To succeed in the private practice of dentistry, you must develop managerial and behavioral skills to augment your technical skills. Completion of a business plan will help you focus on the business aspect of dentistry. Key areas include: 1. how much it will cost you to begin, 2. how much time, effort, and management skill is involved in achieving your goals, and 3. what financial and personal rewards are possible in a dental career.
Business plan outline
A. Critical components
1. Narrative hook and description of the practice - This is a narrative summary of your business plan that is a general overview of your plans and a rationale to support your proposal. It must be a well-written, reasonable, and well-thought-out proposal that will make the lender comfortable loaning you the funds to start your practice. Keep in mind that others are vying for the same resources. Your narrative must convince the lender to: 1. read on, and 2. select you as one of the recipients of limited funds. Following is a list of suggested topics that are usually included in the narrative description: a) location (community, site within community, and reason for selection), b) physical facility (size, lease arrangement, finish-out costs), c) equipment and instruments, d) supplies, e) working capital requested, and f) total amount of loan and how you plan to pay back the loan. Remember, most business loans are only for five to seven years. Buildings or mortgages may be financed for 25 to 30 years and will need to be considered separately.
2. Calendar of events - This section should include a simple calendar of future events and dates connected with the establishment of your practice such as: graduation, licensure examinations, lease signing, signing of bank loan, office finish out - beginning and completion, ordering equipment, move in, first patient, etc.
B. Supporting information
3. Curriculum vitae - The curriculum vitae (resume) is an autobiographical outline of one’s career, qualifications, and accomplishments. Be honest, but do not exhibit false modesty. Be concise, descriptive, truthful, and neat. Include items such as personal information, educational background, honors, work experience, references, etc. A personal photograph is a nice touch.
4. Philosophy of practice - To develop this section, you must first analyze your values, beliefs, and principles with respect to the practice of dentistry. Based on these personal considerations, develop a concisely written philosophy of your personal approach to dental practice. This philosophy should reflect your own important beliefs and principles. Include how you will market your practice, collect fees, and motivate staff.
5. Goals for years one, three, five and long-term - Without some idea of where you want to go, you may never get there. Your goals should be your own goals, stated positively. They should be realistic, compatible, and obtainable. Most goals for a dentist concern practice growth and debt payoff. Goals can be measured. Practice growth goals could include items such as number of active patients, gross and net income, range of dental services delivered, multiple auxiliaries, financing for growth, etc.
6. Personal budget (anticipated monthly expenses, other than practice expenses) - Included in this budget should be anticipated monthly expenses such as food; clothing; mortgage or rent; automobile loans and maintenance; personal health, life, and automobile insurance; educational loan repayment; credit card payments; etc. This budget must be realistic and correlate with your loan request and first-year cash flow projection.
7. Personal financial statement - A form is used to compute current net worth. Lending institutions’ forms vary somewhat, but all require the same basic data. Remember this accounting principle:
Assets - Liabilities = Net Worth
(Your net worth may be a negative amount if you are a recent graduate.) Remember that a $100,000 term life insurance is not an asset since it has no cash value unless you die.
8. Estimated monthly production and collections - This section is a support to the loan summary and should specify anticipated estimates of production and collections for months one through 12. Remember, if you are going to accept insurance payments, then you will not collect 100 percent the first month until the insurance payments are received.
9. First-year cash flow projection - This section verifies, month-by-month and by the numbers, how you will make this business a success. This projection will be a test of your knowledge of expense items involved in the operation of a dental practice and the income required to meet these expenses, provide for debt reduction, and furnish you with take-home pay sufficient to meet the needs listed in your personal budget. This section furnishes the information needed by a CPA to prepare an income statement. [Note: If you are planning to purchase an existing practice, this is a great way to determine if the practice is worth the price or if it will support the loan note, practice expenses, and personal expenses. If not, keep looking or negotiate the price.]
10. Marketing plan - Your marketing plan should be based on your philosophy of practice, fit your personality and style, and be considered a method of obtaining your goals. Marketing should be divided into two types:
• Internal marketing represents those practice-building efforts you and your staff make within your office, among patients of record, and through personal contacts with the public.
• External marketing is more closely related to advertising, direct mailings, and broader efforts in the area of public promotion. You may elect to do no external marketing if this conflicts with your philosophy of practice, goals, or professional ideals. Marketing should bring a return on your investment of at least two to be effective. This means that if the marketing costs $1,000, then you should reap at least $2,000 in production from that type of marketing. R.O.I. = 2.
12. Demographic studies - You need to obtain data regarding your location to supply to the lender. Obtain a study of the zip code and a five-mile radius that you are proposing to locate within. Include population, age distribution, employment sources, education levels, income levels, and growth potential. Browse the Internet for sites. One place you can obtain free information is at www.census.gov. Once you have found this wonderful information, interpret the meaning. Why is your location a good one?
13. Equipment list - For this section, you will need to consult with dental suppliers regarding major equipment needs and wants. You may want to contact local suppliers such as Sullivan-Schein Dental at www.sullivanschein.com. They are usually happy to help you as long as you provide some specifics about the type of equipment you want. Include information descriptions and costs for the following equipment: compressor, vacuum suction, dental chair with unit, dental light, X-ray unit(s), X-ray processor, sterilizer, handpieces, and computer hardware and software. Remember, if you say in your narrative or philosophy that your treatment rooms are completely computerized, you should include those items as well.
