Practice Start-up Strategies By: Jason Tanoory, DDS & Jason Luchtefeld, DDS & August de Oliveira, DDS

Establishing a dental practice can be a daunting, perhaps intimidating proposition. But just ask Drs. Jason Tanoory (in solo practice in New York for two years), Jason Luchtefeld (in solo practice in Colorado three years), and August de Oliveira (in solo practice in California four years), it can be done.

Drs. Tanoory and Luchtefeld began their practices from scratch and Dr. de Oliveira bought a pre-existing practice. Following are some of the challenges they faced and how they dealt with them.

Dr. Tanoory: The decision on where to locate my practice was based on two factors: 1) Where do I want to live and raise a family, and 2) Is there a need for a dentist in that area?

Family, to me, is by far the most important. If you and your family are not happy, then your professional life will suffer. I chose to settle in a small town in upstate New York because it was a 90-minute drive to my and my spouse’s families, I wanted my children to be raised in a semi-rural area, and it fit our lifestyle.

The second factor, a need for a dentist in the area, is also important. The national population to dentist ratio hovers at about 1600:1. This is a key piece of information to have when choosing a spot. I am a firm believer that an eager dentist can go into any part of the country and develop a successful practice. How quickly the success is reached depends on the saturation of dentists in the area. The lower the patient to dentist ratio the more likely you will have to cater to initial patient desires so they choose your office. Issues like participation in their dental plan, weekend and evening hours, and the range of services provided will help separate you from the masses in a saturated area. It stands to reason then, in an area in need of dentists, a start-up practice could become successful somewhat quicker.

Dr. Luchtefeld: To look for an area to practice, I started at the library. What an amazing waste of time. I am sure the library has great census information, the problem is figuring it out. I didn’t have the time or patience so I logged onto the Internet. The communities I was researching happened to have some demographic information online that helped tremendously. Plus, the American Dental Association provides detailed zip code information for a fee.

The basic numbers I looked for were household income, population growth, population, age breakdown, per capita income, and the number of dentists. Using the demographic information and my own personal likes and dislikes I decided on Summit County, Colorado. Now it was time to look for an office space. I came upon two choices for office space. Choice One was next door to the local grocery store and Choice Two was across the street in a Commercial/Residential building. After much negotiating and internal decision making I decided on Choice Two.

Choice Two was new construction in a mountain theme. Good visibility, good traffic flow and a good landlord. I felt really good about selecting this slightly more professional building.

Dr. de Oliveira: When I decided I wanted to be the captain of my own ship, I went with a high credit score and an equal level of gullibility to my friendly local practice broker. I was willing to work any place within 30 minutes of my home. I did not care what type of practice, I just wanted in.

I can remember the day perfectly. I was happily reading a People Magazine, I mean, a research dental journal, during some down time as an associate. My practice broker called about a great practice. Remembering Encino was the backdrop of the 1987 award-winning blockbuster, Encino Man starring Pauly Shore, I knew that it was destiny. So, I drove over after work and took it all in: four operatories, nice building, great dentist and staff. Utilizing the shrewd business negotiating skills passed on to me in dental school, I made a full price offer seconds out of the waiting room. Four weeks later, I was officially a practice owner. Luckily, I bought a fee-for-service office in an upscale area, Encino, California.

Dr. Tanoory: Office design depends on the amount of working capital you are willing to borrow. I knew my start-up was not going to be my dream office so I was comfortable seeking out FREE advice on the best layout for my budget. Any dental supply company has designers who can give you ideas on an office layout. They normally do a very nice job, listening to your wants, goals and concerns. This service is normally free. The supply company is making a good faith donation of their services, hoping you will ultimately use them as your supplier.

For dentists who have more capital at their disposal, there are design firms that specialize in dental offices. Companies such as T.H.E. Design and UNTHANK are two that are well known with great reputations.

The size of the office for me was a no-brainer. I didn’t want to be in a 3,000 square foot dental Mecca. I couldn’t afford it. I decided to start a small 1,000 square foot office with two treatment rooms. Another general rule is 350 total square feet for every treatment room. So, a three-operatory practice could snug into a 1,200 square foot office. For me, being small helped keep my start-up costs low. In retrospect, I should have built a space that would have allowed for five treatment rooms, only outfitting two at the start. As the patient base, and cash flow, grew the additional rooms could have been outfitted.

Dr. Luchtefeld: To design my office I picked up books from Patterson Dental Supply, Goetze Dental, and the ADA. I read through them once. I looked at the pictures a lot! I came up with some rough ideas of how I wanted my office designed. I requested plans and input from Patterson, Goetze, and Sullivan-Schein. I felt Patterson and Goetze were more willing to work with me, but I ultimately chose Goetze based partly on the design process.

I developed an office plan that was clean, efficient, esthetic, and comfortable. I wanted the operatories to have a very professional appearance and the reception area to be very comfortable. So far, I have received numerous comments on the comfort and appearance of the office.

