Dental Economics Editor Explains “How to Make Greater Profits” – Episode 215

From “self-publishing” to “profitability,” a Dental Economics Editor offers his advice.

On this episode of the Dentist Money™ Show, Ryan interviews well-known lecturer Dr. Chris Salierno, chief editor of Dental Economics. Their wide-ranging discussion covers topics from how to publish content to how to control your overhead to why Chris thinks it’s a must to know your “gross profit margins.”

As an editor of a leading industry publication, Chris has his finger on dentistry’s pulse. You’ll want to get his take on cost-effective ways to build your practice.

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Podcast Transcript

Ryan Isaac:
Heyo Dentist Money Show listeners, how you doing? Welcome back. Thanks for joining us. We have a great episode today for you. Friend of the program, longtime friend of the business, Chris Salierno, Dr. Chris Salierno joins us. Chris is a practicing dentist, a business owner, and he’s also an editor for multiple outlets of Dental Economics Magazine. You’ve probably seen his articles. You’ve probably submitted articles to Chris at some point in the past. So today, we have a really fascinating discussion on side gigs, publishing content, the role of content in a dental practice and also the trends Chris sees through all the content that he publishes in the dental industry, where things are at, where they’re headed. Again, awesome episode, super engaging. Thanks for joining us. Thanks for listening. Enjoy the show.

Announcer:
Consult 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.

Ryan Isaac:
And welcome to the Dentist Money Show where we help dentists make smart financial decisions. I’m your host, Ryan Isaac joined today by a good friend of the show, Dr. Chris Salierno. Chris, how’s it going? Thanks for being here man.

Chris Salierno:
Thanks for having me back. It’s my pleasure.

Ryan Isaac:
Yeah, it’s been a little while. Chris, you have such a wide background. We have so many things I wanted to talk about today on the show, from publishing and content and overhead and profit margins. But let’s give a little bit of background. Can you just tell the listeners, I mean you went … you’re a dentist, you’re a practicing dentist. Every week you work for Dental Economics. Give us a little bit background where you went to school, when did you graduate, when did you start working for Dental Economics?

Chris Salierno:
Sure. So I went to Stony Brook for dental school. I graduated in 2005, did a GPR there. So by ’06, I hit the ground running as a practicing dentist and I was an associate doing the associate game for a few years, about three. And then I got the itch. That’s when I decided I wanted to be a practice owner. And so I did a startup with my good friend, Dr. Aaron Thomas. And we’re still here 10 years later.

Ryan Isaac:
And this is where? Where are you located?

Chris Salierno:
We practice in Melville Long Island.

Ryan Isaac:
Okay. Shout out to Melville. Haven’t been there.

Chris Salierno:
Yeah. So I’m there about two or three days a week practicing. And then the rest of the week is dedicated to being chief editor of Dental Economics and just doing a whole bunch of other stuff. I travel quite a bit to lecture and consult. It’s good fun.

Ryan Isaac:
Yeah, this guy’s all over the place. We’ve got so many things to talk about today. So yeah, thanks for that intro. So from right now, so you are currently your couple of clinical days a week. And then in 2014, you got brought on as the editor of Dental Economics Magazine. And you serve as probably editorial director for a few different branches of Dental Economics. Can you just take a little bit and explain, I mean, how’d you get involved with that? What was that career path like? How are you still involved with it?

Chris Salierno:
So I discovered in dental school I got very involved with ASDA, the American Student Dental Association. I discovered very early on that while I like doing clinical dentistry, I really like doing other stuff. I like talking about dentistry. I like writing about dentistry. I really enjoyed public speaking. And so I started a blog called The Curious Dentist, which I’m reviving in the near future. And I just wanted to get my name out there. I just wanted to find ways, how do I get, how do I lecture? It’s not like Nobel Biocare was calling me to be let’s get this young kid here to come give lectures for us. Like no one knew who I was. And I honestly, I didn’t even have like my own point of view. So I was writing a ton, writing for a bunch of different publications, just anyone that would accept my submissions and running on my own blog and just trying to get my name out there and also to figure out what I liked talking about and writing about.

Chris Salierno:
And so one of the groups I had written for and done work with was the Dental Economics family. So that’s the magazine. And then there’s a bunch of, yeah, there’s Enewsletters and all that stuff. So I’d worked with them for a few years, did a lot of like [inaudible 00:04:16] CE courses. So for anyone out there that’s interested in getting your name out there and speaking or writing, it’s you can always reach out to me. I’ll have to talk to you about it. It’s just you just do whatever you get your hands on and just figure it out for yourself and get your name out there. So in 2014, I was just really darn fortunate that when my predecessor Joe blaze was retiring from being chief editor, that they thought of me, which was great. I mean, and the job requires that you don’t practice full time. So that’s a pretty short list of dentists that only want to … are only able to practice or want to practice a couple of days a week.

