Casey and Jarrod explore the hidden costs contributing to high overhead in your dental practice. From inefficient processes to underutilized resources, they shed light on the often overlooked culprits behind this financial burden and offer practical solutions to address them.
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, bud, how are you?
Casey Hiers:
Doing well. I love that shirt, man. What is that? A toucan? What kind of bird is that?
Jarrod Bridgeman:
Yeah, I think it's a toucan.
Casey Hiers:
Gorgeous.
Jarrod Bridgeman:
Nice and blue. We had a situation where you had taken... Maybe not you, but we had taken some clients golfing and they wanted me to go out and do some photos and I have no golfing clothes because I don't golf, and so I went and bought the shirt and I was like, that's actually not half bad.
Casey Hiers:
You look like a scratch golfer almost in that.
Jarrod Bridgeman:
Right. Right. I'll take it. It makes me want to kind of learn enough to just be out there.
Casey Hiers:
If you want to be frustrated, it's like eating the St. Elmo's shrimp cocktail. It makes you cry and you come back for more. For those out of state, St. Elmo's shrimp cocktail has so much horseradish in it that your sinuses magically open up and cry-
Jarrod Bridgeman:
I love it.
Casey Hiers:
... but it's tasty. That's how golf is.
Jarrod Bridgeman:
Yeah. I can see that.
Casey Hiers:
Makes you cry and you come back for more.
Jarrod Bridgeman:
Casey, when you are speaking with these practice owners and these people sometimes before, sometimes after you speak with them-
Casey Hiers:
These people. Dentists and specialists and practice owners.
Jarrod Bridgeman:
Yeah. Those people, yes. When you're speaking with dentists and practice owners and specialists and they hear you speak, what is one of the big things that they end up coming and talking to you about and asking you about? What's for them that they can see be is a big factor they can try and take care of now?
Casey Hiers:
Those typically launch into people going, "Hey, really enjoyed the content. Thank you for that. It sounds like you work for a firm that might master this." "Yes, that's correct." And they want to engage later that month and maybe have a one-off conversation or a private conversation on the sensitive topic and ultimately when we get into them understanding the full bandwidth of what we do and all we do to help practice owners, they want to know the how. And typically it gets to overhead. "I've got overhead. I've got high overhead-"
Jarrod Bridgeman:
For the ones that know it.
Casey Hiers:
Yeah. So, "I don't know what my overhead is, but I feel that it's high. How do you lower overhead?" That's what I'll hear a lot.
Jarrod Bridgeman:
You just what? Fire people and quit buying nice things.
Casey Hiers:
Yeah. That's the first place you go. And ultimately-
Jarrod Bridgeman:
Stop buying avocado toast. Stop going to Starbucks. Right?
Casey Hiers:
Yeah. You don't want your own barista in your practice. I mean, people would love it. No, high overhead, it's hard. And going back to golf, we've said this before, it's like a high handicap. If your handicap's a 25 in golf, that means you're not very good. Well, if you take some lessons and go to the driving range and work at it for a season, you'll get that 25 handicap down to a 15 or a 16, and it's not too terribly hard. But to go to a 15 or a 16 to an 8. It gets way harder. Handicaps... I'm sorry, overhead is similar. Some people have 70, 80% overhead, but there are some things you can do to get that down. But then once you get it down, maybe 60, 65%, that can be more challenging. But, how? How do you do it? There's only three ways to affect overhead, we've said this before on this podcast. You can increase revenues, you can decrease expenses or a combination of both. What a lot of people don't realize is, learning a new procedure, dropping an insurance, you're not working more to increase your revenues, but you're increasing your revenues. And so instantly people go to, I got to work more and fire people. That's not a formula for a world-class firm like our to help our clients, nor the best way to lower overhead.
Jarrod Bridgeman:
Now, let's say you have 50 employees and 2 chairs, maybe you have too many employees. But that's not the thing you run first to, right?
Casey Hiers:
No, no. And actually today we've got eight?
Jarrod Bridgeman:
Yep.
Casey Hiers:
Eight areas that if you have a high overhead in a dental office, here's some things to be aware of.
Jarrod Bridgeman:
One of them I just mentioned, over-staffing.
Casey Hiers:
Yep. And that's a tough one. That's an emotional one.
Jarrod Bridgeman:
Because I mean, a lot of times, you may having these people work for you for years potentially, or they've been the front desk lady for two decades.
