Dental Financial Planning: Turning Chaos into Financial Freedom - Part 5

Welcome everybody, to another episode of the Dental Boardroom podcast. It's Wes Reed, cpacfp, coming at you, carrying on my series on financial planning for dental practice owners, turning financial chaos into financial freedom. Up to this point in my recent episodes, we covered the first few steps in the process of good dental financial planning. Those steps were, number one, assemble your team and create a cadence for how often you meet with that team. Part two is develop a personal financial plan for financial independence. How do you attach meaning to your money? Number three is how do you create a business financial plan that supports your personal financial plan? And then lastly, number four, implement, monitor and revise. So today we are on that third segment of this journey of dental financial planning. It is organizing. It is your developing a business financial plan. Now, the first step in developing a business financial plan was organizing your financial reporting. These are your financial statements, your balance sheet, your financial forecast. It's really getting those numbers every month to tell you a story about the health of your practice in the prior month, year to date, and changes from prior year to date to start seeing trends. If you're a client of practice cfo, we dish out every month an additional report called the CFO Analysis. The CFO analysis takes a much deeper dive through sort of trend data, graphical views to compare how you're doing against the goals that we've established together and how are you doing against your peers in the industry. And as you know, the last report or page on that monthly CFO analysis that we send is where did my cash Go? It's a really valuable report because over the years, many times I've had many dentists say, wes, I worked really hard, I had great collections, but honestly, I don't know where my money went. So that report is a great one to help you answer that question. So let's carry on with step three. Two in business financial planning. Again, step one was organizing or creating a process of having good financial statements delivered every single month as a visual financial X ray to understand the economic health of your dental practice. So now that you have that going, these sort of monthly X rays, financially speaking, now let's go into a little bit more complicated topic, but one that I think provides incredible value, valuable insight to dentists to understand some key financial aspects of what it means to own a dental practice. Now, I want to emphasize something about this point and this step. And this step is understanding your breakevens. You've heard of breakevens from maybe a practice management software, maybe they call it your bam. What do you need to collect or what is your target? Collections every month in order to meet certain financial obligations. Now, wealth accumulation does not start until you have satisfied key break evens. How much do you need to collect to cover the various obligations in your business checking account? And it's not until after all these obligations are met, your debt is taken care of, your taxes are taken care of, and paying yourself today is taken care of. It's only after all of that breakeven and do you start to pierce the financial independence break even do you start to actually fund.

Your personal balance sheet, which will then take care of you later as you rely on your personal balance sheet, I.e. interest, dividends, capital gains and other forms of income to take care of you when you're no longer working for money. So let's go through these breakevens because as I do this, I, I hope it gives you a keener insight into the inflection points throughout the month, when your collections are coming in, at which time you sort of check off certain financial boxes or you meet certain break even elements of your journey toward funding financial independence. All right, if you're on YouTube, please watch or jump on YouTube or I will try to narrate this. For those who are not on YouTube, let's dive into your breakeven. So what I'm looking at on the screen, it's a grid with a Y axis and an X axis. And on the X axis is the collection. So as we move horizontally from left to right, that's during the month. And this is a monthly view that I'm looking at. You start off on day one, you open your doors. Zero collections, first day of the month. Then as you proceed throughout the month, you eventually get to the end of the month and you have a large, larger amount of collections obviously than day one. In my example I'm showing on the screen, we start at zero and we end at about $120,000. Now, if your practice is bigger, obviously that's going to be a lot more than 120,000 potentially. Are you looking to buy or sell a dental practice? If you're a seller, how do you find a strong list of potential buyers? There's no MLS or Zillow for dental practice sales. In such a fragmented market, many dentists selling their practice feel discouraged. That's why I built practiceOrbit.com practice orbit is modernizing how dental practices are bought and sold. It's a platform technology. Y' all know them, Zillow, Airbnb, Uber and OpenTable, just to name a few. These technologies do two things. First, they help match buyers and sellers by centralizing the marketplace. Second, once the match between buyer and seller is made, these technologies help them navigate the sale to a successful close. Here are a few of the features inside a Practice Orbit users can determine.