Ryan Isaac:
So I was going to ask you a lot about this, but we’re on the subject, so we’ll just start here first on the episode today. So, and that’s really interesting thing where you already … what came first? Were you in the position where you’re already not wanting to work full time clinical or did this come along and that kind of helped you make up your mind?

Chris Salierno:
Yeah. So yeah, a bit of both. I was practicing, when I was associating like a lot of folks, I’m working six days a week, right? Like you’re just working, working, working, getting your speed up, getting your first paychecks. And so after a few years of doing that, that’s when I realized like I don’t see myself practicing five, six days a week. For me personally, like I just, my interests were laying elsewhere as I discovered in dental school. Like I love traveling, going to meetings, talking about this stuff, whatever. So I had made up my mind like in a perfect world I thought to myself, I would practice two, three days a week and then do other stuff the rest. And I just didn’t know what other stuff was going to be. Right. Like I didn’t have my sight set on being chief editor for Dental Economics. I didn’t think that would even be available to me for decades to come. What business do I have doing that? Right.

Chris Salierno:
So I just was just keeping my options open and looking for opportunities. Doing a little bit of consulting for some companies and like I said, writing and lecturing, wherever I could do it. So when this came along, it really was at a left field for me. I was shocked, but I was like, “Oh yeah, well this is fit. So this is a steady gig that is so much fun in and of itself that’ll help me get my name out there as a lecturer. But it’ll, yeah, it’ll fully support me to not have to practice six days a week or five days a week.” So I had already started to … here’s the important thing I think though too it’s kind of like the, if you build it they will come.

Chris Salierno:
I had started to scale back days from clinical practice. So at this point in 2013 let’s say, I had my own practice that was a startup only a few years in. I was still working a day or two a week in another practice as an associate just to make a steady paycheck. But I had started to drop those days even though that was like one of the few areas I’m getting an actual steady paycheck. I started to give, peel those away every couple of years just so I could create time in my schedule to write and to research and to kind of chase that dream.

Ryan Isaac:
Interesting.

Chris Salierno:
Yeah. When the DE gig along, it was like perfect. I’ll plug that right into thoughts and-

Ryan Isaac:
So, I mean you’re kind of touching on something that I think a lot of dentists think about all the time, which is like, I mean they went through all the trouble and the expense and time and energy of going to dental school and building either growing or buying or starting a practice. But a lot of people still wonder like there’s something else out there for me. I want to speak, I want to write, I want to teach, I want to build another business or invest in real estate or like something. Like what was the situation? Like was that … I mean it wasn’t on the table when you decided to keep your schedule open. So what was that like? How long did it take before something kind of came to you? And was just like, were you ever at the point where you’re like, “All right, I got to forget this other dream. I’ve got to pick up some other days because this is crazy.”

Chris Salierno:
Yeah, that’s a great question. It’s not like in dental school there’s a career day where they sit you down and say, “You could be the editor of a dental magazine.” Like there’s no-

Ryan Isaac:
Yeah it’s really random man.

Chris Salierno:
Yeah, it is. My plan, all I knew when I … what I discovered after just a few years of practicing five, six days a week was I’d wanted to do something else. That’s all I knew. That was my vision was like, hey, at some point in the near future I need to work real hard to do whatever that other thing is. I knew I liked public speaking, well that could blend itself. I could go back to school and teach at the dental school. Right. And I did a little bit of that. I dabbled in that and it was fine. I enjoyed it part time. I dabbled in working with companies. And one of the other careers that a dentist could have is they could even give up practicing dentistry entirely and work for a major dental manufacturer. Right? That’s a nice, that’s such a great opportunity that dentists could have.

Chris Salierno:
So I dabbled a very teeny, tiny bit in that and I thought that was fun. But again, you just, you can dabble in so many things. As a dentist, you can do so many things other than just practice clinical dentistry. We’re very fortunate in that regard. I’m hard pressed to think of other professions and careers that are this flexible. So yeah. So I didn’t know what I wanted. I just knew I could experiment in a lot of different areas without having to quit something, pick up and move to a totally different location. I could experiment with a lot of these things. Dabble. The key was to give up a day of clinical practice of a day of a paycheck, to give yourself the time and the permission to go experiment and play with these things. That’s the key. You got to say no to some money today to get paid for doing a thing you would love to do in the future.

Ryan Isaac:
Oh, that’s going to be a quote on Instagram after this episode comes out I promise. That’ll be great. Hey, Matt, what do you like to drink or snack on when we do our webinars every month?

