How Reinvesting in Your Dental Practice Boosts Growth

April 15, 2024

At a glance

The main takeaway: Investment decisions around improving your dental practice’s technology and equipment are not made solely for tax benefits; rather, this kind of cash flow decision should drive revenue.
Impact on your business: By considering tax impacts and strategically allocating resources back into your practice, you can position your dental practice for long-term growth and profitability.
Next steps: Contact Aprio’s Dental team to discuss practice optimization strategies that can elevate your dental practice.

Schedule a consultation with Aprio today

The full story:

A dentist’s biggest portfolio investment is often their practice and caring for the business/financial side is as important as caring for your patients. Having the right technology and equipment can be more than a simple financial decision, but an investment in the future of your practice. Whether increasing top and bottom lines with operating efficiencies, attracting new talent to your team, or setting up for a future buyer, preparing your practice with the right financial and operational structure is crucial for success.

Reinvesting in your dental practice means strategically allocating resources back into your practice: upgrading equipment to attract and retain new patients, investing in advanced technology, expanding procedure offerings, or attending trainings to improve your practice. It reinforces you to stay competitive and thrive in a dynamic field, emphasizing your commitment to providing excellent dental care.

But how do you strategically invest back into your practice? Should you invest in practice improvements such as marketing, equipment upgrades, industry training, or physical property renovation/expansion?

Practice investments should generate income to fund other areas of dentists’ personal and professional lives.

Be Purposeful on Where You Focus Your Dollars

When we work with dentists, we often recommend that they focus on investing in four key areas of their business:

Patients: Look at the net new patients and ask them what they are looking for in a dental clinic or practice. Get to know your patients and review the demographics.
Payors: Think about how to invest in your practice to strengthen your payor mix to improve profitability Accept that the type of patient you are attracting will often dictate the mix of payors in the practice.
Procedures: Set goals such as studying new dental courses, expanding outside of your comfort zone, and learning what your patients are seeking in a dentist can significantly impact the financial results of your practice. With the proper mix of procedures in your practice, the ability to grow revenue increases as the right patient with the right payors choose you over other dental providers. Consider what procedures you currently refer to other dental professionals and what procedures might you keep in-house.
People: Keeping and attracting the right people in your practice is an investment. When you invest in your culture, you invest in your people, and they become one of your key marketing tools.

When the right people are with you, they begin to promote you to the right patients, and when those patients come, they bring the right payors, and those payors will be glad to pay for the procedures you perform.

Dental equipment is a significant investment, but tax deductions can help ease the burden. The I.R.C. Code Section 179 represents the concept of “depreciation” expense deduction. It allows you to deduct the full cost of qualifying dental assets — the date the asset is placed into service determines the tax year for the deduction. It must also be placed into service to gain the deduction, and for the year 2024, the limit is $1.22 million.

Remember this: you should not make investment decisions solely for the tax benefit. The tax benefit is one of the key aspects of making an investment. Make an investment because it generates revenue across many years. That’s how an investor thinks. When it comes to the dental practice, we think about the production per patient.

Basic Formula for Practice Revenue (Collections):

Patients x Production x Collection Rate = Collections You can drive up production per patient by improving diagnoses, expanding procedure offerings, and enhancing case acceptance. Additionally, you can increase office revenue by expanding office production capacity and minimizing vacant office space.

ROI is the profitability of an investment.

In terms of investment cash flow, ask yourself this: What income can you attribute to the investment you are making in equipment and technology?

Consider the following collections from:

Expanded procedure base
Increased patient volume
Procedures previously referred to specialists
Increased efficiency and ergonomics
Increased case acceptance
Improved diagnoses

The bottom line

It’s important to create a multi-year plan for reinvesting in your practice. Bring your territory rep and equipment specialist into the conversation and talk about the necessary changes and what to prepare for in the upcoming years. When you make the investment, you’re not just getting the tax deduction; you’re also getting the revenue, and that’s the bigger number. The sooner you make the investment, the sooner the practice grows.

Grow your dental practice with Aprio’s Dental Team today and learn more about our services. We are the single-source growth partner for dental practices of all sizes.