When you hear the phrase “less is more,” it’s only fair to assume the only people who’d say such a thing weren’t looking at their bank accounts.
Still, there’s merit to the notion of less being more.
Sometimes, when we try to take on too much in our lives, it leads to diminishing returns. We stretch ourselves too thin and end up worse off than if we stuck with keeping things a bit smaller.
It’s not a universal rule, of course. Sometimes more is more (e.g. money). But less is often more, and that notion is most reflected in the dental industry.
Specifically, we’ve noticed many pitfalls to practice-owners expanding beyond their one humble practice. In many cases, it causes business-related headaches, negatively impacts your first practice, and hinders one’s quality of life.
Let’s further explore why dental practice owners are often better off sticking with their one practice instead of trying to expand.
There are significant roadblocks standing in front of single-practice owners who want to expand, and it would be wise to mull them over in great detail. We’re highlighting these obstacles below:
You’ll likely need to borrow money from the bank to buy a second practice, adding to your debt obligations.
The pitfalls here are clear – you’re making yourself vulnerable to cash flow problems provided you have an off-month. As you’re just opening a practice, like most new business owners, you can’t guarantee a great first few months. This increases your chances of cash-related struggles.
On top of that, lenders tighten up their financing requirements for second practices.
So, these lenders don’t just need an airtight business plan. They’ll also want a substantial savings cushion of about $100,000. Maybe more.
There are enough credentialing problems involved with running a single dental practice. You can multiply those nightmares by two when you own two practices.
Specifically, a problem you run into owning one practice is applying to too many carriers at once. This snafu often leads to accepting a lower fee schedule, getting too much business for the limits of your billing process, and more.
By branching out and owning two practices, you’re doubling the chances for those headaches.
Buying a secondary practice means it won’t necessarily receive all your attention.
In fact, one expert who owns 16 practices cites how they have to delegate much of the day-to-day of their other businesses to the rest of the staff and management.
Still, second practices aren’t passive investments. They require their owner’s attention to turn a profit.
You must create systems and perform various management tasks to ensure things run smoothly. Even if you aren’t hands-on at your second practice, you’re putting time and effort into it. You’ll need to, at a minimum, invest five extra hours per week into your new business.
That doesn’t seem like a massive commitment at first. But consider how much time you already put into your initial practice. That extra five hours will rob you of your energy, cutting into the attention you pay to your primary dental practice.
When weighing the risks versus rewards of owning a second dental practice, you first must grasp it’s not a license to print money. It’s a strategic endeavour that necessitates careful planning and immense business savvy.
Of course, for many dentists, owning a second practice has indeed paid off. Yet, these are unique individuals. They don’t mind the extra work and thrive off conquering the challenges of such a venture.
On the other end of the spectrum are dentists who regret their decision to take this leap. They end up overextended, understaffed, and scraping every corner to make loan payments.
You must examine your needs and desires before opening a second practice.
The decision to branch out should depend on if the potential for added wealth is worth the risk and added work that goes into it. Additionally, you should only buy a secondary practice if you’re 100% equipped to overcome the challenges guaranteed to come your way. And it shouldn’t hinder your quality of life.
While the title of this article is cautionary, if your heart is set on buying another dental practice, we’re not here to stop you. We assume you’ve done your due diligence and formulated the appropriate business plan to ensure success.
Perhaps, our main point was that opening a new dental practice shouldn’t come at the cost of your well-being (physical, emotional, and financial). Nor should your new business venture negatively impact your first dental practice. After all, your patients and staff still need you to lead the way and be the shining example of optimal oral health they’ve come to trust.