Casey Hiers welcomes special guest Larry Guzzardo to discuss when it’s best to work with a practice consultant and when it’s best to work with an all-in-one financial partner like Four Quadrants.
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 it. I've been looking forward to this podcast guest for a while, and I know our listeners will enjoy what we have in store today. I'm thrilled to have Larry Guzzardo join our podcast this afternoon. Larry is a highly sought-after dental practice consultant and international speaker, who was also a faculty member at the Dawson Academy. Not all practice management is created equal, but Larry Guzzardo is one of the good guys and really, really good at what he does. Larry, I want to thank you for joining us today.
Larry Guzzardo:
Hey, you're welcome, Casey. It's great to be here and I'm looking forward to our conversation.
Casey Hiers:
Same here. Well, let's just jump in. We both help practice owners, but in very different ways. And really, I want to discuss the symptoms of a practice owner that they have, that they may need your services and how you help. What are some symptoms, frustrations, issues that the practice owners have, and once they're aware of them and committed to fixing them, what does that look like? And then how do you come in and help?
Larry Guzzardo:
Well, when I have an initial consultation with a client, I find that most practices, the wheels aren't exactly getting ready to fall off the axles, but they're kind of wobbling. Things are just starting to unravel and so they need to kind of tighten up the things that they're doing in the office. And the reason why they get a sense that they need to do this is they're noticing that their case acceptance is going down. And so that's causing them to have to see more patients than they're able to handle because they don't have the acceptance and they don't have the productivity that they're looking for.
Larry Guzzardo:
Of course, that creates a scheduling problem, and then they realize then that they're not really converting new patients when they call on the telephone. So it's kind of a combination of things. And if I back that up, if we're not converting new patients over the telephone to come into the office, then it is going to create a scheduling problem in the sense that we don't have enough exams. And so there's not enough diagnosis and you know that leads to low case acceptance. And so it's just kind of a vicious cycle for everybody.
Casey Hiers:
Let me ask you this. When you have those conversations and you're hearing that case acceptance is dropping and that domino effect is happening, how long on average is that typically going on before somebody seeks help? And I know it can vary, but talking about a practice owner having that self-awareness to say, "I'm seeing this. I'm going to seek help."
Larry Guzzardo:
Yep. Yep. Well, the guy who pays attention to what's going on in their practice and then monitors, like in consulting, we're going to teach somebody how to monitor their practice so that they can detect a trend within the first two or maybe three months that it happens. And so the guy who's not aware of it, unfortunately, and you probably run into this all the time, they don't really find out they're in trouble until they're doing their taxes. And it's at the end of the year, because now they don't have money for their retirement plan, or maybe worse, they don't have the money for their taxes.
Larry Guzzardo:
So it's twofold. The person who really pays attention to their numbers and understands how to pay attention to their numbers, they realize very quickly, usually within two to three months, they get it. "Hey, something's going on."
Larry Guzzardo:
The reason why I don't say sooner is because every practice is going to have a blip of a month. A real high high, or maybe something that's a little bit lower than normal. But if that goes on for two months, now, wait a minute, we've got a warning sign going on here. If it goes into a third month, uh-oh, now we've got a trend.
Larry Guzzardo:
So to answer your question, the guys who are paying attention or who know how to pay attention, they catch it very, very quickly. The other ones, unfortunately, they probably won't know until the end of the year, when it's literally too late.
Casey Hiers:
You hit on something really poignant that we do see all the time, and it's that they're not looking at the data or their numbers and maybe once or twice a year at the end of the year, some folks... And we always say, what's worse than having incomplete or incorrect data? And that would be trying to make decisions using incorrect or incomplete data. And how many practice owners that you know, who are making major six-figure decisions on strategic direction or buying different equipment, and they don't even know their own data. I talked to someone the other day, their profit and loss and balance sheet, they just got their people the information for the year. And I mean, we're into the fall right now.
Casey Hiers:
And so it's really hard to be a captain of your ship when you don't have the data or information. So I like what you're saying. Once they actually see it, they recognize it and want to fix it. Unfortunately, they're busy being dentists and so they're not-
Larry Guzzardo:
Doing other things.
Casey Hiers:
Right.
Larry Guzzardo:
Yeah. Well, they're using that checkbook management. They're using that checkbook management. When there's plenty of money in the checkbook, they think everything is okay, not realizing the signs are already there, they're just not aware of it. And when there's not enough money in the checkbook, they're like, "Oh my gosh, something's wrong." And so it's because they're not paying attention to their numbers.
