North Texas Dentistry Volume 8 Issue 5 2018 ISSUE 5 DE | Page 26

practice models
THE
PRACTICE
by Haylee Davis and Justin Kendall
It’s a common question: What is the best way to start your own dental practice?
he early reality in dentistry was that nearly every dentist
would simply “hang a shingle” and begin seeing
patients. Starting a new practice was fairly inexpensive
and for the most part, straightforward. In today’s world, how-
ever, practice ownership is neither inexpensive nor simple,
yet it still has potential to be one of the most rewarding experi-
ences in a dentist’s career as long as fundamental principles
are considered.
T
Purchase vs. Start-Up
Purchasing a profitable, existing practice can bring instant cash-
flow, an established patient base, valuable human capital, and
operational systems. For many doctors, the predictability of
purchasing an existing practice is desirable, but for others, the
opportunity to craft a new office designed strategically to meet
the specific standards, tastes, desires and needs of its owner is
unparalleled and worth the risk.
Preparation – Experience & Stability
Preparing to start a dental practice is critical and the two most
important pieces of preparation are experience and financial
stability. Most lenders require the borrowing dentist to have a
minimum of two years of post-dental school clinical experience
as well as cash reserve, minimal debt and a part-time associate-
ship that will continue after the new practice opens. Generally,
an average mortgage, car payment and student loan are accept-
able, but credit card balances, larger mortgages or multiple
installment loans give lenders cause for concern. The average
dental start-up provides around $100,000.00 in income to its
owner during the early years, and the new owner’s lifestyle,
accordingly to many lenders, should be sustainable within that
range. If the new owner wishes to include a spouse’s income to
qualify for lending, the spouse will likely need to guarantee the
debt with the new owner.
26 NORTH TEXAS DENTISTRY | www.northtexasdentistry.com
Financing
Once established clinically and otherwise, the first step toward
practice ownership is to secure financing. When carried out
properly, the dental practice remains one of the most sought-
after small business loans in the industry. As such, lenders
clamor to lend to dentists. Larger banks such as Bank of America
or Wells Fargo offer standard loan packages and reasonable
terms while regional banks such as Sunflower Bank have flexible
lending opportunities with competitive terms. Selecting a lender
should not be about discovering who can offer an approval;
rather, the banking relationship should be at the forefront of this
choice. Remember, the start-up loan is the first of many times
the practice will need to secure funding. An experienced consult-
ant can assist you in selecting the bank that is likely to be the
best long-term fit for personal and professional needs.
Cost & Timeline
Most dental practice start-up projects take six to twelve months
from inception to opening day and cost ranges from
$350,000.00 to $600,000.00+ with the average new office cost
landing around $500,000.00, exclusive of any real estate pur-
chase considerations. Cost, of course, depends on a number of
variables, with the largest contributing factors being location,
practice size and number of operatories plumbed and equipped.
Legal & Financial Framework
The legal and financial framework of the dental practice is para-
mount to its success. While it may be tempting to keep legal and
other financial advising costs to a minimum during the start-
up process, it certainly does not pay in the long run to do so.
The start-up team should include a qualified and experienced
attorney and financial team. Selecting the appropriate legal
entity, designing personal and professional budgets and imple-