Whether you currently own a dental practice, or are aspiring to own your own practice, financial preparedness can keep you from facing some major bumps in the road as you go along.
Last July, Dental B School published an article on 7 Steps to Financial Preparedness when Buying a Dental Practice, which set out to help those aspiring to own their own practice plan out their finances, but what happens after you purchase a dental practice? How can you ensure that you set yourself and your practice up for success financially and avoid going under?
As a follow up to our July article on financial preparedness when buying a dental practice, Dental B School wanted to make sure that current dental practice owners are also financially prepared – which is why we’ve listed out 7 Steps to Maintaining Financial Preparedness for Dental Practice Owners. Have a look:
So, you’ve bought your practice, have things more or less set up and running – perhaps you’ve even created a budget for moving forward. However, one thing to keep in mind is that things change all the time. Clients come and go, which leads to revenue ebbing and flowing. Equipment maintenance, upgrades, new technology – that all costs money and isn’t always something taken into account when budgeting.
By conducting periodic reviews every quarter or even every six months, you can keep a better eye on cash flow. If your cash flow ends up being a negative number, you’ll want to identify areas that would help you bring it back to a positive number:
- Reduce monthly spending
- Increase monthly revenue
Once you’ve conducted your review and have a comprehensive understanding of what your dental practice’s cash flow really is, you’ll want to sit down and define your goals. Conducting those periodic reviews is a necessary step to understand how to accomplish your goals. You won’t truly know how to accomplish your goals without understanding where you are and where you came from financially.
Having goals without a specific timeline is just a dream. So, you want to accomplish X, Y, and Z, but when will you accomplish them? Remember to include this crucial piece of information when determining your dental practice’s goals.
Have you ever heard the saying that risk and financial gains are like yin and yang? They simply go together. However, economic and other factors may cause volatility, hence the risk. Investing in a new, cutting edge piece of technology could greatly benefit your practice however, always conduct your research to determine if it’s the right fit for you practice.
You’d have to be living under a rock to have not heard the saying “time is money.” Too often, dental practice owners, really professionals everywhere, devalue their time by either not charging what they’re worth or feeling like they need to give away free services to maintain their patient deck and/or to bring in new patients. While you shouldn’t over charge for your services, bear in mind that a lower cost may mean that people will assimilate that lower cost to you providing a lower quality of services – even if that couldn’t be further from the truth.
Insurance is your friend. However, protecting your assets isn’t just about having insurance. It’s about ensuring that your dental practice is in compliance with all federal and state regulations. Just like you should conduct a periodic review of your finances, you should also be conducting periodic reviews of your policies, mandatory training, etc. to ensure that there are no gaps there that could result in being on the receiving end of some pricey fines and/or lawsuits.
Once you have a clear understanding of your dental practice’s cash flow, you should take the time to create and/or review your practice’s budget. Are there areas that need to be tightened up? Is there something – such as a new piece of equipment – that you’d like to save for? A budget (and periodic reviews) can help you stay on track to meet your financial goals and prepare you for long term success.
To really be financial prepared though, it takes more than just having a budget… it means sticking to your budget and conducting those periodic reviews.
It’s easy to look at your colleagues and think “man, that was avoidable” when a mistake happens. It’s not as easy though when it’s your own practice and you’re wrapped up in so many other things that the wrong thing slips. Taking lessons learned from other dental practice owners and applying them to your own dental practice can help save you both time and money on correcting some costly mistakes.
While you could always hire a financial advisor to help you with all of this, that’s yet another cost that you’d need to budget for. If you’re considering working through your practice’s financial preparedness on your own, check out Dental B School’s collection of free resources. And if you still need a little more help along the way, we’re here for you. Schedule your strategy session today.