2 Big Bets Dentists Make that Delay Retirement – Episode 90

A bet is a bet whether you realize you’re making it or not. Are you letting your future ride on risky propositions that could be avoided altogether? In this episode of Dentist Money™, Reese & Ryan discuss the most common ways dentists allow luck to determine their financial outcomes. They also share advice for building a plan that doesn’t bank on hitting it big.

Podcast Transcript:

Speaker: Consultant an advisor or conduct your own due diligence when making financial decisions. General principles discussed during this program do not constitute personal advice. This program is furnished by Dentist Advisors a registered investment advisor.
This is Dentist Money. Now, here’s your host, Reese Harper.

Reese Harper: Welcome to the Dentist Money show where we help dentists make smart financial decisions. I’m your host Reese Harper, here with my trusty old cohost, Sir Ryan Isaac.

Ryan Isaac: Good afternoon, Rockin’ Reese Harper.

Reese Harper: I like that nickname you just gave me.

Ryan Isaac: Yeah.

Reese Harper: But I think I’m going to have to go with regular Reese Harper.

Ryan Isaac: Let’s introduce you. I’m your host, regular Reese Harper.

Reese Harper: Regular Reese. This is Sir Ryan Isaac, I’m regular Reese Harper.

Ryan Isaac: I actually kind of like that, regular Reese.

Reese Harper: I don’t think we want to let the common man be left out. [Cue 00:00:51] in the studio, sitting in the back trying to figure out-

Ryan Isaac: What’s going on.

Reese Harper: Where he’s going to, what Q and A mic he’s going to be using for the show.

Justin Copier: It’s the same one I always use. Back here in the corner.

Reese Harper: Yeah, I like it. Let’s talk about what we’re going to jump into today.

Ryan Isaac: Give it to us.

Reese Harper: I’m kind of excited about this episode as opposed to normally when I’m not excited.

Ryan Isaac: Yeah.

Reese Harper: But I think there’s a very, it’s subtle, but I mean, everyone knows that they shouldn’t take massive risks with their finances. Everyone knows that.

Ryan Isaac: Mm hmm (affirmative).

Reese Harper: But what’s kind of crazy is how many big risks people actually take and kind of don’t realize they’re taking big risks. There’s a misconception that if I kind of stretch a little bit and push down the gas pedal in this one area, or take a risk here, there’s going to be a huge payoff.

Ryan Isaac: Right.

Reese Harper: But no one goes around saying that kind of stuff in an overtly-

Ryan Isaac: We end up in that situation, although we say I’d never do that. It’s not prudent.

Reese Harper: Yeah, everyone’s like, well, I wouldn’t do that. I’m a prudent investor. I’m a safe, kind of more of a conservative person.

Ryan Isaac: Five years later.

Reese Harper: Yeah. And then, the next thing I know someone’s walking into my office telling me that x, y, and Z. And I’m like, do you realize what you just told me? The words coming out of your mouth right now?

Ryan Isaac: Yeah.

Reese Harper: And it’s kind of-

Ryan Isaac: They always say like, I know, I know. I know, but-

Reese Harper: I know, but-

Ryan Isaac: But-

Reese Harper: This one, you just don’t know, this is the one.

Ryan Isaac: Yeah.

Reese Harper: And so I think what we’re going to talk about today is that there’s a lot of confusion sometimes in our own personal financial decisions about when we should take that risk and there are risks worth taking and there are risks worth pursuing and bets worth taking. And it’s really hard sometimes to know when, in what context we should push down the gas and in which situations you should probably put on the brakes. Let’s start by talking about a bet that really paid off. And then let’s talk about a bet that didn’t pay off. I’d like to turn the time over to you, [Cue 00:02:57] to tell the story about the bet that paid off. Cause this is a story that you actually went out and found yourself, which I was impressed by.

Justin Copier: So you want me to tell the story.

Reese Harper: Yeah. I want you to tell the story.

