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Thursday, October 9th, 2003 | by Guy Jaffe

Why Struggle?

Recently, a senior dental student told me that several of his instructors encouraged him to start a practice upon graduation. At the time of our conversation, he was well along in the process. He had located a vacant space in a shopping center located in a very nice part of town. He was working with a dental supply house to design the space to his satisfaction. When I mentioned to him that there was an excellent practice for sale nearby, he let me know that he was too far along and there was no turning back. I just wished him well and decided to sit down and write this article.

By the time this young dentist opens his office, he probably will spend close to $150,000. When the office is completed, he will have two fully equipped operatories and one more operatory that will be plumbed and wired for future growth. In addition, he is purchasing office furniture, a computer, and computer software. To pay for these improvements, financing must be obtained for the equipment, buildout, and working capital. In addition to the practice loans, the young dentist already has $90,000 in student obligations. With all this debt, you can see how important it is that the practice expands quickly for the young dentist to survive. The longer it takes to turn a profit, the more pressure the young dentist will feel.

Once the build-out has begun, the young dentist’s attention will turn to hiring his staff. He will concentrate on trying to find an experienced receptionist to run the front desk, including making appointments and doing the insurance. Some start-ups include a chairside assistant from the beginning; others do not. A hygienist is probably not feasible initially.

At the outset, he will have few patients, except for family and friends. He will need to advertise and become involved in the community. Slowly, over time, he will begin to attract new patients. As the practice grows, he will add staff. Eventually, he may be able to afford a part-time hygienist.

Starting a practice from scratch today carries a host of unknowns, risks, and uncertainties. With reference to the young dentist above, one can’t help but wonder:

  • How long will it take him to attract enough patients to make the practice financially successful and increase growth?
  • When will he break even and when will he be able to start taking a paycheck for himself?
  • If it doesn’t grow fast enough, will he be tempted to take managed-care patients to fill up the empty chair time?

On the other hand, when you purchase an existing practice with an active patient base, there is immediate cash flow from day one. Regardless of what others may tell you, you always have more take-home income from a practice that you acquire than from a practice you start cold. It is just simple economics! The source of cash flow for a dental practice is a quality patient base. A start-up practice has no patients; an established practice does.

When you purchase a practice, you are buying the following things:

  • Patients
  • Experienced staff
  • Income
  • Cash flow
  • A paycheck from day one that is often more than the buyer previously made as an associate
  • Systems, including a recall system

Purchasing a practice versus starting a practice from scratch is quite possibly the most important career decision that you will ever face.The choice that you make now will have a major impact on your entire career and possibly on your personal life, too.

Any young dentist with substantial student debt should consider purchasing a practice. If you can’t find a practice to buy after looking for a year or — if the practices that you find are not satisfactory — only then should you consider starting a practice from scratch. And if you do decide to go the long road and start a practice from scratch, be sure and get professional help to guide you along the way. So, I ask again, “Why struggle when you don’t have to?”


About the Author

Guy Jaffe, MBA

Guy Jaffe is the principal of ADS Midwest and has been appraising and selling dental practices since 1987. He had a successful career as president of Pan American Realty Corporation, developing and managing real estate. He also served as director of community and economic development for the state of Missouri and is currently a director of Metropolitan Capital Bancorp in Chicago. He is a founding member and past president of ADS and a current member of the nationally recognized Practice Valuation Study Group.

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