1: Associates on Fire: Igniting our Podcast Series

Hey, dental associates and new practice owners. Welcome to the Associates on Fire podcast. Powered by Practice cfo. This is the podcast that teaches you what you never learned in dental school, the financial side of dentistry. We cover topics from planning for ownership, buying a practice, to student loans, taxes, and all things financial for the hungry to learn dental Associate. So let's light it up. Welcome everybody, to the Associates on Fire podcast. This is our first podcast and I want to thank all of our listeners for being here. I just want to start off with a quick bio about me and a little bit about how the Associates on Fire program has come to exist. So I started working with dentists about 11 years ago exclusively, and it's been a great experience. Just learned a lot about the industry in working with dentists, and I've noticed that there are dentists who thrive and there are dentists who, who struggle to own and run a practice successfully. And I've interacted with probably, I don't know, over a thousand dentists over this time period. And I've helped them at various stages in their career, from being an associate to dealing with those early stage associate questions, for example, student loans and prepping yourself for practice ownership, to eventually going through that transition and buying a practice. And in helping them, we've sort of, I have, and our company has helped create the tools and framework to help them succeed in that journey from associate to ownership. And I've wanted to package that up and deliver it in a way that's accessible and even free to early stage associates. And the reason why we want to do that is because there's trends happening in the industry and we're going to talk about those trends today, which I'm excited to jump into that subject of where is dentistry going and what should dentists be thinking about as they're coming out of dental school and wanting to own a practice? And let me start there. Actually, when I go to dental schools, and I've done this quite often, I asked the dentists in the room, I say, how many of you want to own your own dental practice? And I'm not kidding, virtually every hand in the room goes up, which is a trend I like to see. I think there are. It's an amazing experience to own a dental practice. You get to create your own culture, you get to have the opportunity to be a leader and develop leadership skills skills. You get to practice clinical dentistry the way that you believe in and you get to manage your own schedule. There are so many reasons why being a practice owner is something that should be sought after, in my opinion, as a young dentist coming out of dental school also, those that succeed in that path financially are the ones who typically, I mean, as a, as a practice owner and do so successfully are the ones typically that become successful financially as well. They're the ones getting out of student loans. They're the ones setting aside money for their future. They're the ones enjoying a good lifestyle with them and their families. And so there are many reasons why dentists are, I think, wanting to have ownership because intuitively I feel they recognize those benefits. But the problem is, as I'm seeing the trends in the industry is that a lot of dentists are coming out of dental school and they're not moving into ownership either soon enough or not at all permanently. And for many dentists, that's okay. And that's probably for many dentists, the right path as well. And there's nothing wrong with that. And we're actually going to talk about that a little bit in this podcast.

But I see the correlation between the number of hands that go up in those college classrooms when I ask them how many want to own their dental practice to actually how many end up owning their dental practice. And there's a miss, there's a misalignment there. And I want to talk, start off our podcast series a little bit about the industry, the challenges that associate dentists are facing and what we're seeing and experience and experiencing and working with them to overcome those challenges. Let me, let me kick off this by just giving a quick intro to the Associates on Firepot Associates on Fire program. Really, as a whole, the podcasts are just one segment or one piece of this platform of education for young dentists. We have a website called AssociatesOnFire.com and it's a free resource for dental students and dental associates and even early stage practice owners to give them the language of finance, which is something that they never really learned in dental school. And we want to give it to them in a very accessible way and in a practical way that they can actually use it to make good, smart decisions early on. And so the Associates on Fire podcast has a video series and the video series and really all of the program is divided up into three fuel cells. And these fuel cells are the first fuel cell is about being, making good decisions as an associate in the associate phase, pre ownership. The second fuel cell is about a successful transition experience as you go to actually buy a practice. There's a lot going on there and it's a complicated, complex series of events or transactions and a Lot of dentists don't know what the transaction should look like and how do you make that a successful outcome for them? From gathering your team to gathering creating sort of a business plan for yourself, to negotiating the right price, to doing the due diligence, to working with the attorneys to sign legal documents and getting financing, there's a lot going on there. So fuel cell number two and the Associates on fire is all about that specific phase for a soon to be new practice owner. And the fuel cell number three is once you step into the shoes of ownership, how do you do that successfully? And it's all about tools, resources and knowledge to help them be good business owners, not just great clinicians. That's on you, dentists. And you know what you're doing that. So many of the dentists we work with are hungry to become great clinicians, but I also find a lot of them are hungry to be great clinicians. I'll say business wise as well. And I believe that's what's needed to couple with your clinical knowledge to really thrive today. So on our podcast today, I've got three of my colleagues and co hosts with me. They're what we call CFO advisors here at Practice cfo. Practice CFO is the name of our company that does provides financial services, accounting and tax and business planning and personal financial planning for dentists. And we act as what we call a CFO or a chief financial officer, both personally and from a business standpoint for our clients. And we work exclusively with dentists every single day. It's what we do and we love it. And so I really want to peel from their knowledge and experience to share with you a few opening thoughts in our Associates on Fire podcast series about what this program is all about. And they are Greg Marvilla, Drew Phillips and Justin Reed. So welcome guys. Let's start off with a few questions. Actually, that's really what this podcast is going to be about. It's going to be about a few introductory questions to what are associates facing in the industry and what are we seeing and how can we provide some valuable feedback for them? Let's start with you, Greg. This is Greg Maravilla, CPA financial planner. Greg works with a lot of dentists. He's been here for a number of years. So I'm excited to hear from your answer on this question. What is your take on the dental industry and where is it really? Where is it heading right now, particularly as it relates to dental associates and early stage dentists?

