Weston Lunsford on Numbers that Drive Practice Value – Episode 33

Weston Lunsford, CEO of Dental Intel and self-diagnosed “data geek,” breaks down the numbers behind successful practices and offers a simplified solution for measuring progress. He also explains the meaning of proactive planning, four categories of money making, the impact of broken appointments, and why certain dentists struggle to reach standard benchmarks.

Podcast Transcript:

Speaker: Views on this program are opinions of dental industry experts, and not necessarily those of dentist advisors. Opinions shared in the following interview do not constitute personal financial advice. This program is furnished by dentist advisors, a registered investment advisor. You’re tuned into Dentist Money Industry Expert series, now here’s your host Reese Harper.

Reese Harper: Welcome to the Dentist Money Show, I’m your host Reese Harper, and we are here with a special guest for the industry expert series today, Mr. Weston Lunsford from Dental Intel. How are you doing today Weston?

Weston Lunsford: Good. It’s good to be here with you Reese.

Reese Harper: Thanks man, I appreciate you coming up. We actually live within a short distance of each other but we’ve never had a chance to do an interview. And my team told me that we got to make this happen. And I’ve been wanting to do it for a while, so thanks for coming up.

Weston Lunsford: I’m excited to be on your show, I’ve listened to a few of your podcasts and think you guys do great work, so excited to contribute.

Reese Harper: Thanks man. Yeah, I think a lot of people today are going to benefit from this because it’s a subject that I’m super passionate about. And I know you are too, which is kind of understanding your numbers and making good decisions based on those numbers. And that’s a really tough subject for a lot of dentists. So how about you give us some background on yourself? And you’ve got a really great background to lend some insight into this. And do ahead and give us some of the background and how it got started.

Weston Lunsford: Yeah. Well, back in 2004 I started a CPA practice. And with that CPA practice my partner, [Shaylen 00:01:26] Peck, at that time, we both decided that we didn’t want to run a traditional practice where we’re just doing passive work for our customers. And we didn’t want to run a practice where we’re doing too much work, where it was unnecessary work as well. And so we focus on being very proactive with our clientele.
And as we started working with customers, Shaylen actually has some professionals that are in medical and in the dental. One of his brothers is an orthodontist. Actually practices up in Syracuse, and very successful. And started referring quite a bit of dentists to us, and it really started in 2004 just expanding from there. We started focusing a lot on dentists and medical, and ended up liking more of the dentists than we did the medical, and so put most of our focus on the dentists.
But our goal there was to be very proactive with our customers. And what I mean by that is, we would actually meet with them at least quarterly to do planning, to identify what’s working, what’s not working, what their goals were, and to make sure that we’re drawing out a map for them to be able to attain those goals.

Reese Harper: Tell people how much they owe from their taxes. [crosstalk 00:02:30].

Weston Lunsford: No, they didn’t like it.

Reese Harper: They don’t seem to like that.

Weston Lunsford: I had a trick though. I had a trick, do you want to hear our trick?

Reese Harper: Yeah.

Weston Lunsford: We would always overstate what they owed.

Reese Harper: Okay.

Weston Lunsford: Always. And then a couple hours back we would say, look we did some magic and here’s some things and we drop it down by 20, 30% and they loved us. They loved us.

Reese Harper: So do you think a lot of people do that?

Weston Lunsford: I think that happens all the time in the tax world. Yes.

Reese Harper: Manage expectations. Okay.

Weston Lunsford: That happens. So as we were working with dentists we started recognizing something, and really it hit me in 2008. So after about doing this for four years I started seeing a lot of my friends that were practicing in dentistry making a lot of money. And then I saw another side of friends that weren’t making any money.

Reese Harper: Yeah.

Weston Lunsford: And they were struggling. And that struggling kind of carried into their personal life. And it all started with the practice, they were just stressed and anxious, and not knowing what was going on. And so Shaylen and I decided we wanted to start really looking into this and trying to figure out what’s the difference?
And instead of focusing on after the fact accounting work, and after the fact tax work, we started really diving into the leading indicators of a practice and what was causing success and what wasn’t causing success. And I remember looking at some practices, they were within a couple hundred, just a couple hundred active patients from each other. But one doctor was taking home over $400,000 a year, and another doctor was taking home less than $120,000 a year.

