How Close is Too Close

Competition Analysis For Practice Placement

How Close is Too Close?

Competition Analysis for New Practice Locations

Hello and welcome to The Perfect Place to Put a Practice podcast. My name is Mike Green from Doctor Demographics, and I want to extend a warm welcome to our listeners, especially those who have recently joined us. We've been making an effort to be more consistent with our episodes, and I remain committed to that promise. If you're listening to this podcast, thank you! However, you might be missing out on the full video version, which includes a presentation that could make it easier to visualize the concepts we discuss. You can find the video version on our website, doctordemographics.com, under the blog section, as well as on YouTube, LinkedIn, and Twitter (X). If you’re listening during your commute, I appreciate you tuning in.

Today, we’re tackling an important question: How close is too close? This is a common concern for practice owners assessing competition when choosing a location. We receive inquiries daily from professionals wondering whether the presence of nearby competitors should deter them from selecting a particular area. Should you look elsewhere if there’s competition around the corner or just a few miles away? The short answer is: it depends. Your tolerance for competition, your marketing strategy, and your approach to positioning your practice all play a role in this decision.

National Benchmarks for Competition Analysis

At Doctor Demographics, we use various benchmarks to help determine whether a location is a good fit for a new practice. While there are many factors involved, a simplified approach considers population-to-provider ratios. If you are a general practitioner—such as a dentist, optometrist, or veterinarian—there should ideally be a population of 1,500 to 2,500 people per provider. If this ratio falls below 1,500, we analyze other factors such as population density and business concentration. Conversely, if the ratio exceeds 2,500, we investigate why there is a lack of providers. Is it due to market saturation issues, failed practices, or is the area experiencing rapid growth?

For specialists, the evaluation includes the number of potential referring providers in the area. Ideally, a specialist should have about 20 potential referring providers per practice. However, in densely populated and highly competitive areas, this number might be lower, requiring a more aggressive marketing strategy.

Key Demographic Considerations

When assessing competition, several demographic factors should be considered:

1. Population Density – High-density areas can support multiple practices, but it’s important to analyze whether the density is due to residential or commercial activity. In 2025, we’re seeing a shift back to in-office work, which impacts daytime population numbers.

2. Population Growth Trends – Historical and projected growth patterns reveal whether an area is expanding or stagnating. Major employers moving into an area can dramatically shift demographics and market potential.

3. Age Distribution – The age composition of a community affects the demand for different types of practices. Are young families moving in, or is the area attracting retirees? Understanding these trends helps practices tailor their services accordingly.
   

4. Income Levels and Insurance Coverage – While we don’t have specific insurance data, we analyze income segments to estimate whether an area leans toward fee-for-service, insurance-based, or Medicaid-dependent practices.

Competition Analysis

In addition to demographics, it’s essential to evaluate the competitive landscape:

1. Number of Nearby Providers – While the 1,500–2,500 people per provider benchmark is useful, each area has unique dynamics.
   

2. Competitor Strengths and Weaknesses – Understanding how competitors market themselves can reveal opportunities. For example, in states like Texas, Arizona, and Utah, practices are highly competitive and invest heavily in marketing. In contrast, some California markets may have less aggressive marketing, creating opportunities for new entrants.

3. Services Offered – Identifying gaps in existing services (e.g., pediatric dentistry, cosmetic procedures) allows new practices to differentiate themselves.
   

4. Reputation and Facility Quality – The state of existing practices matters. If competitors operate in outdated or poorly maintained facilities, a new, modern office can attract patients.

Location and Accessibility

Selecting the right location involves more than just demographics and competition. Factors such as visibility, foot traffic, parking availability, and accessibility via public transportation can significantly impact success. High-traffic locations near major retailers like Costco or Whole Foods come with higher costs but also increased exposure. Conversely, practices in less visible areas must compensate with stronger marketing strategies.

For referral-dependent practices, proximity to referring providers is crucial. Studies indicate that 35% of referred patients never make it to their referred provider, so ease of access is key.

Differentiation and Competitive Edge

In competitive markets, differentiation is essential. Your unique selling proposition (USP) should clearly define what sets you apart. Whether it’s a specialized service, a unique patient experience, or advanced technology, identifying and marketing this differentiation is critical. Investing in branding, a strong online presence, community outreach, and referral programs enhances competitive positioning.

Business Considerations

Finally, economic factors must be analyzed:

1. Lease vs. Purchase – Deciding whether to lease or buy depends on long-term goals. Some practices outgrow their initial space quickly, necessitating flexibility.

2. Marketing Budget – Marketing costs vary by region, typically ranging from 1.5% to 5% of gross production. More competitive markets require higher investment.

3. Break-even Analysis – Verifying financial projections before purchasing a practice is essential to avoid overestimating patient volume.
   

4. Referral Relationships – For referral-based practices, understanding the local network is key. If referrals are scarce, direct-to-market strategies become more critical.

Conclusion

There are numerous factors to consider when evaluating competition and choosing a practice location. Each market presents unique challenges and opportunities, and what works in one town may not apply elsewhere. At Doctor Demographics, we specialize in helping professionals navigate these complexities. If you need assistance with site analysis, demographic reports, or unbiased advice, visit DrDemographics.com or call 844-744-5349.

Thank you for joining The Perfect Place to Put a Practice podcast. I’m Mike Green, and I look forward to seeing you in the next episode!