Nearly every younger orthodontist the Bentson Clark & Copple team speaks with wants to eventually own or co-own a practice. As such, we often get asked the question, Is it better to start my own practice from scratch or purchase an existing practice? Doug Copple of Bentson Clark & Copple advises in weighing the financial rewards of both practice situations.
In the latest issue of Orthodontic Products Magazine, Copple explains how to determine which is the best option based on one’s personal situation and examines some of the primary advantages and disadvantages of both starting a new practice and buying an existing one.
Advantages to starting a new practice:
Advantages include the ability for the doctor to create his/her own office and establish everything exactly the way the doctor wants (rather than inheriting the selling doctor’s facility, employees, and systems).
Disadvantages to starting a new practice:
One disadvantage discussed in this article is the fact that orthodontists generally still have to go into debt to purchase equipment and build out the office space. Additional loans are likely to be required to hire and pay employees and to cover operating expenses during the first several months or years until enough income is generated to cover these costs.
Advantages of buying into an existing practice:
One of the largest advantages the purchasing doctor has is an immediate cash flow. If the purchase price is fair, the financial rewards are greater than starting a new practice, even after repaying the purchase obligation. Additionally, the purchaser immediately has a facility and operating equipment (assuming it is in decent operating shape).
Disadvantages of buying into an existing practice:
Disadvantages are similar to the advantages for starting a new practice – ie, the buyer inherits the selling doctor’s facility, employees, and systems. If these assets are not satisfactory to the buying doctor, it can be difficult and time-consuming to make significant changes to the practice.
Financial Reward
The financial reward of acquiring an existing practice is usually much greater than starting a new practice from scratch, particularly in the first few years of ownership. But, undoubtedly, there are many other factors to consider that may make a start-up more attractive than purchasing an existing practice. Within the article, Copple provides example cash flows for both a start-up and the purchase of an existing practice. These examples compare the two opportunities to provide an illustration of the financial rewards of both investments during the initial years of an orthodontist’s career.