October 12, 2022
Should I open another practice location?
Are you considering opening another practice location?
In considering opening a new practice location, you must answer the following three questions:
- Why do I want to open a new office?
- How much will it cost to operate a new office?
- What level of daily production / collections are necessary to ‘break even’?
Let’s drill down on each one of these three questions to better understand why I recommend you answer them before opening a new location.
Why do I want to open a new office? It is vital that you clearly understand the reasons for opening a new office. For example, an orthodontic dentist wanted to open a new location in the college town 30 miles away from her current office. The purpose of this strategy was to access the families working and attending this large state university.
After identifying her target market, she performed the following tasks as part of her business plan:
- She identified the size of this market and the current dentists serving them. Was the market large enough to support another dentist?
- She surveyed the pricing of her competition. Was her pricing and services competitive or would she have to adjust?
- She searched for an office location close to her market. It can be tough to find the right location at the right price!
How much will it cost to operate the new office? Now it is time to ‘sweat the details! You need to think seriously about operating hours, staffing, projected revenue streams and occupancy expenses. Everything you need in your current location will likely be needed in your new office.
There will also be a number of one-time expenses to consider:
- marketing expenses in the first year to promote the new location to your target market
- Legal expenses to lease/purchase the office
- Expenses to build-out and furnish operatories, lab and waiting room
- Equipment purchases with financing costs
What level of production/collections are necessary to ‘break even’? Every business plan should have a break-even point with targeted revenues and profits for each year for the first five years of operations.Your CPA is in the best position to put together this projection and it is worth his time and expense to know your targets!
By having this projection, you will know every month if you are making progress towards achieving your short-term and long-term goals. Be prepared to make changes to adjust to changing market conditions!
One last word of advice; you must be fully committed to make a new office profitable and a long-term success. If you are not working additional hours in the first six months of operation, you are likely not working hard enough! However, with this hard work and careful planning, a new office can provide a significant boost to your profits and financial security!
Still have questions? Please reach out to any of Buckingham’s Practice Integration Advisors. We are here to help!
For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is based upon third party information which may become outdated or otherwise superseded without notice. Third party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Individuals should speak with a qualified financial professional based on their own circumstances. The opinions expressed here are their own and may not accurately reflect those of Buckingham Strategic Wealth®. R-22-4517