**Profitability Update**
The dental industry, like many others, is not immune to the effects of inflation. There is a need to produce more income in order to maintain profits. We’ve posted an update on one of the most important slides from our start-up and buying seminar below. It shows target profitability at different levels of billings. It must be noted that the profit % is essentially EBITDA (earnings before interest, taxes, depreciation and amortization) – it is before any loan repayments. In past years, the loss figure was below 550K and billings near 900K could have profits around 20%. This has changed in recent times and more income is needed to produce similar profits.
Practices for sale generally provide retrospective financial statements for buyers to analyze. That is, the financials are from past years where profitability may have been much more. This is understandable as many businesses lodging through a tax agent are given ~10months following the end of the financial year to formalize financials. However, it is important for any buyer to note that if the sellers haven’t been able to increase billings the profits have likely decreased. Buyers can ask for recent billing’s reports, which are more easily produced, to check this.
We do expect an influx of practices coming up for sale or are already on sale, that are billing less than 500K/year. These practices have no profit and many are making a significant business loss. Please have a read of our previous article about this here – https://practiceownership.com.au/be-aware-the-low-billing-practice/.
Please feel free to comment or add to the discussion. If you have enjoyed this post, please like, share or comment below
Our next start-up and buying seminar is coming up in Brisbane on Friday April 19th and Saturday April 20th 2024. We’ll go through profitability and numbers in greater detail along with other aspects of starting-up and buying. 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.