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Think back to the moment you decided to become a practice owner. What were your hopes and dreams? Did you have visions of freedom, financial upside, and personal fulfillment? Is it playing out like you thought, or has the vision become slightly blurred? In this episode of Dentist Money™, Reese & Ryan describe what it means to live the dream of practice ownership. They discuss common reasons dentists get discouraged along the way, and provide three important keys to building a profitable practice while maintaining work life balance.
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 co-host, Sir Ryan Isaac.
Ryan Isaac: Good morning.
Reese Harper: And never forget, Q in the studio.
Ryan Isaac: Hey Q.
Justin Copier: Hey guys!
Reese Harper: (laughs) we like to make sure that those blue headphones are in hand.
Justin Copier: They are on head.
Ryan Isaac: Or on ear.
Reese Harper: And Kirkland water on hand (laughs). I would like to jump right into the show today, because I feel like it is somewhat the story of my life.
Ryan Isaac: This is the story of your life, because it is living the dream of practice ownership.
Reese Harper: Living the dream of practice/ business ownership. In this case, we are talking about dental practices. I think what we want to start out with is, we want to just kind of frame up this picture of thinking about how the dream started, right? You have this idea of buying into a dental practice, and the alternative was, you could have just gone to work, done your dentistry, and collected a paycheck without having to take on all the risks associated with owning a business. So this kind of path, it’s like… that one seems pretty simple.
Ryan Isaac: It could have been a good lifestyle.
Reese Harper: It is a good lifestyle! It’s dang good.
Ryan Isaac: Yeah. No practice loans, no equipment debt, no building loans, no insurances, no negotiating with companies, no risk of embezzlement, hiring people, firing people, marketing, bookkeeping, cash flow problems, reinvestment…
Reese Harper: You would have just had a life of going in and doing the dentistry. But when you decided that you were going to buy the practice, you consciously said, “I’m willing to take on all of that responsibility, and all of that risk,” because of probably three kind of main things. The first one, you wanted to be your own boss. You thought, “that will give me time and freedom. I will have autonomy and control over my schedule. It would just be nice to— I answer to no one, I just blow as free as the wind. I want to be my own boss! That would be great.”
Ryan Isaac: Pockets lined with money… nothing but time.
Reese Harper: Yep! Nothing but time on my hands. The second thing that you probably went through or thought about was, “I think there is going to be more financial upside. I believe there is more financial upside with owning a business! I think I can grow my income beyond what I can make as an associate by actually running this practice with a healthy profit margin, and I think I can increase the value of this asset that I’m building by reselling it over time for a nice capital gain instead of earning the ordinary income along the way!” That is a rational belief. The third thing you probably thought of is, “I’m gonna be more fulfilled as a professional: I’ll make a bigger impact in the world; I’ll make a bigger difference out there; I’ll be able to use all of my brain and kind of—”
Ryan Isaac: Yeah, be creative, “I’ll create something. I’ll make jobs and mentor people.”
Reese Harper: Yeah, you think about living up to the challenge about actually running this business, and you think of it as a competition that you can succeed in. And it is what the most respected dentists have done, right? They have built their own practice; they have grinded it out; they have their real estate; they have built out nice spaces; they have hired people. It’s just fulfilling to think about accomplishing all of those things.
Ryan Isaac: Yeah. That seems right. That seems fine. That’s the dream.
Reese Harper: Yeah, that’s the dream, but it doesn’t always turn out that way.
Ryan Isaac: And then you wake up… (laughs).
Reese Harper: Well, as Q knows, as he well knows… he is kind of in charge of making sure that these three things actually happen laughs)…
Ryan Isaac: That’s his job. Thank you, Q!
Reese Harper: Thank you, Q, you are a good man. But, it doesn’t always turn out to be like this. So, instead of being your own boss, what typically happens? What do you see happening a lot of times?
Ryan Isaac: Well, you have the dream of the freedom of time. “I’m my own boss! No one is telling me what to do.” You are your own boss, but you probably have less time than your employees do.
Reese Harper: Yeah, instead of having no boss, the business becomes your boss, basically.
Ryan Isaac: Yeah, and it could be a really bad boss sometimes.
Reese Harper: It doesn’t talk back to you, it just beats you with a stick, you know? And you’re just like, “seriously? We’re not even friends, but you just hit me all the time!”
Ryan Isaac: And it never lets up. It doesn’t have any hours… that boss doesn’t keep hours.
