Starting a Dental Practice: A Complete Step by Step Guide
by Tyson Downs
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- Rebranding Your Dental Practice: 7 Things You Need to Know Before You Do
- Tax Considerations When Selling a Dental Practice
Setting up a new dental practice means starting a new business from scratch -- and that can be downright overwhelming. There is a lot of work that goes into establishing your business: from deciding if a partner is right for you, to how many employees you are going to hire, to how you are going to market your business. In this post, we cover all those things and more, helping you get set up for success.
By completing a simple “starting a new dental practice” checklist, as outlined in this post, you can ensure you have everything in order before opening your dental practice.
When Should You Start Your Own Dental Practice?
Starting a dental practice is a big step and it's not something to be undertaken lightly. Before you move forward, you should take the time to consider whether starting a dental practice makes sense for you. There are many factors to keep in mind, including personal and financial considerations that can affect you for years to come. The following are the questions you should ask yourself.
Do I Like to Work Independently?
If you're going to open and run your own dental business, you must be comfortable with working independently. As an employee of an existing practice, you probably work fixed hours and have nights and weekends to yourself. You draw a salary.
Going out on your own means that you'll have more responsibility. You will work longer hours and may not have the same freedom that you did before. It may be difficult to predict your income on a weekly or monthly basis. That said, you will also reap the rewards of setting up the practice the way you want, creating a welcoming environment for patients, and ultimately, if you're successful, earning more money than you would if you were working for someone else.
As long as you are comfortable with the idea of being the one who calls the shots and you're willing to put in the time and effort required to build your new dentist office from scratch, then you're on the right track.
Do I Have Working Capital?
Starting a dental practice requires working capital, often as much as $500,000. You will need to either have cash on hand or the credit and collateral to qualify for a loan or line of credit. You need money to rent or buy office space, invest in equipment and supplies, hire and pay employees and provide benefits for them, and advertise to attract new patients.
If you don't have the money you need or the means to finance your new venture, then you may need to put your plans on hold until you do.
Am I Prepared to Do the Work?
One of the biggest surprises about starting a new dental office is how much work it is. In addition to the money, you'll also need to make a big investment of your time, energy, and creativity to attract new patients and be successful.
It's important to be realistic about the investment you will be making and be sure that you are at a place in your life where you can meet the challenges associated with striking out on your own.
Do I Have a Business Plan?
The only way to be successful with a new venture is to create a roadmap. Business plans serve as templates to help entrepreneurs navigate the challenges of their new ventures. You'll need to understand how you plan to meet the challenges you'll face before you get started.
Your plan should include details of:
- Your budget
- The services you plan to provide
- Your fees for each service
- Payment policies
- Which insurance plans you will accept
- Who your competitors are
- Your marketing plans and strategies
Your plan will make it easier for you to achieve your goals and can also help you attract financing if you need it.
Have I Researched the Local Market?
Market research is necessary for a business plan, but it deserves a separate question because of its importance. It's essential to know about the local market where you plan to set up your office.
What is the population of the area? How many other dentists are practicing there? What services do they offer? You will need to take these things into account before you move forward with your plans. You will need a different strategy in an area with only one competitor than in a location where multiple competitors include national dental care chains.
Have I Reviewed My Employment Contract?
Unless you just graduated from dental school, you probably have an existing employment contract. Before you go out on your own, you should review your contract, with a lawyer if necessary, to make sure you are not in violation of any non-compete clause.
Non-compete clauses can prevent you from opening a new practice within a specified time frame after you leave your existing job or within a certain geographical area. They may also impede your ability to bring existing patients with you to your new dental office.
It's important to understand your legal obligations before you finalize your plans.
10 Steps to Starting a New Dental Practice
Before making any final decisions regarding your dental practice, take the time to review your options and obligations thoroughly. Here are some of the most important tasks you must complete to start a successful dental practice.