Justin Copier: All right, so guy named Fred Smith, he started a little shipping company you may have heard of called Federal Express. Some people call it FedEx.

Ryan Isaac: He should have named it Frederal Express.

Justin Copier: Yeah, so legend has it, and this is according to one of the company’s executive founders named Robert Frock. In the early days of the company, Fred Smith took the company’s last $5,000 to a Las Vegas blackjack table-

Ryan Isaac: [inaudible 00:03:43] kid.

Justin Copier: After the company was denied an important business loan. And the way Frock tells the story is, I asked Fred where the funds had come from and he responded, “The meeting with the General Dynamics board was a bust and I knew we needed money for Monday, so I took a plane to Vegas and won $27,000.” And I said, “You mean you took our last $5,000, how could you do that?” He shrugged his shoulders and said, “What difference does it make? Without the funds for the fuel companies, we couldn’t have flown anyway.” It was not much, but it came at a critical time and kept us in business for another week.

Reese Harper: Crazy.

Ryan Isaac: Crazy.

Reese Harper: And for those of you who do not know, last year FedEx reported over $50 billion in revenue. Which is an exponential multiple of five grand.

Ryan Isaac: It’s kind of-

Reese Harper: But still within the family of fractions.

Ryan Isaac: Crazy to think though that someone took 100% of their operating capital, everything the company had and he said, that was the solution. Do you know in what year that roughly was approximately, like $5,000?

Justin Copier: Yeah, it was in the 70s.

Ryan Isaac: So that was still not a lot of money.

Justin Copier: No.

Ryan Isaac: The fact that FedEx. Took its last five grand-

Reese Harper: Well and he said it got him through the next week. So they turned five grand into 27 but it only lasted him a week longer. I mean, imagine those early days.

Ryan Isaac: That’s cool.

Reese Harper: Good for him for taking a speculative risk that paid off and kept the company in business.

Ryan Isaac: Kept FedEx being FedEx.

Reese Harper: Let’s talk about a bet that didn’t pay off. How about you tell this, my favorite story.

Ryan Isaac: So this is a story in the late 90s, ye olde company of Motorola.

Reese Harper: Are they still around? They still doing stuff?

Ryan Isaac: Oh yeah.

Reese Harper: Jeff’s cell phone. He has a little flip phone.

Ryan Isaac: That’s what I thought, some Motorola. Oh, they’re still, they’re still-

Reese Harper: His wife lets him have his flip phone still. Which is nice of her.

Ryan Isaac: Okay. Motorola. They, so this is in the late nineties, they invested $5 billion in a satellite phone system or company called Iridium.

Reese Harper: [inaudible 00:05:51].

Ryan Isaac: Iridium. And what they’re going to do is they’re going to build and launch this network of satellites and give wireless service around the world. A couple problems here. The cell phone business had kind of started to take hold. So the satellite, which was different than the cell phone business, was not as useful as this new cell phone industry. But number two, the technology was dependent on direct line of sight with the satellite and the phone, which means if you were in a car traveling, no-go. In a building, you couldn’t have service. I mean, you basically had to stand outside and point your brick device to the sky and that’s what they put $5 million into, that people would do that.

Reese Harper: In hindsight, it doesn’t make sense, but at the time it made a lot of sense.

Ryan Isaac: In 1997 it made a lot of sense. They had forecasted out of all of this, that in the first year they’d have 500,000 subscribers and they only ended up getting 10,000 people to sign up. So kind of a slight forecasting error there. And then they ended up filing for one of the largest bankruptcies in all of US history at that time.

Reese Harper: Funny thing to me is who are the 10,000 people that signed up for the satellite phone?

Ryan Isaac: I know exactly who they are.

Reese Harper: Who were the people who were like, okay. I mean, is this where [crosstalk 00:07:12] comes in?

Ryan Isaac: Exactly who they are.

Justin Copier: They were all in Idaho. They all had line of sight.

Ryan Isaac: They were all living in Idaho and out in their farms and they had direct line of sight to the moon, the sun and the stars with no obstruction. That’s the truth.

