Dental Staffing Problems and Solutions—with David Schwab, Ph.D

Welcome everybody to a new episode of the Dental Boardroom podcast. Today's episode I think is going to be relevant to pretty much every dental practice owner out there today. Particularly many of the doctors that I work with tend to have a little bit larger practices. And the subject is one very relevant it is on the dental center staffing shortage. How do we keep, how do we find, keep, retain, motivate a great team? Because a good dental practice is very much reliant upon a stable team. And on the show today, I have David Schwab as a guest. David, welcome to the Dental Boardroom podcast.

Wes, it's a pleasure to be here.

Really quick background that I want you to elaborate on is you are a PhD and you've been in dental and consulting in dental and in the dental sphere for a long time and you are now doing a lot of dental consulting and specifically dental consulting in this area around the team building, the team performance reviews how to address a lot of the, I would say challenging aspects of business ownership as it relates to team members. I would venture to say. Tell me if you think I'm right on this, David, that the most difficult aspect of being a dental practice owner and perhaps a small business owner in general is managing. Other people agree or disagree?

Oh, totally agree. I mean, I hear from doctors all the time, you know, the dentistry is the easy part. Even though they spend a lot of time and they work so hard at it and they're very exact thing and they can get great results. But they say, you know, I really didn't learn this management stuff in dental school. And I feel like I'm just sort of making it up as I go along the part that stresses them out.

Let's start from the top. You know, I imagine the hiring, the retaining, the terminating side of being a business owner has always been the most or if not close to the, to the most difficult aspect of being a practice owner. But I feel like it has, it's very pronounced today and perhaps it's just we are in such a low unemployment period. Maybe there's a migration out of dental among assistance front office hygiene. Let's start from the top. Why is there such a shortage of dental staff? And what are a couple. We'll sort of dive into this with what are a couple of the things dentists can do to address this systemic problem?

First of all, I do think it's a different world now than it was even just a few years ago. I mean, if we just look back to Covid, I think we're just starting to Find out different ways that Covid affected our lives. And what I have in mind is that during COVID we had dental practices closed. Everything was closed. We had people who were not going on vacation, not going out, they were just staying at home and they were thinking and they had a lot of time for self reflection. And I think a lot of people said, why am I doing whatever it is I'm doing? I wish I could do something else. Do I really want to work in a dental office for the next 10, 20, 30 years? And for some people, the answer was I'm not sure. And they experiment with other types of work or work from home or start their own business or, you know, they just change their priorities. And this happened across the country and it's certainly being felt in dental. Another reason that I think we're seeing staff shortages now, you alluded to it earlier a little bit is we do have a low unemployment rate. We really do. And when you have a low unemployment rate, it's harder for people to find good people. But on an even bigger scale, we have a smaller labor force. There are more people exiting the labor force than entering the labor force. So you put the demographic statistics behind this and the unemployment rate and this Covid self analysis all runs together and that creates a confluence of events, which means there are just fewer good people out there for dentists to hire.

So with COVID we had this migration to virtual work. And even here at practice cfo, I sort of missed the pre Covid days. All the offices were filled. We had two conference rooms being used, clients coming in, at least our local clients coming in a lot. And we, we've always done virtual meetings because we have clients all over the country. But it was fun and it was exciting and I feel like there's certain also soft skills that team members learn when they're face to face, especially maybe those earlier out of school that I think are really, really vital that you just don't get the same dose of when you're working from home. But, and dental is obvious, is generally you need to be there physically. But have you seen an evolution at all in virtual work in dental practices? And if so, how is that working?

Well, there certainly has been an evolution. I mean, I've been in any number of practices where we've got somebody off site and the scenario usually goes something like this. Somebody used to work in the practice and then for some reason they moved to a different city miles away. And now they are just working virtually. They're answering the phone, they're doing whatever it is they were doing before, and they're doing it virtually. And, you know, it really is seamless, especially if they used to be with the practice. The phone rings and somebody answers it, and whether they're sitting in that office or several hundred miles away or thousand miles away, it doesn't really make any difference. I've seen that work pretty well. But again, we're talking about people who used to work in the practice, and now they are working virtually. The other thing that happens is we have people who still work in the practice most of the time, but some of the time they're working from home. And a lot of dentists were worried, how is this all going to work out? But now I think the working from home is much more common. People are more comfortable with it, and everybody sort of understands the rules. And it really is a good option because one of the things we learned during COVID or after Covid, the aftermath is what people say they want now is flexibility. They just want as much flexibility as they can get. And working from home is one way to do that.

