When Am I Ready to Buy or Start a Practice?
I get the question a lot, “do you think I am ready to buy or start a new practice?” I’m probably the wrong person to ask as I’m somewhat of a serial entrepreneur. I tend to live by the quote “Fortune favors the Bold”. Maybe I can answer better by giving you a few real-life case studies.
Case Study #1 – I helped this young dentist locate a practice right out of school. He was a typical new graduate. He was clinically sound, somewhat slow with procedures as expected, and not confident at all in managing a practice. However, he found a decent practice that I helped him evaluate. It was not great, but it was producing $45,000 per month. He struggled for the first six months to make ends meet. He had to dip into his working capital to keep things going for a couple of months. We continued to work with him and help him ramp things up. He said he felt more and more confident as time was going on. His hand speed improved and he worked through a few management issues that helped him get respect from the staff. Fast forward 3 years later and he’s now producing $125,000 per month, has low overhead, and is well on his way to a potential early retirement.
Case Study #2 – A dentist had been out of school for about 4 years. He kept looking for that perfect practice in King County. I showed him a number of practices, but nothing fit his model. He finally decided that if a practice wasn’t going to come up on the market that fit his needs, he would need to create one from scratch. We found him a nice location in the heart of the area he was looking. He went from $0 to $40,000 per month within 9 months. Five years later, he’s comfortably doing $80,000 per month.
Case Study #3 – A dentist searched for several years for the perfect practice. There were over 20 practices in a five-year period I have shown this person. We even looked at starting up a practice. We put letters of intent on a number of practices and new start-up locations, but nothing stuck. This dentist is still looking and still has yet to find the perfect practice. By the time they find the perfect practice, their friends will have owned a practice for 7 years and be well ahead of them in terms of building a practice and being in a better financial position.
The moral of the story is that you are never 100% ready to buy or start a practice. Dental schools do not spend enough time teaching you to manage or own a practice. If you have been out of school for a few years, have a good number of associate jobs under your belt, and have a desire to own or start your own practice, it’s time. Find a good practice or location, do your due diligence, get good advice from your advisory team and go for it.
-Rod Johnston, MBA. CMA