Justin Copier: Really?

Ryan Isaac: Well, I don’t know if that’s all 10,000 of them.

Justin Copier: But they were-

Ryan Isaac: Most every farmer I knew-

Justin Copier: Really?

Ryan Isaac: Had a Motorola phone and it was in a case in the back of his truck.

Justin Copier: Oh no way.

Ryan Isaac: He would go out in the field and be like, pull out the old sat phone-

Justin Copier: Oh my gosh.

Ryan Isaac: And chat. Because there’s no buildings and such. So I could understand how Motorola would have gotten it wrong.

Justin Copier: That’s fair.

Ryan Isaac: It’s a bet that didn’t pay off, but that’s a big old bet. $5 billion invested in the old sat phones.

Reese Harper: Yeah, or I mean, the last five grand that FedEx had. So the point of today’s conversation though is that sometimes they do pay off, and sometimes they don’t. And really smart people with a lot of information still get it wrong. The reality though of, and we talk about this with clients sometimes too, the reality of being a dentist and the nature of being a dentist, if you start this early enough in a career, I guess that’s the caveat, is that the amount of income and potential savings that you should have over your career is enough to not make you or force you into taking large bets. You don’t need to.
We talk about this a lot with healthy savings rates and controlled spending and monitored profitability. Then watching a net worth grow at a certain pace. I mean, you don’t have to take big risks when you have the potential to earn the kind of money that dentists do. It’s just not necessary unless you’ve procrastinated some things or put off some of the other behaviors that put you into that situation where you need to. But we’re gonna talk about maybe some ways, two or three ways that dentists tend to take big risks, put off some of the other things and take big risks in their career.

Ryan Isaac: Let’s talk about the big bets.

Reese Harper: Okay.

Ryan Isaac: Big ones. If you had to list one bet, like of all the bets, if you think of all the bets that dentists make right now so that anyone you can think of that people, that they make statistically in their career, in all the phone calls you’ve had, what are the things that come top of mind?

Reese Harper: Well, I’m going to say one that happens a lot, but every, every person says it’s not a bet anyone should ever make, which is assuming the practice sale is going to pay for retirement.

Ryan Isaac: Or at least a big chunk of it.

Reese Harper: A big chunk of it. It’s going to be the biggest-

Ryan Isaac: So the bet that they make is they bank too much on the practice to fund their retirement.

Reese Harper: Yeah, but the ironic thing about that is if you ask any dentist starting out or, I mean at any point in their career, all of them will say, that’s not smart. No one thinks that’s a smart bet. But if you just look at what ends up happening, there’s way too many that have to rely on hopefully as big of a sale as possible in order to make it very far into retirement.

Ryan Isaac: You got to be careful when you start looking at your business as a re-sellable exit value asset as opposed to a cashflow business, because that’s what it really is. There’s just a limited amount of capacity that you have. You want to maximize it and you do want to invest in it in every facet. You have to build the right team, you have to have the right advisers, you have to have the right savings rate.
You got to put the right money into marketing, have the right equipment, have the right space, have the right location, all that matters. But the difference between spending lots of money on your business and just a little bit or a modest amount probably doesn’t change the value a lot because you’re limited by your own-

Reese Harper: Yeah, by a lot of other things.

Ryan Isaac: Production, and all these other factors. And so kind of worries me when too many people are placing too much emphasis on that exit, because-

Reese Harper: Yeah. Oh I was just thinking about something else you said, by the nature of what a dental practice is, it is a cashflow opportunity.

Ryan Isaac: Exactly.

