If you’re a dentist looking for more independence and a bigger paycheck, the idea of starting a dental practice is probably on your mind.
Although practice ownership among dentists is on the decline, it’s still your best opportunity to get the independence and flexibility to shape your business according to your vision. And a successful dental practice is a highly-lucrative investment with the potential for long-term financial stability and growth.
But to reap the rewards of starting your own dental practice, you must be prepared for the challenges you’ll face. In this article, we’ll look at why you may want to launch your practice and the steps you should take to avoid costly mistakes and ensure you do it right!
Why Start A Dental Practice In 2023?
For many dentists, launching their own private practice is a dream. But what exactly does this lifestyle offer you?
Starting a dental practice offers four main benefits— independence, flexibility, control, and financial opportunity.
A private practice lets you shape the life you want, whether that means creating a better experience for your patients, spending more time with your family, buying a new home, or diversifying your investment portfolio.
The Risks Of Launching A Dental Practice
While owning your dental practice can be a rewarding experience, there is also significant risk.
For one, you’ll be investing large amounts of money and likely accumulating debt, so you must set your practice up to succeed from the very first day. If you fall behind your goals, your business and the livelihood of your employees are at stake.
Secondly, you’re leaving behind the relative security of a guaranteed paycheck and benefits from the practice where you’re currently working.
But don’t let the risks deter you—the payoff is worth it! Instead, use the uncertainty as extra motivation to ensure you do your homework upfront to ensure success!
Decisions To Make When Starting A Dental Practice
You’ll have to make some big decisions when preparing to launch a new dental practice. You may already know how to approach some of these, or you may need to consider your options. In any case, here are some key questions you’ll need to answer before you can write a business plan and start turning your ideas into reality:
Should You Partner Up Or Go-It-Alone?
Many dentists prefer to be the sole owner when starting a new office, while others prefer to have a partner. If you don’t have excellent credit, investors, or a ton of cash to invest, you may need a partner to make the funding work.
Partnering with another dentist can help you spread out the responsibility of being an owner, maximize each others’ skill sets, and see more patients grow more quickly. But, on the other hand, you’ll have to sacrifice some level of control and learn to manage delicate situations together.
There’s no “right” answer here, but you need to know which model you prefer before you can start analyzing the feasibility of the practice you want to build.
Should You Start A New Practice? Or Buy An Existing One?
Just because you want to start a dental practice and be your boss doesn’t mean you have to do everything from scratch!
Buying an existing dental practice is a great way to get the benefits of being a business owner while avoiding some of the work. When you buy an existing practice, you’ll often get a built-in client base, so you don’t need to start from zero. Also, you’ll probably be able to buy some equipment from the owner, understand their marketing strategy, and see what kind of profitability you might expect.
But you can still make it your own! You can change the name if you want, invest in new equipment, hire new staff and revise the marketing plans. But you get the benefit of some existing structure and sales volume.
The downside is that buying an established practice will cost more than starting a practice from scratch. And you still may need to invest in updating equipment and making some renovations. So look at your options and consult a practice broker or industry veteran to decide which option best fits your needs.
What Equipment Will You Need?
Medical equipment is expensive, so be sure you project your needs carefully. When buying an existing practice, you may inherit some usable equipment, but some may need to be replaced. And if you’re starting from scratch, your costs for equipment and supplies can run into hundreds of thousands of dollars.
Plan your equipment budget wisely to ensure that you have every critical piece of machinery possible to provide top-quality, modern dental care.
How Much Space Will You Need?
According to HJTDesign.com, you should plan on 300 to 400 square feet for each treatment room you’ll need in your dental practice. So, for a practice with 6 treatment rooms, they project you’ll need 1,800 to 2,400 sq ft of total space.
Using that as an estimate, you can calculate a rough idea of the cost of your space using local averages of price/sqft. But remember that you’ll still need a space with the proper layout to make your office work. So it’s best to project a little more space than you need and reserve some funds for any necessary renovations.
Should You Rent Office Space Or Buy A Building?
When starting a dental practice, you must decide whether to rent office space or purchase a building. There are clear benefits and drawbacks to each option.
Option 1: Rent Dental Office Space
When you look to rent space for your dental practice, you may find better options for securing your ideal location. Also, your landlord will be on the hook for significant maintenance and upkeep, which helps prevent unexpected bills from popping up.
On the downside, you’ll have a rent payment forever (probably with annual increases) and never build any capital in your office. Plus, there’s always the option that your landlord decides to sell the property, leaving your contract in limbo, depending on local real estate laws.
