THE MILLIONAIRE DENTIST PODCAST

EPISODE 40 TRANSCRIPTION

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. I've got in studio with me today, Jason Ewers and we're going to stick to the topic of taxes. And if there's ever a day that most people dread it's tax day. So we're going to share some information that's going to alleviate the stress and anxiety that tax day can bring. It shouldn't be a day that you fear anymore, it should be a day that is predictable and consistent because the work has been done throughout the year. We're going to go through and talk about some strategies that if implemented can help make tax day smooth, predictable, and boring. And if boring is ever a good attribute, it's regarding your taxes. You want that to be very, very boring. So we're going to get into some of those strategies. The first one, convert your company to an S corporation if it's not already, and Jason, this structure allows for better cashflow, more predictability, no more bank account roller coaster games. When you have a compensation structure that is planned properly, it's going to alleviate that stress. Why do this? Right? A lot of practice owners have different corporate entities, and so here's the short answer, although taxes still need to be managed in an S corporation this is a huge step towards reducing that year end tax surprise because more taxes are spread throughout the year with a consistent paycheck and more systems and processes in place. Jason, why don't you share the next one?

Jason Ewers:
Yeah. So number two is hire a dental specific accountant. This is not a CPA that has some dental clients, 15, 20 dental clients. This is a CPA that has exclusively dental clients. By being a specialist and knowing dental terminology they can develop a dental specific chart of accounts, i.e. your list of expenses, and be aware of financial issues that are unique to dentistry. So you're probably asking yourself, why do I need to do this? I mean, your accountant is someone that you will interact with many times in a year. And if you're not interacting with your accountant many times a year, you need to be interacting with your accountant many times a year. If you have to explain to them your business field, including technology, terminology, best practices, et cetera, you'll be losing time and money. It always helps to be able to talk shop with your accountant, but you can't do that without a dental specific accountant.

Casey Hiers:
Well, let's stick with medical as an example, if you have an issue you want to go to a specialist. And I think that example, Jason, of hiring a dental specific accountant really falls in line with that. If you have an issue with your foot, you want to go see a podiatrist, a specialist, you want to get the best and most accurate diagnosis, and feedback, and treatment. And so you wouldn't necessarily expect your primary care physician to solve your intricate foot problem, right?

Jason Ewers:
Yeah. I mean, I think another example that everyone can kind of relate to is your car. You have a Ford vehicle, you're going to take it to a Ford repair shop. It's just going to be more efficient. They don't have to sit and look up manuals someplace because they haven't worked on that vehicle before. They've seen that vehicle multitudes of times.

Casey Hiers:
Let's take that to the next step from a Ford, to a Ferrari, or some of the higher end cars. You're not just going to take it to the mechanic down the street who works on a whole bunch of cars, right? You're going to want somebody who's very specialized.

Jason Ewers:
What I also liked about that is, example for me personally, we took the wife's car into the Ford dealership to get brakes put on it and then they already knew that there was a bunch of recalls on it that we had no idea just because they see that vehicle all the time. They knew that there was recalls on it so they went ahead and fixed the recalls. That's the benefit of going to someone who specializes in that specific area.

Casey Hiers:
Yeah. Hopefully these examples resonate. I'm not a huge car guy, but that being said, I know that having the right people working on your vehicle is going to keep it in the best shape. Same thing with your practice, your taxes, your finances, right? Get that specialist, get that person that really understands your situation. Here's the next strategy that if a practice owner can work on tax day's not going to be so daunting and it's all around developing a safety net and having money to pay your tax bill or a tax surprise that helps take away the sting a little bit. It's a little less painful, but having structures in place to ensure that this is going to happen, it is harder than you think. There's a lot of discipline that comes in with this. A lot of numbers to be consistently tracking and watching. We show our clients the calculations that go into establishing your minimum practice cash reserve and have those strategies to get there. And I always hate hearing the stories about, "My practice account balance keeps me up at night. It fluctuates all over the place. Sometimes it's in a six digits, it gets down as low as $9,000.00 and I sweat payroll." Practice owners shouldn't have to worry about that. There's absolutely systems and processes that a dental specific tax management team can help you with. And here's the why, it's because the balance will float up and down against your ideal balance as overhead fluctuates and life happens. So be sure to take your income and do a predictable situation. It just makes it easier on cashflow and bank balances. And again, predictability and boring are good things when you're talking about taxes. And unfortunately we hear all too often folks that just take what's left over and skip paychecks and ultimately it's because they don't have the systems and processes in place and their practice account balances aren't where they need to be.

