Mike Abernathy on Building Wealth as Big as Texas – Episode 51

Dr. Mike Abernathy, founder of Summit Practice Solutions, joins the Dentist Money™ Show from his ranch outside of Dallas where he reflects on the most valuable lessons he’s learned as a practice owner and consultant. Mike’s approach to business management and personal finance allowed him to retire ahead of schedule and become a mentor for dentists all over the United States. In this interview, he talks about the one statistic to watch in your practice, what it means to embrace consumerism, and the pitfalls that keep dentists from reaching financial freedom.

 

Show notes: 

Website: http://summitpracticesolutions.com/

Podcast Transcription:

Reese Harper: Welcome to the dentist money show, I’m your host, Reese Harper. I’m with a special guest today here from his ranch, if I’m not mistaken, is that right?

Mike Abernathy: Yes!

Reese Harper: Dr. Michael Abernathy, it’s a real treat to have you on the show, sir, welcome.

Mike Abernathy: Thank you so much for inviting me, I’m looking forward to it. I’m actually a little bit nervous, I just got off listening to Ammon’s recording, the CPA. You should have named that “Tail Hook Accounting” or “F18 Accounting”. It would have had a lot more buzz than the name of his company. It was a great show, everybody needs to listen to that.

Reese Harper: Oh, thanks for tuning in and listening to that, he’ll appreciate that. He’s probably up in Denver today and he does a great job, thanks for tuning in. So you’re not intimidated because you don’t get nervous, I’m sure?

Mike Abernathy: I do get nervous, I mean…

Reese Harper: Ok well, you’re practically famous, ok?

Mike Abernathy: Yeah right.

Reese Harper: You’re a well known commodity in the dental world. Alright, so for people who don’t know you, there’s a lot of information about you in the show notes. You’re an author, you’re a speaker, you’ve built up your own dental practice from scratch and owned multiple dental practices. You’ve started a pretty unique business that helps dentists purchase equipment and supplies at discounted pricing. I mean, you’ve done a lot in the industry and have a lot of experience. Today I think the context is going to be a little bit broader than for most guests. You’ve been a dentist, you’ve been an entrepreneur, and you’ve seen what it takes to run a business and what it takes to be a successful clinician, tell me what makes a good dentist from your perspective?

Mike Abernathy: I’ve actually been, well we all have that “born on” date and that “use before” date in dentistry. I’ve been to that 30 or 40 year reunion and we started off with 100 doctors. Two did not finish the curriculum and quit. So of that 100 doctors, forty years later, 14 or 15 are dead, but only 3 out of the group of 100 were able to retire with the same or better income as they did when they practiced as a dentist, by age 62.

Reese Harper: Interesting

Mike Abernathy: It is because we’ve had millions of dollars run through our fingers yet things don’t happen. When I look back and look at the things that went well, ok so this is the old guy looking back and using history to establish that. I was really surprised at some of the guys that were All American guards and I remember thinking, gosh, their fingers look like big pieces of sausage and they’ll never be able to do well, and they did well.

Reese Harper: Yeah

Mike Abernathy: I look at the guys who were Omicron Kappa Epsilon, the top ten percent. They did horrible. In fact when I address dental schools, I ask all the Omicron Kappa Epsilon people to raise their hands and they’re real proud, I said everybody look at these guys because they’ll be working for you once you get out.

Reese Harper: Ha ha, they’re going to be out of a job.

Mike Abernathy: Well, I think the number one skill set was their people skills.

Reese Harper: Ok, so what does that mean to you? What does “people skills” mean?

Mike Abernathy: I would have to say the best job I ever had was waiting tables. And this was at a time when we didn’t pool tips or make minimum wage, and it was a nice restaurant. I paid my way through dental school doing that, that and lab work. So I am not by nature a people person, that is why I live on a ranch. I like being away from people, and am always nervous when I get put in a crowd. You and I would not be a problem, but when I’m put in a wedding, that might bother me. So I needed to learn that it’s not my natural bent. I learned that it’s not the cause effect, the reward part of it in waiting tables, helped me see the cause effect that I could look at people and tell from a personality standpoint, I listened better.

