145: Is Dentistry Struggling?

Welcome everybody to another episode of the Dental Boardroom Podcast. In this episode, I wanna go over a question, and the question is the following: is dentistry struggling? Now, what I'm gonna use as my data set is a report from the American Dental Association Health Policy Institute, recently came out. And it's with data through 2024 and even some into 2025. And here's the key takeaway, and then I wanna elaborate on this. The key takeaway from that report is the following: dentists are earning less while working more. Rising expenses, stagnant reimbursements, and economic uncertainty are squeezing practice owners nationwide. Let me elaborate on some of the underlying data that sort of led to that thesis out of this report. And then let me tell you what I'm seeing successful dentists do today that are competing with those headwinds and ultimately winning as successful practice owners, meaning, and I'll define winning as A, they're enjoying their career as a dentist. B, they are accumulating wealth quickly, much quicker than their peers and frankly, most Americans. Dentistry, I believe, and I know this because I see it firsthand, given we work with about 400 dentists here at Practice CFO, we tend to work with practices on the top 40% of the spectrum, meaning most of our clients are doing somewhere around on the low end, a million. And on the high end, they're doing $10, $15 million. But I would say on average, our standard client is doing somewhere around $1.5 to $2.5 million as a single owner with occasionally an associate dentist and potentially some specialists who come in a couple days a month, generally GPs, although we have a lot of oral surgeons, orthodontic, pediatric dentists, uh, dental anesthesiologists, periodontists, prosthodontists. We have endodontists. We have the whole gang here at Practice CFO. But a lot of what I'm gonna be focusing on is just the, the general numbers as an aggregate industry. So let me start with some of these numbers. Now, those of you are watching this on YouTube, I have a single, uh, page with a lot of numbers, bar charts, some graphs, some summaries. So if you're watching this on YouTube, you can follow along. For those of you listening to it on your phone, I will just narrate it for you. The number of hours worked per week on average for dentists today is owners, so dental practice owners is 37 hours and dental associates is 31.8 hours. So 37 versus 32. So there's about 5 more hours being worked by owning doctors, which would make sense since they have certain work criteria that is outside of the operatory, around the business side of running their practice. Let's go on to on the top middle. Those of you looking, the average GP net income in 2024 was $207,980. Now that's, that's your, that's your take-home income. And the average practice revenue was $698,436. So I'm gonna say $700,000. Now let's talk about the trends. Over time and over since 2015 through 2024, what is the trend line around average dentist net income and average dentist practice revenue? Well, let's start off with net income. So this is what we take home. If you're an associate, this is what your paycheck is. If, if you're an owner. This is what you take home after paying all of your overhead. And again, 2024, that number was $207,980. Now that is down by approximately $30,000 since 2015. So it's down 13.2% over the past decade. Why? Well, what dentists have reported in the survey used to aggregate the data for this Health Policy Institute study is the following: about 60% of dentists are, are seeing that their, their PPO contracts, their reimbursements, are stagnant. Are you looking to buy or sell a dental practice?

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Users can determine a reasonable sale price for a practice in just minutes. All they need is the most recent business tax return. Practice owners can use the directory to find important service providers like practice brokers, attorneys, accountants, and bankers. Practice owners and their brokers can invite those service providers into the platform so all parties are coordinating the sale Practice owners will have a beautiful digital listing of their practice like a home on Redfin. And importantly, the listing will be anonymous, and personal information like your address, name, and pictures are only released after an NDA is signed and approved by you or your broker. Practice buyers can create saved searches to be auto-notified when new listings come on the platform that fit their desired specialty and location. And hey, dental practice brokers, you can list all your practices on the site for free! By doing so, you'll get access to Practice Orbit's large pool of buyers, all of whom have created profiles and saved searches to be auto-notified when new listings come for sale.

