In this episode, Casey and Jarrod discuss the seven critical financial metrics every dental practice owner must closely monitor. Knowing what to look for and how to avoid these financial traps can safeguard your practice and personal financial well-being.
Announcer:
Hello everyone. Welcome to the Millionaire Dentist Podcast, brought to you by Four Quadrants Advisory. On this podcast, we break down the world of dentistry, finances, and business practices to help you become the millionaire dentist you deserve to be. Please be advised, we do speak with an honest tongue and may not be safe for work.
Casey Hiers:
Hello and welcome. This is Casey Hiers back at the Millionaire Dentist Podcast in studio with co-host Jarrod Bridgeman.
Jarrod Bridgeman:
Casey, how are you?
Casey Hiers:
I mean, you're looking like you're coming off a yacht at the Cape Cod Yacht Club dude. I mean, you're more of an eccentric, unique dresser, but I mean, got some oranges and some teals and some-
Jarrod Bridgeman:
Our COO Brogan Baxter mentioned to me today that he thought I walked off the set of Miami Vice, which I took that as a compliment as well.
Casey Hiers:
An updated Miami Vice.
Jarrod Bridgeman:
Right, right. I'm not rolling the sleeves up.
Casey Hiers:
You're pulling it off, man.
Jarrod Bridgeman:
Thank you.
Casey Hiers:
Crockett and Tubbs. What a great show. The white Ferrari Testarossa but they're undercover... Are they undercover?
Jarrod Bridgeman:
Yeah.
Casey Hiers:
Yeah. Dry cops.
Jarrod Bridgeman:
Yeah. Yeah. Yes.
Casey Hiers:
What a show.
Jarrod Bridgeman:
Casey, I wanted to bring you in today because you're always here anyways, but I wanted to bring you in and talk about something that I've heard you mention to other people around the company, and this sprung from conversations you've had with prospects, with practice owners and other dentists out there. There are certain numbers out there for people's practices that they should know.
Casey Hiers:
Like height, weight, blood pressure, body count.
Jarrod Bridgeman:
No, we're talking more like money things, right?
Casey Hiers:
Oh.
Jarrod Bridgeman:
Yeah. So I wanted to ask you, you had written down these are the seven top numbers that a practice owner should know about their own practice. What would you say is the number one, the biggest one that someone should know about their practice?
Casey Hiers:
I don't want to treat one of them more important than the other. It's like your kids, you love them equally.
Jarrod Bridgeman:
Sure.
Casey Hiers:
These are equally important.
Jarrod Bridgeman:
So let's just say the first one you wrote down, then.
Casey Hiers:
Production.
Jarrod Bridgeman:
Production.
Casey Hiers:
Seems like you should know how much dentistry you and your office produce.
Jarrod Bridgeman:
Okay. And so what would cause someone to not realize that? Just poor bookkeeping?
Casey Hiers:
Most know their production and their collections, right? Those are the first two, but sometimes they are unsure, but you probably need to know that.
Jarrod Bridgeman:
And those two tend to correlate pretty closely with each other, correct?
Casey Hiers:
Yeah. I mean, there's some big beautiful offices out there that produce an amazing amount of dentistry, but when you look at what their actual collections are, whether that's because of poor AR or insurance reimbursements, whatever the cause, there's a spread there that is unacceptable. So when I hear people, they're very unsure about those two basic numbers. That's typically kind of a, oh my, they probably love dentistry, but they don't know these basic numbers.
Jarrod Bridgeman:
And we're kind of talking just pretty strong ballpark numbers.
Casey Hiers:
You probably know your social security number, right?
Jarrod Bridgeman:
Right, it's a... Nice try.
Casey Hiers:
But yeah, I mean production and collections, it's probably a good idea to know what those are. I mean, at least on an annual basis. But then on the counterpoint, a lot of people now they have their monthly goal, they know what they want to hit, and they're very dialed in on that as well. And so it's a sliding scale. You can be a great dentist, but maybe not know those numbers. Others know them to a T, maybe they're not as good.
Jarrod Bridgeman:
Sure. These would be the two on your list that people probably know the most well offhand.
Casey Hiers:
Yeah. Yeah. People can give a decent ballpark of production and collections, but the next one on my list is when it starts to get a little hairy.
Jarrod Bridgeman:
Yeah, I was going to ask you, so the next one is the-
Casey Hiers:
Let me hold it up for you.
Jarrod Bridgeman:
Thank you very much. This would be the dreaded, the hated insurance adjustments.
Casey Hiers:
Insurance adjustments.
