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Decisions, Decisions by Steve Owens

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Buy vs. start up? Pay cash or finance? Lease or purchase? The list of decisions for new practices goes on and on.

When analyzing whether you should buy or lease your space, all things need to be considered. Purchasing will involve an architect, real estate broker, contractor, banker, designer, accountant, attorney and others who can help navigate your decisions. You then become responsible for 100 percent of the liability, costs and management issues. Ortho-specific improvements are expensive and as the owner, you’ll pay 100 percent. Oftentimes, when leasing, you or your advisor can negotiate a portion of your improvements paid by your landlord. It’s important to understand that your debt will be paid down over a 20- 25 year period. This means owning your space is a long-term investment.

Yes, the improvements give a nice tax benefit, but proper planning is critical as to the timing of the tax deductions. If production and overhead are neutral by the decision, then buying is the way to go. By purchase, you are building equity in real estate, diversifying your assets, and creating wealth, but, it’s a long-term strategy. That’s the caveat. You have to be there long term. The other question is market value of the property, which currently seems in the favor of buyers. And finally, what about selling? Ideally, you’ll sell your practice and building to the same person, but it’s difficult for the buyer to qualify for both simultaneously. So, you’ll sell the practice first and collect rent for a time until the buyer is qualified for the building purchase. Or, if you have a good tenant, the building remains an asset collecting monthly rent during retirement.

Leasing, however, is not a bad decision. If you’re profitable with a great location, and if you’re far along in your career, I wouldn’t be too anxious to uproot and spend hundreds of thousands of dollars just to own.

Another key decision orthodontists face is spending. Orthodontists are great entrepreneurs – marketing, vision, delegating and hard work are in your wheel house of comfort. However, monitoring spending and budgets are more difficult. As the business owner you are ultimately responsible for the spending. This is a concept better learned early in a career, but it’s never too late. It’s particularly important to monitor two key areas: staffing and marketing. Staffing costs should not exceed 22-24 percent of collections and marketing three to five percent.

Overall, business spending is healthy at 57-60 percent of collections, 51-56 percent is very good and 50 percent or below is outstanding. Above 60 percent (this excludes doctor pay and debt service) is problematic and more monitoring is needed. Having a handle on business and personal spending shows planning, discipline and respect for the hard work and effort it has taken to get to where you are in your career.

Finding the right space for your practice and monitoring your spending are two decisions that can truly impact your practice and quality of life.

Author's Bio
Steve Owens is a partner at Owens & Bondell PLLC which provides accounting, tax and business consulting services to hundreds of dental practices. They help doctors organize and analyze their numbers in addition to providing proper tax and business planning services. They are a founding member firm of the Academy of Dental CPAs (www.adcpa.org). Steve can be reached at 602-995-0081 or slowens@obcpas.com.
Orthotown Magazine
September 2025
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