Starting blocks

Entrepreneurship is something they don’t teach you in dental school. Yet the majority of dentists will, at some point in their career, branch into private practice. Of those, up to a quarter won’t survive the first precarious years of trading, as cashflow problems or poor marketing skills take their toll.

The number of dental clinics springing up across the Gulf is testimony to its fertile business climate. A mix of ingredients including a growing population, an increased focus on health, and the popularity of the Hollywood smile means the time is ripe for dentists considering a new venture.

Making the right decisions from the start can help to minimise obstacles in the future. Here, MED explains how to sidestep the pitfalls and get your teeth into practice.

The best laid plans

Starting a small business in the Gulf can prove challenging. As well as the constantly shifting legislative landscape, fluctuating investment rates can prove fatal.

Even the soundest financial planning can go awry, but a fundamentally solid business plan provides some protection against economic variables.

Due diligence is a must, and the advantage of catalogued local knowledge can’t be underestimated.

To gather market intelligence, Dr Linish Sagar, director of Dubai’s Noa Dental Clinic suggests prospective practice owners carry out a full feasibility study.

This is not, he underlines, a replacement for a business plan, but can be helpful when pitching for financial backing.

“The study evaluates all of the potential pros and cons of the dentist’s business plan, illustrating areas where the plan will work and those areas it won’t,” he explains.

Points to review include; is there a market for your clinic? What are the risks involved? What skills do you need to run your practice? What resources do you need? What alternatives are there to starting a clinic?

Inevitably, problems will crop up as a result of the study. Dr Maximillian Riewer, proprietor of the Dubai Sky Clinic, insists that any business plan must be flexible enough to accommodate these problems.

“You should be really open-minded. For instance, you want a ready patient base but its worth considering setting up somewhere still under development. In two to three years it will be packed with people. It is always a big advantage if you’re the first practitioner in an area.”

For those with limited local knowledge, there are many companies based in the region that will take on the job of delivering a feasibility study. In Dubai alone there are around fifty such organisations appearing on the emirate’s department of tourism and commercial marketing website.

“Considering the number of clinics currently in the area,” Sagar notes, “it is even more imperative these days to analyse the market.”

The money mile

The primary point of your business plan is how you plan to finance it. You may plan to fund your clinic yourself, enlist the help of friends or family or apply for a bank loan. Regardless, be clear about your financial targets for the first, fifth and tenth year of practice.

“When you are starting a clinic you should be very focused about the financial goals you want to achieve,” says Farrukh Zain, ABN Amro’s head of business banking in the UAE. “It is very important for the banks to know that you have considered financial advice when starting your clinic.

“You need to be able to show what you expect your costs to be and the variables that will affect the growth of the business.”

With any new business, the biggest costs are start-up expenses. Feasibility studies, licensing fees, business plans and real estate costs will mount up. Further down the line there will be designers and equipment suppliers to be paid.

“You always start with a certain figure and it nearly always comes in at a much higher amount when the project is completed,” admits Dr Linish Sagar. “More often than not the market rates will change.

“You’re looking at around the AED1m to 1.5m mark (about US$272,000 to $408,000) to cover everything for a two chair practice.”

In the United Arab Emirates (UAE), another source of finance can be found in an Emirati partner. Under UAE law, any business setting up outside a free zone requires a national partner. This partner owns 51% of the business.

The structure of the clinic then dictates whether it is registered as a joint venture, or a limited liability company. Securing the right kind of partner is key to the success of this approach, warns Dr Riewer.

“If you’re lucky, you’ll find an affluent partner who will not interfere with the business,” he says. “A partner with no dental background, that has designs on running your business affairs will not be the right choice.”

But find the right partner and it can be a real boon. “The sponsor can be very supportive financially. They can also provide useful contacts, such as legal advocates, regulatory officials and the like.”

For full ownership, dentists can look to free zones. These zones allow full ownership, and complete repatriation of profits, but typically have high start-up costs.

A third option is to have your clinic set-up by a UAE national, and sign court documents to attest actual ownership is retained by you. This type of agreement normally involves paying your partner a regular, agreed sum of money.