Reese Harper: Yeah.

Weston Lunsford: And so it caused me to say, what is going on? And that really is what stemmed us into really focusing on the data and the numbers, and just doing decade. A decade of research identifying, what is it that we need to really focus on to make sure that we have a thriving practice, versus one that’s just kind of getting by?

Reese Harper: Yeah. It sounds like you had a passion for empowering the entrepreneur as well, right? I mean-

Weston Lunsford: Dentists really like to be dentists. They like to be chair-side. They’re very clinically minded. And I love that. They’re very touchy, feely type individuals where they’re very close to individuals. And which is good. And then there’s the business side of it, they are business owners. And oftentimes we see that they forget that side. But you know what I love about dentistry?

Reese Harper: Hm?

Weston Lunsford: You honestly can’t fail.

Reese Harper: Yeah.

Weston Lunsford: I’ve seen one failure that we worked with. One failure. Is that my phone?

Reese Harper: Yeah. It’s all right. Back up just one second and turn it off and say, you paused and asked me, you said, do you want to know what I found?

Weston Lunsford: Okay, yup. Do you want to know what I found about dentistry though?

Reese Harper: Let me know. I’m curious here.

Weston Lunsford: You can’t fail.

Reese Harper: Okay.

Weston Lunsford: In fact, I’ve seen one dental practice in the last 10 years fail. And what I mean by fail is he literally had to close his doors.

Reese Harper: Yeah.

Weston Lunsford: It’s super healthy-

Reese Harper: It’s a healthy industry. I mean a lot of lenders lend not on the practice itself even [crosstalk 00:05:26].

Weston Lunsford: Yeah for sure, and in fact less than 1% of dental loans are going into default. Less than 1%, that’s crazy.

Reese Harper: Yeah.

Weston Lunsford: But the reality is though, dentists can just get by and have what I would determine a pretty successful life in dentistry, but they’re stressed, they’re unsure, they’re uncertain. They’re not retiring when they want to retire. And they’re definitely not retiring with the amount of money that they want to retire with.

Reese Harper: Yeah. I just finished a presentation where I did a lot of research into what was the actual average retirement age of a dentist.

Weston Lunsford: Uh-huh. And what’d you find?

Reese Harper: That right now if you look at the income that dentists have as an average, right? Usually it’ll rank anywhere from the second highest in the country, to top 10 depending on the-

Weston Lunsford: They’re always in the top 10 for the last 20 years they’ve been in the top 10.

Reese Harper: So they’re making a ton of money, but the average US citizen retires at age 62, and that was the most recent data from Gallop. And the average dentist based on about 12,000 samples from the ADA was that they’re retiring at age 67.

Weston Lunsford: Oh man.

Reese Harper: So the average dentist is retiring at 67, the average US consumer at 62. In most cases making hundreds of thousands of dollars less than the dentist who has to retire five years later.

Weston Lunsford: So let me share a statistic with you on what causes a lot of this. This is something that we’ve seen. We’ve now synced just over 672 practices as of yesterday with our dashboard. And this is really interesting data, but on average between the years of five and seven, we see practices plateauing. And even not just plateauing, but then we start seeing slight decreases. And then they pick up again. And slight decreases. But they’re flat.
And they grew so fast for those first 3-5 years, they grew. And once they hit that mark they start plateauing. And so our big research was, why? What’s going on? What’s plateauing? But the reality is, when a practice plateaus it’s not worth as much.

Reese Harper: Yeah.

Weston Lunsford: And so these dentists will get their practices up to 1.2-1.5 and good dentists are getting up into the $3 million marks and higher. But then they start plateauing. And so the practice isn’t worth $3 million anymore, it’s worth 60% of that. Where if they can keep that practice growing, then they’ll be able to retire earlier, because the practice that’s growing and is a million dollar practice, I can get a million dollars for that. But a practice that’s plateaued is only making a million dollars, then we’re only getting about 65-70% for those practices.
So they’re retiring on a lot less money when they actually sell their practice.

Reese Harper: Yeah. I guess I’m kind of curious, let’s talk about the dashboard just a little bit, because a lot of people are going to say, oh great another thing I’ve got to look at that I don’t understand. Another thing I need. But I don’t understand numbers, they’re complicated. I want to understand them, but it seems like every time I start going on a numbers kick I burnout within a month or two and then I’m back to the same old.
So talk to me about the dashboard a little bit, and the design that’s gone into it. And why you feel like you guys have been able to turn numbers into something that’s a little bit easier to understand.

