Your Practice Is Growing. But Is It Actually Making More Money?

Oct 1

13 min read

By Sarah Beth Herman, MBA, Founder & CEO, Dentistry Support®

Growth is one of the most celebrated milestones in business. A dental practice reaches a new production record, annual revenue crosses another threshold, the schedule is fuller, more patients are being treated, another provider joins the team, and the practice begins operating at a scale that once seemed far away. From the outside, those changes can look like undeniable progress.

But there is an important question every practice owner should ask before assuming that a larger revenue number means the business has become stronger: How much money did the practice actually make?

Revenue and financial health are related, but they are not the same thing. A practice can generate more revenue than ever before while carrying higher expenses, increasing payroll, accumulating outstanding insurance balances, investing heavily in growth, and ending the year with less cash available than expected. That does not automatically mean the practice is performing poorly. It means the top-line number cannot tell the entire story.

The real work begins when you look beyond what came into the business and start asking what happened to the money after it arrived.

That is the focus of this week's Dentistry Support® FREE TRAINING.

REVENUE IS ONLY THE BEGINNING OF THE CONVERSATION

Revenue is easy to understand and easy to celebrate. A practice may proudly say, “We crossed $1 million,” “We are now a $3 million practice,” or “We grew 25% this year.” Those accomplishments matter, and growth should be recognized.

But revenue tells you how much money moved through the business. It does not tell you how much the business retained, how much cash is available, or whether the additional revenue improved the financial position of the practice.

Consider a practice that generated $2 million in revenue one year and $2.5 million the next. That is $500,000 in growth, and on the surface, the business appears significantly stronger. But now look underneath the revenue number.

Perhaps payroll increased by $240,000. Marketing increased by $90,000. Software and technology expenses rose. Merchant processing fees increased because the practice processed more transactions. Insurance premiums increased. The practice added another manager, employee, or provider. It may also have invested in equipment, expanded its space, or incurred additional debt to support growth.

At the end of the year, the practice generated half a million dollars more revenue but has less cash available than it did before.

The practice grew. But did the growth make the business better?

That is a very different question.

The Federal Reserve Banks' 2026 Small Business Credit Survey reinforces why this distinction matters. Rising costs remained a significant challenge for small employers, meaning that businesses experiencing higher revenue may also be absorbing higher labor, service, supply, insurance, and operating costs.

Growth should therefore be measured by more than how impressive the revenue number appears. It should also be evaluated by what the business had to spend, build, and manage in order to produce it.

ASK WHAT THE GROWTH ACTUALLY PRODUCED

There is nothing inherently wrong with expenses increasing as a practice grows. Growth requires investment. You may need more employees, stronger technology, additional management, more space, better equipment, administrative support, or increased marketing. Those investments may be exactly what the practice needs.

The important question is whether you understand what those investments produced.

If payroll increased significantly, what changed because of it? Did the practice create more capacity? Did collections improve? Did patients receive faster service? Did the doctor finally step away from responsibilities that should belong to someone else? Did the practice create infrastructure that can support future growth?

If technology expenses increased, did those systems improve efficiency? If marketing increased, did profitable patient volume increase with it? If you added management, did leadership become stronger and decision-making become more effective?

The goal is not to reduce every expense. The goal is to understand what the practice purchased with the money it spent.

A growing business should be able to connect major investments with meaningful business outcomes.

A REVENUE GOAL NEEDS MORE THAN A NUMBER

Revenue targets can be useful because they provide direction, create accountability, and give the team something measurable to work toward. But a revenue goal by itself is incomplete.

Suppose your goal is to reach $5 million. Why $5 million? What becomes better when the practice reaches that number?

Will profitability improve? Will the business have stronger cash reserves? Will you add another provider? Will you expand the hygiene department? Will the owner reduce clinical hours? Will you invest in leadership? Will the additional revenue allow the practice to reduce debt, create greater stability for the team, or become less dependent on the owner?

The number should represent something. Otherwise, revenue can become a target the business chases simply because bigger feels like progress.

There is an important difference between building a larger business and building a better one. A larger business may have more patients, employees, locations, and revenue. A better business should also have stronger economics, healthier systems, better cash management, greater stability, and an operating structure capable of supporting the growth it has created.