Regulate to accumulate

Keeping pace with the latest local regulations is one of the toughest challenges of practice. Certain Gulf countries have a reputation for Byzantine laws and guidelines, but there is a lot of health authority reform taking place.

“It is getting much better,” says Dubai-based Sagar. “The Ministry of Health here is trying to improve and standardise the whole system so that in the future dentists will not have to go through what we have had to.”

Experts agree, however, the earlier you can start the process the better.

Among the many things that require input from the ministry are; permission to open a clinic, getting the business licensed, adherence to building regulations and arranging contracts for the safe disposal of hazardous waste.

“The whole legislative process should be done during the time the clinic is being designed and put together,” suggests Sagar.

“It will take a month or two to wade through the red tape when you have the location, infrastructure, designer and approvals in place.”

Riewer, whose 21st floor clinic faced more regulatory and legislative challenges than most, is pragmatic about the process. “The licensing process is not impossible,” he advises. “It takes a lot of patience but if your application is correct, detailed and clear, the problems should be minimal.”

While patience is a virtue, Riewer adds that enrolling the help of an Arabic speaking colleague can be a priceless commodity when navigating red tape. “Your life will be much, much easier,” he says.

“It will help you to understand all the processing, how it works and the time it will take to get from A to B.”

“Everything works differently in the Middle East. You shouldn’t expect that everything will run smoothly but…just be patient.”

From a financial perspective, it is wise to stay ahead of local government policy. Moves to widen access to healthcare, or to tighten regulations can have an impact on your business plan.Abu Dhabi and Dubai, for example, have recently introduced mandatory health insurance and there is still some confusion as to whether routine dentistry will be included in these plans; potentially offering a new revenue stream to dentists.

Location, location

Where you choose to set up shop can impact on every part of the process of establishing a practice.

Picking the right location is crucial, and the decision should be based on hard facts – hopefully unearthed by the feasibility study.

Factors such as existing dental services, client demographic and property options are all key considerations.

“It is very important to know what you are looking for to start with,” notes Sagar. “Have an idea of what you are trying to achieve in terms of your clinic and the demographic you are going to serve.”

Potential practitioners should understand their target segment and work backwards from there. “It will influence the choice of staff, the clinic’s location and the financial projections in the business plan.”

One of the biggest costs is property. With the nature of the real estate market in the Gulf, the choice to rent, buy or build can be critical. Serious funding is required to develop a purpose-built clinic, while buying an existing property and converting it can bring its own problems.

Rents are famously high in certain parts of the region, depending on geography and specification of the property. Riewer, who is currently in the process of buying his second clinic, suggests that any new dentist on the block takes time to consider the options.

“My advice would be to rent at first, especially if they are new to the market,” he says.

“It means that you can analyse the market and see where you stand without a massive financial commitment.” If all goes well, a move to a larger, purpose built practice later down the line can be used as a positive marketing tool.

Another option is to buy out an existing clinic. The high number of expats dentists in the market makes it more likely some will opt to pack up and head home.

The benefits of this option include an almost immediate income, minimal outlay on equipment and staff, and a ready patient base. On the flipside, you also inherit the clinic’s reputation – good or bad – and may struggle to put your own stamp on it.

When the hunt is on for the right clinic, Sagar believes it is good practice to spread your options.

“You need to have a shortlist of two or three spaces, because you have to get your facility approved by the authorities. Only once you have that approval can you actually start to get the ball rolling.”

Next steps include recruiting an interior designer to plan out the clinic, finding the right contractors to make the crucial modifications for ventilation, drainage and waste removal and sourcing the dental equipment that needs to be installed.

However, making the necessary clinical changes to the property can be a source of great frustration, warns Riewer. “It is likely that there will be construction delays,” he laments. “It is something that you cannot calculate, but can hit you very hard.”

“I suffered a one year delay when trying to get the Sky Clinic off the ground.”

On steady ground

Launching a practice requires good planning, patience and a measure of luck. The importance of seeking out good business and financial advice cannot be stressed enough. The Middle East, while potentially lucrative, can be a tough market if your business plan proves leaky.

Next month, MED reviews the tools needed to navigate the property market and likely hurdles on the design, planning and construction track.