Right, thanks, Wes. I think there are a Lot of headwinds. And we should be honest and upfront about that with regard to associates and new dentists. And I think there are at least five categories that I think that associates need to be mindful of as they go into ownership. One is the development or increase in amount of corporate dentistry, sometimes known as DSOs out there. And that's being driven by the fact that investors see great returns in dental practices.

There are trade offs, pros and cons with that. You know, the pros are you get a steady job, but you know, some of the profits are being shared with corporations. Corporate dentistry and as a non owner, that makes you an employee and somebody else is calling the shots. But at the same time, if you're an employee, you don't have to worry about paying the bills, firing the people.

Or transitions. That's somebody else's situation. I think corporate dentistry is going to continue to increase for any number of reasons, one of which is my second thought, which is student debt. And student debt is shaping America's future in many ways. Whether it's family personal planning, whether to have a family or buy a house, but also the amount of risk that somebody takes on because corporations act the same way when they have debt. When you have a fixed payment, whether it's personal or a corporate debt, you know that you have to come up with that specific amount of money every month and you have to act very, very conservatively. The amount of. You can't have volatility in your earnings when you have student debt.

So a lot of folks will come out of school needing a constant paycheck. And so that leads a lot of them into corporate dentistry.

I think also the insurance companies are. There's an arms race, so to speak, between insurance companies and dental practices. And that's one reason why corporate dentistry is increasing, because they're growing their market share and therefore bargaining power in the marketplace to counteract kind of the oligopol power of negotiating that insurance companies have. So it's kind of an arms race of negotiation. That's part of what's driving corporate consolidation as well. But I do think that there'll always be room for the private practice in dentistry, just as there still is in the medical field. And two last things that I'll talk about are, you know, of course, the pandemic that we're kind of maybe still in the first wave of is going to cause, you know, probably higher expenses in dental practices. But that's across the board, whether it's private or corporate. And so good dentists are going to need to navigate their revenue to offset that and adjust. But I think you also see a wave of sales as those in a more senior dentist who are already thinking about retiring will put their practice on the market. So that might cause a glut of practices for sale. Just depends on how, you know.

Driven they are to sell at a particular time. And the last and fifth thing that I'll mention is and you see this trend in society which is urbanization. So you'll see, you know, especially in coastal or major cities, a lot of plenty of dental candidates offices, sometimes hyper competition. You know, so oftentimes what we see in our experience is, you know, the more desirable it is a place for a dentist and their family to live. There are a lot of other dentists who had that same thought and are competing hand to hand, you know, usually just a couple doors down from each other. Whereas the rural areas have a real kind of shortage of service providers. So many older dentists there are just shutting their doors or selling for a much lower rate. And I think that's driven in some ways by the schools. Like if a lot of dental schools may be driven to get out of state tuition so they'll take students from abroad or from out of state and guess what? Chances are they're not going to head for the hinterland to practice. So there's a real shortage there. So there's opportunity if you're willing to be flexible on your location.