Larry Guzzardo:
Most likely it's because they don't understand the difference. And these are things that everybody can learn. They don't have to be a CPA or an accountant, or even no bookkeeping to learn it, because it's things that I teach clients all the time. But I want them to understand the difference between an operating expense and a non-operating expense, because it's in their operating profit, where they have the money to upgrade their facility and buy new equipment.
Larry Guzzardo:
Because one of the biggest questions I ever get is, "How do I know if I could afford this? Or can I afford this?" And I'll say, "Well, we've got to take a look at your overhead. If you have enough operating profit, I'll tell you how much is left over." And so you know if you're going to pay for it over time, this is how much you can afford to spend every month, or this is how much you can spend totally. But you've got to understand the difference. But it is something that you can learn.
Casey Hiers:
A lot of practice owners, they're getting advice from friends or mentors or colleagues on major decisions, but the people they're asking, to your point, they're not looking at taxes and balance sheets and profit and loss statements. They don't have a real good feel for it. And to get advice that way can really set a practice owner back. And then talking about the frustrations they have, Larry, to your point, someone who is sort of on top of things, once they see some case acceptance dropping or holes in the schedule, those folks will look to correct it.
Casey Hiers:
But to your point, with the checkbook management, others wait until when their income's affected, their retirement's affected, their cashflow. Then they feel it and say, "Whoa, what's going on?" And sometimes it's been happening for months and months and months.
Casey Hiers:
Larry, tell me a time... I always like examples. Tell me a time, maybe somebody you helped that caught it soon that they needed some help, and maybe somebody who you've worked with that, my goodness, they've been experiencing some of these issues for years or decades, in some cases, and you were able to come in and help them.
Larry Guzzardo:
Well, just like something simple, because I just started working with a client. Unfortunately there's a cashflow issue that's going on there. And just a part of my initial analysis, and I get a little embarrassed to talk about it, because it sounds like I'm just tooting my own horn, but to give people an idea of what's easy to notice and something they could even check themselves is, as a matter of practice, I always look at the client's accounts receivable. Because they may be producing it, yet they're not collecting it. And it could be because they're just not sending out statements. It could be because they're making improper financial arrangements that don't enhance their cashflow. Or it could be that claims aren't going out or claims aren't being answered, and so that's tying them up.
Larry Guzzardo:
But when I looked at this report, I saw that 78% of the accounts receivable was over 90 days past due. And so I'm like, "Doc, I can see a big problem right here, and there's quite a bit of money that could be collected. So my immediate advice is that you get somebody to get on the horn and just start calling people right now and get some money in the office." And of course that has an immediate effect because they can start collecting money right away.
Larry Guzzardo:
I think the bigger question is when you're working with a professional, and in part of what's happening, I think, with a lot of the doctors that you and I work with on a regular basis, it's where they're getting their information from. I hate to say it, but a lot of them are getting it from social media, and they're getting it from places where the sources are promoting dubious types of things. And so they're really not getting it. Even if it wasn't me, I would want them to get it from another professional like me, who's looking at numbers all the time and understand what those numbers mean.
Larry Guzzardo:
But I know when I'm working with clients, because we watch these numbers very closely, it's not unusual for us to see productivity going up between 20% and 25%. So it's a considerable amount of growth for a practice. Which means for them, if their productivity goes up that much, it wouldn't surprise me if their net take home pay, their net profit for them, might go up six to eight points.
Larry Guzzardo:
So my point is, I don't want you just to produce it. I want you to collect it, but it also has to increase your bottom line. I find a lot of dentists only concern themselves with their top line and they forget that being busy isn't always productive.
Casey Hiers:
Well, that's exactly right. You hit on two things I want to emphasize. The first one is that growth. That's great. But if it's not accounted for, and if QuickBooks aren't up to date and the tax situation's not up to date, they're going to have some growth and maybe some increased income, but they're going to get hit with the tax surprise.
Casey Hiers:
And then conversely, you touched on, we see all the time, folks that are producing 1,500, but they're collecting 900. The thing with that, as you know, you've got to staff up for the 1.5 production and that just kills your overhead, if you're only collecting 900. And for us, that bar, that line that we say is, if your adjustments are over 15%, you need to be aware of it. And you need to take a look at it, because that can really start to devastate you. And then for those folks that are at 30% right off, whoa.