Jarrod Bridgeman:
Right. And so why would someone not know that one? I'm sorry, did I just open up a box here of...
Casey Hiers:
So it's kind of like a domino effect. Once you touch that first domino, it just keeps going. Insurance is challenging for a couple of reasons. So bear with me. First off, and we've touched on this in the past, but knowing what your true fees and entire fee schedule should be for you to be at least in the 80th percentile of your zip code. For dentists, most listening would think you're a 80th-best dentist in your zip code. Your fees should reflect that. So the first one is making sure your fees are accurate, but then let's say your fee schedule has a procedure for $1,500. Insurance reimburses you $900. The practice software encourages you to sometimes put in $900. So then you don't actually know what that spread is. So we'll see documents that it comes back that they're 3.7% insurance adjustments. No, they're actually 24% insurance adjustments.
Jarrod Bridgeman:
Because those 1500 and you got 900 back. And so you're not accounting for that 600. That's kind of disappeared.
Casey Hiers:
If you put in 900 for 900, it looks like you're great, right? There's no insurance adjustment there. You got your full fee versus 900, 1500, a little bit of a spread there.
Jarrod Bridgeman:
Do you think anybody does it on purpose to lie to themselves to make themselves feel better?
Casey Hiers:
I think in the past that... I think more often it's because it's just cleaner, right? From looking at practice software, looking at those things, and it's just cleaner. So maybe a front office person did it that way. But now again, the software a lot of times encourages that sort of data input. It's incredibly important to know what your true insurance adjustments are. And a lot of folks don't know them, even if they don't expect to collect, which is what that is called. I call it cooking the books. Even if they don't do that, sometimes they're just not sure because four years ago when they looked at what their insurance adjustments were, they were 17%, but they haven't really paid much attention to it. They're frustrated with cash flow, but it's now crept up to 30% because if you don't pay attention to this stuff, it typically doesn't get better. It gets worse.
Jarrod Bridgeman:
And from my understanding and from my own experiences, insurance companies are never really on your side.
Casey Hiers:
It's interesting. So let's say as a consumer of dentistry, most patients would say, "There's no good dental insurance, I pay too much for dentistry." As a practice owner, you look at it and go, "Reimbursement stink." I guess if anything's going to unite the country, it's our disdain for dental insurance, we might unite everybody on this topic.
Jarrod Bridgeman:
That's right. That's right. At least one thing.
Casey Hiers:
Yeah. But I mean, everywhere I go, I don't like absolutes. Most places I go, most people are frustrated and pissed about insurance in some regard. And so it's baffling that people are frustrated by it, but they aren't even sure if their fees are right. They're not sure if they book expect to collect or not. They don't really know what their true adjustments are. To me, that's how can you be that passionate about something but not actually know the true data?
Jarrod Bridgeman:
That's right. And if you're the type of person that you're hoping to get more patients in, maybe you took on a couple more policies as well, a couple more plans, and didn't really account for the differences in that too, because each one is very different.
Casey Hiers:
It's tough. So this is all connected. If you're frustrated with your income and you're frustrated with your cash flow and you're like, "Okay, well do I do more marketing? What do I do? I need more patients. I need more, more, more, more, more." Because they've been lied to. You have to produce more dentistry, and that's the singular lens to which you're going to have profitability. It's incorrect most times. And so instead of that to go, "Well, I'm just going to take another insurance, get more people in the door."
Jarrod Bridgeman:
And you're doubling your work for when instead of doubling the amount of money from one person.
Casey Hiers:
I mean, look at the big brains on this guy, not coming off the Miami Vice set to now the campus of Yale or some Ivy League now.
Jarrod Bridgeman:
Yeah, boy. Tell you what? Okay, so this is a big one. This next one, and I can see how this might be a harder one to keep track of at times only because it's not my expertise. It is our wonderful team's expertise. They do these kind of things overhead.
Casey Hiers:
I wrote down, OH, and some people would say, IO, I'm not a Buckeye fan, I'm a boiler maker. But overhead, overhead is, again, these are all connected in a way. It's like if you pick a sport football, well, if you get beat by a large margin, when you watch the game film, pretty much every metric's going to be screwed. You got beat. So when a lot of these things aren't known or aren't going well, guess what? Overhead's going to be affected too. It's odd to me how many people don't know their overhead percentage or they're incorrect.
Jarrod Bridgeman:
Well, and maybe because the last time they actually dove into it might've been a couple of years ago, and with inflation and COVID hit and all those other things, all those little things add up and change how much is actually affected.