Yeah. Let me share a couple of comments. As you were talking, we have in our associates on fire program modules that talk about the pros and cons of working for corporate dentistry or large group practices and, and also the private practice. We have a lot of content on student loans and the income driven repayment programs or the IDRs as we all know them to be, IBR, pay repay and even ICR and a lot of modules on that. There's a lot of dentists who will just either ignore that they'll go on forbearance or they'll go on deferment at different periods of time. Why? Because it's pretty easy to do so with their loan servicer. But there's a lot to that landscape and to making the right decision and understanding the difference between those two. And I'm a dental CP and financial planner. I've been working with numbers for a long, long time. And early on as I was working with dentists, it took me a little while to fully understand the ins and outs of these student loans so that I could advise properly on them. And it still continues to be a pretty complicated landscape. So we have some great modules, video modules on the Associates on Fire program about student loans. We also have one talking about detaching from the insurance companies or the PPO that most dentists sign up with. They contract with insurance carriers. Why? Because it gets people in the chair. And they're like airline companies. Their success depends on filling the chairs. And what's the easiest way to do that? Well, you just sign up with 30 PPOs and people start coming. But that is a very arduous, physically demanding way to earn money. And if you can not be so dependent, you're going to find yourself having just a better experiences as a dentist and also perhaps earning more. But it's hard to have a fee for service practice. It's very hard. And most dentists coming out of dental school would prefer to work in a fee for service practice. But they're becoming very, very hard to find. But I still believe that they can exist. And we have clients who have managed to detach themselves to a large extent from these PPOs and just drive a better practice. But there's a lot more to it. It requires a great business mind to be able to do that. And so we talk about that in the Associates on Fire a lot. And then lastly, my last thought too, Greg, was you mentioned bargaining power and how the large group practices have this bargaining power that the small private practice doesn't have. I see a lot of evolution in this space in the industry over the next 10 to 15 years where I think there will be a need for private practices to band together at some level. It doesn't have to be a full corporate dentistry where you essentially sell the practice to a large group practice directly or indirectly. But more, how do you team up as private practices to get some of those benefits of scale? And there aren't many good solutions for that out there. There are some that are emerging, sort of group purchasing, centralized group purchasing and things like that. But there's so much I think that needs to develop in that space to give private practice owners the benefit of scale while still allowing them to own and run their practice and do clinical dentistry in the way that they really believe in. So I'm actually excited for some of those changes as well. All right, Justin, Drew, anything you guys want to comment on that question? Where do you see the industry going before we move on?

I think the only thing that I have to say really is I think it's going to be interesting to see the trends with people working from home more often in These large corporations seeking to gain that 7 to 12% on the facility cost by moving away from the corporate space.

I was talking to a client yesterday who lives in the Bay Area around San Francisco, and she is buying a house in Alameda, which is, I think, south of Oakland, if I'm right. And she was saying that I'm seeing that housing prices have been dipping a little bit, at least sales have been dipping a little bit, but it's actually going up in these areas right around the city. Because now that we've sort of crossed the Rubicon with working from home, it's something that would have taken probably a decade or more before as a society, we would have been more comfortable to really do this. We've been forced into that. But there's some good things coming out of that. And I could see certain areas. Drew, that's a good point. Point. That are going to see a growth as people now don't have to be so close to the geographic location of their workplace. And so in her area, she was saying how prices are going up, she had to bid $100,000 more, actually 150 more to get this house, because all these people who are moving out of the city who wanted to buy that particular house, really interesting trend. All right, let's go on to question number Drew. So back to you, Drew. What are some of the challenges facing dentists in their associate and early ownership years? Some specific challenges.

Since I've started here, Wes, I feel like I've taken on a lot of new dentists, new associates, and been really a big part of that side of our business. And from what I see more often than not is. And to be fair, you know, we're still. You guys are still young when you come out of dental school. And we haven't had. You've been so focused on your studies that you haven't had enough time to really internalize and visualize what the future looks like for you and what you want out of your future. Whether, you know, do you want a life partner or do you want kids? And how many children do you want and what type of schooling do you want them to be in from a young age? And it's. And it's more to it than that, Right. Really understanding who you want to. What type of future you want to have. And from there, you can really reverse engineer how much money it's going to take financially to not only provide the life that you want for your kids and for yourself and for your family, but also what you need to do today in order to save for your future self as well, which ultimately is the end goal. And you may find throughout the way that dentistry may not even be what you want to be in. But at the very least, we'll have a starting point.

