How to Choose a Location for Your First Dental Office

There are many decisions to make along the path to owning your own dental practice. One of the most important—if not the most important—is the physical location of your office. Your location plays a crucial role in the success of your practice as it determines not only the type of office you can establish but also to a certain extent the patient population and demographic(s) you will service.

Some dentists choose to hire a specialized real estate professional to help with the search. These specialists provide valuable insight about particular spaces and have market-specific knowledge. Other dentists choose to look on their own.

There are three main things to consider when choosing a location, whether you’re working with a specialist or by yourself: physical space, demographics, and competition. Align these three elements with your goals to help ensure you choose the right place.

The Importance of Physical Space

The quality and size of the dental practice space must provide enough clinical room to support, treat, and expand your client base in future years. First-time practice owners in cities and urban communities typically start in spaces that range from 1,100 to 1,600 square feet. In suburban areas, dentists generally work in the range of 1,300 square feet or more for their first office.

Plan for Long-Term Growth

Your first office space should allow room for growth; plan for the long term and your practice won’t outgrow its space too quickly. Here are some things to ask as you begin your search:

• Can this space fit the type of practice I envision?
• Is the space size ideal for me to start—as well as grow?
• Is the space properly zoned?
• Does the space need significant upgrades or a significant construction budget?
• Do I have the budget for construction and equipping the space?
• Are there any obstructions that can be detrimental to construction?
• How can I maximize this space?

Consider Your Business Model

If you are going to operate mainly on a fee-for-service basis, you may not have a busy office environment and could go for a smaller, more boutique space. If you plan on being a practicing dentist who works primarily with an insurance and/or Medicare population, you would want to equip more chairs for your office as the business model will be vastly different in nature. In that case, it makes sense to start with a larger location because your business model is predicated on volume.

Understand Your Layout

After you’ve located a suitable space, your next step is to have a dental equipment company representative measure the space and produce a preliminary layout. This drawing will show the space and how it can be configured and equipped as well as the workflow of the office and future advancement of the space. The equipment company will typically provide this service at little or no fee, with the hope of securing your business.

The layout will let you know just how much of your space can be used for clinical work, hygiene, and workflow, which plays an important role in potential outfitting of technology and equipment. This is all valuable information to understand before you move forward with a letter of interest, lease or purchase.

Know Your Potential Patients

Demographic information defines your geographical population. Since most people choose healthcare providers near their homes, it’s essential to understand the makeup of the population around your potential location. Conduct some demographic research before and during your office search; it can help define the type of practice you create.

This data can be purchased through market research companies or, to a certain extent, found through the census or other online sources. The Small Business Administration, for example, maintains a list of federal business statistics available at no cost.

Some of the statistics you may find valuable include:

• Median age
• Ethnicity
• Gender
• Average household size
• Households with private insurance
• Population density
• Population growth size
• Medium income

This particular information will provide a snapshot of the clients you will treat within your geographic area. This is a basic list—some demographics reports will expand to greater detail.

Familiarize yourself with the community around your potential space, and your practice can serve the population that fits the profile of your ideal patients. For example, population growth trends may help you pinpoint a neighborhood with a need for a practicing dentist. Demographic research is an important part of the process and can help make the decision on your first space easier.

Know Your Competition, Too

Competitive research can help determine if the location is ideal. According to the American Dental Association, a good ratio is one dentist to every 1,500 patients, with more dentists in urban areas. You can often find this information in demographic reports.

Some questions you should answer before you secure space are:

• Is there a need for a dentist in the area?
• Are the local dentists meeting the needs of the population?
• Is the current competition aging out?
• Will you provide services that are not currently available to the population?

The answers to these questions can give you insight into the opportunity for you to set up a practice in a specific location.

Market Considerations

Today’s market offers more opportunities with both lease and purchasing options. Many retail and service businesses have stepped away from traditional brick-and-mortar locations in the last few year. The direct result has been an increased supply of commercial space. As supply increases in the real estate marketplace, often times so do the incentives landlords provide future tenants occupying leased spaces. We have seen a number of increases from landlords in tenant improvement allowances, lower escalations on leases, and more flexibility with free rent concessions and—most importantly—pricing and terms.

As far as commercial purchases go, the same rules apply—as supply increases, so do the leverage points of buyers to negotiate down sales price. In regards to owning a dental practice in a leased space or owner occupied real estate, today’s market has significant advantages for those currently looking.

Make a Careful, Informed Decision

If you are thorough in your research on your potential population and competition—and rely on experts to help with location and outfitting your space—you’ve done your due diligence. Bring all the facts together and you can make an informed decision on where your first dental practice will be.

Contact Bank of America Today

Matt Muller
Vice President, Dental Financing
206-290-3185
matthew.muller@bofa.com

Michael Thompson
Business Development Officer, Dental Financing Pacific Northwest
614-813-7671
mthompson27@bofa.com

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