Casey Hiers:
Overhead's like the weight you put on your driver's license, let's look at that number, and then let's put your on the scale and they don't align. So when I ask people what the overhead is, and then if we actually get data and look at it's rare that it aligns. But not knowing what your overhead is hard. What was it five years ago? What is it now? What's your goal for next year? If you're running a business and you're a business owner, which practice owners are, that's just a basic data point that you need to have your arms around.
Jarrod Bridgeman:
And a lot of these numbers here seem like they should be relatively easy to find and get as well. If you keep your-
Casey Hiers:
Relatively is the keyword. So a lot of practice software, a lot of profit and loss statements and balance sheets and QuickBooks, we've talked about this before. They're incorrect. They don't tie out, they're months and months and months behind. So it's this circular frustration. You're producing more dentistry because you want to make more money and have better cash flow, but then you're behind potentially on all your data. So then you're sort of, like I said, throwing darts in the dark sometimes and it's hard to be successful and hit a bullseye if the lights aren't on.
Jarrod Bridgeman:
And it's hard to talk to... If you're looking at an accountant, you're looking at a financial planner, you're looking to talk to Four Quadrants. It's hard to get any plan going if you don't know any of us.
Casey Hiers:
Yeah. Yeah. I mean that's probably a tagline we've said many times, what's worse than incomplete or incorrect data?
Jarrod Bridgeman:
Making decisions.
Casey Hiers:
Using incomplete or incorrect data.
Jarrod Bridgeman:
I knew it. See, I got that tattooed right up above my back here.
Casey Hiers:
I'm repetitive enough sometimes if even you are catching this, Jarrod.
Jarrod Bridgeman:
That's the dirty little
Casey Hiers:
Secret. This is a good sign. This is a good sign.
Jarrod Bridgeman:
Okay, up next. This is one I actually spoke with one of our planners about earlier. A lot of dentists sometimes will not know their income exactly because they just pay themselves whatever's left over at the end of the month.
Casey Hiers:
Yeah. That's another number. If we're are engaged in an initial interaction phone call or our vetting process, it's incredible how many dentists and specialists don't really know what they make. There's an argument that, yeah, there's some moving parts there, but you should know it. Or at minimum, your team should be able to inform you on a frequent basis where you're at with your income. And most practice owners, their income is not reflective of their hard work. They're frustrated and talk to somebody on Monday and collections. They knew that number. They also knew what their income was. And my next question was, and I was trying to back off and be tame like so why isn't it more, I wanted to be like, holy expletive, that's expletive nuts that you're producing that much expletive dentistry and making what you're making.
Jarrod Bridgeman:
And that's obviously a very large frustration because not only are they busting their ass so to speak, but they also probably have a decent amount of debt from student loans and going to school, and there's all kinds of things that really-
Casey Hiers:
The D-word. That's one number a lot of them know, what's your debt? $378,250. Boom. They know that number because it's the most emotional probably.
Jarrod Bridgeman:
Yeah. I can see that. All right, what have we got next?
Casey Hiers:
I mean, these all tie in, right? So I was thinking about if folks go through our vetting process and we get to a consultation, they learn more about their practice numbers and their personal financial situation than anybody's ever shown them. Personal annual spend. How much money as a practice owner in your personal life are you spending? You spend 180,000 a year. Do you spend 400,000 a year?
Jarrod Bridgeman:
We're talking mortgage. We're talking vacations. We're talking groceries. We're talking car payments.
Casey Hiers:
Yeah. Personal spend. And we've seen people that spend 170 a year. We've seen people that spend over 900,000 a year, but not knowing that number. If you don't know how much you spend a year, how do you know how much money you need to potentially retire, which leads to how much money should you be saving every year? These are numbers you need to know.
Jarrod Bridgeman:
It's also going to be reflective of how much income should you be trying to bring in as well.
Casey Hiers:
Well, that's always more how much I want to make more, but yeah, personal annual spend, again, generally speaking, there's always one officer or something. You need to know that, and then-
Jarrod Bridgeman:
So this kind of leads into knowing your normal average spend is how much do you need to retire? Yeah. So if you don't know that first one, how in the hell are you going to know the second one?
Casey Hiers:
Yeah. When do you want to retire? I don't know. How much do you need? Have your team of professionals that help you on this? No, never talked about it. It's fascinating to me. Again, these are just seven numbers that it seems like any business owner or practice owner should know, but especially in dentistry, because your passion is typically dentistry, oral surgery or orthodontia or endodontics, whatever that is. That's your passion. This isn't so you don't feel good about yourself on this, so it's easier to just put your head in the sand than know these numbers, but at minimum, you should know these numbers. You should have a team that helps these numbers and what's powerful when we get to the end of our vetting process and here's your personal spend, here's how much you need to retire. Otherwise, you're going to have to take a significant step back in retirement. That's a complacency mentality. Well just spend less. Bullshit, when I don't work, I spend way more money.
