Whether you’re looking to raise funding from private investors or to get a loan from a bank (like a SBA loan) for your dental practice, first you will need to prepare a solid business plan.
In this article we go through, step-by-step, all the different sections you need in the business plan of your dental practice. Use this template to create a complete, clear and solid business plan that get you funded.
1. Dental Practice Executive Summary
The executive summary of a business plan gives a sneak peek of the information about your business plan to lenders and/or investors.
If the information you provide here is not concise, informative, and scannable, potential lenders and investors will lose interest.
Though the executive summary is the first and the most important section, it should normally be the last section you write because it will have the summary of different sections included in the entire plan.
Why do you need a business plan for a dental practice?
The purpose of a business plan is to secure funding through one of the following channels:
- Obtain bank financing or secure a loan from other lenders (such as a SBA loan)
- Obtain private investments from investment funds, angel investors, etc.
- Obtain a public or a private grant
How to write your dental practice’s executive summary?
Provide a precise and high-level summary of every section that you have included in the business plan of your dental practice. The information and the data you include in this segment should grab the attention of potential investors and lenders immediately.
Also make sure that the executive summary doesn’t exceed 2 pages in total: it’s supposed to be a summary for investors and lenders who don’t have time to scroll through 40-50 pages, so keep it short and brief.
The executive summary usually consists of 5 major sub-sections:
- Business overview: start by introducing your dental practice, where it is located, how big it is (space and number of dentists). Also mention the services and treatments you offer (if you have any specialty e.g. orthodontics for example), the average prices of treatments, whether they are typically reimbursed or not and to which extent. Finally, add the capacity of your clinic so investors and lenders get an idea of the size of your business before jumping in your financials later (the maximum number of clients you can receive in a day or a week).
- Market analysis: summarise the market where you will operate and provide a brief about the target audience (age, demographics), market size, competitors, etc. No need to provide granular data here, save it for the Market Overview section later on (or the appendix).
- People: hiring goes beyond the medical staff for a dental practice. Indeed, if you open a private practice, you may also need a receptionist, a cleaner, and other support staff members. And if you are partnering with other medical professionals, mention every individual’s role in the setup as well as their experience.
- Financial plan: how much profit and revenue do you expect in the next 5 years? When will you reach the break-even point and start making profits? You can include here a chart depicting your key financials such as revenue, gross profits, and net profit
- Funding ask: what loan/investment/grant are you seeking? How much do you need? How long will this last?
2. Dental Practice Business Overview
The business overview section is where you go into details about your dental practice. A few examples of questions you should answer here include:
- Why are you starting a dental practice in your area now?
- What’s the location, and why did you choose it?
- What dental services (or products) will you offer? Do you have any specialty (e.g. orthodontics)?
- What will be your operating hours? days?
- How many dentists will operate in your clinic? Any specialist(s)?
- What is your target market (youngsters, young professionals, retirees, etc.)?
- How many patients can you take care of at the same time (how many rooms are there)?
- What will be the legal structure of your dental practice?
Let’s look at different subsections that you must include:
a) History of the Project
Any business overview must start with explaining the history of the project. There are 2 components here:
- Passion & experience of the business owner
- Rationale behind starting a dental practice today
Passion & experience
You may or may not have prior experience working in the dental industry. So, make it clear in this section to help clients understand what to expect from your practice. Of course, prior experience gives you an edge over your competitors, showing the clients why they should choose your practice over the rest.
Most often, dentists working in clinics decide to start their own dental practices. Yet it isn’t always the case: if you have entrepreneurial experience and a background in the dental industry (but not necessarily a dentist), you may want to start a dental practice. If the latter though, you will likely start either a franchise or a large clinic (as you may struggle to cover you own salary with a small independent clinic instead).
What justifies your decision to open a dental practice in that location today? For example, if there’s a scarcity of dental practices offering cosmetic fillings in the area, you could jump into the opportunity to fill the gap.
b) Business Model
This section outlines the model you intend to adopt when running the business. It should answer the following questions;
- Will you start an independent dental practice or partner with an existing facility?
- Will you target the general population or a specific age group (children vs. adults)?
- Will you offer specialty treatments (e.g. orthodontics, surgery) or general dentistry consultations and treatments instead?
What are the different types of business models for dental practices?
Some of the most common dental practices include:
- Sole Proprietorship-Single Ownership
This is the simplest model of starting and operating a dental practice. In this form of ownership, you only need a single personal tax return, making it easy to operate and maintain your clinic. Dental practices established under sole proprietorship are typically independent and small clinics.
- Single Owner-Professional Corporation (PC)
Alternatively, you can incorporate your dental practice and enjoy the potential benefits like low tax rates and faster debt clearance. Remember, this model also suits associates willing to incorporate their businesses with other dentists acting as partners.
- Joint Ownership
In this practice model, two or more dentists collaborate to form a practice. Usually, this type of arrangement works between a small number of individuals working towards the same goal. This is the most common form of dental practice.