Reese Harper: And so, I mean, unless you’re in the multiple practices and groups where you’re selling for higher multiples of revenue, then it really, the biggest benefit you get out of it is cash flow. And I think it’s, I don’t know. I think it’s okay to view it like that sometimes. And I don’t think it’s wrong in every scenario where the person says, you know what, I kinda just want to let this thing go as long as I can and I’ll just slow down, and I love my work. And I’ll go from five days to four to three to one and I’ll trim back and I know it’s not going to, I can’t sell it. I know eventually I’ll just shut off the lights and walk out. The point is, great, because it’s better than any other job you can go get through retirement and work part time. But you have to acknowledge that early on and start preparing for that fact. And know that, I don’t know. Would you say that’s more common than someone who ends up selling at peak valuation?

Ryan Isaac: Well, yeah, I would say it’s more common for sure. I don’t know that it’s optimal. I mean there is a point where if you can get a bird in the hand by selling your practice and have that lump sum of cash in your pocket, that’s better than extending out the risk, we’ll call it, of what may or may not end up happening. But I mean for most people, let’s say you’re selling a business for 60% of collections and you’re doing a million bucks, you sell it for 600 if you’re doing 1.5 maybe you’re able to sell it for eight, eight and a half. And so if you sell it for that much money and then you look at how much money you’re earning every year just working, I mean, how many years-

Reese Harper: Yeah. What’s the trade off? Would you have earned that kind of money?

Ryan Isaac: How many years would it have taken you to earn that same amount of money? Three? Now, you’re taxed differently on it. So it’s a big difference. So you’re taxed differently on selling the practice than you are earning the money. Earning the money, you’re probably going to pay 35 to 40 cents in tax where selling the practice you might pay 20 to 25 cents in tax on selling it. So it’s not just a, well I’ll, I could just work for three years and earn the same as selling it. It’s not that simple because it’s probably more like you’re going to have to work for five years or-

Reese Harper: To make up the difference in tax, after tax, yeah.

Ryan Isaac: Six year, and all of that’s highly dependent on the value of the practice. But I think it makes sense to try to build up your retirement independent of the practice sale, then sell the business at a peak valuation and not go those last six years of working unless you have the option to do that and you just really want to, but it’s probably not financially… It’s a little more risky to do that because you might not realize the same amount of cash and if you get hurt or if you slow down or if you have new competitors that come in with nicer buildings and nicer spaces and better locations. I mean you could end up [crosstalk 00:13:43].

Reese Harper: Man, and how often have you seen that? You know someone’s in the last 10 years of their career and they were the guy in town for so long. And now it’s declined significantly in the most crucial time when they thought, I’m going to be selling it at this peak. I’ve seen that a lot.

Ryan Isaac: This actually happened to me on Monday where I had a conversation with someone who actually was buying a practice from an older doctor. This was a phone call that came in and they’re just like, what should I pay for this practice? Because it’s not really like a thriving practice. It’s one where you mentioned the person, the doctor, I almost said surviving doctor, like this-

Reese Harper: You been studying estate planning lately?

Ryan Isaac: Yeah. This doctor’s the doctor that the practice is going to be purchased for was I think 74 and so it ended up being a very, very small purchase price. Just a small lump sum of money and a small buyout. And it was kind of surprising because what made this doctor stick around I think was lack of clarity around whether he had enough money. So he just kept working and kept working and kept working. But his practice went for… the doctor that sold, I mean his practice went from very healthy, probably-

Reese Harper: To almost nothing.

Ryan Isaac: In his mid 60s to late 60s the practice was very healthy. Probably not as healthy as it was in his early 60s but to where it was almost worth nothing. But he couldn’t sell the practice with confidence until that point because he really didn’t have closure on whether he was going to be in a good financial situation. And I think that’s the challenge, and I feel for people that are in that situation where it’s like, I just don’t really know if I can afford to stop. My finances are kind of a mess and I don’t really, I have stuff all over and my financial guy tells me I’m going to be okay. But then when you ask them what that means, they’re like, well, I don’t really know. I’ve got this one account here and I got this one account there.

Reese Harper: I think returns have been good.

Ryan Isaac: I think things are okay, but I’m like, well, why aren’t you stopping then? Like why aren’t you selling the practice? Why aren’t you leaving?

Reese Harper: Yeah.

