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When you’re ready to go it alone, do you buy an existing dental practice or start from scratch? Medfin CEO, Paul Freeman explores the decision-making process, and believes the end result normally stems from whether you’re more entrepreneurial or risk-averse.
You’ve got experience under your belt and ready to go from ‘dental practitioner’ to ‘business owner’ – but do you buy an existing practice or start from scratch?
Dentists can spend years studying in the field of oral health, but can often leave little time to develop the skill set required to successfully run their own business. Medfin CEO, Paul Freeman believes that the end decision is normally driven by whether you’re more entrepreneurial or risk-averse.
As Freeman explains, when taking over someone else’s practice, you need to start by analysing all the financial statements, forecasts and past tax returns “at a minimum”.
“You’ll want to know if the business is trading well and making money, but it’s likely you’ll also want to consider its capacity for growth and the need for any short and long-term investment in new equipment.”
How successful you are will ultimately hinge on your ability to compete in your chosen market. “If you decide to take over an established practice with a solid track record of meeting market demand, the value of the goodwill you purchase can be conserved and enhanced through an agreed transition plan with the incumbent,” says Freeman.
For those just starting out, Freeman says a partial purchase can provide a great opportunity to establish some equity. However, this can often require a greater focus on people and the cultural components of the practice – including your ability to work with fellow partners.
“You’re going into a human environment with people who have joint accountability and ownership,” says Freeman. “What you really want is to make sure your professional business partners have previous experience with other dentists so they can help you establish realistic assumptions about the future of your business.”
While opening your own practice can be an exciting venture, it can present times of uncertainty and will require you to use what you know about the market in general.
“You’ll need to consult with trusted advisers and scope out the competition,” explains Freeman. “Then consider how you’ll attract, keep and afford the best talent to staff your practice. There’s also the need to make some critical assumptions about demand for your services in the area and factor in the inevitable ramp-up period to establish the practice.”
Also, the location of your practice, how much space you’ll need and the overall experience you plan on offering your proposed target market are all important decisions to make early on, as you can’t easily – or cheaply – change your mind down the track. “A higher end demographic may justify you spending more on a higher quality, more expensive fit-out or redesign, while a more affordable presentation for a more budget focused demographic may allow you to save on costs.”
As Freeman says, the best benefits come from determining the level of clientele you plan to capture and sustainably maintain from Day 1. “A bigger initial investment may hold potential for accelerated returns and faster payback if the needs of the target market are well met.”
Freeman recognises that despite recent coverage of many new dentists entering the market, there is still unmet demand. “In some parts of Australia, you could easily say there’s an undersupply of dentists and an unmet need.”
Just don’t be afraid of planning for the worst case scenario. “Establish a range of different scenarios including a high, middle and low range set of assumptions,” says Freeman. “If things don’t go as well as you’d planned, you’ll be able to use the lower range assumptions to manage the business effectively and track your journey to profitability and growth.”
And regardless if your practice is new or existing, the more it’s structured correctly, the better your chances are of succeeding. “Don’t skimp on the sound analysis and advice, because you’re making choices and decisions you’ll have to live with as a business owner over a long period of time,” he says. “It’s a strong industry and people who are successful have very prosperous careers.”
Medfin is part of the NAB Health specialist business.
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