Dr. de Oliveira: When the dentist that they have been seeing leaves, if you keep everything the same chances are you will keep the patients. Not me, I wanted to change everything. If it wasn’t bolted to the floor, it got a makeover. If it was bolted down, I at least yanked on it a few times. I had a vision of dental utopia, and it did not include colors that were popular in the eighties. I changed the charts, I changed the instruments, I even changed the upholstery. After everything, I ended up with a new looking office. One may argue that this is a good thing. But looking back I would have kept things the same, and channeled that energy into retaining my existing patients and developing more of a relationship with the staff. Your brain is in hyperdrive during the first few months of a practice purchase, the last thing you need is to retrain your staff with new forms, or figure out why your new PM software doesn’t work.

Dr. Tanoory: I am a true believer in making patient education and treatment presentations as easy and non-confrontational as possible. For me this meant an investment in digital radiography, digital clinical photography and treatment rooms with computers. Being able to show patients some of the issues that present in their mouth and explaining these problems in terms they can understand make treatment acceptance very predictable.

Dr. Luchtefeld: I started out high tech (digital radiography, intraoral cameras, computers in all ops, etc.). The computer system was important to me. I wanted the latest and greatest. The office was networked and we started essentially paperless from day one. The company I used (now called Computer Resource Technologies-CRT) was instrumental in getting the equipment in and working on short notice. They also installed and trained the office on the software.

Most of the “high-tech” equipment was stuff my patients hadn’t seen before so it made an immeasurable impression. I believe that going “low-tech” and inexpensive has its place, but one has to consider the cost of upgrading eventually. For me, it was easy to go straight to the good stuff!

Dr. de Oliveira: One of the benefits of owning your own practice is you get to buy whatever you want. This is a well-documented fact every dental sales representative is educated about. I bought intraoral cameras, handpieces, composite lights and composite systems. I mean, why should I trust the previous dentist with 35 years of dental experience and great clinical skills? I must have spent tens-of-thousands of dollars on gadgets and gizmos that stood idle for at least a year. I was so preoccupied with learning the clinical and managerial skills necessary to running my own office, I didn’t have time to study the 500-page, CEREC 9 4-D, 2.0 manual. Cash flow is always king in running a dental business, but most so in the beginning. It will take a few months before insurance checks come in. I’m not saying not to buy the gizmos. Ask my staff, my office looks like Radio Shack without the dorky sign. Wait a year, find out what’s broken, then go nuts.

Dr. Tanoory: Where do you get capital? Ideally a generous rich uncle. Assuming that’s not a possibility there are two other reliable sources:

1. A commercial bank, be it local or national.

2. A practice financing company specific to dental needs.

The biggest advantage of receiving a loan from a commercial bank is, of course, the interest rate. On average, commercial banks have rates up to 4 points lower than dental specific practice financing companies. This equals a huge savings over the long haul.

The problem is banks rarely have an idea what the earning potential of a young, eager dentist with a good head on his/her shoulders has. Banks often need to see a very detailed business plan, revenue projections and marketing strategies. Business plans should include: the cost of equipment, new or used, estimated build-out costs, staff salaries, marketing, and all the other “little things”.

Practice financing companies; however, do have advantages. They normally employ dental specific business consultants who can help with everything related to a start-up including demographic research and proper marketing of a dental office. These companies pay for these services through higher interest rates on the loan to the borrowing dentist. They are the right fit for the right person.

Dr. Luchtefeld: Financing, what a mess! Everyone told me, “Just go to the local bank and say you are opening a new dental office. They will throw money at you.” YEAH RIGHT! That didn’t work for me. In my experience banks don’t care what you do if you don’t have any collateral. I ended up using ADC Financial, DentFinance.com (now U.S. Bancorp), and my landlord. ADC gives a base amount to nearly any dentist. They will then increase the amount based on your business plan and other factors. Dentfinance.com (a referral I received through Dentaltown.com) was terrific. They helped me determine the remaining amount of financing I would need and then provided it very easily. Finally, my landlord financed some of the leasehold improvements.

One mistake I made was I did the majority of the loans as a leaseback. This means that if you borrow $100,000 and it is determined interest on that loan over seven years is $10,000, then you pay $110,000 regardless of if you pay it off in seven years or seven months. At the time I was taking any loan money I could get––I should have been a little more diligent.

Dr. de Oliveira: It was easy for me to find financing. My practice broker referred me to a representative at Bank One, I got 100% financing (no down). I had very little equity in my condo, but they did not even ask.

Dr. Tanoory: My staff started with one chairside assistant and my wife, Kara, at the front desk. As the practice became busier we were fortunate enough to hire someone with vast front office experience and who shared a similar practice vision.

I didn’t hire a hygienist until a year into the practice. I didn’t see a need to pay someone to perform procedures I could do, especially since I didn’t have other types of production in my schedule. I really didn’t mind doing all the quad scaling and prophies. New patients really loved the fact “the dentist cleaned their teeth.” Having the extra time to spend with patients, educating and building trust was a huge aspect in my practice’s growth. Once patients needed to wait longer than 10 days to get into the schedule, I knew it was time for a part-time hygienist.