Ryan Isaac: I think it’s hard for people to get to the point where they’re like, yeah, I have enough. I’m ready to quit. I’m okay. And because you can still come in and work as an associate, like a day a week if you just want to come in and work. If you want to hang out and work for someone else or just keep your hands going and keep your mind active. Like there’s plenty of jobs. I just think that sometimes it’s hard to see people continue to work late into their careers because there is a point where that practice was worth probably its peak value. It made sense to sell it. Why? Because you’d been investing in it for 20 plus years.

Reese Harper: Heavily, yeah.

Ryan Isaac: So why not take it at that peak value when your tax rate will be the lowest you. The capital gains tax rate’s going to be lower than earning the money. I just think it’s an overall much better decision. I think you should just look at your practice as an asset and your financial planning should include that and you should always be looking at the value of that asset. And a good financial advisor looked at your net worth and looked at all your assets including your practice value and says, Oh man, this practice has been declining in value for like the last three years. What’s going on? Or two years in a row, seeing collections decline. There is a point where it’s optimal to sell.

Reese Harper: Well that’ll affect, I mean I think about that from an investment advisor standpoint. If we’re banking on a big lump sum cash out on selling the practice, which becomes after tax liquid money, if that starts getting smaller and smaller and smaller, our dependence on other assets starts getting greater and greater. And that would affect, if the 401k and the profit sharing plan we’ve been putting money into, suddenly I’d now need it 10 years earlier than I thought because the practice sale is going to be so much less. That changes a lot with the way we invest the money and how much we’re choosing to put in there and the type of plan we even set up.

Ryan Isaac: Let’s take a break right here, Reese. When we’ll come back, we’ll talk about some other common ways dentists make big bets on the future and how they can be avoided.

Reese Harper: Ten four good buddy.
Hi, this is Reese Harper. I’m the host of the dentist money show and CEO of dentistadvisers.com. I want to take just a minute and explain why dentistadvisors.com is different than your average team of financial advisors. We help you plan, invest, and retire better using a unique set of tools you won’t find anywhere else. First, we use our proprietary methodology called elements to assess your financial health. The elements framework enables us to give you data driven objective advice based on a comprehensive picture of your personal and practice finances. We maintain that picture in a custom dashboard that tracks all your assets, debts, and accounts so you know what you’re worth anytime and anywhere. And because we work with dentists and specialists, we can leverage our industry expertise to weigh your progress against your peers. We are the premier wealth management firm for dentists and specialists and we’re ready to put you on a more predictable path to financial independence. Start now by booking your free consultation today at dentistadvisors.com. Thanks again for listening. Now let’s get back to the show.
And we’re back from break, rested and relaxed.

Ryan Isaac: With a plan.

Reese Harper: And I’ve got my Kirkland water in hand. Ryan, let’s jump into the second biggest bet-

Ryan Isaac: Yeah.

Reese Harper: That I see dentists make.

Ryan Isaac: Okay.

Reese Harper: I don’t know what it is yet, but I want to come up with it. Here’s the bet. I’m thinking if I gave you a chance to say what bet you think it is and you’re like, they bet on the practice being the biggest exit.

Ryan Isaac: Oh yeah, I already did give my answer.

Reese Harper: Yeah.

Ryan Isaac: Oh, cool, let’s turn the tables.

Reese Harper: My bet is they bet on really weird businesses that don’t have anything to do with what they do for a living.

Ryan Isaac: I like this subject.

Reese Harper: And I don’t know why, I’m just always surprised at the phone calls I get. Like today I’ve gotten two phone calls, just today, for separate business ideas from dentists based on things they were asked to do in their neighborhood by someone else.

Ryan Isaac: Okay.

Reese Harper: One of them today was to become a mortgage lender for a bunch of houses in their neighborhood. Dentists have a way of attracting-

Ryan Isaac: Yeah.

Reese Harper: Because they’re very nice people. People love them.

Ryan Isaac: Very successful.

