If you want to own your own practice, should you buy an established one or start one from scratch?
I used to think that this was a great time to graduate from dental school because so many dentists in the baby boomer generation would be retiring. It still is a great time to be a dentist, but not for that reason.
In 2009 I made a decision to stop working for other dentists and start my own practice. From concept to construction, my partner and I blazed our own trail to build the practice of our dreams. It wasn’t easy. On opening day, I only saw one patient and it was my father.
If you can find the perfect practice and are able to purchase it, congratulations! But I think those opportunities are even rarer than they used to be. Here are my four reasons why I believe this is so:
(1) Fewer Dentists are Retiring
Since the global economy went in the toilet in 2008, fewer dentists are retiring. The money that was slowly growing in their retirement accounts disappeared very quickly.
Instead of selling their practices, dentists are either continuing to work themselves or they’re hiring associates to do the work while they enter semi-retirement.
If you’re an associate in an office and the dentist is being vague about when he/she will retire, be very careful. Check out this post for my three phases of being an associate. Beware of the dangling carrot! If your goal to buy the practice is being put on hold, make sure you have an airtight contract in place to account for all of your hard work.
(2) The Down Economy has Made the Process More Affordable
The good news about the depressed global economy is that the costs of materials and labor to build your own office have also gone down. You can get more for less. Remember, you don’t get what you deserve, you get what you negotiate. These days you can negotiate lower costs for everything from chairs to paint to networking computers.
Perhaps my biggest savings was when I negotiated my property lease. The terms were more favorable across the board, especially my rent per square foot.
(3) Building Your Own Office is Not Cost-Prohibitive Anymore
I went to my bank to ask for a loan to start my practice. They asked if I had a house to mortgage and I said no. They asked how much money I had saved and I told them that I wanted full financing. They’re response was a bit discouraging.
"You have got to be kidding us! Bwahahahahaha!"
Fortunately there are a few banks out there who understand that dentistry is a special field and are very happy to give us special loans. Our success rate and high earning potential make us excellent candidates for loans! Check out Bank of America Practice Solutions and Wells Fargo Practice Finance for more information.
(4) There is Massive Technology Gap
Currently, retiring dentists and graduating dentists have very different valuations of what a practice is worth. This is a unique time in history for dental offices; the technology gap is larger than the generation gap. Dental schools are outfitted with digital radiography, electronic scheduling and charting, and modern equipment that are not present in many older offices.
But there’s more. I remember the first offices I worked in when I graduated. There were operatory chairs that were older than I was. They had holes in them.
"It still works!"
Now I’m not saying that our generation is superficial; I think new dentists are more aware that our patients do judge books by their covers. It’s hard to sell a large treatment plan when your office looks like it was last designed in 1975.
The problem is that a retiring dentist who has let technology and trends in design pass him/her by for the past ten years or longer will not understand why your purchasing bid is so low. You look at their office and see that you would still have to spend another hundred thousand dollars to get the place up to your standards.
So what should you do? My advice is to look long and hard for your perfect practice to purchase. There’s a very good chance these days that you won’t find it, but it’s worth a look. If you find an opportunity that is good enough and you think you can make it work, make sure the price is right. Don’t overpay just because you think you don’t have an alternative. Opening a start-up practice is always an option; one that I think will become more popular for the next few years until the economy turns around.
For some great information on how to get started, check out the ADA’s resources here.