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My Views on EBIDTA
I’m of the firm belief that using EBIDTA to measure the growth of your dental practice is an essential measurement for its health and success. You never want to overlook the amount of debt you’re taking on and how that is impacting your business. And you don’t want to use EBIDTA as your only measurement of growth. But it is an effective tool if you use it to increase your cost conserving measures and pay attention to your expenses and investments.
In the short video below, I discuss the importance of increasing your EBIDTA and two methods for increasing it. Not everyone uses this method of measurement in their practice, and I think that is a mistake. If you use it strategically to do monthly deep dives into your must-haves and nice-to-haves, you can get a very good idea of how effective your cost-cutting measures are month over month.
What is EBIDTA?
So, what is EBIDTA? Basically, it’s a way to measure your practice’s overall financial performance by stripping out interest, taxes, depreciation, and amortization –
Check out this article on Medium for a more broad context and understanding of EBITDA and how it generally works in business.
Strip out all these other factors and you will have a basic view of your dental practice’s profitability. In my mind, this is an important measurement because it helps you see gauge which cost-cutting measures you take are working. Also, when you strip out all the other numbers, you can focus on the essentials: your operating profitability and your cash flow.
This is by no means the only way you should measure the success and profitability of your dental practice. You still need to take into account the other factors, but this is another great tool for your entrepreneurial toolbox.
Why Should Dental Practices Increase Their EBIDTA Margin?
First, what does increasing your EBIDTA margin mean? Sounds complicated but it simply means lowering your operating expenses in relation to your total revenue. The margin is the percentage of expenses to revenue. So, increasing your monthly EBIDTA margin by 10% means you’re lowering operating expenses or increasing your topline revenue by 10% of your revenue.
It’s incredibly important for dental practices to be mindful of their operating costs in relation to their revenue. There will be times when your investments far exceed your revenue, but this is the exception rather than the rule. Buying a new piece of digital dental equipment that will increase the value of your offerings, or building out a new software system are essential to practices staying relevant and efficient, but these expenses should be taken in moderation at strategic times.
Two Methods for Increasing EBIDTA in Your Dental Practice
When I work with dental entrepreneurs, I like to show them two ways of increasing EBIDTA. These two methods are customized for dental practices and the unique challenges they face in an industry with quite large expenses and investments, especially at the outset of a business venture.
Learn and Earn –
- See the advantage of learning while on the job; learning a new piece of equipment; learning a new dental technique; as an investment. By learning while you earn, you continue to develop your skills as a dentist and entrepreneur while increasing the value of your dental practice to the community you serve. The more value you provide raises your production, which attracts more patients, and increases revenue.
Deep-Dive Accounting –
- On a monthly basis, make sure you take a deep dive into your expenses. Pay close attention to your must-haves, the essentials of running your practice on a daily basis. You cannot run your dental practice without them. But also make sure you pay attention to your “nice-to-haves” and see where you can cut these expenses. You don’t need them. Pay attention to your vendor pricing. I’ve seen prices go up without discussion, get paid, and negatively impact a practice’s valuation without the dentist even knowing it happened. They will enhance your dental practice, but they are not essential to daily operations. The more you manage these expenses the more you increase your EBIDTA margin.
These two methods increase your operating profit and your EBIDTA margin and that is an attractive measure for you as a dental entrepreneur and anyone looking to invest in your company.
Turning EBITDA Insight into Action
Understanding EBITDA is only powerful if you can actively influence it. Increasing EBITDA isn’t about chasing one big change—it’s about consistently improving the operational drivers underneath it: scheduling efficiency, case acceptance, patient retention, provider productivity, and cost control.
That’s why we created the Optimize KPI Tracker for dental entrepreneurs. This tool helps you monitor the metrics that directly impact EBITDA, so you can identify trends early, address inefficiencies, and make smarter decisions with confidence. When you know what’s driving your numbers, you’re no longer guessing, you’re leading strategically.
Ready to take control of your practice’s profitability and long-term value?