6 MISTAKES that can cost you 6 FIGURES when opening up a dental office
Opening up a new dental office is an exciting time for most dentists. However, if not planned well, it can quickly become a very stressful experience.
In this article, we’ll consider six mistakes that can cost you cost six figures, when opening up a new dental office.
Mistake #1 You miscalculated the competition saturation
When beginning a dental startup, it’s always important to consider how saturated the area is with competitors.
For years, the most commonly used formula to check competiton saturation has been the population to dentist ratio. A higher ratio indicates an underserved community, which can help startups grow much more quickly.
However, be very careful when interpreting reports that include raw data dumps, because it’s quite common to get false positives or false negatives.
That’s why it’s important to verify the population to dentist ratio prior to purchasing or leasing real estate.
What’s the ideal population to dentist ratio?
For years, startup experts have suggested the ideal ratio to be 3, 000 : 1 , or at least 2, 000: 1 in a 3 mile (5km) radius.
For specialists, that number can be significantly higher, and some startup experts have suggested at least 30K : 1 or more.
However, there’s no steadfast rule.
You may even be willing to accept a lower population to dentist ratio when you can:
1) offer a unique practice strategy or community connection that gives you a competitive edge
2) relocate a practice with some existing patients
3) have access to an additional 6 figures of capital to market yourself in a saturated market
Mistake #2 – You underestimated the impact of a strong competitor
If you think a great location is ONLY about the competiton saturation, think again.
Even if you have a great population to dentist ratio, if your new office is located down the street from a strong competitor (for example, a large corporation with a very effective marketing strategy in place), you may want to reconsider that location.
Now don’t get me wrong – competition can be very healthy. In fact, I’ve seen some locations where some of the most successful ‘shark’ practices that generate millions in annual revenue, are located in very close proximity to one another.
But, it’s only healthy when well-established businesses compete this way, not for a new dental office with zero patients and limited cash flow.
Remember that with startups, it’s all about getting out of debt as fast as possible, and, because cash is king, you really want to reduce your costs wherever possible. Ideally, you’ll want your practice to grow as organically as possible, without having to invest as heavily into marketing from the get go.
So, unless you have an additional six figures of capital to invest into a strong marketing strategy, then a very strong competitor can sometimes be a BIG threat to a new dental office.
Mistake #3 – You moved ‘too slowly’ into a growing community
Any growing ‘pocket’ with great demographics will not stay unsaturated for too long. New dentists are bound to move into any location with great demographics.
That’s why shortening your startup’s project timeline is so crucial.
Whoever finds a great location first, builds out their practice first, and is able to market and attract patients first – always having the upper hand at growing their patient base more quickly and accelerating their success.
If you’re the last dentist moving into this great location, now you have to invest more money into marketing in order to compete with the other new dentists who are already established there – other dentists who took advantage of this growing community before you did.
You’ll also want to focus on what makes your practice unique. Offer a dental service that’s niche, and be sure that your practice is able to stay competitive in the market.
A good business plan is always prepared for the scenario that a new competitor moves in next door or down the street.
Mistake #4 – You didn’t factor in real estate considerations
Real estate considerations cannot be underestimated when beginning a dental startup.
For example:
Is there lots of traffic flow and visibility from the roadside?
Is the office easily accessible?
Is the building aesthetic, modern, and up to date?
How much space is available – is it too small or too large?
Is there ample parking?
Is the location in a residential, commercial, or industrial area?
Will the co-tenants draw your desired patient demographics?
Do you need a permit to build a dental office at this location?
Are there any large natural parks, forests, airports or lakes that might impact the future development of this area?
Mistake #5 – You didn’t consider the demographics and market facts
One location may be ‘ideal’ for one dentist, but not ‘ideal’ for another.
You’ll definitely want to figure out what your practice strategy is, and what demographics align best with that practice strategy.
Here are some key demographic and lifestyle factors you’ll want to consider when locating your practice:
Household Income and Disposable Income: With higher income demographics, patients tend to be more receptive to elective and aesthetic driven dentistry. Lower income locations can still do very well, with a ‘lower price, higher volume’ strategy.
In general, a household income above $50K is considered ideal for a dental startup.
Median Age: Generally a median age of 35 to 50 is considered ideal, because these patients are more likely to be able to afford aesthetic driven dentistry.
Culture, Religion, and Language: If culture, religion, language, and other lifestyle traits are important to you (or, if you think you would be more successful serving a particular ethnic or religious demographic), then you should consider these demographics when searching for a practice location.
Lifestyle Traits: Does your practice strategy align best with blue-collar, bread and butter dentistry? Or does it align better with white-collar, elective and cosmetic dentistry?
Population Growth: Is the population growing, and how quickly? When the future expected growth is large and positive, this is a healthy sign for that site’s viability.
If the future expected growth is negative, this may be a warning sign for that location. People are leaving that community for some reason.
Workplace Population: Workplace population provides insight to the number of additional people that are working in the area during the daytime. It’s a great market to capture especially in cities.
When there is a high workplace population, then you may want to consider being open in the early hours of the day, evenings, and during lunch time.
To help determine which lifestyle strategy best suits your practice strategy, read our article on Demographic & Lifestyle Factors to consider for Dental Startups.
Mistake #6 – You didn’t have an expert negotiate your lease for you
You’ll be married to your startup’s location for at least the next 10 to 15 years.
There are many factors to consider when signing a lease, and so many horror stories that we’ve heard personally from dentists who unfortunately did not do their due diligence when signing a lease.
These include overlooking demolition clauses, not having an exclusivity in place, not planning for unexpected flooding, and more.
A broker or lawyer who is well experienced with lease negotiation is the best person to consult with.
There are many other things to consider as well, so be sure that you have an expert who’s familiar with the leasing process to look over your lease for you.
ConfiDens Analytics helps dentists in North America locate their practices for success. For more information, get in touch or call 1.877.786.3367.