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How to Open a Dental Startup Despite Rising Construction Costs

By Steve Burns.  Get free updates of posts here

Lately I’ve been getting the question, “can I afford to build my startup practice with the rise in construction costs we’ve seen in the past year?” 

Spoiler alert, the answer is you can’t afford not to.

It’s a fact that many construction materials have had a dramatic rise in costs over the past few months, some are even up 43-60%.  

Just the other day, a headline read, “Lumber Prices Cool.” However, the details in the article were not as encouraging as the headline. Some material costs are coming down slightly, but there is no speculation that prices will ever go back to what they were before the increase. 

To compound the issue, lenders aren’t increasing loan amounts to keep up with the rise in construction costs (don’t worry we have a solution for this ????????). 

The same material shortages affecting construction costs are also affecting dental equipment manufacturing. 

So, I know what you must be thinking: how is it possible to build out a startup dental practice in this environment?

The Ideal Practices’ team has experience with literally THOUSANDS of startup dental practices across the country, so it’s inevitable that we’ve found solutions to these challenges and I’m happy to share them with you now.

The process starts by working with lenders to maximize funding. 

Next comes negotiations for TI (tenant improvement) allowances and the Landlord’s work for space delivery. 

With construction, choosing the proper type of construction path, either architect lead or design build, will cost time and money. 

An expertly detailed contractor vetting and bid process can save tens of thousands in construction costs. We found a client with over $20,000 in construction savings last week by changing one item on the construction bid they did not know they could do without. 

I don’t have to tell you that dental construction is expensive, so you can imagine how finding 1 or 2 areas to cut costs dramatically reduces your startup investment. Not to mention lessens the burden of cash flow during your first year. 

Next, design elements can be evaluated to make sure the practice reflects the quality of dentistry to be performed and balance those elements with the budget by scalable implementation. Some design elements and features can be added to the practice in the future after it is open and cash flow permits.  

Many associate dentists don’t realize that all these elements don’t have to be built out on day one until they consult with us. Now you know that too. 

So let’s get back to the rising construction costs in dental practices. 

There’s no doubt: construction costs are higher today than they were a year ago.  

Interesting fact: construction costs in 2020 were higher than 2019, and 2019 was higher than 2018 and 2018 was higher than 2017. I think you get my point….

…Labor and material costs will always increase. 

Unfortunately, you can’t time the market. You can try to assess the *best* time but it doesn’t truly exist. 

Let’s break down what this consistent increase really means for your dental practice. 

Construction costs rise on average 3-8% every year. Let’s just call it an average 5%. 

If you’ve been waiting 2 years for the *perfect moment*…. I hate to break it to you but your cost to open a practice just went up 10%. 

Let’s do more math…

It takes on average $500,000 – $600,000 to open a dental practice depending on your market and the design and construction decisions you make. 

About $230,000 – $350,000 of that cost is spent on construction costs alone. 

I don’t know about you but for most associate dentists, adding nearly $30,000 (10% of $300,000) to the total build out is not ideal. 

So before you decide to wait for lumber prices to come down, remember that inflation is inevitable…. You can’t beat it. 

So then, the question is not “can I afford to build out my startup practice now?” 

The question is really, “do I want to wait and pay even more later to open the same exact practice?” 

To read more about dental practice startup costs, check out “The True Price to Open a New Office!” 

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About Steve Burns

Steve Burns is a Startup Practice Consultant with Ideal Practices. Steve successfully helps clients with their startup dental practices focusing on the areas of technology-equipment investment and the complexities of the building construction process. His expertise includes over 25 years of dental technology and equipment knowledge combined with firsthand experience working with architects, engineers, contractors, sub-contractors, dental distributor teams and manufacturers. He guides clients with a strategic and proven approach for technology-equipment selection as well as client, dental dealer and contractor relationships to provide a clear team approach, delivering a confident experience for every client.


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