Weston Lunsford: Okay. And you know when I look at metrics or numbers, I’m a data geek. My background is accounting for the last 10 years. And so I love numbers. And dentists don’t. Some dentists do, we come across some dentists that they blow my mind. And I love talking with them, and we have a lot of fun on the phone. But for the most part dentists don’t like it.
And so we had to really take what we knew about data and simplify this. There’s probably, as you’ve been in the industry, Reese you know that there is at least 3-400 different metrics that you hear that people say you need to be measuring and monitoring and looking at.

Reese Harper: Yeah.

Weston Lunsford: That’s overwhelming. That’d be overwhelming for me.

Reese Harper: Yeah.

Weston Lunsford: So our objective when we started the research on identifying what is it that we really need to improve, was to focus on simplifying this. On my dashboard for example, we have what’s called a performance board on the dashboard. There’s nine metrics. Nine metrics, but I can guarantee you that if every single one of those nine metrics were performing at a level that we’re saying that they need to be performing at, that practice will not have any problems. It will be thriving, and the culture will be healthy. And they’ll be growing.
And so we’ve really simplified what we’re looking at in regards to how to improve the performance. And not just improve it, but to motivate and drive performance amongst the team members.

Reese Harper: Let’s talk about that just for a second. If you had to list … We could probably go through all nine if we had a couple hours here, but talk about the top two or three that you feel like are the metrics that you feel like people really need to pay attention to.

Weston Lunsford: Okay, before I tell you the top two or three, can I tell you a simple formula to make this real easy for all your listeners?

Reese Harper: Yeah.

Weston Lunsford: Dentistry, all of the money in dentistry falls into four categories. So we have visits, you have to have visits that come into your practice. And then we have production on those visits. So production per visit. If I just take by visits and times it by my average production per visit, that’s going to be the production that I make. My gross production, right?
Once I produce the money, then we have to collect it. So the third category is collections. After I collect the money, we typically are spending the money, and hopefully saving some. But we’re spending the money, and so then there’s the financial aspect of it. So number one is our visits. Number two is how we’re producing on those visits. Number three is how we’re collecting the money that we’ve produced. And number four is, are we spending it properly, right? Are we fiscally responsible with the money that we’ve earned?

Reese Harper: How much of my money goes to things that are not me?

Weston Lunsford: Yeah, how much goes? So when I look at these four categories, really spending the money can be pretty simply managed. I mean we have really good benchmarks out there for how much hygienists should cost in relationship to the production that they’re doing. We have good benchmarks of as far as what facility cost should be in regards to the amount of money that you’re bringing in. So there’s really good targets that you can try to budget in. The funny thing is, most dentists don’t do that though, they don’t look at that.

Reese Harper: Yeah, I was going to say, it seems like those numbers are advertised everywhere. There’s lots of articles about what standards are. But when it comes to my own practice, it’s hard for me to make those numbers fit my practice. And I don’t know, why do you think people struggle with that?

Weston Lunsford: I think it’s because they don’t have an easy way to measure and to monitor it. Accounting is so lacking. And so by the time I spend the money a month has gone by. And by the time you finally get the books done another month has gone by.

Reese Harper: Do you think that sometimes it’s hard for these guys to make decisions on people’s payroll, that on people that are close to them, their friends, their family?

Weston Lunsford: Yes.

Reese Harper: When they know that their payroll’s out of line [crosstalk 00:12:26].

Weston Lunsford: Which is the biggest cost in Colorado. So when I say light up, that means we plugged in their dashboard and within minutes we have a dashboard. So I call it light ’em up.

Reese Harper: It’s a fancy technology speak.

Weston Lunsford: Fancy technology speak. But we lit up this practice in Colorado, and this doctor was 38% over where he should have been on his profit margins. Meaning he was barely making any money because we want dentists to be somewhere between 35-55% on profit. He was 38% below, so he was just barely making any money in his practice.

Reese Harper: And you’re saying that 35-50 before they pay themselves [crosstalk 00:13:01] all their-

Weston Lunsford: Back out their pay.

