How to pay yourself fairly while building a practice designed to last
Key takeaways:
- How should I structure my dental practice owner salary? We often recommend that you pay yourself as a producer first (typically 30-35% of net production or collections), not from whatever’s “left over.”
- Why does year one feel so chaotic? The “ugly duckling phase” is normal. Higher expenses and choppy income are part of fine-tuning your practice engine for long-term success.
- What’s one financial mistake new owners make? Prioritizing fancy technology over patient growth. You need bodies before cool technology, and marketing often delivers the ROI that can matter most in year one.
You’re going to make dozens of financial decisions in year one, but how you structure your compensation affects every single one of them.
Pay yourself too little, and you’re creating unnecessary personal financial stress that bleeds into how you run the practice. Try to take home too much too fast, and you starve the business of the cash it needs to grow. Wing it
without understanding the tax implications, and you’re leaving money on the table or setting yourself up for a painful surprise in April.
The dentists who get this right aren’t smarter or luckier. They just have clearer data and better coordination between their advisors. They know what they need personally, understand what the practice can sustain, and have a team helping to make sure those two things stay connected as the business evolves.
And it all starts with how you think about paying yourself.
The Core Question: “How Much Should I Actually Pay Myself?”
You pay your hygienists. You pay your administrative assistants. You compensate everyone else on your team with a fair wage. Paying yourself for clinical work should follow the same logic.
A common benchmark is 30–35% of your net production or collections when you’re the one holding the hand-piece. This isn’t your total take-home pay; it’s compensation for the clinical work you’re doing, structured as if an associate were doing it instead.
Relying on “what’s left” at the end of the month as your income introduces unnecessary uncertainty. It makes personal cash flow harder to predict and long-term planning harder to do well. Instead, we want to know what income you would need to support your lifestyle, so that number becomes a clear target.
Determining Your Ideal Income: How We Crunch the Numbers
We’ve seen dentists show $60K on a W-2 while taking home $600K total. We’ve seen others structure it entirely differently. Whether you’re paying yourself through W-2 salary, distributions, or a combination depends on whether you’re set up as a sole proprietor, S-corp, or something else. And the right answer for you might look completely different from another dentist making the same income.
What’s non-negotiable is this: We need to track your data on both a personal and professional level.
Here’s what we actually do when a client asks us, “How much should I be paying myself?”
First, we look at the practice side. What’s your production? What are your collections? What’s realistic for take-home given your current patient base, overhead, and growth trajectory? Is there enough cash flow to both pay you fairly and reinvest in marketing, staffing, and infrastructure?
Then, we help you get clear on your personal numbers. What do you actually need to live your life, maintain your savings goal, and stay financially healthy lifestyle? Not what you think you should need, or what other dentists are spending—what does your life cost?
Once you know that number, it becomes your target. That’s what guides what you need to collect and learn from the practice.
Here’s the thing about year one: You need to be flexible enough to go into “lean mode” if the practice demands it. A high personal burn rate puts pressure on your income at any stage of your career, but especially when you’re building.
This is where having your financial advisor talk to your CPA makes all the difference. Because your compensation structure isn’t just about “how much comes home;” it’s also about tax planning, entity structure, and timing
Related: Click here to read “Taxes 101 for Dentists: Which Entity Structure is Best for Your Practice?”
The “Ugly Duckling Phase: Dealing with Anxiety Avoiding Comparisons
Year one rarely feels like the dream you imagined during your associate years.
We call it the “ugly duckling phase,” and pretty much every new owner goes through it. You’re figuring out systems, dealing with staff turnover, watching expenses run higher than expected. Collections are choppy, income feels unpredictable, and if you’re scrolling Instagram seeing other dentists flexing about their lifestyle, it’s easy to think you’re somehow failing.
This is where we remind you: That’s what building a business looks like.
Whether you bought an existing practice or started from scratch, those first years are about fine-tuning your engine. You’re testing systems, making adjustments, and investing in the foundation that’s going to support decades of income.
If you don’t build a rock-solid foundation in these first couple years, there won’t be consistent income later to fund any of those other goals.
Related: Why Do Dentists Feel Like They Don’t Make Enough Money?
Dental Practice Don’ts: 3 Common Mistakes That Can Blow Up Your Cash Flow in Year One
We’ve seen smart, capable dentists make avoidable missteps in year one. Here are the big ones:
1. Running Out of Runway
The worst-case scenario we’ve seen was a client whose build-out took longer than expected, working capital dried up, and their bank refused to extend more funding. The result: bankruptcy.
That’s rare, but it’s a wake-up call. We’re not here to bring the doom and gloom, but we also know how important it is to plan for the worst and hope for the best. That means locking in enough working capital in your loan, building personal reserves before you even close on the deal, and making sure you’re not forcing the practice to pay you when cash is tight.
If something goes sideways (slower growth, unexpected repairs, higher marketing spend) you need the reserves to absorb it without panic.
2. Buying Toys Before You Have Patients to Use Them On
The golden rule: Don’t take your credit card to dental conferences.
We’re (half) joking, but it’s true that everything looks incredible at those big meetings. The demos are slick. The financing sounds reasonable. You’re one free t-shirt away from signing on the dotted line.
But here’s the reality: You need bodies before you need technology.
Spending $50-$100K to add a high-tech laser that sits idle doesn’t make you money. Strategic marketing that fills your schedule is what builds sustainable cash flow. Whether you’re a startup where literally every patient is new, or you’re rebranding yourself as the fresh owner of an established practice, we recommend putting 5-8% (or more) of revenue into patient acquisition.
Yes, some tech genuinely makes you more efficient (like diagnostic tools that improve case acceptance or equipment that cuts down on lab costs). But we always want to help you evaluate those purchases through a strategic lens:
What’s the ROI? Is this a one-year payback or five? Will this actually generate revenue, or does it just look cool?
3. Not Building Enough Cushion Before You Buy
Preparation is everything.
Before you sign on the practice, we need to think hard about how much cash you’ll have access to. If you’re financing the purchase, it’s often a good idea to borrow the sale price and add extra. You want enough runway to invest in marketing, cover curveballs, and avoid putting financial pressure on yourself personally while the practice stabilizes.
When we build a proactive and organized plan, you have reserves, solid financing, and room to breathe. Without that plan, every bump starts to feel like an emergency.
Let’s Talk About Your Year One Plan
Your compensation structure isn’t static. It flexes as your practice stabilizes, your patient base grows, and your overhead normalizes. But if you start with the wrong foundation (paying yourself from “leftovers,” making decisions in isolation, or not tracking your numbers on both sides), you’re likely making year one harder than it needs to be.
We know this isn’t a “set it and forget it” conversation, which is why we revisit your compensation structure regularly. If this raises any new questions, reach out to your advisor anytime. We can always stress-test a potential change or talk through how a practice decision might affect your personal take-home.
If you’re not yet working with Dentist Advisors and you’re trying to figure out your year-one compensation strategy, let’s talk. We help dentists connect the dots between practice performance and personal wealth, because getting this right early makes everything else easier. Schedule a conversation about building a compensation plan that works for both your practice and your life.