To work from. And that's going to be super helpful, not only for yourself, but also for your advisors and the team that you build around you, because they all have one single purpose now, which is to help you get to where you want to be from, the vision that you set out to do.

With that. I also feel that my young associates have a lack of financial and business knowledge, which we talk about all the time here. And I think that our associates on Fire program is helping to bridge that gap. Almost a financial business MBA for dental associates, so to speak. And I'm looking forward to being able to offer that to the the associates and really help drive that knowledge. And I think that with that knowledge, you'll be able to overcome some of the fear and anxiety that comes with the thought of being a practice owner and taking on a large practice loan, in addition to which most of you have already large student loans. And so with knowledge, obviously Trump's fear, and I think that that's part of the biggest thing for young associates, is to really understand what they don't know and start to work on that. It's not going to happen overnight, but being better in your operational efficiencies, your managerial experience and how you handle your staff and get them motivated and then obviously how the cash flows of your practice work so you can then take those surplus cash flows and invest in your future and set your set yourself up for success. And I think as a nice segue there as well is you know, too often that fear drives associates to buy practices that may feel less risky because they are producing less, which comes with obviously a smaller purchase price, but in turn takes so many years, valuable years, that you're losing from compounding interest in the market from your investments to get to a place where you could have been day one, by purchasing a practice that was already set up to fund your lifestyle and your future retirement. And that practice that does that, day one comes with a larger purchase price. It comes with a larger loan. But the truth is, is that if you are comfortable as an associate producing $4,500 to $5,000 a day, you can own a $1.3 million practice as a general dentist. And that in most areas is enough to not only fund your life, but to fund your future. And compartmentalizing and thinking of it on that granular level is like, okay, what do I need just to do from on my side every day? 4,500 to $5,000 in production, even on a insurance dominant fee schedule is fairly manageable even at your young early stage. I think that you know that really I've talked about student loans. I do feel that student loans are a burden. They help, they cripple, so to speak. You know, your aggressiveness and your ability to think outside the box. But if you bring it all in together, you put the right team in place around you to help educate you and be the mentor on the major areas of your life as a practice owner. These are things that you'll be able to understand in a global picture and hopefully be able to put you in a practice in the very beginning that is set up to do the lifestyle that you, that you're going to need.

