Increased costs due to inflation. Evolving patient demands. Encroaching competition.
In today’s uncertain economic climate, dental professionals face a myriad of challenges when it comes to managing and growing their practice. Now more than ever, it is important to make informed, strategic investment decisions that enhance the quality of patient care and ensure the long-term viability and continuing growth of their practice. Below are some essential investment tips tailored for the dental industry:
1. Clarify Your Short and Long-term Goals
The first step in any investment strategy is to clearly define your short and long-term goals. For dental practices, this could range from immediate objectives such as upgrading technology or expanding services, to longer-term aspirations like opening new locations or preparing for a comfortable retirement. An essential part of this planning should include setting your ideal retirement age and understanding the financial requirements to achieve this goal. By identifying these goals early, you can tailor your investment strategy to meet these objectives, ensuring that each investment decision moves you closer to your desired outcome.
2. Explore Investment Options
The word “investment” itself offers a plethora of options, each with its own set of risks and rewards. For dental practices, investing in advanced technologies such as CBCT systems and other imaging technology can significantly enhance diagnostic capabilities, improve patient outcomes and expand service offerings. Beyond technological investments, consider other avenues such as real estate, stock market opportunities or even retirement plans tailored to healthcare professionals. Researching these options thoroughly will give you a clearer understanding of which investments align best with your practice’s goals and your personal risk tolerance.
3. Consult with a Financial Planner
One of the most critical steps in developing an effective investment strategy is consulting with a financial planner, who is an expert in supporting people in retiring comfortably while meeting their family’s financial needs. Often dentists consult with their accountant or even simply friends and families, but these individuals may lack the experience and knowledge base to properly guide good decisions. A financial planner can offer insights into how different investment options fit into your overall financial picture. Meet with your planner, share your goals and compare notes on potential investment strategies. Ask plenty of questions to fully understand how each investment option will contribute to achieving your objectives. A good financial planner will explain complex investment concepts in simple terms.
4. Invest in your Dental Practice’s Growth
In considering whether to take on debt to invest in your practice’s growth, take into account both the potential return on investment of the debt and these tips from the American Dental Association’s article, The Truth about Dental Practice Loans:
Spend some time on a self-evaluation of your financial goals prior to speaking with a lender. Consider things like:
- Knowing how much you can/want to invest in the dental practice.
- Reviewing your credit history and current debt(s) besides student loans.
- Assessing your personal financial goals, such as buying a home.
Get ready for (a lot of!) questions. As part of the loan application process, talk with your bank to help them understand the dental practice you are hoping to buy or your current practice that you are investing in.
They will want to ask about:
- The dental practice’s history
- How many patients it currently serves
- What kind of staffing model it has
- Its financial information
- Whether the seller plans to stay on for a period of time to help with the transition
Another helpful resource may be this article from dental practice CPAs Tooth & Coin: How to Successfully Apply for Dental Practice Loans. In it, they feature real advice from top lenders in the dental industry, including Bank of America, Wells Fargo Practice Finance and Live Oak Bank. Among other insights, they detail how to avoid these common mistakes dental practice leaders make when applying for loans:
- Not prequalifying for your loan
- Not providing the right documentation
- Not being prompt with providing the right documentation
- Late bill payments
- Misunderstanding legal information
- Not having the right team in place to plan and execute the project
5. Regularly Review and Adjust Your Investment Strategy
The economic landscape and your practice’s needs will evolve over time, necessitating periodic reviews and adjustments to your investment strategy. Regularly assess the performance of your investments and realignment based on your goals as needed. This proactive approach ensures that your investment strategy remains relevant and effective, even as market conditions change.
