Your Best Investment Could Use Some Attention – Episode 176

Your path to greater wealth may seem mundane, but don’t ignore its huge potential.

On this episode of the Dentist Money™ Show, Reese and Ryan examine why too many dentists concentrate on investments that pull them away from their core money-making machine: their practice.

You paid a huge price for a dental degree and the opportunity to run a very lucrative business. But are you shortchanging your potential by letting your investment attention wander elsewhere?

To learn why your practice holds the greatest possibility for net worth growth.

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Podcast Transcript:

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

Reese Harper: Welcome to the Dentist Money Show where we will… oh, shoot.

Ryan Isaac: Oh, you’ve never messed that part up.

Reese Harper: Okay.

Jenni Colborn: Nobody look at him.

Ryan Isaac: Don’t look.

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

Ryan Isaac: Since you’re holding a box of Girl Scout cookies, I thought you would introduce the Girl Scout cookies as your trusty old cohost today.

Reese Harper: I about said, “Thin Mints are the sponsor of this episode,” but I think that might be…

Ryan Isaac: We can’t say that.

Reese Harper: … illegal.

Jenni Colborn: I think Girl Scouts of America might get real upset real fast.

Reese Harper: They might, yeah.

Ryan Isaac: They don’t represent us.

Reese Harper: They don’t represent dentists in their financial picture nationwide.

Ryan Isaac: So you’re a Thin Mints… Are you a Thin Mints guy because it’s the lowest calorie for the flavor consumed, like it’s a great ratio of flavor to calorie, or is it legit your favorite cookie?

Reese Harper: Well, you only asked that first question because I gave you that…

Ryan Isaac: You just told me.

Reese Harper: … piece of data before.

Ryan Isaac: You just said… To recap, you said you can eat four Thin Mints for every two Samoas. No, more than that.

Reese Harper: Yeah, you could probably. I don’t know. It’s not quite four to two but…

Ryan Isaac: Or same calorie count.

Reese Harper: It’s about four to two.

Ryan Isaac: So independent of calorie count, are they actually your favorite? Shout out to the-

Reese Harper: Yeah, mint is my favorite. You give me any… like last night I bought a 90% dark Moroccan chocolate…

Jenni Colborn: That’s specific.

Reese Harper: … and it was obviously a mint infused flavor. I really like mint.

Ryan Isaac: Mint.

Reese Harper: Like any kind of… I like some kind of crispy something inside of my dark chocolate.

Ryan Isaac: Okay. Mint is crisp to you.

Reese Harper: Yeah, well, and I like the flavor of mint. It’s refreshing.

Ryan Isaac: It’s very refreshing. Junior Mints, they’re very refreshing.

Reese Harper: So this is something I’ve bene thinking about a lot lately.

Ryan Isaac: That’s fine. I’m just a Samoa person, but the-

Reese Harper: We’re supporting the Girl Scouts, which is the most important thing.

Ryan Isaac: How many boxes did our office buy this time?

Reese Harper: I bet there was dozens…

Ryan Isaac: Yeah, 30, 40.

Reese Harper: … but I just don’t know if it’s 50 or…

Ryan Isaac: 40.

Reese Harper: That would probably be in the range.

Ryan Isaac: Yeah, 30. All right. Well, today’s also tax day. Happy tax day.

Reese Harper: Happy tax day.

Ryan Isaac: I actually submitted a tax payment this morning.

Reese Harper: Really?

Ryan Isaac: Yeah.

Reese Harper: Me too.

Ryan Isaac: Yeah, you did too?

Reese Harper: It’s really uncomfortable and I’m mad about it still.

Ryan Isaac: Yeah.

Reese Harper: Good news is there’s nothing you can do about it.

Ryan Isaac: Just shit up, put your head down, and move on.

Reese Harper: Yeah, what do you want to do? Have no America? You want to just live nowhere?

Ryan Isaac: Yeah, do you want no America? Then stop paying taxes if you want no America.

Reese Harper: Yeah, so yesterday… well, on Saturday I was shopping with my wife…

Ryan Isaac: Do you want no America?

Reese Harper: … which is important, and we went to this favorite boutique here, Downtown Salt Lake. Shout out to Koo De Ker.

Ryan Isaac: Koo De Ker.

Reese Harper: The good people of Koo De Ker-

Jenni Colborn: I know the woman that owns that.

Reese Harper: Yeah.

Jenni Colborn: She’s so good.

Ryan Isaac: She’s dear to Jenni.

Reese Harper: Just, the owner is…

Ryan Isaac: Boutique what?

Reese Harper: … an Asian-American woman. My wife happens to be Asian-American so they get along well.

Jenni Colborn: They have Miso the shop dog. Have you met Miso?

Reese Harper: Yes.

Ryan Isaac: Miso is the dog’s name?

Jenni Colborn: Miso is the shop dog.

Ryan Isaac: Aw, that’s so cool.

Reese Harper: It’s a good place. So we go and we had the conversation though about how Tokyo right now made America kind of look like a third-world country when she was there.

Ryan Isaac: Oh, really?

Reese Harper: She’s like, “You know-

Ryan Isaac: I’ve heard that.

