Start a dental office by following these 9 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple step guide to starting your dental office. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a dental office?
When you start a new dental practice, you take on significant costs. The average new practice costs between $250,000 and $500,000.
These costs go towards structural changes and uplift to a new building, equipment buyouts or leases, supplies, and startup staffing needs. To finance all this, a dentist needs to have a strong balance sheet and good credit.
A dental office practice loan may be financed for between 7 and 12 years. Current rates (2017) average 5% APR.
Rent for a 2,000 square-foot office space varies by location. Equipment, supplies, and office furniture may cost up to $150,000. Construction costs can add another $110 per square foot for remodeling. You’ll also need working capital of between $25,000 and $150,000, possibly more depending on your staffing needs.
What are the ongoing expenses for a dental office?
Ongoing expenses for a dentist office include supplies, rent, and labor costs. These are typically fixed expenses, however.
Who is the target market?
Clients and customers are usually the general public. Almost everyone has a need for general teeth cleaning, so dentists operate in a local community, serving that community with basic preventative dental services.
In addition to these services, dentists often perform specialized services for people who have existing dental issues like missing, chipped, or otherwise broken teeth. They may also fill cavities and provide adjustment services (teeth straightening). Ideal patients, in these cases, are ones who have a need for these types of services.
How does a dental office make money?
Dental offices make money by charging patients for dental services. Sometimes, direct billing is used, where patients pay the dentist for services rendered. However, most dental offices also accept insurance so the patient may not pay directly. If they do pay directly under this arrangement, they pay a co-pay amount and the rest is billed to the dental or health insurance company. The insurer then bills the patient for any coinsurance.
The fees are usually a fixed or flat fee for services rendered and may include dental hardware for services like braces, fillings, and caps, crowns, and bridges.
How much can you charge customers?
A teeth cleaning is a routine procedure. If you accept insurance, these services are usually covered in full by the insurance company. The cost without insurance can range from $60 per cleaning up to $150, depending on where your office is located.
Other services, like cavity filling can be completely or partially covered by insurance. For example, a dental office might charge $200 per filling without insurance or $225 with insurance (billed to the insurer).
A wisdom tooth removal may cost up to $750 without insurance, but only $400 with insurance.
Fees for various services are usually a fixed or flat fee, with two tiers: with insurance and without insurance (cash price). Insurance pricing may not always be lower than the cash price.
How much profit can a dental office make?
General practitioners can make up to $2 million in revenue, with a net income of up to 45.29%. If you specialize, you may make more. For example, an oral surgeon may make $3 million, with a net income of 47.59%.
How can you make your business more profitable?
Dentistry is a highly regulated business. Most dentists (90%) are general practitioners. This leaves the industry wide open for specialization. While it does cost more to get into a specialized area, this is your best hope for more money.
What will you name your business?
Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your dental office is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, and it's easy enough to form by yourself, or check out the top business formation services.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: You can get $200 when you open a Chase business checking account with qualifying activities. Learn more.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Dentists are required to obtain a dental license from the relevant state agency. In addition, certain state permits and licenses may be needed to operate a dental practice. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
In addition, certain local licensing or regulatory requirements may apply. For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources
Services Contract (e.g. MSA)
Dental practices should require clients to sign a services agreement before providing services. This agreement should clarify client expectations and minimize risk of legal disputes by setting out payment terms and conditions, and service level expectations. Here is an example of one such services agreement.
Labor safety requirements
It is important to comply with all Occupational Safety and Health Administration requirements.
Certificate of Occupancy
A business is generally run out of an office. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a retail location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a dental practice.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build a Dental office:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for your business’ location to ensure your dental practice will be in compliance and able to obtain a CO.
STEP 7: Get Business Insurance
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market a dental office
Dentist offices are often operated on a limited budget in the early years. Due to the fact that a dentist is often in debt due to school loans, additional loans to start a practice need to be carefully considered. Every expense must be justified, even marketing expenses.
Most dentists, therefore, rely on referral marketing or local ads in newspapers and community bulletin boards. Email marketing is also effective, since patients need to come back for regular cleaning. If a dentistry advertises through email, existing clients can bring in referrals.
How to keep customers coming back
Specialization is key to set yourself apart from other offices in the area. Most dentists are generalists. In a highly competitive market, this makes it difficult to separate yourself from the competition. Specialization allows you to charge more and have a more defined niche.
Some dentists specialize in endodontics, oral and maxillofacial pathology, oral and maxillofacial radiology, or oral and maxillofacial surgery. But, there are other specialties, including:
- Orthodontics and dentofacial orthopedics
- Pediatric dentistry
If you’re the only dentist in your town that offers maxillofacial surgery, you will likely get all the patients that need it.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Dental Office In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
A dental office is most suitable for individuals who have a passion for working with their hands and enjoy interacting with the general public. They must also be kind and caring people because many patients have a natural aversion to the dentist. Dentists have a hectic (though scheduled) lifestyle and work long hours.
Dentists have to attend a lot of school, usually in excess of 10 years (at least). As such, only those with a true passion for dentistry will be able to make it in this type of business.
What happens during a typical day at a dental office?
Day-to-day activities in a dental office include checking patient charts, meeting with patients and checking hygienists’ work after a routine dental procedure. Most dental offices also staff billing and HR personnel who are responsible for managing the day-to-day affairs of the office, including the financial aspects like patient billing.
Since dentists typically accept insurance, the office needs to be equipped with billing software that can handle this type of billing. Finally, as the owner, you will be responsible for educating your patients on good dental hygiene.
What are some skills and experiences that will help you build a successful dental office?
Dentists must go through a considerable amount of school before being able to legally practice dentistry. The owner of a dental office is almost always a dentist (otherwise, the owner must employ a dentist). Because of this, the first step in starting a dental office is to get a bachelor’s degree. Once that’s accomplished, the next step is to obtain a doctorate in dentistry. During this period, the dentist specializes in a particular area of dentistry.
Next, the dentist must get licensed in their state, and meet the requirements of that state to practice dentistry. One of these requirements is typically a 1 to 2 year residency.
Dentists also must have good business sense and experience if they start their own practice. Many patients also have a negative association with a dentist. Because of this, a dentist needs to know how to design the office and environment in such a way that it makes the experience a little more enjoyable for the patient.
What is the growth potential for a dental office?
Dental offices typically consist of one head dentist, a few hygienists, and a few receptionists. When starting a dental office, you’ll need at least a minimum “core staff” to cover essential services. In addition to the core dental staff, billing and HR are also usually necessary to assist in managing financials and staffing.
Growth depends on the marketplace demand for dental services. In a small town, a dentist may only have one or two offices. In a larger city, it’s not uncommon for a dentist to have partners and numerous locations.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a dental office?
There is no easy way to break into the dentistry business. It’s highly competitive. The best offices are run by dentists with a good business background. Because of this, successful owners are often those who have experience working in a successful dentist office.
Local marketing is key because referrals drive a dentistry, especially in the early years when money is tight.
How and when to build a team
You need to start building a team right away. At minimum you need one head dentist, a few hygienists, and a few receptionists. When funds allow, hire a billing and HR specialist.