While every practice needs a budget to measure whether certain goals are being met , the financial plan animates the goals and desires of the practice owner . For example :
n What levels of income ( production and collections ) are required to pay for the monthly overhead of the dental practice ? ( Budget )
n How much are the monthly fixed and variable overhead costs for the office ? ( Budget )
n When can an associate dentist be hired to assist with the growing practice ? ( Financial Plan )
n When can the owning doctor afford to allow another dentist to buy-in or purchase the practice ? ( Financial Plan )
n Did monthly expenses outpace the practice ’ s income ? ( Budget )
SUMMARY
A budget and financial plan , working together , are essential , necessary tools that must be at the practice owner ’ s disposal in order to meet his or her short- and long-term goals . Operating a dental practice without such tools causes the owner to fly blind , potentially putting at risk everything he or she has built within the Practice .
Justin Kendall & Haylee Davis are co-founders of The KAD Group , a business services firm which specializes in the business needs of the healthcare industry , specifically dentistry . Justin and Haylee each have nearly 20 years of experience in law , accounting , business transitions and healthcare practice management . They can be reached at : info @ thekadgroup . com or by calling ( 972 ) 294-5254 . n How much is needed to save for the purchase or build of your own building for your practice ? ( Financial Plan )
n Is there enough cash available to place a down payment for the proposed new building ? ( Budget )
Fiscal Health and Practice Growth
Often , the practice owner that is navigating the dental practice without a budget or financial plan finds the business in a precarious situation when it is time to finance practice growth . If poorly planned finances have led to expenses outpacing production and collections , the practice owner may have little to no cash available to finance growth as well as higher than normal debt , leaving no attractive options available to fund growth . The office that has followed a carefully crafted budget and financial plan is prepared for growth and can procure funding for growth through the most attractive financing terms on the market .
Justin M . Kendall , ESQ , CPA Founder & Principal
Haylee N . Davis , MBA Founder & Principal
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Fiscal Health and Practice Value
In today ’ s market , many potential suitors value dental practices based on what is known as an EBIDTA multiple . EBIDTA = Earnings Before Interest , Taxes , Depreciation and Amortization . Simply stated , this means : How much cash is available for the owner after all expenses have been paid ? If the value of those earnings is low , the value of the dental practice parallels the low earnings . Conversely , if the value of those earnings is high , the value of the dental practice parallels the higher earnings . Of course , cutting expenses is not enough ; the practice owner must ensure that expenses are titrated while also maintaining the highest standards for the practice and its team . The owning practitioner should communicate regularly with a practice consultant and financial advisor to review each line item reflected in the profit and loss statement to guarantee that the budget and financial plan carefully account for maintaining expenses and all other financial and operationally-related matters so that practice value is protected .
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