Reese Harper: Yeah, she’s like, “It just kind of really makes you look around and go, ‘Well, I thought Salt Lake was pretty nice, but I’m really starting to notice the power lines that we still have,’ or the-

Ryan Isaac: Yeah, Tokyo’s got, like, flying robots serving your food, and you’re like…

Reese Harper: It’s just an incredible place.

Ryan Isaac: I’ve heard that.

Reese Harper: I’m going to go through the Narita Airport for the first time in my life in a few weeks here.

Ryan Isaac: Oh, when you go to Mongolia.

Reese Harper: Yeah.

Jenni Colborn: Should we do a live episode from Mongolia?

Reese Harper: I think we should in a yurt.

Ryan Isaac: Is that possible?

Jenni Colborn: Yeah, yeah.

Reese Harper: Shout out to all of the people in Mongolia I’m about to meet.

Ryan Isaac: Shout out. That’s the second one of the-

Reese Harper: Get ready for this trip.

Ryan Isaac: Yeah.

Reese Harper: So anyway, is America… Do you want to keep America great again?

Ryan Isaac: Then pay taxes.

Reese Harper: You’ve got to keep taxes going. You’re not going to be able to cut out any of my…

Ryan Isaac: Don’t get political on me.

Reese Harper: I don’t.

Ryan Isaac: Just pay your taxes and keep America a natural place on the map. That’s a slogan.

Reese Harper: Okay, 10-4.

Jenni Colborn: Keep America an actual place on the map.

Ryan Isaac: So speaking of another-

Reese Harper: And that’s-

Ryan Isaac: What is it?

Reese Harper: That’s the new hat.

Ryan Isaac: What is it?

Jenni Colborn: Keep America an actual place on the map.

Ryan Isaac: Yes, I coined it. That’s what I’m talking about.

Reese Harper: Oh, geez.

Ryan Isaac: What’s the acronym? We need to figure it out in a little bit.

Jenni Colborn: KAAPOM.

Ryan Isaac: KAAPOM. I don’t know. I like it. Just, we want it to still be an actual physical location on our globe.

Reese Harper: 10-4.

Ryan Isaac: Pay your taxes. Another favorite American pastime, Reese, is do you ever… Actually, do you remember the movie… this is one of my favorite movies of all time… Office Space? Not The Office, but Office Space. Do you guys remember the movie?

Reese Harper: Was that something from the early ’90s?

Ryan Isaac: It’d be like probably mid to late ’90s.

Reese Harper: Yeah.

Ryan Isaac: You remember that? Do you remember the opening scene where the guy is in traffic, and he’s sitting there in his lane, and the lane next to him is always flying by, so he’ll hurry and get in his lane, and then that lane stops, and the lane he was in before keeps going?

Reese Harper: And basically doesn’t make any progress.

Ryan Isaac: And it doesn’t make any difference. Aw, man. There’s so many good parts, but anyway. I was-

Reese Harper: He’s lane bouncing and he’s furiously lane bouncing, and never can get into the lane that moves.

Ryan Isaac: He still doesn’t get any progress. That’s always been one of my favorite movies, but I was thinking about this concept of lane switching, and if there’s any… I was curious if there’s any studies if it actually got people faster to their destination. What would you guess? Here’s a statistic. On average… let’s see… we change lanes once every one and a quarter miles on average, the average American driver. What would your guess be, Reese and Jenni? Do you think that it actually gets you there faster? Are you a lane changer? I’ve driven-

Reese Harper: I am.

Ryan Isaac: You are a lane changer. You’ll move?

Reese Harper: I don’t admire it. I don’t say that that’s a high-functioning part of my character. I do think it’s in question. There’s two types of people in the world, as Bob Wylie would say, those who change lanes, and those who don’t. My ex-wife changed lanes all the time and… just kidding. I’m actually still married, but I was putting in a reference from one of the American Greats, Bill Murray.

Ryan Isaac: Bill Murray, Bob Wylie.

Reese Harper: Bob Wylie, Richard Dreyfuss. What about Bob back in the day?

Ryan Isaac: Was that really a quote from the movie?

Reese Harper: It used a different quote. The quote was…

Ryan Isaac: It was similar.

Reese Harper: … “There are two types of people in the world, those who love Bob Dylan,” I think and… no. “… those who love Neil Diamond…

Ryan Isaac: Oh, and those who don’t?

Reese Harper: … and those who don’t. My ex-wife loved him.” Yeah, that was his-

Ryan Isaac: But the changing lanes. So you’re a lane changer. I tend to be a lane stayer and if I know I’ve got an exit within five miles, I will be very near that exit lane.

Reese Harper: Yeah, you are. You’re very conservative. Me and you struggle on road trips together.

Ryan Isaac: All the time. I was just going to bring this up. You’ll be in the left lane within like .1 miles of an exit.

Reese Harper: And then I get over.

Ryan Isaac: And you make it. My wife drives the same way. She does the same thing.

Reese Harper: The problem is it depends on how much anxiety you carry in your life about how efficient you need to be with your time…

Ryan Isaac: You don’t care about that. You’re fun.

Reese Harper: … because people will be like, “You know, you’re only going to shave off five minutes,” and I’m like…

Ryan Isaac: I’ll take it.

Reese Harper: … I’ll take it.

Ryan Isaac: I’ll take it. It’s $100.