Matt Mulcock:
Yeah, that’s a good question. I’m usually hitting a Red Bull, but it’s hard because it’s an evening webinar.

Ryan Isaac:
Yeah. These evening webinars taking place 6:30 PM mountain standard time-

Matt Mulcock:
Mountain time.

Ryan Isaac:
Once a month.

Matt Mulcock:
Where do you find it?

Ryan Isaac:
Well, if you’d like to find the webinar or you’d like to register for it, you go to dentistadvisors.com/webinar or just go to the website and click on webinars under the education tab.

Matt Mulcock:
It’s a good time.

Ryan Isaac:
It’s a great time. What kind of things do we cover in our webinar Matt?

Matt Mulcock:
So each month we’re going to hit an element, right? So it’s going to be some component of your financial life. We’re going to dive a little bit deeper than we would like on The Dentist Money Show, right? We get to draw pictures. There’s live polls. You can ask questions.

Ryan Isaac:
It’s great time.

Matt Mulcock:
Yeah. It’s a good time.

Ryan Isaac:
Well, we’d love to see you in attendance at one of our fantastic webinars. Just go to dentistadvisors.com, sign up today for the next one. Thank you very much. Okay, so all right, well, fast forward then you’ve got … so you kind of pick up that. And while we’re on the, this is something I wanted to talk about anyway while we’re on the Dental Economics subject. I’m just kind of curious. So explain a little bit about how do you spend your days at Dental Economics and more specifically, what kind of insight has that given you into where dentistry is at right now and where it might be headed as you see all this content and submission from dentists and non dentists? What are you seeing where things are at and where they’re headed?

Chris Salierno:
Yeah. So first part of the question, my typical day when I’m … I get emails and I have phone calls and I have conferences to attend all the time. It’s a 24/7 job. It truly is. But the days that I’m devoting to just Dental Economics, those few days a week when I’m not in clinical practice, I’m spending my home office or in a local coffee shop and I’m on the phone answering emails, usually in some kind of digital loop of just answering emails, emails, emails, reading articles, going back and forth with an author or whomever. Working with a lot of different companies that advertise in Dental Economics that want to figure out how to engage their audience. So it’s a whole slew of different kinds of responsibilities that’s really fun to do.

Chris Salierno:
So you’re right. It does give me an interesting perspective on where the profession is and where it’s headed because I’m … I mean, anyone can read cover to cover an issue of Dental Economics every month. And if you do that, you certainly will have your fingers on the pulse of what’s happening. But even beyond that, it’s getting a chance to talk to so many different companies. The people that advertise with Dental Economics. Or it’s getting an opportunity to work in all of the other channels other than just the print issue and see what kind of conversations dentists are having, because I got to keep up on that. I got to make sure we’re developing material that readers want to read about. So yeah, the job is kind of being an expert on what is upsetting dentists today. Right. Or what is exciting dentists tomorrow. That’s kind of the job is to just have your fingers on the pulse of that.

Ryan Isaac:
Interesting. Okay. And if you had to pick a handful of those things, what like top of mind, what are you seeing?

Chris Salierno:
Well, I think the … and I’ve wrote about this a lot, not in DE. I do more op-ed stuff in our Enewsletter, The Principles Of Practice Management, comes out twice a month. I’ve written a bunch of and done some videos and some op-eds just talking about SmileDirectClub. That’s one of the biggest ones. Right. And this is interesting because today that we’re recording this-

Ryan Isaac:
I just saw this.

Chris Salierno:
SmileDirectClub just released that they are going to have a new business model that they are going to be offering their aligners through dentists. And that’s just interesting, right? If anyone’s been following the SmileDirectClub story, I’ve been writing about how they had their IPO, their IPO absolutely tanked. It was one of the worst debuts of a unicorn stock like ever, certainly last year. And so it’s interesting to see this company deal with its legal battles and try to come around. And so this is just their new way. So this is just one of those like ongoing issues that is fascinating to dentists because people think it’s because it competes with us and it honestly doesn’t. The people that are getting SmileDirectClub, they’re not really people that are probably coming to see us to have aligners anyway.

Ryan Isaac:
Yeah. They didn’t even leave your practice to go there. Yeah, that didn’t happen.

Chris Salierno:
No, I’ve never, I haven’t had that. Maybe. I’m sure there’s other dentists that have said, “I have an active patient that I’m treating that didn’t use me for their aligners and is instead going to SmileDirect.” I’m sure that no doubt that’s happened. It hasn’t happened to me. If anything, all the money that SmileDirectClub is spending on marketing is increasing the awareness of malocclusions. And I have patients that are just coming to me and asking me more about it. That’s just been my experience and I’m just a … so it’s a test case of one. But what dentists really care about of course, and this is true, is we just, we don’t like seeing the potential. I have to be legally careful here on what I say. But we have to-

Ryan Isaac:
We can edit later if you want.