Before setting the next revenue target, determine what achieving it is supposed to improve.

YOUR LARGEST REVENUE SOURCE MAY NOT BE YOUR MOST VALUABLE

One of the most useful ideas in evaluating a business is separating size from value. The client generating the most revenue is not automatically the best client. The service producing the highest sales is not automatically the most profitable. In a dental practice, the payer representing the most production is not automatically the most valuable payer.

Consider an insurance plan that represents a large portion of the practice's production. At first glance, it appears extremely important. But now look deeper. How quickly does that plan pay? How frequently are claims denied? How much additional documentation is required? How many claims require appeals? How much administrative time does your team spend following up? What are the contractual write-offs? How much unresolved A/R is associated with that plan?

Another payer may represent less total production but reimburse more consistently, require fewer administrative resources, and create fewer outstanding balances.

Which one is actually more valuable to the practice?

You need more than a production number to answer that question.

The same principle can be applied to procedures, services, providers, marketing channels, and even locations. A large number should prompt further investigation. It should not automatically determine the conclusion.

KNOW WHAT IT COSTS TO DELIVER THE REVENUE

Every dollar of revenue has something behind it: clinical time, administrative time, supplies, laboratory costs, payroll, technology, marketing, payment processing, management, and follow-up.

Sometimes the amount of work required to generate a particular dollar of revenue is relatively small. Sometimes it is substantial. That matters because revenue can appear impressive before the costs associated with generating it are fully considered.

Imagine a service that produces strong revenue but requires additional chair time, higher laboratory costs, repeated administrative follow-up, and more adjustments. Compare it with another service that generates slightly less revenue but requires fewer resources and collects more efficiently.

You cannot decide which one is stronger simply by looking at production. The economics underneath the production matter.

Before expanding a service, increasing marketing, or adding more volume, understand what the practice actually earns after the costs required to provide and support that service are considered.

BEFORE YOU SCALE, MAKE SURE YOU LIKE WHAT YOU ARE SCALING

Dental practices are frequently encouraged to grow by adding patients, providers, hygiene capacity, marketing, extended hours, locations, and production. Those strategies may make perfect sense, but scale should amplify something that already works.

If a service has weak economics, increasing the volume may simply create more work without meaningfully improving profitability. If your front office is already overwhelmed, adding substantial patient volume can increase scheduling demands, phone activity, insurance verification, claims, billing, and patient balances.

If the billing department is already struggling with aging claims, more production also creates more claims requiring management. If important decisions still depend entirely on the doctor or owner, expanding the business without improving leadership structure can make the practice even more dependent on one person.

Growth magnifies what already exists. It can magnify efficient systems, strong leadership, and healthy economics, but it can also magnify bottlenecks, poor processes, and unresolved financial problems.

Before asking, “How do we get more?” ask, “Do we want more of what we already have?”

If the answer is yes, scale it intentionally. If the answer is no, improve the economics or operations before adding additional volume.

PAYROLL SHOULD CREATE A BUSINESS RESULT

Hiring often feels like a visible sign of growth. The practice grows from 10 employees to 15, and then from 15 to 20. The organization is larger, and the payroll is larger with it.

But headcount by itself does not tell you whether the investment improved the business.

Ask what the additional employees allowed the practice to accomplish. Did production capacity increase? Did collections improve? Did administrative turnaround times improve? Did the patient experience become better? Did unresolved work decrease? Did leadership become stronger? Did the owner finally stop performing responsibilities that should belong elsewhere? Did the new team members create the infrastructure needed to support future growth?

These questions matter because the true cost of hiring extends beyond the wage on an offer letter.

According to the U.S. Bureau of Labor Statistics, private-industry employers averaged $32.82 per employee hour in wages and salaries and another $14.07 in benefits in June 2026, for average total compensation of $46.89 per hour. Those figures are broad private-industry averages rather than dental-practice-specific costs, but they demonstrate that employee compensation includes significantly more than wages alone.

Depending on the practice and position, the full investment may also include recruiting, payroll taxes, benefits, workers' compensation, technology, equipment, training, and management time.

That does not make hiring a poor investment. Hiring may be one of the smartest decisions a growing practice makes. But the investment should create something measurable.