I just met with a doctor on this past Friday, and when I was there, there was an iPad, and on the iPad was a. The office manager who exactly what you said, worked in that practice for years, moved to Texas. I'm here in San Diego, California. She moved to Texas. Very valuable because she understood the practice, patients knew her, and she. She just knew the processes. And so she. She's been on board for a couple of years, working remotely. And literally, patients come in and they say hi. And they're used to seeing her on the iPad now, and she does a lot of that work. So that's a scenario where the doctor felt that that specialty knowledge that she had was more important than physical geography. And I think in a lot of industries, specialty knowledge is becoming more important than geography, at least where a type of business allows that. And that was the case with me. I probably had six or seven people, highly valued, move away because spouse got a job or whatever the reasons, and we've just retained them. And honestly, I do miss seeing them around. But in terms of the delivery of the quality of the service and the business, I don't think it's actually reduced. That said, I do have mixed feelings about working remote. There are certain personalities that, you know, are just workhorses. They don't need to be babysat. They don't need to even track hours. They don't need oversight like that. They just will work to get the job done. And it has very little to do with resume, education and background, it's just built into their DNA. And other people I think will struggle with that. And so for me, that was also an important variable is what type of profile am I working with here with this person who's now wanting to work remote. I do have to ask this question is just itching in my head. When I go to dental conferences and I do exhibits where I speak and at pretty much every conference now I see virtual assistants where they are working from the Philippines. Philippines is the big offshore location these days. It's the new India. And there's some very qualified people out there. There's some good education out there. The exchange rate is about 10 to 1 and so the cost is extremely low. You're generally working through an agency and so they're not employed. You don't have all of the benefits associated with somebody locally. What's your take on that? David?

I think there are some great people all over the world. Some are in the Philippines. I've seen some in Africa, all over the place who are quite good. And let me give you two scenarios. One is somebody who's totally in the background. It's outsourcing, like it outsourced anything else. They are doing things like bookkeeping, they're doing things like insurance verification. They're doing work, but they're not necessarily interacting with patients. But I think what you're doing, you are referring to, and we do see this more and more often, is somebody calls a dental office and the person answering the phone might be in the Philippines or someplace else. And my thought on that is this. I've had some experience with this. It's nothing against the people who are usually terrific and professional and articulate and can handle everything that gets thrown at them. But you know, you're talking about some of your people who are working virtually who you don't have the face to face contact with them anymore. Well, multiply that by about 10 and you've got this issue with somebody who's never been in the office. So when somebody calls on the phone and asks a question, sometimes it's straightforward and you know, can I make a hygiene appointment at 10 o' clock on Tuesday? And they can do that. But scheduling is an art. And do you really want to turn scheduling over to them? Dealing with patients on the phone is an art and it takes a tremendous amount of training and experience to get good at that. So the way I deal with that is I suggest if you're going to hire somebody like this, use that and have them talk on the phone use them for outbound calls rather than inbound calls. So they can call somebody and say the hygienist is unfortunately ill today we're going to have to reschedule your appointment. I'm very sorry, but let me work with you to reschedule your appointment. It's like, okay, how about 10 o' clock on this day, whatever. And it's pretty easy. And so the outbound call or reminding somebody of an appointment if we couldn't get them through social media or text or email and so forth. So that team seems to work a little bit better. But when somebody's calling and talking to somebody who's not on site, I mean, little things can happen. Oh, I think I know where you're located. Are you right across the street from the bank? And the person answering the phone has no clue if that's true. And it doesn't sound good. But outbound calls work better, inbound calls, a lot of training and anything that doesn't require phone skills, go for it.

I suspect that in time, anything that isn't necessary to be client or patient facing in the office or next to your team or direct clinical almost will get outsourced. Billing verification, certain client communications, of course, a lot of the operational things like we're already an outsourced at practice cfo. We're an outsourced cfo. We're in a CPA firm that's much more proactively involved and acts as sort of a chief financial officer. But that is an outsourced function that the doctors do. I'm just curious if you think that over time there's going to be more outsourcing of those non, I'll say, essential in office tasks to occur.

Absolutely. As a matter of fact, that's one of the things I recommend. I mean, when we were talking about some of the things you can do to overcome this labor shortage and one of them is to have virtual employees, people who, you know, who are working not in the office, or maybe you're hiring somebody from overseas. But outsourcing everything is a tremendous idea. My rule is if it doesn't have to be done in the dental office, it shouldn't be done in the dental office because we've got a real estate issue, we've got a desk, a chair, a computer, a desk, a chair, a computer. And how many of those can we spare for people who could be working from home or around the world or doing things like bookkeeping or payroll, which should never be done in the dental office? I mean, there's no reason to do it there. It's so much more efficient. So we want to do things like. And the other thing I tell people is if you've got staff tied up doing those kinds of tasks, then that's less time they can spend on customer service. I give the analogy somebody walks to a dental office, they're a little nervous, a little anxious, not thrilled about going to the dentist. And the person at the front desk looks like they are an air traffic controller. They're on the phone talking to this one, talking to this one, very busy. What if that person was really more of a concierge person and all those other activities were happening someplace else and that person at the front could take the time and go sit with this person, talk to them for five minutes? I mean, customer service, I mean that goes through the roof if you're doing that well. Now people say, well, we'd love to do it, but we don't have time. You would if you weren't trying to do all those other activities at one time. So that's, that's on my list of things that you can do to overcome the later labor shortage, along with a few other things I'm sure we'll talk about.