Reese Harper: I’m not going to do it at the peril of anyone’s danger in their… but I’m a more active driver, but I don’t think I save a lot of time. It’s just a little.

Ryan Isaac: Yeah, well, surprisingly, there’s a lot of studies on this, like computer modeling, and real-life studies, and there was even like a big MythBusters episode. Did you ever watch MythBusters? Were you ever a fan? MythBusters.

Reese Harper: I don’t think so.

Ryan Isaac: It was like Discovery Channel. Loved that show. I don’t think it’s going anymore. First of all, the studies show that it’s actually a perception that the other lane’s even going faster, or that there’s a an average rate of speed that’s faster in the lane next to you, and it has to do with the direction of the way our eyes are facing when we’re driving, and we don’t notice cars behind us that we’re passing, but we do notice when someone goes to our side, and so perception plays a huge role in this idea that the other lane is always moving faster. Weaving in and out of traffic… thought this was interesting… increases your chances of crashing… let’s see. For every lane change, the risk of crashing goes up by six times, so…

Reese Harper: I believe it.

Ryan Isaac: … you weavers out there, be careful. MythBusters, they tested. The way that they did this is they had five different cars and they put people, like staying in the left lane, middle lane, right lane. They had a weaver. Maybe it was four cars, and they tracked it all with a helicopter. They did this multiple times. The in and out weaver arrived at the destination like… it was barely more than the person who stayed in the left or middle lane consistently. It was like barely more.

Reese Harper: Yeah, the left or the middle, I can see that.

Ryan Isaac: Left or middle. Now the right lane is a different story because that’s where people are entering and exiting the freeway, and slowing down constantly, and there’s… I was thinking about this concept in kind of conjunction with what we see in behaviors of… I don’t know if you’d say it’s a lot of dentists, or the average dentist, or maybe the minority where you kind of have someone who has a successful business, successful practice. Everything’s going well but there’s this tendency to want to deviate into other things faster to try to get ahead quicker as if the perception that something else besides the successful practice that you’ve put 20 years and who knows how much money into is going to be the game changer, not the practice. So today I wanted to cover a few main points, and then I’m going to ask you some questions, and you’re going to get talking, or are you chewing?

Reese Harper: No.

Ryan Isaac: You’re ready to go.

Reese Harper: I just only had one Thin Mint or two.

Ryan Isaac: That’s very moderate of you, which is like, one Thin Mint is almost… no, that’d be like .25 Thin Mints for every Samoa.

Reese Harper: Yeah.

Ryan Isaac: Yeah.

Reese Harper: Mm-hmm (affirmative).

Ryan Isaac: Okay. All right. All right. A few points. Here’s some of the points I want to make today and then we’ll dive into these. Number one is that we often… and I think this is just a human nature thing. We often tend to get distracted on where to spend our time, now specifically as entrepreneurs if I restate it. Entrepreneurs can get distracted on where they need to spend their time. We’ll get into it. Another one would be we can tend to stray from what we’re good at. A third one-

Reese Harper: Is this all the same concept? Different.

Ryan Isaac: Same concept but different points I want to ask you about.

Reese Harper: Okay.

Ryan Isaac: Okay. Another one is there’s the difference between places that build your wealth and places that store your wealth, and then another one is just because it’s a good idea doesn’t mean it’s worth your time. Okay, so back to the first one, okay. As an entrepreneur, if I have extra time in my life, how do I know where to spend… and I’m going to give you two kind of thoughts here, and you can take it however you want from here. One would be, “How does someone know what their priorities should be, as an entrepreneur and in terms of where do we spend our time?” And then number two, you know the book, The E-myth.

Reese Harper: Yeah.

Ryan Isaac: And for those who if you haven’t read it, The E-myth is… it’s small. It is a small book, wasn’t it?

Reese Harper: Micheal Gerber… I bet it’s 210, 220.

Ryan Isaac: Yeah, didn’t seem too bad.

Reese Harper: No, it’s easy to read.

Ryan Isaac: Yeah, a small business book that broke down people in a business into three categories, an entrepreneur, a manager, and a technician, and so my two thoughts are… and then you can take it from here… are, “How do you know how to rank your priorities, as an entrepreneur so you know where to spend your time?” And then, “How does that idea of The E-myth and what role you play in a business, entrepreneur, manager, or technician play into how you spend your time in a business?”

Reese Harper: Okay. Well, first thing, with your weaving example, it’s-

Ryan Isaac: Go back to weaving.

Reese Harper: Seems like a lot of people-

Ryan Isaac: You take it for where you want to go.

Reese Harper: A lot of people weave, I feel like, right?

Ryan Isaac: Tons, yeah.

Reese Harper: And I don’t know that’s always bad. As it relates to even dentists who are focused in their practice and don’t… I think some of the things you’re referring to is like some dentists, they get sidetracked with the… I’ve had dentists try to be like very large real estate developers almost to the point to where they neglected their practice or they start investing in an entirely different industry, and trying to actively build a new type of company in their portfolio, or alternative investments that are really unusual, or it may be, we’ll say, definitely not public markets. So there’s that type of person, but there’s also the type of person in their own practice that’s just weaving around every day based on… I just think it’s easy to be distracted by things that are not the core issue at hand so I can hear. I get caught up in the fact that maybe it’s about having a new piece of equipment, and so then I’m always doing equipment rotation. I’m like, now I need a newer laser, and now I have to have a new cone beam, and my old equipment’s outdated, and you see people weaving through equipment like it’s the key to success. You see people weaving through investments outside of their practice like it’s a key to success. You see them weaving through…

Ryan Isaac: Staff.