Payroll should produce more than additional payroll.

PRODUCTION AND CASH ARE NOT THE SAME THING

This is one of the most important distinctions for a dental practice. Imagine an exceptional month. The doctor's schedule is full, hygiene production is strong, treatment is being completed, and the team is busy. The production report looks outstanding.

Now look at collections.

Look at insurance accounts receivable, patient balances, claims over 30 days, claims over 60 days, claims over 90 days, claims requiring additional documentation, denials, outstanding appeals, and balances that have not received appropriate follow-up.

Doing the dentistry and collecting the money attached to that dentistry are two separate operational events.

Production can be high while cash remains tight. The work can be complete while the payment is still outstanding.

That means a strong production report cannot be viewed in isolation.

The American Dental Association recommends consistent attention to outstanding balances and notes that accounts more than 30 days past due warrant additional follow-up.

Accounts receivable is not simply an accounting number. It reflects the effectiveness of the systems that convert completed dentistry into collected revenue.

SOMETIMES MORE PRODUCTION IS NOT THE ANSWER

When a practice feels financial pressure, the instinct is often to increase production by adding marketing, generating more new patients, filling open appointments, improving case acceptance, or adding another provider.

Those strategies can absolutely help when the business needs additional demand.

But sometimes the problem is not that the practice needs to produce more dentistry. Sometimes the problem is that it has not collected the money attached to dentistry it already completed.

Before automatically pursuing more production, review insurance A/R, patient balances, outstanding claims, denials, appeals, missing documentation, aging, and unresolved balances. Ask how much money the practice has already earned but has not yet converted into cash.

The American Dental Association similarly encourages dental practices to pay close attention to collections, net production, overhead, and related financial indicators when evaluating financial performance.

More production can create opportunity. But adding more work to a weak collection process can also increase the amount of money waiting to be collected.

Sometimes the most valuable financial improvement is not producing another dollar. It is collecting the dollar the practice already earned.

FOLLOW THE MONEY

When revenue grows but the bank account does not seem to reflect that growth, do not dismiss the contradiction. Investigate it.

Where did the money go? Has it been collected? Did payroll increase? Did operating expenses increase? Did the practice purchase equipment? Did it invest in another location? Did it pay down debt? Did owner distributions change? Did margins decline? Is more money sitting in accounts receivable?

The answer will be different for every practice.

There is no single financial ratio or benchmark that explains every business. The important part is developing the discipline to keep following the money until you understand what happened.

The revenue number tells you where the investigation begins. The rest of the financial picture tells you what the revenue actually meant.

PUT THIS YEAR NEXT TO LAST YEAR

One of the most useful exercises you can complete is also one of the simplest. Pull your year-to-date numbers and review revenue, collections, payroll, operating expenses, cash, accounts receivable, and profitability. Then place those figures next to the same period last year.

For a moment, resist the urge to explain them. Just look.

Ask what changed. Which numbers increased? Which decreased? Which remained relatively stable?

Then ask what changed faster than something else.

If revenue increased 18% while payroll increased 40%, investigate why. There may be an excellent explanation. Perhaps you intentionally hired ahead of growth, added another provider, invested in management, or created operational capacity that will produce results over the next several years.

Do not automatically assume the increase is bad. Understand it.

If revenue increased while cash decreased, identify where the cash went. If revenue remained flat but profitability improved, determine what the practice did differently. If accounts receivable increased much faster than production, understand why. If a large payer represents a significant portion of revenue, evaluate the resources required to maintain that relationship. If you introduced a new service, determine whether it is generating the return you expected.

Financial reports become much more valuable when you stop looking at individual numbers and begin looking at the relationships between them.

DO NOT BE AFRAID TO DISCOVER THAT YOU DON'T KNOW

This exercise may reveal questions you cannot immediately answer. Perhaps you do not know why payroll increased as much as it did. Perhaps you cannot explain why cash is lower. Perhaps you have never calculated how much administrative time a specific payer requires. Perhaps you do not know how much of your insurance A/R is realistically collectible. Perhaps you introduced a new service but have never evaluated whether it is truly profitable.

That discovery is not a failure. It is useful information.