Chris Salierno:
Yeah, no, it’s fine. It’s public record that dental associations, the ADA and the AAO have raised concerns about the quality of treatment that can be provided when a dentist isn’t overseeing and vigilant with the care of a patient. So my gosh, what an interesting time to be a practicing dentist. You have these surgeons. We are living in a technological revolution. There are so many different concerns that can be … there’s opportunities that are coming to dentists that we can be 3D printing materials. It’s just wild. But at the same time, we’re also concerned about what these new standards of care are going to be given all of these new opportunities with technology. So what are dentists concerned about? Oh my gosh. I mean the list goes on and on.

Ryan Isaac:
From our perspective, we hear so much about acquisitions, private equity money in the dental space, DSO formations and growth. And that’s probably on your radar.

Chris Salierno:
That’s another big one.

Ryan Isaac:
Yeah, I’m sure it is.

Chris Salierno:
Yeah. That’s another big one. And everyone, the big question there is where are we going to be in five or 10 years? So by many different estimates, DSO, there’s roughly I think about nine, almost 9% now I would think of dentists in the US are working for some kind of DSO, however you define it. And in terms of number of practices, not number of dentists, you hear numbers like 20% or something like that of practices are some form of DSO. So those are your rough numbers. And everyone’s wondering when’s it going to be 50%, right? When 50% of dentists or 50% of practices. And we certainly still are seeing this trend move in that way. But I don’t, I personally having read a lot of this material that the ADA puts out, [inaudible 00:16:59] from the Health Policy Institute has great analysis on this. I personally am not seeing that if all other factors remain the same that we’re going to go the way of optometry or some of our other cousins there. That we’re not going to become a fully DSO-

Ryan Isaac:
Industry entire-

Chris Salierno:
Kind of profession. I think that independent practitioners will be around for a very long time. What numbers are I couldn’t say, but I think independent practitioners will be around for a long time.

Ryan Isaac:
Yeah, it’s easy like human nature to just project out like what today’s growth and environment feels like and just assume. Because it feels like it’s real that it’s just going to do that forever. And I mean people do that with a lot. We do that with a lot of things. We do that with markets and investments and different conditions in the world. So I think that’s fair. I guess while we’re, I was going to ask this later, but while we’re on the subject, if a dentist had a passion for speaking and writing and just started wanting to get some of their opinions or maybe thought leadership out there, what are some good ways to start? I think a lot of people, and maybe this is a broader question about the role of content in a dental practice or for the individual practitioner. What role does it have? And if people want to get involved, where do they begin?

Chris Salierno:
I think one option first is to get a mentor. And I’m always happy to do that. I’ve done it many times and there’s other editors at other publications that can help. If you find someone that you think has done or achieved what you want to achieve something along those lines, then reach out to them. Hopefully they’re approachable and they’re happy to kind of serve in that mentor role and offer some advice. What I would say though, we live in such an interesting time where, and I benefited from this, you can self publish, right? So if you want to write, if you want to speak, you should be able to write. That is still-

Ryan Isaac:
Oh, interesting. Cool.

Chris Salierno:
The publisher parish kind of mentality is still is very helpful. If you just are a speaker and you can’t write and create content, you can still achieve that dream of being on the lecture circuit and speaking left and right, but it’s going to be a harder road. So if you can write or find a tone that works for you, whether it’s very clinical or more relaxed or blog style, I would say definitely look into that. And if no one else is publishing your material, you can publish it yourself thanks to blogs and Facebooks and all that. You really can build your own mini media empire on your own between social media and blogs and podcasts. So you can do this on your own. And certainly I benefited from that.

Chris Salierno:
I was writing two blog posts a week for years on The Curious Dentist and that definitely helped train me to become a chief editor of a magazine and it helped get me noticed. I’m sure that they were like, “Hey, this guy over here is writing this a blog and it’s got e-commerce functionality and he’s got social media and branding. He understands. Okay, he must know what he’s talking about. Let’s consider him for this gig.” So publishing yourself is a great way to start. And you just start to figure out what you want to talk about, you know?

Ryan Isaac:
Yeah. It’s like a long process. What you said resonates so much. I feel like I’m a blabber mouth. I could talk for hours without any preparation, but putting something concise into 500 words or 700 words, and make your point, make it clearly, make it interesting and give it to … It’s so hard. It’s so hard to do.

Chris Salierno:
It takes time to find your voice. And by that I mean the topics you want to talk about, but also what it is that you … how it is you want to connect to your audience. And it’s just, the only way to do that is just write a whole bunch and stare at that blank Microsoft word screen and just do it. Just churn it out.

