by Allison Farey
You will reach a number of crucial turning points during your professional life that will shape your career path and financial future. Deciding whether to move from practicing as an associate to owning your own practice is one such turning point. Before making a decision, conduct careful research and give much consideration to the alternatives, as each entails its own advantages and challenges.
But most important is ensuring that your choice fits your personality type and interpersonal style. This is the key to attaining not only professional success, but deep personal satisfaction and enjoyment throughout your career.
Evaluating your options: is ownership for you?
Working as an associate can provide many advantages. You can focus on practicing your skills and developing relationships with your patients without the concerns and challenges of managing a business. You can enjoy an assured income and employment benefits, have an opportunity to learn from colleagues, and perhaps evolve to buy-in status with shared responsibilities for practice success. This choice may be ideal if you’re comfortable with a predictable lifestyle, prefer to focus on a few areas of expertise, and don’t want to take on the challenge of managing the administrative details of owning a business.
But owning your own practice gives you a better opportunity to gain control over your professional life. Practice ownership puts you in charge of the quality of care, patient and practice environment, customer service, and operation of your practice. It enables you to set goals for your future. And while ownership certainly includes the challenges of meeting financial performance objectives as well as personnel management, customer billing, and marketing activities, it also brings the great sense of accomplishment that comes from creating a successful enterprise.
So how do you know when it’s time to make the move to ownership? Answer the following questions:
- Do you resent reporting to a colleague and working according to someone else’s schedule?
- Do you feel you have absorbed your employer’s management skills and responsibilities and are capable of running the practice yourself?
- Is your level of confidence and clinical speed beyond the third year dental school level?
- Are your case presentation skills well developed?
If you answered yes to at least three of these questions, then it’s time to consider owning your own practice.
Ownership: should you acquire or build?
Once you’ve decided to make the jump to practice ownership, the next big decision is whether to acquire an existing practice or start your own. There are many considerations to weigh with each approach, and the right answer for you will become increasingly apparent as you delve into your research.
Here are some factors to consider.
The benefits of practice acquisition
When you acquire an existing practice, you gain the advantages of an established patient base and income flow. This allows for an easy transition because you can “hit the ground running,” and tweak the details of the practice over time. You’re also less reliant on marketing your practice since you already have a steady patient flow, making practice acquisition an attractive choice for those who are introverted or intimidated by marketing. You may also find it easier to obtain a loan for a practice acquisition, as the business has a proven track record upon which the lending company can base a decision.
Remember, though, that in acquiring a practice you inherit not only the good, but also the not-so-good, such as problem employees, inefficient systems, outdated equipment, or a facility that needs remodeling. In addition, the type of dentistry being performed at the practice may not be a true fit for your dream practice. You may need to engage in ongoing practice modifications and repairs to create the practice you want.
Practice start-up: the pros and cons
Building your own practice from the ground up gives you the ultimate degree of control in creating the professional environment you want. From the facility to equipment to employees, you’re in charge of deciding what works best for you. You’re engaged in a creative process that, while time-consuming and capital intensive, will ultimately produce the work environment you’ve always dreamed of, unimpeded by dated equipment and facilities or someone else’s problems.
But practice start-ups can have plenty of challenges. A successful start-up practice is dependent on the doctor’s ability to sell his or her services, and requires a significant degree of planning and marketing skills. Before the practice is even conceptualized, an important part of planning is ensuring that the demographics of your chosen area will support your practice. Are there enough local residents of the ideal age and income level for your practice to thrive? And how do you determine what percentage level is adequate?
You should also conduct informal research to ensure that your selected locale is not saturated with dental practices. You will want to “run the numbers” to determine how many practices would indicate a saturated market in your area. If you are committed to living and working in an area that already has numerous dental practices, then acquiring a practice with an existing patient base and cash flow might make the most sense.
Finally, some loan companies may be reluctant to lend funds for a practice start-up, as there is no income history, existing equipment, or property to use as a collateral base. This is particularly true for lenders who are not specialists in professional practice lending.
Preparing for ownership
Despite the hurdles, let’s say you’ve decided to go for it. But just as you wouldn’t jump into a marathon without advance training, you shouldn’t jump into practice ownership until you’ve prepared yourself financially and mentally.
Build your financial profile - Use your time as an associate to build your financial profile so it’s easy to obtain a practice acquisition or start-up loan. Lenders look at your liquidity and overall net worth to determine your loan amount and interest rate. Improve your credit rating and build your personal assets to become more attractive to lenders and ensure the best rates possible.
