Congratulations! You’re now the proud owner of your very own dental practice! You likely already know that this is when you get the opportunity to make some serious money, but there are a few things that might occurring to you that you wish you’d known before you signed on the dotted line. Let’s go over 11 of those now.
1. Clinical skills are only a part of what you’ll need to be successful. Loving dentistry is not enough. You need to learn to run a business. That’s why working with a dental CPA is a must. When you own a dental practice, you play three roles: CEO, CFO, and VP-Human Resources.
As CEO, you create the vision of what you want your practice to be. You’ll make the strategic decisions. Do you want to be a high-end cosmetic dentistry practice, or do you want to mainly work with Medicaid patients, or something in between?
The CFO monitors the finances so your practice grows and flourishes, and provides you with a wealth-creating cash flow so you can live your dreams. You’ll need to learn how to read and understand the financials of your practice, and monitor them frequently. Your dental CPA will become an essential partner.
As VP-Human Resources, you’ll need to lead your team, both by example and by getting the right people on your team. Norton always liked to remind dentists that it’s better to hire for attitude and train for skill. Skills can be taught, but attitude is not so easily changed.
If you don’t pay attention to all three of these roles, your practice will fail. Start by strengthening your weakest area, and acknowledge that at times you’ll need outside advice to get you to the next level.
2. Overhead for a dental practice is expensive. When you bought this practice, you likely focused on the top line revenues, and thought, well, with some discipline, I’ll be able to save a boatload of cash.
Wrong.
When you acquire a dental practice, you also acquire the cost structure of the selling dentist. Your biggest expense is for payroll, and assuming most people stayed on, you’re stuck with that. All the other services that your predecessor paid for are probably what you’ll need to keep paying for for the foreseeable future. We advise all our dentist clients to wait at least a year before you change anything. Once you see how everything works (or doesn’t work) together, then you can make some changes.
3. Dentists tend to have back and neck issues. You may already be painfully aware of this, so make sure you do everything you can for yourself (and for your hygienists!) to minimize this.
4. Look at your finances before you buy. Can you really afford it? Will you have the resources to pay off a business loan, your student loans, and your home mortgage? Working with a dental CPA can help you plan your cash flow so you have enough money to manage your business, pay down debt, and enjoy the fruits of your labor. A dental CPA can also help you decide whether it’s better to buy your building, or keep renting.
5. You might be putting in more hours at work than you think. Besides clinical work, as practice owner, you’ll also be putting in time studying the financial performance of your firm, developing growth strategies, and researching various options for adding technology upgrades and new equipment. You’ll also be developing and fine-tuning the systems for your operations.
6. Do the services offered by this practice match my current skill set? Sure, a high-end cosmetic dentistry practice can be extremely profitable, but do you know how to do all the different procedures your predecessor did? If there’s a mismatch, you could be in for a few tough years until you either acquire those skills, hire someone who has them, or pivot your practice so it matches what you know how to do.
7. Is the office in a location where I want to keep my practice for the foreseeable future? Moving can be expensive. Besides just moving your equipment, furniture, and records, you may have extensive (and expensive!) remodeling and reconstruction of your new space. And there will be a few patients who won’t make the move with you, preferring to switch to another dentist in the neighborhood to driving to a new part of town. You might lose a few staff members as well, if their commute becomes more difficult.
8. Are the revenue and profit projections realistic? Working with a dental CPA beforehand to get a realistic projections of revenue and profits is essential to determining whether you can afford this practice or not. A selling dentist always wants the best price, and may be painting a rosy picture of his practice to get top dollar. But now that it’s yours, you’re finding that it’s not quite so rosy. The payments on the note, combined with your other financial obligations are stretching your budget.
9. Does your image of your dream office match the patients you serve? Before remodeling your practice, make sure the intended decor won’t repel the community of patients your practice serves. You may want an opulent, high-end appearance, but that might make your existing patients and new patients think you’re too expensive. Likewise, that youthful, exuberant, bright decor you love may be off-putting to patients accustomed to white-glove treatment.
10. Dental insurance will play a big role in determining how you practice dentistry. Insurance companies, like any business, exist to make money for their shareholders. It’s in their financial interest to pay out the smallest reimbursement they can. That means they may disagree with you about the best treatment option for your patients. If you can’t convince the insurance company to pay for the more expensive option, and your patient isn’t willing or able to pay the difference, you may be stuck providing sub-optimal treatments for your patients.
11. Your team has a greater impact on patient satisfaction than you do. Make sure they’re putting out the consistent message you want your patients to hear. Your team of front desk staff, hygienists, and assistants probably spend more time with your patients than you do. That means it’s essential that everyone be on the same page for how patients should be treated. Develop systems and scripts for every patient interaction and make sure everyone understands their importance and follows them consistently.
These are only a few of the issues you need to consider when you buy a dental practice. If you’ve already bought a practice, or if you’re considering buying a practice, and these questions are making you uneasy, we’ve got you covered. Here at the Hindley-Burgmaier Group, we specialize in every aspect of dental practice ownership — from the initial purchase to maximizing your profits and smart financial planning to exit strategies. Call our office today at 505-299-8383 to find out how we can help you!