- Buying a practice versus starting from scratch
Buying a practice versus starting from scratch
Post date: 19/04/2016 | Time to read article: 2 mins
The information within this article was correct at the time of publishing. Last updated 14/11/2018
Dr Lincoln Harris
When I started out, beginning from scratch was almost always better. There was a shortage of dentists in many rural areas, and you could open and be instantly busy. Those days are gone.
Nowadays, some careful thought needs to go into this decision and regardless of the path you choose, be aware that owning a practice usually involves being worse off than being an associate for a while, before you end up better off than being an associate.
Also, there is no shame in not owing a practice. It’s not for everyone. It involves a whole order of magnitude of stress compared to being a clinical dentist. Some people love it. Some don’t.
This biggest advantage of buying a practice is instant cash flow. Even if you lose the typical 30% of existing patients when you take over, that’s still better than opening and not having any patients at all.
The biggest drawback to buying a practice is that you will almost certainly want to change the culture, and quite often, the practice is run down a bit and in need of new equipment. So over time, you have these costs over and above the purchase of goodwill.
Often the staff have become entrenched in old habits and if the principal was retiring, they may have been used to coasting.
The advantage of a new practice is that you have all shiny new equipment and can start the practice culture from scratch. This can be a big advantage over trying to turn around a ship.
However, you’ll be surprised how quickly shiny equipment loses its appeal if you are going broke. You will start to resent it if you cannot make payments.
You’ll also be surprised how quickly your high minded ideals about having above average fees and doing fine work like you see on the internet, fade away if you are facing bankruptcy. At that point, you’ll be taking every voucher, health fund and anything to stay afloat.
Clearly each option has its advantages and disadvantages.
I’ve helped quite a few people with new practice startups in the last few years. Here are my observations:
- Most dentists, once they decide to have their own practice, are consumed by practice lust and are in too much of a hurry to purchase.
- Most cases, when someone asks for help, they have already made their biggest mistakes, so it’s much harder to help them.
- The biggest mistakes are usually spending too much on goodwill, or equipment. Building too expensive a fit out in new practices but having no plan to get enough patients. Having no business plan to assess how long they can survive on their current cash savings. Having no marketing plan or budget. Having no idea on local demographics. Wanting to spend money on things that don’t make money in the early years.
Here are some tips:
- Cash flow is king. It’s almost impossible to understand this until you have business bills to pay.
- Try to spend less.
- Slow down. There is a very real possibility in you going broke, or having extremely stressful years.
- Get help from someone before you purchase. And listen to advice.
These case studies are based on real events and provided here as guidance. They do not constitute legal advice but are published to help members better understand how they might deal with certain situations. This is just one of the many benefits dental members enjoy as part of their subscription.
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