Can this dental practice pay its owner and its debt?

Recognize fees the practice expects to collect

Procedure volume is constrained by one dentist and one hygienist, booked utilization and missed appointments. Year 1 gross list production is $843,065. Contractual discounts of $166,288 reduce adjusted production to $676,777; the realization haircut then reduces revenue by $16,954. Bank receipts are a separate $626,794 because not all collectible fees arrive during the year.

ADA distinguishes these production and collection measures. Our net revenue is expected collectible production recognized when a completed episode is delivered; it is not a claim that the full list charge is cash. In a real practice, crown deposits, staged billing and payer contract rules may require a different completion/recognition schedule. Use an accountant-approved treatment-level ledger and avoid counting preparation and seating as two full crown sales. Finance definitions.

Separate paid capacity from procedure expense

Monthly opening payroll is $43,226, including $180,000 annual gross owner salary, one hygienist, two assistants, front desk and 18.0% loading. All are fixed paid commitments in this reference model. A light appointment book does not remove their paid hours. Procedure materials and crown laboratory work vary with completed episodes; card processing varies with actual receipts.

Other fixed operating costs are $11,900 monthly, including $5,400 assumed occupancy. Equipment depreciation is $3,710 monthly and does not itself spend cash. Scheduled loan payment is $6,346; only interest is an income-statement expense, while principal reduces debt and cash. Positive monthly pre-tax earnings carry an illustrative 25.0% cash tax allowance, without loss offsets. This is a conservative planning convention, not a filed return or statutory rate.

Inspect the favorable and unfavorable cases

Base bookings settle at 85.0% dentist and 90.0% hygiene before 8.0% missed appointments; PPO share is 60.0%. Lower bookings retain an additional 80.0% multiplier throughout this stress case, so effective dentist booking is 54.4% before 14.0% misses. Lower also weakens fees/realization, raises supplies and delays PPO cash. It does not quietly remove paid staff.

Higher assumes 95.0% and 95.0% bookings, 4.0% misses, 45.0% PPO share, stronger realization, a 1.03x fee multiplier and faster collections. It never exceeds clinician hours. These are competing hypotheses, not probability bands or guaranteed demand. All three use the same capital, staffing, owner salary, debt rate and term.

Follow the five-year base cash failure

Year 1 net income of −$218,720 plus depreciation $44,514 less receivable growth $33,029 equals operating cash flow −$207,234. Deduct principal $29,456 to obtain −$236,691. That bridge proves why neither EBITDA nor billed production can replace cash.

Negative cash is an unfunded obligation, not an available overdraft. The balance sheet shows zero available cash and an explicit funding-gap liability solely to reconcile the continued stress calculation. No facility, interest rate or permission to continue operating after cash exhaustion is assumed.

Use a declared recovery basis

Project recovery compares cumulative unlevered after-tax operating cash, including receivable growth, against all $680,200 committed funding including reserve. Equity recovery compares cumulative cash after scheduled debt against $200,000 initial equity. Opening reserve is not counted again as a recovery receipt. Owner wages have already been paid and are not an investment distribution. No sale proceeds or terminal equipment value enter either test.

Base and lower do not recover either basis in 60 months. Higher reaches modeled project recovery in month 48.0 months and equity recovery in month 32.0 months. Neither is an unconditional promise. To fix the base case, test a supported fee/payer mix or a differently scoped paid roster and opening spend; a larger cash reserve alone cannot increase contribution.

Do not call EBITDA owner take-home

The owner receives $180,000 gross salary in Year 1, rising with the modeled wage assumption; personal deductions, benefits received, loan guarantees and personal taxes are outside this take-home calculation. Employer loading on owner salary is included. The company makes no assumed dividends or distributions. Even the higher case has cash commitments and cannot distribute its accounting profit without checking reserve, tax, debt terms and working capital.

The owner must also perform 40.0 paid hours each week, with 32.0 scheduled clinical hours. Recruiting, supervision, claims follow-up and clinical documentation use the remainder. Reducing salary may fund the business through unpaid owner labor but does not prove economic profit; document that change rather than calling the work free.

Compare the monthly cash path

Download all scenario cash values (CSV). This educational case export is separate from the planned personalized Excel model.