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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 together. 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 specific 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. You can use the platform to introduce your listings to a targeted set of buyers. Additionally and optionally, you can use the platform tools such as a built in NDA or 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.

Now on the Y axis are your financial obligations that you have for the month. So let me. Let me start off with what I what is the first financial obligation? These are what I call or what you know, in finance or economics we call your fixed costs. Your fixed costs. And they are costs that are, as the name states, fixed. Which means you pretty much are going to pay these every month whether or not you have collections. Now, I want you to understand that it's not. This isn't a perfect explanation. It's not always going to be completely black and white, what I'm about to tell you. But for the most part it is true. Let's look at some of your fixed costs. A very easy, simple example of one of your fixed costs is rent. Doesn't matter whether you close down for the month. Doesn't matter whether you're open 16 hours a day. Doesn't matter you're going to pay the same amount in your monthly rent. Now if you own your building, you're going to pay the same amount in the mortgage related to the acquisition of your building. So that is a fixed cost, doesn't change regardless of your collections. What else is fixed? I will say that your labor is fixed. Now granted, you may do some production based bonuses for your team and I'm not talking necessarily about your associate, which may be a purely variable cost that you pay your associate a percent of collections. That's, that's not fixed. But most of your team is going to be fixed, meaning that they're going to show up in the morning, they're going to leave at the end of the day, and regardless of the production, they're going to be paid within some band of consistency from month to month. Again, it's not perfect, but it is pretty much going to be consistent from month to month. Now I, I know that in time it becomes a variable cost. If you double your collections, you're going to have to hire a lot more and therefore your labor costs for your front office assistant and hygienes, et cetera, that's going to go up over time. If you ex, if you sort of zoom out from a one month period to let's say a 10 year period, everything's going to be a variable cost. Everything's going to be a variable cost. And by the way, I didn't mention this be this in the beginning but, but there's just two primary types of costs that I'm focusing on here. There's fixed costs and there's variable costs. And so I'm starting off with the fixed costs and then I'm going to get into variable costs. But it's important that you know that this is in a finite period of time that I'm referencing when I decide what is fixed cost and what is a variable cost. But in any business, as that business doubles, triples, quadruples in revenue, everything becomes variable, even the rent, because you're going to need more operatories. And so you do a build out and you expand and you take on more rent or you move into a bigger space, et cetera, your employees, as you grow, you're going to need more hygiene, you're going to need more assistance and that becomes a variable cost. Virtually everything becomes a variable cost in time. Even like your phone bill, maybe you start to need more data or more lines or whatever, that becomes a variable cost. Everything is subject to change over time. But again, in this example I'm really focusing on month to Month. So during one month to the next to the next, within, you know, a short period of time, what are, what's staying the same and what's a function during that month of your collection. So it goes up or down with your collections. So back on fixed costs. Your rent is one, your labor is one, your oftentimes, your marketing is one. If you're paying a fixed marketing company, you, your administrative costs are usually pretty fixed. What you pay for a bookkeeper, what you're paying in maybe certain ongoing legal fees or I don't know, legal fees. Actually you're really not paying an attorney on a regular basis. That's more transactional. But other fixed costs on your P and L is the interest on your loan. So your debt, actually if we look at your whole debt, your whole, your whole debt is a fixed cost. I mean that's a classic example of a fixed cost. You pay the same amount every month. Now if you're on an interest only, then theoretically that's a variable cost. But that's not a variable attached to your collections. That's a variable attached to the market rates of return, what's called prime rate that adjusts interest only debt up or down. But most of your debt is not going to be interest only in your practice. And so that amount that you pay every month stays pretty much the same. Now what are, therefore, I think an easier way to look at this would, would be to say virtually all of your costs in your dental practice are fixed except for two primary categories. That's labor. I'm sorry, sorry. That is labs and that is supplies. Labs and supplies, those go up and down with collections for obvious reasons. Now there's a few other things in there like collection or credit card processing fees. The more treatment you do, the more you collect, the more you're paying. In Visa, MasterCard, Discover, processing fees. But that's a small item in terms of like kind of big nuggets on the P and L. It's your labs and supplies. Those are your primary variable costs from month to month. So imagine the line. In this example, I have all the fixed costs for, for the month equal, about 40 on my screen it's looking to be about 45,000 in this example. If