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Additionally, and optionally, you can use the platform tools such as a built-in NDA, a customizable LOI, and a workflow tool to navigate the sale from LOI to closing. In fact, you can manage all your listings on the system from listing the practice to NDA to LOI and finally to closing the deal. Create your free account today at www.practiceorbit.com. So most dentists, more than 50%, are saying Over the past 10 years, the PPOs really have not increased my reimbursements hardly at all. And for some doctors who went from being on Delta Premier to Delta PPO, they may have seen a decline, which leads me to the next number. 7%. I'm sorry, 25%. 25% of dentists have seen a decline in the reimbursement levels from the PPOs. And only 7% have seen an increase. Now, there's a few percentage points in there that are varied, um, sort of outside of these basic amounts, but the, the key takeaway from this area of the report was most dentists are either seeing flat or declining, um, declining reimbursements. Now, let's go over to the next one. The next one is average practice revenue. Average practice revenue. So average practice revenue has remained about flat. It's remained about flat. And so what is the difference coming from if PPOs are reimbursing the same? Or less. Again, 60% have stayed stagnant, uh, and 25% have declined. So the, the, the UCR of a lot of dental practices, they are raising that, which is good. And if you're hearing my voice, I don't care if you're in-network with 100— if 100% of your collections come from being in-network. And the— if you think the insurance companies aren't going to raise their reimbursement levels, honestly, it doesn't matter. They need to know that your UCRs are going up year to year because they look at the aggregate UCRs in the industry as one of the variables in determining how much they're going to reimburse. So even if it's just an FYI data point that you're giving to the PPOs, it's important that you do raise your UCRs every year. If you're a client of Practice CFO, we have a database we subscribe to where we can use your zip code to tell you in each of your UCR categories where you are relative to those other dentists of your specialty in that zip code. And it's very valuable information. Most of my clients are somewhere between 70 to 90% of UCR fees for their zip code. And I think it's a critical exercise every year to do that and to raise your fees every year, even if it's just by 2 or 3%, because guess what? That's what the cost of living is going up. And in some areas, it's It's quite a bit more than that as well. And so for you to not lose money every year, even if your revenue and overhead and net profit stayed the exact same, exact dollar in absolute terms, you're actually becoming more poor each year. Why? Because inflation goes up. And as inflation goes up, the purchasing power of a dollar goes down, meaning you can buy less stuff with a dollar, and so you need your revenues, i.e., your collections, and your profit, which is after all of your overhead, to be going up at a bare minimum, the rate of inflation. If you want to maintain your economic lifestyle today and save for your future. Now, ideally, you're getting better every year. Your reputation is getting better every year. You're becoming a stronger clinician. Your brand is good, and you're able to market more effectively and run your practice more effectively because you're getting better and better and better every year. And should therefore see an increase in collections. And so even if your overhead stays the same, but your collections are going up, your bottom line should be going up as well. Now, I will elaborate more on that, and you've heard me emphasize this over and over again in my podcast. Dentists need to understand that the nature of their dental practice, economically speaking, is that you have high fixed costs. So whether you collect $20,000 in a month, or you collect $200,000 in a given month, generally speaking, your overhead tends to be the same from month to month. Unless you're terminating a staff, or unless your staff are basically paid off collections or incentive, your staff compensation every month is probably about the same. Now, it may fluctuate within a 10% range, but by and large, it's the same. Your Facility costs, i.e., your rent or your mortgage, that's not changing. Most of your administrative costs are not changing, like your phone bills and your professional fees or consulting fees. Your collection costs, your merchant terminal costs, those are generally staying pretty similar. The two main variable costs are your labs and your supplies. Those go up and down as your collections go up and down, and those tend to be somewhere around 10 to 20% of your collections, which means 80 to 90% of your overhead stays the same from month to month. So if your collections go up from year, year over year, let's say 10%, I would expect because most of your costs are fixed, they're not all going up by 10%. Only a few of your costs are going up. By 10%, if most of your costs are fixed, or let's say you give your staff a 3 to 4% raise because the earth goes around the sun. Let's say your rent maybe goes up by 3%, right? Your overhead might go up in general by 3%. But if your collections can go up by 10% or 15%, let's say you go from $1 million to $1,150,000, of that new $150,000 in collections, in the new year, you should be seeing about $100,000 of that drop to your bottom line. Why? Because again, most of your costs are fixed. So most of that new collections flows right down to your bottom line. And let's say last year when you did $1 million in collections and let's say your profit was, was $400,000. That's a healthy practice. 