A Dentist’s Guide to Building or Buying a Practice

Dental Office

For many dentists, opening their own practice represents the ultimate achievement in their career. But this path comes with a significant decision: should you build a practice from the ground up or buy an existing one? As a dental CPA, my primary responsibility is to be transparent with my clients. That’s why I always present both advantages and disadvantages of the options. The right choice will depend on the dentist’s goals, personality, and resources.

Starting a Dental Practice from Scratch

While entrepreneurship offers financial independence and professional fulfillment opportunities, starting a dental practice also comes with risks. According to industry reports, the success rate of dental startups varies, with factors such as market saturation, competition, and business acumen playing significant roles.

However, owning a dental practice provides substantial benefits that make the endeavor worthwhile. Dentists who own their practices enjoy greater autonomy in their professional decisions, the ability to create a personalized patient experience, and the potential for higher earnings compared to salaried positions. With the right planning, support, and dedication, owning a dental practice can lead to a fulfilling and prosperous career.

Advantages: Complete Control

When starting a practice, you have the freedom to hire and train your own staff from the beginning. This allows you to build a team that aligns with your practice philosophy and work culture. You are the decision-maker. From choosing the location and designing the layout to selecting cutting-edge equipment and crafting a patient-centric culture, you have complete control over every aspect of your business.

 Another significant benefit of a start-up is the ability to set up your systems and protocols from the outset. This includes implementing your preferred practice management software, establishing workflow processes, and creating company policies that reflect your values and priorities. This initial setup can lay the foundation for a cohesive and productive work environment as your business grows.

Disadvantages: The Long Road

When you start a dental practice from scratch, you begin with no existing patient base, and building one takes time and significant marketing efforts. In contrast, transitioning into an existing practice provides an immediate patient base, which ensures cash flow from day one. 

Another thing you should keep in mind is that starting a dental practice involves significant upfront costs, including equipment purchases, office build-out, marketing expenses, and working capital. According to a survey by Bank of America Practice Solutions, the average cost to start a dental practice in the United States ranges from $350,000 to $500,000, depending on various factors such as location and practice size. Because of this substantial upfront investment, securing financing can be challenging.

Besides, like any other business, there’s an inherent risk in any startup venture. Market trends, such as shifts in patient demographics, advancements in dental technology, and changes in healthcare policies, can impact the landscape for dental startups. Staying informed about these trends and adapting business strategies accordingly is essential for long-term success.

Acquiring an Existing Practice

Acquiring an existing dental practice presents numerous advantages, including immediate cash flow, an established patient base, and a quicker path to profitability. While the upfront costs can be substantial, the risks are often lower compared to starting a practice from scratch, and financing is more accessible due to the low default rates among dentists. Thorough due diligence and careful planning can significantly enhance the likelihood of a successful acquisition, making it a viable option for many dental professionals looking to own their practice.

However, acquiring an existing dental practice also comes with its own set of challenges. One significant issue is the integration of the existing staff and the potential for conflicts if there are differences in management styles or practice philosophies. We’ll point out other challenging aspects later. 

Advantages: Continuity & Retention

As we mentioned before, when acquiring a practice, you have an instant patient base. You inherit loyal patients, providing immediate income and a foundation for growth. One of the critical factors in the success of acquiring a practice is patient retention. Studies show that patient retention rates can range from 80-90% if the transition is handled smoothly and the new dentist maintains the quality of care.

Existing practices typically generate revenue on day one, allowing you to focus on patient care and building your team. In some ways, this represents a shorter path to success. Established practices offer an accelerated path to profitability compared to starting from scratch. One factor that contributes to this affirmation is that existing practices usually have a financial history, offering a clear picture of the practice’s health while minimizing financial surprises.

Disadvantages: Resistance

Buying a dental practice is about adapting to a new culture. In this scenario, dentists who can maintain a harmonious and resilient approach are more likely to achieve success. Think about it: you’re inheriting the practice’s existing culture, staff, and patient base. Adjusting to their established routines might require patience and diplomacy. 

You may also need investment in upgrades. In a practice transition, you inherit the current office setting, which can be both an advantage and a limitation. While you save on the initial build-out costs, you can face expenses related to updating outdated equipment or renovating the space to fit your preferences. Additionally, the existing office design may not fully align with your vision.

Last but not least, there’s the price of acquiring a practice. The cost and ease of acquiring a dental practice can vary widely by geographic location. Practices in urban and suburban areas tend to be more expensive due to higher patient volumes and greater demand, while those in rural areas may be more affordable but with different market dynamics. Carefully evaluate the asking price to ensure the return on investment justifies the cost.

Making the Right Choice for You

Which path is best for you? As you must have noticed, there is no right or wrong answer, so here are some additional considerations:

  • Your Risk Tolerance: Are you comfortable with the inherent risk of building from scratch, or do you prefer the relative certainty of an existing practice?
  • Your Vision: Do you have a strong vision for your practice that you want to implement from the ground up, or are you open to adapting to an existing practice’s culture?
  • Your Financial Resources: Do you have the financial resources to cover the upfront costs of starting a new practice, or are you better suited to financing the purchase of an existing one?
  • Your Time Horizon: How quickly do you need your practice to be profitable? Building from scratch takes time while existing practices offer a faster path to revenue.

Regardless of your choice, consulting with experienced professionals is crucial. Talk to dental practice brokers, financial advisors, and experienced dentists to gain valuable insights and avoid pitfalls.

The decision to build or buy comes down to your personal goals and circumstances. Both paths offer unique opportunities and challenges. By carefully weighing the pros and cons of each option and seeking professional guidance, you can make the best choice for your future in dentistry. If you’re interested in more insights, learn more about dental practice startups and transition here. Did you get a dental practice and need extra support? Call our Dental CPA office to hear from our dental specialist.

About Our Experts

Fazel Mostashari is a dental practice expert whose specialty is financial accounting, tax planning, and practice purchase and set up for the dental industry. For over 10 years, Fazel has been the driving force behind the success of many dental practices.

As a proud husband to a dentist, he understands the unique challenges of running a dental practice. Together, they run a thriving, multi-specialty practice in the sunny city of Woodland Hills, CA.

If you’re looking for expert advice, set up a consultation with Fazel.
Fazel Mostashari: Dental Practice Financial Expert

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