Dental practice expansion calculator

How this calculator works

project_cash[t] = steady_state_additional_collections*ramp[t]*(1 - variable_cost_share)
  - incremental_fixed_cash_costs - maintenance_capital

project_NPV = -initial_investment + SUM(project_cash[t]/(1+discount)^t)

initial_owner_cash        = initial_investment - proposed_loan
owner_cash_after_debt[t]  = project_cash[t] - scheduled_loan_payments_in_year[t]

The project and its financing are two separate questions

Project NPV is unlevered on purpose: loan proceeds are never added to it. Borrowing the whole investment does not make a bad project good; it changes who supplies the cash and when it comes back. Change the loan amount and watch the NPV stay exactly where it was. Borrowing more than the initial investment is treated as an inconsistent-funding condition, not as an infinite return.

Break-even additional collections

The break-even figure divides the recurring cash costs you entered plus the scheduled annual debt service by 1 - variable_cost_share, because only the contribution margin on additional collections is available to cover fixed costs and payments. It assumes those fixed costs really do stay fixed across the range, which is often false at the point where you need another team member or another hygiene day.

Payback

Payback is computed from cumulative unlevered project cash after the initial investment, including the negative early ramp years, and interpolated inside the first year where the cumulative total actually crosses zero. If it never crosses inside the horizon, the tool says so. It does not extrapolate a payback period from a mature-year profit figure, because that would answer a question nobody asked.

A positive mature-year cash flow does not guarantee a positive project NPV. The default example shows exactly that: the mature years are comfortably positive and the five-year NPV is still negative, because the ramp years and the discount rate matter.

What the model assumes away

• No terminal business value and no exit multiple on the additional earnings.
• No equipment resale or salvage value at the end of the horizon.
• No recovery of the initial cash outlay or of any working capital inside it.
• No tax effects at all. Section 179, bonus depreciation, MACRS and interest deductibility are all outside the model, and they can change a real decision.
• No cannibalisation of existing production, unless you enter the additional collections net of it.
• No change in the existing practice's economics beyond the incremental costs you entered.

The assumption that actually decides this

Everything here depends on the additional collections figure, and that figure needs evidence: unmet demand you can point to, chair time or hygiene capacity that is genuinely constrained today, a referral pattern that would change, or procedures currently being referred out. Equipment does not create patients, and a fourth operatory does not fill itself. If the additional collections are a hope rather than a forecast you can defend, the NPV is arithmetic performed on a hope.

A second location adds one more thing the model cannot capture: management capacity. Another location can consume cash and attention for years while the first location remains profitable, and that is a common way a profitable practice gets into trouble.

Questions to answer before funding this

• Where specifically do the additional collections come from, and what evidence supports the number?
• Is the constraint really capacity, or is it new-patient flow? Only one of those is solved by buildout.
• Who does the additional clinical work, and is their compensation in the incremental fixed costs?
• How long is the disruption during construction or installation, and what does it cost in lost production?
• What training and downtime does new technology need before it produces anything?
• What is the useful life of what you are buying, and what happens at the end of it?
• If the ramp is half as fast as assumed, can the practice still service the debt?