Financing a dental practice's office expansion

By Lindsay Harkey

As a dentist and small business owner, are you capitalizing on a growing dental market? Technology advances are pushing the industry forward, providing expanded treatment opportunities to larger patient populations. More than 65% of the US population is covered by a dental benefits plan, and an aging population will require more frequent dental visits.¹

Growing your business can be done in a number of ways. It can mean increasing office visibility through a more favorable location. It can also mean adding space, which allows for increased capacity to provide a wider range of services. But how do you know if your practice is ready to grow? And once you know, how do you get started?

Expansion options and considerations

A typical challenge for dental practice owners in considering expansion is “when.” The “when” can depend on many different factors:

• Are you creating positive cash flow?
• Do you want to move to another part of town, one that provides better visibility and helps grow your client base?
• Are you outgrowing your current space?
• Do you want to add more technology?

If you’re answering “yes” to these questions, then it’s time to move from “when” to “how.”

There are different approaches for securing expansion financing. Consider the following situations:

• Relocation - Oftentimes, the location you chose for your practice is no longer working. It may not provide the space you need, or it might not be in the place you desire. Relocation, a common choice made by dentist-owners, allows practices to overcome these limitations. A new location can also allow for growing your patient base. For example, an ideal location will be visible from sidewalks and roadways to generate more brand awareness and easy access for new patients.
• Second location - If your first location is successful, expanding to a second location under the same brand is a good option to broaden your visibility, patient base, and workforce. With an established business plan, strong patient base, and successful associates, the upfront risk is often lower than breaking into the market. However, it’s important to consider that opening a new location is no simple feat (as you undoubtedly know from opening your first practice). You’ll need to ensure your first location is a well-oiled machine, allowing you to focus your efforts on your new office.
• Acquisition - Purchasing a competing dental practice is another way to grow, and this approach may have less risk than opening a second location. Be sure to weigh transition risks carefully. For the practice you’re considering buying, how loyal are employees and patients to the owner? What will be your immediate gain? How will your cash flow be affected?

When choosing one of these options, consider purchasing the real estate. Owning the real estate creates more opportunities, such as tax benefits, property value, design control, and potential rent income.