Page 104 - The Dental Entrepreneur

The Dental Entrepreneur

to you because there is a huge amount to learn after graduation. One of the most important
concepts is that of practice profitability. Just how profitable is dentistry? The following section
on profitability and money management should be read daily for a minimum of 30 days. These
principles must be etched in your brain.

PRINCIPLE #1: Collections – Overhead = Profit

The first equation is fairly simple. Notice how I use the word collections and not production. I
really don’t care how much dentistry you produce. It is what you collect and deposit into your
business account that has any value. Do not make calculations and projections off of your
production figures. That can get you into trouble in a hurry.

PRINCIPLE #2: Profit – Taxes = True Net

Taxes are a huge reality in life and I am confident that 99% of new graduates do not know that
they are probably in the 40 to 50% tax bracket shortly after graduation. For the sake of a
conservative conversation lets say 50%. It’s a blend of potential federal, state, social security,
Medicare, self employment, and probably a couple other hidden taxes.

How Does This Apply To Dentistry?

In dentistry, your total overhead in the average office today is probably 70%. So in this
example, for every $100 you collect in your practice, you have a profit of $30.

Collections - Overhead = Profit

$100 70% $30

But Profit - Taxes = True Net

$30 50% $15

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