40% profit margin on $1 million, collected $1 million, profit was $400,000. Then if you add $100,000 of profit in the following year, because the new $150,000 of collections led to a $100,000 increase in your profit, you just went from $400,000 in profit to $500,000 in profit, and that is a 25% increase. So your revenues, i.e., your collections, went up by 10%, your profit went up by 25%. That is called leverage. Meaning that a small change in one unit led to a bigger change in a correlating unit. Your col— if your collections go up by X, generally speaking, your profit should go up by 2 to 3X. That's how powerful, uh, I'm sorry, not 2 to 3 by it, by, uh, 120 to 130% of X. So like in that example, your collections went up by 15% and your profit went up by 25%. So that's a powerful expansion of your take-home because you grew your top line. So in a minute, I'm going to tell you what my takeaways are from this study on how you can grow your top line, compete effectively, and have a really rewarding career as a dentist, particularly around the financial side, which is my area of expertise as we work with dentists. So let me carry on. So our costs are going up. So here's the reason why the average practice collections have stayed flat while average take-home to the doctor has gone down by 13%. Here's why. We explained why collections are staying pretty flat or even declining. However, costs are going up. Staffing costs are going up by about 6 to 10% year over year since 2015. Now, in one year, 6%, 7%, 8% may not seem like a lot. Let's say in a given year, your staff costs were $300,000. If it goes up by 6%, you know, that's $18,000, not the end of the world. If it goes up by 10%, that's $30,000, not the end of the world. However, when it goes up year over year like that, while your collections are staying exactly the same, that's a problem. It's eroding directly to your bottom line, and you are going to take home less money as a doctor. So you're literally becoming less wealthy, or I should say, you're literally becoming more income poor from year to year, even though your collections stayed the same. Now again, I don't want you to get too disheartened by this. I'm going to share why you should stay optimistic, but let me carry on. Labs and supplies are going up by about 5% year over year. In 2025, due to the effects of tariffs, it's closer to 10% to 20% on supplies going up. Total overhead right now, per this report, is at 62%. Now I, I find that it is often higher than that 62% because a lot of the dentists, at least the dentists we work with, tend to be in a little bit more metropolitan areas where rent is a little bit more, hiring people is a little bit more, et cetera. And so we're finding a lot of, uh, doctors tend to have somewhere around 65 to 70% overhead when we find them. And then as we work with them, we try to get that down closer to 60%. And certain specialties can get well under 60% overhead. Also, but this is called overhead creep. Your overhead is just creeping up every year. So let's look at what should your overhead percentages be in each of the main categories of expenses. Number 1, labor. Labor for a general dentist should be somewhere around 26 to 30%, and that includes payroll taxes, which is Medicare and Social Security, and that includes sort of state, local taxes as well. That includes benefits. So all in, your labor should be around 26 to 30%. Now, if you have an associate or you have specialists that come in and you pay the associate, let's say 31%, or you pay a specialist 40% or 45%, then that's going to average up the average cost of your labor as a percent of collections. However, if you have associates, and specialists coming in and you're able to go from, let's say, $1 million to $1.4 million, I don't mind if your labor costs go up by 3 or 4% because your collections went up so dramatically due to the extra provider, the extra hands. So that's where labor should be. Labs should be somewhere below 7%. And I keep that somewhat open because a lot of clients now have a CAD/CAM, like a, like a CEREC machine. and they're doing a lot of labs in-house. Now, I see it all over the place. Some doctors buy it and it literally collects dust. Others, doctors, I've, I've had a few clients who had two of them running all day. They're just milling these things out like crazy, and their labs are closer to 2%. Now, if you put in the blocks and burs in there, that can, you know, move it to, to maybe 3 or 4%, but it's not the 7 to 8% that I commonly see in practices without a lab, or high-end labs sometimes can be closer to 9% or 10% even. But I like to see labs somewhere under 7%. And if there's a CAD/CAM, I'd like to see it under 4%, max 5%. And if done right, that CAD/CAM could pay for itself, no doubt. I generally will stay out of the clinical argument, although I've been hearing a lot of very positive things about what CAD/CAMs can do these days. Technology has come a long way. In that regard. Supplies should be somewhere around 5% to 8%. If you do some more costly procedures, maybe there's bone grafts or other expensive materials, you might creep up to 8% to 10%. But generally speaking, I like to see supplies somewhere around 5% to 6%, ideally. Facility costs, that's your rent, and I like to see that below 10%. Ideally around 6 to 7%. If you're in Orange County, California, or New York City, it's probably going to be higher, closer to 10%. Some clients I see it all the way up to 14 or 15%. It's very hard to cash flow well when your rent is running 15% of your collections. So if you collect $1 million and your rent is $150,000, that's 15%. That's going to be tough to have a good profit margin. So I like that to be lower. Now, if you bought your building, your mortgage may be more than what would a going market rate rent would be. Mortgages can be higher. However, the benefit of the mortgage is twofold. Number one, now you own a building and with the building you can accelerate depreciation. Some strategies people use, or we may recommended depending on your overall economic situation is what's called a cost segregation analysis, which that's for another episode, which I'm going to make a note to do an episode on cost segregation, what that is. The second reason that owning your building can be much more valuable than renting your building is in addition to that accelerated depreciation you can get by owning your building, you can increase your rent from your practice to your building because you're the landlord and the tenant, and you can raise that rent and use that depreciation in your building to offset, essentially offset some of your practice income. So that somewhat relates to number 1. So maybe that's an extension of number 1. So now let me go on to number 2. Number 2 is your building equity. Every mortgage payment you make You are now building an asset value on your personal balance sheet that later you can monetize either by renting it out and having a passive income stream or by selling it down the road. If you rent, as you know, you have no equity and you will never be able to convert that building into a monetizing asset. That's why I love doctors to own their building whenever the opportunity presents itself. If you're buying a practice, oftentimes you can't afford the 20% down when you buy it, if you can, that's awesome. A lot of sellers don't want to sell their building, but what I would always negotiate is a first right of refusal so that if the seller of the practice who owns the building eventually sells the building as well, you can be first in line to match any competing offer to buy the building. I really like our doctors to own the building, provided that the price is right.