Do your homework to ensure you have a good grasp of all potential costs involved in your practice acquisition or start-up. This means working with a CPA to outline as many financial details as possible. This will not only minimize any unanticipated costs during the acquisition or start-up transition, but also make the loan application process smoother.
Be mentally prepared for hard work ... make that very hard work ... for a while. Practice acquisitions may require an 18-month transition period, while start-ups often require two to five years to grow a full patient base. During this time, you will likely be working long hours as you make multiple design and purchase decisions, interview existing or potential employees, initiate customer tracking and office systems, update or purchase equipment, get to know or acquire patients, and conduct marketing activities. You can make it work if you have the ability to face adversity and find solutions, and have a great team behind you.
For ultimate mental preparedness, beware of the dangerous “entitlement trap.” This is a self-defeating belief that “I deserve” and, therefore, am assured success simply because I’ve been through school, worked in a practice, and “paid my dues.” The truth is, you still should expect to work very hard to build your practice and fulfill your dreams of ownership.
Six key characteristics of the successful owner
Despite the challenges of purchasing or starting your own practice, statistics show that most dental practices succeed - far more so than many other independent professions. In fact, the dental profession is ranked by the Small Business Administration as the fourth best performing small business sector of 171 small business sectors.
At Matsco, we’ve found there are six key characteristics of success that help ensure not only professional achievement, but personal satisfaction in transitioning to practice ownership:
- Good business manager - Successful practice owners perform beyond their technical skills to become excellent business managers, understanding “P&L,” managing cash flow, and developing and following a marketing plan for attracting and retaining patients. They create systems and protocols for managing their staff, patients, and collections. And they continually educate themselves in order to increase their business skills and knowledge base.
- Strong leadership skills - To drive your practice toward success, it is important to be a strong leader and use effective communication to motivate your staff and build a cohesive practice team. Influential leaders have a compelling vision that they share with their team and advertise to patients. If they don’t possess leadership skills, successful owners delegate the responsibility to someone who does, such as a persuasive office manager.
- Goal-oriented - Successful practice owners know how to achieve goals and create systems for measuring progress. They involve team members in establishing goals, and reward them for helping to achieve goals.
- Excellent people skills - Working effectively with others is one of the most critical aspects of running your own business. Well-managed professional relationships can eliminate many problems before they begin. But doing so requires a high level of emotional intelligence, which includes: the ability to be self-aware, the ability to manage your emotions and other’s, empathy for others, skill in handling relationships, and the ability to face adversity. Successful practice owners are good listeners and can identify and translate patient needs into dental care solutions.
- Team player - Professionals who make the most successful transition to practice ownership surround themselves with an effective team that provides expert advice, perspective, and recommendations every step of the way. This team typically includes a lender, management or financial consultant, certified public accountant, lawyer, project manager, and equipment vendor.
- Well-balanced - Successful practice owners lead balanced lives with strong ties to family and friends. They exercise and take care of their physical and mental health. They possess high self-esteem and a sense of humor. And they have the ability to separate their professional life from their home life.
These key characteristics of success apply to all business people and companies, no matter what their profession or industry.
Focusing on the true meaning of success
Only you can decide if your personal style and temperament are suited for practice ownership, and whether the pay-off is worth the hard work. Remember that you may actually make more income as an associate, so you need to think carefully about what’s really important to you.
No matter which path you take - associate or practice ownership - it’s wise to find a mentor for your career, someone who can provide perspective, set a professional example, encourage your growth, and celebrate your success. A good mentor can help you stay focused on what’s really important in your professional life - a sense of accomplishment, satisfaction, and personal enjoyment. This is the true definition of success.
There has never been a more exciting time in dentistry. You have many options to choose from in how you want to practice and every opportunity to create the experience you truly want. By surrounding yourself with professionals who can help you make this important life decision, you can maximize your opportunity for professional and personal success. Reach out to those in the dental community who are experienced in first-time practice ownership.Take advantage of the extensive network of professionals, from specialty lenders to accountants, attorneys to practice-management consultants, who can assist you at this crucial turning point.
Above all, know that whatever direction you take, you are in for a rewarding, life-enhancing experience as a practitioner in today’s field of dentistry.
Allison Farey, president of Matsco, has more than 25 years of experience in the equipment leasing and financial services industry. Matsco is the only practice financing company to be selected especially for ADA members and endorsed by ADA Member AdvantageSM. Farey can be reached at (800) 326-0376 or firstname.lastname@example.org.