Your Practice Is Growing, and You Have No Cash. There Are Only Two Reasons.
Production up eleven percent. Collections up nine. Line of credit drawn for the first time in four years. Your accountant says it was a good year. Your checking account disagrees.
Two things happen, and only one is a problem.
The first reason is timing.
You pay for the work when you do it — lab bill, supplies, payroll on Friday. You get paid about five weeks later, and the payer decides then what “paid” means. So every new dollar of production opens a gap between money out and money in. Grow faster, and the gap gets wider. Level off, and it closes on its own.
This is normal. It’s what a line of credit is for. This is most practices, most of the time, and if this is you, stop reading and go enjoy the good year.
The second reason doesn’t close.
Two kids, same lemonade stand. Every cup costs 50 cents to make and sells for 40. Both lose a dime a cup. Neither one knows it.
The first kid works off birthday money in a jar. Every cup takes a dime out. One Saturday she reaches in, and the jar is empty. No more lemons, no more stand.
The second kid gets an allowance every week, and he’s saving for a bike.
Same dime, same cup. But when he’s short, he covers it out of his allowance without really thinking about it. The stand never runs out of money, because the allowance never runs out. So it runs all summer. And the next summer. He gets better at it every year — more customers, more cups, a bigger sign.
He never gets the bike.
That’s a practice. A restaurant losing money on every plate is gone in months, because it runs off a jar, and the jar empties. A practice runs for decades because it’s running off the owner’s allowance- his paycheck, his Saturdays, the retirement contribution that quietly didn’t happen this year either.
The restaurant fails because it cannot cover itself. The practice survives because the owner can.
No bad Saturday. No empty jar. No day anyone could point to. Just a valuation, thirty years on, that comes in at a third of what he has in his head.
The practice doesn’t fail. The retirement does.
Why nobody catches it.
Because the owner’s time gets booked as whatever’s left over instead of as a cost. No other business is allowed to do that. Price your own time at what it would cost to hire someone to do the same work, and the picture changes.
The test takes ten minutes.
Add up the bills that come whether you work or not, plus what your family actually needs to live on. Divide by the hours you can realistically sit at the chair in a year. That’s what one hour has to bring in.
Now figure out what one hour actually brings in — after the write-off, the lab, the materials, and your own time priced honestly.
If the second number is smaller, working harder cannot close it. There are no more hours. You cannot cut your way past a rate you don’t set.
You would never treat a failing restoration by putting more of them in.
Three sentences that mean you should run the number this week.
We just need more volume.
We’re one good year away.
Once the new office matures.
Not sure which decision you’re actually facing?
Stay, Scale, Slow Down, or Sell — most owners are working hard on the wrong one. The What’s Next Assessment is a free, ten-minute tool that sorts which of the four you are genuinely in, before you spend another year optimizing a path you were never on.
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I write about the money mechanics nobody teaches in dental school. One piece at a time, no schedule, no pitch.
Dr. David Darab, DDS, MBA, CEPA, practiced oral and maxillofacial surgery for 33 years as a multi-doctor group owner and went through a full private-equity due diligence process before walking away ahead of the LOI. He writes for independent dental practice owners at darabadvisors.com.
The Cash Flow Surgeon™, the 4S Framework™ (Stay, Scale, Slow Down, Sell), and The Decision Before the Decision™ are trademarks of Dr. David Darab and Darab Business Advisors. All rights reserved.