Reese Harper: But I think the perception that you have as a business owner is often probably a little unhealthy; it is not quite the reality of the way things are.
Ryan Isaac: Yeah, financially, it can feel that way too. When cash gets tight, or you have to make payroll, you have new expenses, you have build-outs, you have to expand the practice, you have to hire the new person, the highly-paid person… and we’ve said this before… you can forget that your balance sheet might be growing, the asset of this business that you are building might be growing—
Reese Harper: The practice itself might be getting worth more.
Ryan Isaac: Yeah, worth more money as part of your net worth, but you might actually have less cash. I mean, that’s a reality too, but the perception of that can feel pretty awful.
Reese Harper: Oh yeah, it’s real! I mean, I know from personal experience watching this business become worth a lot more money over the last five years, but as it grows, many of you know that a lot of times, the cash flow that you need to put towards growth, whether it is equipment, or a new associate, or more hygiene, or a more capable front office, better insurance coordination and collections… a lot of these salaries take up some of the additional money. So the practice gets to be worth a lot more, but you might not feel like you have a lot more in your pocket. You might not feel like you are getting ahead faster, because usually, what makes you feel successful is when you have extra money to either do stuff, or take time off, or buy stuff (laughs).
Ryan Isaac: Yeah (laughs). It’s pretty simple.
Reese Harper: And so if you don’t have more money for these things, then you often don’t feel like you are successful.
Reese Harper: I had a client the other day… we got on the phone, and he was just really frustrated about the last two years, right? Just like, you know, “we’ve grown so much, we’ve gone from—” this is a big practice, so… “we’ve gone from two million in change and collections to north of three million in collections,” and he was frustrated, like, “we’re not getting anywhere! I’m making the same amount of money I used to make, and the same progress… we’re just not going anywhere. I’m just gonna let go of all my associates, and just go back to the way it was, and produce all of this on my own.” And I’m like, “well, right now, actually, the last two years—” I just showed him his progress report, which helps kind of remove the anxiety and feeling that people have around—
Ryan Isaac: Let’s consult the numbers. Let’s go to the data.
Reese Harper: And we will talk about this a little bit later, but it was interesting to watch him kind of light up when I was like, “your net worth is increasing by—” it was like $170,000 a quarter. You know, like, “look at how much has changed! Your practice has increased in value; you have paid down a ton of debt; your investments have gone up; your taxes are actually— because of the more that you have earned, and you haven’t been spending more personally, you have actually had an increased savings rate, and you are putting a little more money away than you used to.” But, you know, he just hadn’t really, like, enjoyed it yet. He hadn’t gone on a decent vacation; he hadn’t really taken some time off; he was working like crazy. And I just think all of those emotions and not having balance in his like with his own personal finances, not having a little personal, you know, scrilla (laughs), like you said, and a little bit less time… it makes people go, “I’m not going anywhere!”
Ryan Isaac: Yeah, “nothing is happening. There is no progress here.”
Reese Harper: But that is not the truth, that’s just the perception!
Ryan Isaac: I think the other perception, too, is that as the owner, you know every problem; you know everything that is wrong in the business. So, in the practice, you know the things that it should be doing that it’s not. You know about the hygienist who isn’t performing so well; you know about the lack of marketing; you might know about the chair that is about to bust. (laughs) you know the arm, where you have to tighten it every morning, and that arm is going to fall off, and you are just waiting for the patient to like, be having a tough time in the chair, and the arm goes flying? Like, you know all these tiny little problems; you know all the cracks in the ship. And that can just wear on you, too, when you know so many of the problems and not have the ability to just go fix everything in one shot.
Reese Harper: Yeah. Today, we want to talk about how you can live that initial dream you had when you decided to become a practice owner: how you can really enjoy the freedom of being your own boss; how you can capture this financial upside of running your own practice, and also how you get the sense of accomplishment that comes from building a successful business. These are the three things you wanted, and I think you can have them. It is not going to be turning a light switch on and off to where just one day to the next, you are going to be able to achieve all of those, but I think that that is the— business ownership is not worth it if you can’t enjoy some of those things at some level.
Ryan Isaac: It should improve the quality of your life, I mean, the things that you are doing, in one way, and maybe your motivation is more wealth, maybe it is more time, maybe it is more creativity… one of those things, one of those facets of business ownership should improve the quality of your life somewhere.