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Okay, that's facility around 8% or so. Marketing, you know, marketing is what it needs to be. I'll just put it that way. It could be between 0% and all the way up to maybe 8%. And if you've got a lot of open chairs, or maybe you're a very high-end doctor, fee-for-service, or maybe you do some big specialty treatments like All-on-4s, marketing becomes more critical. And in that case, there is no budget. Instead, there's a target, and maybe your target should be 4 or 5% in order to generate traffic. The only caveat I'll say about this is there's a lot of marketing dollars that are just tossed up into the wind. They don't produce a return on that investment. That's why vetting a good marketing company is critical, and even more critical is that you hold them accountable. Hold them accountable by meeting with them at least once a month, preferably more, even if they're a quick 20-minute huddle. Look at the data. What is it saying? What traffic is being driven? What, what lanes or channels of marketing are working and which ones aren't? You have to be intentional and proactive about your marketing. Otherwise, you've got plenty of marketing companies who will take your dollar and just plug it, you know, plug it into their template machines and really not drive results. So this is not a diss on the marketing companies out there, although there are a lot of bad marketing companies out there, just like there's a lot of bad dentists, just like there's a lot of bad CPAs and financial advisors. And the reverse is true as well. So you need to vet those very, very intentionally. That's one of the most important things you need to do if you're trying to grow your top line. And when I say top line, I mean collections, of course. So marketing is what it is. Generally, I don't see that above 6 or 7%. However, it could be a little bit more if needed. And lastly is administrative costs. So every other expense that you have, like paying your, paying your phone bill, paying your merchant processing costs, paying for your accounting or your legal work. So everything else like meals or continuing education. So everything else goes in this general administrative bucket or general administrative bucket. And that should ideally be below 10%. I'd prefer it to be below 8%. I don't mind if it's below 10%, especially if you have like a practice management consultant or somebody that you brought in to help really build out systems as well. I think those are good investments and those typically fall in the admin category as well. So once you take out all of the expenses, I like operating income to be somewhere around 38% to 45%. And operating income is sort of a synonym we use for profit, which is simply what's left from your collections after you pay those 6 categories of expenses of labor, labs, supplies, facility, marketing, and admin. What's left? Now, operating income, i.e., profit, is also, though, before paying you, before paying your debt, before paying your taxes, And before paying your, your, what I call your perks, that's things like your car or your Amazon and Costco. Some of the stuff you run through the practice is in none of those 6 categories. 'Cause those 6 categories of expenses, those are actual operating expenses, not slush stuff that you run through the practice to get a tax deduction on. So I like to move those expenses below the line, which might be, you know, $1,000 to a couple thousand dollars a month in those various expenses. So that operating income, again, it's before paying taxes, it's before paying debt, it's before paying you, it's before paying those slush expenses, and it's before savings for your future. 38% to 45%, that's where I like to see it. Now it's continually dropping every year right now because of these forces that I've been talking about. Now let's go on to the right side of, of my screen. This is 2024. Income by group, and the groups are male GPs, female GPs, owners, non-owners. So you have these two main categories of gender and then owner. And then lastly, um, what are doctors making 5 years out of school? So male GPs are averaging around $222,000 in 2024. Female GPs around $181,000. So there's that gender gap that we're all familiar with and have heard of on the, on the scene. In terms of owners and non-owners, owners are doing about $218,000 and non-owners are doing $161,000. 5 years outta school are typically making about $167,000. So some of those grads outta 5 years outta school are owning a dental practice, and those owning tend to make more money. All right, now, uh, a couple other stats here. Number one, there is one area of a win in this ADA Health Policy Institute study. It's that rural revenues, so rural practices, their collections grew by 6.1% over the past decade while urban revenue fell 1.2%. So kudos to you, rural doctors. For going out into the unknown and building a practice and serving the rural community. I think there's a lot of benefits, including lifestyle benefits to doing that. So that, that's awesome. All right. Now, how have worked hours changed? Hours worked weekly hours rose over the past decade from 35 hours, which was between the years 2010 and 2019, per this report to be specific. To 36.2 hours. So that's 1.2 hours extra between 2021 and 2024. Now, I'm wondering if the report skipped out a couple years there, the COVID years, because the data just got too skewed. That's what I think happened there. So bottom line, newer dentists are working