Jarrod Bridgeman:
Way more.
Casey Hiers:
I need distractions.
Jarrod Bridgeman:
I get bored. Yeah, very easily.
Casey Hiers:
Let's go buy something.
Jarrod Bridgeman:
Yes.
Casey Hiers:
I mean, it used to just be like QVC. You had to pick up the phone and talk to somebody. Three clicks man, I got some Jordan golf shoes coming on Friday.
Jarrod Bridgeman:
Oh, you do?
Casey Hiers:
Yeah.
Jarrod Bridgeman:
Bring them in, I'll check them out.
Casey Hiers:
They're sweet.
Jarrod Bridgeman:
Nice.
Casey Hiers:
I be getting too old to wear those. Maybe with the boys, with the bros.
Jarrod Bridgeman:
Maybe you get yourself some PDD clothes.
Casey Hiers:
Oh.
Jarrod Bridgeman:
I'll skip that for now.
Casey Hiers:
Oh, man.
Jarrod Bridgeman:
All right, Casey, you laid it out for me. These sound great. I'm sitting down, I'm looking at my books. I'm kind of figuring these numbers out. Are there any benchmarks out there that practice owners should shoot for or look at?
Casey Hiers:
Good question. I'll be in a room with 22 people here in a couple of days and presenting, and most of those people will have different situations, different practices. Everything's very custom. That being said, generally speaking, here's some benchmarks. If you're collecting one, one or one, two and you're not making $400,000 and you're not saving 80 to $ 100,000 a year minimum, there's probably something wrong. You've got a lot of leaks in your boat. So a lot of times those general benchmarks can tell somebody, they're like, "Well, wait, no, I'm not there. I should be, maybe." I mean, everybody has different situations, but for insurance adjustments, if you're over 15%, pay attention. There might be a very good reason why you're at 21% and you might be in a specific area with specific variables. That is a strong mark.
Jarrod Bridgeman:
But if you're seeing that, it wouldn't hurt to look into it.
Casey Hiers:
No. Yeah, you need to know. I mean, we've said this before, but if your overhead's not 55% as a general dentist, well, why not? And what's the plan? Is there a strategy? Are you okay sitting at 72% for the next three decades? I would hope not.
Jarrod Bridgeman:
Well, who knows?
Casey Hiers:
What do I know?
Jarrod Bridgeman:
Casey, I want to thank you for coming in and helping to explain this to me and to our listeners out there. I'm sure a lot of this is not news to a lot of our listeners, but it might have hurt a little bit to hear that. Now you need to know that these numbers not just have a rough idea. If you want to come and hear us, Casey speak, we're going to be in several new areas coming up throughout the year. I know we're coming to Boston. We're going to be in St. Louis. We're going to be in our home area of Indiana as well this year.
Casey Hiers:
Boulder.
Jarrod Bridgeman:
Boulder.
Casey Hiers:
Denver.
Jarrod Bridgeman:
In Denver as well. Denver is about to sell out folks. We've got just a handful of seats left, I think less than three, so less than a few. Boulder, we're doing a brunch, which will be awesome.
Casey Hiers:
A brunch?
Jarrod Bridgeman:
A couple of seats left, less than 3. Brunch, that's breakfast and lunch combined.
Casey Hiers:
Avocado toast, is that what we're talking?
Jarrod Bridgeman:
We're promoting the more... You buy more of that. Buy more avocado toast. Don't worry about savings, just buy the toast. If you want to check that out, go to fourquadrantsadvisory.com/events. You can register on there. Also, if you are listening to us on Spotify, we're also now on YouTube music as well. Please give us a like, subscribe, and review us, all that kind of fun stuff.
Casey Hiers:
I don't even know what those things are. I thought we're just talking in a mic where people are listening.
Jarrod Bridgeman:
I have to mail Casey a phonograph of all this stuff. So again, thanks folks, and we'll see you next week.
Announcer:
That's all the time we have today. Thank you to our guests for their insight and for sharing some really great information, and thank you to you, the listener for tuning in. The Millionaire Dentist Podcast is brought to you by Four Quadrants Advisory. To see if they might be a good fit for you and your practice, go on over to fourquadrantsadvisory.com and see why year after year they retain over 95% of their clients. Thank you again for joining us and we'll see you next time.