Reese Harper: Yeah, totally. So, let’s talk about the first one: how can you enjoy the freedom of being your own boss? How do you really get to the point where you really enjoy that? I think the answer to that question is that you need to know your best role. You need to know your best role in the business, and once you can find that, you are going to be able to really enjoy the freedom that comes from being your own boss. Let’s just talk a little bit about this. We have talked about a book on the podcast before called The E-Myth, and it is written by a guy named Michael Gerber, and in one of the quotes in the book— the E-Myth actually stands for e for entrepreneur, so it is the entrepreneur myth. I think the first title was actually called that— and really what he is talking about here in one of the main quotes that probably expounds the point of this book goes as follows: “the e-myth, e for entrepreneur, is the flawed assumption that people who are expert at a certain technical skill will therefore be successful running a business of that kind.” So, when I hear that, I’m like, “dude, that is totally applicable to dentists,” right?
Ryan Isaac: Yeah, the expert dentist— the craftsman, the clinician, you know, the person who loves the science and the art of dentistry, and loves that craft— the assumption, then, is, “well I could run a big dental practice. I could run a big business, because I know the craft so well, and I love the craft so much.”
Reese Harper: Yeah, and in The E-Myth, the main story behind it that Michael Gerber starts with is his friend Sarah, and there is a model that he kind of outlines using the story of Sarah’s pie shop. So, as you might expect, Michael Gerber, the author of the book, mentored Sarah, and taught her how to run her business like an entrepreneur and a manager, and to hire technicians to do most of the other book.
Ryan Isaac: Yeah, those are the three role that he points out. I mean, most people have probably read or heard about this book, but those are the three main roles that exist in a business: you have the entrepreneur, the manager, and the technician. We will just talk about them really quickly.
Reese Harper: Yeah, what is the entrepreneur, I guess?
Ryan Isaac: Well, that is the dear visionary. Those are the people who are the catalysts for change; those are the people who are constantly forcing something new to happen, you know? We have created a product, or a service, and it worked for today, but what is tomorrow? What is five years, or ten years from now? What are the problems that will exist? How do we tackle them now? How do we innovate for what is not even happening yet? That is the entrepreneur.
Reese Harper: Yeah. I think that an entrepreneur typically lives in the future a lot of the time. They are always asking, “what if this happened?” or “what if that happened?” or “what if we could do this?”
Ryan Isaac: How many conversations in the last ten years of working together have you been like, “Ryan, have you ever thought about this problem?” and I’m like, “no. I have not thought of a problem, okay?” (laughs)
Reese Harper: (laughs) so, I think they tend to ask, “what can be fixed?” or “what’s broken?” or “what’s going to be broken? What will break?”
Ryan Isaac: (laughs) that is such an interesting mindset, though! I mean, it is definitely unique; not everyone is built that way (laughs)–
Reese Harper: Why are you laughing at that?
Ryan Isaac: Cuz it just makes me laugh, man! You’re constantly asking the question— anyone in that role— what is going to be broken, and how do we try to fix it before it is even broken, you know? It’s funny, man.
Reese Harper: Well and that is the entrepreneur, typically. Then, you have the manager. The manager makes sense of the entrepreneur’s madness; I think that is exactly how Gerber puts it. He kind of puts all of the mess that the entrepreneur is creating into boxes; he gives it structure.
Ryan Isaac: Yeah, “we’re gonna shelf that. Yes, that could be a problem but we are not going to tackle this right now.”
Reese Harper: Yeah, they are much more pragmatic. They monitor business processes; they keep things operating smoothly. They live more in the past, and they want to keep everything nice and orderly. So they look at the business in terms of what it currently is based on past data, and they are trying to make sure that—
Ryan Isaac: Where have we been? Where are we now? What does the data tell us?
Reese Harper: And they try to make decision based on that information. Then, you have the third personality type, which is the technician. The technician is really the doer. It feels good for the technician to just roll up his sleeves—
Ryan Isaac: Have a well-defined role, a well-defined job, and just go get it done as best as possible.
Reese Harper: Yeah. And as long as he is working on that job and not being distracted by a bunch of other things, he is pretty happy. That person doesn’t really want to be told how to do things… they want to be in control of the work, and they want of be able to kind of be autonomous and just do their work, and they really live in the present moment. They live in the now, and it is kind of stressful sometimes to live too much in the past, or in the future. And I think that all of these roles are really essential to a business functioning well. Without the entrepreneur, there is not going to be any innovation. No improvement. The business will become dated and kind of inspire. But without the manager, there is no order, and no processes. If there wasn’t a manage— you will see a lot of businesses where—
Ryan Isaac: Well you just chase so many different things—
Reese Harper: Yeah, the entrepreneur’s ideas just send the business down ten different channels, and there is not a lot of focus. And then without the technician, nothing really gets done.