more and— or dentists are working more, but newer dentists are generally the ones working the most according to this. Which does seem to conflict a little bit with my earlier statistic that owners work 37 hours and associates work about 32 hours. So I don't know how to reconcile those two exactly, but that's what the report says. Let me go on to the last stat here, and then I'll make my closing remarks about how you can be successful in spite of some of these headwinds. Hours worked gap nearly closed. So female dentists now work 98% as many hours as male counterparts. Up 94% in 2000, uh, from 2000, up from 94% in 2010. So in 2010, females were working 94% of the hours of males, and today they're working about 98%. So there's almost full parity between male and female dentists. And I know outta dental school, my understanding, it's not in this report, but is that there's more female grads coming outta dental school. Than there are male grads coming outta dental school. So that could, uh, these, some of these stats could continue to change. All right, so here's my takeaway. How can you hear this and not feel daunted by the trends occurring in the industry today? Here's my takeaways. And by the way, dentists, you're not alone. You're not alone in this. This is happening in a lot of industries. Especially a lot of traditional industries. It's occurring in my industry, in the financial advisory space, in the CPA world as well. So these are headwinds that I'm dealing with. And let me tell you, the things I'm about to share with you are a lot of the things that I've been working on. Now, most of you know I don't work directly with clients anymore. That allows me to focus on the business side of dentistry. Now, there, there's a handful of clients that I, uh, will still be a part of, but I have spent an incredible amount of time working with building and curating an incredibly powerful team of CPAs and financial advisors. We have 8 of them here. Their resumes are incredible. We have regular ongoing training. We have, uh, group chats. We are all employed. There's no independent contractors here. We are all very tight. We have a very, very common clinical, uh, clinical process so that every client is receiving essentially the same experience from our advisors. And that's been a huge effort in order to do that and to do that effectively. And it's an ongoing process to always be sharpening our saw. So, but by doing so, it's allowed me to build out some of these things that I wanna share with you today. Now, you're still at the chair, and for most dentists, uh, delegating dentistry is very difficult. It's a little bit different than delegating, say, work in a spreadsheet, like CPA work, for example. Delegating dental work is very, very difficult, which is why you're gonna hear my next episode on the state of the industry with, with DSOs, why DSOs are a lot more challenging than dentists think, because scaling a dental practice is very difficult. So I'm not necessarily encouraging you to try to leave the operatory. Now, I am encouraging you to find space outside of the operatory. Now, that may be in addition to, or over time, reapportioning some of your energy and your hours and your work a little bit away from the clinical and more into the business. This is kind of my bottom line, that you have to find more time in the business. Now, I'm gonna be specific with a few suggestions here, but you have to find more time. You have to be intentional with your learning and rollout of business strategy and skills. So here's a few takeaways. Number one is that these business skills are required. One thing you can do, uh, one of the most important things to do as you build out an effective business is what's called platforming the business. Platforming the business. Now, Let me elaborate on this term a little bit. Platforming a business. If you come from the business world, you come from Wall Street, or you have any insight into, into the private equity world, the PE scene, platforming a business is as common of a word as, I don't know, sky. I mean, it is an extremely common word in their world, platforming a business. And what private equity does is they find an original acquisition target. An ori— in this case for DSOs, they find an original dentist, or they find an original CPA firm, uh, or they find an original restaurant or whatever it is that they're wanting to sort of consolidate to get economic efficiencies and, uh, be able to scale the business operations. So they find that first one, and that's called their platform acquisition. It's the very first entity. That they step into and they say, we're gonna acquire this one because its processes are good. Its business is running well, operationally speaking. And then we're gonna go in, we're gonna resh— we're gonna shape it a little bit better, fine-tune it, make it, you know, make it great. And then we're gonna bolt on other businesses. We're gonna acquire other businesses and we're gonna make them use the same processes. And in time we'll have 10, 15, 20, 100, 200, 400, And they all use a centralized operational resource, like a hub and spoke model. And so payroll is centralized, accounting is centralized, practice management systems are centralized, marketing is centralized, reporting is centralized, hiring is centralized. All these things are centralized and following a common process, and they get the benefits of being large, i.e., they can negotiate discounts with vendors, for example. Now, that's the theory