Dr. Luchtefeld: I started my staff with one employee. She predominantly did front-desk work. I worked by myself doing the dentistry/assisting/sterilizing/etc. Gradually, she learned to be my assistant. After six-months, when the original employee was working as an assistant full time, I hired someone for the front desk part time. One month later I brought the new person on full time. Those two employees are still with me. I brought in a full-time hygienist in December 2003. I am currently looking to find a part-time front desk/assistant, which will eventually be full time.

Dr. de Oliveira: When purchasing an existing practice, definitely keep the existing staff. I butted heads with two of my staff members initially. At first I was shocked and angry. Later, I realized they truly loved where they worked and the patients. They saw some changes they did not agree with and it upset them. Later, we all gave in a little. They realized I was not the anti-Christ and I realized they were not the spawn of Satan! I did add a dental assistant as we were understaffed.

Employee salaries and benefits were definitely a “don’t go there” area as far as trying to keep office costs down. I looked at different labs, dental suppliers, and insurance services for the practice. It was easy to find labs that did outstanding work at a fair price. My dental supplier is like Costco or Target, I know I’m getting the lowest price so my staff doesn’t waste their time searching through catalogues. Also, my insurance agent went through all my existing policies and saved me hundreds of dollars per month.

Dr. Tanoory: Marketing a practice depends on many factors such as location, the dentist’s comfort level, and saturation of other dentists in the area.

At the start, I felt very uncomfortable marketing my practice aggressively. I didn’t want to upset the “good ole boys club”, better known as other dentists in the area. Then, I had a long conversation with one of the most intelligent, motivating men I have ever met, Rod Kurthy, DMD. He basically said, “Why do you care what other dentists in the area think of you? They’re not putting food on your table. The times of a dentist being flooded with patients simply by unlocking his or her door are gone.” He was right. He encouraged me to be aggressive with my initial marketing campaign. I chose, based on his advice and teachings, to use direct mail. By far it has been the best for us.

I also tried a number of other marketing ideas, from phone book ads to “Q and A’s” in the local paper. The truth is every type of marketing brings in patients. The type of patient brought in, now that’s a different story. For us, our small phone book ad brought us mainly emergency and insurance driven patients. Our targeted direct mail campaign brought us patients concerned with their overall dental health.

Dr. Luchtefeld: Everything else being equal, marketing is probably the most important aspect of opening a new office. If nobody knows you are there, then nobody will come through the front door. Howie Horrocks has written two amazing books on advertising for dentists and Rod Kurthy has a book on dental marketing.

I started advertising in the local newspapers six weeks before I opened. Calls were forwarded to my cell phone. I carried a planner and scheduled patients anywhere, anytime. Opening day I had three patients and it has grown from there.

Once I opened, I broadened my advertising by suppling toothbrushes to races and grade schools, advertising on the radio, and co-sponsoring some events. I did almost everything I could to get my name into the public’s mind.

Soon I began getting personally involved. I joined the Chamber of Commerce, local bicycling groups, and after being in practice a year, I was invited to join Rotary.

Some of the activities listed above were strictly marketing oriented; however, others were marketing on accident.

Dr. de Oliveira: I tried marketing my practice, but it flopped. The people in my upscale demographic area don’t go to dentists they find in the phonebook, on a coupon or in a brochure mailed to their home. Everything in my area is now strictly “invite only”.

Let’s face it, even after Drs. Tanoory, Luchtefeld and de Oliveira have shared their experiences in starting or purchasing a dental practice, it may still be an intimidating thought to some of you. The good news is you don’t have to open your practice alone. Drs. Tanoory, Luchtefeld, de Oliveira and more than 34,000 other dental professionals are available to answer questions or calm anxieties on the message boards at www.dentaltown.com, and the best part––the advice is FREE! And don’t worry, if you are too shy to ask a question, chances are you may find the answers you seek in the searchable archives of Dentaltown. Log on today.

Jason Robert Tanoory graduated from the University of Pennsylvania in 2001 and finished his AEGD from the Eastman Dental Center in 2002. He maintains a private practice focusing on preventative and family dentistry in Canandaigua, NY. He is a faculty member at the Eastman Dental Center and has studied at the Pankey Institute and at the Center for Advanced Dental Learning under John Kois. He can be reached at Jason@fingerlakesdental.com or on the Dentaltown.com message boards.

Jason Luchtefeld graduated from Southern Illinois University School of Dental medicine in 2000. He performed a one-year General Practice Residency at the Veterans Affairs Hospital in Denver, CO. During his time at the VA he spent countless hours researching dental practices (running the office, starting a practice, purchasing a practice, etc.). Eventually, he found an area to start his practice and opened the doors in August of 2001. Jason can be reached on the Dentaltown.com message boards or at jluchte@hotmail.com.

August de Oliveira graduated from the University of Washington School of Dentistry in 1997 and completed a General Practice Residency at the VA Sepulveda in 1998. August maintains a family dental office in Encino, CA and lives in Santa Monica with his wife and two children. August can be reached on the Dentaltown.com message boards or at Augustodds@aol.com.