The experts, who included a lawyer, banker, coach, lender, architect, and builder, gave their tips to help first-time practice buyers get started. Below are five things you should know.
1. Build savings before paying off student loans
You may think it's best to pay off your student loans before applying for a loan to open your own practice, but that may not be the case if you're aren't also saving for a rainy day.
Multiple experts said that banks expect you to apply for a practice loan with existing student loan debt -- dental school is expensive, after all. But they also expect you to have enough cash saved in liquid assets, such as cash or certificates of deposit (CDs), to cover unforeseen expenses.
A general rule is to have established, nonretirement savings of 10% of the amount you'd like to borrow from the bank. To get there, you may have to put less of your paycheck toward paying back student loans and more toward a savings account, according to Jonathan Miller, a dental practice coach at Fortune Management.
"They would rather you come to them with a lot of student loan debt and 10 grand in the bank than having paid off all your student loan debt and have two grand in the bank," Miller said.
2. Increase your credit score
Once you've built a cash safety net, it's time to look at your credit score.
In the U.S., there are three credit bureaus: Equifax, Experian, and TransUnion. These bureaus rate an individual's creditworthiness based on factors such as length of credit history, on-time payments, and account types.
Credit scores range from 300 to 850, with higher scores meaning individuals are more likely to pay back what they borrow. Banks tend to look for good to excellent credit scores, and applicants should aim for a score of at least 700, according to Brad Beck, senior vice president at Bank of America Practice Solutions.
If your score isn't in the ideal range yet, Beck mentioned a few things you can do:
- Pay your bills on time.
- Pay more than the minimum monthly payment for credit cards.
- Limit how often you apply for new credit cards or loans.
- Monitor your credit report for accuracy.
3. Create your team first
It's important to consult with the right people before venturing out and looking at potential office spaces. Commercial real estate leasing is very different than renting an apartment or house, and what you don't know can cost you in the long run, according to attorney Ali Oromchian, JD. Oromchian is with the Dental and Medical Counsel law firm in San Ramon, CA.
"We've seen some really scary things where the doctor has to pay thousands of dollars just to get out of the lease," said Oromchian. "So you want to be careful."
Multiple experts recommended starting by consulting with a commercial real estate expert and by finding a bank/lender. You'll also want a contractor to manage the design and build out of your office. However, if you need them, there are also a number of other experts to help guide you along the way.
4. Budget enough time to build your practice
It takes about six months to build a dental practice, although it can take longer. Morgan Davis, chief operating officer of Blue Northern Builders, recommended bringing in a builder sooner rather than later because it can help you negotiate a better deal and get things moving as soon as possible.
"We like to be there early on for a lot of reasons," Davis said. "What we try to provide to you is negotiating power for the lease at the very beginning. ... We're looking for red flags."
This is important because one of the things you can negotiate is free rent -- the amount of time some landlords give for dentists to build out their practice. The amount of free rent varies based on the landlord, but Oromchian advised dentists to aim for at least three to four months of free rent before you intend to open your doors.
5. Think about human resources from day one
Human resources (HR) lawsuits are currently outpacing malpractice lawsuits in dentistry, according to Oromchian.
"That's right. You're more likely to be sued by your employees than your patients," he said.
Settling these lawsuits isn't cheap either, with an average settlement of one to two times the employee's annual salary, according to Oromchian. Because this is a big risk, it's important to ensure your practice is HR-complaint from the first day of operation. This means having the right forms for your employees and following labor laws, such as routinely checking your employees' licenses, following lunch-break rules, and paying overtime.
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