Ryan Isaac:
You started telling me before we started here and I was like, “No, no, no, no. Hold onto that thought because just share this when we hit record.” You told me over the last few years you’ve been really taking a deep dive in kind of an interest into one part specifically about dental finance on the business side and practice numbers. So give us just a little intro of the things you’ve been digging into and we’ll kind of work through a few questions I’ve got here in front of me about that subject.

Chris Salierno:
Yeah, sure. So I’ve become very interested in profits and the opposite of profit really is overhead. I remember hearing about this even when I was a dental student. I could hear dental faculty just sitting around while they’re doing prep checks like, “Oh, I got to get my overhead down.” They’re just talking about this evil monster of overhead. And I had no clue what they were talking about. And 10 years ago when I opened my doors for the first day and I saw one patient my first day and it was my dad and I don’t think I saw another patient for like another week after that, the overhead monster is very real and scary in your startup, early days of a startup, right? And no one ever taught, file this under the list of things that you never get taught in dental school.

Chris Salierno:
So I started to become very interested in this because this is the thing that will, if not managed properly, will lead to the failure of your business. Right. I was always concerned, in dental school you’re worried about like clinical now practice or you’re worried about some sort of a major catastrophe with HIPAA or something like that. And yes, those are important things to pay attention to. But really at the end of the day, if you can’t pay the bills, they’ll come and shut you down. But good news is that it’s compared to other industries, it is very rare for a dentist to have to close their doors because they just run out of money. Right? I mean, yeah, these days you have some more senior seasoned dentists that they’re just kind of running their practice until it drowns very slowly.

Ryan Isaac:
They shut it down. Yeah. It’s like done.

Chris Salierno:
Yeah. They’re just kind of … they’re basically retiring without a plan. So yeah, those guys at some point just shut it down. But let’s take those guys out of the equation here. Dentists that are trying to have a thriving practice, but they just can’t make their payments, their rent or whatever. Fortunately, that is not a common thing when you compare ourselves to like the restaurant industry or like so many other industries out there. So that being said, you’d say, “What is our overhead? What is our profit? How do we pay the bills?” These are all of these terms that I’ve heard and I never really had a clear understanding on them. So as I was struggling to pay my bills and I’m looking at a stack of bills and my partner and I are like, “Well, which ones do we pay this month?” That’s when it became very real to me. Like, oh yeah, this is that overhead thing people are talking about. Oh yeah, we need to … yeah, this is a little scary. Okay. Yeah, we need to hear this one out.

Ryan Isaac:
Okay. So-

Chris Salierno:
That was my foray was losing it and then it became very real.

Ryan Isaac:
I’m still trying to picture like dad in the chair. And then did he come back though? Was he a repeat patient? Did he-

Chris Salierno:
He did. He was great.

Ryan Isaac:
I’m like, did he come back?

Chris Salierno:
Yeah, he came back. We didn’t scare him away from our, being the very first patient.

Ryan Isaac:
So if you’re going back to yourself, like in the early days when the monsters just staring at you, how would you teach yourself in some simple steps, like what is the overhead problem or how do you calculate this? Where do you begin to truly calculate it? What would you tell yourself?

Chris Salierno:
Well, when you’re in a startup situation, the answer is, well we need more patients, right? But the thing is even established practices, if they’re a little slow, if they have some holes in their schedule, it still is the first thing that people think of when they say, “Why am I not taking home the paycheck that I want? Why am I struggling to make payroll? These are all overhead problems, right? That’s what it’s all tied to. Right? So in those cases, still the dentist’s mind runs to well, I just need more patients. And that could be part of it, but as I’m sure you well know, working with so many different practices, just adding more patients onto the ship doesn’t necessarily, that’s not necessarily the solution you’re looking for. Right.

Chris Salierno:
If you’ve got a sinking ship then this, you’ve got a sinking ship. And what I’ve discovered was in those early days, yes I needed more patients. Of course I was a startup. I saw one patient in a day. We were really excited when we saw three patients in a day. So yeah, that’s a patient flow, new patient problem, no question about it. But along the same lines, we also were having a spending problem, right? We were wasting money on efforts and overpaying vendors or team members. We organizationally, we had an office manager. We were paying an office manager salary to the one front desk person that was there.

Chris Salierno:
Why? We’re starting. We need a a receptionist. We need someone to answer the phone and have a pulse. Not belittling the people that are receptionists and the different front desk personnel that we have. Now I’m not belittling them at all [crosstalk 00:26:16].

Ryan Isaac:
Just under a different role. Yep.

