Startup vs: acquisition: What’s your best option for practice ownership?
There are pros and cons to both options for practice ownership.
Doctors considering practice ownership are often faced with the complex choice between a startup practice or an acquisition.
Most young dentists don’t want to remain associates for their entire career. They recognize the opportunity to create more control, income and independence through practice ownership. Rightfully, they see the opportunities for personal and professional satisfaction as unparalleled.
As we contrast startup practices and acquisitions, consider how these topics will better prepare you for an enjoyable and fulfilling career without the unnecessary mishaps of certain practice failures.
So, which option is better for today’s dentist: Startup or acquisition?
Startup practices: Opportunities and warnings
When starting a practice from scratch, doctors experience a once-in-a-lifetime process.
Each step is customized to meet your personal standards, vision, tastes and desires. From the location selection, to the development of proper protocol, to floorplan design, branding, marketing, team development and processes - all are built with the values and the personal touch of the owner.
By choosing and creating a customized clinical environment, doctors can have a business that represents them on a personal and professional level. It’s a fulfilling process of imagining a successful practice and then seeing it come to life on your own terms.
However, there are important warnings to consider.
Long gone are the days when a startup practice can expect success by haphazardly choosing a location and hanging a shingle. Fortunately, when a location is chosen with precise demographic data and proper real-estate negotiations, the right location will help propel a practice to tremendous growth in its first year.
The complications of PPOs, demographics, taxation and business systems all make following the proper planning stages more impactful than ever before for startups. In recent years, competition from larger practices has created geographies of high concern that should not be considered for startup practices.
With hundreds of variables that must be factored, six key elements for startups are:
Proper analyses of current-day demographics studies
Floorplan layout alignment with your clinical standards, not equipment sales
Real estate selection that is functional for a private practice
Negotiations in equipment and construction that consider national pricing
Banking and profitability planning with a business plan customized for your vision
Tested marketing and hiring processes to grow quickly
Wayne Gretzky, arguably the best professional hockey player in history, said much of his success was due to his uncanny ability to “anticipate where the puck is going.”
Proper planning with all the key factors allows you to forecast and “anticipate” growth, like the Gretzky of dentistry. Forecasting in this way puts startups in a category by themselves.
In other words, startup practices, when planned properly, can experience growth that is smooth and predictable.
Floorplan design is also a unique experience for startup practices owners. Floorplans, when created well, significantly increase productivity. Acquisitions may trap you in a practice designed in the days of film dip tanks. Startups, however, benefit from one-of-a-kind custom designs that help your practice stand out among competitors. Floorplans also affect practice efficiency with all the modern advances in technology, practice flow patterns and custom ergonomic preferences. As an added benefit to startups, “line of sight” spacial planning concepts and creative design touches can be used to highlight your personal values.
Office protocol and systems are also designed from the ground-up in startups. This concept of smooth running office systems is of high interest to doctors who are turned off by changing dysfunctional, deeply ingrained processes found in some older practices.
What about profitability?
Many doctors express concern about reaching profitability with a startup. With a full, legitimate business plan that incorporates precise demographics, staffing plans, business protocol and financial projections, many startup practices reach profitability within their first six to nine months.
The biggest regret of startup practice owners is the failure to follow proven planning stages, leading to drastically higher costs and much lower profits.
Next: The value and risks of practice acquisitions