Buying and financing dental practices is a big decision. Here are some key considerations of dental professionals who are looking to expand their practice through financing.
Clearly define your goals
Defining your goals may seem like an obvious step, but it's a crucial one. Do you need a new office to accommodate an influx of patients? Perhaps you’re thinking about taking on a more specialized focus, such as pedodontics? Or maybe you’re looking to have an office in an underserved part of your city?
If you’re struggling with capacity and need a new location, you may also want to explore the costs of hiring more staff. Or, if you’re thinking about adding a new location to serve a specific specialty, you will need to factor in costs for new equipment that you may not have in your current practice.
5 tips to help grow your dental practice
Factor in practice management
When buying an existing dental practice, you need to explore whether the practice aligns with your vision and patient care philosophy.
Does your specialty line up with the practice’s services? Do you like the facility and location? And most important, could you envision yourself working there?
Whether purchasing an existing practice or opening a new location, you also must investigate the area demographics. Are you looking to serve the same patients or target a new demographic? You also need to figure out whether you would need to hire new staff, or if this location is in a centralized enough location for your existing team to handle both locations.
If purchasing an existing practice, you also need to find out how their staff organizes their records, billing, and payments. What are their onboarding and billing dispute processes? Not only will this give insight on if the practice is run smoothly, but it will also give insight into any additional operations investments, such as office management hires, new office equipment, and billing management software.
You must determine how much operational and culture change would be necessary to support your vision and goals. Not only will this factor into financing, but it will also help give clarity on the time and energy involved in getting the practice moving at the pace you want.
So you're ready to expand? Here's how
Conduct financial due diligence
While exploring culture and existing operations is important, you also must do your financial due diligence. If it’s an existing practice, make sure you review the practice’s cash flow, revenue forecasts, accounts receivable and payable, debts, contracts, equipment, and any previous legal issues and claims. It could also be helpful to find out why the current owner is selling.
Not only will this give you an understanding of the potential risks involved, but it will also help you negotiate favorable purchase pricing and terms.
Now that you’ve explored your reasoning and goals, the needs of your new community, and your due diligence when it comes to existing businesses and property, it's time to crunch the numbers. The decision to buy or expand will come down to cost—not just the cost to run the business but also cost to improve or launch the business.
Make a list of operational costs such as payroll, utilities, building maintenance, and inventory. Beyond these costs, explore the other mentioned factors: remodeling, new staff, new equipment, and system updates.
You'll also want to consider how long it will take to earn a profit and whether it’s feasible to keep the practice operational until then. You will want enough cash to make necessary changes and keep the location functional. It is also smart to factor in the cost of lost productivity during the transition and the potential loss of patients.
Choose the right financial partner
Dental professionals and dental practices have unique needs and often a unique credit and purchasing history. It is important to find a provider that knows how dentists operate and understands the intricacies involved in expanding and purchasing new dental practices. Partnering with a provider that has experience within the dental industry can speed up the process and make expanding your practice a cinch.
Whether you’re purchasing an existing practice or expanding into a new location, defining your goals, doing your research, and crunching the numbers can help position you for success and make expanding and growing your business not only exciting but also fruitful.
Chris Panebianco is chief marketing officer for BHG and is responsible for all marketing initiatives to support BHG’s commercial working capital loans, personal financing, commercial and personal credit cards, patient lending, SBA loans, and collections management.