you're a bigger practice, obviously that's going to be a bigger number. If you're a smaller practice, that will be a smaller number. But 45,000 bucks and it's a straight horizontal line along this green. So even at zero, we're at a hundred thousand dollars of collections. It doesn't matter for that month. These are going to be costs that you're pretty much going to pay no matter what. And it's going to be everything I just mentioned, except for labs and supplies. So debt and then everything else, that's your first tier of fixed costs. Now, I want to step back and emphasize something about the unique nature of the economics of a dental practice. A dental practice is intensely, it's a, it's a intense fixed cost type of business because you buy all this equipment, you take on debt, the debt has a fixed cost, you're open a consistent amount of time, you have teams that come in on a very fixed schedule. All of this creates this sort of consistent fixed cost structure. There are some businesses that have a smaller fixed cost, but a large variable costs. And the challenge with the fixed cost business, there's, there's both a challenge and a benefit. There's a pro and a con here with a business like a dental practice. The con is that if you have a bad month, you still have to pay all those fixed costs, which are about 80% of your P and L. Because if you look at labs and supplies and talking about a general practice here, if you're say an oral surgeon and you don't have labs or pediatric dentist and you really don't have labs, then your variable costs are actually, actually less. But the, generally speaking, the fixed costs in a general dental practice are about 75 to 85% of.

Of your cost structure is fixed. And then you got about 20 to 25% that's variable. And so the disadvantage here of the economics of a dental practice is that if you have some bad months, because your fixed cost structure is such a large portion of your overall cost structure, your bank account balance can drop pretty quickly in order to meet those fixed cost obligations. So if you have, if you're normally collecting, let's say 100,000 and you go three straight months where you only collect 60,000, I guarantee you your cash is going to drop pretty quickly because your overhead, your fixed costs aren't going to go down very much. So if you're normally collecting 100,000 and you only collected 60,000, you only collected 60% of your collections, you had a 40% decline, but I bet your fixed costs are pretty much the same. They may fall like 5% or so. And so if your fixed costs in that case are $70,000, you're going to have to dip into your cash in order to cover not only your fixed costs, but then your variable costs and a few other outflows that I'm going to talk about here in just a little bit. And up to this point of fixed costs, guess what your overhead is. I want you to, I want you to. That's a, that's a rhetorical question. For now, I want you to think about that. And then near the end of the podcast, I'm going to answer that question. But what is your overhead as a percent of revenue? It's a, it's a question we often ask ourselves as business owner, which is, what is my. What, what is my overhead percentage and what is my profit percentage? And my profit percentage is simply 1 minus my overhead percentage or 100% minus my overhead percentage. So my overhead percentage all in is 60%, then my profit percentage is 40% and vice versa. If my overhead percentage is 40%, then my profit percentage is, is 60% of revenue. They're sort of a teeter totter to each other. And a lot of dentists will say, well, my overhead is X, my overhead is 55% or my overhead is 70% and my profit is 30%. You know, sometimes we use just these general big blocks to understand what is the profitability of our practice. And a general dental practice should be somewhere around 40% profitability, depending on where you live. In San Diego, it's a little bit less. It's closer to about 37% in other rural areas where cost of living is cheap, rent is cheap, that kind of thing. You might see a 45% profit margin for a dental practice and then specialists like an oral surgeon, it's going to be closer to 50%, sometimes 55% for oral surgeons. They just don't have a whole lot of overhead relative to the large revenue from their, their larger treatments that they do. All right, so let, let me now come back to this. And again, back on the screen, is this grid and going from left to right horizontally is this fixed cost structure. It is a perfectly flat line. It doesn't decline and it doesn't incline. Now what's the next layer of costs in your cost structure of your dental practice? It is variable costs. So in my example here, I'm going to say that your variable costs are 15% of revenue. 15% of revenue. So as we go from, from left to right, from 0 collections on day one to 120,000 of collections at the end of the month. This slope of variable costs therefore inclines throughout the month because the more you collect, the more you're paying for labs and the more you're paying for supplies. And now I know that there's a lot a lag that you may be paying for labs and supplies, labs related to treatment that you did last month or supplies that you're going to use next month. But just, just generally speaking, as your collections go up, you're going to be paying more labs and supplies. And so sitting on top of that fixed cost line at about $45,000 or so on day one, your fixed cost and your variable cost start at the same point. They're at the same point, meaning that the variable cost layered on top of the fixed cost is zero. It's zero. You haven't paid any variable costs on day one. And then as you go throughout the month, that creates a spread, an incline above that fixed cost straight line, then, okay, so at this point you've now covered your fixed costs and now you've covered your variable costs.

