One of the most consequential decisions a dental practice owner makes is where to allocate capital. A new CBCT scanner. An additional operatory. A second location. These are six- and seven-figure decisions, and in my experience, most practice owners make them based on a combination of peer recommendations, vendor pitches, and gut instinct.
There's a better way. In corporate finance, capital budgeting is a discipline — a structured approach to evaluating whether an investment will generate returns that justify the cost. The same principles apply to your practice, and they're not as complicated as they sound.
The Three Questions Every Capital Decision Should Answer
- What's the incremental revenue? Not "how much could this generate" — but realistically, based on your current patient volume, case mix, and referral patterns, how much additional revenue will this investment produce?
- What's the true total cost? Purchase price is just the beginning. Factor in installation, training, maintenance, supplies, the cost of any downtime during installation, and the opportunity cost of that capital.
- What's the payback period? How many months until the incremental revenue covers the total cost? And what's the risk that your assumptions are wrong?
A Real Example
I recently worked with a practice evaluating a CBCT purchase. The vendor's ROI projections showed a 14-month payback. When we built our own model using the practice's actual data — their case mix, their referral-out rate for implant planning, their fee schedule — the realistic payback was closer to 26 months. Still a good investment, but a very different conversation about cash flow and financing.
The difference? The vendor assumed utilization rates that didn't match this practice's patient demographics. That's not deception — it's just the gap between a generic sales model and a tailored financial analysis.
Why This Matters
Practice owners who think like business owners make better capital decisions. That doesn't mean you need an MBA — it means you need the right analytical framework and the right data. That's where a fractional business analyst adds value: bringing financial rigor to decisions that are too important for back-of-napkin math.