Chris Salierno:
But in the very first day of a startup, we need someone who has a great phone personality. You can think of all of the criteria of what is no doubt a tough job, but you don’t need an office manager with HR experience. Like who are the employees? It’s me, my partner, one hygienist, one assistant and the office manager. We probably don’t need an office manager for this, right? So we had built out a practice in a lot of ways structurally, financially we had kind of over committed to a lot of things that we really in the end didn’t need. And so I think a lot of dentists these days, kind of jumping to a quick conversation point, a lot of dentists are interested in this concept of lean dentistry. And that’s going to be the cover story in May for Dental Economics, a mean startup.

Chris Salierno:
What are the real cost effective ways and unwasteful ways you can build a practice? But that’s a whole other conversation. So I sort of get really interested in overhead. And what I discovered was it was very ill prepared to understand the financial paperwork that I was being handed by my accountant. I learned, the accountant wasn’t really necessarily giving us the advice that we needed to hear as young dentist business owners. And even after a few years, fast forward a few years, now we’re seeing some patients, there’s some flow. We’re still not taking home a paycheck, right? So now we don’t really have a new patient problem. It’s become clear there’s a profitability problem in this practice, right? We still could certainly be busier, but being busy or didn’t put any more money in my pocket. Right? So there’s something else going on.

Ryan Isaac:
Exactly. So now there’s this in this big … Now the question is profit margin. Now you’ve got revenue, but now it’s a profit margin issue.

Chris Salierno:
That’s right. So I started to look more into this. And there’s so much great information out there. If you just do a Google search dentist or dental office and overhead, you’ll find a ton of great content, some of which has been published over the years in Dental Economics. You’ll hear people like Alan Schiff, who is a CPA, and the head of the Academy of dental CPAs. You’ll hear Roger Levin, you’ll hear all of these folks at least just in the dental economic space, talking about what the numbers are, how to calculate and discover what your overhead is, where it’s hiding. And when I finally discovered that years after opening a practice, this makes so much sense. This is why I’m hemorrhaging money.

Ryan Isaac:
You’re like oh, okay. Yeah.

Chris Salierno:
Yeah. And no doubt you’re well aware of this, but for the benefit of your listeners, it’s you look at a profit and loss statement. You look at a P&L or an income statement, whether you’re doing it yourselves or you’re having or hopefully having a CPA do it for you professionally periodically, minimum twice a year. But I would argue it’s better to do it quarterly. You have some numbers that are being presented to you to show you, here’s what you made and here’s where it went. And from that document, from the P&L, you can discover what your overhead is. Now that’s just the start, right? So you know where the money’s going. I have been handed those forms, those documents for years, and I just looked at the top number. I look at the gross revenue, right?

Chris Salierno:
I’m like, “Oh, that went up. Ooh, up is good.” And then I just file that in a cabinet somewhere and I never looked at that financial instrument ever again. Right? So what I started to learn was that there are these categories. There are so many types of expenses. I mean, you look at the line items on a P&L, there are so many expenses that you can have, so many different categories and it’s not standardized, right? Like some accountants do one way, some do it another way. But there are some very basic, four in fact, basic categories of overhead that a dental office should be very focused on to evaluate their own health and to evaluate the health of any other business that they were looking at.

Chris Salierno:
First and foremost is the team, the staff. The second would be your dental supplies, your cotton rolls and composite and impression material and all that. The third is your lab bill and the fourth is your rent. Those four categories there actually are some industry standards for. So for your staff, anywhere from 20 to 30%, let’s say 25 on average. If you’re running your team overhead at 20%, like that is incredible. That’s very, very low. It’s usually a lot higher that than that, especially if you have a seasoned crew that’s been there for a long time-

Ryan Isaac:
Or more producers, multiple producers. Yeah. Things like that.

Chris Salierno:
Oh, well, and then geez, I mean I’m just even talking for like the typical solo practice.

Ryan Isaac:
Just one, yeah.

Chris Salierno:
When you start to add in like associate dentists and it gets a bit more complicated and that’s where you really need to sit down and speak with your CPA. But yes, but for our purposes, we’ll just say it’s your hygienists and it’s your assistants and all of that. Your supply bill, all those cotton rolls and composites and everything is between five and 7%. Again, 5% you are really running lean and mean. 7, 8%, you’re like yeah, it’s kind of more the average. Then your lab bill for a typical GP practice is anywhere from say seven to 12%. Let’s call it 10 on average. Seven is a real nice target. If you’re running at seven, you’re doing some nice bread and butter crown and bridge.

