THE MILLIONAIRE DENTIST PODCAST

EPISODE 34 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 dentists 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 and today I'm joined with Jason Ewers and we're going to discuss when to hire an associate. But we're going to start off doing two things. Number one, we're going to lead with the four questions that every practice owner should be asking at a minimum before bringing on an associate. But guys, we're going to take that a step further. If you're in a position where you are considering an associate, give us a call, 1-877-720-6213. Again, 877-720-6213. We work through associates and transitions in our sleep all day, every day and we'd be happy to talk to you.

Casey Hiers:
But today we're going to tell you what those four questions are that you should ask before hiring an associate. The first one is simply, can I afford it? We're going to unpack these individually after we go through these. The second question every practice owners should ask, how will the associate buy-in? Jason, you want to give him the third and fourth?

Jason Ewers:
Absolutely. The third question is what happens to the pay after they buy-in? Then finally, how will your stake be treated after the associate buys in?

Casey Hiers:
These are simple questions, but we have found around the country many, many practice owners consider hiring an associate or actually bring on an associate and they don't have clear answers to these four questions. So as we unpack these, it's going to become clear why these questions should be answered.

Casey Hiers:
Unfortunately too many associate decisions, Jason, are made using emotion only. What I mean by that is they will find someone who they are interested in, have a conversation with, maybe they go to lunch or have some coffee. They have a feeling, an instinct that they like them and that unfortunately drives the decision versus some of the data that needs to be reviewed and some of the points we're going to talk about today.

Jason Ewers:
I think also though, I mean, having a matching personality with someone you're going to be working with is very important, but it's just not that. There's a lot more detail that goes into bringing in the perfect candidate for you to be able to hopefully turn into a partner eventually.

Casey Hiers:
It's the icing on the cake. Let's dive into, can I afford it? We don't even recommend bringing on an associate until collections hit at least $1.5 million, income is around $400,000 and overhead is sub 65%. Now those data marks, for our clients, are things that are typical, they're usual. For a lot of practices that we see, those are lofty numbers. All too often, we hear people at maybe $700,000, $800,000, $900,000 in collections or if they hit that million mark, they say, "Well, it's time for an associate." There's a reason, Jason, why 80% of associates never become partners. It's because these questions aren't magic that occurs that, well, I have an associate and now practice accounts are going to be better. Income's going to be better. Overhead's going to be better, it's actually in the reverse if you're not careful.

Casey Hiers:
We want to address a lot of people want an associate because if they're out of the office or they go on vacation, there's no production and so that feeling of, well, if somebody is there, it will be better. But we've seen it, a lot of folks can't afford it and what happens is they cannibalize their own income as a practice owner by bringing in an associate and then two or three years later, both parties are frustrated, part ways and it was a little bit of a waste of time.

Casey Hiers:
If you don't have the money or the patients currently to support the hire, the timing just isn't right and that's why it is so important to have an advisor or a team who does this who can guide you through this and make the right decisions, because done the right way, it can propel a practice and propel a practice owner. Done the wrong way, it can waste years.

Jason Ewers:
The second question is how will the associate buy-in? We always recommend that you have to establish an incentive for them to buy-in and will that motivate the associate to become a partner? What triggers should be in place that activate the associate's transitioned to partner, such triggers as time worked in the practice, production goals, a combination of both. Bringing in an associate who does procedures that you may not want to do can be very valuable to yourself and to your practice.

Casey Hiers:
That's a very good point. The third question that every practice owner should ask before bringing on an associate is what happens to pay after the buy-in? What I mean by that is once the associate buys in, they have a shiny new loan from the bank and they're going to need a pay raise and so that needs to be discussed ahead of time. You need to know what that pay raise will be and how it will affect your income as the practice owner. The pay increase needs to be enough to cover the loan payment or at least help them with it and if not, that's where we find that the trouble will start.

Casey Hiers:
Here's the other thing I want to mention, Jason. As a practice owner, if you address these four questions, again at minimum, and really dive into it and have a plan and have it structured, the younger dentist is going to view that as good leadership. They're going to view that as this practice owner knows what they're doing, they're clear and concise and there's going to be a raised level of trust. Even if there are some uncomfortable conversations, having them ahead of time is so important.

Jason Ewers:
That leads us into to the fourth question is how will your stake be treated? Your goal is to retire and you'll need to give full control over to the new partner. There needs to be some discussions on how you will start to phase out and how the remaining stake of your practice will be handled.

Jason Ewers:
You should also clarify when this will happen and what triggers that sale, such things as you're going to go down to two days a week, then one day a week the next year or on. That's something where you need to see what's best for your practice. Talk to your team that you have in place to see what's the best strategy that you guys can come up with.

Jason Ewers:
But like we've mentioned before, all these questions, this all needs to be-

Casey Hiers:
Formalized.

Jason Ewers:
... formalized and it needs to be discussed way ahead of time, not as you go as you bring in an associate in. That's when troubles starts to happen.

Casey Hiers:
Well, and I'll review the four questions as we wind up, but to our audience, these are just general benchmarks. The devil's in the details. There are so many variables regarding this and again, too many practice owners go on instinct or one or two data points and again, in reality, you need to know, can I afford it? You really need to look at that hard. Again, our benchmarks are $1.5 million in collections and come $400,000, overhead under 65%.

Casey Hiers:
Now, if you want an associate and you're not to those numbers, how are you going to get there? For our clients, we're able to help them achieve data and benchmarks like this so that they have options and that the timing is right for an associate and you really see things grow. But can I afford it? How will the associate buy-in? What happens to pay after the first buy-in occurs and how will the older dentist's practice stake be treated? Those are the minimum questions that really need to be addressed. Again, the more that's formalized, the more it's talked about and collaborated with, the better chance for success that you'll be one of the 20% where the associate actually does buy-in and become a partner and there's some good things that occur.

Casey Hiers:
Unfortunately, we've seen when these questions aren't asked and the practice owner doesn't have that leadership, Jason, we've seen this go to court. We've seen it get litigious. We've seen lawsuits because the associate and the owner, once they buy-in, they start to see a different side of them sometimes. So, a lot goes into this. I would just tell our audience, ask these four questions at minimum and hopefully you have a team, an external CFO team that can help you with these decisions.

Casey Hiers:
I want to think our audience, if there are any questions around bringing on an associate, reference that phone number I gave you at the top of this and everybody be well.

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.