- Create a business plan
- Consider a partner
- Find a location for your dental practice
- Decide what equipment you need and how much it will cost to buy or lease it
- Determine your space requirements
- Obtain financing
- Sign a lease
- Determine personnel needs
- Develop a dental marketing strategy
- Get necessary permits
Each of these items is explored in further detail along with final pre-opening tasks. While this list doesn't cover every single factor that goes into opening a new dental office, it should help you create a detailed outline for moving forward with your goal of setting up a dental practice.
First Things First – Take Lots of Notes
Before you start putting too much thought into each of these items, you should start taking notes and keep them in a centralized place. Keep organized with a notebook that you have set aside only for notes on opening your practice. You can also create a Google Doc or use a notes app to keep track of your thoughts.
It is easy to overlook one or two steps when all the information is in your head. Use a word processing program to jot down your step-by-step plan and any additional thoughts that you think might be important down the road.
Now, onto your 'starting a new dental practice checklist'. When starting a business, you must be prepared. Take the time to explore multiple options for each item covered below.
Some of the action items below involve financial planning. It’s important to perform detailed research and include all financial information in your business plan. This includes your lease, salaries, equipment, website creation, licensing fees, and other costs.
Keep in mind that your progress through these steps may be fluid and non-linear. You may complete them out of order. You may start a step and need to table it for a while before returning to it later on in the process. You might also complete some of these steps concurrently. As long as you address all of them, you will be ready for the challenges ahead.
1. Create a business plan
The first step to opening a dental practice from a scratch is creating a business plan: a detailed, living document that will help you get up and running. Your business plan should include your business strategy, standard operating procedures, costs, earnings, and other financial information. To obtain a business loan for your practice, you will need a thorough business plan.
There are many online resources available to assist you in developing a business plan. You can even find business plan templates with a quick search. However, before you spend a lot of time researching, you should create a general outline of the information you want to include.
As you follow this checklist, continue to incorporate all pertinent information into your business plan. If the information you gather does not apply to any of the categories in your outline, you can place additional details in the appendix.
One important thing to include in your plan is your exit strategy. It might seem unnecessary to consider an exit strategy before your new dental office opens, but there may come a time when you want to sell your practice. So an already included exit strategy will prepare you for the future and make it easier to activate them if necessary.
For example, if you buy a dental practice that is known for one thing and you want to be known for something else, this needs to be considered. Or, if the practice name has a specific word in it that doesn't mesh well with you (such as implant, smiles, family, etc.). If so, you need to think about the potential rebranding that needs to take place for you to get the practice where you want it to be so you can build it up, and then possibly sell it down the road (if that is your plan).
2. Decide Whether You Want a Partner
Are you going to open a dental practice on your own, or are you going to partner with one or more dentists? Teaming up with a partner can help offset the costs of opening the dental practice and obtaining a loan. A downside of opening a practice with a partner is it can be hard to find someone who shares your vision.
If you decide to find a partner, you will need to incorporate details about the partnership when you organize your business. These details include information about what will happen if one partner wants to leave the business.
Deciding whether or not to include a partner is a major consideration as it is a big commitment to go into business with someone. Make sure you give this item careful thought. Also, remember that even if you don’t envision yourself with a partner in your initial business plan, you can always reconsider this later if you have difficulty obtaining financing on your own.
3. Settle on a Location for Your Practice
One of the most crucial decisions that you will make is determining the location of your dental practice. This step requires extensive research. Before you begin looking for available office space, you need to find out how many dental practices are in the area.
Hopefully, you have already chosen the town or city where you would like to set up your office. If you haven’t done this yet, then you should start by asking yourself where you want to live and work, and start doing some research on the best places for you and your family. Once you know the general area in which you’d like to practice, research your competition and the population of the area where you will be practicing.
Keep in mind that the average number of dentists per 100,000 citizens is about 55. However, this number will vary from state to state. Factor in the total dentists per capita in your region and then determine where the other dental practices are located within your city. You should also consider the services other providers are offering and how you will differentiate yourself from them.
When choosing a location, you should also consider the potential for walk-ins. As you establish your dental practice, it helps to be in a location that receives a lot of pedestrian traffic. For example, you also need to think about the importance of being on the first floor or upper floors of a commercial property. Being on the ground floor can be more cost-effective for the construction that you will require. On the other hand, an upper-level floor can provide more affordable leasing options.