Reese Harper: Yeah.

Weston Lunsford: So he wasn’t making very much money. And as we looked at it we immediately saw that he was 22% over on what he should have been industry-wise on paying his dental assistants. I immediately said, do you see this? Do you see where you’re 22% over on your payroll, and it’s specifically in dental assistants? And so our dashboard we also breakout the payroll so we know by front admin, hygiene and assistants, and then associates if I have them, so we can see if one’s overstated within that category.
And he immediately said, oh I know, I have my dental assistants that’s been with me for the last 15 years, and then my niece ended up getting into dental assistance, so I had to hire her and she had her friend that she needed … And his practice had four dental assistants by the time we got done talking. And he only had 800 active active patients.

Reese Harper: Yeah.

Weston Lunsford: He didn’t need four dental assistants, he needed 1.5.

Reese Harper: Yeah.

Weston Lunsford: And so sometimes that’s what I love about dentists though, they’re so good hearted. And so they make decisions a lot based off of emotions.

Reese Harper: Sometimes they’ll sacrifice their own future though-

Weston Lunsford: They will.

Reese Harper: -for the people that they care about, right?

Weston Lunsford: They will, but sometimes that ends up impacting the people they care about because if the dentist is not thriving, the practice is not going to be thriving. And if the practice isn’t going to be thriving, none of the team members can be thriving.

Reese Harper: Yeah, I think it’s important to remember that you sometimes when you feel like you’re doing someone a favor, if it’s putting your finances in a position where it’s not fair, you’re not being compensated fairly for the work you’re doing as an entrepreneur, and as a practicing dentist, it’s not really doing anyone any favors longterm, you know?

Weston Lunsford: Right.

Reese Harper: I’ve seen a lot of practices have to lay people off rather than have a long, thriving healthy career just because they’ve short-changed themselves on their overhead.

Weston Lunsford: Very difficult circumstances. But the good news is, it’s still a great industry. And so even without a lot of focus on the business side you can still be doing okay. But I don’t want practices doing okay. I want them doing great.

Reese Harper: Yeah.

Weston Lunsford: So back to these four metrics, or these four categories. Financial side, it can be managed. There’s a lot of people out there that can help. There’s people like you that can help on that aspect, and looking at where people are spending money and identifying if they’re over or under in categories. The collections side can be a problem, but typically it’s not. Most people realize when they go into a dental office they’ve got to pay. And so we’ve seen a lot of our customers where they’re actually have credits. A substantial credit balances, and I think there’s because there’s a lot of training and continued education going out there now saying before you do any major treatments, collect at least 50% of that upfront. Collect the other 50% when they’re in the office.
And so we’re seeing pretty good job on collections. Where we see issues is the first two categories. Which is the visits and the production per visit.

Reese Harper: Yeah.

Weston Lunsford: And a lot of doctors will focus on their production per hour. But when I think about production per hour, or they don’t even go down that far, they’ll just look at their production.

Reese Harper: Production. Just total number.

Weston Lunsford: They look at the total number. The question is if production didn’t hit the mark for the week, or worse, they’re looking at a monthly basis, and it didn’t hit the mark for the month, I’ll ask dentists why. And they won’t know.

Reese Harper: Yeah.

Weston Lunsford: Sometimes it’ll come, well I have a lot open spaces in my chairs. And so then we’ll look at that and say, okay that’s dealing with the visit side of things. Why do you have open spaces in your chair? I don’t know, my front desk is not scheduling the way that they need to be scheduling. And sometimes she is. And in fact sometimes dentists are not giving their front desks the credit they deserve, it’s a hard job.

Reese Harper: It’s super tough. Yeah.

Weston Lunsford: So when we look at these four categories, Reese, the most volatile is visits.

Reese Harper: Visits. Yeah.

Weston Lunsford: Getting people in the chair in the right time, and in the right chair, is the most volatile aspect of it. When I look at visits there’s so many different metrics that can revolve around that. But the reality is, I have to have the patients in the chair in order for my practice to make the money it needs to make. In fact, I’m just going to give you a … I don’t have a white board right now, but if I was to draw out a formula. Let’s say that we average $200 production per visit. That’s just the dentist’s stat. And this is a metric that we show. Average production per visit.
Because we want that to grow. In fact, I start seeing dentists when they start growing their visits, guess what starts happening to their production per visit?

