In the quest for greater profitability, growth seems a foregone conclusion. If you’re fortunate enough to be at the center of a thriving private practice, purchasing a second location might be on your radar. For many dentists, such a move could pay out massive gains in the long run. For others, it could be an unnecessary risk that leads to ruin.
How do you know if expanding your practice to include a second location is the right decision for you? Is it a venture worth exploring, or a gamble to avoid at all costs? The answer depends on you, or more specifically, your motivation, your core values, and your level of preparedness.
What’s your motivation?
Let’s examine why a private practitioner would choose the complex task of managing two operations at once. If you’ve got great systems in place and you want to give competing DSOs a glimpse at how personalized dentistry can hold its own against the corporate model, you might be able to prove your point while making a hefty profit.
If you have solid systems in place and your current business is robust, then incorporating a second practice would provide the perfect opportunity to not only replicate your success, but more importantly, do so in conjunction with much of your existing overhead, particularly your computer systems, accounting, and back-office staff. Ideally, those costs would not increase.
Other costs would increase, however, and you’d have to be prepared to shoulder those expenses. You’d be paying for two buildings, which means double the maintenance. While your staff wouldn’t exactly double, it would expand considerably since caring for more patients necessitates more hands on deck.
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More challenges of a second practice
This brings me to the biggest challenge: you can’t be in two places at once. You’d want a partner with some skin in the game. Why is having a business partner so critical, particularly when you’ve already proven your industry prowess? In short, you’d need someone on site who not only can put out brush fires, but who wants to put out brush fires as soon as they occur to minimize any potential damage.
Do you have a sense of how your overall role would shift once you brought a second practice online? You’d no longer just be managing an office. You’d be leveraging well-run systems to run a larger enterprise whose components are managed by people you can trust.
If you’re having second thoughts, that’s a good thing. It doesn’t mean you can’t purchase a second practice. It simply means you must prepare yourself first. Start by knowing your core values. People come first. I often say that we’re in the people business. Abundance and prosperity are a natural by-product of caring for people. Make sure that everyone on your team abides by this philosophy. Second, make sure that you’ve surrounded yourself with people who have integrity, which means they do the right thing even when no one is looking.
When managing a small operation, some of my philosophy can fall by the wayside without interfering with profitability. You can run on inertia alone, meaning that organized chaos may reign supreme, but the bills still get paid on time. However, that sloppy work ethic will inevitably kill your attempts to grow profitably. Small cracks in the work become magnified tenfold under the weight of sudden expansion. If you’re struggling to find the right people for your practice, you’re not close to being ready.
What if you do have the proper staff? You’ve managed to secure a team of go-getters who come to work excited, you have a full roster of patients who must schedule months in advance, and you’ve got a fire in your belly for success. Now what? A second practice might very well be your ticket to formulate generational wealth.
Time to put a plan in place
Do you have a business coach? If not, you should seriously consider a trusted advisor who has experience with mergers and acquisitions in dentistry. You’ll also need an accountant who understands dental business integration. You want guidance from professionals who have successfully navigated these ventures before, and who are confident they can help expand and train your team when the time comes.
If you’re serious about moving forward, then you must have cash competence. Fear of remaining solvent must never be an issue. You need assets and liquidity so there are no hiccups in securing proper financing. Taking on a second practice isn’t something you do on a whim, a hope, and a prayer. It’s a calculated decision that, when executed properly, rewards your stakeholders (employees and patients) with greater efficiencies while contributing mightily to your bottom line.
Ultimately, every benefit of taking on a second location stems from greater efficiency. The cost of running both offices must be less than the cost of running each location independently. If it isn’t, then the venture is a no-go. Thankfully, the tools to ensure these efficiencies already exist to some extent. Your main job is to focus on the continued optimization of your current practice.
You’ll know when you’ve reached the limit of your office’s profitability and when a second location would be the next logical step. The thought of expansion will elate you instead of scare you, and the people to make it happen will become accessible when you decide to reach out to them. You’ll witness a natural unfolding of events, with the right opportunities coalescing at the right time. If you work diligently toward that end, your success will be the only outcome worth considering.
Author’s note: Expanding your business requires deft precision. If you would like guidance on how to best grow your practice, contact us at (973) 422-9140 or [email protected]. Our greatest satisfaction comes from lending you the insight on how to effectively achieve your highest potential.
Mark B. Murphy, CEO of Northeast Private Client Group, is an accomplished author, speaker, and motivator who's revolutionizing the financial planning and wealth management industry. He helps entrepreneurs achieve multigenerational wealth through personalized strategies, leveraging his strategic planning and financial engineering expertise. Forbes has ranked him as the number one financial security professional in New Jersey and number 15 nationwide. Additionally, his book, The Ultimate Investment, is a number one bestseller and new release on Amazon.
Editor's note: This article appeared in the November 2023 print edition of Dental Economics magazine. Dentists in North America are eligible for a complimentary print subscription. Sign up here.