Reese Harper: … their staff, their officer manager rotation, and you see them weaving through events, and continuing education, and the next marketing pitch, and the next theme for their office, the next décor, the next branding and positioning. You see a lot of weaving like that in non-essential areas, and I think some of those non-essential areas are… these are all good things, okay. They’re all good things that you’re experimenting with, but there are only a few things that really drive the growth of your net worth, and developing a specialization in growing your practice collections, and understanding how to identify the gaps between you and the next 500,000 collections, the next 250,000 collections. That’s really the core focus. I need to take my business from a million collections to a million 250, to 1.2, to 1.5, to 1.5, to 2. That should be the real… Do whatever it takes to weave on that issue and prioritize what it’s going to take to make that happen, but I feel like there’s not… within your practice specifically, there’s not a thing you can just go and do or rotate through that’s going to drive collections up.

Ryan Isaac: With the one thing, yeah.

Reese Harper: Yeah, you got to experiment to figure that out, but the thing that worries me is probably when dentists go outside of their practice and assume that outside investments, like if they pivot careers or pivot into… for some reason, there is just a lot of dentists who try to take their money instead of reinvesting it back into their practice, and expanding to increase that next level of collections or that higher market value of their practice, they go and they buy a third real estate holding, or they start a multi-family development with a friend, or they’ll find an investment in an oil and gas limited partnership, and the whole time, I’m seeing their practice profitability be subpar, and collections are kind of stagnant, and they’re-

Ryan Isaac: Or missing opportunities where they have more control or expertise, where they’re actually going to spend their time on a daily basis.

Reese Harper: Yeah, and staff gets underfunded and office management is under… they have staff that is not capable enough, not seasoned enough, not experienced enough because they’re not willing to pay for the right infrastructure. They’re not willing to bring in the right manager.

Ryan Isaac: Which perpetuates the cycle of rotating and weaving through employees.

Reese Harper: Yeah, totally. So I don’t know. To me, that’s one thing that’s become apparent and something that I worry about for certain clients is that instead of spending 15 to 20 years really dialing in how they can grow their practice and take advantage of the entrepreneurial opportunity that they have in front of them, they’re spending 10 hours a week, sometimes more on all things unrelated to that.

Ryan Isaac: Yeah, so in your course of running a business, then, is it personality driven by the individual? Is it just human nature that the things we’re used to… Humans are kind of wired for novelty. That’s just the way we’re built. Is it that we just get so used to the stuff around us that we don’t notice anymore, that we just kind of look for something else?

Reese Harper: Well, it’s interesting what drives people, like I don’t think it’s-

Ryan Isaac: Yeah, that was my first question is, “How do you know what your top priorities are? How do you rate that?”

Reese Harper: Yeah, today I was talking to someone over the phone where… very successful dentist that they’re hyper-focused on one other outside business that they’re just really, really passionate about, and they stay hyper-focused on that. And I don’t really feel like that’s necessarily bad. It’s not even as high of a returning venture as their practice, but it’s just what they want to do. It’s like they really, really, really enjoy it. To me, that doesn’t really bother me, like let’s just say that you really, really enjoy teaching school.

Ryan Isaac: Okay. Actually, yeah, that’s actually a really good example because I know a lot of people who do that.

Reese Harper: Well, that’s not going to be as high of an income return as continuing to grow your practice and open a second location, bring on some associates, build a little bit more of a small enterprise, but if you love what you do, and you really want to focus your time in that area because that’s your personality, to me, that’s not a problem. That’s just a conscious choice you’re making to trade lifestyle with income. You’re just saying, “You know what? I’m not going to make as much for doing that but I don’t care. I really want this life.”

Ryan Isaac: If you’re acknowledging it.

Reese Harper: Yeah.

Ryan Isaac: So someone just has to go, “Okay, this 10, 15 hours a week I’m spending could be in the practice to make me more money and build a bigger business, but I’m choosing not to. I’ll trade off collections and income for that, but I do get to kind of follow a passion in this other area, and it’s totally worth it.”

Reese Harper: Yeah, that happens to a lot of people when jobs they take. Everyone takes a job. It’s some combination of an income but also a passion project, and a trade off on what they’re going to learn, and maybe the impact that they’ll have on their customer, or the type of work that they’ll do. A lot of people, I’ve seen take less money in a job to be able to have the type of job that they want, and I don’t think there’s anything wrong with that. The thing that’s scary is when you’re actually pursuing things to make more money, and it’s not a focused pursuit.

Reese Harper: For example, to me, reducing your taxes and finding higher returns and passive investments, that does not qualify as another pursuit. Okay, you’ll never be done with that. You can’t develop specialization in that unless you start a business that’s a highly specialized accounting firm, and you say, “I’m going to dive deep into providing tax services for people.” Then you could probably make that be your life’s work is finding out how to reduce and defer taxes for people, and that’s a specialization, but as a dentist, if you spend five hours a week trying to evaluate and figure out more ways to reduce and defer your taxes, it’s probably not the best use of your time, but a lot of people do that.
A lot of people also spend five hours a week analyzing deals, random deals and one off projects. I don’t feel like-

Ryan Isaac: Yeah, like little private venture…

Reese Harper: Yeah.

