We're revisiting this important episode about what we call BAM, an essential financial metric for dental practices. BAM stands for the Basic Amount of Money Needed to Operate the Practice, a monthly cash flow target that covers not only overhead and loan payments but also the doctor’s take-home, retirement contributions, and other foreseeable necessary expenses. The conversation explains why BAM is not the same as breakeven or net income and highlights common mistakes dentists make when evaluating practice finances.

We talk about the practical steps for calculating BAM, noting the importance of using both historical and projected figures. Listeners learn to account for staffing changes, equipment purchases, rent adjustments, loan payments, and anticipated growth. The episode also addresses how BAM serves as a basis for staff bonus systems and why it should be reviewed annually to remain accurate and fair. Other considerations include handling unique expenses like retirement plan changes, owning versus leasing property, and whether to include discretionary spending.

Key Topics Discussed:

• What BAM (Basic Amount of Money Needed) means for dental practices
• The difference between BAM, breakeven, and net income
• Why BAM is a monthly cash goal based on collections, not production
• How BAM factors into staff bonus systems
• Annual recalculation of BAM and handling large changes (“baby BAM”)
• Adjusting BAM for new hires, anticipated expenses, and growth projections
• The treatment of rent, including owner-occupied property
• Accounting for loan payments, including deferred or interest-only periods
• Whether to include retirement contributions and discretionary spending
• The effect of BAM calculation on practice planning and financial management

Ash welcomes Dr. Ruth Mannschreck to discuss lessons learned from selling her dental practice and outlines practical steps for dentists preparing to transition out of ownership. They discuss one of her biggest mistakes: not preparing early enough for the sale, which resulted in leaving value on the table when Dr. Ruth sold her practice. She explains why it’s critical to consider not just the financial aspects but also operations, team culture, and personal goals well in advance of selling.

Dr. Ruth also covers key areas that practice owners should address, including increasing practice value, decreasing risk for buyers, identifying competitive advantages, and ensuring the business can run smoothly without the owner. She suggests involving the team in the transition process, even encouraging interactions between staff and potential buyers before a sale is finalized. The episode wraps up with Dr. Ruth's advice on creating a self-sustaining practice and her offer of a free checklist for those looking to prepare for a future sale.

Key Topics Discussed:

• Early preparation for selling a dental practice
• Determining your post-sale goals and non-negotiables
• Increasing practice value through team, systems, and culture
• Reducing buyer risk by addressing dependencies and diversifying referrals
• Practice branding and its impact on the sale
• Involving your team in the buyer selection process
• Building a competitive advantage beyond financials
• Creating a self-sustaining, turnkey operation
• Handling challenges with delegation and letting go of control
• Free practice transition checklist resource

In this episode, Ash and guet host, Erin discuss whether it is still worth buying a dental practice in today’s changing landscape. They talk through how the dental industry has shifted over the past decade, with urban market saturation, shifting reimbursement rates, and the rise of DSOs (Dental Service Organizations) creating a more complex environment for new and current dentists. Ash shares that while owning a practice used to be the standard end goal for most dental professionals, now the decision requires more individual consideration and careful research into location, business model, and personal goals.

The conversation touches on the pros and cons of both starting up a new practice and buying an existing one, as well as alternatives like joining a DSO or seeking equity in a group practice. Ash emphasizes the need for self-awareness, understanding your appetite for risk and business management, and the importance of factoring in potential exit strategies. The episode closes with practical advice on evaluating your own goals and considering all options before committing to practice ownership in a rapidly changing dental industry.

Key Topics Discussed:

• Shifting trends in dental practice ownership
• Impact of urban market saturation
• Differences between buying a practice and starting up
• Rise and influence of DSOs in the dental industry
• Importance of location and demographics
• Role of business models: PPO, Medicaid, fee for service
• Lender requirements for dental startups
• Adopting existing practice culture versus building your own
• DSO purchase structures and seller lock-ins
• Associates getting equity and alternative paths to ownership
• Generational differences in career goals
• Burnout risk and planning for exit strategies