How Much Do Ontario Dentists Make?

A Google search for the keywords “How much does an Ontario dentist earn?” referred me to a 2014 Globe and Mail article. In that article, based on a conversation with the then Canadian Dental Association’s president, an average dentist earns $140k a year before taxes. Hmmm… that was a few years ago. Also thanks to Google, on a website called PayScale.com, it says the average dentist in Canada earns, on average, $104k a year before taxes. So far, only national figures. And these figures seem to factor in all sizes and locations of practices. But what about Ontario specifically?

But what about Ontario specifically?

Well, I did some digging. And while you can’t trust these numbers blindly, they do provide some valuable insight. So here we go… based on the 2015 Statistics Canada-Small Business Profiles Offices of Dentists in Ontario (both incorporated / unincorporated, of which there 9411 entries), dental offices/practitioners earned:

A few points worth mentioning:

1. This information is based on all “offices of dentists”. It includes both incorporated and unincorporated business structures. It’s not just based on individual human dentists per se, but on that industry classification, which can be misleading. It likely incorporates associates with practice owners.
2. This information is the latest version for which information is available (2015).
3. This information was obtained from tax returns. That should basically tell you: take it with a grain of salt since we all tend to prepare our tax returns in a way that minimizes revenues and overstates expenses.
4. Here why you can’t trust these numbers blindly: (1) amortization/depletion is an accounting entry (not a true cash expense) and we’re not sure if equipment is being properly capitalized/amortized or simply written off in the year, (2) other expenses were $91,900 – but what are those anyway?, (3) expenses could be overstated by having family members (who don’t actually do anything) on as labour or consultants or professional fees, and (4) it’s impossible to gauge whether the dentist was being paid as an associate, employee, or owner (for example they could have received a percentage of collections, a management salary and/or dividends on their corporate shares. If they were taking salary, then this would be a deduction to their corporation and would impact the net profit (it wouldn’t show a net profit as being reflective of the net adjusted cash flow earned by the practice in a given year).

Highlights

1. On average, a dental office was profitable – to the tune of $200k. On $607k of revenue, that translates into a 33% profit margin. It’s unclear whether this is the total cash available to the dentist since they may have included themselves under “labour” if they were paid as an employee (as opposed to receiving dividends from their corporation).
2. About 94% of all of the dental offices were profitable. The other 6% had an average net loss of $50k in 2015.
3. The highest quartile of dental offices had profitability of $452k on overall revenues of $1.485-million.
4. The lowest quartile of dental offices had profitability of only $42k on overall revenues of $73k.
5. Incorporating: Since about 60% of dentists are incorporated, and given that the bottom half (bottom quartile and bottom middle quartile) of dentists don’t have more than $114k in profit, all things being equal, they shouldn’t really be incorporating. You only really want to incorporate for tax purposes and where the savings outweigh the costs to set up and maintain the corporation: basically, you want to leave money behind to get taxed at a lower rate or to income split with family members. But you can’t really leave much behind if you’re only making $114k in profit (at least in the GTA, where the price of everything has and keeps going up!).
6. Practice Management Required? the larger practices may not be as efficient in turning their higher production into higher profit.   The dental offices in the largest quartile have a profit margin of 30.45%, which is a few percentage points less than the average (33.03%). And that’s because the larger practices seem to be spending more on things like wages and labour and professional and business fees. Does this include associate and hygiene fees where those individuals are providing services as associates? Are they bringing in specialists and paying them a greater percentage of collections? Interestingly, these larger practices are not necessarily spending more (on a percentage of revenues when you compare it to the average dental office) on things like advertising, rent, insurance, or repairs and maintenance. So if practice management can be used by these larger practices to reduce wages/labour costs and professional and business fees, then the larger practices can be more profitable.
7. Other Interesting Numbers:

• Advertising and Promotion: $9,500 or ~1.6% of revenues.    Is your practice spending this on websites, direct mail, Google Ads, stationery, signage each year?
• Professional and Business fees: $33,900 or ~5.6% of revenues. Note: this could be mischaracterized to include associates, family members, lawyers, accountants, practice management consultants, etc. Professional fees for the top quartile is $92,300.
• Rent: $31,600 or ~5.21% of revenues, but the bigger practices / those in the GTA (again, likely in the top quartile) will spend more like $71,200.
• Wages and Benefits were $9,100 on average, which seems to suggest that this only represents benefits like CPP and EI for employees. This means that associates and hygienists who are independent would not fall within this expense, but could fall within labour and commissions and perhaps even professional and business fees.
• Purchases, materials and sub-contracts: ~13.7% of revenues. It should be around 7% based on anecdotal evidence. I’m not sure what dentists could be putting in here and writing off as an expense (instead of capitalizing/amortizing over a longer-term).