Dentist funding and working capital is paramount to effectively run a dental practice. This is true whether you are planning to start a practice from the ground up, expand a current one, or acquire another dentist’s dental practice.
Dental practices are like every other business on the planet, they must have profitable earnings in order to stay open. Working capital can do wonders for your practice and enable you to continue serving patients by providing the highest level of care.
However, sometimes dentist funding is needed to improve working capital. Therefore, in order to run a financially successful dental practice, dentists will have to think more like entrepreneurial business owners.
What is working capital?
The money needed for the daily operations of your dental practice is referred to as working capital. It’s calculated by deducting the current liabilities from your current assets. Any asset that can be converted to liquid cash within a year is a current asset.
Any liability that has to be paid in cash within a year is referred to as a current liability. Working capital ratio is the ratio of current assets to current liabilities. In other words, the ratio of cash you have to the debts you owe.
When current assets are the same as current liabilities, the working capital ratio is 1. If your debts are more than the cash you have, the ratio will be less than 1. For a financially successful dental practice, the working capital ratio should be above 1. Lenders will be reticent if the working capital ratio has been below 1 for a considerable duration.
Improving your working capital
Dental practitioners should work out their capital needs beforehand. Due diligence here will avoid a lot of headaches later. You’ll have to look at rent and unnecessary marketing costs among other things to reduce expenditure. But, bear in mind, expenses can be curtailed only to a certain extent.
To be a financially successful dental practice, the emphasis should be on generating more revenue. This could be through monetization of existing infrastructure, up-selling or cross-selling services through better patient engagement, and organically expanding your patient base.
Dentist funding and securing working capital
Before approaching lenders, you should calculate your capital requirements, cash flow, and create a business plan. This should be done with the help of qualified financial planners, specifically, ones that specialize in the dental industry.
There are exceptions, and that is if you are starting your practice. Though, even in this case you should strive to build a working capital ratio that’s above 1 (especially if you’re in the process of building out a practice). The good news is that the dental industry is seen as low-risk by lenders. Plus, financial institutions have divisions devoted to dentist funding.
Setting Up Your Dental Practice for Success
One of the primary aspects of successful dental practices is that they have a sufficient amount of working capital. However, this does not happen overnight (unless you win the lottery or come into an inheritance).
The best strategy for building working capital is to do it from day one that way you don’t need to rely on dentist funding. This means being methodical about your spending power, and not overpaying for equipment, supplies, rent, and more.
In fact, the experts at Dental Whale have been able to achieve this, and are some of the most sought-after professionals in the industry. Often speaking at dental conferences and events across the country, they also provide one-on-one consultations to help other dentists become successful entrepreneurs.
To learn how to improve your working capital or transition into an entrepreneurial role, visit www.dentalwhale.com.