What to Know Before You Start a Dental Practice

So you are thinking of starting your own dental practice? Whether you are working for a dentist that is interested in selling his practice or you want to set out on your own to blaze your own trail, there are few things you should know before you purchase a dental practice or begin the work on your own dental practice start-up.

The most important step you can do before you even consider a private dental practice is to do your homework. The average dental practice can range in the $400k-$500k range to complete. This cost also includes some working capital and a marketing budget. You should consider whether purchasing an existing practice would be more cost effective than a start-up.

If you are going the purchase an existing practice route, make sure you get a fair and independent practice valuation. This will ensure that both buyer and seller will receive a fair market price for the practice. A rule of thumb that most practice valuations follow is that a practice is likely to sell for between 40% and 60% of the average of last 3 years of gross income. However, many other factors go into determining the value of a practice.

Also, it is a good idea to have a demographics report of the area that you interested in that covers all surrounding zip codes. Get to know how many dentists are in the surrounding area and considering their marketing tactics. Will you be able to compete and grab new patients? Also, check out if dentists in your area are supplementing their marketing practices with a company that does SEO for dentists, this can have an effect on local search rankings.

Hire the Best Consultants for Your Practice

When you are looking for a dental CPA or Medical CPA you want to hire the best. After all, you're putting your trust and the success of your firm into another person's hands. So for a little extra piece of mind why not hire a CPA that is recognized by the Institute of Dental CPAs as being an exemplary member.

You want a Medical CPA that knows the ropes and has the knowledge and experience to advise you on the tough decisions and ultimately help your practice become more successful.

In the end you need someone who is reliable, trustworthy and knowledgeable about their industry. The dental practice consultants at D-ME will optimize your office and make your practice work harder for you.

Let us Take a Look

Filing their annual tax return is something that no one looks forward to but at Dental Medical Economics we want to make the process as painless as possible. For many of our clients we find deductions and over payments that they may have overlooked.

But we aren't just medical and dental CPAs, we also specialize in medical and dental practice management. Our management team will give you advisement at the CFO level from everything from practice systems optimization to hiring and firing.

Yes, we do tax preparation but we can also help in almost every facet of your medical or dental private practice.

Managing Your Private Dental Practice

When you are on the road to opening up your own private practice your first step should be to contact a CPA firm that deals with medical or dental practice management. The CPAs and Dental practice consultants at Dental Medical Economics LLC have the experience and knowledge to get your new private practice running like a top!

The skill set that these professionals carry will allow you to fully optimize your practice and maximize your profitability. Many times when doctors start out on their own they can come up against the hardships and financial difficulties associated with starting your own private practice.

Many doctors are great at what they do but they are not neccessarily the best at managing the business side of things. Sure they may have an office manager to turn to but where do the managers turn to?

That's where firms like, Dental Medical Economics come in. They offer CFO level advice on a variety of specialties.

Some of the areas that D-ME focuses on are financial services, strategic practice planning, cash flow projections and dental practice management.

Using the professional services offered by Dental Medical Economics to get your practice up and running, you will receive CFO level advice that will help to guide your decisions and inform you on the process of starting a new private practice.

Questions for a Dental CPA

This question is from the fine folks over at the Dental CPA blog and Mr. Tim Lott.

How much should a private practice dentist keep in his business account?


Tim says:

"In my opinion you want to keep your business account as low as possible. I generally suggest 1/2 months to one month’s expenses. 1/2 should suffice as a/r should cover the other half if something happens where you need to cover a full month. If you want to have a "business" fund, we suggest you strip it out of the practice, either as wages or S-Corp divs and set it aside personally and when the time comes for a large need you simply lend it to your practice and pay yourself interest.

Every business (practice) should also have a LOC available as well, maybe as much as 10% of gross available to borrow

We believe business accounts are more susceptible to fraud and theft. Staff can see how much is there when mail comes in. Depending on how it's delivered others might have access to it. Offices are more susceptible to outside theft. When cash balances get heavy small discrepancies are less likely to be noticed. If the practice gets sued can the cash accounts be frozen.

If you prefer $100k, why not take out $50k and place it in a personal savings account? You can always give it back quickly through a phone transfer.

We just think you need to be very careful keeping excess cash laying around in business checking accounts.

Tim - Correct me of I’m wrong but the reason I think you'd like to see the Checking account balance so low is so you don't get double taxes on Biz Income at the end of the year.

No, really has nothing to do with income taxes.

But what if you wanted to keep in 100-300K for a down payment for a piece of property or a office acquisition. At some point your personal income has to take a back seat to save this capital come up right?

Do you think it isn't worth saving it to that point? - also do you believe in Work Stoppage insurance?

But having that money sitting somewhere usually means you're going to pay tax on it and if you're an LLC or s-corp, that money will usually be taxed to you anyway. So why not take it out of the business and set it aside personally for future use. I’m not suggesting you strip the cash out of the business to spend, I’m suggesting that if you want to park a cushion of cash somewhere. I’d prefer a personal account, earmarked for business."


This is territory that should be covered by your dental practice consultant and if you have any questions be sure to bring them to the attention of your CPA.

Number 1 Mistake on Tax Returns

The most common mistake on tax returns is...get ready...wrong social security number. The problem with an incorrect social security number is that the names will not match up and this will register as an error with the IRS computers and your return will be rejected. When this occurs all of your credits and deductions will not be credited to your account. This seems like a simple mistake but your social security number is how the IRS identifies you and how they match your deductions with your tax liabilities.

This is something as simple as putting your name on your paper in school but sometimes it can be over looked. Before you file your taxes, double check the information on your paperwork and make sure everything is correct and accurate. The less contact you have with the IRS the better!

Your social security number is also your tax ID and it is linked to income statements, savings account interest, and retirement plans. It is the most important part to claiming your tax credits.

If you own a dental practice or medical practice it is always a good idea to hire a specialized Dental accountant or medical accountant to ensure you are filing correctly. Again, the less the IRS contacts you, the better!

What Does a Medical CPA do?

A medical cpa is really no different than a regular cpa but the knowledge and skill set are slightly different. Where a regular accountant deals with personal tax liability, a medical cpa will mitigate the tax liability for an entire medical practice. Also, a medical cpa has the knowledge to help a practice owner file correctly, understand and take advantage of all of his tax information and optimize a medical practice.

The medical CPA uses knowledge of tax planning and preparation to help practice owners mitigate their tax liability and also aid in mergers and acquisitions, financial planning and practice management.