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And it would really help if you could watch this on YouTube to better understand or visualize what I'm displaying now. In addition to paying your overhead, which is your your fixed overhead is your labor, your facility costs, your marketing, and your admin, those are your. Those are. And your debt. Those are your fixed costs. Then you lay around the variable costs of labs and supplies. Now what's left? What's left? Well, you have to pay yourself and you have to pay Uncle Sam. And so now there's this new line above the yellow line, which is the variable costs, I.e. amount of collections needed in order to pay your living expenses. So if you need $15,000 a month to cover your personal living expenses and you're having to Pay, let's say, $6,000 a month to cover all of your taxes, that's FICA. That's. That's federal and state income tax. In order to cover all that, now you have a new line. Now, the interesting thing about this line, and this is going to be the orange line. The interesting thing about this line is that now it's covering all your fixed costs. It's covering your variable costs, labs and supplies, and now it's covering your personal living expenses and your taxes. Now this, this is great. But one really interesting thing about this line is that it, as the month goes on and as you collect more, that orange line starts to steepen as it goes from left to right starts to steepen like you're starting to walk up a hill. And the reason why is as you make more money, every new dollar of income that you make starts to get taxed at a higher rate. That's the nature of a progressive tax scale. A progressive tax scale goes like this. Your first $15,000 of income, you don't pay anything in taxes, nothing. You're your next $20,000 of income. You only pay at 10%. Now, I'm making these numbers up a little bit, but if you actually Google the tax code, the federal tax code, you'll see these steps and what the rate is at each step. So now we're up to $30,000. Then the next $40,000 might be taxed at 25%. And then as you keep going, eventually the highest federal bracket is at 30, 37%. 37%. And if you're a married filing joint, you hit that at around 600,000 or so. If you're single, you hit that somewhere around $300,000 or so. And now every new dollar after you hit that amount is taxed at that higher bracket. So if every month you're starting to collect more, then as you collect more, you have to budget for a little bit more taxes per unit of dollar made. Now, if you have a good cpa, a good financial consultant, you can really try to erode the taxes and bring, bring that back in your pocket through different strategies. That's what we do a ton here at practice. Cfo wealth accumulation is much more greased, I will say, if we can reduce that massive friction of taxes. So this, that's a big thing as we help our doctors become financially independent as financial planners, is to help them on the tax side. And that's why financial planning for a dentist, in my opinion, needs to be done by somebody who truly understands the cash flows inside of the dental practice. Because that advisor can give really good tax advice. Because most of the tax reduction is going to occur on the inside of your dental corporation, not on the outside in your personal account. And good financial planning is also going to encompass good tax planning, which is, which means we got to look at the cash flows in the business to really do that. Right? All right, so now if you can collect enough to meet your fixed cost, your variable costs and your net pay to yourself and your taxes now you're able to live, you're living, you're enjoying your life today. Everything is covered except for one thing. At this point, everything's covered. Your overhead, your debt, your taxes, your living expense, they're all covered except for one thing. What do you think that is? I'm going to tell you. It is your future self, I. E. Setting aside money every month in savings, setting aside money on your personal balance sheet, your personal net worth statement that will be used to grow, accumulate and then eventually spin off income that will take care of you. And so the last line on my display, on my visual here is a blue line that includes an amount of your collections going towards savings. Now. So I've got four lines. I have fixed costs which include debt. I've got your variable costs of labs and supplies. I've got your net pay in taxes for your lifestyle and taxes. And then I have savings for your future self. That is the universe of everything that you need to cover. And that's a lot. Now if I draw a diagonal line from the very bottom left corner of this grid where it's zero and again the Y axis going up and down. That's the, that's the cost of these various inflection points, these various break evens, these various costs within your cost structure, both business and