Reese Harper: Declining.

Weston Lunsford: Starts decline. And a big part of that is because they’re getting busier. They can’t spend as much [qualiative 00:17:30] time with the patient, and so they’re diagnosing.

Reese Harper: Diagnosing.

Weston Lunsford: But they’re not getting treatment accepted because they’re not presenting it in a way that’s-

Reese Harper: It’s not effective presentation.

Weston Lunsford: It’s not effective, right? They’re fast, they’re rushing through it.

Reese Harper: Yeah.

Weston Lunsford: And so one of the things though that as we watch as visits go up, if I have one broken appointment, and I’m averaging $200, let’s say on a daily basis my cost is $1,000 a day.

Reese Harper: Yeah.

Weston Lunsford: Most dentists don’t know that either. What does it cost you to have your practice open a day? We show that break even number on the dashboard. But if they knew what it cost, so if it cost them $1,000 a day, and they want to be at a 50% margin, how much production do they need to do?

Reese Harper: Yeah.

Weston Lunsford: $2,000.

Reese Harper: $2,000. Yup.

Weston Lunsford: Right? So they produce $2,000, they have cost of $1,000, they made $1,000 that day in profits.

Reese Harper: Yup.

Weston Lunsford: As long as they’re able to collect all that money.

Reese Harper: Yeah.

Weston Lunsford: So what ends up happening though, let’s say that they’re averaging that $200 per visit. And so that means in order to generate $2,000 a production, they need to have 10 visits that come in. If one of those visits cancels, they lost $200, not their gross production is $1,800. Their cost is still $1,000. They just lost 20% of their profits for that day by one no-show or one cancellation.

Reese Harper: A lot of times we’ll wash that under the … [crosstalk 00:18:49] It’s not a big deal.

Weston Lunsford: They think it’s no big deal.

Reese Harper: That really does add up over a calendar year.

Weston Lunsford: Oh man, it hurts. And so one of our performance metrics is broken appointments. And not just broken appointments, but broken appointments, and if they broke, did they reschedule the same day, or did they get back on a schedule. And it would shock you looking at the data that we look at, of how many broken appointments actually occur in a practice, in a day, that don’t even get rescheduled back on. Even when I go back and look two months later those appointments that accepted treatment, they accepted it, they’re still not rescheduled to come back in because they fall through the cracks.
And so that’s one thing that we want to focus on is making sure that the visits we schedule, it’s right there, right there in front of us every day. That one, they’re not breaking. And if they are, there’s things that can be done. But what we’ve seen, when performance is measured, performance improves. And when it’s reported back to the entire team, the rate of that improvement, it starts to accelerate. And it’s almost like a game, it makes it fun. Right? We see that my cancellation percentage is sitting at 15%, ad we see that it’s a problem, and all of a sudden a week later it drops down to 12%.
And now we want to even tighten it up even more, and it drops down to 6%. And so by having that type of a performance dashboard it really drives performance and makes it fun, and creates a healthy culture because everyone in the practice can see what’s going on.

Reese Harper: So one question that’s maybe more of an industry question I though you’d add some good insight into. When we look at dentistry as an industry there is a big trend to DSOs and consolidation. Where I think your product could obviously benefit a multi location practice. It can benefit a large group. But it also is, I mean the roots of your product are with that single location, second location, you know sole proprietor, entrepreneur, that’s still the bulk of the market, right?

Weston Lunsford: Right.

Reese Harper: It’s still the bulk of that [crosstalk 00:20:43].

Weston Lunsford: I want to keep it there.

Reese Harper: Yeah.

Weston Lunsford: Right? And I think dentists are better suited to keep it there. I have to be a little bit careful because we have some large partners.

Reese Harper: Yes.

Weston Lunsford: That have a lot of practices, and a lot of DSOs and MSOs and corporate [dentistrists 00:20:56] that are using our product now.

Reese Harper: Yeah.

Weston Lunsford: The reality is, these corporate organizations, they’ve had access to this data-

Reese Harper: For a long time.

