Opening your own dental practice is the dream of many ambitious dentists. You’ll have the independence to decide the direction you want to take the business and greater control of your financial future.

However, while it can be exciting, it can be difficult to know where to start. At RA Accountants we are experts in helping dentists at every stage of their journey. We help dentists make the right business decisions from starting up their first practice, to growing to multiple sites, all the way to eventual succession planning.

Based on our experience, we have created a guide that outlines some of the considerations you’ll need to make when opening a dental practice.

Our guide will cover:

• Your dental practice business plan
• Buying an existing dental practice vs building a dental practice from scratch
• How to finance your dental practice
• How to pick a location
• The legal and regulatory requirements
• Important considerations for a dental professional becoming a business owner

Create a business plan for your new dental practice

One of the initial steps in establishing your dental practice is to create a comprehensive business plan. A business plan serves as a roadmap for your practice, outlining your goals and the business strategies needed to achieve them.

A well-crafted business plan for a dental practice should include:

• Business Goals: Clearly defined objectives for your practice.
• Target Market Analysis: Research on your potential patients, including demographics and their dental needs.
• Market Strategy: How your practice will meet the needs of your target market.
• Competitor Analysis: A thorough examination of competing dental practices in your area.
• Sales and Marketing Tactics: Strategies for attracting and retaining patients.
• Financial Projections: A detailed breakdown of your current financial situation and future projections.

Developing a business plan not only helps you clarify the steps needed to succeed but also increases your chances of faster growth. Studies have shown that startups with a business plan grow 30% faster than those without one.

The important thing to remember is your business plan is not a static document, as you learn more or situations change you can come back to your business plan and update it.

Include in your business plan how you will manage mixed income: NHS & Private Practice

An important part of your business plan will often need to be how to manage the mixed income from NHS and Private Practice.

As you’ll know, dental practices often operate under a mixed income model, with revenue coming from both NHS contracts and private patients, this brings a unique set of challenges:

1. Apportioning costs: Accurately apportioning costs between NHS and private income streams is crucial for both tax reporting and financial management. Dental accountants with expertise in both NHS and private practice operations can guide you in properly allocating shared costs (such as rent, staff salaries, and overheads).
2. Understanding NHS contracts: Navigating NHS contracts can be tricky. Dental practices need to be aware of contract performance targets, funding changes, and billing processes. An accountant with experience in this area will help you avoid common pitfalls and maximize revenue.

It may seem complex at first, but spending the time to build these considerations into your business plan at the start of your business journey, and even seeking out expert help when needed, is a great way to avoid common mistakes and set yourself up for long-term success.

Buying an existing practice vs building a dental business from scratch

A big first decision you’ll need to make is whether to buy an existing practice or start a dental business from scratch (starting a squat practice).

There is no right answer to this question.

The best option will for you will depend on your personal circumstances. However key consideration you should make include:

• Upfront Investment: In both cases substantial upfront investment is required. When acquiring an existing practice, you’ll have a fully equipped practice from the start. While, when setting up a squat practice you’ll be able to tailor the practice layout and processes exactly to your needs.
• Cash Flow: An established practice will have an existing cash flow from day one. This can make your revenue more predictable to manage and provide a quicker return on investment. However, a new squat practice might have greater potential for growth over the long-term.
• Patient Base: An existing practice will have an existing patient base for you to tap into. A new squat practice will require you to build your own patient base from scratch (often requiring greater marketing investment upfront).
• Staff: You’ll need a team to help your practice succeed. When acquiring a dental practice, the staff might already be in place and up-to-speed with all the practice processes. This can be a double-edged sword, you’ll have the benefit of an experienced team but might also inherit staff issues or embedded cultures that are hard to change. With a squat practice you’ll be hiring and training your staff from a fresh start.

Carry out due diligence

One essential step you’ll need to make when buying an existing practice is carrying out due diligence. Performing a thorough due diligence exercise before purchasing an existing dental practice is crucial to ensure you’re making a sound investment.

When undertaking due diligence, it is vital to assess the financial health of the practice, its patient base, contracts, and the condition of assets. This process will help uncover any potential risks or hidden costs and provide clarity on the expected return on investment.

There are different ways to acquire a business, typically through an asset purchase or share purchase. You’ll find each option has its own tax and legal implications that you’ll need to careful consider.

If you are not sure which option is right for you, then talk to an experienced professional. They’ll be able to chat through your options to help you figure out the most appropriate option for your personal situation.

