Smart Savings: Practice Investment Strategies That Retain the Most Value


By making sustainable, calculated investments, you can increase your revenue, practice value, your retirement nest egg, and more.


To become a dentist, you’ve invested heavily in your education—very heavily. The American Dental Education Association reported that the average debt for 2021 dental-school graduates was $301,583, with only 17% of graduates reporting no student-loan debt.1

You’ve made a hefty investment to make this career a reality. But it’s not a one-and-done deal: To pay off that investment, you’ll need to invest even more.

From the day you start practicing, to the day you open a practice, to the day you retire, you should be thinking about investment strategies that can benefit your practice and yourself. By making sustainable, calculated investments, you can increase your revenue, practice value, your retirement nest egg, and more. It’s important to make investments that will retain value and continue to power practice and wealth growth over the years so you aren’t left with money wasted on stagnant investments without long-term benefits.

“Once you transition to owning a practice, you can’t ignore the numbers anymore,” says Matthew White, cofounder of White & McGowan, a financial firm in Little Rock, Arkansas, that specializes in strategies for dentists and physicians. “You can’t ignore planning. You can’t ignore organization, risk management, or finances. Those all become a part of your life, and when that starts to happen, you need to take more interest in financial planning. This shift happens when you become a business owner.”

Investing in Your Practice

The American Dental Association reports that practice owners can expect to make an initial investment of approximately $500,000 to start a dental practice from scratch. These costs include construction and renovation of the building ($240,000); acquiring tools, equipment, technology, and supplies ($190,000-$200,000); and back-end expenses like marketing materials, information technology (IT) support, legal representation, and start-up employee salaries ($70,000).2

But these costs only represent the start-up. To remain profitable, you need to continually invest in smart strategies that will grow your practice and keep it appealing for sale when the time comes to sell out or retire. What follows are several areas that practice owners should keep in mind.

1. Real estate

Owning your practice’s physical space instead of leasing can be a very good investment. Having real estate helps you build equity in your practice, which appreciates over time and gives you the option to borrow against the property if you need to in the future. Plus, there are big tax breaks: Property owners can deduct interest, non–mortgage-related experiences, and depreciation. In fact, you may be able to accelerate deductions on your income taxes by applying Section 168 of the tax code. This section allows practices that have undergone a cost segregation study to break the building down into Internal Revenue Service (IRS)–sanctioned asset classes instead of sticking to the standard 39-year depreciation schedule that would apply to the whole property.

Under Section 168, different aspects of the practice are assigned different useful lives, which can open the door to accelerated depreciation for shorter components. Aldrich Advisors, an accounting, wealth, and consulting firm, reported that ground-up practices that switched to Section 168 had 24% to 65% of total building costs reallocated from the 39-year schedule to much shorter ones, which could have a major effect on your tax liability.3

2. Marketing

The best way to ensure continued revenue growth is to have an established and growing patient base. After all, your patients are what brings in the money. In addition to generating revenue for you now, it also makes the practice more attractive to potential buyers down the road that are going to look for a stable, sustainable patient base. This means you must be able to reach prospective patients.

One way to do this is to invest in a web designer and IT support system to ensure you have a user-friendly, attractive, modern website. Although a website may seem like a low priority, it’s the first impression prospective patients get of your practice. In the digital age, it’s critical that your website be up-to-date and tech-savvy and promote a positive image of your practice. You also want to ensure this presence carries over to your social media accounts, which should always be active. Posting a few times per week boosts your internet presence and makes you more accessible to patients.

Although the first inclination may be to invest in technology for the operatory, this digital technology is critical in getting new patients in the door—so that you have someone to use all that exciting new clinical technology on. If you don’t have someone in-house to run your website or social media, consider bringing on a contractor or partnering with an agency to maintain your digital presence.

3. Technology

This brings us to clinical technology, such as 3D printing, imaging, CAD/CAM—whatever latest emerging tech appears on the market. Investing in new technology for your practice allows you to treat more effectively and efficiently while also showing your patients that you are providing the most modern and best-on-the-market care.