Great. You know, I have a number of thoughts off that. Drew tons of good comment there. Speaking of student loans, most of the associates listening to this will probably have student loan balances that are increasing. You guys have seen that, right? Student loan balances are increasing. Why? Because they're on an IDR program and 10% of their pay is less than the interest portion of their student loan payment. So the balance is going up. And that can be daunting, especially when you see that balance going up. It might be hitting 6, 7, $800,000. And then you go to buy a practice and you take on another $800,000, a million dollars, whatever that is. And then you buy a house and you take on, well, if you're here in Southern California, you're going to take on another 800,000 to $1.3 million or so to buy a house. Next thing you know, you feel like you're never going to get out of debt. It's just this mountain that is on your shoulders and the thought of getting out, it probably makes some people feel, and I've seen this discouraged and a bit hopeless. That said though, what I love about dentistry is, is that if you do it right, it is a very high cash flowing business for you. The margins can be very good. And if you're wise in the way you spend your money, both inside and outside of the business, you can designate a portion of your cash flows to pay that off. And it's a little bit. The example I always use is Andy Dufresne. He's trying to get out of Shawshank, a prison. And how does he do it? Just a pocket full of dirt as a time. Now There will be some experiences in your life where you'll be able to maybe pay off extra, because maybe you pay off a practice loan and now you got an extra $3,000 a month and you sort of roll it into your student loans. There needs to be a plan around the full anatomy of how you're addressing all of your debt. And I really liked what Drew said, how it is very true that a lot of dentists I find come out of dental school and they say, I'm going to buy a practice that costs 250,000 bucks and going to build that thing up to a million dollar practice or $1.3 million practice. Well, you can do that. But I have typically found, almost like a startup, that the pathway to profitability just takes a lot longer than if you buy a $1.3 million practice, sustain the cash flow and be intelligent about your money. You end up getting that cash flow a lot sooner, possibly in the very first year that you even bought that practice. So I don't think dentists should be afraid of debt, even though inherently they might feel that way. Seeing all of those student loans and the balance of those loans even growing, that was one of my thoughts. The other one too, is how important is leadership in dentistry. That's one thing I completely underestimated when I came into dentistry. I just thought, you know what, if you can do the best crown or the best dental implant or the best veneers, you're going to make the most money. And I found that that is absolutely in no way true. Now the way I look at it is it's sort of a bar. You have to have that solid clinical skill set as a bar. If you don't have that, you're going to have bigger problems to be worried about. But I don't find dentists. I find generally dentists are able to get good education and they're hungry for it through programs like Spear or Kois. And there's a lot of these great programs out there and they become very versed clinically. But the next stage that a lot of dentists don't go after is that stage of becoming first financially as well. Another thought I had was getting that production early. That's another challenge of early stage dentists is how do I get enough production? Because when you go to take out a loan to buy a practice, the bank wants to see that you're doing enough production to replicate the production of the seller. And if you don't have that, guess what, Most likely that bank, especially if they're a Dental specific lender not going to lend to you. And then there's the issue of specialty work. I'm finding a lot of young dentists or early stage dentists are making that decision. It's a challenge of how do I retain profits in my practice that I just bought, because now I have a big debt and I just lost Delta Premier reimbursement rates, which is a huge cut from, say, 11 or $1,200 reimbursement on a crown down to $600 reimbursement on a crown. Now, if you haven't got to that point of buying a practice, we talk about that in the Associates on Fire program is the significant cut that many dentists these days are seeing because Delta Premier is not extending those rates to new buyers. And so suddenly on day one, you have a significant drop depending on the level of Delta in that practice. Delta Premier in your numbers, when you buy a practice, you got to do some really good due diligence to understand what that drop is going to be. But that's another significant challenge I'm seeing young dentists are having to face in the industry. And okay, Justin, on to you. Here's my question. Should associates, given these challenges. I just mentioned Delta Premier. We've talked about the growing large group practices, we've talked about competition, just a lot of things. Should dentists fear ownership?

Yeah. Good. Good question, Wes. Kind of a loaded question, right after hearing all that. And I'm not a psychologist, and most people would probably think of CPAs as the opposite of psychologists, Right. But we've been around a lot of people, worked with a lot of associates, and it's easy to see that people respond to new circumstances and new situations differently. So whether or not you fear a new circumstance, a lot of that is inherent. But in looking at what associates have already undertaken to this point in their career by embarking on dental school and potentially specialty school, we know that they're capable of taking on big challenges. And what comes with practice ownership is just a lot of unknown, like Drew said. And it's not just one big unknown. Right. It's all of the unknowns that come with managing a team, to learning how to process payroll, to dealing with different vendors, negotiating lease rates, all of the above. So wearing the hat of a business owner is just going to require us to experience lots of new challenges. And so what do we do in this situation? What we can do is we can educate ourselves, like Drew said, education, there's a lot of myths out there that we'd look to dispel and you start by networking in your geographic area and getting good advice from a good team, both on the business side and in your personal life as well. You want to surround yourself with people that are going to feed you with good, accurate advice. But when it comes to fear, I.

Mean.

All of this is a big opportunity. So you want to look at this more as an opportunity. Like Wes said, never the opportunity to cash flow a dental practice is huge. So don't let those fears or those anxieties.

Creep in and keep you from taking that leap into owning a dental practice.

