Estimated reading time: 5 minutes
Many dental practices may look successful from the outside but behind the scenes, the same five money mistakes are in fact holding them back. By John Burfitt
Financial strategist Salena Kulkarni recalls the time she met with a dental practice client whose business had kept $2 million in cash reserves for years because he was too scared to spend it on the wrong thing.
“He was paralysed by fear,” Kulkarni, a chartered accountant and certified property investment adviser with the Phoenix Wealth Group, says.
“He hadn’t invested it or even parked it in a simple index fund, and the cost of doing nothing was hundreds of thousands of dollars in lost income.”
Canberra-based Kulkarni, who runs the Freedom Warrior Dentist program which helps practice owners build wealth, says the issue of lost financial opportunities among dentists is not unusual. “Dentists are some of the most intelligent clients I’ve ever worked with, but for all their clinical expertise, too many make avoidable money mistakes that keep them working harder and longer than necessary.
“Many appear wildly successful, but when you look behind the curtain, the financial picture can be fragile.”
Kulkarni describes five main money mistakes dentists often make and how to avoid them. “Money is the reward for patience, consistency and a clear plan. These are the same qualities that can make or break a practice.”
Too scared to act
Having helped guide the financial decisions of many dentists, Kulkarni says the most common mistake dentists make is to let excessive caution jeopardise their financial security.
“I believe dentists are great clinicians, but when it comes to money, they can be so conservative that they do nothing at all,” she says.
The expense of inaction can be staggering. Even modest, low-risk investments can create significant growth over time, but making the wrong choice can seriously cost.
“The sweet spot is when you can make informed decisions with confidence, either by learning how better investing works or asking for advice on what to do,” Kulkarni says. “This doesn’t mean you need to become an accountant. It simply means holding the reins and ensuring wealth-building decisions align with your goals.”
No plan
Many dentists, Kulkarni claims, operate without a financial plan and instead rely solely on their accountants for financial advice. “This is flying blind without a financial road map as accountants are historians, not navigators,” she says.
“So if you are not acting as your best chief financial officer of your practice, then you are not empowering yourself to make better financial decisions.”
Kulkarni has known many dentists who assume their accountant is steering their wealth, when in fact the accountant’s focus is on compliance, not forward planning. “Accountants are excellent at tax and compliance, but that’s backward-looking. Dentists often assume their accountant is their CFO, but no-one is steering the ship forward. That’s why you have to step into the CFO role yourself and use advisers to support your plan, not create it.”
Failing to diversify
A common mistake dentists make is to treat their practice as their only asset. While a dental practice may generate a strong income, relying only on one stream can become what Kulkarni calls ‘golden handcuffs’. “I’ve seen dentists whose practices earn well in excess of half a million dollars a year, but they’re terrified to take even two weeks off because the whole business relies on their active production,” she says.
A busy appointment book is not the same thing as financial freedom. You can be in the top 10 per cent of health producers and still be financially fragile.
Salena Kulkarni, Phoenix Wealth Group
Then there are owners who assume that selling the practice in the future will be the best path to financial security in retirement.
Instead, she encourages dentists to focus on building wealth outside of the practice, including investing in property, building a diversified portfolio and exploring alternative and emerging opportunities to generate passive income streams. “Your income may be great, but income isn’t freedom until you actually convert it into investments that pay you,” she says. “Your practice is an incredible asset, but it should not be your only one. You need to have a plan B that allows you to breathe a little easier.”
Confusing productivity for wealth
“A busy appointment book is not the same thing as financial freedom,” Kulkarni warns. “You can be in the top 10 per cent of health producers and still be financially fragile.”
Practitioners across all medical fields are often trained to measure performance by production, the measure of success being a full appointment book, number of procedures completed and patient retention.
But production does not necessarily equal wealth, which is why it’s essential to track all financial metrics of the practice, not just the clinical ones.
“I’ve often seen dentists pay a great deal of attention to how busy their chairs are, but overlook wealth KPIs, like cashflow, net worth growth and asset performance.
“Dentists are often so busy working hard on the tools that tracking the right metrics falls to the wayside, but even simple annual tracking and analysis of wealth indicators can keep you focused on the right long-term outcomes.”
Financial ignorance
When it comes to investing, many dentists completely hand over their savings to planners and end up with cookie-cutter portfolios. This, Kulkarni explains, is why a dentist needs to be their own Chief Financial Officer.
“I’ve seen wealth advisers just hand dentists a default menu of investments, and if you always invest from it, you’ll only ever get average results,” she says. Delegation isn’t the mistake, but delegating without understanding is. “You can’t judge and make decisions about what you don’t understand.”
Kulkarni believes it’s important to gain a better financial working knowledge and to look beyond mainstream managed funds or standard property investments.
“What you really need is financial acuity, with enough knowledge to judge whether advice adds value or just delivers the default menu. Delegation works best when you understand enough to stay in control.”