Reese Harper: Yeah

Mike Abernathy: I tried not to talk as much, and you’re having me talk, and listen more. So it was that. If anybody could learn this… I mean if I could learn, anybody could learn. I think most dentists become dentists not because they knew about what it would take to be good at dentistry, didn’t necessarily have tweezer dexterity, they made better grades than somebody else. and so they got into graduate school. But when they get out, I think that’s why so many doctors are disillusioned by dentistry, cause when they get out the realize that, ok, some of the things that you really need to have to do well, like maybe some business experience, people skills, and also from a leadership standpoint is actually understanding that you can surround yourself with team members that compensate for the areas that you’re not strong in. So i’m thinking that really good dentists actually learn pretty quickly that they’re not the smartest guy in the room but they’re smart enough that they can surround themselves with intelligent people and compensate for the lacks that they’ve got.

Reese Harper: Yeah, that’s interesting. As you’ve gone around and spoken to a lot of different groups, what are some of the things that you think dentists struggle with the most in their lives? What are some of the challenges you feel like they’re faced with in your experience? If you do a Q and A session, what comes up the most often?

Mike Abernathy: They struggle with a lot of stuff, and a lot of it hinges from this entitlement mentality when they get out of school. Again, in broad categories, new patients, productivity, consumerism, competition.

Reese Harper: Let’s hit some of those, what do you mean by entitlement mentality when they get out of school?

Mike Abernathy: I think we all have that, if you spend a long time in school and spend a lot of money on it, there is this presumption of a little bit of affluence, a little bit of privilege, I ought to be able to afford a new car and whatever. I come from a background of attorneys, for 7 generations, every male is an attorney, my daughters an attorney.

Reese Harper: Makes for a good family conversation.

Mike Abernathy: It’s a horrible Thanksgiving and Christmas, and they’ll argue, it’s a political year.

Reese Harper: Haha, no one’s got an opinion!

Mike Abernathy: Yes exactly, and they don’t care which side is right or wrong, they’ll argue either side and still make you look stupid. I do think it’s a mistake to assume you can do certain things, and often times they do it too early. Some of that’s generational.

Reese Harper: Ok, so this entitlement mentality you’re saying is, I go through school, I’m starving a little bit, I’ve racked up some student loans, I’ve paid the price, at some point I deserve what I’ve worked so hard to enjoy, I deserve it!

Mike Abernathy: Yeah, a dentist can have anything in life they want, they just can’t have everything. They need to be selective. There was a book, and I’m sure you’ve heard of this, it’s called “the fulfillment curve”. It’s just a line that goes up the air and kind of makes a curve and a loop. Like an upside down test tube, on the left would be the essentials, shelter, home, food, education and some amenities. Each one of those give us a bump in self image and its like taking a drug, it feels good. But there is a point in which you get, in this particular book, I don’t know if it’s adjusted for inflation, but that money can buy happiness, I don’t know if it’s up to about 75-$80k per year. After that, the fulfillment of spending money or maintaining the things we bought diminishes. I think doctors, when they walked across that stage, never thought about being average, and they get out and realize what they have to do. And 5-10 years into they are average and they’re trying to compensate and take back their lives and that won’t do it, neither will debt.

Reese Harper: Yeah it’s true. That was a pretty landmark study. I think that there is a big bell curve and on that right hand side your fulfillment kind of starts going down as you spend more and they call that over consumption.

Mike Abernathy: Yes, that is it. Exactly. It makes me sad because I get calls from doctors in their fifties and sixties who have successfully ended three marriages who have just married someone twenty years younger than them who just had twin baby girls and don’t have a penny saved for their retirement. They are still paying alimony checks, no one got re married, and they want to retire in two years with five million dollars. I am going, part of ending up good, is to start good. If you are not reducing that debt, it’s trouble. I have never seen a dental student or dentist that we could not get out of debt in 5-7 years. Also, they were still able to save 20% of what they took home. It has just changed. We can’t use the demographics or lifestyle of our parents or somebody that you think has made it. This is boring, but I can remember back when, real estate crash and banking crash and high techs crash and you would be at a party and somebody would say, “what did you refinance your house for?” And I said, “ I don’t owe any money on my house.” they would all move away. Or somebody would walk up to you and say, “how much did you lose in that high tech deal?” And I would say, “Oh, I wasn’t in that so I didn’t lose anything.” It is boring when you think about it, but again, it is not the guy who dies with the most toys.

