As a dental practice owner you continually look for ways to grow your business and expand on your success. But have you considered literally expanding your practice by opening a second location? Assuming your current practice is well grounded with a solid patient base, good management practices and steady cash flow, expanding to a second location can be one of the most dramatic and effective ways to build business success as well as create options for long-term security.

Build Your Business Assets
Just as buying a second home increases the value of your assets and provides profit opportunities for the future, expanding your practice to a satellite location provides several advantages in building your business.

New Market to Tap. At some point your current dental practice will reach a threshold beyond which it cannot grow without additional space, services and clientele. A new market provides an entirely new foundation for growth. Opening a second location to tap into an existing, underserved market with basic care services is one of the most effective ways to supplement your cash flow. In addition, a new market provides an opportunity to specialize in unique services such as denture or pediatric care that are in particular demand in that community.

Distinct Revenue Stream. A second office generates a distinct revenue stream separate from your current income that can be designated to help pay off student loans or continue reinvesting in the growth of your business. You have the opportunity to focus your satellite office on specialty services that command a higher fee, such as cosmetic dentistry, endodontics or periodontics, generating a higher level of revenue for your business. The cost of your investment in a second location can be offset by the additional amount of cash flow.

Retirement Vehicle. In addition to immediate income, your second practice location can be the vehicle that helps fund your retirement. Invest a percentage of operating profits from the satellite office directly into your retirement plan, or reinvest in and grow the practice for a profitable sale at a later date in order to fund your retirement.

While you will want to spend time in all practice locations to ensure consistent, high-quality care, consider developing a group practice with associate specialists to help service your locations. As you begin to wind down your work schedule in later years, you will have the opportunity to sell your interest in the satellite locations to your associates while retaining the level of ownership you need or desire at your base practice for ongoing cash flow.

Look Outside Popular Metro Areas
So where do you start looking for a second practice? Unlike the residential housing market, dental practice values in diverse metropolitan areas remain relatively strong, so you won’t find any real bargains in trendy and well-populated cities. However, the valuable opportunity you don’t want to overlook is the small, profitable dental practice in an economically sound but under-served community. Many of these practices can net more than $200,000* per year, have little competition, and are often moderately priced. Moreover, these locations may support services that are not currently available, enabling you to expand into new dental specialties such as cosmetic dentistry or endodontics.

Take Advantage of Finance Terms
Today’s financing terms continue to be favorable for dental practice acquisitions, making the purchase of a second practice that much more accessible. Many times a dental practice can be acquired with no, or very little, equity payment. In addition, acquisition loans can typically be closed in 30 days if all information is available, particularly if you are working with a lender who specializes in dental practice financing and understands your needs.
So if you are interested in significantly growing your business and are willing to work hard to make it a success, consider expanding to a second location that can provide new market, income and retirement opportunities. If properly managed, you’ll find it’s a dramatic and highly effective way to build your business and invest in your future.
*Practice Transitions Marketplace and the Current Economy, Dental Economics, Sarah Lynch, October 2008.

 

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