This webinar explores a common challenge among dental practice owners: being extremely busy, yet not feeling profitable. The discussion focuses on shifting from production-driven thinking to business-owner strategy, with practical steps to improve cash flow, margins, and long-term value.
About the Speakers
Omar Virjee
Omar Virjee is the CEO and Founder of Virjee Consulting. He launched his first business at age 16 and founded Virjee Consulting in 2013 after working in various Fortune 500 roles. He is an active commercial real estate investor, a participant in the Goldman Sachs 10,000 Small Businesses program, and Virjee Consulting was recognized as an Inc. 5000 nominee in 2024.
Lautaro Putallaz
Lautaro Putallaz is a Senior Tax Consultant at Virjee Consulting, specializing in tax strategy and financial advisory for dental practices. He works closely with clients on a monthly basis to guide growth decisions, improve profitability, and identify operational opportunities based on financial data.
Why So Many Dentists Feel Busy but Not Profitable
Virjee Consulting frequently sees three core issues among practice owners:
- They are extremely busy but not economically profitable.
- Their bank balance does not reflect their production numbers.
- The practice is heavily dependent on owner production.
Many dentists report strong collections—sometimes over $1 million annually—yet still feel financially strained. Bank balances often tell a different story than production reports. When tax season arrives, large unexpected tax bills further strain cash flow.
Additionally, if the owner takes time off, production typically drops. This creates what feels like “golden handcuffs”—the dream of ownership turns into constant operational pressure.
Shifting from Dentist to Business Owner
The first mindset shift is recognizing that ownership requires thinking like a business owner, not just a clinician.
Most small business owners never clearly define what success looks like. Instead, they move from milestone to milestone—associate, ownership, expansion—without defining their personal financial goals.
The foundational question becomes:
What does success actually look like for you?
For some, success may mean:
- Owning multiple practices.
- Working three days per week.
- Building and selling within 5–7 years.
- Creating passive income through real estate.
- Operating a lifestyle practice with reduced hours.
Without a defined end goal, owners operate in zigzags, chasing the next opportunity without direction.
Reverse Engineering Income Goals
The process begins by defining a take-home income target—after taxes.
For example:
If the goal is to deposit $300,000 annually into a personal account after taxes, the business must generate sufficient profit to support that number.
From there, reverse engineer:
- Required net income
- Required profit margin
- Required collections
- Required daily production
- Number of working days per week
If a 35% margin is needed and the target net income requires $1.1 million in revenue, then daily production goals are calculated accordingly.
This creates clarity. Instead of guessing, the owner now has measurable targets tied to personal lifestyle goals.
Case Study: From $100K Take-Home to Strategic Growth
One client had:
- $1 million in collections
- Approximately $100,000 take-home income after taxes
- A fully booked schedule
- New motherhood responsibilities
When asked what success looked like, she initially had no clear answer. After discussion, she defined her goals:
- Work three days per week
- Earn $300,000 take-home income
- Purchase two rental properties within four years
To reach $300,000 take-home income, she needed approximately $400,000 in pre-tax profit. That required:
- 35% profit margin
- $1.1–$1.2 million in collections
- Approximately $6,200 daily production (working four days initially)
This clarity allowed her to align production targets, team expectations, and scheduling accordingly.
Step Two: Tightening Cash Flow and Margins
Before joining advisory services, her margins were approximately 22%.
Issues included:
- Missed deductions
- Poor tax planning
- Paying prior-year taxes while funding current-year estimates
- Weak visibility into expense structure
Many practice owners operate based on production reports and bank statements. However, these are incomplete financial “X-rays.”
A proper financial review includes:
- Payroll costs
- Lab fees
- Dental supplies
- Fixed costs
- Variable costs
- Industry benchmarking
By comparing her expense structure to similar practices, inefficiencies were identified in staffing and overhead. Adjustments were made, gradually moving margins toward 35%.
Monthly review meetings created accountability and clarity.
Setting Targets for the Team
Once financial targets were defined, measurable KPIs were introduced, including:
- Collection rate
- No-show rate
- Treatment acceptance
- Production targets
- Marketing ROI
Clear targets eliminate ambiguity and improve team accountability.
Stop Running the Practice by Bank Balance
Bank balances do not reflect true performance due to:
- Tax payments
- Loan payments
- Owner distributions
Instead, Virjee Consulting tracks five core KPIs (the “Fab Five”):
- Revenue
- Collections
- Payroll
- Fixed costs
- Variable costs
Revenue and expense targets are reverse engineered at the beginning of the year. Monthly performance is then compared to those targets.
In one example:
- Revenue was on target.
- Payroll was below target (improved efficiency).
- Fixed costs were reduced by eliminating unnecessary overhead.
- Variable costs remained aligned with revenue.
The result was improved EBITDA.
Because practice valuation is largely based on EBITDA, even a $100,000 increase in EBITDA can significantly increase practice value—potentially by $700,000–$800,000 depending on multiples.
Optimizing EBITDA directly improves long-term wealth.
Step Four: Tax Strategy
Tax strategy plays a major role in cash flow.
In this case:
- Section 199A (QBI) was activated by adjusting income below threshold levels.
- Additional deductions were implemented.
- 401(k) contributions were maximized.
- Self-employment tax savings were optimized.
These adjustments generated approximately $50,000–$80,000 in additional cash flow.
Instead of sending a quarterly tax payment, the client used savings as a down payment on her first rental property.
Outcomes
As a result of structured planning:
- She purchased her first rental property.
- She is working toward a three-day schedule.
- Margins improved.
- Cash flow increased.
- Practice value increased.
- Stress decreased.
Monthly advisory calls helped maintain focus amid the distractions of marketing, hiring, vendors, and daily operations.
What If You’re Collecting $1 Million but Still Feel Broke?
The issue typically falls into one of three areas:
- Profitability and margins
- Tax optimization
- Debt structure and loan payments
In some cases, refinancing debt can immediately improve cash flow. In others, real estate strategies, retirement plans, or benefit plans may reduce tax exposure.
The starting point is diagnosing whether the issue is profitability, cash flow, or tax structure.
Setting an Income Goal
If you have never set an income goal, begin with this question:
What income level allows you to feel financially stable and content in your daily life?
Once defined, reverse engineer the business requirements needed to achieve that number.
Lower financial stress improves decision-making and overall well-being.
Staff Cost Benchmarks
A general benchmark for staff costs is:
25%–30% of revenue
However, this depends on:
- Practice stage (startup vs. mature)
- Number of providers
- Growth phase
Comparisons should be made between similar practice types and stages for accuracy.
Final Takeaways
- Define what success means personally.
- Reverse engineer income and production targets.
- Track clear KPIs monthly.
- Optimize margins and eliminate inefficiencies.
- Implement proactive tax strategy.
- Increase EBITDA to increase practice value.
- Use accountability and structured review to stay focused.
Financial clarity, structured planning, and proactive advisory support transform a busy practice into a profitable and scalable business.