Reese Harper: That is true and we can move on past this, but I want to add one more thought to that. It seems like sometimes it is just about timing and patience for when you deserve certain things. You get out of school and you have said that their is this pent up entitlement and in my experience at least, we interview probably three people a day, where it is just different dentists getting out of school looking for help or wanting someone to tell them what to do. We do this big intake form where they fill out stuff before we call so we know what everyone’s goals and priorities are. It is amazing how many people within one or two years out are focused on that. Yesterday, I saw two surveys come back and one of them was, “how do I get my second home,” right? I saw another one two days ago was, “how do I get a second home?” This person was only three to four years into practicing. They are liquid ya know $40,000-50,000. I’m like, woah!

Mike Abernathy: They still had debt too! Not that there isn’t good debt, but people who do not move towards debt freedom also tend to not want to overextend themselves again. I mean it is not goal setting the two make goals for.

Reese Harper: You remember how it felt, right? You remember how it felt to be in that painful situation, and how hard it was and how life has gotten less stressful now. Life has become much less stressful and so I don’t want to go back there again and live in that.

Mike Abernathy: Well, it kind of focuses your life decisions a little bit better too. And too, when you start modeling that, you are again rubbing off on your wife. I rarely see doctors that if they are kind of mean to their staff or they don’t handle money well or they are not very good with people in the office. It usually is that way in the home. So, again, if they are not good with money in the office they generally have problems there too. Today, I think dental students have finally found a way, I feel like Dr. Phil, like “what were you thinking”. I mean they figured out one other way, not only are they coming out of dental school with a lot of debt. I just read an article where the average student debt 4-5% of it is spent on drugs and alcohol. You know though, they get out, and marry another dentist! So instead of coming out with $300-400 thousand, they have a million. They have to live near each other and both have jobs and stuff. You know, they just keep adding a twist to this!

Reese Harper: Ya, that is good insight. That is one thing that you said in your list. You hear about entitlement. You mentioned a few other things, one being new patients. Everyone seems to care about this, you know, obviously it’s a huge issue. In your experience how much effort do you think people actually put towards that themselves versus just kind of complain about it. I am curious how much mental bandwidth does that take up and how much time do doctors actually spend on marketing and growing their patient base versus just being frustrated that people don’t come and knock the door?

Mike Abernathy: I think you could apply that to anything. I don’t think they spend any bandwidth on it. Again, they would say they would because they are thinking about it right then. They don’t work on the practice as much as they work in the practice. I think it is funny when you talk to dentists and I say, “how much profit did you make this year?” He goes, “uh, 25-30%.” I went, “you made 30% above what you paid yourself?” “No, I took 30% home.” That is not profit. You earned that, and you deserve it. But, you made no profit if you took home 30%. I mean if your overhead was 70% and you took home 30% there is no profit. The profit comes after that. These doctors that look at this about new patients, if there was one number, and I know that you have had people look at kind of key practice indicators or key things that you need to keep your eye on. If I could see one number of the whole practice, I don’t care what they produce or whatever, most of that can be fixed. But the one number that is most important is the number of direct referees they get. If I don’t see at least a 50% direct referral rate, we got trouble. Doctors tend to think of new patients as a new problem or my accounts receivable as a problem. Those are symptoms, not problems. If you think about it, if you are not getting new patients or you are not getting a high direct referral rate, people don’t like you. Or maybe they don’t like something about your practice. It doesn’t matter what their list is, but if you are not getting their referrals than that is a problem. I like to take and think of practices as donor and recipient practices. The recipient practice is that good practice that they have got people lining up to come in, they don’t really need to market, but they should because they are doing everything right. Then you take the rest of us, which a lot of us are donor practices. We really need those new patients. We aren’t even getting an average of 25 or 30 a month and we need that. We probably shouldn’t market because we are looking for an external solution to an internal problem. A lot of that new patient deal we could spend three hours on talking about, “ok, here is how you work on it.” If I work on their P & L and see that they are spending over 5% on marketing. I think 3-5% would be ok. But they are spending quite a bit on marketing, and they have quite a few patients, but they do not have the direct referrals. That is a slow death spiral. You are just not inspiring these people.