How to raise finance for your dental practice

To determine your financial sources for opening a dental practice, you’ll first need to estimate your startup costs. Calculating the total cost to open a dental clinic can be complex, but common expenses typically include:

• Dental equipment and supplies
• Rent and deposit
• Staff salaries & costs
• Practice fitting and renovations
• Licenses and association fees
• IT and practice management software
• Marketing costs

Working with an experienced accountant can be invaluable in creating a comprehensive financial plan.

Once you’ve determined your startup costs, the next step is to secure financing. There are several ways to raise the necessary funds, and each dentist’s situation will be unique. Some common sources of finance for opening a dental practice are:

• Personal Savings: This can include your own savings or contributions from friends and family. While it may be challenging to cover all expenses with personal savings, having a portion of the funds can be crucial for securing loans, as lenders often require a 10-20% deposit.
• Loans: The most common method to finance a new dental practice is through a bank loan. Passing due diligence is essential, so having a good business record, a well-thought-out business plan, and a strong relationship with your bank manager can be very beneficial.
• Partnerships: If you cannot raise enough funds on your own, partnering with one or more individuals can be a viable option. Each partner’s financial contributions can help raise a larger deposit, potentially leading to lower interest repayments on loans.

In reality, it’s rare for someone to have enough personal savings to open a dental practice entirely on their own. Most dentists will likely use a combination of the financing sources mentioned above.

If you have any concerns, seeking professional advice from financial experts is a wise course of action. They can help you weigh the pros and cons of each financing option and develop a plan tailored to your needs.

How to pick a location for a dental practice

One of the most important decisions you’ll need to make when opening a dental practice is your location.

Your location will decide your catchment from which you can draw patients, and the demographics and competition of this catchment will decide everything from the services you focus on, your approach to marketing and your chances of success.

You’ll need to consider closely:

• Local demographics: You should not just review the number of people in your catchment area, but also the wider demographic data. Are there lots of families interested in would be interested in family care? Is the area full of high-income individuals who might be interested in in elective or aesthetic treatments?
• Competition: Consider what does the existing competition look like and why does it look like it does. The presence of competition is not necessarily an issue if you plan to focus on a different set of services. However, if the market is oversaturated then it might be better to look at elsewhere. Alternatively, if there is no competition in an area, while that might at first glance look like a good thing, is there a reason for this? Maybe there not a large enough patient base to support a practice for example.
• Local development plans: Look at any possible upcoming developments, future residential developments can rapidly change the demographics of an area – creating new patient base where none existed before.

All this information can then be fed back into your business plan to inform what your dental practice will look like.

How to compare different potential dental practice locations

To help you pick a location and compare different possible sites, the Office National Statistics provide a wide range of open sources for reviewing the demographics of an area. These include:

• Income estimates: see figure 1 on the webpage
• Household composition: see figure 3 on the webpage

On top of this, free tools, such as datadaptive, place these datasets into a more digestible format. For example, you can use datadaptive population density tool to work out how many people live within a specific radius and then overlay with this with the demographic data from the ONS.

As people, are highly tied in how far they are willing to travel for dental services, this is often a powerful way of figuring out how many potential clients you could attract. You can then use an AI tool to review how many competitors are also operating in this catchment.

Top tip: In rural areas, areas where dental practices are highly limited or where driving is more prevalent, you can expand the distance people are willing to travel to work out your practice catchment zone. While in urban and highly competitive areas you might choose to reduce distance radius.

Once you have this raw data you can take a few locations and use some basic metrics to measure each locations potential. The end result might look like the below:

In the example above (using three real locations), we can see that even though site C has the highest population density within a 2km radius, by the time we account for competitor practices – it has the worst ratio of population per existing dental practice.

Once, you have narrowed down sites, you can then carry out more detailed analysis by counting footfall (the number of people per hour who walk past a specific location) and even parking availability.

In most cases, when choosing the location of your first dental practice it always best to choose somewhere you know. This local knowledge can give you the edge in choosing the perfect location for your practice.

Another consideration for particularly ambitious dentist is to even think ahead and consider where you would like to place subsequent sites.  When opening a second or third site, you’ll now be splitting your time between multiple locations so proximity can be an important factor in ensuring you are able to stay on top of the management of multiple locations.

What legal and regulatory requirements you’ll need to meet

Navigating the legal and regulatory landscape is a key part of setting up or acquiring a dental practice. You’ll need to consider:

1. Dental practice licenses: In the UK, dental practices must be registered with the Care Quality Commission (CQC). Depending on the nature of the practice (e.g., whether it’s private, NHS, or mixed), there may be additional registration or compliance requirements.
2. PAYE & Pension schemes: If you’re employing staff, it’s essential to set up PAYE for tax deductions and contributions. Additionally, providing pension schemes for employees is not only a legal requirement but also boosts staff morale and retention.
3. Business registration: You need to decide on the structure of your business. Options include:
   • Sole Trader: This is simpler to set up, but the owner has full liability.
   • Partnership: A shared structure where partners split profits and liabilities.
   • Limited Company: This offers personal liability protection but requires more administrative work.

