How opening a dental practice is like cooking a steak
As a dentist, should you buy a practice or start your own? Ryan Clower, CPA, gets this question from all the time. His reply is, "How do you like your steak?"
You know you want to own a dental practice, but should you buy one or start your own? Well, have you ever cooked a T-bone?
A common question we get all the time is, “I know I want to own a practice, but I don’t know where to start. Should I purchase an existing location or start my own?” It’s a very common question. It’s a good question. And yet it’s a hard one to answer—without all the details. So I often like to relate the question back to something I know and love: eating a good steak.
If you came to me and asked, “Ryan, I’m really hungry and want to eat some steak. Should I cook my own or order one at a restaurant?” I would have some follow-up questions (obviously, of course, because I am extremely opinionated when it comes to good steak).
Some questions that immediately come to mind are…
- Do you want to cook your own steak? Cooking your own meal can be hard work!
- Do you know how to cook a steak? Do you have a good recipe, or have you done it before?
- How good of a cook are you? Are you confident you can make a good steak?
- Where would you go to eat it? Know of any places that serve good steaks?
- How hungry are you, or how soon do you want this steak? Cooking a good steak takes time!
- What do you have to spend? Can you afford to eat out at all? Can you afford to eat steak?
This might seem like an incredible digression (and, truthfully, it might be) but the point I’m trying to make is this: there are a lot of questions that need to be considered when even determining something as simple as eating a steak. The funny thing is, these questions are completely and totally 100% applicable with opening a practice. Really! Let me show you.
If you wanted to own your own practice and asked me, “Ryan, I’m ready to be a business owner and want to own a practice. Should I start a practice from scratch or buy an existing one?”
Some of my follow-up questions that immediately come to mind are…
- Do you want to start your own practice? Starting a practice can be hard work!
- Do you know how to start a practice? Do you have a game plan, or have you done it before?
- How good of a business owner are you? Are you confident you can run a business?
- Where would you go to start it? Know of any places that have a good practice for sale?
- How soon do you want to own a practice? Starting a practice takes longer than buying one!
- What do you have to spend? It costs more to buy a practice than start one!
Once you put it into that perspective I think the problem gets a little easier to digest (no pun intended). When you start thinking about the start-up question with the steak analogy it sometimes gets a little easier to rationalize things and weigh the pros/cons of each option.
The “Pros” about cooking it yourself (or starting your own practice)…
Cooking a Steak
Starting a Practice
1) You can make it exactly how you want it.
If you don’t like mushrooms, don’t add mushrooms.
If you don’t want 6 ops, don’t build 6 ops.
2) It’s cheaper (probably).
Not paying for the ambiance, preparation, or service for a steak at a restaurant
Not paying for someone else’s goodwill (brand, staff, old equipment, etc.)
3) You know exactly what you’re getting (no surprises)
You don’t have to worry about someone spitting on your steak or dropping it on the floor
You don’t have to worry if the equipment is in good shape or the financials were accurate
The “Pros” about eating out (or purchasing an existing practice)…
Cooking a Steak
Starting a Practice
1) It’s quicker!
It’s a lot quicker to eat out than buy the ingredients, cook it yourself, and do the dishes.
It’s a lot quicker to purchase an existing practice than to build one from the ground up.
2) It’s easier (kind of).
You don’t have to worry about prepping, cooking, cleaning, etc. You just eat steak!
You don’t have to worry about architecture, IT, build out, etc. Just start practicing!
3) Less Risk
For the most part, you can assume that a good restaurant knows how to make a tasty steak.
For the most part, you can assume that a good practice has consistent cash flow.
So, after comparing the two examples, which one makes more sense for you? If you want a very particular steak with some sort of a very particular, exotic, marinade served with your favorite childhood mashed potatoes, make it yourself! No matter the restaurant, you cannot get the same customization of the recipe you could get by making it at home. You might even be a great cook!
However, if you don’t want to mess with the headache of cooking a steak at home, and if you have the money to spend on a nice restaurant, eat out! It will take less time and you’ll curb your appetite quicker, allowing you to start eating (practicing) much sooner than cooking a steak at home.
If you find a great restaurant with fantastic reviews and an affordable price, it makes sense to buy their steak, right? A practice with a proven track record (i.e. financial performance, cash flow, etc.) and an affordable price tag might be your best bet to get a good practice, but don’t be afraid to start your own!
Ryan Clower, CPA, is a partner at MWA CPAs + Advisors, a national accounting and advisory firm dedicated to serving leading dental practices, practice owners and dental service organizations. Clower specializes in practice management, financial accounting, practice performance optimization, practice valuation and practice acquisition and sales. Clower is a Certified Public Accountant. He graduated from the University of Texas at Dallas.
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