Cool. Yeah. A few thoughts that came to my mind too as you were talking was in dentistry today, there's been the emergence of dental specific service providers across a lot of services that they receive. And we are naturally, we are a dental CPA and financial planning firm. We specialize in dentists. So we have this belief built into the way that we work with dentists is that specialty knowledge today is extremely valuable and it's extremely important. And as the landscape of business ownership and taxes and debt and managing a team and vendors and marketing, it just, it's a complex array of decisions that doctors have to make. So there's specialty providers in these areas like accounting, tax, like marketing, like hr. And I would say really understand those and tap into some of those because they're there to be a support for you. Also, how awesome is the technology that dentists have these days from the just their X rays, the CAD cam technology is just seems to be emerging pretty aggressively and there's various CAD cams and now you have a lot of new vendors in the CAD cam space and doing same day dentistry or in house dentistry. Now I know there's a lot of various opinions clinically around, around some of these technologies and that's out of my jurisdiction. But I will say that to the extent that doctors use the various technologies that are emerging to that same extent, do they become more efficient in the way that they run their business as a business owner? Because whether you like it or not, you're not just a dentist who surrounds him or herself with some people to support you. You are a business owner. And if you don't think of yourself as a business owner, you need to think of yourself as a business owner and, and accept the challenges. And in some ways I think the excitement that comes with business ownership and those clients of ours who view it that way and they tackle it with optimism and excitement are the ones who are just, they're charismatic, they're great leaders and they go into their practice, and they produce excellent results. And they're not, I don't believe, taking advantage of any patients or upselling. They're simply getting patients to say yes to treatment that they need. And everybody listening to this podcast probably knows that there's a lot of unaccepted treatment that's presented to patients that the patient should be saying yes to. But what do patients tend to do? They tend to wait until the moment of crisis. Now the pain is there. Well, at that point, it's probably going to be more expensive to fix or maybe even lose the tooth because of it. And a lot of people walk out the door. I believe, in dental offices not having said yes before that moment of crisis, when they should have, and in the long run would have been less expensive to treat it the right way at the right time. Well, you as a dentist need to convey that in the right way and in a persuasive way to get people to say yes. Dentists hate to be called salesmen, but every business owner is a salesman. They're simply trying to persuade people to accept the treatment or the product or the service that they believe that individual needs. And dentists are some of the most honest people that walk this earth, I believe. And sometimes they're so concerned about appearing to be too aggressive that they almost let up on the pedal way more than they should, and their unaccepted cases are just extremely high. And then the practice can languish financially because of that. So a good business owner has to think about things from that light, not just thinking about the clinical side of dentistry. So. But I love technology and its ability to help the private practice owner. I was talking earlier about specialty work and the challenge of dentists bringing in specialty work. That's very much a decision of, of the gp. And we're definitely seeing that trend as a way that young dentists or GPs are thinking, how can I increase my margins given my profit margins, given the challenges I'm facing to pay my bills and pay my debt and all of that stuff. So one of their solutions is to go and start doing endodontic work or implants or whatnot. And that's going to be a decision for the gp. That's not for me to say yes or no, but I will say I see a lot of practices who don't do specialty work in house. They do nut and bolt dentistry and they're, they're thriving, they're doing excellent because they've, they've learned how to get patients to accept the basic dental treatment that they need. Now, whether you bring that in house or you form a multi specialty group or have a roaming specialist come in, those are a lot of things going on in the industry and we're going to talk a lot about that as well throughout our podcast. Podcasts, I'm sure, as really relevant subjects. Okay, let's go on to the final question. Greg, this one's for you. As I mentioned, you've worked with a lot of dentists. I mean, right now, exclusively dentists, you see them on the full range in their career, from buying a practice to getting ready for retirement, to actually retiring as their business and personal cfo. You've been able to see many succeed and you've probably seen a few who have languished, really struggled. What are some of the common characteristics among those that are succeeding, especially as early stage dentists? Right.

Well, some of it. I mean, to some degree, there's always that unknown factor that certain types of people have, the leadership and the smarts. It's hard to put your finger on. But there are some things that I have seen regularly and I'll point them out to you. So just the fact that you're listening to this podcast right now tells me that you're the kind of person who's interested in topics outside of the clinical realm. If your natural motivation is to listen to something like this and get smarter, that is probably one of the best indications that you're going to succeed. I see that the best dentists ask all kinds of questions to all types of experts and also to their peers. They're always, you know, they're the ones who go to the study clubs and are listening to podcasts and also turn to advisors. I know just for me personally, sometimes, like for example, working around my house, I like to do a lot of things myself and sometimes it ends badly, but it's really, I mean, doesn't matter if I make a mistake there. But in business.

Miscalculations can send you off on a trajectory that is really the wrong direction. So I do encourage you to spend a little bit of time interviewing good experts who can help you. And I think the people who should be in your corner there in particular would be a good attorney, a good accountant, and have somebody help you be on your side when you buy a practice. You really need that. Because.