Option 2: Buy A Dental Office
The benefits of buying office space for your dental practice are familiar to any homeowner—you get more flexibility and freedom without a landlord to answer to. In addition, instead of spending money on rent, you’re investing in a property you can eventually sell.
Commercial real estate, however, is less predictable than residential real estate, so it’s tough to know what the value of your property will be in 30 years. A mortgage increases your debt and ties up valuable cash. And you’re on the hook for repairs, upkeep, and property taxes.
As you can see, there’s no easy answer here. It may come down to your preference, availability, and local real estate trends.
How Much Money Do You Need?
The ADA estimates that the average dental startup requires an investment of around $500,000, including ~$240,000 for construction/repairs and ~$200,000 for equipment.
Depending on the size of your practice, the local real estate market, and the size of the office, you may need to invest more or less than that half-million number. In addition, with inflation at decades-high levels heading into 2023, you may expect to pay a bit more. Complete a detailed breakdown of all your anticipated expenses and build that into your first-year budget.
If you’re looking to buy an established practice, the price will run around 70% of gross receipts. Of course, you may pay more or less than that, but the cost is generally calculated as a percentage of sales. Plus, you’ll need additional funding for renovations, new equipment, new staff, and marketing initiatives.
Estimating how much money you’ll need may be the biggest challenge to getting your new dental practice off the ground. But if you don’t do it right, you could end up underfunded and unable to open your doors for business.
How To Fund Your Startup Dental Practice?
Most dentists need to take out at least some loans to start a new dental practice. But borrowing money from a bank isn’t your only option.
Here are 4 channels you can explore for financing:
- Self-funding: If you have personal savings or assets that you can use to fund your startup, self-funding your dental practice could be a good option.
- Bank loans: Many banks offer small business loans specifically for startups. You will typically need to provide collateral and a detailed business plan to qualify.
- Investment from friends and family: Securing investment from friends and family members is a possible way to fund your startup practice. It’s especially true if you can only secure some of the cash you need from a bank.
- Grants: Some government agencies and non-profit organizations offer grants for small businesses, including dental practices.
- Partnerships: Partnering with another dentist allows you to pool your resources to get better funding and provide better services. But it also requires mutual trust between you and any potential partners.
Each funding option carries its risks and rewards. For example, self-funding may sound great to avoid interest expense, but that money may be more valuable to you invested elsewhere. So consult with a professional financial advisor when developing your funding strategy. They’ll be able to help you design a plan that fits your unique situation.
What Staff Do You Need?
Hopefully, you have an idea of what your team might look like, but you should start putting that on paper as soon as possible to ensure all the pieces fit correctly.
Will you be hiring other dentists or working alone? At a minimum, you’ll need a receptionist, assistants, and someone to run the office and keep track of paperwork. But your team may be much bigger than that including a great treatment coordinator.
First, decide how many people you must hire to make your practice run smoothly. Next, figure out an average salary for each position. You should have a good idea of what’s reasonable in your area and use that information to create your personnel budget. This information will also go into your final business plan and help you determine your financial projections.
How Will You Attract Patients?
Dentistry isn’t known as a creative field, but when it comes to marketing your practice, you can let your imagination run wild. There are dozens of creative ways to raise your profile, reach your target patients, and grow your sales.
That said, you’re going to want to plan to include these elements in your marketing budget, regardless:
- A mobile-friendly website design
- An accurate Google Business Profile
- Facebook and Google Advertising
- Local magazines or newspapers
- Outdoor advertising (bus stations, billboards, etc.)
- Local event sponsorships
- Attending local events or trade shows
With all these options, knowing where to invest can be confusing. A marketing firm can help you allocate your funds to the right places and tell you how much you need to spend to get the desired results. Try to avoid generalist marketing firms and work with someone with a proven track record of growth for dentists in similar situations to yours.
Step-by-Step Guide To Starting A Dental Practice In 2023
Research Or Planning: The Chicken Or The Egg?
Armed with the answers to the critical questions above, it’s time to start planning your new business.
The following two steps in building a successful dental practice are thoroughly researching your market and creating a business plan. But where you start may depend on your situation.
For instance, if you plan to start a cosmetic dentistry office in a specific city, you may want to create a rough business plan first. Detail how much revenue you need, your expenses, and how you’ll market your business. And then, once your business plan is complete, you must research the local market to ensure that demographics can support your project.