Chris Salierno:
As you start to do more cosmetic work, advanced implant work, yeah you’re going to see that number go up to more like 12, 13 or higher. Certainly for [inaudible 00:31:54]. And then finally rent. A huge … I mean this is national averages is about 5%. But obviously there’s a huge difference between a three chair practice on second Avenue in Manhattan and a 10 chair practice in Omaha, Nebraska. Like there’s just, you can’t … they’re so different, right. But just 5% would be a national average. So just knowing that those four things should be a target helped me out so much. I realized in those early days that I was spending way too much on my team salaries. I valued my team, but we were paying a premium for that. So when we wondered where’s our money going, that was part of it.

Chris Salierno:
We also were using a very nice high end expensive lab because that’s what I wanted for my patients. But if you’re only getting paid from GHI $400 for a crown, then you really can’t afford to have a $250 lab bill for every crown. And that seems so silly and obvious right now. But that’s an example of the kind of things we were doing [crosstalk 00:33:03].

Ryan Isaac:
But just seeing the numbers, so you’re just saying like these are four of the main categories anyone can Google. And you probably, if you asked a lot of dentists, they could probably rattle off a few. But if you’re not seeing them, I mean that’s like … I mean we preach that all the time. The first step to making any good financial decisions is just baseline the organization and being aware and honest about what the numbers are telling you because it’ll shape your behavior even in slow, subtle ways over time.

Ryan Isaac:
As you’ve listened to our podcast, maybe there’s a question about your finances you’ve wanted to ask. It’s easy to get an answer. All you do is just pick up that phone, give us a call at 833-DDS-PLAN to set up a consultation. Or if you don’t want to call us, you can just go to the website dentistadvisors.com, click the book free consultation button and set it up. It’s free. Do it today.

Ryan Isaac:
So there was a question on this list that I wanted to hit that’s on the clinical side of things. It’s definitely like out of my realm and that is profitability on the clinical side. So profitability with the most and least profitable procedures that you can do in a practice. Which is definitely not, it’s not my training man. So you can touch on that a little bit.

Chris Salierno:
But I’m happy to. So I’m on a crusade to teach dentists about gross profit margins. So we just talked about overhead of a whole practice. Now we’re talking about the overhead of an individual procedure, an individual service that you provide. And dentists don’t have the slightest clue by and large what it costs them to do a thing. So if I ask most dentists, “What’s your gross profit margin on a crown?” They’ll first of all, probably not even realize what I mean by gross profit margin. What I mean by gross profit margin, and this is in any industry, right. On my favorite show, The Profit with Marcus Lemonis, he’s calculating gross profit margin all day long whatever industry he’s investing in. It’s basically your direct materials and your direct labor. That’s your gross profit margin is when you take out your direct and your direct labor, how much profit is left.

Chris Salierno:
So what is not included in gross profit margin, what’s not included is all of the other expenses to keep the lights on in your practice or in your business. Right? So this is, when we take our fee of 100 bucks and we take out what our assistant’s salary was for that half hour or hour and all the costs of the materials that we used to make that crown or a filling or whatever, when we take out those expenses, that’s when we’re left with our gross profit. Let’s say it’s 50 bucks for just for argument’s sake. That means that we now have 50 bucks left. That’s our gross profit. That doesn’t mean that’s what I put 50 bucks in my pocket. I still got to pay for all the other stuff to keep me on, my rent and my loan and all this other stuff. But that means I’m running at a 50% gross profit margin, obviously. Right?

Chris Salierno:
And that as it turns out, not that great. It’s hard to be overall profitable when you’re running at [inaudible 00:36:16] that low. So I started to do this analysis. I said, “Okay, I pay my assistant $18 an hour. If it takes me an hour long to do a procedure for a patient, then that means my direct labor is $18 an hour. No, I’m not including my hygienist. No, I’m not including my front desk. That’s all indirect labor. We’re just looking at what it costs me to do a specific thing.”

Ryan Isaac:
Just to do it. Yep.

Chris Salierno:
The direct labor is the assistant. And no, I’m not including myself. I’ve lectured around the world on this topic. Oh, what are you going to put yourself? I’m like, “Yeah, no, we’re small business owners. What we make is what is left over at the end of the day. Right. And if you want to put in, I deserve $400 an hour. Okay. You go ahead and do that, but I’m not muddying the waters.” Our real direct labor in this case using this business principle-

Ryan Isaac:
Yeah. It’s needs to be there. What does it cost?

Chris Salierno:
It’s the assistant. Yeah. It’s the assistant. Right. Okay. Then you add up all of your materials. And yes, I’m actually suggesting that the next time you have a no show and you have a free half hour that you and your assistant or whomever is in charge of ordering supplies, you open up your catalog and you think, okay, let’s think of how much composite, the anesthetic, the impression tip, blah, blah, blah. You actually add that up. It doesn’t take that much time to do it. And you just write that down and you round up, round down. I don’t care. You’re not trying to get to the last penny here, but get a sense of what the material cost is for you to do a thing. If I asked most dentists after explaining what gross profit margin is, and I asked them, “What does it cost you to do a crown,” what do they tell me?