personal, that's what's going up. So you start at zero and at the very top of the screen I have $120,000. Your overhead, your fixed overhead is about 45. Your variable costs go up over time. They're 15% of your collections. Your taxes and pay is another roughly 20,000 or so, 22,000. And then I have savings on here for about another 7 or 8,000. In this example, what those numbers are in actuality related to you is going to Be a function of your own practice overhead, your own tax situation, your own personal budget needs, and your own future goals and savings. So the numbers I'm using clearly just an example here. And then again, the, the x axis on the bottom from left to right, that's your collections. So imagine now this, I have this, this light blue line that goes from zero on the very bottom left and it sort of curves exactly evenly splitting this grid by going from left to right and top or bottom to top. So it just basically moves Forward at a 45 degree angle like a steep straight hill. And this assumes that every day you're just kind of collecting a consistent amount throughout the month. And by the end of the month, let's say in my example here, I'm showing about $105,000. At that point, you have pierced each one of these break evens in order to satisfy those and make progress financially. Now, on this graph there are three key points. Number one, these are the three breakevens that I refer to. The first one is your practice breakeven. This is what I call this totally wes made up terms, but I use it here a lot. At practice cfo, it is your practice breakeven. And this is the amount of collections you need in the month in order to cover your fixed and your variable costs. So your labor lab, supplies, facility, marketing and admin and your debt, all of that, that is your practice break even. Meaning that if you stopped at that point of collecting just enough to take care of those things, you can keep your doors open. Great. You're not going under, you're not going to file bankruptcy. That said, you haven't paid yourself anything, you might as well go work an In N Out burger because you're going to make more money ultimately taking home into your personal account. If you're only collecting your practice enough to cover your fixed and variable costs, you're not taking anything home to you, let alone even paying some taxes. At that point, you actually aren't going to owe any taxes because pretty much all of your costs are going to be tax deductible. Not all of it. The principal on your debt repayment to the bank is not tax deductible. But. But you're for the most part not going to pay a whole lot of taxes. If you're only collecting enough to cover to cover your labor lab, your labor labs, supplies, facility, marketing and admin and your debt. Because your net income on your profit and loss statement is going to be zero, we're pretty close to it. And if your net Income is zero. You're not going to pay taxes, assuming that you didn't also issue yourself a large W2. But bottom line is there's really no operating income and therefore there's no taxes to pay if you don't have a net income. And worse, if you're at a loss, well, you're definitely not going to pay taxes if your company is running a loss. All right, so that is what I call my practice of break even. Let's go on to the next break even. I have three break evens. The second one is your living budget break even. And your living budget break even is that amount of collections you need in order to cover your fixed costs, variable costs and debt. But now also to cover your living expenses and your taxes. That's called your living budget break even because it's covering everything, including your living budget and your taxes. Now, in my example on this screen, it's right at about $80,000 of collections that you have met all your fixed costs, you met your taxes, and you have enough to pay yourself that amount of roughly 15,000 per month to live on. Now, the first break even, the practice break even was right at around $57,000 or so if you collected 57 in the month. Now you've covered your labor, lab supplies, facility, marketing and admin and your debt. Then you keep going and you get to $80,000 in collections. Now you're covering paying yourself and paying the tax agencies. That was one more break even. And this is the break even that covers all those fixed cost, variable cost debt, covers your lifestyle expenses today and your taxes. And then it covers also the funding of your personal balance sheet to take care of you later. This is what I call your financial independence break even. And if you're a client of practice cfo, every month we issue you the CFO analysis report and one of the pages is, what is your financial independence? Breakeven. What do you need to collect in order to pay for your overhead, debt, taxes, et cetera, and yourself. And also now to fund your retirement goals. That is financial independence.

