Advantages

The advantages of a de novo relate to the fact that a dentist can make the dental practice exactly what they want it to be. It is their practice, including business systems, practice philosophy, and managed care participation. The location, the design of the office, and the staff will all be what the dentist wants, not what a previous owner wanted. New offices and equipment need less maintenance and repair. New practices may be less expensive because the buyer is not paying for “goodwill.” If the area chosen is in high need of dentists, the newcomer does not need to buy goodwill. If someone can be relatively busy from the beginning and grow at an acceptable rate, they do not need to pay someone else for a patient pool.

The dentist controls the regional and specific site location of the practice. They may want to buy into a practice in a particular area, but if no dentists are interested they obviously cannot buy in. That is not the case with a practice set‐up. Similarly, the office design and equipment selection will fit their criteria, not what exists in the facility.

Dentists can grow professionally with the patient pool when they start a practice. Initially, their clinical speed will not be as high as it will be later. (Clinical speed comes from decision‐making, not just hand skills.) So clinical speed increases as the patient pool and practice “busyness” increase.

Disadvantages

On the downside, starting an office from scratch can be more expensive because the dentist generally buys new equipment and supplies. Establishing a new practice takes six months from the idea to the first patient visit. If the dentist is not working or in school during this time, they have lost a half‐year’s income, adding to the expense. New offices take much time, effort, and many headaches to develop.

A new practice does not have a patient base. Depending on the area, it may be easy or difficult to market and build a patient base. Because of this, new dental practices generally have cash‐flow problems. New practitioners must borrow additional working capital (often about three months’ expenses) to weather this problem. Insurance plan participation currently drives dental marketing in many areas. These plans result in lower income from plan‐fee requirements, leading to lower cash flow and lower profit in new practices in these areas. Because of this, bankers are warier about financing a practice that does not have a demonstrated cash flow.

Regional Location

Many new dentists had already decided when they entered a dental school where they planned to practice. They are from a specific town or area and have always wanted to return to that area to practice. Their decision is easy – the decision is tougher for the buyer with no pre‐established region to move into. The latter must examine their desires and then do a lot of homework to find an area that meets their needs.

Site Location

Once someone selects a region or general area to practice in, the next decision involves picking a specific site for the practice. Marketing gurus say that there are only three factors to consider in developing a successful business: location, location, and location. Although this is an oversimplification, it points to the importance of specific site selection in practice development.

There are many types of locations for dental offices, each with pros and cons (Box 4.1). Freestanding buildings, either owned or leased, are becoming less common as commercial real estate gets more expensive. Medical office buildings are accessible to the public, have ample parking, and lend an air of professionalism. These landlords are used to the specific needs of professionals, which can be helpful. These sites are expensive, however. Many are condominium‐type arrangements, in which someone purchases the office and then pays a fee to the condominium association for maintenance and repairs. Strip‐type shopping centers have adequate parking and are generally on a significant road, giving high visibility. They are relatively expensive. The landlord is usually responsible for snow removal and other everyday maintenance items, although they generally charge the lessee (dentist) a maintenance fee to cover these items. The lessee usually must purchase and maintain heating and air‐conditioning units.

The practitioner should check the types of businesses the property owner caters to. A dentist probably does not want a pawnbroker, tattoo parlor, or head shop opening next to their office. Large shopping malls are the highestcost location. Set‐up costs are high because most retail space is not set up for plumbing, electrical, and other dental office improvements. Malls often charge high rent and sometimes a percentage of gross sales. The practitioner should try to negotiate this out of the lease. Like in strip malls, the practitioner is usually responsible for utility upkeep. General office buildings may be the least expensive alternative. Location and parking may or may not be optimal. The advantages of these sites are on a case‐by‐case basis.

Lease versus Buy

Most dentists today lease space for their offices. Many who do own are owners in a condominium arrangement. Many owners believe that owning their building insulates them from the problems of having a landlord. That is true, but it brings with it the problems of ownership. When the plumbing breaks down, the practitioner is responsible for fixing it. Changing tax laws may reduce or increase the value of ownership.

