YOU NEED TO ASK
There is a very simple calculation, which is a handy rule of thumb:
“for each surgery you need to allow
a total of 40 sqm of floor space”
Each surgery itself is only 12 sqm to 15 sm, but when you add in the share of reception, waiting, steri, corridors, staff room etc.; this is what it come to and it is sufficiently indicative when you are looking for suitable space
If you want an OPG, internal staff WC, practitioners offices, lab act, you may need more. Saving on space by making rooms doubling up as access to other rooms is poor solution. The further rooms rarely get used as it gets a bit annoying to have someone come through your work space.
COST & FINANCE
Please call for to speak to one of our project consultant who will be able to provide a cost estimate based on your requirements. The projects success will ultimately come down to 2 factors:
1. Getting the funds and a realistic budget
2. The right design so the practice works well and feels great The cost of the project and your ability to borrow can be neatly tied together in the one exercise. It’s called a ‘feasibility report’. You need to do it for your own peace of mind; your banker will pick it up and run with it.
The cost of fitout will depend on the size of your premises. Although the quality has an effect on the cost, it is a small component. The big costs are electrical, plumbing and joinery. These three items will account for about 75% of the cost. The actual cost per sqm to fit out will include walls, internal doors, flooring, lighting, joinery, painting, air-conditioning, but not external fittings like shop front window or signage, nor dental or office equipment, nor loose furniture, artwork or decorative items. The
cost for fitout per sqm varies from $2,000/sm for larger premises to $3,500 sqm for smaller premises.
Before you start talking to a banker, prepare a budget sheet with the following headings and refill them as the quotes get more accurate:
2. Dental Equipment 3. Office Equipment
4. Loose Furniture, Decorative Items and Artwork 5. Marketing and Advertising
Your application to the bank will be judged for your accuracy in estimating your budget as much as your credit-worthiness.
Your next step is to work backwards from your expenditure budget. You have your budget from the 5 lines above, your banker or specialist health finance broker can give you a leasing cost per annum. This figure should be no more than 6% of your gross patient fees. For instance if your lease repayments are $50,000 pa, you need a practice turn over of $830,000 to support it. You may not have that turn over on day one, but your practice will need to be able to achieve that when you are fully booked.
The next step is to estimate your income from the number and type of practitioners. If you have 2 chairs, with yourself using one and a hygienist/therapist using the other then your gross when fully booked could be:
Dentist $600,000 pa Hygienist $300,000 pa Total $900,000 pa
This shows that your gross justifies the project expenditure, which will cost $81,000 pa to service. The same can be done with rent, it should be around 6% of your gross, so on the above gross the maximum you can afford to pay in rent is $54,000 pa.
The final step is to create a projected profitability sheet for the first 5 years. It’s easy to do with Excel or any computer spread sheet. There are just 8 lines to fill and there are established ideal expenditure percentages that allow you a fudge factor:
Ideal % INCOME
100.00% Gross Receipts 8.00% Less Lab Fees
Net Receipts Less Expenses 36.80% Dentists pays 16.50% Staff
2.00% Services & General 6.00% Rent*
9.00% Fitout/Equipment> 1.00% Marketing 8.50% Admin >
The first column should be for your current year if you have a practice, if you are starting out, then your estimated gross for your first year. Then add columns for subsequent years and add 10% to 15% growth each year. If you have chosen a good location and you have good communication skills this is very achievable. The final (5th) column
should show the maxed out income for the number of chairs. So the feasibility has 4 stages:
1. Expenditure budget for fitout and equipment 2. Mortgage/Lease & Rent structure
3. Income from practitioners 4. Financial Projections years 1 to 5
* An example of a feasibility/costing/income/finance/profitability projection is attached at the end of this document
An explanatory note for the 6.2% profit: this is what you get as the return on your investment, which is the reason you would attempt to be self employed in the first place. It is reward for taking a risk and for running the practice. It may seem a small return
It is further more the basis for establishing a valuation of the practice should you consider selling or allowing an associate to buy in.
OF THE PREMISES &
Only you can decide if the location of a potential site is right for you. It is your first business decision and one when taken, is irreversible. The building has to be the right size, reflect the demographic you are serving, have good visibility and easy parking. In the end it has to ‘feel right’ to you. You need to be able to visualise your self in the premises, proud of your practice, seeing your patients comfortable and relaxed. The design always looks easy. We have seen many back-of-the envelope sketches that look workable at first blush. Don’t rush into it, as there are more factors to take into account than what initially appears. For example the location of reinforcing in a concrete floor will restrict where core-holes can go for waste pipes. Dividing walls can’t be placed in the middle of windows, the internal walls should run along the lines of the ceiling tiles (its called a Reflected Ceiling Plan), the location of the services stack in the core building can effect the location of waste pipes and drainage distance to the chairs.
Use a design professional and some one who has lots of experience. It costs the same to place a wall in the wrong place as putting it in the right place. And you wont know the difference until you work in the practice for some years. Many architects will not have experience in designing healthcare space as it’s a specific sub-speciality. Just like orthodontics or endodontics. A trained professional will see options you might not.
If you still want to design it yourself start off by drawing it to scale. A scale rule of 1:100 or graph paper allows you to see the actual proportions and correct lengths. Include the thickness of the walls (usually 100 mm), mark in the position of the windows including their height from the floor, bring a compass with you when you measure up and mark North on your plan. Mark where your water, power, data, air-con is in your site. The design has to allow for traffic flow, width of corridors, lines of site and privacy. The practice needs to have 3 principal contiguous areas:
1. Public – waiting room, pt WC 2. Clinical – surgeries, steri, OPG, lab
3. Private – staff room, practitioners office, store, utilities, admin Finally the colours need to form a complementary palate that builds as you move from room to room.