Ryan Isaac: So then, the question that you had asked earlier is, how do you get to this point where you know your role, you know? Some people can be I think mixes of those different personalities, right?
Reese Harper: Yeah. Well in a perfect world, I think you are equally balanced amount all three, right? You would be the perfect person: a third entrepreneur, a third manager, and a third technician. That would be the perfect person to execute. That is a really balanced person, and very unusual, and I haven’t met anyone who is that, you know? Usually what it takes— most of us aren’t all three, so as the business grows and gets busier, it becomes more obvious that we shouldn’t try to pull off the ol’ triple-threat hat trick of being all three. But honestly, earlier in my career, I was pretty confused about what I was. When I first read this book in 2001 or 2001… no 2003, this is when I read that book for the first time. I remember thinking… I just remember being very self-aware of who I was! I couldn’t really peg what drove me quite as much. I mean, you hear these descriptions we have given today, and it might be a little easier for you, because we are bringing it into a pretty real-life context, but for me, reading the book the first time, I wasn’t really sure, and maybe a lot of people listening to this aren’t either. And so I think one way to kind of look at this is you can kind of pay attention to where your mind goes when things get really stressful at work. When your head starts spinning, which activities do you revert to?
Ryan Isaac: Yeah, what do you go back to? That’s interesting.
Reese Harper: Where do you naturally gravitate? What is your survival mode? And it has been interesting watching you— when I watch you, and you are in kind of survival mode, you like, lock everything out, and you do the work.
Ryan Isaac: Yeah, hunker down and work.
Reese Harper: You just work, and you plow through stuff, and you are really efficient, and you get a ton done. You are just super productive.
Ryan Isaac: You want to shut me down? Open my office when I am in the middle of that work, and then be like, “let’s talk about the future” (laughs). Yeah.
Reese Harper: Yeah, and I am sure you can look at me, and— observing me, how would you label me?
Ryan Isaac: The work you revert to is looking to fix future problems. I mean, it is always like, “what’s next? How can I sit down and just clear everything off my plate, and just think and brainstorm about that is next? What could we fix in the future?” Yep.
Reese Harper: And it’s hard, but it takes a while to kind of know where you are at, right? Do you work more hours and just fit in more patients into your schedule? Focus on your hand speed and just think about production? Because that would be someone who would be more like a technician. Are you always looking for ways to cut costs, or motivate your staff, or negotiate better reimbursements from insurance providers?
Ryan Isaac: Yea, when you are maybe stressed or something, do you go spend your day off and start working on management tasks? Organizing, and trying to create more processes, and— yeah.
Reese Harper: Or do you go back to the drawing board and kind of like, scrap it all, and just say— do you question your business model? Your location; your office square footage; maybe the number of operatories. Whether you even want to a sole practitioner, or whether you want to have associates, or how you want to position your business on the market. Do you look for different revenue streams to increase the revenue of your business? Because that is more of the entrepreneurial mindset: trying to figure out what you could do in the future to make this whole thing just be better and solve more problems, right?
Justin Copier: Where do you guys think most dentists gravitate? I would assume it is technician, but what is your experience?
Reese Harper: Yeah, I mean, there are a fair amount of people in the entrepreneur and manager camps, but technicians probably make up the majority of people. It has been surprising to me how many people either have strong manager or strong entrepreneurial ambitions or characteristics. You would think that dentistry would just be a straight technician career, but it’s really not.
Ryan Isaac: No, I talk to a fair amount of people who have no idea how they will do this, or how they will accomplish it, but they know right off the bat what the future holds for them. “Oh, for sure I don’t wanna be in the chair my whole life. I want multiple locations—” and it is not even a money thing, they just kind of know what they want to be involved with, you know?
Reese Harper: Yeah.
Ryan Isaac: And other people know very clearly, “I want as little management headache and entrepreneurial headache as I possibly can get. I want one location, really simple, maximize profitability, a few days a week,” you know, and dig in.
Reese Harper: Well, a lot of people who are pure technicians hire a good office manager to kind of take over this managerial function—
Ryan Isaac: Yeah, they lead meetings, and negotiations, and work with vendors—
Reese Harper: And from an entrepreneurial perspective, they have enough entrepreneur in them to have owned their own practice, right, and thought about one location, and where that location should be, and how to structure the business. They don’t spend the majority of their time thinking like an entrepreneur, but once they got into an entrepreneurial situation that they could kind of leverage, they really focused on that technician side. And a lot of those people retire super early. I mean, they are the least distracted people, because they just know that it comes down to working better, having higher production per hour, fitting in more patients, and making sure that they continue to improve their hand speed over their career so that they can do more production throughout each hour of the day.