Joint ownership has a few advantages, like low startup costs and reduced administrative burden. Also, patients visiting the practice can be shared amongst the practicing dentists, with revenue divided proportionally amongst the partners.
With joint ownership becoming less common, many dentists opt for cost-sharing models. Here, the partnering dentists maintain their independence while sharing some expenses. The nature and type of shared expenses vary but may include equipment purchases, administrative expenses, and rent.
c) Products & Services
The dental services you offer will depend on the size of your practice and the business model. You should highlight this clearly to give the investors a sneak peek of your establishment. Here are a few examples of the treatments you can offer to your patients:
- Cosmetic fillings
- Dental cleanings
- Root canal therapy
- Dental sealants
- Teeth extractions
- Teeth whitening
- Dental veneers
- Dental crowns
- Dental bonding
- Preventive care
d) Pricing Strategy
This section explains the pricing structure you will use in your dental practice. Indeed, the prices of dental services vary by type and complexity. Of course, your rates should reflect what other dental offices in the area offer.
For example, a fully-fledged dental practice charges anywhere between $600 and $4,500 on dental services in the US. So, you may want to use that as your benchmark.
We strongly recommend you use here (or in your appendix) a pricing table of all your services and treatments along with the prices.
Along with the prices, make it clear whether the treatments are reimbursed by Medicare/Medicaid, the largest health insurance providers and to what extent. This will give investors and lenders (who aren’t necessarily experts in dental treatments) a good idea whether these treatments are affordable (or not) for your patients.
Also, it will allow them to tie your prices into the financial projections later on (see more on that later).
e) Legal Structure
Finally, your business overview section should specify what type of business structure you want. Is this a corporation or a partnership (LLC)? Who are the investors? How much equity percentage do they own? Is there a Board of Directors? If so, whom? Do they have experience in the industry?
3. Dental Practice Market Overview
A thorough understanding of the market is just as important as the location. By understanding the target audience, you will know which services to offer, depending on the demands of the population.
At the very least, the market overview section of your dental practice business plan should address the following;
- Dental practice status quo: how big is the dental industry in your region? What is the growth rate? And what are the factors influencing its growth or decline in the region?
- Competition overview: how many dental practices are in the region? How do they compare to your setup? How can you outshine them?
- Customer analysis: who exactly is your target audience? What type of dental services do they need? How often do they need dental services? How much are they willing to spend on dental services on average?
a) Dental Practice Industry Status Quo
How big is the dental practice industry in the US?
The dental practice industry in the US is estimated to be $162 billion in 2022.
Also, according to the latest reports, there are approximately 191,497 dental offices in the US: that’s an average annual turnover of approximately $850,000 per dental practice.
The major driving force behind the rapid growth is the increased consumer expenditure on healthcare services.
How big is the dental practice industry in your area?
After getting a clear picture of the dental industry in the US as a whole, narrow down to your location. It’s very likely that you won’t find the number anywhere (at least not for free). In that case, you can use our guide to estimate the TAM, SAM, and SOM for your business. Here is an example of how to do it below:
For instance, let’s assume there are 50 dental practices in the city where you want to operate. Because each has an average annual revenue of $850,000, it’s safe to assume that the dental practice industry is worth $42,500,000 in your city.
How fast is the dental practice industry growing in your city?
As part of the market overview, you should also estimate the growth rate of the dental industry in your region. Here, you can rely on the number of practices if you can’t find this information online (which you likely won’t).
For example, if the area had 45 dental offices in 2020 and 50 in 2022, the average annual growth rate would be 5.4%.
b) Competition Overview
Understanding who are your competitors and their strengths and weaknesses is very important for you to succeed in this industry. For example, patients might be looking for treatments and services existing dental practices cannot offer: this is where you could have an edge.
Start by understanding the services offered by your competitors, their marketing strategies, and their pricing structure. If all dental practices offer the same services, then what are their marketing strategies and revenue potential?
Here, you should add a comparative table after doing your research to give the lenders and investors the best possible overview of your main competitors.
c) Customer Analysis
This is where you should describe your target audience. A few factors to consider when breaking down this section include:
- Demographic data (age and gender distribution)
- Frequency of visits to dental practices
- Average monthly income
- Average expenses on dental services per visit (or per year)
- Most common types of treatments
4. Sales & Marketing Strategy
Discuss your marketing strategy at this point. You will be good to go if you can answer the following questions:
- Which marketing strategies will you use to acquire new customers?
- How will you track the success of the chosen marketing strategies?
- What will be your marketing budget?
- What are your unique selling points (USPs)?
- Will you include any offers or promotions to attract new clients?
What marketing channels do dental practices use?
Like any new business, you will need to invest significantly in marketing in the first few months / years to attract new customers, including from your competitors.
A few typical marketing channels for dental practice are:
- Word of mouth, recommendations
- Online local listing (Google Reviews)
- Social media content & ads
- Search ads (Google Ads)
Note: Be careful when choosing a marketing channel for your dental practice. Besides being appropriate, the chosen strategy must be ethical: unlike other businesses, medical services have very stringent limitations when it comes to marketing, which can change state by state. Make sure you check with a lawyer before you go ahead.
