THE MILLIONAIRE DENTIST PODCAST

EPISODE 69: FOUR DUMB THINGS SMART DENTISTS DO

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EPISODE 69: FOUR DUMB THINGS SMART DENTISTS DO

Even the smartest people still make dumb mistakes. Casey and Jarrod talk about 4 common dumb things that dental practice owners do that are really hurting their income and retirement savings.

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EPISODE 69 TRANSCRIPTION

Speaker 1:
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 it for the Millionaire Dentist Podcast. Jarrod Bridgeman is in studio with us. Jarrod, how you doing, sir?

Jarrod Bridgeman:
Good. How are you?

Casey Hiers:
Thriving, thank you for asking. We've got a podcast today that I think the title is going to catch some people's attention. Hopefully won't offend anybody as we get into it a little bit, but Jarrod, let's talk about four dumb things that smart dentists do.

Jarrod Bridgeman:
Wait, are you saying that even smart people sometimes do dumb things?

Casey Hiers:
Yes. Bing, bing, bing. And in this case, it's almost to no fault of their own. But we're going to get into it a little bit. The first one, a lot of practice owners out there they think that more is better. More practices simply equals more money. We did a previous podcast on this with our founder and CEO, Jason Smith, where we get in a lot more detail. But at a high level, you've heard this around here, right?

Jarrod Bridgeman:
I have.

Casey Hiers:
I just want to make more, so I need to open two more practices.

Jarrod Bridgeman:
I feel like a lot of times the mindset on that could be, I'm making X amount of dollars per year or per month at my current location, if I open two more, I can times that by three.

Casey Hiers:
Just that simple. Yeah, no, I think you're onto something and more practices, it does equal more production and that's a good thing. Yet production typically isn't the issue with practice owners. Production is actually what they're good at. Producing dentistry, that's really their passion. A lot of their stressors come from staff and equipment and all the variables that additional practices would bring in. If you think about that, they're magnifying their stressors, the areas that potentially they don't like to get more production.

Jarrod Bridgeman:
For example, if you have five employees at your practice, you open another one, you're probably going to have about the same amount, another five employees. Now you've just doubled not only payroll, PTO issues, anything like that, but also just personality issues of dealing with people.

Casey Hiers:
It magnifies so much more the areas that a lot of practice owners don't enjoy, but all they think about is exactly what you said, you're right. I'm making X, I want to multiply that so I'm simply going to open more practices. Again, production's typically not the issue and there's ways to produce more without tripling your overhead potentially. But yeah, it really is. Again, it can be really good. Everything we talk about audience, it's if you have the right team and you have the data to support it, there are a lot of things in dentistry that you can do creatively to do that. Unfortunately, so many take that equation and you're not a dentist and you're not a financier or a czar of numbers, but you basically hit on it. I make X, how do I multiply it? More practices, go. People look up years later and go, "Well, this isn't exactly what I had in mind. I've got a lot more headaches."

Jarrod Bridgeman:
Look at any other business out there, any let's say any local chain or franchise. One spot may take off and then they rush and open up two to three more locations and then all of a sudden they're gone for good.

Casey Hiers:
Well, I think I've given this example before, but I talked to a guy who had nine practices.

Jarrod Bridgeman:
Oh wow.

Casey Hiers:
Out west and ultimately he admitted that he was doing that exact thing. Well, I need to make more. I'm not hitting my financial goals so I'm just going to keep going. And he got the nine practices now the headaches are incredible. He's not right now making, saving more, and on that track. He does have those to sell, but it's almost like a fire sale. He's built them and he can't wait to get rid of them to get that payday that everybody's looking for the payday. And there's other ways to do it.

Jarrod Bridgeman:
How many hours a week do you say he's now working? Not even just producing because he owns nine of them.

Casey Hiers:
His original passion of being in the mouth and helping people with dentistry has taken a back seat to something he didn't really want to do, which was the business side. But now he's pot committed. He's got nine practices, he is pot committed. He's got to get them looking as good as possible to hopefully sell them to somebody to get that final payday. But for him, he straight-up admitted, "It's just, I magnified my issues and I've yet to see the financial return because my overhead and my systems and processes weren't in place to magnify anything."

Casey Hiers:
The next one, one of the next dumb things that smart dentists do, they think that they have to own a building or be a landlord. That is a big one. Listen, another asset is good. Assets are good. This is another asset. This can make sense, but it's not the only way to financial freedom. A lot of people think they have to check that box on their path to financial freedom and that's not necessarily the case. There has to be a method to the madness.

Jarrod Bridgeman:
What would be the reason why a dentist may not want to own the building they're in?

Casey Hiers:
Perfect. Remember, once you own, anything that now happens to that building is now your issue, right?

Jarrod Bridgeman:
Oh yeah. Just like owning a home versus renting an apartment?

