Dental Office Construction

Tips for a Successful Dental Office Construction Project

Taking on a construction project may seem daunting, but the end result could be the key to the successful growth of your practice. Design and construction take a considerable amount of time, so start planning early. Whether a renovation or ground-up build is needed, here are four items to consider before starting a dental office construction project:

  • People
  • Money
  • Space
  • Timeline

THE PEOPLE

Design with the end in mind. Clients, team members, and patients should ultimately be at the heart of your decision to grow your facility and how. By using a human-centered design approach and first empathizing with the end user, you may find solutions to problems you didn’t even know you had.

Start by asking customers and employees about their experiences. Ask them to paint a picture and walk through every step of their last experience with your practice, starting before they arrive on the property until they leave the building. No details are insignificant. If you can, record the conversation or take copious notes, listening for what was important to them and how they were feeling about their experience.

Once you get the whole timeline of their last experience, dig deeper.

  • What did they like most about their experience?
  • What about the least?
  • What would they like to see in the future?

Their answers may surprise you, so do this with a variety of clients and team members. Rarely does this exercise not illuminate pain points that can be improved in the future design of the practice.

THE MONEY

Financing a new dental office construction project can be a bit of a chicken or egg scenario. Do you first calculate how much your practice can afford to build, or how much what you want to build will cost? Ultimately, the real question is can you afford what you need?

The goal is to increase business, not stress your cash flow. A frustrating scenario is when an owner overbuilds and cannot enjoy their new space because they are overly stressed by trying to generate enough business to support the cost. An equally disheartening scenario is when an owner cannot afford to build a space that will truly allow them to grow; their finances only support a newer version of the same size as their existing space. By examining your finances early, you can start to have more realistic expectations of what the final product will be.

Total project costs can be dramatically different than just the construction costs. Total costs should include architectural, electrical, mechanical, structural, and civil engineering price tags. If building from the ground up, the site acquisition and site development costs also will be part of the total project expenses and must be factored into the construction budget. This includes site development costs, such as grading, utilities, paving, stormwater management, and more.

All of this will be in addition to the actual costs of the “sticks and bricks” of the building itself. Other costs to think about are IT cabling, security system, phone service, cabinetry, office furniture, and equipment. Contingency costs (funds built into the loan budget to serve as a buffer in case of unforeseen issues or cost overruns) are also important to a successful build. Assembling and listening to a team who is experienced in dental construction projects will help ensure your budget includes all the necessary categories.

Conventional and SBA lenders have favorable terms available for financing dental construction projects. To determine how much debt the practice can reasonably support, the lender will evaluate whether the cash flow of the business is sufficient to cover the monthly payments associated with financing the construction project. In addition to cash flow, other factors about the practice the lender may examine include:

  • Revenue trends
  • If revenues are maxed out due to limited space
  • If upgrades are needed to keep up with the competition
  • What new services you will be able to offer

Lenders consider not only the business’s ability to pay the loan but also your personal credit history as a major factor in their decision. Having early conversations with your lender can set you up for more successful access to financing.

THE SPACE

Now armed with the information provided by the end users on what the new space needs and an understanding of how much you can afford, you need to start evaluating what the end result of the space will be. With the help of your architect, you will want to establish your wants versus needs list for your practice. Ask yourself these questions:

  • What additional services will you offer?
  • What equipment is required?
  • How many exam rooms are needed now and for future growth?
  • What kind of building and style do you want for your practice?

The answers to these questions will influence the design of your building and, ultimately, the cost.

THE TIMELINE

Dental office construction projects like these don’t happen overnight, so having realistic expectations on timelines is critical to opening your practice. The planning process can take months or even years. Either way, the more effort put into the early planning stages can have a dramatic influence on outcomes. For instance, realizing early that you may not need an extra 500 square feet could save you upward of $100,000. The cost influence curve is an important concept to recognize in any construction project; as you move through the stages of your project, your ability to decrease costs continually diminishes.

Depending on the type of construction project, the time it takes from groundbreaking to being fully operational can take anywhere from months (with a renovation) to more than a year (with a ground-up construction). Geography and time of year are also important factors. Breaking ground in the dead of winter in northern states can be a headache because of frozen grounds-it may be worth just waiting a few months before starting construction. With commercial real estate, determining if the property is properly zoned and the timelines on zoning and permits should be researched to help gauge realistic timelines for the project.

The key for setting a realistic timeline is your team—and getting the right team on board early is critical to a smooth project. The team will likely consist of a lender, an architect, a contractor and of course, you—the owner. Dental industry construction expertise may cost more upfront but may save you time, headaches, and long-term costs in the end. The team should work together to ensure a successful project and support you as the owner in making decisions. In conclusion, your expansion team is there to execute a successful construction project that helps your practice prosper. Keeping your people, your money, your space, and your timeline in mind help lay the foundation for you to love, and fully utilize, the new space you build.

This may seem overwhelming, but at Live Oak Bank, this is what our construction loan specialists do every day. We are with you every step of the process, from groundbreaking to grand opening, Live Oak is your dental office construction financing partner. We can help you avoid costly mistakes and construction disasters. Contact a dedicated dental loan officer today to explore your options for expansion.

This article comes from our Path to Constructing a Dental Practice Guide. Click here to download the full guide.