Think Before You Spend: Investing Wisely in Your Practice

The past two posts were about how (and how not) to analyze your practice’s financial health. Do it right, and you’ll have a clear and correct picture of exactly what you have and then you can manage your practice intelligently and effectively. The next step is to make investment choices that make sense. But this, too, benefits from analysis so you can be sure you’re investing wisely.

In the life cycle of any dental practice, an owner periodically will be faced with making investments to improve financial and operational performance or to simply maintain the status quo. In order to consistently make the right decisions, it is helpful for the owner to have a set process for evaluating different investment choices.

What Is the Investment?

Major investments in a dental practice fall into one of three main categories-people, equipment/technology and real estate. While it is not necessary for a practice to spend money and time on each of these categories every year, it does make sense to create a long-term plan that focuses on each area and spreads investment dollars over a period of years.

Without a plan and a budget, these big expenditures tend to stack up until they require urgent attention. At that point, you might be faced with two unattractive alternatives: (1) ignore the investment needs of your practice and suffer financially as a result or (2) make the necessary investments all at once and keep your fingers crossed that everything works out for the best.

Why Are You Considering the Investment?

You might be making an investment in your practice to maintain the status quo or to upgrade or enhance your practice in some way. The larger the investment, the less likely that you will be satisfied with “business as usual.” Instead, you will likely have an expectation that the investment will enable you and your team to do things better, more efficiently and more profitably. The right investment, handled correctly and done at an opportune time, can make those expectations a reality.

Develop a Measurement System for Tracking Performance

Once you have a plan for what you want to buy, when you want to buy it and what you think it can do for you, you then need to develop an implementation strategy and a performance tracker. Even if we are talking about refreshing or upgrading the skills of your team, you need to be able to determine whether your investment was money well spent or money down the drain.

Remember, the goals of financial analysis are to dodge mistakes and repeat successes. With a systematic process for evaluating opportunities, making strategic investments, creating implementation plans and measuring results, you will put your practice on a path to high performance.