Looking to become a practice owner? Kaival Patel explores setting up a squat practice versus acquiring an existing one, and how to know which is best for you.
Yes, I admit it! I’m scared. No, it’s not because I walked past a mirror… as for many of us, it’s because of the unknown.
When I realised that I wanted to become a practice owner over a decade ago, the traditional approach was to either become a partner in the practice you were an associate in, or look to acquire an existing practice.
Kana Health Group has now grown to a small group of practices, but I have always stuck to what I’m comfortable with: existing practices with goodwill that I could potentially grow.
I am absolutely delighted when someone challenges my thinking and, so for this article I interviewed a man that did exactly that. Bobby Bhandal, owner of the squat dental practice Avenue Dental Practice, has created a course dedicated to building your dream dental practice, and he has kindly shared with me his pros and cons of squat practices.
Having now gone through the journey a number of times, I will share my take on existing sites. Who has the more compelling argument? Please do let me know!
Does your ‘why’ impact your decision?
In my previous articles I delved into this in more detail, but knowing why you are looking at venturing into practice ownership may well determine which route may suit you best.
Existing
At the start, my ‘why’ very much involved having an itch that I needed to scratch as I always loved the business and marketing side of dentistry. I also had invested a lot of time, effort and money into a Masters in implant dentistry and was very eager to dedicate the next step of my clinical life into this.
My aim, therefore, was to look at buying a larger practice with a good patient base that was referring their implant patients elsewhere (far more common than it is now). As a result, I could grow the practice by keeping this all in-house.
Squat
Bobby’s ‘why’ was very much frustration when the practice that he had worked in as an associate for many years was taken over by a corporate and he felt that he was no longer being heard and that there was a lack of leadership.
He had spent seven to eight years refining his dentistry and had done a lot of NHS dentistry where he had really developed his craft, speed and skill. Bobby’s frustration in how his old practice was being run after a takeover was the drive he needed.
Looking at developing a practice from the foundations up, where he could look at implementing his own style of leadership, culture, layout, systems and processes, was far more appealing than inheriting someone else’s version of this.
It may be anecdotal, but your ‘why’ will almost certainly change during your career, and I just want you to know that this is completely fine and natural. My top tip is to actually give yourself time every so-often to reflect on what you are trying to achieve and review the steps you are taking to try and get there.
It’s simple, yet so powerful, to just write this down somewhere. You will thank me later!
Old versus new – layout and culture
Existing
When you take over an existing practice, you inherit existing team members and inevitably an existing culture.
Creating a new culture is hard. Change of management is hard. If you push too much, you may lose the team and impact the goodwill you have just paid a lot of money for.
If you push too little, then you may lose the reason and autonomy of why you wanted to be a practice owner in the first place.
Your physical patient journey is also very much restricted to the existing layout of the practice. For example, you might really want to incorporate a separate consultation area but there just isn’t the space to do this as every nook and cranny is being utilised.
There can often be a workaround, but often there is a level of compromise that doesn’t need to be the case when you are designing the layout from the start.
Squat
After speaking to Bobby, probably the biggest benefit to a squat practice is being able to create your ideal culture from scratch, exactly how you want it and with people that believe in your vision and values from the start! You just need to be clear on what these are before you start employing.
Part of Bobby’s process when looking at a squat site is to get an architect involved and design the patient flow and floor layout exactly the way he wants it. This means there is no sacrifice in delivering his ideal patient journey. The devil is in the detail.
Let’s talk money!
Existing
When we bought our first practice, I had a number of financial commitments; I was married with a mortgage, had a child on the way, and I had become accustomed to a fairly lavish way of life, having worked as a good-grossing associate for a number of years.
With the baby on the way, it suddenly dawned on me that I wasn’t very clued up on non-dental investments (not advisable!) and my thinking was that I wanted to secure my family and retirement with a nest egg. I also needed income coming in from day one, especially when I was likely to be the sole earner while my wife was on maternity leave.
As a result, looking at purchasing a practice that already had some regular cash flow was the route for me. The first few years were certainly tough, and I ended up earning far less than I did as an associate – which will be featured in a future article. Not to mention the mental impact of figuring things out on the job – it’s the reason why I’m so keen to help others that find themselves in the same boat.
The total investment for buying an existing practice is usually higher. This is usually because you are paying for the goodwill. You will often need to get your head around having more debt, and sometimes securing some of this debt with other assets or equity you may have.
Currently, you are looking at contributing 10-15% of the purchase price as a deposit and spreading the rest as a loan over the length of the lease or longer if you are also buying the freehold. Many banks will fund 100% of the freehold value if this is an option.
However, if you have got your sums correct, as well as drawing an income from the business, you will be paying off this debt from the business’s income year-on-year, and the plan should be to add to the value of that practice as time goes on. Therefore, on exit (depending on the market) your practice should hopefully be a lucrative investment.
Squat
Bobby typically advises that the initial investment you need when looking at a squat is higher than existing. The total cost in setting up a squat practice really depends on various factors, ranging from location and freehold/rent rates to the quality of equipment and furnishings you are looking to purchase.
However, a typical cost to set a squat up could be anything between £300-500k. You would need two loans. The commercial loan will cover 70-80% of the building work, leaving you to contribute the remaining 20-30% as a deposit. The commercial loan is normally spread over a longer period of time, eg 10-15 years or the length of your lease. Bobby’s advice is to recognise that ‘cash flow is king’.
The second loan is for asset finance, which would need to cover your equipment – this tends to be a shorter-term loan, eg five to seven years. It’s a good idea to have some working capital in the business as well, as it will take a little time before you are making a profit.
In Bobby’s experience, it can take up to six months until this happens, although I have heard others give timescales ranging from three to 18 months to start making profit.
With the initial lack of certainty when it comes to the income from a squat, you really need some savings in the bank to cover your personal expenses for a good six months, or income from other sources, eg a spouse’s income/other passive income.
Sometimes an option may be to carry on as an associate on a part-time basis elsewhere and build up the squat business part-time. But is it fair on either business if your heart/head/time/attention is not fully committed to either place? I’ll let you ponder that one…
A mini MBA
Dental school doesn’t prepare you for practice ownership and there is no quicker way of learning about the good, the bad and the ugly aspects of the business side of dentistry than owning your own practice – be it squat or existing.
In the past, you very much had to muddle along on your own. Nowadays, there are many wonderful mentors, speakers and courses available to help you on your practice ownership journey. Please do reach out if you would like any recommendations.
Bobby has kindly shared his details for anyone wishing to learn more about setting up a squat practice – feel free to email him on [email protected] or visit www.squatsuccess.co.uk. Any questions for me on existing practice acquisitions, or even any feedback, please feel free to contact me on [email protected].
The Kana Dental Academy has some exciting news coming up for all those wanting to learn more about the business of dentistry – like and follow us on Instagram and Facebook and be the first to find out when the news hits!
So, to conclude… Which is better, a squat practice or an existing one? The truth of the matter is that it could be either or neither. You can certainly get to the same destination whichever route you take, it’s the journey that will be different. You just need to decide which journey suits you the best.
Read more from The Kana Way:
- What no one tells you about buying a dental practice
- Are you ready to buy your first practice?
- How do you make ‘I do’ work in business?
- Introducing The Kana Way.
For more information, visit www.kanahealthgroup.com or www.kanadentalacademy.com.
This article is sponsored by Kana Health Group.