The convenience and the total number of parking spaces must also be considered when choosing a location. There should be enough parking for both your patients and your staff.
4. Determine What Equipment You’ll Need
One of the biggest expenses when starting a dental practice is the up-front cost of equipment. In addition to dental equipment, you need furniture, computer systems, dental practice management software, medical supplies, and office supplies.
Find a reputable equipment salesperson early on in the process. You want to find someone who you can work with to obtain affordable, quality equipment. Just be sure you research all of your options before making any large purchases. It may be less expensive to lease equipment initially and then buy new equipment when you are ready to upgrade.
Keep in mind that in addition to the dental tools, the category of “equipment” also includes things like your instrument management system, dental practice management software, call tracking systems, etc. When it comes to choosing software, it’s a good idea to read some dental software reviews and also test out any programs you are considering using.
5. Determine Your Space and Layout Requirements
Before beginning your search for office space, determine how much actual square footage you need. How much space do you need for your waiting room, bathroom, reception area, and exam rooms? Will you also need an x-ray room, storage space, and a break room? These are things to figure out before you start looking for an office.
Depending on your preferences, you may also want to include a private office, a consultation room, or even a sterilization area. Of course, the number and type of rooms will vary from one practice to the next, but it’s a good idea to research other dental practice layouts that you like so you can begin to envision how you want your own office to look.
Once you have envisioned your perfect practice layout (keeping things on the conservative side, unless you’re in the position to build a palace), make a list of the number of rooms you need, and come up with approximate square footage for each room. When you total the figures, you will have a general idea of how much space you require.
6. Obtain Financing to Start Your Practice
Unless you already have a lot of capital from, for example, selling another practice or business, you also need to get financing to open a new office. After you have reviewed your business plan, you can apply for a loan from a bank or lender. If you are not able to obtain the financing that you require, then you might have to think about joining with a dental partner – even if you originally planned on opening a dental practice on your own.
Depending on your situation, you may have to wait on getting a lease, hiring employees, or any of the other steps that require financing. The average practice requires around $475,000 in up-front costs.
Obtaining financing is a process. First, you need to start talking to different lending institutions and get a feel for their willingness to lend to dentists. After that, you need to put together a preliminary loan package with your chosen lender and apply for the loan. Finally, finalize the loan package (making sure your attorney checks everything before you sign on the dotted line).
You may choose to do an all-in-one loan for your financing needs. In some cases, it may be preferable to get a line of credit and then apply for equipment financing as needed.
7. Obtain a Lease for Your Office Space
So, now that you know where you want to open our practice, the exact type of office space you need, and have (hopefully) secured the financing you need to open your practice, you can start evaluating office spaces. Usually, you will do this with the help of a practice broker. Sometimes, it can take a frustratingly long time to find one or two good candidates, but in other cases, you may find the perfect office space fairly quickly and decide to pull the trigger ASAP. In either case, you will need to obtain a lease once you find the perfect office.
You already know this, but it’s so important that I’ll remind you once again: opening a dental practice is a very large investment. In addition to obtaining a lease, you need to buy equipment, construct your facilities at your chosen location, hire staff, and deal with other operating costs. You may be tempted to splurge if you find something great that’s a little outside your budget, but it is important not to spend too much on the lease. Remember that you can always build your “dream office” later on down the road, once you have an established dental practice.
Generally, dentists obtain a 10-year lease. This locks in the monthly rent and protects you from rate increases. Many landlords are open to offering discounted or free rental rates for the first few months. This can help you cover the starting costs of your dental practice – especially during the construction phase. Depending on the location you choose and your requirements, construction may take several months. Be sure to have your attorney look over your lease before you commit.
8. Determine Your Personnel Needs
You will not be able to do everything on your own, so you should start thinking about your staffing needs sooner rather than later. Even if you don't plan to bring another dentist on right away, you still need to hire a receptionist, dental assistants, and a billing specialist or office manager. You may not be able to hire a full-time IT person, but you should look for a contractor to have on call when the need arises.
