The Simple Guide to Starting a Dental Practice and Getting it Right the First Time

By Manfred Purtzki

Are you thinking about starting your own dental practice and want to get it right the first time?

For the enterprising dentist The Simple Guide to Starting a Dental Practice and Getting it Right the First Time is an invaluable resource. Starting a practice from scratch in today's competitive market can be a sca

• Language: English
• Publisher: Blue Beetle Books Inc.
• Release date: Jan 1, 2023
• ISBN: 9781777828752

Book preview

The Simple Guide to Starting a Dental Practice and Getting it Right the First Time

Copyright © 2023, Manfred Purtzki

All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system without the prior consent of the publisher. Reviewers may quote brief passages in conjunction with a review written for inclusion in a magazine, newspaper, or broadcast.

First published, 2023

Trade paperback ISBN: 978-1-7778287-5-2

Blue Beetle Books Inc., Victoria, B.C.

www.bluebeetlebooks.com

Tel: [phone]

Inquiries regarding requests to reprint all or part of The Simple Guide to Starting a Dental Practice and Getting it Right the First Time should be addressed to Manfred Purtzki at:

Purtzki Transitions Inc.

1700-570 Granville Street

Vancouver, BC

V6C 3P1

Tel: [phone]

Email: [e-mail]

It is recommended that legal, accounting, and other professional advice is sought before acting on any information contained in this book as each individual’s financial circumstances are unique.

The authors, publishers and all others directly or indirectly involved with this book assume no responsibility or liability, direct or indirect, to any party for any loss or damage by errors or omission, regardless of cause, as a consequence of using this book, nor accept any contractual, or other form of liability for such use. The personal services of dedicated professional financial and legal advisors should be sought.

Written in collaboration with Mike Wicks.

Cover design and book layout by Tom Spetter.

Editor: Kara Anderson

Custom publishing services provided by Blue Beetle Books Inc.

Printed in Canada

Also by Manfred Purtzki

The Simple Guide to Selling Your

Dental Practice for More Money

The Simple Guide to Buying

a Dental Practice and

Getting a Great Deal

Contents

Chapter 1: Introduction—Starting Your Practice From Scratch

Allan’s Story

Sophie’s Story

Why Start From Scratch?

Starting From Scratch—Two Potential Missteps

The Four Building Blocks of a Successful Start-Up

Chapter 2: Location, Location, Location

Emily’s Story

Zoning

Signage

Parking

Usable Space

Patient Demographic Analysis

Chapter 3: Negotiating the Lease

The Offer to Lease

Other Considerations

Chapter 4: Partnering for Practice Start-Up

Partnerships

Selecting a Suitable Partner

An Example Contract

Chapter 5: The Business Plan

Assumptions

Table of Contents

Executive Summary

Market Sector

Customers (aka Patients)

Competition

Services

Promotion

Revenues

Location and Administration

Personnel

Financials

Risk Assessment

Critical Steps To-Do List

Sample Business Plan: Scratch Start Dental

Title Page

Executive Summary

Lease Summary

Cash Flow Projections: Years 1-3

Marketing Strategy

Cash Flow Projection—Years 1 to 3

Chapter 6: Arranging Bank Financing

Case Study

Sample One-Page Loan Request

Information Required by Banks

Negotiation Tips

Chapter 7: Your Dental Office—Design and Construction

Design as a Competitive Edge

Effective Design Improves Productivity

Design—Don’t Lose Control

Technology

Construction

The Pros and Cons of the Design-Build Method

Change Orders

Tips for Selecting a Building Contractor

Chapter 8: Staffing Your Practice

Who to Hire First?

When to Hire Your First Hygienist

The Interview Process

Introducing New Staff

Creating a Championship Team

Chapter 9: Managing for Success

Patient Satisfaction

Moments of Truth

Cash Flow Up, Stress Down? Thank Pareto!