But if you’re flexible on your practice’s location or specialty, then you should start by conducting market research on a few different areas. You may find a big opportunity that you would have otherwise overlooked. And the process will help you start to give shape to your ideas to help you build a better plan.
In either case, you’ll need to perform both activities to complete your business plan. But where you start may depend on your situation.
Step One: Market Research
We’ll start with Market Research for dental practices because your research forms the logical foundation for all the decisions you’ll make in your business plan. You must first choose a market that can support your business, or you’ll never thrive.
Consider hiring a practice broker to ensure you understand the market thoroughly before you make a life-changing investment. Here are a few items you’ll want to look into:
Does your market have enough families to support your pediatric dentistry practice? Or will you need to rely on an aging population to drive your profits through restorative work?
You should use publicly available data to learn about the local market, including population demographics, economic conditions, and healthcare trends. All these factors will influence your decision about what type of dentistry to focus on, where to put your office, and how to market to the local community.
Where you decide to open your office will play a crucial role in your success. So you should understand each potential market well before making a decision.
A suburban shopping center may offer you convenient parking, a high median income, and many families with children. A street-level location in a highly-pedestrian city doubles as high-profile advertising that could boost your reputation and revenue. But a second-floor unit might help you save money on rent.
You should research the available options and areas in the markets you’re considering to choose the suitable business model to make your practice successful.
It’s much easier to succeed in a market with just one other general dentist than with a range of options. Even if the demographics of a market look slightly less appealing, a lack of competition could make it a huge opportunity. Likewise, a neighborhood that looks great on paper might be overrun with competition, making it nearly impossible to grow profitably.
Be sure you weigh all three of these options against each other to understand where the opportunity aligns with your vision. And then, move on to the business plan, where you’ll start giving shape to your new dental practice.
Step Two: Create A Business Plan
Your business plan serves as a living roadmap that guides the development of your new practice. You’ll need to plan for every aspect of your new business, from the services you’ll provide to the prices you’ll charge and the financing you’ll need.
As your project evolves, you’ll need to update your business plan frequently to incorporate the new reality and ensure that your projections are as accurate as possible.
Let’s look at the critical components of your business plan for a dental practice:
Your executive summary should include a brief overview of the entire business plan, including the main objectives and goals of your dental practice. Focus on what will make your practice unique and why you’ll be successful in your market. Include a top-level financial overview and growth plan to put some weight behind your lofty goals.
Here you should go into more detail about who your dental practice will serve and the types of services you’ll provide. Think this through and spell out how your vision differs from the competition or what you’ll do to ensure success.
If you have people lined up, you can preview your management team and their experience or discuss your unique experience and qualifications. You should include a mission statement and focus on the why that drives your organization rather than simply what you’re going to do.
If you start with market research, this section should be a breeze. You will detail your conclusions about your local market and the dental industry here.
- How is your practice positioned to serve your target audience best?
- Where are the opportunities to differentiate yourself?
- What are your competitors doing well, and where are they missing the mark?
Use the data you’ve assembled to create a compelling case for your short-term and long-term success—the funding you need depends on it!
Management Team & Organizational Structure
In this section, you should establish your vision for the management team and the practice’s organizational structure, including each team member’s roles and responsibilities.
Talk briefly about the legal structure of the company you plan to establish (LLC, S-Corp, or Sole Proprietorship). And clearly define the ownership if you’re forming a partnership with another dentist or bringing in other financial investors.
Include a projected organizational chart showing you’ve thought through the best structure for your service team. Include details about potential employees or the qualifications you’d require for crucial roles.
Discuss in-depth the services you’ll offer and how important each will be to your financial success. Where possible, discuss pricing strategies for treatments and detail how they align with your revenue goals.
Include any innovative treatments or unique services you’ll be offering. And discuss how your service offering compares to local competitors and aligns with projected future trends for the dental industry.
Marketing And Sales
How are you going to get patients to your new dental office? Will you focus on getting referrals from other dentists or medical professionals? Invest heavily in local advertising and public relations? Or blow up Facebook and Instagram with creative ads?
There’s no single strategy for growing your sales, but you need to have a plan. And part of that plan may be hiring a dental marketing agency to help you get a better return on your investment.
Ultimately, the success or failure of your dental practice will all come down to your ability to fill your schedule with patients. So be sure you don’t mail this section in. Instead, plan a strategy to help you stand out and bring revenue to your practice from day one.
If you are looking for external investors or a small business loan, this section will detail precisely how much money you need and your plan to secure it.