You have identified something the business needs to understand.

“I don't know” becomes valuable when it leads to “Let's find out.”

The problem is not discovering that you do not know something today. The problem is continuing to make major business decisions without ever finding the answer.

YOUR FINANCIAL REVIEW FOR THIS WEEK

Set aside time to review the business without focusing exclusively on production. Compare your current year-to-date performance with the same period last year and determine how revenue, collections, payroll, operating expenses, cash, accounts receivable, and profitability have changed.

Then go beyond the numbers themselves.

Ask what your additional spending produced. Identify where money is getting stuck. Determine which areas of the practice require more resources than expected. Look closely at services and payers that may appear attractive based on production but look different once administrative effort and cost are considered.

Ask whether you are trying to grow something before fully understanding its economics.

Ask whether you are adding volume to a healthy system or to an existing problem.

And finally, ask:

Did our growth actually make the business stronger?

Do not judge the practice solely by whether every number increased. Use the numbers to understand the quality of the growth.

BUILD A BETTER BUSINESS, NOT JUST A BIGGER ONE

There is nothing wrong with wanting more patients, production, revenue, providers, locations, or opportunity. Growth can create extraordinary possibilities for a practice, its patients, its team, and its owners.

But bigger should not become the goal simply because it sounds impressive.

Healthy growth should give something back to the business: greater profitability, more stability, better systems, additional capacity, stronger leadership, improved cash flow, more opportunities for the team, or more freedom for the owner.

Before asking how you will make more money next year, understand what happened to the money you made this year. Before adding another employee, understand what your current payroll is producing. Before adding another provider, understand whether the practice can support the additional volume. Before increasing marketing, understand what happens to the patients already entering the practice. Before scaling a service, understand whether its economics deserve to be scaled.

And before celebrating the largest number on your financial report, make sure you understand all of the numbers surrounding it.

Revenue matters, but revenue is only one part of the story.

The goal is not simply to have more money moving through the practice. The goal is to build a business where growth actually improves what remains after the work is done.

COMING NEXT ON NO SILVER SPOONS®

This conversation does not end with a revenue report.

In the upcoming No Silver Spoons® Episode 143: “Your Revenue Number Is Lying to You,” the conversation goes deeper into one of the most common ways business owners evaluate growth: the top-line revenue number.

The episode examines why revenue alone cannot tell you whether a business is financially healthy, what it may cost to create that revenue, how payroll and operating expenses can change the real value of growth, and why a business can produce more than ever while still wondering where the cash went.

For dental practices, that conversation becomes especially important when comparing production with collections, insurance accounts receivable, patient balances, and the amount of completed dentistry that has actually been converted into cash.

If your practice is growing, the next step is not simply deciding how to grow faster. It is understanding the economics of the business you are already building.

Follow the money. Understand what the growth is costing you. And make sure the bigger number is actually creating a stronger practice.

References

Federal Reserve Banks. (2026). 2026 Report on Employer Firms: Findings from the 2025 Small Business Credit Survey. Small Business Credit Survey.

U.S. Bureau of Labor Statistics. (2026). Employer Costs for Employee Compensation — June 2026. U.S. Department of Labor.

American Dental Association. Overdue Accounts. Practice Management Resources.

American Dental Association. Six Ways to Strengthen Your Practice's Bottom Line. Practice Management: Finances.

U.S. Bureau of Labor Statistics. (2026). Employer Costs for Employee Compensation of Private Industry Workers, by Establishment Size — June 2026.

Disclaimer:

To learn more about Sarah Beth Herman, the author of all free training content you can read her bio here. These materials are intended to provide helpful information to dentists and dental team members. They are in no way a substitute for actual professional advice based on your unique facts and circumstances. This content is not intended or offered, nor should it be taken, as legal or other professional advice. You should always consult with your own professional advisors (e.g. attorney, accountant, or insurance carrier). To the extent, Dentistry Support ®has included links to any third-party website (s), Dentistry Support ® intends no endorsement of their content and implies no affiliation with the organizations that provide their content. Further, Dentistry Support ® makes no representations or warranties about the information provided on those sites. You can view our privacy policy and terms and conditions by clicking those pages in the footer of our website