How to Start a Dental Practice with a Partner
Starting your own venture can be scary, that’s why many choose to work with business partners.
Here’s your ultimate guide to starting a dental practice with a partner.
All the information you need
Starting a dental practice with a partner might be the key to your success. While running a dental practice can be both satisfying and profitable, it also requires a significant financial and time commitment - something that many dentists may struggle with as they are busy delivering services directly to their clients.
That’s why many dentists will embark on their entrepreneurial journey with another dental professional. In this guide, we’ll explore the initial considerations of starting a dental practice with a partner, how to turn your venture into a reality and, ultimately, how to fund your business.
The last couple of years have been difficult for many businesses, not least dentists. The wake of the Coronavirus pandemic forced dental practices to transition from busy waiting rooms to emergency services online practically overnight in the spring of 2020. The subsequent lockdowns and development of vaccines have meant that many businesses are well on their way to recovery now, but it’s clear that the economic impact of the pandemic will continue for many months, and possibly even years, to come.
So, what does that mean for dentists starting their own practices in 2022 and ahead?
Good news for entrepreneurial dentists, experts are forecasting growth for the dental market going forward. The UK ‘high street’ dental market is worth over £7bn, and many dentists are hoping to take a bite out of this growing industry over the next few years. So, whether you and your partner are looking to open an NHS, private practice or one that offers both services under one roof, there is a lot to consider before signing on the dotted line.
From finding the partnership balance to choosing a location, purchasing equipment, hiring staff and even securing finance, keep reading to find out what you need about starting a dental practice with a partner.
Starting a dental partnership
If you’re reading this guide, you probably have a partner in mind, but it’s still worth discussing how to know if you’ve chosen the right partner and ensure you get the best results from your partnership.
You may have already worked together before under another dental practice, or you may be starting a venture with your life partner. Of course, no two business partnerships are the same, but there are some universal factors you need to consider.
Who can be part of a dental partnership?
Starting a dental partnership is more complex than simply launching your own business in any other field. It requires legal and financial protection, so you will need an experienced solicitor on your side. Since the dental industry is subject to a number of regulatory constraints, it’s vital to have experts on your team that know the market inside out.
Firstly, a dental partnership must be made up of registered dental professionals only. Under the GDC (General Dental Council), any partnership that does not meet this requirement is unlawful and may be subject to criminal charges. The GDC defines a dental care professional as “a person qualified to a certain aspect of dental care that is registered with the GDC to work in the UK.”
The term doesn’t just cover dentists but also dental nurses, dental technicians, dental therapists, dental hygienists, orthodontic therapists and clinical dental technicians.
Partnership or LTD company?
This is where the technical rules come into play for dental partnerships. A partnership must be formed between two dental professionals as defined above. However, it is possible to have an LTD company with partners who are not dental professionals, only if dental professionals own the majority share of the business.
So, while it’s against the law to start a dental partnership with a non-dental professional, like a practice manager or finance director, there is one exception to the rule. If there is a General Dental Services contract (GDS), then non-dental professionals can enter a partnership with a dentist under the National Health Service Act 2006. However, this applies only to NHS dental practices, and there are some other restricting factors you will need to keep in mind. To find out whether your partnership qualifies for this exception, we recommend contacting the GDS direct and appointing a specialist dental lawyer.
Starting an NHS dental partnership
There are two types of contracts for NHS dental practices: a GDS contract and a Personal Dental Services agreement (PDS). When it comes to starting a dental partnership to provide NHS dental services, you must have a GDS contract - a PDS agreement does not cover a partnership of any kind. If you intend to appoint a partner, you will need to transition from a PDS agreement to a GDS contract.
As mentioned above, a GDS contract allows you to partner with a non-dental professional, but this may result in lower Units of Dental Activity (UDA) values.
While you are only at the start of your journey, you will have to consider if you ever intend to sell the business in the future. It is very difficult to sell a practice under a PDS agreement, so a GDS contract is necessary if you think you may sell the business in the future. Meanwhile, the benefits of a PDS agreement include higher UDA values and is usually attributed to highly specialised professionals like orthodontists or cosmetic dentists.
So, if you’re reading this guide with plans to start an NHS dental practice, then you will need a GDS contract, and you and your partner will need to be dental professionals unless you are an LTD company with a majority share. If you’re not sure whether your set-up is legal then be sure to consult a legal specialist in this area before taking the next step towards your dental business.
The process of starting a dental partnership
Now you have determined the setup of your dental partnership and sought legal advice, you and your partner are ready to get the ball rolling. As with any venture of this scale, your partnership should start with an investment. A clear and comprehensive business plan will ensure that all spending plans are detailed and within budget. Whether you are investing your own money, getting finance or a combination of both, then you will need a clear oversight of how you intend to spend the finance, such as property, equipment, recruitment and any other ongoing costs like legal and marketing fees.
