If you build it, they will come
The economic and financial considerations you need to build the modern,
technology-driven dental practice
Dave Juliani, DDS
THIS WAS THE QUESTION I STRUGGLED WITH FOR MANY YEARS: If I invest
the time, energy, and financial resources to build my dream practice, will it pay off?
KNOW YOUR NUMBERS
Luckily, dentistry can be profitable with a little understanding of just what it takes. When considering remodeling, at
the very least monitor the profit and loss statement of your
practice monthly. This helps you plan the costs, budget,
and how the project will affect your bottom line.
I monitor the numbers of my practice daily. Thanks to
modern technology, everything is at our fingertips. Before
I leave the office every day, my office manager hands me
a packet of reports that includes a summary of the day,
month, and year. It gives me up-to-date collection, production, and provider summaries that allow me to monitor
my collection percentage, expenses, and overhead.
Armed with these numbers, it’s easy to budget my project.
We closed out 2015 with collections of $1,600,000 on
$1,740,000 production (that’s 91.8% collections). Our 2015
overhead was very close to 62%, which left me $608,000
profit. The profit margin on a large practice is exponential
when compared to a smaller practice. I could be comfortable
at 75% overhead at completion of the project. By taking the
difference between those two overhead percentages—13%
(75% at completion minus 62% currently)—I came up with
what I wanted to budget and spend on the new space, which
was $208,000 annually or about $17,000 per month in additional expenses (13% of collections). So, my budget was
$17,000 per month for the new space, built out and equipped.
LOCATION, LOCATION, LOCATION
The first decision I had to make was whether to lease or
buy my new location. Rochester Hills, Michigan, is bordered
by developed communities that are squeezed into every
inch of available property. This location gave me options
to either expand in my existing space, look for another
space to lease, or buy.
The suite next to me was available, but my rent would
increase to nearly $10,500 per month, or 8.4% of my expenses.
To spend that much monthly over a five-year term made no
sense to me, especially given an annual 3% increase. To ensure
I was making the right decision, I took my average monthly
rent during the past 20 years and multiplied it out. It was
nearly $1,200,000. I could own my building with what I had
paid in rent. I made the decision at that moment to buy.
After speaking with Patterson Dental and local real
estate agents, $2,000,000 seemed to be the amount it would
take to get the project done. I found two freestanding
buildings and one condo unit that suited my needs. One
of the buildings was rebuilt and would bring costs to
$1,750,000. The other was a renovation that would cost
about $1,450,000. Depending on the number of treatment
rooms, that would leave me with approximately $250,000
to $550,000 to equip, decorate, and complete my project.
The condo unit was listed at $670,000 for 4,200 square feet.
A basic layout by Patterson gave us an estimate of $200,000
to build the space, for a total of $870,000. This option left
me more room to complete the project and come in under
$2,000,000. The condo made more sense financially, and I
purchased the space for $850,000.
EQUIPMENT SELECTION AND BUILD
The real estate financing guided my equipment allowance.
Armed with that information, all I had to do was choose my
treatment rooms. My existing equipment was very old, so I
made the decision to bring absolutely nothing to the new
space except my three CEREC units and my Orthophos XG
3D. In September 2015 during CEREC 30, Dentsply Sirona
introduced its U. S. Treatment Centers, and I knew they were
the solution. I was immediately sold on the CEREC integration options, specifically the Teneo and Intego Treatment
Center models, as well as the implant, endo, and camera
integrations. Patterson sent the plans, and I placed the first
full U.S. Dentsply Sirona Treatment Center order.
SCIENCE & TECH