Casey Hiers:
The over-staffing a lot of variables that goes into this. But number one, what is the benchmark for you and your practice that you should have? What are your employee wages percentage versus revenues? And some people don't know. Some people it's 28%. Some people it's 45%. Some people it's 55%. They typically all say the same thing, "We're like family, and I can never imagine reducing anybody. All that stuff.
Jarrod Bridgeman:
I'm going to tell you this right now any company that tells you we're like, family here, don't work there. That's a big red flag.
Casey Hiers:
They want you to drink Kool-Aid. Yeah. No, I don't know that that's a big red flag. That's a cute goal to have and a catchphrase. But from over-staffing, it just comes down to what is the benchmark and where are you at?
Jarrod Bridgeman:
Now could over-staffing... That doesn't just mean having too many people as [inaudible 00:05:42] right-
Casey Hiers:
If you have a bunch of people that are producing a lot for you, then that could work. But ultimately-
Jarrod Bridgeman:
It could also be, you're one person who's getting, let's say, overpaid, would that fall into over-staffing as well?
Casey Hiers:
For me, that's more getting into the weeds. That's where a lot of people take their minds to. But the biggest picture is, are my employee wages percent of revenues around 20%. Having a benchmark. What's the goal and where are you? Most people don't know those two pieces of data. That's the first thing with over-staffing. It's not getting emotional about somebody who's been there or couldn't imagine... What is good and where are you?
Then you look to see, okay, what decisions could be made? I've told this story before, but working with somebody at the beginning and they said, "We're like family. My people are, I think, underpaid. We live in an expensive area that's off the table." It's like, that's great. The benchmark should be 20%. I know in this day and everything's ebb and flow, but right now that's a little higher because people are having trouble finding good people. But yours is 45%. Well, he didn't know what the benchmark was and also didn't know what theirs were. Those are the first two steps. So they already hadn't reached a conclusion without the two pieces of data that are the most important. And so people go to the emotional, "I don't want to fire anybody." So just to repeat it for the fifth time, know what the benchmark is, here it's 20%, generally speaking, there's always a lot more data that goes into it. But generally speaking, 20% is what employee wages would be as a percentage of revenues. And what is your percentage? That's the first one. So that's what the over-staffing one is.
Jarrod Bridgeman:
Gotcha, gotcha. All right. That covered it pretty well, Casey. Next up, I would say, let's dig into, it can kind of tie in some ways, but overspending. So this would dive more into any costs that could be associated with borrowing money to buy things that you may need or you thought you needed for tax purposes, but equipment and new technology and things like that.
Casey Hiers:
I feel like you're just throwing me softballs here.
Jarrod Bridgeman:
I am. There you go.
Casey Hiers:
Overspending, so this comes down to a couple things. Number one, having a custom dental chart of accounts that your external team has created for you that shows you and tells you things like are you losing money on a procedure? Are you using six different points of advertising? Yet, you dump in an advertising versus have six line items and that way you can tell if there's two losers there. So the overspending comes from knowing those pieces of data. You mentioned equipment, section 179, please don't let your equipment reps come in at the end of the year and tell you do you want to pay taxes or do you want to shine a new piece of equipment. If they-
Jarrod Bridgeman:
If you actually need it that's a different conversation.
Casey Hiers:
Correct. And if they have an intimate view of your personal financial situation, your profit and loss statement, your balance sheet, your tax situation, then they might be able to help you with that decision. Newsflash, those people don't have access to that stuff, nor have any lens to be able to analyze it.
Jarrod Bridgeman:
No. They're trying to make money.
Casey Hiers:
A lot of times. So, section 179 that can lead to overspending. Going into debt is a terrible tax strategy. And then it's just again, the shiny thing mentality. And then supplies, everybody thinks they're getting a great deal. Not everybody's getting a great deal.
Jarrod Bridgeman:
I mean, your rep will tell you that because, again sales.
Casey Hiers:
Well, and the person who does the buying is going to tell the practice owner, "I'm getting the best deal possible."
Jarrod Bridgeman:
Casey, I know that when we're vetting out potential new clients, one of the things we really can dig into is their fees and how much they charge for their fees. Sometimes there's situations where it's too low. Maybe they haven't updated it in a decade and inflation has hit.
Casey Hiers:
This is low-hanging fruit yet so many practices miss on this.