Reese Harper: In marketing generally, the dental industry is it’s own beast. There is not a lot of great research on it because there is not a lot of consistent marketing programs that are being implemented, but when you look at other industries they depend heavily on pull traffic, or what you are calling direct referral. There is some sort of pull to the practice that is based on the value that the business derives. It is not a mailer, it is not you externally trying to buy traffic, right? You are attracting people to your business and that is a huge metric that businesses look at, but I think you are just bringing it up that within dentistry that is crucial. Sometimes if you are seeing 15 new patients a month, but we have got 5 of them are from direct referrals and 90% are not. That is unhealthy.

Mike Abernathy: Can you see the consistency in the thought of practicing dentists though? They would rather throw money to the latest greatest you know whiz bang never happened before marketing campaign, rather than form that relationship with the patient or stay involved in the community. I got a call from a doctor and it was a couple of years ago. They just get my number and they call. He is in his fifties and he is tired and burned out and wore out. He says, “I used to have this good deal, I am only getting about ten new patients a month, it is getting harder to pay the bills.” I said, “you are how old?” I said, “let me tell you a story.” He told me at one time he got seventy or eighty patients a month when he first got there. I said I bet when you came to town you were the high school teams dentist and I bet that you went to the lions club and the rotary club and I bet your wife was a kindergarten or first grade teacher and you were involved on the PTA and gosh you played golf there at the little golf course. I bet now, that you live outside of Nashville, I bet you live in a gated community that is twenty or thirty miles away. You get there late, you leave early. You don’t buy your tires in town or eat in town. He goes, “how did you know my wife was a kindergarten teacher?” I am going, exactly dude. This is always going to be relational.

Reese Harper: So that is the new patient thought here. I think that is crucial. You mentioned a few other things, production, consumerism, do you want to talk about production at all or jump to consumerism?

Mike Abernathy: Well, you know, back to the new patients you have got to have about two new patients a day for a hygienist. If you are an average practice and you are going to have somewhere between 25-30 patients a month, that’s about two a day. If you grow you have to keep that ratio of new patients coming in. When we look at production, hygiene is going to do a third of total production. That means that the hygienist every month is doing 17-18 thousand of that. So production is not just the doctor, but it is that dynamic of partnering with your staff to help people want what they need. That makes a huge difference. I think the biggest mistake I see doctors making in productivity is in their case presentation. They want the dentist to do more than the patient does. The minute that happens you cross the line and you can’t get back on the other side of it. If you partner with your staff to do certain things, I mean, I can send you stuff and you can send this to your readers if that would help. I can send you materials that talk about that special relationship that you form with your team, it is as if the patients don’t really believe a hygienist or an assistant have a reason to sell them something. It just becomes a dialogue and all of a sudden the production goes up. Again though, it takes everybody on board, everybody seeing that vision. I guess as a leader your number one job is defining what is core in that practice. What is reality, and you guard that! But you also have to embrace change and that brings consumerism into it. I think the best definition of consumerism is going to be giving people what they want when they want it at a price they can afford. Again, the price they can afford doesn’t necessarily mean lower fees, but if you can give them interest free financing, if you could stage the treatment, if you took on the mentality that it’s ok if it takes two or three years to get all of this done. Instead of my way or the highway, that will help afford it. The time is consumer hours. I mean, any front desk person will tell you, the only two times patients want to come in, early in the morning, late in the afternoon: 7-9, 4-6, or any Saturday. So the Monday – Thursday practice died about fifteen years ago and the walking dead out there is still kicking, but that is going to change. Giving them what they want. Again, I don’t know if you have ever experienced this, but I know hygienists have. A doctor will go out and take a sleep apnea class and then he becomes a hammer and nail. For the first six patients that day he is just hammering and the hygienist is going crazy thinking what is going on? Ok, take a deep breath, ya you need sleep apnea or you need twenty eight veneers.

Reese Harper: He took his advanced course.

Mike Abernathy: Yes, and you are going, “oh my goodness this is not working well.” Again, you cannot get better at giving patients what they don’t want. If your practice isn’t growing, you are not inspiring the patients.

Reese Harper: You got to take a look at that.