At this point, all you have to do is decide how many people you need to hire to operate your practice. Finding employees for your dental practice isn’t always the easiest task, so set yourself up for success by planning ahead.
Then, determine an average salary for each position. You should know what a reasonable salary is in your area and use that information to create your personnel budget. This information goes into your final business plan and helps you determine your financial projections.
As it gets closer to the time when you will open your office, you can start to put your personnel plan into place and hire the staff you need.
9. Come Up With a Dental Marketing Strategy
In this day and age, every business needs a website. A Facebook business page and a social media presence are simply not enough. A website will help you attract new patients, increase your brand recognition, and act as your primary marketing tool.
There are many different ways to create a website. You can choose to go it alone using a website builder platform such as WordPress, Squarespace, or Wix. Though this is an affordable option, it can take a considerable amount of time – especially if you’ve never set up a website before. Unless you have marketing and SEO experience, you also run the risk of having a website that doesn't generate leads as well as it could.
In addition to creating a website, you should employ the services of an SEO firm to help your dental practice attract potential patients and become more profitable. You do not need to wait for your doors to open. It can take several months to begin seeing results from an SEO campaign. For many, it can take a year before you see a positive return on investment. Keep in mind that you'll get the best results from a firm that specializes in dental SEO and marketing.
By getting started early, you begin attracting attention before your dental practice is fully operational. Once you are up and running, you can increase your SEO investment and online marketing efforts.
Nearly all new practices will want to consider paid digital advertising to bring in patients quickly. PPC for dentists could be one of the most effective ways to increase your patient numbers.
10. Apply for Necessary Permits and Licenses
One of the final things you need to do when opening a new dental practice is to make sure you have all the necessary permits, licenses, etc., required to practice dentistry in your area. You will need:
- Business organization papers, whether you are operating as a sole proprietor, partnership, LLC, or corporation
- A tax ID number
- A business license from your state
You might also consider buying a membership in professional organizations if you think it is necessary or beneficial to your practice. As a dentist, you may want to join dental organizations as well as your local Chamber of Commerce to get to know other local entrepreneurs. Laws and regulations vary from state to state, so be sure to research this final step carefully and to leave sufficient budgeting and time before opening to obtain these required permits.
Executing the Starting a New Dental Practice Checklist
These ten steps cover the most important decisions that you will need to make when opening a dental practice. However, they may not always be completed in the order presented. For example, you could have to wait on several steps until you have obtained financing.
Keep in mind that nothing should be overlooked. There is no such thing as too much information when opening a new business.
Once you have plotted out and executed the above 10 steps, you can complete your final pre-opening checklist, which includes some smaller details and many final pre-opening tasks. Keep reading to find a refined checklist with all of the smaller steps in between, as well as the final pre-opening tasks.
Countdown to Grand Opening Checklist
Not sure when you should be doing all these steps? Here is a timeline of when to complete each of these steps, with the additional smaller steps to complete in between, and the final pre-opening tasks you need to execute before your Grand Opening.
10-12 Months Before Opening – Steps 1-3
- Develop your practice philosophy and detailed business plan.
- Come up with a budget and determine all major expenditures.
- Decide if you want a partner.
- Hire an attorney and a CPA.
- Hire a practice broker.
- Decide on a general area for your new practice.
- Evaluate potential locations for your practice with your broker.
7-9 Months Before Opening – Steps 4-5
- Determine your exact space and layout needs.
- Narrow your site search down to 1-3 locations.
- Get contractor estimates for any necessary remodeling.
- Compile a list of equipment you will need to buy and other major expenditures.
- Start reviewing software systems for your practice.
- Evaluate different lending institutions.
- Put together a preliminary loan package with your lender.
- Get bids on leasehold improvements from contractors.
6-7 Months Before Opening – Steps 6-7
- Finalize your loan package.
- Choose and finalize the site for your new practice (after reviewing the lease with an attorney and making sure it meets all zoning requirements).
- Sign the lease.
- Develop your floor plan and equipment layout.
- Select a contractor to do any needed remodels and start remodeling.