Jarrod Bridgeman:
Do you think they're afraid if they raise their fees, people will stop coming? They're that kind of fear of...
Casey Hiers:
Well, that you hit on it again, that is the first emotional thought that comes. So a couple things. Number one, we use the Wasserman fee study, but there's different fee studies out there. You should know where you are to be in the 80th percentile within your zip code using a whole bunch of variables, it's adjusted for all sorts of things, cost of living, this, that, and the other. Just going through our process we do that for people. Some people are 3% low, others are right on target. Other people are 20, 30 and 40% fees low. To which they say what? "Well, I can never raise my fees." Listen, there's a strategy, it's 3%, it's 5% annually. You've got to do those things. And that's what kind of practice do you want? Some of our best clients, they know we're not cheap and they go, "Well, as a practice owner, I'm not cheap either. I'm providing excellent service and I charge for it. And by doing that, I also keep, sorry to say it, undesirables out of my practice." I've had people say, "Well, what happens? They're not going to be able to afford dental service." There's 200,000 dentists in the country. You're not the only game in town for the most part, they're going to get the dental done. So, don't use sentimental emotion as an excuse. If you are a listener out there-
Jarrod Bridgeman:
If you have passion, if you have a passion for any amount of charity work, there's always options for that too under your own terms.
Casey Hiers:
Yeah, do it on your own terms. But all the excuses I hear are just, they're unfortunate. But, know where your fees should be and unapologetically you should think you are an 80th percentile, good or best-performing dentists, charge accordingly.
Jarrod Bridgeman:
Casey, sometimes, one of the things that could be an issue, I think a harder subject to tackle or correct would be location and capacity issues, possibly due to just the building you've rented is only X big.
Casey Hiers:
Are you trying to tie together the fact that location and building and capacity issues can screw up overhead?
Jarrod Bridgeman:
I think so, yeah.
Casey Hiers:
This is interesting. A lot of variables. If you're in New York City, oh yeah, it's going to be a little different than you're in Omaha, Nebraska. But unfortunately, what we have seen sometimes are dentists will want the practice of their dreams not using much data-
Jarrod Bridgeman:
Get that Taj Mahal practice you talk about sometimes.
Casey Hiers:
Yeah. Not using data to drive that decision, but instead of motion. Buying a big space, blowing it out, decking it out, and it's just beautiful.
Jarrod Bridgeman:
Potentially it's a situation where you've made it too big. There's not enough patients or people around to actually fill the space that you need and that you're paying for it.
Casey Hiers:
Yeah. It comes back to data. How far are you booked out? What's your capacity? What's your vision? Do you want an associate down the road? Do you need space for them? Are you referring out a bunch of stuff or are you learning new procedures to do it yourself? How far are you booked out? How far hygiene booked out? If you're a GP. There's so much data with that. But unfortunately, too many people think if they get this big sexy office on the best corner in town and it just looks good that they're going to come and Field of Dreams is outdate-
Jarrod Bridgeman:
Yeah. If you build it... Right?
Casey Hiers:
You build it and a lot of times the only thing that comes is high overhead. So again, you've got to have good data and ultimately a good team to help you guide that. Unfortunately, we've seen way too many people that just go ahead and make that jump, or maybe it's a second location, their overhead is going to be high and they've used 2 pieces of data instead of 16 pieces of data.
Jarrod Bridgeman:
And that's a really hard one to bounce back from.
Casey Hiers:
Yeah. It can set you back five to eight years for sure.
Jarrod Bridgeman:
Obviously, we talk about this often and it's a thing we really focus on here at Four Quadrants, but poor insurance adjustments and reimbursements. That's one I hear, as a patient insurance seems like something you'd want, from the owner doc side sometimes these insurances aren't the greatest.
Casey Hiers:
Well, this is probably a 101-level bullet point, but if you take a lot of insurances and you're producing 2 million, you're staffed up for 2 million, you have a building that's the sized up for 2 million, you've got supplies for 2 million of production. But let's say you are collecting, I don't know, 1.3 million. Your insurance adjustments are $700,000. That Fs overhead.
Jarrod Bridgeman:
Obviously, that would be a 35% insurance adjustment right there.
Casey Hiers:
Look at you quick number guy. I don't know if you're right or wrong on that.
Jarrod Bridgeman:
I'm going to say I am. It's like my every argument I have with my wife, "Remember that time I was right?" That's what I say.