Casey Hiers:
Yep. That's a good analogy. And here's what young owners can run into and again, dentists and specialists, high achievers, they want to achieve, they want to do more. A lot of times they really want to have that ownership because again, they think they have to check that box for the financial freedom and gains that they want. Young owners, vacant run into the issue of getting financing for the building, but have a hard time getting financing for the equipment and the build-outs that you need to have once you add some of that. And this can just crush cash flow. So those are, it's all timing, right. These, but does that make sense? So just some of the issues that can really, it can really mess with you,

Jarrod Bridgeman:
For example, okay. It'd be like, you know, oh, I bought this really great big house, but I can't even afford a couch now.

Casey Hiers:
Right. Right. For some of our older listeners, there was a movie called I think it was Boiler Room.

Jarrod Bridgeman:
Oh, the Vin Diesel.

Casey Hiers:
Ben Affleck, Vin Diesel and they're all these young guys making a lot of money fast. And so they go over to watch a show and the cars, it's Lamborghini, Ferrari all these cars, beautiful mansion, walks in and there's a tanning bed that's on, a big screen TV and one couch. The place is empty. And he goes, "How long you been here?" He's like, "I don't know, four or five years." That's exactly right, people that buy the big house and they can't even have curtains up because they've spent all their money. That's the example here. You can potentially get finance to own your building, but if it crushes your cash flow and your debt's off the charts, you're not going to get any more.

Jarrod Bridgeman:
It just needs to make sense.

Casey Hiers:
Money from institutions. And that's our central theme, emotion out, data-driven, your team, your accountant, financial planner, practice advisor, all those folks, they need to be supplying you with this information to tell you, "No, it's not the time and here's why." Or, "Yes, it is the time. Here's why. Here's the plan."

Jarrod Bridgeman:
Because I understand the emotional feel and response you may get from owning your own building, which is, "Oh, I own my own thing."

Casey Hiers:
Who doesn't?

Jarrod Bridgeman:
I get that. But if you're stretched too thin or if you are barely scraping by week after week.

Casey Hiers:
It's not going to solve the problem. It's not. And I guess segueing into the third area that people should potentially stay away from until the timing's right, is hiring an associate way too early. And track with me on these numbers, think of it this way. If your overhead is at 70% and you're going to bring it in associate and pay them 35% of collections, which is fairly common, you are essentially paying a $105 to make a $100. Your overhead needs to support the hire. Now, if you have 55% overhead and you want to pay your new associate, 30, 35%, now that's worth considering. Those numbers actually make sense again, if collections and production and new patients and patient flow matches up as well. Those are some key data points.

Casey Hiers:
But again, having an external CFO team that can take the emotion out and help you with the data-driven decision is key. But you've heard me talk about this. Somebody that's maybe $750,000, a million dollars, 1.1 and they say, "It's time for an associate." And they're not making the money that they want to make, their overhead is too high and they just, they like the person. They make that decision, 18 months they're gone. It's been frustrating. It's hard on patients. It's hard on staff, but again, it was emotion. I think I need to hire an associate and they hire them way too early.

Jarrod Bridgeman:
What would make someone even very early on feel the need to? Does it often come down to money, to making money? Or do they feel pressured by the amount of patients that they have at the time and maybe don't realize that they can still handle their workload?

Casey Hiers:
I bet some of our listeners out there already have the answer because they probably experienced it. The answer to most questions is money. I think that's a driving force. The other one is when you are a solo owner when you're not producing, nothing happens and so that can be stressful. You don't enjoy vacations. You don't like being away from the office. There's that constant stress. And so the idea of having somebody in there producing when you're not is attractive. They think, I'm going to get more money and I'm going to have more freedom. And again, right timing? Yes, it's the right time. Let's do this. Here's the data, here's the strategy. Let's execute it. And that is exactly what happens and it propels practice owners to where they want to be. But again, a dumb thing that smart dentists do when they do it too early, it wrecks cash flow. It does not increase income.

Jarrod Bridgeman:
In fact, you said it even can decrease.

Casey Hiers:
Well if your overhead just getting crushed and the new person isn't happy and ultimately it's a waste of 12, 18, 24 months. And again, when you think about your patients and your staff and having to explain why somebody was in here and why they're not in here and you don't really want to tell them the real reason was you brought them in too early and the money didn't add up, that is not fun for anybody.

Jarrod Bridgeman:
Now is it true that oftentimes dentists will hire an associate with the mindset in the hope that in a few years, 10 years that wherever they are in that place in life, that associate's going to take over and maybe buy out the practice?

