So you want to be a practice owner someday: Planning for growth and expansion
Editor’s note: This is the fifth article in a summer series of New Dentist Now blog posts on practice ownership from Wells Fargo Practice Finance, the practice lender endorsed by ADA Business Resources. To read other articles from the series, click here.
Most new practice owners don’t open their first practice with thoughts of immediate growth in mind. Nevertheless, it’s critical to layout future plans early in your career so you are prepared when the time comes to expand. While there are some clear indicators that will tell you when it’s time to update, expand or relocate your office, getting ahead of the process so you are in control will make the process easier, and the outcome more rewarding.
There are three facets to growing your practice – increasing the number of patients you treat, increasing the types of services you provide, and expanding your physical space to accommodate these patients and services. Your plan for growth needs to address all three aspects, using the following guidelines.
Put your growth plan in writing
The first task in preparing for growth is to have a written plan that outlines your vision for your practice. For instance:
- How large do you ultimately want your practice to be? Specify the number of patients, operatories and associates you envision for your practice, and the amount of revenue you would like to achieve over the next five years or so.
- Outline how you will attract new patients. Will you use local advertising, internal marketing, promotional programs?
- Can you manage this growth in place with your current office set-up or an expansion, or will you need to move your practice location?
- What kind of financing will be required for a practice expansion or relocation? Is your financial profile robust enough to ensure you can fund future growth?
Putting these details in writing mentally prepares you to take all the necessary steps for making a smooth transition to a larger practice when your growth plans succeed.
Understand the growth indicators
How will you know when it’s time to expand to a larger practice? Some key growth indicators for triggering an expansion might be:
- Your space is not adequately meeting patient demand, with appointments booked out for two or more weeks. Generally speaking, if you are at 85% of capacity in your current facility, it’s time to start thinking about expanding or relocating your office.
- You are referring too many patients out for specialty services. This represents lost revenue that could be kept in-practice if you can add an associate who offers these services.
- Your technology is not keeping up with the competition. If your equipment is clearly dated and incapable of delivering a high level of efficiency and performance, it’s time to expand your services with a technology upgrade.
Prepare for the impact
Remember that an increased patient load not only impacts your facility with potential overcrowding and traffic flow issues, but also your staff and operations.
- Staff– Be sure you have capable staff that can continue to provide excellent service to your full patient base. Consider including part-time or temporary staff positions to maximize your cash flow and build flexibility into your payroll until your patient base stabilizes.
- Support – Don’t forget that more patients means you will be making a greater demand on your dental laboratory. Make sure your laboratory can continue to provide the turnaround time you expect, and add an additional lab to your support team if necessary.
- Dental tools – Your computer software should be able to absorb an increase in patients, but not necessarily your dental tools. Take an inventory of your equipment and determine how many units you need of each tool to service your existing patient base. Then determine how many new patients you have added or plan to add this year – say, an additional 15%. Multiply your current inventory by 15% and this will tell you the equipment purchases you will need to include in your practice growth budget.
Once you have carefully outlined a plan for the growth of your practice, understood the key growth indicators, and primed your facility for increased traffic, you have taken some of the key steps in preparing for the success that is bound to come your way.