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Avoid These Financial Surprises in Your Dental Practice
Summary:
Surprises in dentistry can be wonderful—like discovering a perfect margin on your crown prep. But when it comes to financial surprises in your dental practice? Those tend to be less exciting.
Surprises in dentistry can be wonderful—like discovering a perfect margin on your crown prep. But when it comes to financial surprises in your dental practice? Those tend to be less exciting.
Sure, you might get lucky and have a patient refer their entire extended family to your practice, or that new technology investment might pay off sooner than expected. But let's be honest: Financial surprises in dentistry usually aren't cause for celebration.
The good news: You can take proactive steps to prevent being blindsided by financial surprises that could impact your practice's cash flow or threaten its long-term viability.
Here's a look at some common financial surprises that dental entrepreneurs often face at various stages of their careers—along with tips for anticipating and managing them effectively.
RETIREMENT SURPRISES FOR DENTISTS
Unexpected developments when you're no longer practicing—and instead relying on your investments and savings—can be particularly concerning for dental professionals. Without the steady income from your practice, any financial uncertainty can create significant stress.
- Higher-than-expected taxes. Many retiring dentists anticipate moving into a lower tax bracket. While this often occurs, the opposite can happen—resulting in higher-than-expected tax exposure. This might occur when dentists forget that their Social Security benefits may be taxed, or when they start withdrawing money from certain retirement accounts (especially if they're also receiving income from practice buyouts or deferred compensation plans). To avoid this, closely monitor your annual earnings from all sources and understand the income levels for various tax brackets. In some cases, converting a tax-deferred account to one that allows tax-free withdrawals in retirement can help minimize your tax burden.
- A longer-than-expected life. Living longer than anticipated should be a blessing. And it usually is—unless you're not financially prepared to fund your lifestyle needs far into the future. While it may seem unlikely to live to 100, advancements in medical technology are making this increasingly possible. As a dental professional who understands the importance of preventive care, it's wise to plan for a longer life span in your financial strategy.
REVIEW YOUR PLAN
- Bigger personal expenses. Pre-retirement dentists often hear that their expenses will decrease significantly once they retire. However, it's common for expenses to remain similar to those in the final years of practice. Additionally, factors beyond your control (such as recent inflation surges) could cause your expenses to rise more than anticipated. The takeaway: Don't assume retirement will be inexpensive when planning for your golden years.
'LIFE HAPPENS' SURPRISES IN DENTAL PRACTICE
Managing a dental practice involves juggling numerous tasks daily, making it easy for financial surprises to sneak up on you. Here are some to watch out for:
- Overlooked payments. While fees on overdue bills won't bankrupt your practice, they're unnecessary expenses that can be easily avoided. Set up account alerts via text or email for upcoming payments, or schedule regular online payments for recurring bills like equipment leases or supply orders.
- Practice repairs and equipment failures. A broken CEREC machine, a flooded operatory, or an unexpected building repair—these things happen. An adequate emergency fund is crucial for these situations. Equally important is having the right business insurance for your specific practice risks. This is particularly vital if you own multiple practice locations. Ensure your coverage accounts for the high-tech, expensive equipment in your office—rebuilding costs after a disaster could far exceed basic coverage limits.
- Lawsuits. As a successful dental entrepreneur, you may become a target for unjust lawsuits. Asset protection planning can potentially shield your personal and practice assets from future lawsuits and creditors. However, it's essential to implement these plans before any legal issues arise. Regularly review and update your asset protection strategies to reflect changes in your practice's value or risk exposure.
Conclusion
If you work with a financial professional who takes a comprehensive, proactive view of your dental practice and personal finances, you're less likely to be caught off guard by these financial surprises. Nevertheless, it's wise to periodically review your emergency fund, various insurance policies, and retirement spending plans.
If you're unsure about your protection against financial surprises, consider stress-testing your plan to see how your financial picture could look under various scenarios. This way, you'll know whether you're well-prepared or if you need to take steps to keep your dental practice and personal finances more stable and predictable.
Tim McNeely
Advisor to Dental Entrepueriers
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Driven dental entrepreneurs who are incredibly successful at thriving while running their businesses often find themselves overwhelmed by financial confusion and fear in their personal lives.
Their finances become complex and chaotic, and they don’t have the right team in place to bring clarity and peace of mind. I believe you deserve to thrive in the midst of financial uncertainty by being empowered to confidently move from chaos to control.
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This material is intended to be used for educational purposes and does not constitute a solicitation to purchase a security or investment advisory services. Some material on this site has been researched and prepared by BSW Inner Circle and its affiliates, CEG Worldwide, LLC and AES Nation, LLC. Timothy J McNeely has retained AES Nation to conduct research and prepare informational materials for his use. Mr. McNeely is a member of CEG Roundtable and pays an annual fee for these services. Mr. McNeely is involved in these activities through The LifeStone Companies.
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