How to prepare for dental practice ownership

Practice Ownership Article

How to prepare for practice ownership

Do you want to be an owner instead of an employee?  If dental practice ownership has been your dream, don’t assume that it’s out of reach or impractical.  For many, ownership is still the most rewarding path to independence and wealth.

Concerned about your student debt? Don’t be.

Student debt can create a level of uncertainty that makes you unsure of the path you should pursue.  It may make dental practice ownership seem out of reach.  However, the main ingredient in preparing for ownership is to manage your student debt payment and your lifestyle to a conservative, comfortable level.  The amount of overall student debt does not usually keep you from dental practice ownership.

Pathways to ownership.

If you want to be an owner instead of an employee, there are three distinct pathways that you can take – starting your own practice, buying a practice or partial ownership.

Start a Dental Practice:

Starting a dental practice can work, but it is also higher risk than other options. If you are in newly developing area, starting a practice instead of acquiring one may make more sense. If you aren’t sure, a review of the area’s demographics will help you decide. Talk to advisors in your field from the real estate, banking, supply/equipment and consulting side to help to identify an underserved area.

If you are considering this route, be sure to have business plans and projections so that you can predict what the risk will be.  Having a little money saved (liquidity) and a second source of income will help hedge your risks until your practice takes off. This is where an advisory team is crucial in understanding your goals and will help you assess the risk.

Buy a Dental Practice:

This is the most common way people become dental practice owners in the Pacific Northwest. There is less risk associated with purchasing a practice than there is with starting your own. Metropolitan areas are typically considered sellers’ markets and rural communities are considered buyers’ markets. If you’re in a sellers’ market, you need to have your advisory team established so that you are ready to pounce on any acquisition opportunity. This team will help you evaluate the opportunity and assess the risk. In short, position yourself such that you can make an educated decision very quickly.

How should you position yourself beyond building out your advisory team?

Aim to Become a Partial Dental Practice Owner:

In some unique situations, you can become an employee at a dental practice with the intention of becoming a partial owner at some point. This is called practice buy-in. The owner will bring you on with the intention of eventually selling you part of their practice. Most would say your advisory team is still necessary, especially your lawyer, your accountant and your lender.

Be sure to think about what your pathway will be (how long you will be employed before becoming partial owner, how much of the practice you will purchase, etc.) so that you can have the legal agreements set up. It is also important that you consider how well you get along with the other partial owner. A partnership is a business marriage and it needs to be approached with delicacy and special consideration.

Build an advisory team.

As you begin the ownership or acquisition process, you will need to build out a team that can support and guide you as you go. This assembled team of professional will be able to guide you in your decision making and can ask the questions you may not know to ask.

Who is part of this advisory team?

  1. Dental Accountant: Not only can this person help you with analyzing the opportunities that are in front of you, but they have special expertise that will help you with the financial management of your practice in the way a general accountant wouldn’t be able to.
  2. Specialized Practice Lender: A specialized practice lender can help prequalify you for financing and educate you on the fiscal structures and cash flow of your opportunity.
  3. Dental Lawyer: A dental lawyer is essential for reviewing all of the contracts you will encounter as you grow your practice (i.e. employment, practice purchase, real estate, etc.).
  4. Insurance Agent: Whether purchasing an existing practice or starting your own, you will encounter insurance needs such as life, disability and business insurances. Having a knowledgeable person that can guide you through structuring these things will be a great tool.
  5. Real Estate Agent: The key is to have an agent that is specific to your specialty. This help is essential for finding the best spot for your practice. It’s also important to find a broker that is knowledgeable and interested in private practice.
  6. Dental Construction Firm: Practice design and development is very specialized, and you’ll need contractors who are knowledgeable on the specifics of your needs.
  7. Business Consultant: A consultant could be a great tool as you begin planning your business. For example, if you are looking to start your own practice, a consultant can help you build out your office as well as teach you how to manage a team.
  8. Equipment Vendor/Supply Company: If you own a practice, it is obvious that you will have equipment needs whether you’re building a new office or maintaining a current one. If you work exclusively with one company, you will get a much better level of service than you will if you have relationships with multiple vendors.

 

Enter HomeStreet

As dental practice specialists, we know how to access every member of this team. In addition, we have loan programs specific to the needs of practices, including up to 100% financing for practice purchases and major remodels.   

With more than 100 years of combined experience providing financing for professional practices, HomeStreet has an expert team that can address the all the needs of dental practice owners throughout the West Coast.

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