As a dental practice owner, you likely track production per hour, hygiene department performance, and claim filings – but are you paying attention to BAM? If not, you could be missing a crucial financial metric that helps ensure your practice stays profitable and supports your lifestyle goals.

In a recent episode of Beyond Bitewings, the team at Edwards & Associates, PC broke down BAM (Basic Amount of Money) and discussed what it is, why it matters, and how to calculate it accurately.

What Is BAM?

BAM stands for the Basic Amount of Money needed to operate your practice successfully. However, it’s not just a break-even number – it includes:

• Overhead costs (rent, salaries, supplies, etc.)
• Loan payments for practice purchases, equipment, or expansions
• Owner compensation (including taxes and personal financial goals)
• Profit to keep the business healthy

Think of BAM as a financial goal – the amount your practice needs to collect (not just produce) each month to cover all expenses while maintaining the income and lifestyle you want.

Why BAM Matters

Understanding BAM is essential for cash flow management and ensuring your practice is set up for success. It also plays a key role in staff bonus structures – since any revenue collected beyond BAM can often be used to reward the team.

Additionally, BAM isn’t just based on historical numbers. It should factor in expected expenses such as new hires, equipment purchases, and rent increases to give you an accurate picture of future financial needs.

How to Calculate BAM

To determine your BAM, you’ll need to account for:

• All fixed expenses: Rent, payroll, utilities, supplies, insurance, and other overhead.
• Debt payments: Loan repayments that aren’t reflected in your profit & loss statement.
• Owner compensation & taxes: The amount you need to take home after covering all practice costs.
• Future growth: Planned hires, equipment purchases, or operational changes.

BAM should be reviewed and updated annually to reflect any major financial changes, though adjustments – such as a gradual BAM increase (Baby BAM) – may be made in cases of significant shifts like hiring an associate or expanding operations.

The Difference Between BAM and Net Income

A common mistake is assuming that net income (the bottom-line figure on financial statements) reflects the actual cash needed to run a practice. However, BAM factors in non-cash expenses (like depreciation and amortization) and full loan payments, giving a clearer picture of financial needs.

Plan Ahead for Success

By understanding and tracking BAM, you’ll have a clearer financial goal for your practice and avoid surprises when it comes to cash flow. Whether you’re planning for growth, refining your bonus structure, or simply ensuring financial stability, BAM is a must-know metric for every dental practice owner.

Want to learn more? Listen to the full episode of Beyond Bitewings for expert insights and practical strategies!