It is always surprising how long it takes to complete the project. Negotiating a commercial lease often takes 3 months. They are a lot more complicated than residential leases. Once a lease is signed the project on average can take 5 months from commencement to seeing your first patient. That includes design, council approval, construction, dental installation and moving in.
Don’t rush the design stage. Give your self the luxury of understanding how your practice will look, feel and work. Be prepared to go through an emotional roller coaster during construction. The rooms will look too small when they are marked out on the floor, by the time the walls go in, the rooms will look too big. This will see-saw several more times during the process. Trust your designer, making sudden changes during construction rarely improves the final result and can cause the cost the sky rocket with variations.
The rule of thumb is that there are 3 factors at play: 1. Time
2. Cost 3. Quality
You can squeeze any two of these, but they will affect the third. You may have a tight timetable, but that may mean the cost will go up and the quality will be compromised. You may have tight budget, but you won’t be able to build quickly or with quality. Most practitioners would love to have a low budget, tight timetable, and fantastic looking practice. Be realistic about the effect of the compromises you need to make.
& CAR PARKING
Councils don’t care what sort of dentist you may be. They don’t take into consideration community need or jobs you will create. Their only legal requirement is to make sure that the town planning laws are enforced. The laws vary from state to state but there are always two types of codes.
1. Local Environmental Plans- LEP 2. Draft Control Plans
The first is approved by the state government and is not negotiable. It covers zoning and what you can do in each zone. If healthcare use is not permitted in your zone, there is no point arguing with your local council; they don’t have the power to make an allowance for you. The second is negotiable, but the complicating factor is there are lots of DCP’s. One for car parking, another for disabled access, still another for signage. Usually your council can provide a certificate that states every “instrument” which applies to your site. Even then it’s a minefield. Engage a consultant town planner or alternatively our designers are experienced in these areas.
The number of car spaces required is calculated by the number of surgeries or the size in square meters or the number of practitioners.
Each council has its own methodology, but it basically always works out to 2 to 3 car spaces per surgery. Some councils allow you to pay a one-off levy in lieu of providing spaces. It may not be commercially realistic not to provide sufficient spaces for your patients.
The trigger for requiring council approval is what is known as a “material change of use”. There are a number of categories of uses, some common ones are:
- office - retail - commercial - warehouse - vet - healthcare - workshop - restaurant
This means if the previous tenant used the premises for anything other than healthcare, you are faced with a material change of use and need council approval.
Older buildings rarely have sufficient car spaces as requirement have increased considerably over the past 50 years.
JOB Dental State NSW Frenchs Forest Client Consults 4
Date sm 160
1 SUMMARY OF ESTABLISHMENT COSTS TOTALS EX GST
1. Interior $/sm NLA sm
Design &Fit out Costs/sm $2,400 160.00 $384,000 Furn $15,000 $15,000
Deco Items $5,000 $5,000 $436,000 2. Exterior Unit cost
New entry Bay window paint
Car park upgrade $125,000 D & C Prelim Total $561,000
3. Dental equip new surgeries 3 $150,000 materials $35,000 OPG Install chairs $7,500 $192,500 4. Office
Computers & IT $3k/site $35,000.00 Phones $3,500.00
printer/fax/scanner $1,000.00 $39,500 Equip & Office $232,000
TOTAL BUDGET $793,000
2 MORTGAGE AND LEASE STRUCTURE
1. Dental Practice Costs Lease Cost 9% Lease 5yr/10% Fitout Lease $561,000 $127,908
Equip Lease $232,000 $52,896 Total $793,000
Rent Rent $/sm/pa $386 $61,760 Equip. Lease & Fit Lease $180,804
3 GROSS FEES
1. Gross Required # Gross /mth Rent 6% $61,760 $1,029,333
Fitout & Equip Lease 9% $180,804 $2,008,933 $19/$1000 2. Dentists/hygienists days/yr Princ. Dentist (PD) 1 $715,000 $3,250 220 Employ. Dentist (ED) 1 $550,000 $2,500 220 Hyg/Therep. 1 $286,000 $1,300 220 Practitioners 3
Max Gross Production $1,551,000
4 DENTAL BUDGET
Ideal % Based on: Yr 1 Yr 2 Yr 3 Yr 4/5 100.00% Gross Receipts $500,000 $700,000 $1,133,000 $1,551,000 8.00% Lab Fees $40,000 $56,000 $90,640 $124,080 Nett Receipts $460,000 $644,000 $1,042,360 $1,426,920 Expenses 36.80% Dentists pays $ $184,000 $257,600 $416,944 $570,768 16.50% Staff $82,500 $115,500 $186,945 $255,915 6.00% Material $30,000 $42,000 $67,980 $93,060 2.00% Services & General $10,000 $14,000 $22,660 $31,020 6.00% Rent* $61,760 $64,230 $66,800 $69,472 9.00% Fitout/Equipment> $180,804 $180,804 $180,804 $180,804 1.00% Marketing $5,000 $7,000 $11,330 $15,510 8.50% Admin > $42,500 $59,500 $96,305 $131,835 6.20% Profit $(136,564) $(96,634) $(7,408) $78,536