Reese Harper: And so they’re the people that have some money to be able to do a loan. So I’m just like, how much money do you think that would be for all of these neighbors? Well, we can just put together a pool of loans and maybe I could fund that and get… So, you just walk you through this. The real estate market just slows down a little bit.

Ryan Isaac: One of your neighbors-

Reese Harper: One of these neighbors can’t make his payments. Are you going to play hardball with him?

Ryan Isaac: Are you now opening a collections agency?

Reese Harper: Yeah. And then what if he doesn’t pay you then and then someone else doesn’t pay you? Do you let one person off the hook, but then not… Are you going to be able to apply it consistently across to everyone, if someone’s behind? What’s your late pay policy?

Ryan Isaac: Do you want their house?

Reese Harper: So do we need to hire someone now to manage this so that you don’t have to be the person that’s like the intermediary. Okay, so here’s my point is, you have a very good person that’s been asked a question and they don’t know how to say no because they don’t want to let anyone down because they do have the money to do some of this and then it leads into a bigger project. Another one was I’m going to start a restaurant franchise. I’ve got a new idea for a fast casual restaurant and my friend is a expert at fast casual and he did it with-

Ryan Isaac: Tacos and cookie dough.

Reese Harper: This other company and you know, whatever.

Ryan Isaac: Okay.

Reese Harper: Another one was that an energy play. An oil and gas partnership that he was going to participate in. It’s actually a she in this case. Then there was a startup mobile dental franchise, which was kind of related but very… The business model hadn’t been fleshed out a lot. Here’s my point. I’m always surprised when someone who has a lot of skill and a lot of success in their career pursues a completely unrelated venture. When it usually has to do with two things. One is the risk return or the return that it’s going to provide is really compelling. So they’re really excited about how it might speed up this retirement and get them out of the rat race. Okay, so they don’t want to be in the grind of $200 per visit to $400 a visit. They just want to get to the point where they can make $100,000 in a pop or find a way to make $1 million.
And that’s really compelling. So they’re willing to take a big risk on that sometimes. Any number of these ventures is going to be a big-

Ryan Isaac: Potential payout.

Reese Harper: The potential payout’s really big. But they’re also going to take a big chunk of their money to do something and start investing their time into it. And it happens a lot. I don’t know how often dentists like to talk about that because it kind of makes them, it kinda hurts their practices. So in my experience, even though a lot of people are doing a lot of things, they’re not telling anyone that they are doing them. A lot of people are just doing a lot of side businesses because of this trying to accelerate their plan.
The second reason they do it is because someone asks them about it and they wouldn’t do it if it didn’t have a really compelling return. It’s usually a much more compelling return than what they’re getting out of their safe emergency fund and 401k and retirement accounts. It’s usually the possibilities are much greater. But it usually is also triggered by a friend or someone close to them saying, will you do this with me, and they don’t want to let them down. So I don’t know how many times I have had to write sample emails to give to clients that they can send to friends to tell them no.
What would you tell them? How do I say no? How do I get out of this? How do I tell someone I don’t want to do this? And so I’ll write off a draft email, this is what I would say. And it’s just like the biggest relief because it’s like, oh thank you. That’s exactly what I need to tell them. So I don’t know, I just think there’s a lot of pressure for dentists to accelerate their retirement growth by making a bet on a private business venture and they feel that pressure because the practice kind of hits a plateau. They’re making-

Ryan Isaac: Yeah, they can see where the end is in the practice [crosstalk 00:24:37].

Reese Harper: I can’t really push harder there and I got to find something that lets me have an opportunity to grow.

Ryan Isaac: Which is where I think so much of this comes back to not being organized enough to understand what is actually happening in the boring parts of your life. I mean the boring financial part of your life is not going as bad as you feel like it’s going.

Reese Harper: Yeah.