What are Your Unique Selling Points (USPs)?
In other words, how do you differentiate yourself vs. competitors?
This is very important to point out to investors and/or lenders your USPs as you will very likely need to win customers from competitors. A few examples of USPs for dental practices are:
- Quality of services
- Affordable treatments
- Promotions and discounts (for example, discount on the first(s) consultation(s) when there are a series of checkups and treatments later on)
- Location: your dental practice may be located closer to your patients vs. competitors
5. Management & People
You must address 2 things here:
- The management team and their experience/track record
- The organizational structure: different team members and who reports to whom?
Small businesses often fail because of managerial weaknesses. Thus, having a strong management team is vital. Highlight the experience and education of the other dentists that you intend to hire to oversee your dental practice.
For the dentists and general partners, describe their duties, responsibilities, and roles. Also, highlight their previous experience and track record.
For the receptionists, personal assistants, office managers, dental assistants, etc. no need to go into a lot of detail, especially as it’s likely you won’t have hired them yet before you get the funding you need, which is the objective of this business plan.
b) Organization Structure
Even if you haven’t already hired anyone yet, you must provide here a chart of the organizational structure defining the hierarchy of reporting.
6. Financial Plan
The financial plan is perhaps, with the executive summary, the most important section of any business plan for a dental practice.
Indeed, a solid financial plan tells lenders that your business is viable and can repay the loan you need from them. If you’re looking to raise equity from private investors, a solid financial plan will prove them your dental practice is an attractive investment.
There should be 2 sections to your financial plan section:
- The startup costs of your dental practice
- The 5-year financial projections
a) Startup Costs
Before we expand on 5-year financial projections in the following section, it’s always best practice to start with listing the startup costs of your project. For a dental practice, startup costs are all the expenses you incur before you open your clinic and start treating patients. These expenses typically are: the lease for the space, the renovation costs, the equipment and furniture.
Logically, the startup costs vary depending on the size of your clinic, the treatments you will offer (and therefore the equipment you need), the quality of the equipment and furniture, whether you buy the real estate or rent a commercial space, etc.
On average, it costs $170,000 to $550,000 to open a general dental practice with 2 dentists in the US.
Note that these costs are for illustrative purposes and may not be fully relevant for your business. For more information on how much it costs to open and run a dental practice, read our article here.
|Building from scratch or refurbishing existing space||$120,000||$480,000|
|Equipment||$50,000 – $70,000||$50,000 – $70,000|
|Total||$170,000 – $190,000||$530,000 – $550,000|
b) Financial Projections
In addition to startup costs, you will now need to build a solid 5-year financial model for your dental practice business plan.
Your financial projections should be built using a spreadsheet (e.g. Excel or Google Sheets) and presented in the form of tables and charts.
As usual, keep it concise here and save details (for example detailed financial statements, financial metrics, key assumptions used for the projections) for the appendix instead.
Your financial projections should answer at least the following questions:
- How much revenue do you expect to generate over the next 5 years?
- When do you expect to break even?
- How much cash will you burn until you get there?
- What’s the impact of a change in pricing (say 15%) on your margins?
- What is your average customer acquisition cost?
You should include here your 3 financial statements (income statement, balance sheet and cash flow statement). This means you must forecast:
- The number of patients over time ;
- Your expected revenue ;
- Operating costs to run the business ;
- Any other cash flow items (e.g. capex, debt repayment, etc.).
When projecting your revenue, make sure to sensitize pricing, cost of raw materials (medical supplies) and the number of patients you will care for. Indeed, a small change in these assumptions may have a significant impact on your revenues and profits.
7. Funding Ask
This is the last section of the business plan of your dental practice. Now that we have explained what your dental practice’s business model is, the treatments you offer, your marketing strategy, etc., this section must now answer the following questions:
- How much funding do you need?
- What financial instrument(s) do you need: is this equity or debt, or even a free-money public grant?
- How long will this funding last?
- Where else does the money come from? If you apply for a SBA loan for example, where does the other part of the investment come from (your own capital, private investors?)
If you raise debt:
- What percentage of the total funding the loan represents?
- What is the corresponding Debt Service Coverage Ratio?
If you raise equity
- What percentage ownership are you selling as part of this funding round?
- What is the corresponding valuation of your business?
Use of Funds
Any dental practice business plan should include a clear use of funds section. This is where you explain how the money will be spent.
Will you spend most of the loan / investment in paying your employees’ salaries? Or will it cover mostly the cost for the lease deposit and the renovation of the building?
Those are very important questions you should be able to answer in the blink of an eye. Don’t worry, this should come straight from your financial projections. If you’ve built solid projections like in our dental practice financial model template, you won’t have any issues answering these questions.
For the use of funds, we also recommend using a pie chart like the one we have in our financial model template where we outline the main expenses categories as shown below.