Building from the ground up: the advantages and drawbacks

When approaching practice ownership, one of the biggest decisions a dentist can make is whether to acquire an existing practice, or build a squat practice from the ground up. Both options can be highly successful, but each comes with its own risk profiles, funding considerations, and lifestyle implications. Often, the choice is a deeply personal one, depending on personality, appetite for risk, long-term goals, and available capital.

The inherent appeal of opening a squat practice

One of the biggest draws for those opening a squat practice is the ability to have total control. When acquiring an existing practice, the buyer inherits the systems, staff structures, workflows, branding, patient demographics, and culture that has been built and maintained over many years. This usually creates a stable base, but can limit flexibility – as many of these factors are ingrained into the daily workings of the practice.

With a squat practice, everything can be built around the buyer’s vision. This means having the ability to select location, brand identity, layout and patient journey, equipment selection, team culture, clinical offering, and growth strategy, without the limitations associated with purchasing an existing practice. For many ambitious practitioners, this degree of ownership and creative freedom is incredibly attractive. In addition, there is a long-term financial upside that comes along with opening a squat practice. When executed well, a squat practice can create significant equity value over time, especially when developed in underserved communities or niche markets.

It’s not all smooth sailing

The most obvious challenge encountered when opening a squat practice is simple: there is no patient list on day one. Therefore, opening a squat practice requires someone with entrepreneurial flair, able to turn their hand to not only being a clinical dentist, but also a marketeer and a good financial manager – able to monitor the business’ KPIs. Regardless of the level of clinical skill, if a dentist isn’t able to market their treatments, there will not be any patients to treat.

Commonly, opening a squat practice is easier for those who have already developed a following, with many growing an audience on Instagram, for example, during their associateship. This gives them a backlog of patients with which to work. If this is not the case, and a dentist doesn’t have an existing patient audience, they’ll be relying on organic footfall or paid marketing to bring patients in. This can be far more difficult, unless there is very strong financial backing – not only are there marketing costs, staff wages, and usual expenses to pay, but there are lost opportunities that come with not being able to work as an associate as they’re required to be available in the squat practice.

Additionally, running a squat practice requires significantly more work behind the scenes to get set up. With a squat, the owner is responsible for building out every moving part of the business including: property fit-out, CQC registration, recruitment, supplier negotiations, branding and marketing, software implementation, and building all operational systems from scratch.

Finding funding

Lenders often assess squat practice applications more cautiously than acquisitions, funding future projections rather than a proven historic performance, making them more high risk. With a squat practice, lenders place their faith in the operator, the business plan, demographic analysis, and projected growth assumptions. As a result of this, capital contribution requirements can be higher, lending structures may be more conservative, and banks will often want to see strong personal financial backing and contingency planning. However, the market has become increasingly supportive of high-quality squat projects, especially those with a strong operator, clear demand, and a realistic growth strategy.

The experienced team at DE Finance are one of the busiest specialist dental finance brokers in the UK, helping buyers with their dental practice ownership journey. The team will analyse your assets and liabilities to provide a theoretical budget, work with banks to ensure you get the most competitive terms, and stay with you until completion and offer support with the CQC.

Weighing up your options

In short, there is not a universal answer as to whether squat or acquisition is best. Ultimately, it’s a case of weighing up your options and making the decision that’s best for you. Additionally, some might consider the option of a halfway house – buying a small amount of private goodwill as a merger, and then moving into practice in order to build a platform. Likewise, there’s the possibility of buying a small NHS contract, moving that into a squat practice, and gaining the benefits of guaranteed footfall and little to no advertising costs for being featured on the NHS website.