Ryan Isaac: So, one thing that you pointed out then is, look at the stuff you tend to do when you are in survival mode; what do you gravitate towards? And then the other way to look at this is, what do you tend to avoid? What do you try to avoid when you are busy, or things get stressful?
Reese Harper: Yeah, so if the last thing you want to do is look through your P&L and try to find cost-savings opportunities, or if you hate negotiating with your suppliers, then maybe you were not meant to be a manager. But if that is the case, you would likely be better off hiring someone, or getting a consultant to help you put systems in place for purchasing and supplies, right? Maybe also having someone help with operating and HR issues, and figuring out how your patient flow should be structured a little bit better, and maximizing your office performance. Those are kind of managerial skill sets that really need— someone has to look at them. What we are saying, I guess, is that it is important to be honest about what your strengths are, and just give yourself a chance to maximize whatever performance you need to maximize and the role that is uniquely you, and then be willing to let other people fill the other roles. Don’t force yourself to do things that you are not naturally good at. I think it is okay to stretch yourself a bit; if you are 0% entrepreneur having 10% entrepreneur, it is probably a good thing for you, and if you are 100% technician, getting some manager in your skill set is probably not bad, but for the most part, you just need to staff up to those deficiencies.
Ryan Isaac: You will be happier; you will be more successful; you will do better at your craft.
Reese Harper: Yeah, just do what you are naturally good at.
Ryan Isaac: Alright, let’s take a break, and when we come back, we will hit a few more.
Ryan Isaac: Welcome back from break, everybody! Let’s jump back into it.
Reese Harper: Let’s go into question number two, which is: how can you capture the financial upside of practice ownership? And I think the answer to this question is you need to manage by the numbers. Whether it is someone you have hired to do it for you, or whether you do it yourself, you can capture the financial upside of practice ownership if you really manage by the numbers. So, don’t make decisions solely based on your gut, or what you think other people are doing, like hiring an associate, or—
Ryan Isaac: Yeah. I mean, there are specific numbers that would guide that decision, right? Is it time to hire an associate? If you do it too early, what is going to happen? Both of you are going to have holes in your schedule, or you are going to give up production when you are not ready to give up production; there are definite numbers that will guide that decision.
Reese Harper: Well, and based on what you are trying to accomplish. For example, let’s say that your goal is to have one associate in your practice and maximize the production. The time to hire that person will be different based on your goal. If you are trying to open multiple practices, and you want to have a five-location, small brand, then the time to hire an associate is the minute that you have enough financing to just get that person started working. If your goal is, “I want to have one location where I maximize my own income level as much as possible, but then have another associate come in and continue to maximize our facility by spreading out more production across these six operatories that I have, then what you would want to do is wait until you were making— let’s say that you are going to pay your associate 30% of production— so you would wait until you were making 30% of production plus your profit at the bottom had a profit margin that was satisfactory to you. Maybe that is 15%; if you make 30, and you have 15 left, and it is a total of 45, maybe you are happy there. But that is not when you hire the associate. You have to push past the point to the point where you have enough to hire that person and still maintain your profit margin! So you wouldn’t say, “well, I will hire that associate, and then I will wipe out all my profit,” because if you did do that, then you are hiring a little early, right?
Ryan Isaac: You are not going to be happy. Yeah.
Reese Harper: What you will want to do is try to push your production to the point where your profit is probably higher than it should be. Like, maybe it is hitting 20%, and you’re like, “okay, that is really— I can’t produce any more, and I am really maximized, so I am going to take some of my profit, and I will drop my profit back down to ten,” or “I’ll drop it to twelve. And I’m still gonna have profit, but if I pay my associate 30% now of his or her production, I will still have a profit margin at ten or twelve, and we can grow to get back up to 20% together of profit at the end.”
Ryan Isaac: That is a really good point, basing it on the numbers and the goals. The goal also might be to cut back, and there are people who are like, “I just want more time. I want to buy back my time, and I am willing to buy it back with some income.”
