Practice Ownership: Startup or Existing?

Any doctor weighing the benefits of practice ownership must eventually determine whether to purchase an existing practice or risk opening a startup. There are potential benefits to both options, but you should consider your professional priorities before committing to one over the other.

In some cases the choice between purchasing an existing dental practice and starting a new one may be relatively straightforward. If a practice that suits your professional needs is available for sale within your budget and in a desired geographic region, then it might be the best decision for you. An established practice with a well-documented history of stable financial success is an attractive prospect for many doctors looking for a low-risk entry into ownership.

But if purchasing an available practice would entail compromising your needs, then it might be wise to consider a startup. Building a practice from scratch allows you to customize the facility’s layout, equipment and location, but it also presents a new set of challenges. Review the following advantages and disadvantages of starting an existing practice and a startup.

Starting a Practice:

Pros:

  • Can be built very near to your choice of location
  • Can be designed to your exact specs
  • Ability to build your own team

Cons:

  • No or negative cash flow to start
  • Need to hire and train staff
  • Negative equity position initially – owe more than the practice’s value
  • Incur leasehold improvement costs that accrue to landlord
  • More difficult to finance, and greater working capital requirements

Purchasing a Practice:

Pros:

  • Shorter decision tree
  • Instant patient base
  • Instant stream of business
  • Instant stream of cash flow
  • Management/marketing support from seller
  • Proven market potential and site effectiveness
  • Ongoing business momentum

Cons:

  • Limited availability within desired dental care delivery market and time frame
  • Purchasing the seller’s business and clinical reputation
  • Possible ill-fitted or outdated equipment
  • The challenge of fitting into a preexisting dental office staff
  • Entering cold into a rapid day-to-day business and clinical pace

Want to learn more about purchasing a dental practice or an orthodontic practice? See our sellers steps here, or view a list of dental practices for sale.