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Several experts reviewed important considerations for new dentists who are thinking about owning their own practice at the Yankee Dental Congress in Boston, Mass., on Saturday, Jan. 28.
At the 2017 Yankee Dental Congress session titled Building a New Dental Practice, several speakers explained the importance of having a well-rounded team of experts come together to help aspiring practice owners plan and buy a new dental practice.
Financing Your Practice
When considering becoming practice owner, before you decide whether to buy an existing practice or open a start-up, you must first get your finances in order. At the session on Saturday, Jan. 28, Greg Whitmer, Bank of America’s New England regional business development officer for the dental division, discussed key considerations a lender would base his or her decision on.
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First, does the individual in question have good credit? What is the individual’s debt load, and what kind of debt is it? Whitmer explained that debt from student loans does not count against an individual, unless they have missed payments. However, if the individual is leading a lavish lifestyle, this may incite reservations.
Next, how much is this person worth? What liquid finances does the person have at hand? Typically, there isn’t a lot of business in the first 12 to 18 months, and so having a backup fund is a responsible and preferable means of sustainability. Ultimately, the lender wants to know that the money you borrow will be put toward the practice, rather than living expenses.
Whitmer said that while a new dentist might make more money associating at an established practice than he or she would overall in the first year in your own practice, it will be better to be the business owner in the long run. Even if you are procuring an established practice, it’s important to keep in mind that the existing patient base visits a practice for the doctor, not the building, Whitmer said. As a result, one cannot rely on the existing patient base for revenue. To offset a lack of constant revenue, he suggested associating in conjunction with working at your own practice for that first year.
In addition, Whitmer warned against choosing a loan solely based on interest rates. One must also consider the following questions:
How much are you approved for?
How long is the payment term?
Are the interest rates fixed or variable?
What fees must you pay? Advanced payments, administration fees, closing costs
Are there penalties for paying off early?
Are there collateral requirements in addition to your practice?
Can you lock the rate you were approved for? For how long?
Does the loan foster future growth, or is it restricted?
After getting the loan and creating a budget, you will want to look for the perfect space, said Dave Miller, a commercial real estate broker from Carr Healthcare Realty in Boston, MA and Harford.
It is important to first have an idea of the type of space you’re looking for. Do you prefer your practice to be in an office space, or a retail space? With retail spaces, there will be a lot of visibility in terms of the established customer base of the surrounding businesses. However, if your practice will be in an office space, there may not be a lot of foot traffic.
Miller said that what looks good on paper doesn’t always look good in person. He suggested that before considering a space, visit it and try to see it from the patient’s perspective: Would I want to be a patient here?
Next, is there parking access that meets the permit requirements established by the city? Sometimes when you are repurposing a space that wasn’t previously an office space, parking — especially handicapped parking – may be an issue.
In finding a space, it is important to know whether your budget will allow you to lease or buy the practice space. If you plan to lease a space, it is important to discuss renovations with the landlord. If you will be adding lighting or tiles, you should let him or her know that you will increase the value of the property, and that they should be sharing some of the expenses. Since the default rate for dentists is less than one percent, remember that you are a desired tenant, Miller said.
Especially if you are going to be doing construction, Miller noted that it is important to try to negotiate rent to start as soon as you move into the space, rather than when you start building. He concluded, “Everything is negotiable.”
One main point that both speakers made during the session was warning that each offer should be taken on a case by case basis. For example, if you have two loan offers, one may give you a lower interest rate, but would not allow you to pay it off at once. To determine what is best for you, it is important to consider what your long term goals are. On the other hand, you may think you are getting a good deal on an office space because your neighbor is paying more; however, you can never be sure that the other space doesn’t have more perks.