Reese Harper: Yep. “I don’t wanna make as much as I am making right now, because I just pay 45 cents or 50 cents in taxes on every dollar I earn, so I would rather just have a day back.” And so you can hire someone to buy that day back. But you know, you have to manage this based on the numbers. And the same thing applies for a new piece of office equipment, or hiring for an office manager, or hiring any kind of staff: how much of your overhead should be going towards staff as a percentage of your collections? And what is the production that you are going to be gaining by having this new piece of equipment? And when will the break-even period of time be? And for people like us who are used to doing these calculations all day, it is pretty easy. And you should have someone on your team who you can call and be like, “I’m thinking about this decision. What is the choice?” And if you get this vague answer, like, “well, it’s totally up to you…. It’s just whatever you make of it—” no opinion, but just like a bunch of fluff… that’s not an answer! I get frustrated when I hear financial advisors give fluffy answers to people, because it’s like, what good are you if your answers are all vague and general? Like, “you should probably save a lot for retirement.” “Well how much? What percentage of my income? What would you advise in my specific situation? You’re my actual advisor! What do you think I should save?” “Whatever you feel like you can do, Doc! What do you think you can do?” Well how helpful are you if you can’t give me any numbers that I should be doing? And so, if you can’t get these numbers on your own, find someone who can give you good numbers, because if you are not managing your practice by the numbers, you are not going to be driving a financial reward for taking on that business risk. I promise you that any large dental chain and large dental business has to get to where they can manage things by the numbers down to the penny in order to be successful, and if you want to be able to continue to compete in this really competitive landscape, you need to learn how to manage by the numbers too, and you are going to have to invest a little bit of time and money and energy into either a team who can help you do it, or you are not going to be able to compete as effectively.
Ryan Isaac: Now, would you say there are times where there is kind of an ebb and flow of profitability versus growth? You know, like different phases of career where it is worth not having as much profit just so you can get to that point— if you are starting out, and you have 3, 4, 500,000 in collections, but you know you could be a million plus practice… you have the facility and the capacity to do it, and you want to work that much to do it… is it— there is probably a point early in career where you go, “it is worth putting more money back into this thing.” Having a little less profit to get to that point where it is finally, like, at its capacity.
Reese Harper: I think it depends on what your goal is, like we said that last few minutes. Whatever you are trying to get to, there is going to be a tradeoff in profitability to get there. And it’s okay to sacrifice—
Ryan Isaac: Well, we have seen people live in a tiny townhome and drive old cars and be worth, on paper, ten, fifteen million bucks, because they are plowing every penny back into like, the next location, or the next associate, or the next partner. And that is just the sacrifice you have to make until you hit that goal.
Reese Harper: Yeah, for what you want to do. And I think that depending on the size you want to be, there is a tradeoff, and that tradeoff is, everyone has to sacrifice. From the single location that wants to do a million in collections to the producer that wants to have multiple locations and be an entrepreneur that doesn’t do production, I mean, there is a lot of sacrifice that has to happen in the early phases of every business, and the cycle of growth versus profitability will likely ebb and flow throughout your career! You can have one or the other: you can have growth, or you can have profitability, but you really can’t have growth and profitability at the same time.
Ryan Isaac: Or no good amount of either.
Reese Harper: Just think about the math behind it. If you want profitability— let’s say you have a million dollars of collections in a dental practice, and you are getting paid 30% of production, and there is 20% profit leftover. That is $200,000 of profit that you get to keep above and beyond what you would get paid working at a normal associate job. So, you are excited about that, because there is great profit there. The enjoyment is, you get to do things with the money: you can buy a boat; you can buy a nicer house; you can retire earlier—
Ryan Isaac: More pizza.
Reese Harper: You can have more good dinners and meals—
Ryan Isaac: Mountain bikes—
Reese Harper: Better steaks… you can stop going to Sizzler for the all you can eat $9.99 (laughs).
Ryan Isaac: Hey, shout out to Sizzler, man! (laughs) Sizzler treated me right for a lot of years back in the day.
Reese Harper: (laughs) I liked Sizzler back in the day. I haven’t been there for a while, but that place was solid.
Ryan Isaac: I haven’t been there for a long time, so I still have, like, a really good perception of Sizzler. So, much respect to Sizzler. The next point we were going to make is, you kind of have to start with some of your own financial goals, and business financial goals, and determine what the business needs, like, where you are at, right? So, the example you gave, maybe taking a lower-than-average associate’s wage, giving up all profit to grow… you can’t just do that and just hope that all the money that is not coming to you is being efficient somewhere, you know? Like, you have to be measuring it. You need to me measuring your net worth, and the equity you are building in this practice, and what is the practice value, and how is it trending, and where everything is going. You have to be extremely detailed about that, or else what will happen is you will just make not very much money, and stuff will get wasted in other places as you attempt to expand the business, and then you will just be mad one day, and then shut her down.