Casey Hiers:
That is the ideal scenario. Now, some people have an agreement, I never want to be an owner. I want to be an associate. Perhaps, some female dentists may want to be an associate but then start a family. They don't want that ownership. There's some scenarios where that makes total sense. But ideally, yeah, you bring someone in who gets to be entrenched in your practice and it's kumbaya. Here's a stat for you though. 80% of associates never become partners. And so not only is it a waste from that perspective, overhead and income and cash flow, they don't improve either. If you don't have the right systems and processes and overhead and all these things in place, again, it magnifies issues. It does not solve them. Cash flow isn't solved this way. And again, it's a dumb thing that smart dentists do too early. But yeah, you hit it. The motivation is typically money and freedom to which they get, neither. They might get a little freedom for a short period of time.

Jarrod Bridgeman:
They get one day off.

Casey Hiers:
Yes. And the fourth dumb thing that smart dentists do, debt. They try to pay off all their debt as fast as possible. And debt is emotional, but don't let emotions get in the way of your retirement. There is a balance of debt reduction and retirement savings. That's the key, reducing your debt while at the same time saving for retirement. There's a sweet spot where you can do both. Again, your team should show you, they should be able to know what that is, but interest rates are low, three, four, or 5%. Rates of return from an investment standpoint have been between 10 and 20%, generally speaking. Compounding interest increases faster than interest on debt. Again, in most cases. But no debt and a weak retirement, financially speaking is not a victory. It's not a win.

Jarrod Bridgeman:
Yeah. And I feel that that's an issue a lot of people may tend to have in general, is that mindset of, well, I have to worry about this debt right now. I have to worry about my debt. But I think it comes to, a lot of people may have listened to Dave Ramsey speak on how paying off debt is quintessential. Which don't get me wrong. At some point, you probably do want debt paid off, but that's not a let's pay it all off in the next three years without saving a single penny towards retirement.

Casey Hiers:
When I was a young man, I heard Dave Ramsey speak. I bought his book. He signed it. He was lovely. He was very pleasant. Dave Ramsey is a visionary for let's call them the common person, for most people. Dentists and specialists who own their practice, who are bringing in millions of dollars in production and revenues, aren't necessarily his target audience. And I hear this all the time, Dave Ramsey, no debt. In dentistry with what your business model is and what you're producing and the numbers that you're producing again, there is a delicate balance where you can have it all. But too many people do focus on getting rid of the debt. It's emotional. They hate it. They want to get rid of it. But again, putting off saving for retirement, even if it's a little bit is a mistake and there is that delicate balance. But again, practice owners didn't get a degree in finance or an MBA or whatever you want to call it.

Jarrod Bridgeman:
Well, I was thinking in my mind, it's not quite the same, but in terms of my own debt that I need to pay personally when you start talking about the percentages that for the longest time, I was too worried about student loans. When no I should be focused on my credit card debt because that's probably 22.4% versus the less than 5% I'm paying on student loans.

Casey Hiers:
Yep. No, that's a good example. Yeah. That in a nutshell, those are four dumb things that smart dentists do. Again, dentists are smart high achievers. Unfortunately, they're not trained in everything. They're not brilliant in everything.

Jarrod Bridgeman:
Nor do you have to be.

Casey Hiers:
No.

Jarrod Bridgeman:
That's what you get other people to do that for you.

Casey Hiers:
Yeah. You delegate, you find things that you're not maybe skilled in or educated in. You find people that are.

Jarrod Bridgeman:
And if you're a high producer and you own your own place, I feel you may have a hard time sometimes letting go of a few things.

Casey Hiers:
No doubt about it. But yeah, We'll just review them and we'll get out of here and then I want you to tell me which one you think maybe is...

Jarrod Bridgeman:
Number one?

Casey Hiers:
Yeah. Which one do you think is maybe the dumbest? I don't know, but we've got think that more is better, More practices just simply equals more money, thinking they need to own the building and be a landlord as soon as possible, hiring an associate way too early, or trying to pay off all their debt as fast as possible.

Jarrod Bridgeman:
In my mind, I would say the first one would be the biggest mistake only because if you don't have your main place-making enough or really having a good cash flow, why buy more? It's just going to stretch yourself out.

Casey Hiers:
Yeah, no, I think those first two probably have the biggest hit on cash flow. And really, they're probably sort of an order, but again, all of these, they can set you back. To our listeners, if you're struggling in these areas, they can set you back versus doing them the right timing, the right way with data and not emotion, can propel you to be a multimillionaire in dentistry, retire on your terms, take a deep breath because of the time and stress that you spend pouring into these topics. Your team needs to be doing that for you. And so hopefully our listeners were not offended by the title, Four Dumb Things that Smart Dentists Do. But unfortunately, these are.

Jarrod Bridgeman:
Maybe next time we'll do the four smart things that dumb dentists do. That might not work.

Casey Hiers:
You just blew my mind. I love it. Well, Jarrod, thank you.

Jarrod Bridgeman:
Thank you.

Casey Hiers:
Hopefully, our listeners will take this in the spirit in which it was intended and just get better.

Jarrod Bridgeman:
All right, have a good one.

Casey Hiers:
Thanks.

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.