Although the up-front cost of purchasing the latest digital scanner or 3D printer may be steep, the dividends it can bring make it worth it. Convenience is one major benefit. For example, if a dentist invests in a CAD/CAM solution that allows them to design and produce crowns, they could offer ceramic restorations in a single appointment—reducing the number of patient visits and increasing the ease of accepting care. This CAD/CAM solution could also save you on lab costs and costly production delays. Essentially, the benefits it provides now in saving you money, attracting new patients, or increasing case acceptance can more than cover the initial costs or the cost of investing in newer emerging technology down the road.

And if the cost seems insurmountable, there’s good news. Practices can claim a bonus depreciation tax deduction under IRS tax code Section 179 for 50% of the cost (or up to $500,000) of equipment purchased and put into use in a year.4

4. Practice design

It may seem superficial, but the look of your office can have a big impact on whether patients return. Your waiting room should be comfortable and comforting; many patients experience anxiety at the dentist’s office so providing them with a low-stress experience can keep them coming back.

In addition to considering aesthetics, investing in a layout that maximizes efficiency is something to consider seriously because it can save your practice time and money. If you’re struggling in your existing exam space, invest in renovations to add another operatory. If the cabinets in an operatory are inconveniently located and causing your hygienists to spend time getting up and down to get tools, redesign and reequip the rooms.

Although the investment cost of renovations may seem daunting, the long-term benefits can outweigh the price tag. Plus, there are other tax breaks for building improvements, which qualify for the leasehold improvement deduction under Section 168 of the IRS tax code. Leasehold improvements are depreciated over 39 years, allowing you to spread the cost of upgrades across a longer period.5

5. Your people

Your practice is only as good as its people. Investing in your staff—whether that be through offering continuing education credits, competitive salaries, practice-performance bonuses, or other benefits—rewards hard workers and helps retain personnel. You may face more up-front costs by paying higher salaries or offering benefits or competitive retirement plans, but you’ll be able to retain talent. Not only do you get to keep the people that keep your practice running smoothly, but you avoid the cumbersome, time-consuming process of having to train a new front-office member or hygienist on a regular basis.

Additionally, patients appreciate staffing consistency. Having long-term staff reflects well on the practice owner and helps build relationships with patients that will keep them coming back. If they receive oral-health or treatment advice from a trusted hygienist that they’ve been seeing for years, they are more likely to accept treatment than if they didn’t have a relationship with the dental professional. Higher patient return rates and higher treatment acceptance mean more revenue for the practice, which can easily offset the cost of compensation.

6. Yourself

You’ve already invested so much money in your education and your practice, but you also need to remember to continue to invest in yourself. Dentists should continue to pursue opportunities to grow to provide the best care for their patients. Continuing education courses, lecture circuits, publications, and research are all great ways to stay on the cutting edge of the industry while also establishing yourself as an educated and forward-thinking clinician. Doing this can result in an increase in revenue. If dentists position themselves as always learning and improving, it can become a great marketing tool.

Social media and the practice’s website are great places to let patients and potential patients know that you’re consistently invested in improving the care you provide by participating in continuing education. If you learn a new technique with new technology, promote it on your page to explain how this new technology can provide better care for them and that you are equipped to handle this technique or type of case. This can help drive more patients who see that you are experienced in treating their problems in the most up-to-date manner.

Continuing education also gives you the opportunity to create blog posts or educational materials. You can present the information you learned and how it will help you provide better care to your patients, which positions you as a knowledgeable professional there to educate as well as treat. By enhancing your own continuing education, you are also enhancing your public image and thus growing—and maintaining—your patient base over time.

Financial Investment Strategies That Pay Off

Smart savings go beyond just investing in the practice itself. Doctors should always be thinking about the value of their investments when it comes time for a practice sale or retirement. Getting started with these investments early can pay big dividends in the long run. But where should practitioners be putting their money?

The smartest investments you can make are varied. White says that diversifying your investments is the best way to plan for the future. Doctors can diversify by investing in a variety of plans for themselves and their employees to maximize their pretax contributions and pay less in taxes.

