Starting a dental practice: planning, funding and compliance

This guide explains how a dentist starts a new practice. It comes from Copeland Consulting Services and uses public sources. It is general education. It is not legal, tax or financial advice. Licensing, entity choice, leases, loans and taxes depend on your facts and on state law, so involve an attorney, a CPA and a lender.

It is part of the wider dental practice ownership guide. If you are still deciding between a start-up and a purchase, read the guide to buying a dental practice next to this one.

Is starting a practice the right path for you?

Starting a practice is one of several ways to own. Others are to buy a practice, buy in as a partial owner, or stay an associate. Ownership as a whole is changing. The ADA Health Policy Institute concludes, “In a nutshell, young dentists today are practicing very differently than their predecessors.” The same brief reports that 73 percent of dentists were practice owners as of 2023, and that ownership comes later in a career for recent graduates.

A new practice is called a de novo practice, or a practice start-up. The owner builds everything: site, systems, team and patient base. The table below compares it with a purchase. It is a way to organize questions, not a ruling on which is better.

Goodwill is the value of a practice’s patient relationships and reputation beyond its equipment. A start-up has none at first. A purchase price often includes it. The valuing guide explains more.

What goes into a dental practice business plan?

A business plan is the written map of what you will build and how you will pay for it. The SBA says a business plan can help you get funding, and a lender will usually ask to see one.

The SBA lists common sections of a traditional plan, including an executive summary, company description, market analysis, organization and management, service line, marketing and sales, a funding request, and financial projections. It adds that no single format is right: “There’s no right or wrong way to write a business plan.” Pick a format your lender accepts.

For the financial section, the SBA advises a prospective outlook of five years, including forecasted income statements, balance sheets, cash flow statements and capital expenditure budgets. For the first year, it says to be more specific and use quarterly or monthly projections. A CPA can help you build these. See the glossary entries for business plan, cash flow and practice budget.

Market research

The SBA suggests asking questions about demand, market size, economic indicators, location, market saturation and pricing. For a dental practice, you might apply these to the area around a proposed site. For example, ask how many dental offices are nearby and which payers serve the area. Public data and a local dental society may help. Check the date and method of each source before you rely on it.

How should you list and estimate startup costs?

List every cost, sort it into one-time and monthly, and get a written quote for each. The SBA explains that calculating startup costs helps you estimate profits, run a break-even analysis, secure loans and attract investors.

The SBA gives this general list of startup costs for any business: office space, equipment and supplies, communications, utilities, licenses and permits, insurance, a lawyer and an accountant, inventory, employee salaries, advertising and marketing, market research, printed marketing materials, and a website. A dental practice adds items such as dental equipment, imaging, software, a build-out, and lab and supply accounts.

The SBA says to count “at least one year of monthly expenses, but counting five years is ideal.” This guide gives no dollar figure for a typical start-up. The SBA does not publish one for dental offices, and costs vary a lot by site and equipment. Ask vendors and your lender, and use the overhead percentage post to understand how running costs are measured.

Working capital matters at this stage. A new practice pays staff, rent and suppliers before it collects much revenue. Ask your lender and CPA how much to hold back for that gap.

How does funding work?

Most start-ups use a mix of the owner’s savings and a loan. The post on financing a practice purchase covers common lenders. This section covers the SBA 7(a) program, because it is a published, government-backed option.

The SBA lists “Start a business” among the allowed uses of a 7(a) loan on its lender comparison. It also lists working capital, equipment, furniture and fixtures, and leasehold improvements. The maximum loan amount is $5 million. You apply through a participating lender: “You will always work directly with your lender and not with SBA.”

Eligibility factors are credit history, business type and location. The SBA says applicants must be “creditworthy and demonstrate a reasonable ability to repay the loan.” A lender sets interest, collateral and fees within SBA limits. Because a new practice has no history, expect a lender to ask hard questions about your plan, your experience and your own credit. Ask each lender what it needs.

Questions for lenders:

• Do you lend to new dental practices, and how do you evaluate a plan with no history?
• What do you need in a business plan and in projections?
• What collateral and personal guarantees do you require?
• Can the loan cover equipment, build-out and working capital together?
• How long does approval take?

An SBA District Office and the SBA’s Lender Match tool can help you find lenders. The SBA 7(a) page links to both.

What legal and licensing steps come first?

Work with an attorney to choose and form your business entity, and with the Missouri Dental Board on licensing. This guide cannot tell you which entity fits you. That depends on liability, tax and ownership goals, so it needs your attorney and CPA together.

The Missouri Dental Board’s page lists forms and services, including “Request a Professional Corporation Name Approval.” It also says licensees can change corporate officers or owners of a licensed business through its online system. Read the board’s rules and statutes, then ask an attorney how they apply to your plan.

Items to review with an attorney:

1. The business entity and its name.
2. The lease, including build-out terms, exit terms and any personal guarantee.
3. Employment agreements and handbook.
4. Vendor and equipment contracts.
5. Patient record rules and what happens to records if the practice closes.
6. Insurance, including professional liability.

For employment documents, see the employee handbook contents post and the guide to hiring and keeping a team.

What compliance systems does a new practice need?

A new practice needs safety, infection control and privacy systems in place before it sees patients. Start with the compliance checklist guide and work through the topics with advisers.

OSHA notes, “There are currently no specific OSHA standards for dentistry.” It adds that hazards in dental offices are addressed by OSHA’s general industry standards, such as those for bloodborne pathogens. See OSHA and the OSHA requirements post. Infection control guidance is covered in the CDC infection control post. Privacy duties are covered in the HIPAA post.

Advertising your new practice

Missouri treats dental marketing as regulated advertising. The statute lists conduct that can lead to discipline. One item is any advertisement that “does not contain the name of one or more of the duly registered and currently licensed dentists regularly employed in and responsible for the management, supervision, and operation of each office location listed in the advertisement.” The same statute also lists claims about cure, relief, or superiority, and the use of specialty titles without the matching license.

Ask your attorney to review your website, signs and ads before you launch. Marketing a new practice is a large topic. See the dental practice management guide for the wider picture.

What risks should you test before you commit?

The sources do not rank start-up risks, so this list is a set of questions for you and your advisers. Write an answer to each one before you sign a lease or a loan.

Your CPA can test the first four rows against your projections. Your attorney can read the lease and guarantee terms. A lender will ask about most of these anyway, so having written answers saves time.

What is a sensible order of work?

Many start-ups follow a path like the one below. Dates and order vary. Use it to build your own schedule with your advisers.

1. Write your goals and a first business plan.
2. Test the market around your target site.
3. Build the startup cost list and projections with a CPA.
4. Meet lenders and learn their requirements.
5. Form the business entity with an attorney.
6. Secure a site and negotiate the lease with an attorney.
7. Order equipment, software and supplies.
8. Hire and train staff. Set up payroll and benefits.
9. Put compliance systems in place.
10. Prepare marketing that follows Missouri advertising rules.
11. Open, then track the numbers every month. See the KPI guide.

Track production, collections and overhead from the first month. Early numbers show whether the plan and the real practice match.

Next step

To compare paths, return to the dental practice ownership guide. To ask about practice ownership, contact Dr. Jon Copeland, DDS, a general dentist in Wildwood, Missouri: contact Dr. Copeland about consulting.