If you're buying a practice from a seller and they have a broker, just realize that that broker is paid by and loyal to just the seller. So just that stretching out for advice. I think the other thing that allows them to succeed financially is realize that even though dentistry is often referred to as an industry, it's not McDonald's. It's difficult to scale, and a lot of doctors think, hey, you know what, if I could just get this million and a half dollar practice up to 2.5 million, all my problems would be solved. But if you're talking to people who are experts and who are there all the time.

With owners, you'll find that it is sometimes counterintuitive that getting bigger in a highly specialized industry doesn't always lend itself to more profits. In fact, I see a lot of my clients who are over a million and a half dollars doing. There's kind of this Goldilocks point, right? If you have 400,000 in collections, you're, you know, you're lucky to take home your own paycheck. It's really the sweet spot, depending on your geography and your expense structure, about 900,000 to 1.5 million of annual collections. Because once you get past that, you need another set of hands to deliver that work, meaning another dentist and those. That's a very expensive piece of labor and chews up a lot of that excess profit and increases your just management responsibilities and the directions that you're going. So be just, you know, just, it's, it's kind of conflicting advice here. I just told you to reach out to experts, but then also be mindful of what you know, the motivations are of everybody in the industry. If you go to conferences or seminars, you know, are they aligned with yours? And your goal is to get ahead financially. And just being busy or taking every insurance under the sun may not translate to, to the bottom line. Another thing that I see is a key success factor is you're willing to get your hands just a little bit dirty, right? You don't have to be an expert in insurance billing. You don't have to be an expert in everything. But you do need to be involved, you know, and even sometimes the best clinicians can overlook things, but you really need to.

Get involved in insurance. Because for example, I came across a very successful client of mine who after his office manager of 17 years retired, found that she had been crediting the explanation of benefit difference between insurance rates and the UCR to the patients, thereby giving them refunds or free dentistry to the tune of about $900,000 over her 17 years. So just that little bit of involvement will get you there. And to your point earlier, Wes, I can't stress enough being a leader, and I think what that means in business is you can't Be.

Everybody'S friend. You need to be friendly. But there are times when you're going to need to terminate employees or discipline them or whatever, and you can't be afraid of that because, you know, even with this, this pandemic, I've had at least one client hygienist tell that practitioner that they're not going to come back. And that's really hamstrung the office from opening. So you need to have that leadership and sometimes be tough.

Great man. So much good content on that. My thought you touched on a really, really important subject that I don't know how to do. Our first podcast and not touch on the subject, but it's the desire to own multiple practices among young dentists. And a good friend of mine who's also a dental CPA calls it the empire builder mindset. And I don't know where this originated from. It's almost like the I want to be a business owner to the extreme mindset. And dentist comes out of school says, great, I'm going to buy my practice. And they're hungry and he or she succeeds, they do it. They run a 1.3, 1.5, 1.7 million dollar practice and the margins are good and they're thinking, now I just have to replicate this. Heck, others are doing it. Why can't I do it? So they buy a second practice and the second practice doesn't do as well as the first practice and probably feeds or sucks a lot of the profit out of the first practice to sustain it. And then they think, well, if I go to the third practice and at the end of the tunnel, the light is If I get 10 to 15 practices, well, I sell to private equity or I sell to a large group and I walk away with many, many millions of dollars in my pocket. That is a pervasive.

