What’s the Real Reason for Your Financial Pain?

There’s a common patient story that almost every dentist and doctor can tell. It goes something like this:

A patient goes to her dentist complaining of a toothache. “Which one?” asks the dentist. She replies, “It’s my lower back tooth and it’s really painful.” After a thorough dental examination, the dentist tells her that the tooth causing the problem is actually her upper-left molar. She replies, disbelieving, “There’s no way it’s an upper tooth!”

You’ve probably experienced a situation just like this. In the medical profession this is called referred pain. It happens because the brain has a hard time identifying the real source of the pain. Dentists and doctors see it often enough to know never to assume, but to carefully examine and then diagnose.

Where Is Your Financial Pain Coming From?

This may be happening to you too, only in the financial realm. It could be a problem in your practice; it could be cash flow; it could be taxes; it could be your investments. All you know is there’s definitely a financial pain you’re feeling.

Likewise, financial pain is often blamed on a source that isn’t the true source of the pain. Like the financial equivalent of referred pain, it takes further analysis, research, or an expert to identify the realsource and offer a real solution.

Let me explain what I’m talking about.

The Pain: I’m Not Earning Enough Money

There are a lot of reasons dentists feel they aren’t earning enough money. One thing I hear is, “I just can’t make enough money, my one location isn’t enough.” The assumed fix for this problem is opening another location will take away the pain.

You may have the personality, entrepreneurial nature, and skill set to make a multiple location practice successful. However, there could be other reasons for the pain. You may need to improve your profitability. Or you may already be profitable but need to grow your collections. Or you could have a marketing issue. Would rearranging your space to allow another operatory and more production capacity make a difference? Are your fees aligned with current market prices, or do they need an adjustment? And—a good analysis of which insurance plans are profitable for collections can go a long way in tightening up your overall profitability.

There are a lot of considerations to explore before deciding it’s time to open another location. With so many downsides, it’s something you should never do without a lot of forethought. Just remember, the bigger your operation gets, the more complicated it will become for a long, long time.

Advice: Not earning enough money? Work to improve your profitability first.

The Pain: I’m Always Tight on Cash

When the pain is not enough cash flow, the easiest scapegoat is debt. The assumption is, “If I hurry and get rid of the debt faster, my cash problems will go away.”

I understand the emotion—getting rid of debt feels so tangible it almost outweighs everything else. It’s hard for most dentists who come from fairly normal backgrounds to borrow money for school, which is a risk; then to borrow more for a practice, which is another risk. You start feeling like you’ve been taking risks indefinitely and need to stop. At some point it seems to make sense to start paying off all the debt. But it’s not the first reaction you should have when your cash flow is tight.

While the problem could be debt, it also could be taxes; and it’s always good to take a look at the spending side of your ledger. Often you don’t realize that your personal spending is out of control and you’re spending five or six thousand more a month than the average person at your income level.

Ironically, sometimes the answer for better cash-flow is debt. But there are more ways to look at debt than pooling all your resources for the next fifteen years to get rid of it. Don’t think of debt as one big pile. It’s actually chunks of money you owe, which means it can be paid down strategically. Refinancing a couple of loans may ease the stress—like taking that huge practice loan you wanted to pay off in five years and stretching it out just a little bit longer … or the real-estate loan, or the equipment loan. There are numerous ways to free up cash flow and get rid of the financial pain.

Advice: Think carefully through your cash problem before you back yourself in the corner by attacking debt in one huge lump, making things even tighter.

The Pain: I’m Too Busy!

The pain of being too busy results in the assumption that there’s just way too much work for one person. “I can’t get to all of it!” The usual conclusion is if you hire an associate, it will solve the problem.

Not so fast. What can happen if it isn’t the real problem? Your personal production could suffer, your profits could drop, or you could rush into hiring the wrong person that doesn’t fit your office culture.

Consider this first—who on your current team can take on some of your tasks? Do you have an employee who would be good at marketing? One who could handle more admin work? Too many dental offices are not fully utilizing the skills that their staff has to offer. You might be surprised at who could relieve some of your pressure.

One thing many dentists don’t understand is that a really good office manager with experience running a business can take on a lot of their responsibilities. Find one who is competent enough to make a big difference to your practice.

Advice: There may be other ways to alleviate the pain of being too busy before taking the huge step of hiring an associate.

Conclusion—Get to the Root of the Problem

Just like referred pain that needs to be examined before coming up with a diagnosis, be careful that you don’t jump to a quick conclusion when you’re feeling financial pain.

Much of the financial pain that dentists suffer is due to the lack of a financial plan—they know there is a lot of money coming in, but they can’t tell where it’s all going. Alleviate your financial pain by getting organized, reexamining your assumptions, and putting a good financial plan in place.

Reese Harper, CFP®  is host of the Dentist Money™ Show, a weekly podcast dedicated to helping dentists make smart financial decisions. He is also the founder and CEO of Dentist Advisors, a registered investment advisory firm which focuses exclusively on dentists and specialists. His trademarked planning methodology called Elements® is used by dentists all over the country to plan, invest, and retire better.

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