So you want to be a practice owner someday: Paths to ownership – Should you acquire or build?

By | July 22, 2015

Editor’s note: This is the second article in a summer series of New Dentist Now blog posts on practice ownership. To read other articles from the series, click here.

Congratulations on your decision to become a practice owner! You have many challenges and rewards ahead of you. One of your first tasks is to decide whether to acquire an existing dental practice, or start your own. The ideal choice for you depends on your personality, professional interests and circumstances, and will become increasingly clear as you explore each path to ownership. Below are some of the advantages and disadvantages of a practice acquisition versus start-up, according to Wells Fargo Practice Finance, the practice lender endorsed by ADA Business Resources.

Wells FargoPractice acquisition: Pros and cons

A practice acquisition can be an easier transition for new doctors as systems and cash flow are already in place. In a true turnkey situation, you could potentially start working on patients the same day you obtain the keys to the office. Benefits of acquiring a practice include:

  • Immediate source of production. A beneficial practice acquisition provides an established patient base and income flow, so you can immediately cover loan payments for the purchase while tweaking the details of the practice over time.
  • Ready staff of employees. If you can retain the employees currently in the practice, you will save hours of time in hiring and training hygienists and office staff and have a ready foundation for ongoing operations.
  • Support systems in place. An existing practice will have scheduling, patient tracking, and operational systems in place, saving you time in selecting and installing these types of support mechanisms.
  • Less reliant on marketing. Since you are purchasing a practice that already produces income, you are less dependent on aggressive marketing efforts to generate interest, commitment, and cash flow.
  • Easier loan approval. You may find it’s easier to attain a loan for a practice acquisition than a start-up, as the business has a proven track record upon which the lending company can base its decision.

However, acquisitions can also have their share of problems, which makes it especially important to conduct thorough due diligence. For example, you could inherit troublesome employees who require training or discipline, inefficient procedures or office systems that need to be overhauled, outdated equipment that should be replaced, or a dated facility that needs remodeling. You may also find that the type of dental services provided at the facility are not a true fit for your interests or specialty, requiring you to gradually transition to the offerings and services you prefer. It’s up to you to determine whether it’s worth your time and money to overcome these issues.

Practice start-up: The satisfaction of doing it yourself

Nothing beats the feeling of being in control of your circumstances, and this is the key benefit of the practice start-up:

  • Complete control. With a start-up, you have the ultimate degree of control in creating the professional environment you want.  From the facility itself to equipment, systems and employees, you’re in charge of deciding what works best for you.
  • Creative endeavor. You have a unique opportunity to express your professional and personal taste, unimpeded by dated equipment and facilities or the inheritance of someone else’s problems.
  • Set your own pace. Since you don’t have existing patients to serve, you can set the pace for your transition to ownership, continuing to work as an employee a couple of days a week if necessary while you gradually build your facility and practice.

Of course, start-ups come with their own brand of challenges and risks, such as:

  • Time consuming. Time you could be investing in patient relationships will be spent making numerous decisions about office design, equipment purchases, employee hiring, systems and protocols, and patient outreach. You will need to invest more time in growing the practice than with an acquisition, requiring excellent organizational skills.
  • Marketing-intensive. The success of your start-up will be dependent on your ability to sell your services, and will require a significant degree of planning and marketing skills to establish the business.
  • Location constraints. You will need to choose a location that can demographically support a new dental practice to ensure long-term success. This may limit your practice location options.
  • Loan limitations. Some loan companies may be more reluctant to lend funds for a practice start-up as there is no income history, existing equipment or property to use as collateral. This is particularly true for lenders who are not specialists in professional practice lending.

No matter which path you choose, it’s most important to ensure your choice fits your personal style, situation, and needs. This is the key to attaining professional success, personal satisfaction and enjoyment throughout your business career.

Leave a Reply

Your email address will not be published. Required fields are marked *