**Client Case Studies: The Successful Start-up**
Recently we had a past client approach us for a practice health check. The client first contacted us back in 2017 to assess a potential location for a dental start-up. We were bullish on the site and the client ended up doing the start-up. Fast forward to now. We were able to see the financials of the start-up over this 8-year period. The start-up was in a growing coastal region with some competition already. The practice is not a preferred provider. The client was in his mid 20s at the time and probably a few years out of dental school. He was clinically driven and within that 8 years of ownership upskilled in implants as well as orthodontics.
In this post we will go through the numbers of this start-up. Let us be clear, our intention with this article is not to over glorify practice ownership. It does come with many more risks, challenges and time commitments than being an associate. Rather this post is to highlight what can be achieved from dental practice ownership. For balance our next post will be a case study on a not so successful start-up.
All numbers are rounded for the sake of simplicity and profit and earnings are before any tax has been paid. The client pays himself the market rate for an experienced dentist (40%). The clinics initial rent was 76K/year including outgoings and had yearly increases of 4%. The start-up cost for a 4-chair practice and only putting in and fitting out 2 chairs initially (but having the plumbing in for the 3rd and 4th chair), after landlord incentives was 360K. This included the fitout and all the equipment. This was the cost back in 2017 and has gone up since.
Year 1 (first full financial year): The practice billed about 530K in this first year. The client didn’t have any associates and he did the 530K of billings himself. He took home 205K from his clinical work which was his market earnings (40%). However, he had to put 40K of that back into the business as it was making a loss. The client effectively took home 165K that year.
Year 2: Year 2 was similar to year 1 in billings and profits (lack of).
Year 3: The billings ticked up to 870K and the client made his first ‘business’ profit of 92K in addition to his market earnings (40%) from his clinical work which was 332K. This gave him a total take home of 424K.
Year 4: The client got an associate on and invested in a CBCT along with a scanner and onsite milling at a cost of 310K (from memory there was some excellent tax incentives available at the time as well). The billings increased to 1.56 Million and the clinic made a profit of 363K. The client also earnt 376K from his clinical work which gave a total take home of 739K. The items fee report shows an increase in implants and orthodontics.
Year 5: The client fitted out and equipped the remaining 2 rooms at a cost of 170K and got another associate on. The billings increased to 1.67 Million and the profit was 346K. The decline in profit here was due to an increase in auxiliary wages likely due to an additional chair operating but also perhaps due to some of the significant post covid wage rises starting to occur. The client cut down some clinical hours and earnt 252K giving a total take home of 598K.
Year 6: The billings increased to 2.12 Million and the profit was 572K. Another associate was also added. The client further cut down clinical hours and earnt 236K giving a total take home of 808K.
Year 7: The billings increased to 2.36 Million and the profit was 676K. Another associate was also added. The client reports he worked clinically for only 2 days in this financial year and earnt 220K giving a total take home of 896K.
Year 8: The clinic is projected to bill 2.66 Million in the current financial year. With profit over 750K. The client is down to working 1 clinical day and reports his clinical earnings are still projected to be above 150K.
The total spent on the major capital equipment and fitout over the years was 840K. The practice will sell for greater then 2.5 Million on the open market (potentially significantly more to a corporate). Remember there was only 1 or 2 years with a small (in the scheme of things) business loss initially but multiple years following with significant profits. This client has obviously done extremely well and shows what can be achieved with practice ownership. He is now considering expanding and moving into his own purpose-built facility. For balance, our next post will be a case study on a not so successful start-up.
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Our next start-up and buying seminar is coming up in Sydney on Thursday 13th and Friday 14th of March 2025. We have a few spots remaining. Please register asap using the link below to avoid missing out.
We also offer expert guidance in various areas of practice ownership. Please see the below link for more information.
We’re holding our 4th Dental Practice Owners Conference (#DPOC2025) in August this year. This is the premier event for practice owners and not to be missed. We have an amazing line up of speakers as well as spectacular events planned. There will also be a trade show with exhibitors from the major dental companies present providing conference only specials. The learning and networking opportunities will be immense. Please see the link below for more information.
https://dpoc2025.com.au