Breakeven.

I personally don't like the word retirement or retirement planning. I like the word financial independence or financial freedom. The concept of financial independence, is there a point in time when you are no longer depending on working in order to take care of yourself? Financial independence is. You could literally watch Netflix all day, every day and you and your all of your living expenses are covered. That is financial independence. And who wants to do that? But you know what I mean, whether that's golfing all the time traveling the world, spending a lot of time with kids or grandkids, donating money to your church or doing church service, whatever that is that you want to do, that doesn't earn income. And once you have enough assets to fund your ability to do that so you don't have to work, that is being independent, financially speaking. So that is our financial independence. Breakeven or what I in short form call fi. Break even. That's where we want to go. And in this graph I'm looking at right now, it's right at about $90,000. $90,000, you cover everything. Now in this example, if you were to able to keep going and eke out more, let's say you collect $100,000. Well, now you have an extra surplus. And I love it. When I meet with the client, we sit down, we're looking at the financials. I've already prepped a financial forecast. I've already defined what I believe is the surplus. It's a beautiful conversation when there's surplus after. I've already sort of budgeted our tax payments. We've already planned for your overhead costs. I know you're covering your debt, your personal living expenses. We're funding some money now into our retirement. Let's say you're funding 10,000amonth into your 401k plan or defined benefit plan or IRAs. Once all that's done, I love it when I see even extra because then we're, we get to have just that fun conversation of hey, what do we want to do with this? Do we want to pay down any debt? Do we want to invest in growing your practice by building out another operatory? Usually I prefer just taking out a loan for that kind of thing because it's pretty low rate and tax deductible. But do we want to fund it into a brokerage account and go invest in a, in a prudent, savvy investment allocation in the stock market or the bond market? Do you want to go buy a rental property and save it up for that? Do you want to put it into your kid's 529 education savings account? Do we need to build up an emergency reserve so you feel really comfortable with the amount in your business and personal checking accounts at all time so you don't lose sleep over insufficient cash? What is it that we want to do with this? And those are just some of the best parts of financial plannings when you get there. So the way that I look at this is when I meet with a doctor, the first order of business is to try to make sure we have enough collections to at least for now meet our living budget, break even. And in some cases, if your practice isn't quite there or you're a newer practice owner and you have a lot more debt from buying the practice, or maybe a lot more student loans, maybe live in a more high cost area. We have to try to keep your personal budget down because at the end of the day, if you're having financial struggles, it's either because you are not earning enough or your expenses are too high, one or the other. And so the way to fix it is you get your collections up in the practice or your income up. Maybe you work a day or two a week as an associate somewhere outside of your practice in order to supplement your income. And that's very common if you're starting up especially or you got to go cut your expenses either in the practice or, and, or in your personal life. It's one of those two things. Now the strategies can get a lot more involved when you start looking at budgeting, tax planning, cash flow planning, debt structuring. There's various things you can do from a structural or a strategy standpoint in order to create the cash flow needed. But sometimes it's just a, just the hard truth, you gotta go spend less, period. And sometimes it's combination of the strategy and the financial discipline as well. All right, now let me answer the question I posed earlier on in the podcast. What is your overhead percentage? Somebody asked you what's your overhead percentage? I'm going to tell you your overhead percentage or your profit. I will say which is the inverse of your overhead, your profit. What's left after overhead, Your, your profit up to the point of paying your fixed and variable costs is zero. Because every single dollar and a hundred percent of that dollar goes to paying your labor lab supplies, facility, marketing, admin and your debt 100% of that does. And so your profit margin is zero. So if you ended off the month with $55,000 in collections, in this example, your profit margin was zero. Now from after that though, after you've met your labor lab supplies, facility marketing and admin and your debt, once you've covered those costs in your