Ryan Isaac: … like someone brings in the deal or an opportunity to invest in something.

Reese Harper: Yeah, and I just don’t feel like that’s a… there are people that do that full-time. There are private equity firms that do that full-time. There are consultants that evaluate investments full-time. There are financial advisers who see hundreds of investments per week. That’s just not a good use of your time and I do see a lot of dentists spending 5% to 10%, sometimes 15% of their time spinning their wheels in something they can’t really build deep specialization in.

Reese Harper: Deep specialization really takes 10,000, 20,000 hours of your time, and so that’s just not efficient to go down the path of… I’m going to build wealth through either this… because I think that’s just a pain a lot of people feel is if I reduce my taxes or I increase my investment returns on these passive investments that I own, whatever it is, I’m just going to find a better piece of real estate. I’m going to find a better startup, and I’m going to find a better alternative investment, and find a better private placement. I’m going to find just a better value on… I’m going to find a better tenant. I’m not saying any of these one things will not increase your income and that they won’t increase your wealth. It’s just a question of, “Does it come at the expense of the bigger opportunity that you could’ve achieved by being more focused?”

Ryan Isaac: Why do you think that is? From an outsider, it seems so obvious in this thing that you spent a decade in school learning and sometimes seven figures building up, and it’s where you spend 30 plus hours a week, and you have all of your expertise, and you have all of the control. Why is that overlooked as the most obvious place to put money first? Because if you think about the math on it, and someone’s debating, “Okay, I could get really focused on more team members and more marketing,” to the tune of maybe multiple six figures per year, year over year into a business that you have all those things, control, and time, and expertise versus $50 grand to brother in law for the solar startup or whatever? It seems like the most obvious place, but why do you think it gets overlooked so easily and just skipped? Is it the novelty factor? Is it boring after you’ve done it for 15 years?

Reese Harper: Well, I feel like people often don’t want to do the thing that they… The hardest thing for dentists has usually been building that practice to the place it’s at. It’s been the biggest grind. The payoff has been…

Ryan Isaac: It’s tired.

Reese Harper: ,,, slower, and they look around at these lane bouncers, or these people hopping around the lanes, around them and sometimes, like the person driving the car assumes that if they just bounce out to the left lane like everyone else, they get to their destination way, way faster instead of staying in that center lane, and the truth is that everything that you’re not doing looks better sometimes than what you are doing, and I know that’s just human nature because you look around, and you see someone that’s successful, and you just go…

Ryan Isaac: Yeah, what do we do?

Reese Harper: … “Man, why did I not do that?” Or, “Why did I not do this?” And I think that’s an okay… There are people that are going to be more successful than you and who did accomplish more at a… They were smarter. They were faster, they…

Ryan Isaac: Yeah, better opportunities.

Reese Harper: … had a better opportunity, like whatever, but that doesn’t necessarily translate into your personal success by following someone else’s path or trying to replicate or do something. The truth about what usually happens with those people is they’ve been highly focused, in most cases, around one area of expertise as well, and I just don’t think you can passively invest your money in things you don’t have control or expertise over, and then get exponentially higher returns than you can just from public markets. Stocks, bonds, and mutual funds offer the highest risk, reward, return off for a passive investment for literally doing nothing.

Reese Harper: Then once you start getting into kind of passively engaging a lot of other opportunities, I get a little bit uncomfortable as an entrepreneur because I see how many times I have thought about doing that or I have tried to do that, and then just realized that the fastest way for me to really grow is to focus on my own business where I have control and expertise, and then why not just invest some of my money there?

Ryan Isaac: Do you think… and maybe especially in dentistry because it’s just obviously, by nature, such a highly specialized clinical profession, that maybe a lot of dentists just don’t know how to do that? It has to obviously be a huge clinical focus, most of their education, right? And then you kind of get thrown into the world of entrepreneurship and business ownership, and then… Do you think there’s a lot of owners that just don’t know how to reinvest and grow their business? They’d gladly do it over an alternative, but they just kind of feel…

Reese Harper: Yeah.

Ryan Isaac: … lost as to even how to approach it?

Reese Harper: I think so. I think so and I think because there’s not a formula for people to go from… There’s not a lot of formulas that are obvious that are schools of thought, or training, or teaching where you can go from one location and say, “Here’s how to get to two in a predictable way,” or, “Here’s how to take your one location…

Ryan Isaac: Just out of the box.

Reese Harper: … to [crosstalk].” Yeah, it all feels very kind of, to the person that doesn’t have the background, everything feels like a huge risk and a big step, and you have this bird in hand, which is your higher income that you could just get by just pulling the money out and saying, “I’ll take it home.” You don’t usually want to take that risk of putting money back into an associate or-

Ryan Isaac: Because that requires, yeah, a gamble on people. It requires marketing projects. How many marketing projects over a decade plus didn’t go anywhere that you spent money on?