Mike Abernathy: And then the last thing would be, if we look at a practice, let’s say a doctor is on this call and he is listening and he is doing a certain amount of money but he wants to do more or he wants to lower his overhead or he wants more new patients, this action would be that everything you do, every system, every protocol is precisely designed to give you the result you are getting. I like what Jim Roan said, he says, “you don’t get better by chance you get better by change.” If everything you are doing is giving you a particular result and you want a different result, you have got to go to different. It has to be different and it is the difference of change that really holds back doctor and staff.

Reese Harper: That is good insight, that is really meaningful. Let’s go to a couple of other thoughts that I had. What are some of the biggest financial mistakes that you see dentists make in their careers? You have some financial opinions, you are definitely more finance minded than a lot of people. You retired super early and have been super successful. What are the mistakes you see dentists make with their finances?

Mike Abernathy: You know, I don’t know that they ever look at finances as a decision that they can make about things. I mean it is almost like they are listening to one of the large dental suppliers who goes, “well, you are gonna need this.” Ok. I mean and before they know it they have given all of this money and then they have a wife who does the same thing. Could be a male doctor and I have seen that over and over. I have seen that over and over again where we have a female doctor and a male spouse who is spending tons of money. Then you got to send your kids to the best school. I remember when I was forty. I didn’t overspend what I made and I had saved, I don’t know, a million dollars by that time. I still had some debt though. Then I started looking ahead. For me, it was setting that goal to arrive at a certain place at a certain length of time and then once you did that it is called the Hawthorne effect. What gets measured, gets done. It is kind of like predictive counseling here. You can kind of tell what is going to happen. The minute I decided how much I needed and what that needed to look like and where my practice was going to go, and I revisited it, then all of a sudden the timeline I gave myself was fifteen years and half a million 7.

Reese Harper: You are so right. I don’t want to talk about us during this interview, but that is a founding philosophy that drove our operation. We just say if somebody saves fourteen percent in a calendar year, and I know what that is, we track it, we build a little report with a big blue box that says 14% say savings rate, and we measure it every January. We show it to people and we say, this is what you saved, here’s the different buckets you put it in, and here is what you have earned. We had this assumption that if we just put the numbers in front of people in a really easy to understand way then they would change their behavior. People would go from having an average savings rate of 11%, to now we have an average savings rate of 24% across all of the practices that are with us for more than three years.

Mike Abernathy: That’s incredible.

Reese Harper: You see people’s behavior change when they measure something. When they acknowledge it and know that is there. Like you said, I set a goal, I wanted to have this much by this point and it is amazing how it just kind of happened. I set this goal and it just kind of happened. It is not just that simple, but there really is something powerful about doing it. Dentists don’t feel like they have control over their numbers, that it just kind of happens.

Mike Abernathy: Right, it begins in the small things, you know, like, paying off that school debt. That needs to be important. Not letting our lifestyles outstrip our earning capacities. I mean you can buy instruments like insurance and stuff like that if their was a catastrophic disability or death but the odds are you are going to live. The trouble I am seeing is that doctors in their sixties that the best thing that could happen to them is if a bus hit them.

Reese Harper: They get sold so much insurance early in their life because that is apparently the thing that they are going to have to worry about is dying. But then 99% of them end up living, so you know, 99.9% end up not ever dying but they have spent so much money on so much insurance. Sometimes I wonder, do we ever realize that the biggest risk is not having enough money? That is a much more probable risk that is going to occur when I am 65. I won’t have enough money, but unfortunately dentists are taken advantage of a lot. This is in my personal experience, I am not advocating for no insurance. I am just saying that I see guys spending thousands a month on insurance and they are not saving a dime. That doesn’t work. The probability of you having those incidents is pretty low, I am not advocating not to have coverage, but you have got to be pretty scrupulous in today’s world of where you let your money go or you will end up with nothing.

Mike Abernathy: Well, and you have tiptoed around this, but probably one of the biggest success habits that I got into was researching and finding experts to help me in certain fields. I figured out pretty quickly that one, I wasn’t the smartest guy in the running. Two, I could buy a head start. I didn’t have to start at A,B,C. I could start at S and T, from a practice manager standpoint and investments, savings, and tax.

Reese Harper: You don’t have to start at A!