Reese Harper: Totally. Shut her down. Like Ryan said, I would start with your personal financial goals, and determine what the business needs to produce, and how much your business asset needs to be worth so that you can have what we call a point where work is optional, which is something we call your “Tt” score. Your Tt score just measures the number of years you could really live on all of your assets combined, and the bigger that number is— if it gets close to like a 30, or between a 30 and a 40, that is kind of a point where work really is optional, meaning, if you spend $100,000 a year, and you are worth $3,000,000, that is 30 times what you spend a year that you have in assets, between your practice, and your retirement accounts, and your cash, and your real estate, you are in a pretty secure spot. So, manage by the numbers, have profitability metrics in place, and align your business with all of your personal and practice financial goals, and you will be able to capture this financial upside with owning a business. Otherwise, I think it is just working too hard for too little money. Anyway, the third thing we want to kind of hit on… we talked about earlier that people want to feel successful. They want to have a sense of accomplishment or fulfillment that comes from building a business. So, how can you get the sense of accomplishment that comes from building a successful business?
Ryan Isaac: The answer would be to be consistent with the important business initiatives that you are working on.
Reese Harper: We are talking about things like, marketing, employee development, continuing ed, staff meetings, P&L management—
Ryan Isaac: Managing the numbers, negotiating with your insurance providers, tax planning with your accountant team, purchasing, insurance policy reviews—
Reese Harper: Facility upgrades, expansion, new locations, patient satisfaction, recruiting, HR issues, researching new technology, clinical issues, clinical research and continuing ed… all these things are part of building a good company, and you want all of these business initiatives to always be happening. You don’t want these to be, like, pet projects that show up every—
Ryan Isaac: One gets attention for a little bit of time, really intense, and then everything else kind of falls off, and—
Reese Harper: Totally. They are not as needed initiatives. They are always being done. Your books need to be reconciled consistently, and you shouldn’t be the one that is having to think about going and doing that, because you should be the one that can look at your costs, and look at your collections, and see how they are trending, and this should just be like an automatic part of your operation. Looking at your P&L, or someone looking at your P&L, shouldn’t be a haphazard, as needed project. It should be constantly happening!
Ryan Isaac: It shouldn’t be something that is just getting done to hurry and catch up so you can file something.
Reese Harper: Yeah, you have to catch these minor issues before they become big problems. And in order to do good tax planning, you have to know this information. So, a good financial advisor can actually do this for you if you properly delegate it and empower them to do it, but if you are doing a lot of the stuff on your own, sometimes your CPA alone will not be either completely empowered or able to do good tax planning, because they will not have a clear view into your personal finances. And maybe you think recruiting is something you do when you have a vacancy to fill in your staff—
Ryan Isaac: Yeah, time to hire because someone left.
Reese Harper: I think this is a good issue to touch on. But you always want to be fielding applications from potential candidates so when the need for an employee rises, you have multiple people in mind! You can look at pieces of software like recruiterbox.com; it is a software that I have used that I like to be able to keep track of all of the people who are applying for certain positions. I am always looking for new advisors who can help push our business in the right direction. And if you always look like you are always hiring, and you are, on a regular basis, reaching out to attract qualified candidates, and just letting them know, “we are always taking applications. We are always looking for—”
Ryan Isaac: Yeah, you are always interested in the right fit.
Reese Harper: Yeah! I mean, you have a chance to always improve your human capital and improve the quality of your team. And so, I think that is just an important goal.
Ryan Isaac: Okay. Marketing is another huge one. You guys took a trip recently to a marketing summit and learned some—
Reese Harper: Yeah, we went to a big marketing summit in San Francisco a few months ago—
Ryan Isaac: The host and Q went.
Reese Harper: Well, and J Train. He pretty much ran the–
Ryan Isaac: Oh, and Jeff was there! Shout out to the man behind the camera right now.