Reese Harper: Yeah, you might have dozens of projects that don’t go perfectly and they’ll feel like a waste of money, and they feel like you’ve burned up your gas.

Ryan Isaac: But it taught you things to get to the next marketing project that you wouldn’t have arrived at had you not done the first one that failed.

Reese Harper: Yeah, I don’t think it’s… not everyone has to grow that way. I think what we’re cautioning against today is this idea that the best place to put your money is things that are kind of what look like fast ways to grow your wealth, or better ways to grow your wealth than a boring old reinvestment back into your practice or a boring old investment into a public stock or bond market, and there’s got to be a better way. All the rich people have real estate, right? All the rich people have investments that really-

Ryan Isaac: So why not just do that?

Reese Harper: Yeah, or the people that are really rich got rich through a really big payoff investment, and it usually doesn’t work out that way. It’s usually like small business ownership, stock in a business by far exponentially more than any other asset creates the wealth that people have, whether it’s the dental practice’s equity and dividends they get from owning that equity, the annual income and profits they get, or whether it’s a business owner in another industry starting a business and eventually having a liquidation event.

Reese Harper: By far, the majority of all the wealth created in the United States comes from starting an enterprise and selling it. Tangible, commoditized value of stuff, the same land has been around for the dawn of time, and so it continues to grow.

Ryan Isaac: Literally.

Reese Harper: Right?

Ryan Isaac: Yes.

Reese Harper: And it continues to inflate, and it’ll have value because it’s like we have to live on it, but business has an…

Ryan Isaac: [crosstalk] water world.

Reese Harper: … exponential difference in how fast someone can create wealth in a business.

Ryan Isaac: Yeah, the value.

Reese Harper: Think about the real wealth in the dental practice is created in that first year or two when they go from zero collections, or let’s say a dental startup. You go from nothing to a million collections over a couple years. You just created the most value. You got 100% return on your equity right there over a couple year period of time. That’s the massive kind of change in value, the opportunity that gets created there, and taking a practice too from a million to 2 million or 500 to 900, like wow. The value of that that’s created in that moment, it’s just nothing compares to that, and it’s risky. There’s some risk to it.

Ryan Isaac: Yeah, for sure. So we’ve had this… This is a pretty frequent conversation because there’s this perception that there’s a difference between… and this is what you’re talking about… places where you build wealth, and then places where you park or store wealth that kind of grows but it’s not like really built, and there’s confusion between the two. Like you were just kind of saying, there’s this tendency to look at the other person who might have accumulated a lot of real estate, or other things, and go like, “Oh, that’s the place where true wealth was really built,” when you’re saying, for a dentist, that’s probably not going to be the case. Like some of these things outside of the practice will be places where wealth is stored, preserved, grown steadily, but not like truly built at a high rate of return.

Reese Harper: Yeah, and often, when you take money, I don’t care where you store your wealth.

Ryan Isaac: There’s a lot of places you can, yeah.

Reese Harper: You could store it in the public stock market, the bond market. You can store it in land. You can store it in a building. You can store it in real estate investments. You can store it another business stock. You can put it in a retirement account. There’s a lot of place to store your wealth. What we’re really talking about is, “Do some things that you do in your life with your time come at the expense of how you should be growing your wealth?”

Reese Harper: Creating your wealth comes from the total amount of earnings that you have in a lifetime, so your entire life, all the money that you’ll make over that entire lifetime, that’s your wealth pot, and so if in a five-year period of time, you can create an above average amount of earnings through either selling your business, or growing it, or having it appreciate more, or having it move, that’s a really, really… You’re going to have a really high amount of lifetime earnings compared to someone who didn’t do that, and I feel like what some dentists don’t… Not everyone has the opportunity to have a business that they can grown, and pull that lever, and see it-

Ryan Isaac: Put money in here and see it grow there, yeah.

Reese Harper: Grow quickly, and whether you’re choosing to stay at one location and just improve your profitability to the point where your total lifetime earnings is greater through higher profits, or whether you’re choosing to expand and hopefully have a liquidity event, or capitalize a few practices together, and exit to a larger dental enterprise, and have a capital gain transaction that gives you a cash infusion. Either way, that’s lifetime income that’s going to you, and however you can maximize those earnings, the better, and sometimes I worry that we take… some dentists will take their money, and they put it in areas that are just incrementally more like stores of wealth at the expense of growing their wealth to their maximum potential that they want to.

Reese Harper: They’ll be like, “Man, I just wish I could get my practice to a higher level of profitability,” or, “I wish I had a second location. I wish I would’ve just had a couple of associates to help me get my overhead to where it was a more efficient. Well, you could’ve done that but you prematurely started storing your money in these other areas that didn’t really help you follow that goal. You bought a bunch of real estate. You put all your money in a store of wealth, whether that’s, like I said, the public market, retirement accounts, pay down debt…
These are incremental movements and improvements but they’re not like-

Ryan Isaac: They don’t carry the same overall rate of return or growth that the private business can grow, and you’ve presented or lectured on this before of like the order of assets that you’ll withdraw from in the future should kind of be the order of assets that you grow in the early part of career, like pre-retirement, so like if the practice is basically the first thing you’re going to sell and access when you’re done, that should be the first thing you start building right from the beginning.