behind it. Listen to my next episode and I'll tell you why that's extremely difficult in dentistry and why my prediction is that over the next few years, you're gonna see a ton of DSOs fail, and a lot of practices are gonna go back on the market for sale because most of the time these things are just a game. They're a game that are deceptive with a lot of smoke and mirror offer letters that dentists get lured into, and then they sell to the DSO with seller's remorse down the road in most cases. I'll explain where I think The few cases where it actually works could make sense. But the reason why I'm bringing all this up is not because I want to talk about the DSO trends. I'll talk about that next. Really what I want to talk about is just the concept of platforming, because this is a good takeaway from this PE world of a business concept is platforming your business. If you could platform your practice, which doesn't mean I want you to go open up a second or a third, no, it means I want you to have a single, incredibly productive highly profitable, well-run organization that you just love, that you wake up in the morning excited for what you've built, and it's making you great money. You're setting aside good money for your future. You're in control of your schedule. You're in control of your culture. You own not only your tax ID legal entity, but you own everything about your practice. It's got your fingerprints all over it. And it's something that gives you incredible sense of satisfaction for having built that. This is what I'm talking about, platforming your business. So here's the definition. Platforming a business means building the systems, people, and processes that allow a single location to grow. Or in my definition, a single location, cuz that's my preferred model. That's the most tried and true profitable model to accelerate financial freedom is a single large location. With one set of fixed costs. So let me go over that again. Platforming a business means building the systems, people, and processes that allow a single location to grow its revenue and capacity beyond what the owner alone can produce. So the business scales without the owner working more hours. In other words, how do you leverage And it's important you understand that term leverage. Think of like how a crowbar can help you open up something that you can't open up without it. You're able to leverage that crowbar to, to use your strength and expand that strength for a given outcome. That's leverage. So when you platform your business, you are leveraging processes, you're leveraging technology, you're leveraging people, you're leveraging coaching, you're leveraging all of these business features and tools that allow you to scale beyond what your own hands and your own time can do. Because your time, your schedule eventually is your biggest bottleneck to growth and financial independence. So how do you take your skillset? And then leverage other tools to gain 2 to 3x what you would normally gain without being a good business owner. Because you could go in and just be a dentist, walk in the door, say hi to everybody, go straight to your first patient at the chair, do the work, end of your last patient, say goodbye to everybody, leave. You're done. That isn't a business owner. That's an employee who has surrounded him or herself with a few other employees. That's different. That is the opposite of platforming your business. So let's talk about platforming your business. Um, let's say this, let me say this. In platforming your business, there are key financial systems. I'm just gonna highlight what I think are the 3 biggest boulders, the 3 biggest financial systems. Number 1 is marketing. And I put marketing on here first because Without marketing, or without new patients, better said, you have no collections. Without collections, you have no profit. With no profit, you have nothing to take care of yourself and to grow your practice. You have nothing to use to invest into other tools and mechanisms to platform your business. So nothing gets going until patients are in the chair. Now, you could go sign up. With a bunch of PPOs, and that is marketing. Please, that's what, that's how you need to view your PPOs. It's just a marketing spend because at the end of the day, PPOs are primarily there for one thing, is to get, is, is to get patients in the door, sitting in your chairs to do dentistry. That's what PPOs are there for, period. And that is by definition marketing. And guess what? It is by far your most mark— your, your highest marketing expense. Good luck finding something where you're giving up 50% of your UCR just to get a body in the chair. Yes, that is unbelievably expensive. Now, I'm not entirely opposed to PPOs. I think there's ways to be profitable within the PPO sphere, and I've done a few podcast episodes on this, but it definitely is the more difficult route operationally. It's the easier route from a marketing standpoint, even though it's the most costly. It is the most easy route because you get people show up, but operationally you have to be incredibly efficient with your patient flow through the office because your overhead costs are pretty much the same whether or not that's a fee-for-service client and you're getting, let's say, $1,700, $1,800 for a crown, or whether you're getting $700 for a crown through Delta PPO. The overhead is the same, which means if you want that $700 crown to be profitable, you gotta be incredibly efficient, and your cost