Weston Lunsford: This is why they’re successful. They understand it, they’re business-minded, and they look at the numbers to know what they need to do in the practice. And that’s what’s made them so successful, and why they’re gobbling up dental practices. But the reality is that dentists themselves can do this. They can do it. They need to simplify things, and they need to be looking, discussing and discovering what the data is saying. And if they keep those three simple things, look, discuss and discover, then they’re going to be successful. But they need to be able to have something to look at.
And if I’m pulling a bunch of reports and taking hours to consolidate numbers, I don’t want to spend time looking and discussing anymore. Because it’s taken so much time just to run the reports.

Reese Harper: Yeah. That’s a good insight. I think how do you see the … What does an independent dentist have to do in order to continue to thrive in this changing market? Kind of end up with there, I think it’s a good way to kind of summarize what you guys are trying to do. What do you see the real takeaway from what guys need to do to thrive as an entrepreneur?

Weston Lunsford: I really strongly believe that dentists that are single associates, or one to two, three associates, and maybe 1-5 locations, they really need to learn the business of dentistry. They need to understand the business. That doesn’t mean they have to shift their focus, because if they’re not producing, if they’re not chair-side with their patients, they’re not making money either. But they still have to take some time, even if it’s one hour a day, to understand the business of dentistry.
And the reality is, they think, well how do I spend one hour a day? They can’t, without simplified solutions, technology is available now to where they can get data in a meaningful manner. Where they never have been able to do before. But they really need to learn the business of dentistry to be successful.

Reese Harper: Maybe one other question I’m thinking of here. Do you feel like sometimes dentists neglect the need for an employee in their office to actually take ownership over some of this stuff? Or do you think this is the dentist’s responsibility primarily? How do you see that kind of synergy between someone … Because in a lot of cases you’ll see that the assistant gets promoted to the front, and the front gets promoted to office management, and office management doesn’t have any financial background. But they’re dealing with a business. And so there really isn’t an operator with a business background-

Weston Lunsford: It’s a unique business, right?

Reese Harper: It is and [crosstalk 00:23:34]-

Weston Lunsford: -small businesses where you’ll see millions of dollars made where they don’t have a CFO.

Reese Harper: Yeah. So do you feel like this is the dentist’s responsibility? That dentist needs to build … I mean obviously they need to increase their education and build some intellectual capital and grow as a leader and as a manager. But is that fair to ask them to be the service provider to the patients full-time and try to learn these business skills?

Weston Lunsford: Great question.

Reese Harper: Or they need some help.

Weston Lunsford: They need help. First and foremost, they do need some help. But they still are the CEO of that practice, and so they need to be involved in it. Now, their time of involvement can be greatly reduced if they have good systems put in place. But they do need to be involved. I feel like every good, successful dental office needs a good right-hand person, whether they call them a team leader, whether they call them an office manager. Someone that will help take the lead on this, but at the same time, that dentist has to make sure he’s involved at some aspect.
He can’t just turn off the lights on that side of it and think that the practice is going to run successful, because it’s his practice.

Reese Harper: Yeah. Sometimes I think it’s easy to just try to outsource things and not take responsibility over whether they’re being properly implemented, right?

Weston Lunsford: And outsourcing is great, outsourcing in phenomenal. I’ve watched a lot of practices outsource even things such as calls, right? Answering calls or collections. But the reality is, if the dentist is not involved in watching it, they’ll still start trending down even on converting new patient calls coming into the practice. They’ll start trending down. The doctor has to look at the stats, he needs to know what’s going on. So that if something’s not working the way that he feels it should, he can say something. And just by him even celebrating success, that will drive more success. Or by if there’s an area of focus, by bringing it up and saying, guys it looks like this is an area we need to look at. That’ll drive more success. He’s got to be involved.

Reese Harper: Yeah, that’s awesome. Well, Weston, this is a great interview man. This is my friend Weston Lunsford here. Weston, if people want to get in touch with you or in touch with Dental Intel, what’s the best way for them to go about doing that?

Weston Lunsford: Our website is dentalintel.com. And that’s easy to find us there. They can email me personally if they want, weston@dentalintel.com. But going to our website’s the best way to reach us.

Reese Harper: That’s awesome.

Weston Lunsford: Dentalintel.com.

Reese Harper: Well thanks for coming by. I think it’s a lot of good insight today, and look forward to continuing to learn more about your success in the future, so thanks for swinging by.

Weston Lunsford: Thanks Reese. A lot of fun.

Practice Management