Jason Ewers:
That leads us into number four here, devise a more cashflow friendly income structure. Most tax advisors suggest you take home most of the cash reserve or stab in the dark at where you should set your income at. That should never be that way. Your income should be set based off of your practice and your goals. Structuring income this way will often result in huge quarterly tax payments or sporadic lumpy distributions, neither of which are friendly on your personal, or business bank accounts, or with your relationship with your spouse. Casey, want to explain to us why that needs to happen?

Casey Hiers:
So many times, again, it transitions to what we had just kind of touched on, but if there's no predictability, if you're taking what's left over, if you're skipping paychecks, the practice owner's frustrated, the spouse is frustrated. And we hear these stories all the time where the practice owner will bring home a large distribution, a large bonus, and everybody's happy, but then they don't know when they're going to get the next one and it might be many months or quarters down the road and that can be really, really frustrating. Here's what we suggest. Every practice should have a consistent distribution every month and a set W2. There is a sweet spot for each practice. Your tax team should help you find what that is. It's very common here we'll have people set up at $280,000.00 for a W2, consistent $12,000.00 a month distribution. That's right sized for their practice. Again, every practice is different, but your team should be helping you set that up for more predictability and again, to keep things boring, that's absolutely key. Do you want to give them one of the last things that can help?

Jason Ewers:
Yeah. So number five, the last one is to reevaluate your retirement plan. Not all 401ks are created equal and you should learn how to identify whether yours is outstanding or mediocre. We recommend a fee only investment environment, free of commissions that can penalize a proactive involvement. Why do we do this Casey?

Casey Hiers:
Well, and again, it's got to be the right timing and the right setup, but by adding a generous match, it allows a profit share component that a lot of practice owners are surprised how much retirement savings can be accumulated without the complication and expense of other sophisticated retirement plans. And you get different benefits of being able to shelter money from Uncle Sam via tax savings with a great retirement plan structure. We're going to do a podcast on chasing tax write offs. Ultimately, you got to pay Uncle Sam, but there's ways to minimize your tax liability and maximize your yearly savings. Those are the kinds of conversations we want to have. And listen, it's ultimately about saving more, if you can save more, you're going to be more financially free earlier. We've said it before. We hate those calls when somebody is 64 years old and they want to retire, but they just can't because they haven't addressed these things for decades and they just let them go on, and on, and on, and they don't have very many options except corporate dentistry sometimes.

Jason Ewers:
That's true and you also get the opposite where you have someone who really loves dentistry and never wants to really retire. Sometimes that's I don't have enough money to retire signal, but realistically you get the right retirement plan in place, wouldn't it be nice to be able to say, "Hey, I'm done," retiring at 60. I want to be done at 60 and then you can go work [crosstalk 00:09:13].

Casey Hiers:
At least have that option.

Jason Ewers:
Have that option, or you have... You don't feel like you are forced to work until you're 69, 70.

Casey Hiers:
And if our listeners want a measuring stick, you've heard this before from us, if you're a practice owner, collections are $1,000,000.00 or more, you should be saving at least $100,000.00 a year for retirement. That is the marker, right? Ultimately that's the goal and if these five things are implemented into your practice, it's going to help you. I've gotten cursed at for talking about, yeah you should be saving $100,00.00, $150,000.00 a year for retirement. And when people try to do it on their own and they save 12, 18, 20, 40, $60,000.00 a year, it's hard. It's hard for them and then when you start to implement items like this, have a plan, are proactive, have the right systems and processes in place, then you look up one day and you're saving $140,000.00 and it didn't hurt. It didn't feel as hard as it was, but again, it's about having the right team, the right systems and processes in place. Just these five items to implement, it's not rocket science. It's not something that, oh, I can't believe that, but it's just like anything else, if you want to lose weight, move more, eat less. It's not that they don't know how to do it. It's implementing it. Our clients have a team to implement it for them, which i.e. makes it much easier versus the person who's trying to do it themselves, and just struggling to do it, and taking so much time away from hobbies, family, or being in the chair. But again, just these five areas should help make tax day and tax season less daunting. And hopefully you can implement these, get your team to implement these, and start saving more, and having your tax conversations not bring on anxiety, but bring on a sense of I've done the right things. We can do this. We'll wrap up like this, end of year tax surprises, they can blow a hole in your financial plan. Normally they're simply the result of poor planning or no planning at all. Don't rely on an accountant who doesn't see your financial big picture to get your tax structure in order. Get a comprehensive plan, get a comprehensive team that's tailored to your specific needs as a top performing dentist. Do you know your tax blind spots for next year? Again, don't keep getting caught off guard, take control of it. It's worth it. Thank you, Jason.

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.