Theme that's running in the dental industry right now. And it's sort of like a siren song is the way I view it. It's attracting a lot of people. But then the boat crashes. And I say that not because I don't want doctors to thrive and thrive in the biggest ways. I say it because I see so many of the crashes. And so I have by default encouraged doctors to stick with a 1.3 to $1.7 million practice. And if you're doing a lot of specialty work in house, or you have some unique thing going on with your practice, or you're a specialist or whatever, and you can go above that, great. But if you, if you're doing one point, let's say $5 million. And you have a 40% profit margin. That is a very good profit margin. That's $600,000 of profit margin. Trust me, you're going to be able to pay off your student loans and get ahead financially. And you can probably end up doing that, working four or four and a half days a week and have a great lifestyle. It's hard to. It's hard to place a value on just that right there. And sometimes we get there or dentist gets there and they just want more, and that's okay. And we're going to talk in the Associates on Fire podcast and program a lot about whether you should go into the second or third office. And we've helped clients do that as well. There's ways to do it right and there's ways to fail. And there's a lot of ways to fail is the thing. And a lot of the companies that are doing it really are owned and driven by people who have purely a business background, no clinical background at all. And they get significant amount of financing. And there's also this big bridge of going from two to three practices to 10 practices where you hit the bank and you're no longer eligible for a loan through private health care lending. You got to go to commercial. And there's that big gap in overcoming that gap is really hard. So I'm glad you brought that up and I don't mean to spend too much time on that, but it's a huge subject and he huge theme and there's pros and cons to making that effort if you are trying to become an empire builder. But I also just want to sort of finalize the content here by also just talking one more time about delegating and leadership as well, which you touched on some of our most successful dentists. And I'm going to have a lot of these dentists sit on podcast, by the way, which I'm really excited to interview them and have them share with you listeners what has worked, what's been their formula. But so many of them, they speak that language of business adequately across all the areas of their business. But their first job is to go in and create this culture of purpose, what I'll call a true north. And in the practice, everybody there, from the front office to the assistants to the hygienists, everybody is excited about accomplishing that purpose that the doctor has instilled within the practice. They're not just fixing teeth, they're making people experience, have a great experience with their dental experience and understanding the Oral systemic relationship and how this matters to their patients and their staff, their team that's servicing the patients is driving that sort of experience and that mission home. And then they delegate really well. Once it's been motivate, they have motivated staff, they find them to work very effectively. Okay, thanks guys. Let me, let me just really express my appreciation for all of your comments and emphasize that we close this podcast that dentists, I mean, literally 30 years ago, 40 years ago, you could hang up a shingle outside your office and dentists made great money. And dentistry continues to be an area where good money can be earned in a way that feels ethical and right because you're treating patients well. And it's such a win win scenario. But I'm finding that the trend is there is a growing gap between dentists who have and dentists who have not. Sort of like the income gap that's growing in our country. I'm seeing that same thing happen among dentists. And what's driving the difference really is those dentists who are seeking to have a solid business and leadership mindset, that's what the AOF platform is designed to do, is to give them some of the tools and skills, knowledge to make decisions financially and to avoid critical mistakes. And what I call the Sisyphus mistake. Sisyphus was a. He was punished by the Greek gods in Greek mythology for chronic self deception and deceiving other people. And his punishment was he would have to roll this boulder to the top of the hill. And as soon as he got there, the boulder would slip, it would roll back down the hill, he'd have to go back down and, and heave it back up. And he did that ad infinitum. Never, never ended. And I see in dentistry that dentists work so hard and then that boulder slips, they make a significant error in judgment. And usually success is little by little. But I find that failures sometimes are just one big terrible decision. That's a big setback. And there's a number of those which we won't go into. But to the extent that you as a dentist build your financial knowledge and understand your business to that same extent, are you going to avoid that boulder from slipping, rolling back down and having to reset and build that back up? Really excited about these podcasts. Let me just lay out the format of the podcast. We have four types of podcasts, podcasts where we are interviewing new dentists who have just, I'm sorry, new owners who have just bought a practice. We're going to learn. What was your experience? You just bought six months ago or a year ago? What can you teach future buyers that will help them succeed or maybe avoid some of the mistakes that you saw in your own experience? We're going to talk number two with seasoned owners over their career, what has made them successful as seasoned owners? Then we're going to have a third category which is just interviews across us, what we call our CFOs, like this one. And it'll be one on ones or three of us. And we're going to talk about specific things going on in the industry that we believe every dentist should be aware of. For example, Covid is huge right now, and the government stimulus through what's called the PPP program and the eidl, very relevant for dentists. We'll be doing podcasts on subjects like that so that you have real concrete knowledge to be working with today as you're running your practice. And then lastly, we're going to have interviews with industry specialists that might be bankers or attorneys or practice management consultants, other people to shed their knowledge to help you as a practice owner. So I'm really looking forward to this. We hope that you can couple your clinical knowledge with your financial knowledge to make those intelligent decisions, specifically early on, to have a game plan early on as a dentist around the management of both your career and your finances. So thank you guys for joining today and listening and everybody on the podcast. Thanks for engaging in this our first Associates on Fire podcast.

Thanks guys.