5-6 Months Before Office Opening – Step 8
- Start developing an office policy/procedure manual.
- Set the hours of operation for your practice.
- Finalize interior finishes.
- Decide on software for recordkeeping, business management, customer relationship management, etc.
- Review personnel needs.
4-5 Months Before Office Opening – Step 9 - 10
- Talk to dental SEO firms to start building a marketing strategy.
- Start checking out telephone and answering systems.
- Review and test patient management software.
- Get a telephone number.
- Review the state dental act and codes of ethics.
- Obtain provider numbers (Delta, Medicaid, etc.).
- Hire a web designer or use web builder software to create a business website.
3 Months Before Office Opening – Step 10
- Start on-site monitoring of leasehold improvements.
- Apply for licenses: narcotics, occupational (state, county, city, township, etc.).
- Apply for a business permit, if required.
- Apply for a tax ID number.
- Acquire dental society memberships (local, state, and national).
- Apply for staff privileges at hospital facilities as needed.
- Put in all equipment and supply orders.
- Order and install a computer system, patient management software, and office supplies (stationery, business cards, prescription pads, etc.).
- Talk to an insurance professional about what insurance you need and fill out the necessary forms (unemployment insurance, workmen’s comp insurance, etc.).
- Call local utility companies to set up telephone, electric, and internet service.
2 Months Before Office Opening (Final pre-opening steps)
- Place ads to fill staff positions.
- Put together your fee schedule and payment policies.
- Make laboratory work arrangements.
- Make pharmacy services arrangements.
- Make arrangements for janitorial services, maintenance service, and uniform/linen service.
- Join a local credit union or bank and set up a business account.
- Make arrangements with a bank or merchant account to accept credit card payments.
- Apply for membership in the insurance provider plans for your state.
1 Month Before Office Opening (Final pre-opening steps)
- Monitor completion of leasehold improvements.
- Finish installing equipment and computer systems and test them to make sure they work properly.
- Hire and start training your employees (don’t forget to complete IRS forms, bonding, etc.)
- Set your Grand Opening date.
- Place office opening announcements on your website and other places online.
- Place office opening announcements in local print publications.
- Send office opening announcements using direct mail.
- Have the office inspected by necessary city/county officials.
- Open your office for business!
Use these suggestions and the items described to put together your detailed business plan. The process of opening a new dental practice is not easy and you will have a lot of major decisions to consider, some of which come up unexpectedly, but you can use this guide as a starting point.
Many of the decisions that you make will be crucial to the success of your dental practice. Once you move forward with your plans, it is hard to make changes. For example, it can be costly to back out of a lease once it is signed. For this reason, it’s important to make sure that you do everything right the first time around.
Take your time when planning your new dental practice. Also, do not be afraid to reach out for help. If you have any contacts in the dental industry, use them to gain additional information and helpful tips.
Starting a Dental Practice: Tips for Success from Actual Dentists
- Don’t pay for construction/interior design work up front. Spread out payouts throughout the build.
- Advertise to your target patient base based on demographic research of the area. For example, if you are targeting young families, you probably don’t want to place all your marketing emphasis on dental procedures.
- Revise your business plan and procedures based on what works and what doesn’t. By continually evaluating processes, systems, and employees, you can make the adjustments you need to build a lucrative practice.
- Focus on patient retention, not just bringing new patients in. This requires a smart marketing plan and for you to solicit feedback from patients.
Final Word on Starting a Dental Practice
We hope that reading this post has helped you learn the necessary steps to opening your new dental practice. Remember that despite all of the hard work, running your practice can be very rewarding. You can be your own boss while performing a job that you love. We wish you the best of luck on your journey.
Do you need help setting up your dental website and establishing an online presence? Contact us today to learn how we can help!
About the Author
Tyson Downs, the owner of Titan Web Agency, has years of experience working with small businesses and helping them meet their revenue goals. Prior to starting Titan Web Agency, he freelanced in SEO and Web Design while working in the corporate world. Tyson is a graduate of Brigham Young University, the father of 5, and enjoys spending time with his family. Particularly on the baseball field.