Ryan Isaac: It’s got a stagnant as you think it is. I was having a conversation, every quarter we send out reports on our client’s net worth, how they trend every quarter, how much has net worth changed quarter over quarter. And I was having a conversation with a client about their debt and the feeling when debt is in the hundreds of thousands of dollars is that it never goes anywhere. It never changes.

Reese Harper: Yeah, it’s never moving anywhere.

Ryan Isaac: Yeah. The crazy thing is though, is we just looked at this report, the debt’s going down, it was going down like 40 grand a quarter. I’m like, did you realize-

Reese Harper: Almost 200,000 a year.

Ryan Isaac: Yeah, you realize how much debt you’re paying every single year. It’s like $160,000 of debt that’s going from minimum payments.

Reese Harper: Yeah.

Ryan Isaac: And she was like, oh, I had no idea actually. I’ve never thought about it that way. I always just thought minimum payment, the statement comes back and it’s literally like 100 bucks less. I don’t even know. And so I think part of this problem is that it’s easy to jump onto something that seems like it’s the big ticket out and the fast way out. If you don’t understand that you already are making progress, like saving money and having a good savings rate and keeping good profitability and putting money into that retirement plan and paying off your debts even if just their minimum payments. I mean, you’re making progress.

Reese Harper: Yeah, a lot of it, yeah.

Ryan Isaac: It’s just surprising. So I think some of it just kinda goes back to not feeling organized enough to know how to quantify that. And so you just feel like everything else is stagnant. Like you said, that the practice isn’t growing, 401K is not going anywhere, debts are up, so-

Reese Harper: I would say just some takeaways here that I think are really important. Focus on building your own business. If you can get to the point where you have a steady flow of new patients and your practice is healthy and you’re operating at kind of peak efficiency, it’s okay to sort of see collections just stay in a similar level for a long time. That’s fine. I mean you don’t have to be pushing higher and higher-

Ryan Isaac: Once upon on a time, that was the dream.

Reese Harper: Yeah. Yeah. At some point, like holding your collections at a healthy level and seeing them kind of increase just modestly while you’re making a lot of money is a great way to retire yourself. Instead of you selling your practice, you’re harvesting it just year by year by year. You’re just showing up and doing the work and you’re actually receiving the benefit from that.
There’s nothing wrong with that and that’s still very entrepreneurial. That’s a great way to go about doing things. I would only put money into side ventures when you’ve achieved a pretty meaningful, for most people, this is good advice for most people, once you’ve achieved financial independence, meaning you have enough money to retire, then it’s a different equation when you start thinking about side ventures. If you’re highly entrepreneurial and you just can’t stop yourself from doing side businesses along your career, which I do have some clients in that situation, then make sure that your savings rate’s at least 20% meaning you’re putting 20% of your income, your gross income away into both your savings and that can include some debt reduction, some extra payments. I mean, 20% of your gross income should be going to kind of no brainer growth, liquid investments and-

Ryan Isaac: Longterm stuff.

Reese Harper: Retirement plans.

Ryan Isaac: Yeah.

Reese Harper: If you’re doing that and you still have extra money, then just be very careful about the things you try to spend your time on. Make sure you know what you’re doing and you have a lot of experience in a given area.

Ryan Isaac: Well, I would say protect that too. I mean, it’s not just about having excess money to put into something, but if it also is going to start detracting from that business that took so much time to build and sustain, be careful, then.

Reese Harper: In most cases where people get extraordinarily rich from big ideas that happened in a really short period of time, the truth is that most of that was luck. It’s not skill that drives a lot of those things. And any entrepreneur will tell you that if you got disproportionately wealthy in a very short period of time, there’s usually a lot of luck and what we call market inefficiency in that transaction.
Instagram was a multi-billion dollar company within two years. That’s not normal. And that’s not entirely skill. There were a lot of really high quality photo sharing applications.

Ryan Isaac: Yeah, there were.

Reese Harper: There was a lot, and we’ll get into the story at another time, but there was a lot of reasons why that transaction happened that didn’t have to do with the quality of the application. And that happens a lot where people get disproportionately rewarded over a very short period of time. And that’s what makes everyone get really excited to want to do a side business. Because like, oh, maybe I could do something in like a year and then I’ll be like a billionaire.