Reese Harper: Yeah, and it’s got the most tax efficient way to put money into it, and a lot of people are like, “Well, if I invest in this life insurance policy, then I don’t have to pay taxes, or if I invest in this real estate and I just keep 1031ing my equity, then I-

Ryan Isaac: Like you never need it.

Reese Harper: I don’t have to pay any taxes. You also don’t have to pay any taxes if you just hire a good… you hire a really capable associate, or manager, or operator in your practice…

Ryan Isaac: Open more hours.

Reese Harper: … or open more hours, and expand. You don’t have to pay taxes on that salary either. You don’t have to pay taxes on the growth of your business asset, the appraised value of your practice. It just defers until you sell it and want to liquidate it, and I think we just got continue to look at our business as a really… the first place you should be thinking about putting money is… and it’s critical to have this debate with yourself. Am I going to store this wealth for the future or am I going to grow my practice and-

Ryan Isaac: Yeah, like actively trying to grow it.

Reese Harper: Mm-hmm (affirmative). Now am I going to grow my business or am I going to store this wealth and park it? And I think there’s definitely a time for storing the wealth and parking the wealth, and trying to accumulate it, and then there’s a time for growing your business value, and I think a lot of people don’t do either one of those. They kind of start speculating on things that are a little higher return possibility, but they’re still stores of wealth. They’re passive stores of wealth. They’re not real businesses and they end up losing $100 grand, or they lose $75,000.

Ryan Isaac: Well, I’ve seen that a lot. That’s what I was saying. It’s not uncommon to have a conversation where someone is willing to chuck $100 grand at an outside “passive investment” that was brought to them, but on the same token, you said, “Are we willing to take $100 grand for the next five years and put it back into the business in people and marketing?” And that’s not even on the the table.

Reese Harper: Yeah, it’s like, no way. I don’t want to spend down all my cash.

Ryan Isaac: Yeah, yeah. Where would I put it? I don’t really want an associate, or I don’t know how to do marketing, but it’s the mathematical return and size of those investments are like… they’re totally different and the probability that putting it back in your practice if you do it the right way with the right help is just so much larger than that smaller dollar amount hitting this massive home run in some unknown, out of your control, out of your reach kind of opportunity.

Reese Harper: Anyway. I think both Ryan and I want to be supportive of whatever direction you choose to go consciously. I just feel like don’t look around at the guy in the left lane, far left lane, and assume that if you just switched your strategy and had a big win, and another opportunity, or you could reduce your taxes in some way that was potentially not even defensible if you got in an audit.

Reese Harper: I just think there’s a lot of things that just drive people to kind of be non-traditional that I don’t think are… they don’t need to think that way first. There’s nothing wrong with being creative and there’s nothing wrong with trying to push the envelope and trying to maximize your returns, and your passive stores of wealth, and your passive investments, but I feel like a lot of people miss the opportunity to grow the business that’s right in front of them and they under capitalize it for decades.

Ryan Isaac: What do you think the balance is? Because I hear this sometimes too with the other side of this argument which are when dentists will say, “Well, I don’t want multiple locations. It’s not the life I want. I don’t want a bunch of associates. I don’t-

Reese Harper: I don’t think that that’s what they don’t want. I think that they’re saying that because they feel like-

Ryan Isaac: They feel like the trade off with that is going to be like the infringement on the-

Reese Harper: Well, those are the pain points. I think what they don’t want is they don’t want to feel like their life is not in check. They don’t want to feel like they’re always rushed and they can’t spend time with their kids. They don’t want to feel like they’re always like…

Ryan Isaac: Six days a week between a bunch of locations.

Reese Harper: … over grinding. But no one wants to make less money or have less impact, or not have a thriving practice, or they’re not saying no to the good things. They’re saying no to the bad parts of growth, and those are… Not every associate brings the same pain. Not every second location is burdensome. It’s just the wrong second location and the wrong associate. It’s just a mess and that’s why most people say, “I don’t want the life like that,” and I think a lot of it has to do with just you don’t have to have an associate. You don’t have to have a second location. You don’t even have to have… you don’t even have to be an owner, and you can still be in great shape, but I think that most people just are… they assume that the-

Ryan Isaac: Yeah, they carry burdens that they just don’t want to deal with. It might not even be true.

Reese Harper: Yeah, they assume the growth just comes with some baggage and it does in most cases, but no matter what, the idea that you’re going to turn away from growth because it’ll make your life simpler, eventually that’ll come and bite you too. If you’re not growing, anyone, whether you’re employed or an owner, if you’re not growing and developing, that will come back and bite you. The point is we all need to grow, and develop, and expand, and be more tomorrow than we were today, or that’ll come back and bite you. You’ll get replaced by a robot if you don’t…

Ryan Isaac: That’s cool.

Reese Harper: If your mentality is just like, “I don’t want that pain.”

Ryan Isaac: I’m fine with the way it is, yeah, yeah.

Reese Harper: You might have an okay career, but those are the types of people that in their late ’50s and early ’60s, they’re just like, “Dude, I don’t even have a practice anymore. What’s going on? I’m down to like 400 in collections and I can’t even… I’m making like three times less money than I used to make. I remember when back in the day I used to make X and now I’m…” It’s like, well, you haven’t done anything for 20 years.

