Should I buy a Practice or Start One from Scratch?
Timothy Brown, CEO of ROI Corp, answers the age-old challenge about whether a dentist should start his/her own practice from the ground up or purchase an existing one. While both options have merit, they also have their downsides.
Today’s dental marketplace is very competitive and one must consider whether there is an adequate supply of active patients for the dentist. This ratio of dentist to active patients can be as high as 1:1500 and as low as 1:500 in some downtown urban areas like Toronto. This number is important as it will affect cash flow, and debt-serviceability. A new practice in an urban area may not break-even until 2-3 years after it has been started.
An existing practice comes with an existing patient load which means cash flow immediately.
Rural practices within an hour of a major city are underserved. Setting up a new practice in these areas is advantageous as the communities do not have enough dental “manpower”. These rural areas often serve large populations of patients (as high as 3000).
Practice owners in rural areas are often able to save more due to the lower living costs and practice overhead costs in these areas. In some instances, dentists in rural areas may be more willing or able to exit practice ownership earlier than their colleagues in urban centres.
Full Interview (5.33″)