Ryan Isaac: Yeah, and everything’s relative. I mean, when you feel like you are rich or you have a lot of money or a lot of wealth, there’s always someone that has a lot more than you. But I think you got to kind of remember though too, it’s easy to lose sight of the fact that a dental practice, if it’s successful already, was a pretty extraordinary sacrifice. It was already a pretty big risk in a business you spent, at that point in your life, a half to a third of your life in school and then you’re hundreds of thousands of dollars on the hook just to open the front doors. And then with minimal business experience or other things lacking, you’re able to grow. I mean, it’s already a huge sacrifice. I just don’t think most dentists need to go looking for more risks to take.

Reese Harper: Another thing, yeah.

Ryan Isaac: They’ve already taken a lot of risk in a really, in a private business that can give them a really good return if they treat it right.

Reese Harper: I think, and that’s the point I always make is that most people should take the bird in the hand, right? Which is just take what’s right in front of you and make the most of it and you’re going to put yourself in a… Because the averages right now tell us that most dentists won’t be at a place where they can walk away from dentistry without selling the practice. Like most dentists won’t be able to do that and they have to sell the practice to even be able to walk away. And when they do, they’re usually in their late 60s between 68 and 69 years old. So if that’s the average, all you have to do to get ahead of that average is don’t make any mistakes. Just don’t-

Ryan Isaac: Be done at 60 and you’re way ahead of the curve.

Reese Harper: Don’t do anything outside of the norm. I mean, I’m not saying that there isn’t someone listening who shouldn’t go pursue this thing they’ve got in their head. If you’ve got something that you want to go do, I don’t want to hold you back from doing it.

Ryan Isaac: Or more commonly it’s probably the person that just doesn’t want to sit in one practice. They want five or they want 10.

Reese Harper: Yeah. Pursue growth. And I want to encourage that, I’m just saying it shouldn’t come at the expense of your financial security and you can continually put money away and build a steady consistent retirement without putting it all at risk and making one big bet. And I think that’s what we want to kind of hit on today. So is it possible to take one or two big risks in your career and have it pay off? Yeah, I mean-

Ryan Isaac: Yeah, for sure.

Reese Harper: Yeah you can, happens to people all the time. But in most cases there’s a lot of luck involved and there’s a lot of what we call market inefficiency and that just isn’t something you want to bet on. And so I like taking risks with money I can afford to lose. And that’s where that kind of rule of that 20% that we mentioned I think is a helpful guideline.

Ryan Isaac: It’s a good benchmark. Okay, well let’s wrap it up for the… We would really love for everyone listening to leave us… What would that do? How many reviews would that be if everyone listening actually left a review?

Reese Harper: Thousands, thousands.

Ryan Isaac: That’d be thousands of iTunes reviews. Probably not going to happen. We’d love a few iTunes reviews. That’d be great. On whatever platform you’re using, just go into that platform and leave us a review on the podcast. We’d love it. If you want to talk to us, you can go to our website dentistsadvisors.com. You can schedule a free consultation at the link at the top of the website or call our phone number, which is 833-DDS-PLAN. Really clever and fancy. Just go ahead and call that number and we’d love to hear from you any time.

Reese Harper: Don’t call us from your Iridium satellite phone from Motorola.

Ryan Isaac: Yeah, good luck.

Reese Harper: Carry on.
There’s not anything I really like in life except being done with something that I hated, and I’m like, things are great.

Speaker: [crosstalk 00:33:30] we ought to get-

Ryan Isaac: Hold on, that’s a quote. That’s second runner up to, I got my dad bod at 26.

Reese Harper: What did I say?

Ryan Isaac: You said you got your dad bod at 26.

Reese Harper: Oh, dad bod.

Ryan Isaac: Yeah.

Reese Harper: Yeah, yeah.

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