collections during the month. So let's say you're on the 18th of the month and you have collected $58,000 in my example, this very first circle that practice break even at that point. At that point you have now covered all of your overhead and your profit up to that point was 0%. But now guess What? Any collections above your fixed and variable cost. Any collections above that amount has virtually. Yes, any dollar above that amount ends up going 85% to you. Because every new dollar that you collect, every new dollar that you collect is only going to pay for the new variable cost, the new labs, and the new supplies on that new dollar of collections. And so that's why this becomes a really more granular way of answering that question is what is your profit margin now? Yes, at the end of the month, with, when all is said and done, you'll blend these two and you'll say, my profit margin was 42%. But I just want you to understand conceptually that as you progress through the month, your profit margin is zero until you pierce your fixed costs. And after your fixed costs, your profit margin ends up being 85% because you're only spending about 15% for labs and supplies. This is why that extra case, that extra day of being open, that extra treatment plan presented, being accepted, that extra little bit that you eke out there near the end of the month makes the world of difference. It makes the world of difference because that's where you get the majority of your profit, is in those extra cases. And then you're really. You're really dropping money to your bottom line. And that's. That's critical. So what I would do is I'd look at your finances, at your financial statements, and kind of understand you can do a little analysis or work with your CPA and ask them the question, what is my fixed costs, which includes my debt? What is that amount? Is that 40,000? Is it 100,000? Do you have a large practice and your fixed cost is 200,000? What is that amount? And you can park that in your head. The more you think about that, it's like you're doing an intuitive way of measuring. And when we measure things, it's like we're keeping our eye on it. And when we do that, it motivates behavior to go a little bit more and to perform a little bit better. It's like measuring your diet. And if you're trying to lose weight or measuring your speed and running a 10k or a marathon, when you measure gives you something to benchmark against in order to take your next step of effort, to progress more and do better next time. And so if I run your numbers and I say, hey, doctor, your overhead, your fixed costs, they're really about. They're really about 70,000. And we know based on your labs and you're maybe you have a CAD cam and so you're only maybe 10% for labs and supplies. Now we're starting to get a really good idea of at what point during the month when you're collecting do you hit that practice breakeven. And now everything after that goes toward your living budget and your financial independence. Okay, this is, this episode is on breakevens cost structure and breakeven levels. And the takeaway from this one is to get your finances, ask your CPA, what are my fixed costs, what are my variable costs, and what do I need to collect in order to meet all of those obligations and then meet my taxes and my spending, and then what is my additional amount needed if I want to set aside $10,000 a month? Now that's going to be a little bit of an analysis for the CPA to do. If you go with a model, more like a practice cfo, a CFO or a finance model, this is sort of very inherent to the type of analysis we do at the company in order to get, give that education to our clients, to then make really good decisions and ideally motivate them, motivate them to get to that level, to not just get to the living budget break even, but really get past that into the financial independence break even. All right, everybody, I hope you found this one helpful. In the next episode, we are going to go into completing a tax plan. And I do think this will be really valuable, the tax plan, because a lot of dentists, and I won't say a lot of just people in general business owners don't quite understand what tax planning is in their head. It's you get some taxes, deductions, there's a tax strategy, there's sort of a silver bullet or cure all tax planning strategy. And some really complicated attorneys will come and present things which are in so many cases just a horrible idea that leaves, that is very expensive and leaves the bag held by the doctor in the event of an audit where it's 99% sure going to fail. These things happen a lot. When I'm at the California Dental Association, I see a number of these types of companies just selling product, these legal products that are just dangerous. And I've seen them flop many times and really cost the doctor a a lot of money and a lot of time. So I'm going to talk to you about what is healthy, good, effective tax planning as a dental practice owner. So stay tuned for that until next time. Have a great one.