“Having multiple types of retirement plans gives the owner the ability to make greater pretax contributions,” White says. “You do you have to make 401(k) contributions to those employees, which is a cost and is overhead, but assuming the tax savings for the owner is greater than the overhead cost of making matching contributions to employees—which it typically is—then it makes sense for them to implement plans like a 401(k), and a profit-sharing plan, and a cash-balance plan.”

White believes that retirement contributions can start early and may even be an option for younger dentists who may not be in a position to contribute much at this stage in their career. For instance, cash-balance plans are age-weighted in the way the contributions are calculated, so the older you are, the larger those pretax contributions will be.

“If you start when you’re really young, your contribution on top of…a 401K and profit-sharing plan will be much smaller, but if you are age 55 and starting a cash-balance plan, your contribution may be $250,000 a year that you can contribute to this account pretax,” White says. “The deductions can be significant and can help a dentist save a significant amount in taxes.”

These deductions add up quickly. In 2022, White says people younger than 50 years can contribute up to $20,500 with a 401(k), and those 50 years and older can add another $6500 to that total as a catch-up contribution.6 If you’re younger than 50 years and add a profit-sharing portion, you can set aside $61,000 per year pre-tax. And, depending on your age, if you do a cash-balance plan on top of that, your contribution could amount to an extra $50,000 on top of the $61,000 for those younger than 50 years and the $67,500 for those 50 years and older.

When it comes to investing in retirement, understanding the different options for savings can help dentists save more and pay less. Aldrich Advisors recommends that business owners invest in the following 3 types of retirement plans:3

1. Individual retirement accounts (IRAs)

Making contributions to a tax-qualified retirement plan is a great way to start saving. An annual investment in an IRA can grow to a substantial amount by retirement time. As a bonus, contributions to IRAs can often reduce the amount you’ll owe at tax time because it affects your adjusted gross income. Practitioners should begin making contributions to one of these tax-qualified plans as early as possible.

2. 401(k) plans

Contributions to 401(k) plans are another way to set aside savings. These contributions are deducted from gross income before income taxes have been deducted. The money contributed—and any investment earnings—aren’t taxed until withdrawal. Although the downside is paying taxes on your withdrawal, you may be in a lower tax bracket by that time, which will save money overall.

3. Roth IRAs

A Roth IRA differs from a traditional IRA in a few key ways. With a Roth account, you’re able to contribute after-tax dollars, your money grows tax-free, and you can generally make tax- and penalty-free withdrawals after the age of 59½.7

According to Charles Schwab, Roth IRAs are best suited for individuals who expect to be in a higher tax bracket when they start making withdrawals.7

“Let’s say we convert a million dollars over 5 years,” White says. “By going ahead and paying taxes on that before the required minimum distributions hit and getting it into the Roth IRA, it’s able to grow tax-free from that point forward. Since there is no required minimum distribution on a Roth IRA, it allows this money—that you may not need for a long time—to grow tax-free.”

In the end, being left with more money is the goal of all investment strategies. By investing in your practice and planning for your future, you can ensure that down the road, you will see the results in increased practice value—and its subsequent revenue.


  1. Educational debt. American Dental Education Association. Accessed August 24, 2022.
  2. The real cost of owning a dental practice. American Dental Association Marketplace blog. Accessed August 24, 2022.
  3. What do you do with extra cash in your dental practice? Aldrich Advisors. March 17, 2017. Accessed August 24, 2022.
  4. IRS issues guidance on Section 179 expenses and Section 168(g) depreciation under Tax Cuts and Jobs Act. News release. Internal Revenue Service. December 21, 2018. Accessed August 22, 2022.
  5. 26 U.S. Code § 168 - accelerated cost recovery system. Legal Information Institute. Accessed August 24, 2022.
  6. Waggoner J. How much can you contribute to your 401k in 2022? AARP. November 10, 2021. Accessed August 23, 2022.
  7. Roth IRA vs traditional IRA. Charles Schwab. Published 2016. Accessed August 23, 2022.,current%20income%20after%20age%2059%C2%BD

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