As you think about your career in dentistry, there are three main questions to answer. What will be the focus of your practice? Will you go out on your own, or join an existing practice? And if you go out on your own, should you buy a dental practice or start a new office? Here we’ll discuss what’s involved involved in starting a new practice, and give you some things to think about as you consider the costs.
No doubt about it, the costs of starting a new practice are high. If you are independent and enterprising, and willing to put the time and effort into creating a solid and detailed plan, financing with reasonable terms is available. Buying an existing practice can be similar in cost and you’ll get everything in one package, with adjustments for depreciation of assets. You will also benefit from a couple of pretty big assets that aren’t involved in starting a dental practice: the practice’s reputation and patient base.
Whether building from the ground up or buying, you need to consider many of the same principles.
What You Probably Already Know
When you start a new practice, your practice has to be located somewhere. You have some options here. You can buy a piece of land and build a new building on it. You can lease a piece of land and build a new building on it. You can lease a piece of land with an existing structure. Or you can lease space in a multi-tenant building. The last option is probably the least expensive, but may be the most restrictive in terms of what you can do in your space and in the common areas.
What is the most advantageous option will likely depend on where you practice. Leasing within a multi-tenant building might be the smart move in an urban area whereas buying is probably more practical in a rural area or small town. Even if you lease, it’s highly unlikely the space will be ready for you to move into. You’ll need to budget for the lease (which, unlike an apartment lease, will probably involve a substantial down payment of several months’ rent up front) along with costs for renovations, including decorating and furnishing.
Other major costs include:
- Equipment: this will include everything you need to provide clinical care and operate the practice. Chairs, handpieces, imaging equipment, computers, printers, office supplies, etc.
- Employees: eventually employees will be paid out of revenue, but, when you start or buy a dental practice, you have no revenue. So you need to budget to pay your hygienist, your receptionist, and whoever else you’ll need (along with your lawyer and accountant) to have a functional office. Also, you’ll have to provide insurance and other benefits. Remember that your patients will probably spend more time interacting with your staff than with you, so it’s important to put the time into carefully selecting the right people (it will take more time that you think), then compensating them in a way that makes them happy to work for you.
- Marketing: how are you going to get patients through the door? You’ll have to advertise and make your community aware of you and your services. Here it might be best to start small and increase your advertising budget when you can or if its needs a boost. For more on modern dental practice marketing, read our post on the topic.
- Operating costs: once you’ve staffed and equipped your office, your costs don’t stop. Supplies have to be replaced as they are consumed. Staff has to be paid every month. So do insurance premiums. And utility bills. And so on.
What You Might Not Know
Unless you’ve already ran a small business, there are a lot of costs that might not be on your radar. These can include:
- Self-employment taxes: You aren’t going to just be a dentist. You’ll also be CEO (literally, if you organize your practice as an S-corporation). You’ll also be the human resources department and bookkeeper. However you manage it, at the end of the day, it’s up to you to make sure all of the necessary taxes are being paid, including Social Security and Medicare. This isn’t just what comes out of your paycheck, but includes quarterly payments you have to make as an employer.
- Health insurance: whether you offer this as part of an benefits package for your employees or not, you’ll probably want to have health insurance for yourself and family. In addition to purchasing a plan and making the premium payments, you may want to consider a health savings account or flexible spending account for additional out-of-pocket expenses.
- Vacation time: when you’re an employee, you may enjoy the luxury of paid time off. Not so when you’re self-employed. Anytime you aren’t working is time you aren’t earning. Maybe you won’t take any time off in those early months, but, after a while, this will be something that you will need. Be sure to plan well for it.
- Retirement: you might be inclined to put this last, as retirement is, chronologically, last. But it’s something that will be easier the sooner your start, and it’s highly unlikely that you’ll regret planning for the future. Discuss this with your accountant or financial planner to create a plan that is right for you, including options such as an IRA or other savings plan with tax advantages.
- Maintenance and repairs: it’s smart to create a monthly budget for maintenance and repairs. You want a surplus because some months, you won’t need much, but others, you will. If you’ve used your monthly allotment for a building repair and then have equipment malfunction, you don’t want to have a disruption in your ability to see patients.
This is not a comprehensive list, but gives you something to start with. If you’re starting as an associate, take a look at the practice you’re working in and make notes about what you see that you will have to take care of (and pay for).
ddsmatch Southwest Can Help You Buy a Dental Practice
At ddsmatch Southwest, we have available practices in Texas and New Mexico. As part of our Trusted Transition Process, we specialize in matching the right buyer with the right practice. We understand this is about more than just exchanging money for the keys to a business: its a career choice with far-reaching consequences throughout your life. We want our clients and whoever is on the other side of the transaction to walk away feeling like they’ve each gotten what they wanted out of the deal. If you are interested in buying a dental practice or an associateship, contact us today and find out if we have the right practice for you.