Larry Guzzardo:
Well, look at it this way, if you're at 20%, we just use a nice round figure. If your write-offs are 20% in your practice, then you're already writing off one day a week. And at the end of the month, you've written off a whole week. And at the end of the year, you've written off three months. So it tells me that you're working all the way until April the 1st, just to pay for your write-offs.
Casey Hiers:
Well, I love the way you just illustrated that because broad strokes, practice-owning dentists and specialists, they are nice people. They're kind. I hear it all the time. "I'm okay giving away some dentistry." And I always say, "Do it on your terms." But I like how you just put that. Sometimes it has to come down to your family or theirs, and you can still do good dentistry, but boy, that's a conversation that your clients are lucky to have with you. And obviously we point that out with ours on the financial and business side of it as well, is it's okay to give away free dentistry, but do it on your terms.
Larry Guzzardo:
Yes. Yes. But you have to be able to afford it, because if you want to donate more to charity, the consideration is, will I be able to do it over the long haul? It's nice for you to be able to do it this year or next year, but what if you can't do it the year after that? How did you help that organization?
Larry Guzzardo:
So the question I always ask a doctor is, if I use a nice round number, like 20%, if you're writing off one day a week, and one week a month, how fast can you tread water? How much longer do you think you could keep up this pace? And Casey, that's the trap that most dentists get into, is they think, well, you know what? I'll just work more. And then they feel like, "Well, I'll get an associate." And it's like, "Whoa, whoa, whoa, whoa, whoa, wait a minute. If you're not as productive as you want to be, or worse, you're not as profitable as you want to be, bringing on an associate just means I'm going to have two busy people who aren't productive or profitable either."
Casey Hiers:
Larry, that may be one of the most important things said on our podcast, in my opinion. And it's simply because you hear it all the time, and I do too. Folks that aren't ready for an associate want an associate, and it can devastate them. It can set them back five years and it's not always just plug and play, and if they can't afford it, what are you doing to yourself? Like you said, a lot of busy people, but if you're not capturing it, it's not set up right.
Larry Guzzardo:
Exactly. It's not worth it. And I think it's because again, people listen to a lot that's going on in the media and the media is always pushing bigger, like that's better, and it may not suit your lifestyle at all. And I don't have to tell your listeners because they've heard all the horror stories of bringing on an associate. And I'm not saying that bringing on an associate's a bad idea. I'm just saying, it's not a good idea for everyone.
Casey Hiers:
That's exactly right. And that whole bigger is better, I'm shocked at how many folks I'll talk to, and they say, "Well, I want to buy a new practice every so often and bring on associates. And my goal is at the end of this decade or next decade to have six practices," and all this. And I peel the onion back and ask them why. And ultimately it's because they're not earning what they thought they would be earning or saving when they went to dental school as a practice owner, and they think the only way is to just do that.
Casey Hiers:
And I always say, "If you don't have the right systems and processes in place, you're simply going to magnify the issues." And we hear it all the time. The $800,000 practice who, they think if they can be one for, all their problems are solved and nothing's changed. The numbers are just bigger and the problems are magnified.
Larry Guzzardo:
Exactly. Because they're thinking like a retailer. For a retailer, it's all based on volume, because they have very, very, very low operating expenses and they have very, very high operating profit. We're just the opposite. We have very high expenses and very low operating profit. And so that's why, what we see in retailing, like more locations, more hours, work more days, that's why that works for them. If they want to make more money, they just open up on Thanksgiving. But I wouldn't recommend that to one of my clients. It may work in retailing, but I don't know how well it's going to work for your life.
Casey Hiers:
Well, I'll give sort of a scenario. And I'll say, "Let me paint a picture of option A, maybe owning one or two practices with an associate and this level of income, retirement savings, and net worth at retirement projection. Or B, six practices, kind of that bigger is better," and give some of those metrics of what that can look like. And they go, "Well, obviously I'd like the smaller one. For what I want out of my practice financially, how could I get it?" And a lot of times it's there, they just need the right guidance. And I want to kind of-
Larry Guzzardo:
It's the case acceptance, because if they were more productive with their patients, they wouldn't need to see as many.
Casey Hiers:
No, that's right. Larry, I want to thank you for joining us. Like I said, I think we'll have you back for a part two down the road. I feel like we've just-
Larry Guzzardo:
I would like that. I would like that.
Casey Hiers:
Well, that's great. Thank you so much and be well, my friend.
Larry Guzzardo:
All right. Thank you so much. Bye bye.
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.