Casey Hiers:
But you're right. Insurance adjustments and insurances, when you talk about increasing revenues, decreasing expenses. If you're an insurance shop, the production's high, the collections are low, and your revenues and profitability is not great.
Jarrod Bridgeman:
I mean, that's an entire podcast or more, that's a big one.
Casey Hiers:
That's probably a 90 minute presentation. But what is your insurance situation? That's going to affect overhead greatly. Unfortunately, you'll have big offices with big staffs and many associates. And again, a lot of production, not a bunch of collections, a lot of insurance write-offs and a massively high overhead, and that's a poor combination.
Jarrod Bridgeman:
When you were talking to some other dentists and specialists out there, a lot of them will say, "Yeah. The insurance sucks." And this kind of thing. But have you seen any legit horror stories involving insurance reimbursements?
Casey Hiers:
Yeah, I mean, I was at a state meeting recently and talked to some people, and that's what they said. They said, "I started in dentistry and I loved it, and I got into it for these reasons and I started with insurances just to get the patients up with the intention of backing off. And I look up six years later and I'm in the same spot or worse." It can be really hard and challenging. And again, that's why for our clients, they have a full team to help them navigate these stormy waters of insurances because they're a necessary evil. That being said, they will control you unless you control them. And we've worked with people who used to get smoked with insurances and now they're making $200,000 more in income than they were already making before, and they're not-
Jarrod Bridgeman:
And tend to be working less. Less production-
Casey Hiers:
... practicing more. That's for sure.
Jarrod Bridgeman:
Yeah. Another, I would say, this seems really obvious-
Casey Hiers:
This one ties a bow on it.
Jarrod Bridgeman:
It ties the bow on everything. Bad decisions. Bad decisions all around. What are some specific bad decisions you've seen of or heard of or come across that have led to a high overhead?
Casey Hiers:
Well, practice owners aren't potentially going into something like, "Man, I'm going to screw this up, make a bad decision." But unfortunately what they settle for, and we've said this before, their taxes have been extended, they're late, they're delayed, their QuickBooks are months and months and months behind, their profit and loss statement and balance sheets are months behind. And so they're making decisions with incomplete or incorrect data, and so they're not intentionally making a bad decision, they just don't have all the information, and then they go ahead and make a decision. The bad decision is making a decision. Kind of a mind pretzel. They're not trying to make a bad decision, but there's a crossroads, but they shouldn't be making that decision-
Jarrod Bridgeman:
It could be bad or ignorant decisions?
Casey Hiers:
Just uninformed.
Jarrod Bridgeman:
Uninformed.
Casey Hiers:
You walk into a dark room with a dart and you throw it and you're like, "Well, why wasn't that a bullseye?" Well, it was dark and you couldn't see. If you don't have your data and your information, and, really, some people to help walk through, "Here's what I'm thinking. Tell me the good and the bad. Tell me what I need to hear not what I want to hear." Because a lot of these bad decisions, staffing and spending and fees and location, you've got a lot of cheerleaders trying to almost help you along because they assume you as the brilliant practice owner, has already looked at all the data and has a good decision. They don't know your dirty little secret that you're kind of going on a motion.
Jarrod Bridgeman:
Casey, thank you so much for stopping by today and helping me work out some of these reasons for high overhead in practices. And I know you're heading back out soon, you're always on the road.
Casey Hiers:
Just like, two days, one night.
Jarrod Bridgeman:
Yeah, and you send me some pictures and I'm like, "Dang, that looks nice. I like that hotel right there."
Don't forget folks that we were going to be in St. Louis in the beginning of April... April, I'm sorry. In the beginning of August. We still have just a handful of spots available for our Avoid Cashflow Traps in Your Dental Practice, it's at Topgolf in the St. Louis area. After that, we will-
Casey Hiers:
The tasting the night before is overbooked.
Jarrod Bridgeman:
Yeah. We've completely overbooked that one.
Casey Hiers:
Got a couple spots for the Topgolf.
Jarrod Bridgeman:
And then if you're in the Minnesota, Minneapolis area, we'll be having a tasting event and a Topgolf event there as well. That will be in the August 17th and 18th, so visit our site at fourquadrantsadvisory.com/events, and if you're in that area, sign up. It's free and there's a lot of great education. You get to chat with Casey and there's also things to do with it, some fun things. So thank you, Casey.
Casey Hiers:
Excellent.
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.
