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Product Insights by Warren Bobinski

Warren Bobinski

How much does it cost to open a new dental clinic?

Date: 09/27/2012 01:36pm

How much does it cost to open a new dental clinic? About $1,000,000
 (2012–if it's 2040 and you are looking at this, significantly more.)
 But don't be scared my little grass hopper...the return on investment still makes this viable. You can still open your dream clinic with some good planning.

The dental profession has established fee guides and payment systems that will help cover the cost of investment over a reasonable period of time. All you have to do is have patience (and patients!) Be wise in your investments, especially those outside of dentistry. Our profession has very high success rates compared to other industry–but that doesn't mean it is absolutely fool proof.

The return on your investment after 5 years should be netting you 35-40% or greater of your gross income. Don’t forget–some of your income comes from the equity in your business. Regular investments in your business are the ONLY way to make sure you get this equity out, keep current, comfortable, profitable and viable.

Here are some guidelines:

Dental Office

Location and Construction

Be careful when you pick location. Make sure there is GROWTH if you are building new. Don’t set up a new clinic in a well established part of town with several other clinics that are already servicing the area, unless you are willing and absolutely able (without interference) to compete. Make sure to use a lease negotiator–this can save you tens of thousands over time! Unless you have a realtor licence–it’s one of the first good investments you will make.

Location costs–you will need about 400 square feet for every operatory you will build. In our $1,000,000 average office example you will have 5 operatories developed. 400 x 5 operatories is 2000 square feet to be comfortable. This doesn’t mean each operatory is 400 square feet! This is just an easy formula for figuring out space. This will give you a nice private office/consult room, staff room, a little bit of room for storage, waiting room, etc. Make the most of your space–the biggest mistake I see a lot of doctors make (in my area) is UNDERestimate the space required. Probably one of the biggest regrets most office have is NOT getting enough space for future expansion!

The average cost of building in North American cities is pretty close. Sit down. As this is going to surprise you a bit. 
$170–$210 per square foot.

Don’t be cheap–as it will cost you more in the long run. This is an INVESTMENT! Make sure to INVEST wisely. There are professionals (just like you grass hopper) that KNOW what they are doing. Designers, lease negotiators, lawyers, accountants, business administrators, and most importantly–the "Dental Sales Rep"...the one person who KNOWS almost every person you need to hook up with. You are not alone...the so called Field Sales Consultant (FSC) IS THE FORCE! And may THE FORCE be with you! These are the people who KNOW the community, the the people, know where there is opportunity, what is costs to build, who to talk to every step of the way...albeit–let’s get back on track!

Equipment Costs
The range again depends on quality. You can be cheap (and pay more in the long run) although some less expensive equipment is well built! It’s a matter of taste as well. If you are comfortable driving a basic, get you there dental chair with basic, get you there equipment (functional and no frills) you can get away with as little as $50,000 per operatory. If you want to get "Mid grade" with some frills, but not completely decked out budget $75,000 per operatory. If you want "luxury, frills, technology, high end–then budget $120,000 per operatory. Or be cheap and pay later, or hate going to work instead of loving going to your dream clinic...

The differences come in quality of digital systems, computer costs, and networking as well as support, are you a basic panoramic guy or do you need iCat/3D quality since you are going to be doing implants? A panoramic alone ranges from $30,000 to over $200,000!

I HIGHLY recommend when I build offices to use at least mid grade or better. One of the biggest purchases you will make with equipment is cabinetry. The stuff I sell is ENGINEERED DENTAL EQUIPMENT–I personally don’t like the name Dental Cabinets. It implies that anyone can build a dental cabinet. And after seeing hundreds of offices with different grades I can tell you quite simply: You get what you pay for. An investment in quality, engineered cabinets will pay you back in time. More efficiencies, upgradablility, functionality, durability, retained value. It costs MORE to build your own in the long run (although it may seem ok at first – it is RARE that cheap cabinets are worth while).

A whole blog could be written on this matter my little grasshopper. This is where your FSC will give you good advice based on your personality, taste, and location. They WANT you to succeed, and a good one will give you good advice on which equipment will work best!

The fact is, you will likely set up for LESS than a million bucks. Some of you considerably less. But you NEED to be aware of what an average clinic costs when you speak to your banker or favorite funding relative! It's better to assume your expenses are higher (and then come in UNDER budget) while your cash flow will be less (and kick ass instead).

Buying a clinic looks a lot more attractive! First–they have already done the hard work of attracting patients. Second, the basic mechanical renovations were likely done back in the day when renovations cost significantly less. Yes, you probably need to upgrade–but you are likely in for about half the cost of new. Also important–Cash Flow, experienced staff, equipment–new or old–if it functions, it’s opportunity!

When you are considering building–also consider the cost of buying an established clinic. Remember your dream and the type of patients you want to see–look past the beat up old clinic (but keep it in mind when establishing a price as well). CASH FLOW is GOOD WILL! Positive Cash flow is worth something...do some research, and again talk to your local FSC (the everything dental guys!)

Summary
 
My dear grasshopper. Your dreams should still be alive. Be confident! It’s most important! Together we will make this work–you have spoken to an old and wise, experienced dragonfly. Here is a very interesting link on opening a dental clinic, including costs of staffing, first year expectations. Very much in line with my estimates for 2012!

http://www.dentalclinicmanual.com/chapt2/1_1.html

To view the entire blog post, click here.

This blog was re-posted with permission from DMDRep.com.

Warren Bobinski is a consultant at Henry Schein and is owner/operator of DMDRep.com, a blog that shares ideas on dental products, techniques, practice management, and life.

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