Mike Abernathy: You see these doctors, and I am thinking back at, wasn’t Morgan Hammond his name? He had mentioned that the first year they take the 179 deduction, but then the second and third year they don’t have deductions and now they are starting to make money and then they are really surprised. The problem with most CPA’s and people that you go to is that they don’t give the advice. They just regurgitate a profit and loss. I just thought they made such a good point in that interview a P & L doesn’t really show what a dentist would consider to be profit and loss because we don’t have corporate distributions and we don’t have debt service. So you know I start at early and get the basics done and call people and hire people to help you. When you hire these people though, it doesn’t mean you are stuck with them for the rest of your life. I think the thing that people don’t count on is that when you give your money or your finances to someone else for their expert advice, all of us have the hair on the back of our neck stand up because I’m going to watch this guy. They weren’t watching the money when they held it, but all of a sudden it makes them look at the guy and watch him.

Reese Harper: Totally.

Mike Abernathy: I am all about hiring my advice like colleges hire coaches. Basically it is like, “coach, we are behind you 100% win or a tie. You start losing and your ass is out of here.”

Reese Harper: Win or tie.

Mike Abernathy: You can do that, but you know, go to people that have made the mistakes and kind of figured this out and…

Reese Harper: Ya, no question.

Mike Abernathy: Ask them who they use! I have had people that they couldn’t find this person no one could, but here is their phone number. I say you would not be able to get to this person, and then I give them their number.

Reese Harper: I like the way you said it you start at a T instead of an A. If you can hire somebody that accelerates your learning curve, it’s great. I really look at these service providers as almost college tuition you have never paid for. I’ll share this quote, there is a guy name David Booth, he is the primary donor of the Booth school of business at the University of Chicago and he said, “Are you willing to sell someone a shoe that doesn’t fit, or are you willing to lose a sale because you didn’t have the right size?” I think that is a really important concept for people to get about their service provider. Is the person that you are about to do business with are they willing to sell you a shoe that doesn’t fit? Are they trying to force you into something that just feels like it is a bit of a grind against what you feel like you need? Or are they willing to lose your sale because they don’t have the right size for you. They had better be willing to do that or they are not the type of service provider that I would like to do business with. My whole team and everyone we interact with, I like people who will say, “I am sorry, I am trying to fit my solution into your business” or, “I am trying to fit my product into your life” or “if I get that product or if I have that solution then I will bring it to you, but I can’t right now”. They are willing to walk away when they don’t have it. I think that is an important barometer for dentists to remember. I see guys making the decision to hire the wrong service provider at the wrong time with the wrong solution. Even though we tell them you got to go hire people, they just go on a hiring spree hiring all the wrong people and they cram services into their practices that are not the right fit. Does that resonate with you?

Mike Abernathy: The trouble with responding to it is I am going to probably mention some names that would get us both in trouble.

Reese Harper: We are editing this. Beep, beep, beep, beep, beep.

Mike Abernathy: This would sound like Chris Rock doing an interview. Again, I guess we could call that the Cinderella syndrome right? Someone goes around with one size shoe for the one person that will fit and he has to pass on all the others. That is a great analogy. I can see that. I think when debt and life and just the stress of doing it just overwhelms you then you start to compromise on the core things that you thought that you would never do or never say. It is kind of like you and I saying well my dad was a real hard ass and I am never going to do that or say that to my kids. Then they do something and you yell that one thing that you said you would never say and you are going, “oh my gosh.” I’m looking down going, “Damn, i’ve got my dad’s hands!”

Reese Harper: I’ve used all his lines, I’ve got his hands, and his brow.

Mike Abernathy: You can’t escape this.

Reese Harper: Well Mike, this has been a really insightful interview. We have talked about what makes a good dentist, the entitlement mentality, new patients, and some statistics that people can take away, we talked about consumerism. I remember talking a little bit about that. I think we talked about having a few things in the show notes that we will get from you to be able to list. We talked about dentists feeling like they don’t always have control over their financial stuff that they are kind of an object and not able to make these decisions. We gave them a few tips on how to do a few things and how to hire the right people. Anyway, I really think that you have got a lot of experience and it is interesting to chat with you. Definitely going to have you back on the show at some point.

Mike Abernathy: That would be great!

Reese Harper: I’ll let you get back to the ranch life, I appreciate it.

Mike Abernathy: I’d come back any time.

Reese Harper: Thank you so much, appreciate all you are doing in the dental community and for dentists everywhere.

Mike Abernathy: Bye-bye, Reese.

Practice Management