Most dentists do not wish to remain associates for their entire careers, dreaming of practice ownership or partnership, but as with any small business, ownership can be daunting.
Nevertheless, many recognize the unique opportunity practice ownership represents, from creating higher annual income, more control and greater independence to achieving long-term personal and professional satisfaction.
However, dentists considering practice ownership are faced with a complex choice: starting a practice or purchasing one – and a myriad of factors must be weighed. This decision invariably becomes less daunting once a dentist learns the relative advantages and disadvantages of each option.
Buying an existing dental practice has many benefits that make it a strong choice when considering ownership.
Take advantage of turn-key operation upon entry. The new owner will take on a practice that has an existing office and equipment, trained and tenured staff, and management and computer systems already in place, allowing work to begin immediately.
Avoid patient acquisition and intake. Existing dental practices have established rapport with existing patients and will have immediate access to patient records, eliminating the headache of intaking all new patients.
Have an understanding of historical and future performance. Practice characteristics and historical financials indicate sufficient demand to continue to support the practice. This can create security in knowing the practice’s historical performance and growth potential.
Utilize seller’s knowledge in transition and mentorship. Another benefit of buying an existing practice is having the seller’s assistance in the ownership transition period. The seller will be able to give you additional insight into the practice as a whole and provide post-acquisition mentorship.
Buying a dental practice may seem like the obvious choice due to the high failure rate of start-ups, but it does have its drawbacks that must be considered before taking the next step. In many respects, the disadvantages of buying a practice are the advantages of starting a new practice from scratch.
Updates may be needed. If you buy a practice that is more than a couple years old, you may need to update due to inadequate or antiquated office design or condition and the possibility of not meeting OSHA, ADA or other regulatory guidelines. Old equipment, technology and digital charts may all need to be updated.
Adapt to inherited reputation and dynamics. There are inherent risks associated with the actions of the previous owner or staff. If there is negative history, you may have to work to cast a new, positive light on the business. A buyer will have to adapt to unknown staff and/or patient conflicts.
Altering the seller’s policies and business structure. Buying an existing practice means you will inherit the previous owner’s policies and business structure that may be difficult to change immediately.
Although purchasing a practice can have many inherent advantages over starting one from scratch, the allure of pursuing a start-up cannot be understated. It is perhaps a once-in-a-lifetime process, in that each decision made is aligned with the future owner’s standards, desires and vision.
Make the business your own. From selecting a desired location, to the implementation of proper processes and protocols, to floor plan design, branding, marketing, staff hiring and development — all are approached with the values and personal touch of the future owner.
Place the business in your ideal location. The area and community in which the dentist resides and practices is perhaps one of the most important determinants of long-term personal and professional satisfaction.
Invest in new equipment and technology. Starting a dental practice from scratch allows you to purchase brand new equipment and technology. Though this can be pricey, expensing the depreciation can help offset the cost.
Starting from scratch allows the owner to have total control over the practice from day one, but with that freedom comes downsides that must be considered.
Creating a new business has a high risk of failure. Small business failure is typically due to undercapitalization, often due to struggling to build cash flow while battling location and/or economic hardships.
You may face unexpected expenses. By overlooking less obvious needs or working with a non-specialized contractor, a dentist may find themselves short of funds before the project is even complete.
Competition is increasing, especially in certain areas. In recent years, competition from larger, multi-specialty practices (including emerging DSOs) has created geographies of high concern that should not be considered for startup practices.
Whether you decide to buy an existing practice or start one from scratch, the best way to ensure success is through surrounding yourself with experts who can advise you every step of the way.
If finances is a roadblock holding you back from owning your own practice, Panacea Financial is here to aid in fulfilling your dream. As a dental-specific lender, we know the costs of acquisitions and start-ups and can help you navigate the intricacies of your next career move.