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News Bulletin : ADA News Bulletin November 2011
37 NOVEMBER 2011 STARTing UP A PRACTiCE Choosing practice structures and business plans practice management Compiled by Andrew Chen One of the most important steps when starting a dental practice is the preparation of a business plan. A business plan focuses your mind on what matters to the success of your practice. It’s very much like a road map in that it shows you where your practice is at, the destination you want your practice to reach and the strategic route to get you there. The benefits a business plan will give include a greater understanding of your dental practice ‘business’, stronger basis for day-to-day control and operations, and the provision of a picture for the future direction of your practice. Where are you now? Destination: where do we want to go? Planned strategic route: how will we get there? THE 10-STEP PROCESS The best business plans follow this 10-step process: 1. Know the type of dental practice you want to run; 2. Determine the target market for your dental services, e.g., by geography, specialist services, patient types; 3. Establish what services your practice will provide; 4. Prepare a SWOT analysis to assess your strengths, weaknesses, opportunities and threats; 5. Decide where you want your practice to be in three years – this is typically referred to as your ‘vision’. 6. Examine the key issues facing your new practice; 7. Identify key strategies to get your practice where you want it to be; 8. Develop action plans comprising tactics to achieve your strategies; 9. Assess likely outcomes and set achievable targets; and 10. Prepare financial budgets and cashflow of funding requirements. WHAT ARE STRATEGIES? Strategies are broad statements about how you are going to achieve a given objective. They need to focus on: • Quality of patient care; • New or repeat patients; • Staff resources and support; • Operations – technology, equipment, communications, premises, insurance, banking, accounting and practice management; and • Financial – funding and practice business structure. YOUR PRACTICE STRUCTURE Choosing an appropriate business structure is a fundamental decision when you start your practice. Getting it right is essential. All sorts of financial and tax consequences can arise if you choose the wrong structure and decide to change it later. TYPES Of STRUCTURES An effective practice structure is one that is flexible, adaptable and scalable. The legal entity chosen must be appropriate for the business model of your practice. The most common entity structures are: • Sole proprietor practices; • Partnerships; • Companies; • Trusts. There are a number of factors that will influence your choice of practice structure: • Protection of assets and income; • Ease of entry and exit; • Funding requirements; • Flexibility to allocate income; • Wealth creation; • Setup and maintenance costs; • Access to cash; • Tax effectiveness; • Personal tax preferences of practice owners and their families. For your practice to grow, and for you to effectively manage your practice both operationally and financially, it is important to invest time in developing your business plan and strategic initiatives, and to have an appropriate structure in place. Andrew Chen is a Principal at Crowe Horwath. He specialises in improving financial and taxation outcomes for dental professionals and professional practices. Phone: 02 9619 1626; or email: firstname.lastname@example.org Readers should not act only on the basis of material obtained in this newsletter because the contents are of a general nature and therefore do not take into account each person’s individual circumstances and may be liable to misinterpretation. Do not act upon any of the information contained within this article without first obtaining specific advice from a tax advisor. Crowe Horwath assumes no obligation to update this publication after it has been issued. Whilst every effort has been made to ensure accuracy, information contained may not be complete, may have changed or may not be relevant to, or appropriate for your circumstances.
ADA News Bulletin October 2011
ADA News Bulletin December 2011