Reese Harper: We went to a big marketing summit in San Francisco a few months ago, and one of the biggest takeaways was, in order for your marketing initiatives to work, they have to be consistent. And we have know that, but it was just interesting that that was like, the big takeaway that everyone is preaching all the time. Whether it is direct mailers, social media posts, email campaigns, promotions, or whatever you have decided to use, it needs to happen on a frequent basis over an extended period of time in order for your brand to stick in people’s minds. If you do one social media post a year after you realized new patient count is down, that is probably not going to solve the problem. And the principle is to put all of these things into a process that makes them happen like clockwork. All of the tax planning, the marketing, the HR, the recruiting— I have just listed a few examples, but it can’t be an as-needed thing. It could be as simple as mapping out your business initiatives on a calendar; just putting them on a calendar, and being like, “these are the things I’m going to do.” And you are not going to get good at this in one year, and I don’t expect that— you know, 10% of the people listening to this would even know how to get started, really. But if you don’t know, you are just like me ten or twelve years ago when I started my own business: I didn’t know all of these things! I learned marketing for the first time, and I learned payroll for the first time, and learned how to manage my P&L. I mean, I remember being really stressed for the first year of business operations about how I was categorizing my expenses on my P&L (laughs), and I haven’t thought about that for a while, because it is so dialed in, and that part of our business is working so well that I don’t have any— I am not only not doing, I am not even actually making the decisions on it anymore. Someone else is making the decisions on profitability, and thinking about when we can afford to hire the next person, and when the right time is to incur certain expenses, and how much we can afford in a certain area.
Ryan Isaac: But I mean— and I have been around you long enough to know what those days felt like when it was one person’s job, and I remember the days when that wasn’t dialed in, too. There were some, like, “we’ve gotta to make decisions based on, how does this feel?” or gut reactions, versus today, there is a pro forma, and a P&L, and projected numbers that tell us when certain things get executed. It feels way different!
Reese Harper: Yeah, and it allows me to not feel like I am having to make a choice that is like, subjective.
Ryan Isaac: Well, I mean, you know how those conversations go as a business owner, too— clients and listeners do this all the time— where when the numbers aren’t precise, and you don’t have the data, you feel like you have to make a decision, and there are feelings and emotions about it, and then you go back and forth on that decision for a long time, you know? Arguing both sides of it, because it is just not clear. It feels scary, but you feel like you need it, and so…
Reese Harper: I think that there is a lot of technology, and there are a lot of people who you can reach out to for help, and I think the point of this is that if your business isn’t really firing on all of these cylinders, it is not going to be very fulfilling, right? When you have business systems in place that help you address all of these important business goals on a consistent basis, you will get the sense of accomplishment that comes from creating something that has a lot more value than when you started. And if you don’t put all those things into place, you just won’t see the business mature into something that you are really proud of, and that has kind of reached its potential. And I think it is just scary sometimes for people to sort of commit to getting help, and they underestimate the amount of time and money that needs to go into getting help.
Ryan Isaac: Yeah, I mean, how long does it take for good accounting to really make an impact— good bookkeeping and good accounting— how long does it take for good financial planning to make an impact in your life? It’s not overnight, you know?
Reese Harper: Good marketing… how long does it take to train a staff person properly, right? How long does it take to get your office functioning, and your patient flow, and all of your scheduling, and appointment reminders, and follow up, and HR, and all of your accounts receivable, and collections— it takes time. But people need to be focused on these individual roles; they need to be at the right place. So, I think to recap, you really can live the dream of practice ownership, and if you do it right, the financial outcome will greatly exceed what you could have produced as an associate. That being said, there are many situations where being an associate is the precise role that fits your preference as a technician, and your goals in life. And so, I don’t think that the takeaway I want from this podcast to be that everyone needs to be a practice owner, but I do want it to be very realistic, and I want people to feel like they can pursue that path if that is part of what really drives them.
Ryan Isaac: Yeah, if that is the option someone is choosing, then you can get out of it what you expect to in the beginning, which is the time, freedom, financial reward, and kind of the fulfillment from creating something.
Reese Harper: So, know your best role, we talked about that— these are kind of like three takeaways: know your best role– this manager, this technician, this entrepreneur– and find out where you are at, manage by the numbers, and be consistent with all of your business initiatives. I think those are the three things that I would like people to remember from today.
Ryan Isaac: Alright, well we would like to thank everyone for listening today. We would invite everyone to follow us on Facebook and Instagram, the Dentist Money™ Show, you can find us there. If you would like to book a free consultation, go to dentistadvisors.com, there is a link at the top of the page to book a consultation, a phone call, on our calendar, or you can call us at the glorious phone number 833-DDSPLAN. We would love to hear from you, and thanks for joining us today. Thanks guys!
Reese Harper: Carry on!Income, Cash Management, Practice Management, Tracking Progress