Try to create a 5-year plan for funding and show precisely how you’ll use the money that you receive to acquire equipment, pay employees, or cover operating expenses as you work to build your revenue.
The critical piece of your financial projections will be your projected budget. You can show exactly how you expect to make sales and cover expenses as your business gets off the ground.
You should also include a projected income statement, balance sheet, and cash flow statement for the first 5 years of your practice. Then, break down the first year by month to give a detailed picture of your financial position during the most challenging period for your business. And, of course, make sure that any loans or investments detailed in your funding plan flow directly into your financial projections.
Consider hiring a professional business plan writer or having your accountant review your financial projections. Some colorful charts or graphs will go a long way to helping readers understand your numbers more easily.
At the end of the business plan for your dental practice startup, recap the main goals and objectives, including your funding goals, one last time. Next, attach any necessary supporting documents in an appendix. Finally, reiterate why your practice will be a huge success and use positive language to ensure readers are enthusiastic about the potential of your new business!
Step 3: Preparing To Launch Your Practice
Now that your business plan is in place, it’s time to implement your strategies. Here are the steps you’ll need to take before opening your doors:
Assemble An All-Star Business Development Team
To ensure your business is successful, you should have an experienced support team to help you make decisions. If you haven’t already, you should find a great dental CPA, an attorney, and a practice broker. Together, they’ll ensure that your decisions form a solid foundation for a profitable business.
Start Your Location Search
With a firm idea of the physical space you need, start to explore the real estate market in depth with your practice broker. At the same time, analyze the locations to grasp estimated remodeling expenses and equipment costs. Finally, update your business plan regularly with the most accurate information.
Secure Your Funding
Take your business plan and financial projections to your banks and other potential funding sources to line up the cash you’ll need to fund the project. At this point, your plans should be precise enough that you and your funders can feel solid about your projections.
Finalize Your Lease Or Purchase
Work with your attorney to ensure that your location meets zoning requirements, and consult with your practice broker to double-check that everything meets your needs. Then sign the contract and start planning your physical layout.
Set Up Your Business Structure
If you still need to, be sure you have your Tax ID# from the IRS and any necessary permits, licenses, or memberships. Local regulations vary greatly, so don’t try to figure this out alone. It’s your attorney’s job to be up-to-date on everything you’ll need.
You want to be sure your business is protected, so work with an insurance broker to ensure you’ve got all the coverage you need in your area, including liability insurance, malpractice insurance, disability, worker’s compensation, and unemployment insurance. Plus, you may also want to invest in business overhead insurance to ensure your practice doesn’t fail if you’re temporarily disabled.
Nail The Details
You’ll need to check many boxes before you’re ready to open your doors, and this article is not a comprehensive list of everything you’ll need to do. If you can afford to hire an office manager before you start taking patients, they can be critical in helping you accomplish some of these time-consuming tasks.
Some of the things you’ll need to arrange in the last few months include:
- Getting a phone number
- Applying for provider numbers from Medicare
- Apply for membership in insurance provider networks
- Order all necessary supplies and equipment
- Set up a bank account
- Set up credit card processing
- Set up internet, telephone, and electric service
- Hire a janitorial service and a uniform service
- Choose and Install Patient Management Software
Step 4: Opening The Doors To Your New Dental Practice!
Once you have the logistics lined up, it’s time to fill your office with people and start telling the world about it!
Place employment ads several months in advance to ensure you can find good people with the experience you need. The job market is challenging in 2023, so you may need more time than in previous years to fill positions with great staff members.
Set Your Grand Opening Date
Once everything is ready, it’s time to set a date and put all your effort toward ensuring you’re prepared for that day. You’ll have to start training your employees, organize your workflow, and finalize all human resources paperwork before the big day!
Launch Your Marketing
Work with your marketing agency to build your logo and brand image and start planning your launch marketing campaigns, which should go live about a month before you open your doors. Your optimized website should be up and running by the time your campaigns go live.
Don’t skimp on the budget for your launch—this is a big deal, so make it feel like one! Buy ads in local papers, send postcards to the neighborhood, buy social media ads, and host a big event with balloons and signs out front to draw the attention of passersby.
Is 2023 The Year You Start Your Dental Practice?
Opening a new dental practice is a lot of work, as you’ve seen, but it can be a life-changing experience if you’re well-prepared.
Make sure you do your homework and surround yourself with experienced experts, and you can bring your dream practice to life.
If you’re ready for the opportunity and the challenge of being your own boss, don’t wait. Instead, start preparing to launch your dental practice today!