Ryan Isaac: So is this like a problem where there’s maybe not a willingness to get help? Maybe there’s just like a, “I don’t want to hire a consultant. Consultants have a bad rap, or I don’t know who to hire, or I don’t know where to turn.”

Reese Harper: That’s the concern of today’s show, I think is the focus of our message is making sure that people don’t get distracted when they’re growing, but there is this personality on the other side that you’re kind of bringing up at the end that’s like, “Where’s my balance? I don’t know where I fit in this whole thing.” And I just think that the right approach is like you just need to be surrounding yourself with people constantly that are making you feel a little bit uncomfortable.

Ryan Isaac: Yeah, well, and I like what you said in the beginning. We can wrap this up but you were just saying kind of at least acknowledging what the trade offs are. If you’re going to spend less time working in and building your practice so that you can go teach at a lower income, but it’s fulfilling something in your life that’s more meaningful than just the money, if it’s like being acknowledged, then that’s fine.

I think the problem lies when you have a conversation where it’s like, “I don’t want associate. I want more locations. I don’t want more hours, but I do want more growth in my net worth, so I’m going to go try to find it in some outside business that’s not dentistry,” which I don’t know. Maybe that’s bad expectations. It’s the wrong assumptions about what growth means. It could be someone… I don’t know. You’ve had clients and met people who are kind of hitting mid-career, and they’re going like, “I don’t even want to be a dentist anymore. I have an interest in growing other things, and doing other things, and pursuing other businesses,” so that could be something else but…

Reese Harper: Yeah, again, there’s not a right way to be except for I do think that someone who having a growth, a progress oriented mindset’s going to be good whether you’re an associate or an owner, and if you’re an owner and you’re looking for that growth mindset in sporadic ways and in consistent ways outside of your own practice, that’s not the first place you should be looking.

Reese Harper: The first place you should be looking is, “How can I maximize the opportunity of what I already signed up for and get it to the point where I’m putting all my extra effort and energy into this practice, getting it to the size that I can take it with my own capability, and knowledge, and resources?” And then once you get to that point, if you don’t want to be a dentist anymore, great. I get it and you can transition. You can sell.

Ryan Isaac: Do your thing.

Reese Harper: You can do whatever you want, but you already signed up for this highly specialized entrepreneurial… the reason dental school costs more than optometry school, and the reason dental school costs more than medical school, and the reason dental school costs more… I mean, because you still have an entrepreneurial opportunity that’s built into the cost of your tuition. That’s the reason why they charge more.

Reese Harper: That’s the reason why tuition is so much more expensive, and so if you don’t take advantage of that, you’re essentially just overpaying, and I tell that to students all the time. If you could do medical school, or dental school, or you could do optometry, or if you could kind of be okay in any… Dental school’s tuition has baked into it, an entrepreneurial cost that-

Ryan Isaac: You just can’t get in other places. It’s harder.

Reese Harper: Yeah, you’re going to overpay for dental school if you don’t go take advantage of that opportunity because that’s built into the cost, so you just own that and try to take advantage of it before you get distracted, and pivot, and try to do other things that are unrelated because you’ve sunk the money in for that cost and now go enjoy the awesome return that comes with it.

Ryan Isaac: All right. Well, Thin Mints, Monster Energy-

Reese Harper: It’s been good.

Ryan Isaac: Only one consumed this whole time though.

Reese Harper: Not bad.

Ryan Isaac: Like half a Monster drink and one Thin Mint.

Reese Harper: It’s good. I loved it.

Ryan Isaac: And some traffic studies. It’s not going to change your behavior on the road though…

Reese Harper: Nope.

Ryan Isaac: … our discussion today.

Reese Harper: Well, I’m-

Ryan Isaac: You’ll still be a left laner swerving to the right to exit the freeway.

Reese Harper: Swerving would be a strong word but I’m definitely going to be like-

Ryan Isaac: Do you swerve as much in a truck as you did in a small car or sedan?

Reese Harper: I don’t think I’ve changed my… I think I’m just the same. It’s just like you just got to be careful either way but, you know.

Ryan Isaac: Now you’re more in like a battering ram. You’re not as worried about the objects you might encounter.

Reese Harper: No, I’m cautious about it because I don’t want to hurt anybody. It’s just more about trying to get that last little min out.

Ryan Isaac: Well, to be fair, when we do travel together, I am terrible at maps.

Reese Harper: Yeah, usually you’re like, “Okay.”

Ryan Isaac: I can’t figure it out. It takes a few minutes until I get oriented on the screen and I figure it out, so all right. Well, thanks everyone for listening. If you have any questions for us, there’s two ways you can ask some questions to us. First you can go to our Facebook group at dentistadvisors.com/group. Go in there and join the group, and post some questions, and oftentimes we answer questions from that group on the show, or you can go to our website, or call us and get on our calendar, and have a chat with one of our advisers. You can go to our website at dentistadvisors.com. Click the button that says, “Book free consultation,” or you can call us, or text us at 833-DDS-PLAN. Shout out to Thin Mints. Shout out to Good Driving.

Reese Harper: Thanks, Girl Scouts.

Ryan Isaac: Thanks, Girl Scouts, and thanks for listening.

Reese Harper: Carry on.

Investing, Practice Value