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The dental practice industry is rapidly moving toward massive consolidation. Most dental practices operate at 50% of their potential with slim profit margins, typically 15-25%. The root cause of these outcomes is a lack of entrepreneurial focus and understanding of how to operate a business.  

We at OPS see an urgent problem in this, which is, dentists need to learn quickly how to fulfill their potential, increase profit and build a sustainable exit strategy to protect their assets and retirement prospects. The hard part is…How? How do you increase your potential, while increasing revenue, while building a sustainable exit strategy? That’s a lot.  

Think Like an Entrepreneur 

There are many ways to increase revenue, you can scale your business model and open a second or third location; plan and execute an expansion of your practice in another way, like adding an associate or hygienist; or you can implement and aggressive marketing strategy. There are a few effective ways to expand efficiency, fulfill your potential and increase your profit and revenue. And some of these will create a successful exit ramp when you’re ready.  

Measure Twice, Cut Once 

And in dentistry, you need to be measuring, like, all the time. But there is one key metric to look at, gauge and increase as you look to grow, build and exit. It’s called EBITDA.  

This is the one essential financial metric for evaluating the performance of your practice and figuring out what you’re fiscally prepared to take on. EBITDA is a magical formula that allows you to measure the actual and fiscal success of your business. So, what is it?  

What is EBITDA? 

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a financial metric used to measure a company’s operating performance by excluding certain expenses that can vary widely between different businesses. EBITDA provides a clearer picture of a company’s core profitability and operating efficiency. 

EBITDA for your dental practice

Why is EBITDA Important for your Dental Practice? 

In the context of dental practices, EBITDA offers valuable insights into the business’ financial health and performance. And if you’re interested in fulfilling the potential of your practice, which leads to an increase in profitability which leads to an increase of protecting your most valuable asset on your way to retirement, then it’s EBITDA that will allow you to see the big financial picture and track the value of that asset.  

Three Invaluable Tools in One 

EBITDA does three things – 

How to Calculate EBITDA for Your Dental Practice 

Calculating EBITDA for your dental practice involves several steps

Once you’ve completed these steps, you’ll arrive at your practice’s EBITDA figure, which can be used to assess its financial performance. 

Use EBITDA to Measure your Success 

Now that you understand how to calculate EBITDA for your dental practice, let’s look at tactics for how you can use this metric to measure success – 

EBITDA is a valuable metric for measuring the success of your dental practice or organization. By focusing on core operating performance and excluding non-operating factors, EBITDA provides a clearer picture of profitability and operational efficiency. By calculating and monitoring EBITDA, dental practitioners can make informed decisions to drive growth, optimize performance, and ensure the long-term success of their practices. 

One Tool – Three Powerful Uses

This is one powerful way you can focus on the three areas: low potential, slim profit margins and little to no exit strategy. But by using this one metric effectively you are switching your mindset from dentist to dental entrepreneur. You are getting out of the dentist’s chair and taking a 10,000-foot view of your practice or organization.  

And it’s imperative you take this step, for yourself, for your family, for your team and for your legacy. My business partner, Dr. Jack Bayramyan, and I believe the future of dentistry belongs with dentists. Using EBITDA is one way to keep that future safe.  

One More Tool to Measure Growth in your Dental Practice

I run a regular mastermind built exclusively for dentists. A mastermind is a group of peers that come together on a regular basis to work out their biggest challenges, share resources and lean on each other to get through the rough patches and celebrate the wins. It is the single most effective tool that an entrepreneur has in his or her entrepreneurial toolkit.

One of the best ways I know to remain steadfast in your goals, bust through your obstacles, find resources and community to keep you strong is joining a Mastermind. Other benefits of this mastermind are the incredible opportunities you will get to improve your leadership skills, understand the importance of team culture within your dental practice and learn to create greater team cohesion. You will learn from those who’ve walked in your shoes and found success.

We have created a strong community and we would love for you to join us. Click the button to register for the next one and we’ll see you there!