Let’s begin by saying that, as a dentist, you’ve chosen an amazing line of work with proven high success rates. With every chapter, every experience and every challenge you encounter in your career, there is opportunity. Hopefully you will take from this article insight about growth, learning and avoiding the costly mistakes many new practice owners make.
Here are 10 tips to make your practice start-up experience a successful one:
- Do some homework
The failure rate for dental practices is very low, but when it happens, it can be a life-defining disaster, both professionally and personally. In the past, one could build a practice from scratch and have a booked schedule of patients before opening for business. This is rarely the case today. As soon as your mind is made up to become your own boss, start exploring the unknowns that lie ahead. Talk with current practice owners about what challenges they faced, what they did to prevail, and what (if anything) they would do differently today. Once you’re comfortable with the challenges you’re likely to face, you’re ready to move on to tip number two.
- Build a network of trusted advisers
Starting on the day you decide to start a practice, you’ll meet many people. As you filter through all the advice and various relationships you’ll establish, it is important to team yourself with industry-specific advisers who will help you with the many crucial decisions you’ll make. Your team of trusted advisers should include:
Dental-specific building contractors:
This is very important. Trying to save money with a general contractor who’s not experienced in building out dental practices can lead to overruns and frustration. Dental-specific contractors are easy to find: Your equipment specialist can likely put you in touch with contractors they’ve worked with, or you can look for contractors at your state annual session. You can also check with colleagues who may have valuable feedback about contractor performance.
A specialised CPA: A general dentist can do root canals, but an endodontist is highly recommended for more difficult procedures. In much the same way, a specialised Certified Public Accountant is highly recommended for your practice. Of course, there are many general CPAs who would like to earn your business, but we encourage you to have a conversation with a CPA who works with at least 25 dental clients.
A dental equipment specialist: A good equipment specialist won’t try to sell you as much equipment as your financing will allow, but instead will look out for your best interests. This person can also be one of your most insightful advisers. In fact, it’s not uncommon for a dental practice owner to maintain a career-long relationship with a trusted equipment specialist. It is important to these specialists that your start-up practice is positioned for success, since they hope to provide you with updated equipment and the latest technology for many years to come.
A dental-specific lender: Many financial institutions — including local, regional, and national banks, SBA lenders and loan brokers — are interested in financing dental practices. Some are experienced in the dental industry and some are general small-business lenders who typically look to lend against the collateral in the transaction and don’t always consider soft costs, which include build-out or tenant improvement and working capital. Dental-specific lenders are familiar with the true cost of a start-up practice, which may run upwards of some very huge amount of money (and of which only a third is equipment costs.) It’s important to work with a lender who understands the project breakdown.
As your business grows, you are likely to meet other dental industry advisers who can help you make key business decisions. You may have a need for a dental-focused attorney, for example, or a practice management consultant who can help you become and stay efficient as your practice grows. A practice management consultant can also be an excellent source in your practice-planning stage for insights on establishing internal control systems and making personnel decisions.
While there is no shortage of banks wanting to lend to dentists, you may find that your local bank and others are unfamiliar with the cost and funding allocation requirements for a start-up practice. But many major lenders are familiar with your needs and can provide you with the required funds. Also, be sure not to base your loan decision solely on interest rate. Although the rate is important in keeping your payments lower, it should only be one factor in your decision-making process. Here are some other loan features to consider:
Loan term: Similar to your home mortgage, you should consider the longest term available (for example, 10 to 15 years.) This means you’ll have lower payments as you begin to grow your revenue stream. If your business does better than expected, you can always pay down your loan, the same way you might pay down a mortgage. Loans can typically be prepaid after three to five years without a penalty.
Pre-payment: Pre-payment options vary from lender to lender. Loan pre-payment terms are less important in the early years as you open and build your practice. But pre-paying your loan may become an option after your practice is no longer considered a start-up and is looked upon by lenders as an established practice. This occurs when you have demonstrated proven practice collections, adequate cash flow, and the new loan you’re considering is in your best interest — or more attractive than your existing loan.
Interest rate. Rates can be fixed for the term or adjust with prime or other rate indexes. Although payments may be lower with an adjustable rate, rates will eventually rise; so locking in a competitive fixed rate for the next seven to 15 years is your best solution.
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