Happy and Motivated Team Members

Optimizing Financial Performance

Key Performance Indicators (KPIs)

Chapter 10: The First Thirty Days

To Be, Or Not To Be, an Associate

Start-Up Marketing Strategies

Know What Marketing Dollars Are Working

Sales

Cash Management

Customer (or Rather, Patient) Service

Acknowledgements

Praise for Manfred Purtzki’s Books

CHAPTER

1

Introduction—Starting Your Practice From Scratch

Let me make an assumption—you have been an associate for a number of years, dreaming of becoming the master of your own destiny by buying an existing dental practice. You have come to this conclusion because you feel your only secure option in today’s competitive market is to purchase an existing patient pool that will provide a secure source of income.

However, you are struggling to find a suitable practice to purchase. You have been searching for a long time, and your frustration is building. It has crossed your mind that you could start a practice from scratch—but the risk scares you. You doubt you have the business acumen or entrepreneurial spirit to pull off such an audacious plan. How am I doing so far?

Of course, you may be one of the minority of associates who has the appetite and courage to set out on your own. Whichever category you fall into, I do not doubt that the proposition of starting your own practice scares you to death.

What if I was to tell you that buying an existing practice can potentially carry more risk and requires more business skills and entrepreneurial attitude than a start-up?

I don’t blame you if you are shaking your head and thinking what is this guy talking about? Please bear with me and allow me to present you with two scenarios. The first follows an associate called Allan, who managed to buy what he thought was a great practice, and the second is the story of Sophie, who started her own practice.

Allan’s Story

Allan is a patient man; he spent many years searching for a good purchase opportunity. He considered himself lucky to find what he thought was an excellent practice. Of course, in today’s market, he wasn’t the only interested party; three other dentists were vying for the three-operatory family practice. His winning bid was $50,000 over the practice valuation of $750,000, which in this case reflected the clinic’s annual gross collections. Before taxes and after debt servicing and owner compensation, the net operating income was $300,000.

Allan was delighted with his purchase, but it wasn’t long before the bloom was off the rose. He imagined that owning an existing clinic was like driving a bus full of patients and employees. Once he bought the clinic he would take over from the previous driver, and all the passengers would be happy, and the bus would travel along much as before.

However, he quickly realized that the road to Shangri-La—to prosperity and wealth—was bumpy with large potholes. The first jolt hit hard when he discovered that the patient pool was shrinking by around twenty patients per month. Based on the clinic’s approximately 2,000 registered patients, that amounted to over ten percent per year. Such an attrition rate was both alarming and unsustainable. This would not have been a significant problem if the clinic was attracting new patients in large numbers, but records showed only six to eight new patients monthly. He had to reverse the trend—and fast.

Let me provide some relevant background to Allan’s situation. His clinic is on the third floor of a downtown professional building. This is quite common for older practices, which, when they opened, didn’t need street exposure. Two decades ago, dentists were in high demand and short supply. When the clinic opened twenty-plus years ago and built its patient base, most were younger people. Over the years the number of patients fitting this demographic dwindled. Patients married, grew their families, and moved to other areas on the city’s outskirts to purchase single-family dwellings. When Allan took over, the remaining patients consisted primarily of single people and retired condo dwellers—and they were aging. When Allan looked at the demographics, he discovered that 80% of his regular patients were fifty-five-plus with limited discretionary income.

His first thought was to ramp up the clinic’s marketing. Given the location and the demographics though, Allan was less than confident it would be enough to help, especially in the short term, and the cost would be exorbitant. He knew he needed to upgrade his website and initiate a direct marketing campaign, but he also needed to do something more immediate. So, facing the threat of declining revenues, he turned his attention to expenses to reduce the clinic’s overhead, which was 60% of gross revenues.

Allan considered retaining a practice management consultant to increase efficiency, but he got pushback from his staff and abandoned the idea. He then turned to salaries and quickly discovered that taking that route would be like wandering into quicksand. The clinic’s hygienists had built relationships with patients over many years. Because of their value to the practice, they earned 20% above the going rate. It didn’t take Allan long to realize that pay cuts would result in him losing good hygienists, not to mention the patients who would follow them to their new clinic. Good staff equals good patient retention. Wisely, Allan shelved any expense reduction plan that would affect employees.

He never imagined that taking over what