease, speak with dental contractors. It is recommended to speak to 2-3 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:
- Marketing Agency
- Equipment and Supply Reps
- Technology Advisor
- Commercial Real Estate Agent
- Contractors, Architects, Practice Consultant
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 start-up range between $350,000 and $550,000. This amount includes:
- Leasehold Improvements
- Working Capital
External factors will also contribute to your start-up 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 that 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 start-up 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 5 operatories within the next 5 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:
- Good patient chairs
- Practice management software
- Quality autoclave
- Leasehold Improvements: Another way to minimize your debt is by employing various strategies for any leasehold improvements. These include:
- Find a space with a vacated dental practice, therefore the plumbing for the operatories is already taken care of.
- Explore space-share opportunities with other medical professionals or dental specialists.
- Find a landlord who will be motivated to make you happy and will pay for all, or most, of your improvements.
- Keep your office design simple at first and upgrade once your cash flows allows.
Establish Goals for Your Dental Practice
Whether you are one that wants to “visualize” your goals, or one to 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 start-up 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 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. When considering your marketing plan, be sure to plan to devote 5-7% of collections on marketing for the first 3-5 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, “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 Start-Ups
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. Lastly, 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.