Chris Salierno:
They tell me their lab costs. Every dentist knows their lab costs. But what they don’t know is how much they paid their assistant to be there. They could probably figure that out pretty quickly. They have no idea though about their impression materials, the temporary material they use, blah, blah, blah, blah, blah. And when you figure this out, and when you convert that gross profit number after you subtract direct labor and direct materials from your fee, after you subtract that out, if you convert that to a margin, to a percentage, that number right there tells you how profitable your different procedures in the practice are. You may find out as I did that I have some procedures that are ridiculously profitable and I have some procedures because I’m doing them on certain PPO panels that are ridiculously not profitable. Now with that information in mind, I can evaluate, are the materials I’m using too expensive?

Chris Salierno:
Are there great alternatives out there that don’t sacrifice patient quality of care but still get the job done? Am I just buying the most expensive thing because of vanity reasons? I can discover that I need to not participate in this insurance plan anymore because I’m losing money every time I do a procedure for them. I can discover, I’ll give you an example. Post and core is one of my favorite examples because post and core material is really expensive. You look in the catalog, you see all these fiber posts and cements and whatever, and the raw cost of material is pretty high for post and core. But because you get them done pretty quickly, let’s say 15 minutes or something like that, you can do a post and core in.

Chris Salierno:
And the reimbursement rates are pretty good and certainly your private fee should be pretty good. That’s a really profitable procedure. I mean my profit margin on a post and core is about 93% when I get my private fee. 93% gross profit margin. That is ridiculously, ridiculously profitable. If you were on the show The Profit with Marcus Lemonis and he came into evaluate your business-

Ryan Isaac:
Yeah. What’s your business do?

Chris Salierno:
And he said, “What’s your margin on doing a post and core,” and you said, “93%,” he’d fall out of his chair and say, “Are you freaking kidding me? That’s crazy.”

Ryan Isaac:
Just do that all day.

Chris Salierno:
Yeah.

Ryan Isaac:
What are you doing? Yeah.

Chris Salierno:
Do that all day long. Do post and cores all day long. And you can’t always compute for everything and it doesn’t have to be perfect. As I said, you don’t have to go down to the penny. And I’m not doing this by the way. I’m not suggesting dentists do this calculation for every single procedure they do. Two surface filling, three surface filling, blah, blah, blah. No, just get some basic ideas. I do it for, and I’ve already done it so I don’t really have to do it again unless I make big changes to my materials. But you do it for like a two surface composite, a denture, a crown, a root canal. Like you do it for the big, just enough to get a sense of where you’re losing money and where you’re making money.

Ryan Isaac:
Yeah. That’s awesome man. Time has just flown by and I feel like we just covered such a broad range of things from profitability, profit margin, procedures and publishing content. So what kind of parting words would you leave everyone with? What kind of advice in any of those subjects would you leave people with? Any resources you want to point people to, shout out to the magazine or anything online you want to leave with us for resources too?

Chris Salierno:
Yeah. I’ve got a great resource. So if you’re interested in profit, if you’re interested in tackling overhead, beating up PPO companies the way they beat us up, the Dental Economics conference this year, it’s June 2020. It’s going to be in Las Vegas at the Park MGM. Go to principlesofpracticemgmt.com or just go to Google and put in Dental Economics Conference. You’ll find your way there. It’s a stellar lineup and we’re calling this, Principles Of Practice Management is the name of our brand of conferences. This is [inaudible 00:41:53] conference. We’re calling this one The Profit Summit. It is just focused on profitability.

Ryan Isaac:
Profit only.

Chris Salierno:
So if you want to learn more about what I just talked about, I’ll be speaking. I’ll go into detail on this and we’ve got a bunch of other great speakers that are going to be going and hammering cashflow and profitability from every possible angle. Two great days in Vegas. You’ll walk out a superstar.

Ryan Isaac:
Man, that is so cool. Thank you so much for joining us. Seriously appreciate it. Where can people find you, dental Economics, anything helpful to point them there?

Chris Salierno:
Yeah. So I’m in every issue of Dental Economics. You can always find me in my email address in there. So I’m easy to find. My Instagram tends to be the best way to locate me. I’m the_curious_dentist on Instagram. That’s a great way to message me and get in touch.

Ryan Isaac:
Man, thanks again for being here and sharing all this like huge, broad scope of all these different subjects. Really appreciate it man. Thanks for your time.

Chris Salierno:
Oh, thank you. It was a ton of fun. Thanks for having me back.

Ryan Isaac:
Catch you later. Thanks everyone.

 

Getting Organized, Practice Management