If a dentist is going to lease, they must know that most commercial property is priced on a square‐foot‐per‐year basis, such that “$13 a foot” for a 1000 square‐foot office is $13 000 yearly or $1083 per month. Depending on the state of commercial real estate in the area, the practitioner can negotiate specific clauses into the lease. They want the property owner to pay as many ancillary costs as they can negotiate. These include general maintenance, plumbing, heating and air conditioning, snow removal (if appropriate), and cleaning of the common areas. Leasehold improvements (improvements that the practice owner makes to the landlord’s property) are expensive for a dental office. This is primarily because of the extensive plumbing needs. (Each operatory requires hot and cold water, waste, air, vacuum, nitrous, oxygen, and electrical outlets.) Many dentists have negotiated a given amount (e.g. $10 000) for leasehold improvements. Others have gotten months of free rent while the owner–dentist makes the improvements. When a dentist negotiates any of these items, they should be sure that they write these items into the lease. The landlord may be noble and true. However, if the landlord sells to another party, there is no record of verbal agreements. Many landlords want a professional office in their space. Dentists are excellent, high‐class, long‐term tenants. So, the practice owner does have some bargaining leverage.

General Design Decisions

There are unique design criteria for operatories and x‐ray areas. The dentist must decide if they want open operatories or closed rooms. Either one works, depending on the office owner’s style. Pass‐through x‐ray heads save costs if they can be designed to reach chairs in both operatories. They often cannot, however. The type of equipment being bought may determine, in part, the design of the operatories and support areas. Traffic patterns should be convenient for patients, staff, and the dentist. The office owner must place high‐traffic areas near the front, making patient traffic patterns as short as possible. This also relieves congestion in hallways. The hygienist probably will see more patients a day than the dentist. Therefore, the hygienist’s operatory should be nearer to the patient reception area.

The dental office must have a centrally located sterilization area. Employees will need a large counter space for breaking down trays and cassettes; a deep double sink to wash instruments; another for packaging and autoclaving; and more for preparing and storing sterile trays and cassettes. A dental office will need a minimum of 10–12 ft of counter space for efficient instrument sterilization. If the office has cabinets below and above the counter, there must be enough space for office sterilization procedures. Many people use the lab for this space. Separate areas, however, are a better idea.

Some areas are low‐use areas, which need to be away from high‐traffic areas. Staff lounge areas and mechanical rooms are often noisy and smelly; those should be away from patient treatment and traffic areas. Private offices are luxuries and should also be out of the traffic flow. There need to be public restrooms if the office is in a stand‐alone building or is freestanding. These restrooms need to be near the patient waiting room but under the control of the staff. (It is amazing what kids try to flush down the toilet.)

Most designs do not have a large enough business office area. Dental business offices need significant counter space for electronic gadgets, such as a computer, printer, fax, copier, answering machine, and maybe an oldfashioned typewriter. The more storage, the better. As paper patient chart numbers increase, so do storage requirements. (Electronic charts do not have this problem.) Front‐office personnel should not make collection or other private patient calls within hearing of patients in the reception room or treatment areas. The office should have a separate room, near the business office but closed off with a door, for making these telephone contacts. There should be a counter, at elbow height near but out of the patient flow, for patients to write checks or sign charge slips. It must also include a pen.

The reception area ought to be just that. Patients should be received, not made to wait there. If the dentist and patients are both on time, there is minimal waiting. Rural practices and practices that see many children will often have family members waiting for the patient to receive treatment. In these cases, a larger waiting room is helpful. The lab is a seldom‐used area and should be in a peripheral, low‐use section. The same goes for the private office. If a dentist sits at a desk, they are not seeing patients or generating any money. The office should be a lowpriority, low‐use area as well. Many dentists like a consultation area for patient treatment plan presentation and financial arrangements. If the office owner wants one, it should be a separate room near the patient traffic flow area.

Advantages of Buying a Practice

From a financial perspective, purchasing a practice may allow the buyer to make more money than a cold start. This occurs more in areas where patient competition is higher because the dentist has a built‐in patient pool. The buyer will have a full book of patients from the first day, and they will have more cash flow because of those immediate patient visits. When starting a practice from scratch, a dentist may lose time when the office is not open because of construction delays or equipment delivery schedules. A dentist generally buys new equipment for a new office. Although this equipment needs fewer repairs, it costs more for the initial outlay. If the practitioner purchases the accounts receivable of an existing practice, they will not need as much working capital or start‐up cash. A buying dentist probably will not need to recruit staff for the office immediately. Hopefully, existing staff will remain when the new dentist takes over.