Here we are at the last blogpost in this series, The Business of Owning a Dental Practice. I can’t believe it’s been nine weeks now. Thanks for hanging with me and if you haven’t yet read the previous eight posts, please go back and check them out. You’ll find some good stuff.
Today’s topic is all about GAAP and the Profit First Equation. You know by now, I’m the Profit First for Dentists lady. Yes, I do teach and coach dentists using this method. I also wrote the book and my hope is that more and more dentists will read my book and implement this cash flow system in their practice.
Why? Because it works! And I believe dentists are some of the most hard working people out there. They deserve to be paid well and I don’t always see that happening.
Let's get to the topic today. GAAP stands for Generally Accepted Accounting Principles. These principles were created and put into law in the early 1920’s in the United States. They were created so accountants would have a standard to follow when reporting their business client’s income to the government.
The GAAP formula that was established then and still used by all businesses today is this. Sales – Expenses = Profit. The premise is that a business has sales, collects the money, pays all the bills, and keeps what is left.
Unfortunately for many small business owners, including dentists, the money left over isn’t always the profits they imagined and so deserve.
This is where Profit First comes in. By flipping the equation there is a mindset shift of putting profit first. It’s the pay yourself first model. It works wonderfully to impress upon business owners what they’ve wanted all along. The Profit First equation is Sales - Profit = Expenses.
I urge you to learn more and give it a try. I'm here to help if you have questions. And I hope you'll keep reading my blog. Next up is a series on the Core Principles of Profit First.