Last updated on October 4th, 2023 at 03:49 pm
This blog is part 1 of 3 in a series on opening additional locations. Click here for Part II, and here for Part III in this series.
MGE Power Program clients’ offices tend to expand fast – sometimes VERY fast.
Having taken so much ground in such a short period of time, it’s not unnatural to want to expand your “game” and maybe open an additional office (or ten…).
I say more power to you, and in that vein, wanted to share a few observations I’ve made over the years on what seems to work and what does not when it comes to opening multiple locations.
Before I get into this, let me give you a little disclaimer. This blog is based on my personal opinions and observations. Please treat it as such. As always, you must do what you feel is right for you and your circumstances. This is not the “official position of MGE in these matters,” it is however my official position.
Additionally, this information is targeted primarily at GPs who are looking at additional locations, not specialists. While some of this information would be helpful for specialists, there are a few different rules that apply to them with multiple offices.
If you are a specialist and find that you have questions that haven’t been answered in these articles, e-mail me at jeffb@mgeonline.com or call me at (727) 530-4277. The same goes for anyone else who reads these – feel free to contact me with any questions.
Okay, with that out of the way, let’s take a look at this subject.
If a client were to approach me and ask for my advice on opening a new location, I would initially have them consider the following:
1. Why are they opening another office?
2. Is their “house in order” at their current location?
3. Where are they looking at opening the second (or third, fourth, etc.) office?
4. Are they going to work in the new location? If so, how many days and how will this affect their primary location?
5. Are they bringing in a partner in this venture or are they going it alone?
6. Are they starting a scratch practice or buying an existing office?
7. How are they going to staff the new office?
8. How will they administer the finances for each office?
I’ll break each of these down further and give you an idea of what I’m looking at in each instance.
1. Why are they opening another office?
People can do what they want, but obviously I have a responsibility to a client. While I don’t ultimately control what a client is going to do, I’ll be the first one to say something if I think they are making a mistake. So, I usually ask this question first. I want to know what’s motivating them to add an additional location. If I hear answers like, “I hate my office and want another one,” I’d find out why. If the location was a real problem (e.g. not enough space, no room for expansion, etc.), I might advise that, distance permitting, they just move. If I hear, “I’m not making enough money from my first location,” or similarly, “my first location isn’t very profitable,” I’d probably advise them to hold off on a second location until they sort this out. Why? Well, if your primary location isn’t profitable, then we’d better fix that first (more on this later). And if location #1 isn’t making money, what’s to stop this client from repeating this in location #2?
If they are doing fine in location 1 and just want to do more, then they could be ready to move on to location 2 and beyond, which leads us to the next point:
2. Is their “house in order” at their current location?
This one is a very big deal. If you are looking at expanding out, you’d want to make sure that your primary location is in pretty good working shape. The last thing I’d want someone to do is leave to start a new location with a mess at the old office – employee strife, low profit, down statistics, etc. All of these issues will just suck their attention back into that office. I would look at a couple of things here with relation to the primary location:
a. Is the office properly organized and staffed both adequately and stably?
b. Does the office have competent and trained executives who can run the office successfully as shown by statistics?
c. Are the stats of the primary location in a good range?
d. Is the primary location continuing to grow? Even if this growth is minimal – it shouldn’t be contracting. This would apply to revenues and new patients.
e. Is the primary location profitable? Here I would want to know that it’s not just “paying the bills.” It should be able to save a decent amount each and every month and continue to support the main owner/doctor. Especially if the owner/doctor is going to be spending some time in the new office. Let’s say, you are going to cut down to two days in your old office and add two days at the new location, with an associate picking up the slack. In this case, I’d want to make sure that the old office is still viable for the owner/doctor while factoring in what you’ll have to pay the associate.
3. Where are they looking at opening the second (or third, fourth, etc.) office?
Whether you are buying an existing practice or starting from scratch (again more on this later), distance is important.
And by this I don’t mean picking the “ideal” location – i.e. traffic, visibility, etc. That is something completely different. What I mean here is the proximity of your new location to your primary office.
In my opinion, I wouldn’t put the new office so close to the old one that patients could drift back and forth between the two. I’ve seen this before and while it might appear to be convenient, it can cause problems down the road. Similarly, I probably wouldn’t go out and start an office three hours away – if for nothing else the inconvenience.
Think about how all of this will play out down the road. Some day you’re going to want to retire or cut back. You may, at some point, want to sell one of your locations and stay practicing in another. If the locations are too close, this can prove to be problematic. For example, let’s say you have two practices within five miles of one another. They are both successful. Patients move back and forth between the two. You decide to sell one of the locations and keep practicing in the other. A prospective buyer looking at this deal may have a problem with this. Why? They are so close that he or she runs the risk of buying your office only to see the patients follow you to the office you are staying in.
This could kill some of the goodwill value of your practice when it comes to the sale. Conversely, you could sell the location itself with no charts, keeping and moving the patients (which means a lot less for you in the transaction), only to see some of the patients go to the doctor who purchased the other office due to familiarity or convenience.
If you are selling all of your offices to one buyer then this is obviously a non-issue, although needing a buyer like this to pull the sale off definitely limits your pool of potential buyers.
This all handles by asking yourself a simple question before you open the new office: If you were a dentist and looking at buying one of your offices, with the idea that the dentist you were buying from was staying put in the other, would you buy it?
If the answer, based on location and proximity, is “Yes,” then you should be OK. If the answer was “No way,” then you might need to find a different location.
How far apart they should be is completely subjective and depends on where you are and you’ll have to take this into account. In New York City, fifty blocks (about 2 ½ miles) is a world away. In a normal suburban area this is a five to ten minute drive depending on traffic and no real inconvenience.
Summary
Starting or buying a dental office is an expensive proposition. It’s definitely more involved and usually more expensive than buying the family home. Don’t put yourself in a position where you’ve laid out hundreds of thousands of dollars only to wish you’d located elsewhere. While it’s not the end of the world, it’s avoidable, so do your due diligence, especially on this point.
And with that, I’ll wrap up this week’s installment. Next week, we’ll look at the next two issues: How much time you’ll spend in your new location and the pros and cons of adding a partner in the new location.
