By: Drew Hinrichs, CPA, CEO of Engage Advisors
For those of you who plan to own a practice but aren’t sure if you want to buy an existing business, you also have the option of starting up a practice on your own. Building a business from scratch comes with some pretty big challenges, but for some dentists, it’s by far the best option. The trick is knowing whether or not it’s the right choice for you.
To help decide, let’s walk through the risks and rewards of starting your own practice. We’ll look at the risks first.
Risk #1: Building a Patient Base
Starting a practice from scratch means you start with zero patients. By comparison, a healthy dental practice has about 1800 active patients. Ultimately, your success will be determined by how quickly you can go from zero to 1800. If you add an average of 20 new patients a month, it will take 90 months, or 7.5 years. If you can increase that average to 30 new patients per month, you’ll get there in 5 years. Or maybe you push really hard and add 75 patients each month, which allows you to reach 1800 in just two years. Whatever approach you choose, you need to have a solid plan and be inspired by the challenge.
Risk #2: Paying for Overhead
You may not be borrowing $1M to buy a practice, but you will still need money to get started. No matter how careful you are with your budget, there are some expenses you can’t avoid, such as:
- Lease and utilities for office space
- Dental equipment
- Office furniture and equipment
You’ll need to pay for all of these things and more just to start and before any money is coming in, so plan for it. You’ll want to scale up your staff as your patient inflow increases. For instance, you might start out by performing the hygienist duties yourself, and then add a hygienist once you have the cash flow to pay someone. But just as you want to avoid hiring too many people too soon, you also want to be sure you have enough people so you’re not trying to do everything yourself.
Risk #3: A Plan for Personal Income
You have expenses that need to be paid every month – student loans, rent or mortgage, transportation costs, food, clothing, etc. Until your practice is profitable, in addition to having a plan to pay the office overhead, you need to figure out how to cover your personal overhead. To minimize borrowing, some dentists opt to hire out one or two days a week while they’re getting their practice off the ground, then spend 3-4 days at their office. They may be working 6 days a week for a period of time. You have to decide if that’s something you can tolerate without burning out.
We’ve established that it’s a lot of work to start a new practice, now let’s consider the rewards.
Reward #1: You Make All the Choices
With a start-up you get to decide everything – location, staff, office décor, business culture. You have complete control. This can be especially appealing if you have had some bad experiences in the past and want to avoid another toxic work environment.
Reward #2: Create the Systems You Want
You never have to deal with someone else’s way of doing things or undertake the monumental task of getting people to change their procedures. Likewise, you don’t inherit someone else’s bad habits. When you start from scratch, you get to set up all of the processes and systems correctly the first time.
Reward #3: Lessons Learned
You will learn a lot through the process of building a practice from the ground up. These are priceless lessons that will help you be successful in the long run!
Starting a practice from scratch isn’t for everyone, but if you are undaunted by the challenges and are motivated by the chance to build a business that reflects your unique sensibilities, it’s a great option.
If you’re thinking about owning a practice or have questions about how to get started, schedule a call with our team at Engage Advisors. We can discuss your options, and help you make a plan that will put you on the path to success.