structure has to be managed very well. So I would say marketing, specifically trying to market to get non-PPO patients, because one non-PPO fee-for-service crown is worth 4 to 6 PPO crowns when it comes to your bottom line. So you have to work a lot harder for the same profit. So marketing, come up with a system around marketing. Vet, who's gonna be a good marketing consultant for you? What, um, systems are needed? How are you gonna meet? How often are you gonna meet? What are you gonna review? Once a patient comes in or calls, how are you gonna make sure that that patient then gets inside the office from a scheduled appointment? Once they're in their appointment, how do you get them to say yes? But just getting people aware of your practice is step number 1. So you need a great marketing system. Number 2 is now patients are coming in. How do you give them the absolute best experience in the world as a patient? And that is really your practice management system. And I believe that the vast majority of doctors should at some point in their career invest in a really good practice management consultant. And again, there's good ones, there's bad ones, there's big ones, there's small ones. Just make sure you in you, uh, interview, I would say, 3 to 5 practice management consultants. Ask for some reviews, look online, get an experience, maybe have 'em do an initial analysis, see how that goes, almost like a dating period. And then engage somebody because it's a big commitment financially and it's a big commitment of your time, and it's a big commitment for your team to engage a good practice management consultant because you are reworking the way that that office is run, but I would say a really good operational structure. So that's practice management. Lastly is financial systems. Now that's me, that's practice CFO. That's us as your fractional CFO, as we call it, which is just an outsourced chief financial officer. Most CPAs don't do this. You may think they do, but CPAs are historians. They're gonna give you a P&L and file a tax return with a little bit of advice. That's not what I'm talking about. Financial systems are What banking platforms are you using? Are you getting away from manual checks? How are you paying your team? What is your payroll system? How well is your payroll technology feeding into your accounting technology? And how well is your accounting technology feeding into your tax technology? How often are you getting financial reports to evaluate the economic story of your practice profitability? And are you reviewing those reports? Are you sitting down with somebody periodically to review those with you, to do a financial forecast and a tax plan and a personal budget, making sure you know how much you can take out of the practice and how much should your W-2 be if you're an S corporation, and what tax strategies can you implement in order to reduce your taxes? All of that is the financial systems. Now, you can be making a ton of money, and I see this a lot with prospects that come in the door. They may be doing $2.5 million, and they're taking home like $150,000. I'm like, you might as well go work for Pacific Dental Services or something rather than own a $2 million practice where you're working 6 days a week and constantly stressed out. So it's not just about a good top line. As I've said before, top line is vanity. Bottom line is sanity. Profit is what matters the most. And so a good financial system will track all the inflows of your money, how it Plink goes through your P&L, through your debt, through your taxes, and you have a really good managed ecosystem around the flow of your dollar in and out of your practice. All right, those are the 3 primary systems. Let me make one more comment on the practice management side, or more generally speaking, the operational side of your practice. I believe that it's virtually impossible to run a remarkably successful dental office without having some management structure in place. Now, when I mean management structure, I mean a specific management program. And you could read books and try to implement some of these books, but what I would do is I would find a management program, and there's a few out there. One I like and one we use, and you've heard me say this a lot on, on the podcast, is we use the Entrepreneurial Operating System, or EOS. You can look it up, uh, just Google EOS, Entrepreneurial Operating System, and it is a very specific program. I mean, it is granular in the way it guides you to run your business as the CEO of your small business. It's specifically designed for small businesses as well. And I can tell you, when I got to about 20 employees at Practice CFO, about, I don't know, 7 years ago, things were starting to get a little bit rickety. How do I keep this, this thing on the track and make sure our clients have a great experience? And so we adopted EOS and we've been adopting it increasingly every year, and we are, we are mostly in traction with this. That's the term in traction, meaning that the operating system is working. All of our team members know what to do. We have a dashboard where we track what we're working on called projects and to-dos and rocks. We have our mission statement, our core values that we stand for. Our mission is to help our doctors or to make their financial journey through life remarkable. That is our mission. And everything we do around accounting and financial planning is to drive a remarkable financial experience for our doctors. But