December 19, 2021
If you’ve always pictured yourself as the owner of your own practice, your dream might seem far off in the distance; especially if you’re neck-deep in student debt and have no idea where to start! But there’s no reason to panic, as your dream can still be made into reality—and perhaps much sooner than you think! Keep reading to learn more about five financial must-do’s to consider before purchasing your first dental practice so that you’re set up for long-term success.
#1. Monitor Your Credit Score
It’s always wise to monitor your credit score, especially if you’re working towards purchasing a practice. That said, if your score is below 680, your chances of obtaining financing are likely slim. If you aren’t already, you should get in the habit of checking your credit score periodically; with identity theft on the rise, it’s best to catch any potential problems before they have the chance to escalate (much like with preventive dentistry, coincidentally). If something happens while you’re trying to close on a sale, it can undermine all of your hard work!
#2. Know Your Production & Work to Improve It
Part of obtaining financing is being able to prove to your bank that you’re capable of producing enough of your product (in this case, dentistry) to create the revenue necessary to service the loan. You can easily do this by running a monthly production report; this will also confirm that you’re being paid appropriately! Banks can also use specialized formulas to backtrack your productivity, if necessary. It’s important to show that you’re improving your productivity over time by increasing efficiencies and utilizing dental auxiliaries. In any case, the easier you can make it for a bank to calculate your productivity, the better—and the more likely you’ll be able to obtain financing.
#3. Become As Liquid as Possible
This is a tough one, especially if you’ve lived frugally during school for the last few years. You should try to do whatever you can to obtain as much cash on hand as possible. Save a decent portion of your monthly income. Consider cashing out stocks and bonds. There are also many articles with tips about how to reframe your lifestyle and live comfortably below your means.
#4. Don’t Add to Your Student Loans
You might be wondering if it’s better to pay off only the minimum on your student loans to help you build up a down payment for a practice. But you should make sure that your student loan payments cover at least the interest and a little bit of principal; you don’t want to inadvertently increase your debt over time!
#5. Understand Interest Rates
Interest rates can be a little puzzling at times but understanding them will allow you to successfully navigate through any fluctuations that might affect your monthly payments. In the 1980s, practice loans were often financed with rates into the teens, but today interest rates can run under 5%; however, you shouldn’t let inflation deter you. You can also ask your lender if there’s a certain point in the process when you can lock-in your interest rate.
Purchasing your first practice might seem like a daunting task but taking care of these five things will ensure that you’re able to fulfill your goal and get the ball rolling.
About Next Level Consultants
Next Level Consultants strives to provide dentists with the knowledge and tools they need to successfully start and run their own business. Under the leadership of Mike Dinsio and Paula Quinn, the team at Next Level Consultants has helped hundreds of specialists hit the ground running and is looking forward to helping you next. To learn more about Next Level Consultants, feel free to reach out online or give them a call: (720) 309-9551.