How One Associate Could Add $240,000 a Year to Your Dental Practice

You can double the passive income in your dental practice by adding an associate who doesn't even do half of what you're doing.

I know that sounds like a stretch. But for a lot of practice owners, the thing holding them back from this decision isn't the idea. It's understanding the math behind it. So let's walk through it.

How much profit does an associate dentist add to your practice?

In my experience, about 50% of what an associate produces falls to the bottom line. So an associate producing $40,000 a month, only 40% of what a $100,000-a-month owner produces, adds about $20,000 a month in passive income. Over a year, that's roughly $240,000 from one associate.

Start with the passive piece of your practice

I helped build a $150 million dental organization from a single practice all the way to 70+ locations. This is one of the tricks we used to increase income without stressing ourselves out.

Let's start with round numbers. Say your practice collects $100,000 a month on the doctor side. I'm leaving hygiene out for a second to keep it simple.

If you're doing that production, you should be paying yourself about 30% for it. That's $30,000. Because you're an S corp, you may be paying yourself less and taking some as distributions. But to see the real picture, pay yourself what you'd pay an associate to do the same work.

Then team and overhead take another 60%, or $60,000.

That leaves the practice with a passive net income of around $10,000 a month.

You might be taking home a lot more than that. But most of it comes from doing the dentistry yourself. If you're producing most of the revenue yourself, the passive piece is the number we're looking to increase.

What happens when you add one associate

Now let's add an associate. Not nearly as good as you are. They produce $40,000 a month.

We pay them the same 30%, so that's $12,000.

Then we add supplies, lab, and an assistant for another $8,000.

That leaves $20,000 a month falling to the bottom line. From what I've seen, that's the pattern: with every associate we add to a practice, about 50% of their production falls to the bottom line.

And there it is. That associate just brought in double the passive income the practice was making before. You went from $10,000 a month to $30,000.

Is an associate worth it if they're not as good as you?

Yes. Think about what just happened. On an annual basis, you produced an extra quarter million dollars of passive income from an associate doing 40% of the work you're doing.

They don't have to be you on day one. That $20,000 a month gives you room to hire someone and train them up. Maybe they start with the smaller procedures on the schedule while you move up to the more complicated ones.

And once that's working, it opens the door to the next question. Do you want another associate to start taking on some of the work you're doing?

Why two doctors make more money than two locations

This is why I say two doctors make more money than two locations.

When you try to grow by adding locations too early, you overextend yourself with multiple sets of overhead. A second doctor in the space you already have is how you really maximize that space.

When you focus on optimizing the practice you have, you produce more cash flow and have more to put back into the business. It's better for your culture and your growth, too.

At DEO, we call this stage Duplicating Profits. You grow by duplicating what's already working inside your practice before you take on another location.

What to do this week

Run this same math on your own practice using last month's numbers:

1. Your doctor collections, with hygiene left out
2. What you'd pay an associate to do your work, at 30%
3. Your team and overhead
4. What's left. That's your passive piece.

Then look at your schedule and ask yourself: if a second doctor did 40% of what you do, where would they fit?

If you can't pull those numbers in an afternoon, start there. Get your financial reporting cleaned up first, because you can't make this decision without them.

Frequently asked questions

Why leave hygiene out of the math?

To keep it simple. Looking at the doctor side on its own shows you exactly what one associate adds to the bottom line.

Does my associate need to be as productive as me?

No. In this example, the associate produces $40,000 a month, which is 40% of the owner's $100,000. They still double the passive income the practice was making on its own.

What do you pay the associate in this example?

30% of what they produce, the same percentage the owner would be paid for doing the doctor work. On $40,000 of production, that's $12,000 a month.

Should I add an associate or open a second location?

I say two doctors make more money than two locations. A second location brings a second set of overhead, while a second doctor helps you get the most out of the space you already have.

Want more tricks like this?

If you want to learn more ways to lower your stress and improve your practice, book a Growth Accelerator Call. You'll talk to one of our team members, walk through where your practice is today, and see if DEO is right for you.

Adapted from Emmet's YouTube video, How One Associate Could Add $240,000 a Year to Your Dental Practice.

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