it's very specific. And every week, Tuesday at 10:00 AM Pacific time, I meet with my leadership team for 90 minutes and we go through what's happening. What are the issues that have surfaced that we've pinned to a board? What are the biggest issues? How are we doing with our projects and our rocks? What employee issues are we working through? And it's an incredibly productive, collaborative, um, intentional approach to solving problems at the company and constantly getting better and better and better. And every year the goal is to move the needle, move the needle, move the needle. It's like evolution. If you move the needle every month, every quarter, every year, you will become a very, very successful company over time. It's just like reverse gravity. It will happen. So look up, uh, EOS. There's another one called Scaling Up. Some people have joined the DEO organization, which is a little bit like EOS, but for dentists. I self-implemented our EOS program. We did have a coach come in for a little bit, but for the most part, we self-implemented. I'm going on 6 years now that I'll be going to the EOS annual conference. Really exciting. And I love it when I see dentists there. I'm like, good for you, Dennis. Good for you for being intentional about the way you run your business and taking this seriously. So find a management program, learn it, adopt it, master it, get your team to understand it, adopt it, and master it. And you will find your ability to leverage or platform your business will skyrocket. Once you do that. But let me assure you, it don't happen overnight. This is, this is, this is a, this is a multi-year project. But the more you engage it and the more you're consistent with it, and the more you have the cadence of those meetings, the better you're gonna get there. Now you'll need a software. We use one called Streti. There's a few of 'em out there for EOS. And without a software, honestly, I don't know how we would do it. The software keeps everything incredibly organized. as you implement this management system. Okay. The last thing I'm gonna say as I conclude this, uh, episode, uh, actually two things. One is I really want you to believe that you can succeed. If you are ever feeling that your economic confidence is low, just know that there is a pathway to change that to be high economic confidence, but it requires you to do work outside of the operatory. All right, a couple things you can do. Number 1, listen to the Dental Boardroom Podcast. So this podcast, if you go back and you listen to episodes 111 through 123, I talk about the, the financial systems, dental financial planning, and practice, how to grow, sort of some concepts about growing your practice. By the way, on that practice management, uh, side of things, or using EOS, I really believe dentists need to use an operational dashboard like Dental Intel or Practice By Numbers. There's a few of them out there. And use those religiously, daily, to understand your numbers. 'Cause what gets measured gets improved. That's just human nature. So go back, listen to episodes 111 through 123 of my podcast here. And then lastly, remember this. Less is more. Less is more. And what I'm referring to there is in your personal life, if you can spend less, so I'm gonna put on my CFP hat, my, my certified financial planner hat for a second. If you can spend less money in your personal life and allow that extra, maybe a few thousand dollars a month to stay in your business, you can then use that extra money in order to invest in these three platforming areas: marketing, practice management, and financial systems. Now, let's say you can reduce your personal spending by $2,000 a month. Remember that in order to get that spending, it has to go through a tax screen. So you may have had to have earned $3,000 a month or $3,500 a month such that after the taxes, you, you have that extra $2,000 to spend. So if you spend it in your practice, guess what? It doesn't have to go through that tax screen. Because it's tax deductible. And so that extra, let's say, $3,000 to $4,000 a month that you can allocate toward good marketing or good practice management consulting or good financial systems, the better. Now, in terms of ordering, I would typically say marketing one, so you get collections up. Practice management number two, so your operations can then sustain the growing collections. And then number three, financial systems, accounting, tax, business financial planning, personal financial planning, Because if you get marketing and practice management right now, you're gonna have a lot of strong cash flow. So how do you keep your taxes down? How do you convert that to your personal life for living and for saving? And how do you be prudent and disciplined with your money? All right, everybody, that is another episode of the Dental Boardroom Podcast answering the question, is dentistry struggling? The answer is, well, it's certainly facing some headwinds. However, there is a bright side, a silver lining that a good a dental practice owner can still crush it. I see it every day. Our clients, so many of them are just absolutely crushing it. Virtually all of them are setting aside somewhere between $50,000 a year and $400,000 to $500,000 a year. Yep, we have some clients saving almost half a million dollars a year. They're absolutely crushing it. It is still a possibility in the industry today, but it doesn't happen without very deliberate business management skills. That's my takeaway. Until next time.