You’ll no longer be just a dentist, you’ll be a business owner

When you set-up a dental practice you’ll no longer just be working as a dentist, you’ll have the all the responsibilities and tasks of a business owner. This can be an immensely exciting and satisfying challenge, but also often tough with a lot of hard-work required.

Some of the roles you’ll have to take on include:

Managing your finances

When opening your first independent dental practice, you’ll no longer just be filling the role of a dentist. You’ll now be the head of your own business. This can be immensely rewarding but can also come with additional administrative tasks.

An important part of that will be managing your accounts. You will have to look after your cash flow, bookkeeping, and payroll.

When opening multiple dental practices, these tasks can quickly build up – eating up lots of time that could be spent running your business.

Luckily, it is possible to outsource or automate these tasks. If you need advice on how to automate these tasks, we recommend speaking to your accountant who will be able to support you.

An experienced accountant will also be able to set you up with cloud accounting software – such as Xero. This software will give you real-time access to your financial data, meaning you always know exactly what your financial position is.

If you want further tips on how to grow your dental practice, take a look at our article on tips to maximise your dental practice income.

Marketing your business

When you work as a dentist you don’t often have to think about building your client base. As a practice owner though it’ll be one of your most important tasks.

Attracting clients is central to building your business revenue.

When it comes to marketing, think closely about what makes you different. Why should a potential client choose you over another practice?

This could be the quality of your service, the different types of treatments you specialise in, or the types of patients (e.g. children or the elderly) you focus on.

Then articulate this difference through your marketing material. This could be through digital marketing (Paid-per-click advertising and local SEO), print media sent to local addresses, email and SMS messages, attending local events or encouraging referrals.

Delivering excellent patient experience

Once you have attracted patients to your new dental practice, you’ll need to think about how you keep them.

A central pillar to keeping your patients coming back year-after-year, is to think closely about the patient experience you provide. Improvements to patient experience provide dual benefits to your business – in that they increase patient retention, and great patient experience can generate referral clients.

When thinking of ways to improve patient experience consider the following:

1. Streamline your booking system: Implement an efficient online or phone booking system that minimizes wait times and enhances patient convenience. Digital tools like automated reminders can reduce no-shows.
2. Reduce wait times: Patients appreciate quick service, so optimising appointment scheduling and treatment times is essential.
3. Staff training: Dental staff should not only be trained in technical dental procedures but also in customer service and upselling. Training in communication skills, patient interaction, and explaining treatment options in a way that is clear and informative can make a big difference in patient satisfaction.
4. Feedback: Collecting regular patient feedback and acting on it can help improve the patient experience. Implementing surveys or feedback forms ensures that you understand patient concerns and areas for improvement.
5. Practice layout: A well-designed practice layout can enhance patient comfort and flow. Consider waiting areas, signage, lighting, and the overall ambiance.

Recruiting and managing staff

You’ll now be responsible for a team of staff who will be vital for making sure you don’t spread yourself too thin – doing important tasks for you to keep your business running smoothly.

You’ll also be working with them day-in day-out. Therefore, it’s important to make sure you trust and get on well with everyone you bring in.

Review your business performance

Once your business is up and running, you’ll start to need to think about keeping track of your business performance and practice’s financial health.

The best way to do this is to establish a set of key performance indicators (KPIs) to track your business against.

These can cover everything from your finances, marketing performance, patient satisfaction and staff performance.

The best KPIs are often those that aren’t too complex to measure but help flag possible issues before they becomes problems.

Have an exit plan

With so much to do in setting up and growing your practice, it is often easy to lose sight of where you are going.

We recommend always having a clear plan of what you want to do with your business – do you want to eventually sell the practice or pass the business onto a family member?

Whatever your end goal, planning ahead early is important – especially from a tax perspective.

RA Accountants are specialists in offering accountancy services for dental professionals. We offer a complimentary, initial online consultation to discuss your personal circumstances and to see how we can help. Get in touch to book your appointment today.

These articles are for guidance only and professional advice should be obtained before acting on any information contained in them.

No responsibility can be accepted for loss occasioned howsoever to any person as a result of action taken or refrained from as a result of reading.