How much money do I need to start my own dental practice?
Starting your own practice is daunting, but dental practice startup costs might not be quite as bad as you think.
You generally don’t need a million dollars to open your own office and given the high success rate in the dental industry, it’s relatively straightforward and easy to secure a loan if you’ve got good credit.
An industry average
Average startup costs vary greatly by region. In some parts of the country a small office can be launched with just over $300,000. But a more realistic number for medium to high cost-of-living markets is $450-$600,000.
More relevant than the overall cost is your monthly payment. Most dental practices are financed and so instead of focusing on the total cost, think about how much you’ll need to bill in a month to cover your debts.
On a loan of $500,000, you can expect a monthly payment of $4,500-$7,000 depending on the length of your loan and the interest rates at the time. Dental practice loans are typically granted in 7, 10 or 12-year terms.
The square footage balancing act
The physical size of your office plays a big role in the overall cost of launching your practice. As such, it can be tempting to trim square feet as a money saving measure. But keep in mind that expanding your practice down the road is expensive, so it’s best to think about your future plans now.
Plan for success
Your ability to run your practice as a profitable business will impact your bottom line more than your initial loan amount. Start with crafting a solid business plan. Consider including the following elements in your business plan:
- Vision and mission statements
- Profit and expense projections
- Competitive analysis
- Marketing strategy
- Employee retention and hiring planning
Estimating equipment costs
The costs of dental equipment, furniture, computers, software, general supplies and everything else you need to open the door can vary widely. It’s easy to get caught up in the excitement when looking at new technology but if you can’t justify the cost of non-essential equipment you’re better off waiting.
Just like any other business, cashflow is the lifeblood of your dental practice. Starting from scratch, you’ll need to make sure you have enough working capital to stay afloat until cash starts coming in.
Finding your sweet spot
The right amount to invest in your dental practice is a personal decision. Don’t overextend yourself but don’t go too cheap either. Plan for success but don’t use “financing” as an excuse for acquiring equipment you don’t need or top-of-the-line office design that doesn’t match your target market.
This article is a starting point for your research. You’ll want to speak with financial professionals before signing any loan agreements.