It’s vital that all elements of the partnership are recorded and documented by a specialist legal professional, even if you feel you have a strong pre-existing relationship with your business partner. There is no room for cutting corners or unspoken agreements when it comes to starting a dental practice and poor documentation or legal due diligence might result in losing access to financing or worse - legal troubles.
Dental practice location: acquisition or starting from scratch?
Once you have established the legal aspect of your dental partnership, it’s time to make decisions about your first practice. Do you intend to acquire an existing practice or start from scratch? There are benefits to both options.
With the prior, you get the benefit of an existing practice, often acquired with equipment and even staff, plus an established client base. However, buying an existing practice is expensive, and unless you have significant investment upfront, then this might not be a feasible option for you. There is also the consideration of buying an underperforming practice, which can be an affordable way of acquiring an existing practice.
With the right business and marketing strategy, you can look to turn around a struggling practice and attract clients from an established community. However, if clients are unaware that you have acquired the practice and intend to transform the service, then you might suffer at the hands of the previous owner’s reputation.
Another option is to start your own practice from scratch. When you go down this road, you need to consider the location of your practice. For example, if you choose to open a dental practice where the local community is already loyal to an existing practice, you may struggle to acquire new clients. However, if that practice is oversubscribed and there is a lot of new housing in the nearby area, this could be a sign of potential.
Finding the perfect location isn't just about picking a postcode, either. You have to consider the facilities at any given property. This goes for both practice acquisition and starting your own. What is the parking situation? And is the practice easily accessible via public transport or on foot from the local residential area? Remember, not everyone is able to drive to a commercial building development on the outskirts of town. So, while the footfall statistics may be good in areas like office parks and railway stations, it doesn’t necessarily mean that clients will want to attend dental appointments here or even be able to.
And, of course, the pandemic has changed attitudes towards travel - even within local communities. Even now, many people are still working from home either full or part-time, so opening a dental practice in a business park may not be the best decision right now, even if the high number of vacant properties present the appeal of affordable lots.
Once you’ve chosen the area, it’s time to find a property that best suits you and your partner. If your partnership is made up of a dentist and a dental nurse, for example, you may be considering starting a squat practice - a single surgery practice. In this case, you will only need a small property.
However, if you and your partner are both dentists, you will likely be on the hunt for a property with space for two surgeries, and with this commitment comes a significant investment in rent, equipment and wages. This leads us to our next point… how do you intend to fund your dental partnership?
Financing a dental partnership
Financing a dental venture with two or more partners is slightly more complicated than funding a practice with a single shareholder. Your biggest concern is that the lenders will consider all partners' financial situation, taking any previous ventures or investments into account. This may present issues if a partner has any credit issues, for example.
On the other hand, lenders will often provide partnerships with better terms if both partners meet their criteria and present low risk as the practice is in a more secure position when it doesn’t just rely on one individual. Work through Rangewell’s broker team and we’ll help you ensure your funding application meets the expectations of lenders to maximise the chance of you and your partner’s success. We know the lending market like no one else, so we can help choose the ideal funding options that we think will give you the best chance of success and more favourable rates.
Depending on your business structure and the plans you have in place, you may be considering a business loan to help kick off your dental partnership. A business loan, which can be either secured or unsecured, will provide the much-needed cash injection you need to get up and running. This will help with the day-to-day operations of the practice, such as helping to pay wages while you fill your client books and start to turn a profit.
A secured loan is typically a long term solution that is tied to the security of your business assets, while an unsecured loan is much more flexible and may be preferable if you are a new practice that lacks assets. To determine the best financing option for you and your partner, you should work with a broker like Rangewell to ensure your application is fully comprehensive and you can tap into the very best finance available to you.
Setting up a dental practice is expensive. We’ve already talked about property, but what about equipment and other necessary assets you need to get started? At the very least, you will require basic equipment like x-ray machines, dental chairs, computers and dental instruments. With dental equipment finance, you can invest in the equipment you need now and repay over a period of time.
Merchant cash advance
As a dental practice, you will most likely accept credit and debit card payments. Did you know that you may be able to tap into Merchant Cash Advance, a service that could give you an unsecured finance injection repaid via monthly payments as a percentage of your transactional sales taken via your debit and credit card machine. To find out if this solution is right for you, and whether you qualify for any of the above finance solutions, reach out to Rangewell today.
Depending on your business, you may be able to delay repayment until you turn a profit or are in a stronger financial position in general. All of this depends on the risks determined by the lender, so it’s critical that you assemble an application that negates the risks and highlights your strengths to secure the necessary funding on the very best terms.
At Rangewell, we have access to whole of market finance, including several specialist lenders who already work with dental partnerships like yours to finance their ventures. We’re not just here to provide you with a list of deals, we’ll help you to create your application, identify any areas of weakness and support you to get the most out of your investment, so you can kick off your dental partnership on the right foot.
So, if you’re starting a dental practice with a partner, then make sure you have Rangewell on your side. Get started with your dental loan application today.