Rise or Fall: 4 Ways to Make Your New Dental Practice More Profitable

April 24, 2023

At a glance

  • The main takeaway: The first five years of a business’s life are crucial to its viability — and for dentists in particular, the road looks different depending on their unique situation.
  • Impact on your practice: To increase and maintain profitability, dental practice owners should know key numbers to track across practice segments, understand their people’s needs, know their realistic capabilities and prioritize forward-looking planning.
  • Next steps: New practice owners can work with industry-specific advisors like the team at Aprio Dental and lay the building blocks for long-term growth and success.

Contact an Aprio dental advisor today

The full story:

No matter how prepared they are, dentists face several opportunities and challenges during the first five years of owning their practice. Whether it is growing their patient lists, learning how to be a manager or finding the right equipment, the learning curve can be steep, especially for first-time owners.

On top of these tasks, practice owners are also concerned with mastering an even bigger feat: growing and maintaining profitability. When we discuss profitability goals with our clients at Aprio, we often focus on the areas that have the most potential for growth, including patients, payers, procedures and people.

By viewing your profit-generation activities through this lens, you can steadily achieve your goals and benchmarks. Here are four profitability-focused considerations to keep in mind as you focus on increasing your practice’s top line.

1. Know your numbers

Several benchmarks and data points should serve as the “vital signs” of your practice’s financial health, while informing you about progress toward achieving your profitability goals. Here are the metrics you should be tracking in each of the growth areas I mentioned above:

  • Patients: Whether you own a startup or have acquired an existing practice, you need to consistently monitor your new and existing patient list. Questions to consider include:
    • What is your current patient count?
    • How many new patients are joining your practice on a monthly basis?
    • How many patients are “no shows” or inactive in your total patient count?
    • What percentage of your patients are recalled?
    • Are you consistently tracking your reappointment rate within your hygiene department?
    • Are you tracking patients’ cancellation rates and creating processes to prevent systemic cancellations?

The answers to these questions can help drive your marketing and brand awareness efforts, which will have a direct impact on your profitability.

  • Payers: If you accept insurance, then now is a good time to prioritize negotiations for better rates, update your fee schedule, and potentially drop the policies that are the lowest-paying or most difficult to pay. These activities can have a massive impact on your top line.
  • Procedures: Your practice management software should be updated to provide you with critical information about procedure statuses — such as “diagnosed but unscheduled treatments” —  and give your staff details about which patients to call and prioritize for scheduling. This also comes down to educating your staff or your treatment coordinator on appropriate best practices to ensure timely scheduling for procedures post-diagnosis.
  • People: In today’s market, payroll costs are steadily increasing, and labor itself is the highest and largest cost every dental practice must grapple with. During periods of rising labor costs and flat revenue, your bottom line will suffer. To maintain profitability and keep pace with the competition, it’s important to continually benchmark your compensation against industry standards, leverage software to pull data for analysis, provide wage increases commensurate with the market and employees’ performance, and offer continuous feedback to position your staff members to succeed.

2. Understand your people

Speaking of retention, devoting time and effort into bolstering staff engagement pays you back dividends in terms of profitability. Your approach to employee engagement will likely differ depending on where you are in your practice’s lifecycle, and whether you own a startup or an acquisition.

If you acquired an existing practice, you likely employ hygienists and staff members who have been working in the business for a while, and your engagement efforts may be focused around ensuring a smooth transition and change-over in leadership. On the other hand, if you own a brand-new practice, you are starting from square one and need to understand how to scale employee engagement as you continue to build your team.

Regardless, remember that healthy staff retention translates into stronger productivity and a richer in-office culture, which ultimately drive increases in top-line profitability.

3. Be realistic about your capabilities and needs

This is another profitability measure that depends on the stage of your practice’s lifecycle. You may be starting a practice from the ground up and need to purchase new equipment and tools, which is a significant investment that may not generate tangible financial results for a year or more. On the other hand, if you are acquiring a practice and need to replace your equipment or bring new technologies into the practice, the impact those purchases make on the top line could be vastly different, depending on your patients’ needs and expectations.

The same goes for patient acquisition. As a startup, you will need to invest more marketing dollars into growing your patient base and your brand. On the other hand, owners of acquired practices can afford to invest less in grassroots marketing and focus more intently on building their existing patient base.

It is important to enlist the help of a qualified practice advisor who can help you grasp your financial reality, and then empower you to make decisions that reflect your capabilities while weighing the risks and benefits.

4. Be forward-looking

Like most dental practice owners, you will likely be moving at a breakneck pace during your first five years of business. You may be inclined to place urgent, time-sensitive demands over planning for the future. But your ability to maintain profitability beyond the first five years hinges on your progress toward long-term goals.

Let’s say that you are a practice that generates $500,000 in revenue annually, but you want to scale to $1 million in annual revenue over the next five years. What tangible steps will you take each year to increase profitability and achieve that goal? How will you balance this revenue goal against evolving tax legislation and requirements and staffing needs? Once your practice is established and firing on all cylinders, how will you pivot to scale the business?

These are the questions that an industry-specific dental consultant like Aprio can help you answer. Our team of CPAs and advisors can help you run projections and parse out the actions you need to prioritize to maintain healthy profitability and achieve long-term success.

Contact us today to start the conversation.

Related Resources

About Aprio Dental

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About the Author

Mary Kathryn Williamson

Mary Kathryn has dedicated the past decade to serving dental practices and growing Aprio’s dental group. She specializes in helping clients grow, start or buy dental practices. Through Aprio’s ERC team, Mary Kathryn referred more than 60 engagements that have resulted in more than $1M in credits for dental practice owners.


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