When you’re ready to start your own dental practice, there’s a lot to think about, not least of which is the financial side of opening an office. From leasing office space to getting the equipment you need, a lot of costs are involved. Navigating the finances of running your own business takes some planning.
Like everything in life, you may never feel fully ready to take the plunge into your own practice. But with preparation and careful planning, you can take that step with confidence. You’ll first need to decide between starting your own practice or buying an existing one. From there, it’s a matter of knowing how much funding you need and making sure you’re not overextended.
Stepping out of the comfort of working as an associate in a practice where someone else is responsible for the details is scary, but owning your own practice comes with rewards that are well worth it. Start with these tips to make sure your dreams come true with the least amount of risk and struggle along the way.
Start From Scratch or Buy an Existing Practice?
Before you work on the finance side of things, decide whether you want to build a practice from the ground up or buy an established practice. There are pros and cons to each option.
First, the obvious benefit of buying an existing practice is that everything is already in place. You won’t have to hunt down the perfect location or buy everything right down to the chairs in the waiting room.
Of course, that comes at a cost. Buying everything all at once is expensive. You’ll also need to carefully review how the practice is performing and take into account updates that might be needed to equipment.
Starting from scratch is costly as well, but it does give you the opportunity to start smaller and expand later, which may be the more affordable option. The ADA estimates the cost of starting a dental practice at about $500,000, with a higher cost if you’re buying a large, thriving practice.
Loans to Finance a Dental Practice
As long as you’re on good financial footing, you shouldn’t have much difficulty with approval for a loan. Most large financial institutions will offer financing to dentists looking to start their own practice.
Compare several loans before you sign anything, and don’t be afraid to fill out more than one application. Rates and terms will differ from bank to bank, so make sure you sit down with a few options and compare the fine print. You should also take advantage of any special offers for members of the ADA. Some banks will reduce fees and offer other benefits as part of the deal.
A traditional bank is just one of the options, though. Today’s online lenders can offer speedy and convenient loan applications and processing. Just remember that fast isn’t always best. Make sure you aren’t jumping into something just because it’s convenient.
An option that offers the potential for lower interest rates is a loan from the US Small Business Administration (SBA). SBA loans generally have more generous terms, but they can also take a long time to process and have strict requirements for eligibility.
Staying on Top of Your Finances
There’s a lot going on when you’re starting a new business, and keeping track of the ins and outs of your finances requires careful attention to the details.
You’ll first need to open a business bank account for handling all of your expenses. With direct deposits and direct payment of bills, you can avoid the mistake of missing a loan payment or forgetting to pay the water bill for your office.
Running a business involves a lot of legal and financial details, so find a good lawyer as well as an accountant to help you stay on top of things. Business taxes and employment laws can be complex, and you’ve got enough going on with building a practice.
Let a professional make sure everything is done by the book. A good accountant can also help you with the right tax strategies for dentists to save you money in the long run.
Cost-Cutting Tips When Starting Your Practice
Looking at the costs involved in starting your practice can be daunting, but there are some ways to keep the bills in check.
Start small. If you’re starting out alone, start with a smaller office space. While a large, airy waiting room and multiple treatment rooms may be part of your vision, that might have to wait.
Once things are established and going well, you can expand your space. But in the beginning, a smaller office comes with a smaller price tag and lower maintenance costs. It also requires a smaller staff to run it, reducing your payroll costs.
Consider a partner. Starting a practice with another dentist allows you to share the costs and may help the practice grow more quickly. Make sure you carefully consider who you want to partner with, however, as dissolving the partnership later can be complex and costly.
Start with an interest-only period. If it’s available, consider taking on an interest-only period at the start of your loan payments. It’s usually offered for the first six months to a year and allows you to make smaller monthly payments while you get established and deal with other costs.
During this time you won’t be paying down the principal of the loan, which does mean slightly higher payments later. But it may be the cushion you need in that first year.
Avoid high-interest credit cards and loans when possible. When buying equipment for your practice, buy as much as you can with cash. (It’s vital to have a decent amount of cash on hand when you start out.) Or, use funds from your business loan to avoid the high cost of credit card interest rates.
Use the cash you have to buy things that would result in drawn-out monthly payments on a high-interest card. Look for options to finance equipment at lower rates where possible.
Save money in other areas of your life. Reducing what you’re paying on other bills opens up more cashflow to your fledgling practice. If you’ve got a high car payment, consider switching to a cheaper set of wheels for a while, or look to refinance the loan.
At the same time, look at the options for reducing the cost of car insurance for dentists. This is also not the time to increase other costs of living, so put that new home purchase on hold.
There are a lot of ways to make owning your own practice affordable. But bear in mind that if it’s not in the cards right now, odds are good you will get there.
Although the numbers have declined a little, by age 55 a solid 92.3% of dentists do have their own practice, and opening a practice as a younger dentist can be a reality, too. Do your research and plan ahead, and it will soon be your name above the door.
Ms. Kasperowicz is an insurance and finance expert who is the managing editor of CarInsuranceCpmparison.com. She is a former Farmers Insurance and Financial Services CSR and has been helping people understand insurance and finances through education for more than 10 years.