Starting a new practice vs buying an existing one: A guide for dentists, doctors and vets

For healthcare professionals, taking the leap into practice ownership is a significant milestone. One of the first big decisions you’ll face is whether to buy an existing practice or start your own from scratch. Both options come with distinct advantages and challenges, and the right choice depends on your goals, resources, and circumstances. Whichever option you choose, you’ll need careful planning and expert advice.

Here's a comprehensive look at the pros and cons of each path.

Buying an existing practice

For many, purchasing an established practice may feel like the easiest option, offering the advantage of stepping into a functional, income-generating business from day one. However, this route also comes with its complexities.

Advantages of buying an existing practice

• Immediate income: Established patient base ensures revenue from day one.
• Staff and systems in place: Existing employees are already trained, and the practice's workflows are operational.
• Known entity: The practice likely has community recognition, reducing the need for aggressive initial marketing.
• Easier financing: Banks may view an established practice as less risky, making loan approval more accessible.
• Inclusion of equipment and fitout: Typically, equipment and furniture are part of the sale, saving upfront costs.
• Cost efficiency: While you pay for goodwill, acquiring an established practice is often less expensive than setting up from scratch.
• Lower patient acquisition costs: Retaining existing patients is generally cheaper than marketing to attract new ones.

Disadvantages of buying an existing practice

1. Patient retention risks: Patients may leave due to changes in ownership or management style.
2. Staff turnover: Key staff members may not stay or align with your vision and values.
3. Ageing fitout and equipment: Updating old infrastructure can be costly.
4. Limited growth potential: Without significant investment in marketing or systems, growth may stagnate.
5. Goodwill costs: While goodwill can be an asset, it’s intangible and may not always align with your long-term plans.

Key considerations

When looking to purchase of an existing practice, it’s important to do your research. Work with an accountant to undertake due diligence, and review the practice's financials, patient numbers, fee structures, and profitability trends. They will also help to ensure the practice is fairly valued and determine an appropriate offer price.

To help determine if the practice is right for you, you should also consider why the owner is selling, and if the location and demographics will allow for future growth.

Starting a new practice

Starting your own business from scratch allows you to design the practice of your dreams, but it comes with greater risk and significant upfront costs.

Advantages of starting a new practice

• Complete control: Build the practice to your exact specifications, from layout and design to systems, branding and culture.
• Modern equipment: Everything is brand new, minimising maintenance and maximising efficiency.
• Choice of location: You get the opportunity to select a site that aligns with your ideal patient demographic and growth goals.
• No legacy issues: No "baggage" from previous owners or staff or ineffective systems already in place, allowing a fresh start.
• Potential cost savings: Avoiding goodwill costs can make this option more financially viable for some.

Disadvantages of starting a new practice

1. High initial costs: Fitout, equipment purchases, and marketing require significant capital, with no existing patient base to guarantee revenue from day one.
2. No patient list: Establishing a steady flow of patients can take time and investment.
3. Time-intensive: Navigating zoning requirements, planning permits and dealing with builders and equipment suppliers can be time-consuming.
4. Hiring and training Staff: Recruitment and onboarding processes can be resource-intensive.
5. Financial challenges: Securing finance may be harder without the proven cash flow of an existing business.

Key considerations

Starting a brand-new practice from scratch is an existing opportunity to build a business to your exact specifications, however, it requires careful planning and attention to detail. Finding a suitable premises in the correct location that is zoned to allow healthcare businesses can be tricky. Add in extensive marketing requirements to acquire a steady flow of patients and setting up new systems and procedures, and you’ll quickly realise how demanding it can be to balance the start up of a new practice alongside working your "day job”. However, if planned and executed properly, the rewards of building a practice that aligns with your vision and serves your community can make all the effort worthwhile.

You’ll need an accountant on your team

Whether you're buying an existing practice or starting from scratch, engaging a specialist healthcare accountant like Amalgam Advisors can make the process smoother and more financially secure. Here's how we can help:

• Due Diligence: Review financials, identify red flags, and advise on offer pricing.
• Corporate structuring: Set up the right business structure to minimise taxes and protect your assets.
• Finance applications: Assist in preparing loan applications and connecting you with healthcare finance specialists.
• Compliance and reporting: Ensure your business is compliant with tax and regulatory requirements from the outset.
• Financial foundations: Set up your bookkeeping systems and procedures, including Chart of Accounts, Single Touch Payroll (STP) registration, and payroll systems to ensure a financially organised and healthy practice from day one.
• Industry connections: Introduce you to trusted legal advisors, insurance brokers, fit-out specialists, and equipment suppliers.

We’re here to help

Owning a practice is a rewarding step in your career, but choosing between buying an existing one and starting from scratch is a decision that requires careful consideration. Whichever path you choose, having the right professional support is essential to avoid costly mistakes and set yourself up for success.

The Amalgam Advisors team has over 20 years’ experience in helping healthcare professionals navigate the financial and operational complexities of practice ownership. Contact us today on 1300 604 380 to learn how we can support you in achieving your goals.