You know, I have a philosophy I've sort of developed over time. If you look at individuals and you say individuals are essentially made up of hardware and software, like a computer and software you can teach, software can be learned. Hardware is just built into their DNA and you almost either have it or you don't have it. And I would never make a great basketball player. I think no matter how much I train. I just, I just don't have it physically, I don't have it. I have like a 10 inch vertical. It's just not my thing. And I wonder when I hire a lot of times, depending on the position. Of course, some positions you absolutely have to have pre built software. You need a resume. They need a tax credential, for example, to do good tax work. But some positions, I care more about the hardware. And for example, at our front desk here, we hired somebody named Sydney, who just has the most bright smile and face and so lively and well dressed. And I have received so many compliments by the warmness that people are welcomed with when they come into the office, that it's become a feature of our brand. Almost everyone, at least who comes in physically. And it sort of spreads throughout the company when you have somebody who is just so constantly positive like that. And she had no experience in working in a CPA firm. Tax firm, an investment firm, all of which we are. And she's had to learn a lot of language because she, a lot of communication sort of channels through her. And that was very much a great find for us. And it's just reaffirmed that belief that you could almost find somebody who doesn't have any background in dental and if they have those characteristics, shape them to be a great contributor in your practice. What's your take on that?

Well, I think that's true. As a matter of fact, a lot of dentists are always on the lookout. You know, they go to a restaurant, they go to a business, and they're, you know, they're asking people, are you looking for a job? And that's, that's a smart thing to do. I remember one business office I walked into, not a dentist's office, but a business office. There's a sign that said, welcome to the friendliest place in town. And the person behind the desk had this, you know, tremendous smile. And I thought, you know, that's it, that's, that's what they're selling. This great, this great branding. But the way I approach this is when you're looking for people, you know, what are we gonna do with the labor shortage? You know, we need assistance. They can be trained, you can hire, you can train them yourself, that's fine. But hygienists have to have a credential. You're looking for people at the front especially. I always say, look for part timers. Because the old days we tried to find a full timer who was going to be there, you know, all day every day and stay there for years and years. It doesn't work that way anymore. So what we have to do now is say, let's find a couple of part timers. Maybe somebody works Monday, Tuesday, and somebody else works Wednesday, Thursday, if you're open four days a week. And that gives you tremendous advantages. First of all, you don't have to pay benefits if they're not full time people. And secondly, you've got built in flexibility. So you can tell them if you'd like to switch days with your counterpart. As long as I approve it, you can do that. If you are going to be sick a certain day, then I need you to contact your counterpart and say, hey, can you come in for me on Tuesday? Now you have to tell me, the boss, the owner, the dentist, I have to approve this. And the person who's going to fill in has to send a text right away that says, oh, I understand you were notified. The first thing is the person who's not coming in has to notify. And then the person who is coming in has to notify. I'm taking this person's place. Yes, I got the message. I'm on. It's not just the other person telling you this. I will be there. And all of a sudden we're sort of really maximizing our people and doing a great job of that. And it really does work.

There's been the rise of the concept of the gig worker and there's more opportunity for gig working. One of the causes to the rise of gig workers is the online marketplace platforms that have been created. A very classic one is going to be Uber. That's a gig work. You choose your time. You're an independent contractor, although that went to, I think, court around that. But you're an independent contractor and you're sort of your own boss and your own business and you get to choose your gigs. I'm wondering if that's going to emerge more in dental. There are some online companies that are now gaining good investor funding in order to create online marketplaces. Cloud dentistry is an example of one, but I think I saw three at the Northern California Dental association event. Are you seeing these emerge and are they helpful at this point?

Yes, they're definitely emerging because the Uber model we all think works, right? So why wouldn't we like the Uber model? And the idea of just being able to go on your phone and say, you know, I need an assistant today and have pick out somebody, have somebody say, okay, I'll be there at 8 o' clock, is quite good. So, yeah, I'm seeing that a lot. And I think it's something that we're going to see grow over time. People ask me questions though, do I really want to get a temp in there? Because, you know, I like my hygienist, I like my assistant, and it's not so easy to work with a new person. And my answer to that is, if it's a front desk person, we talked about maybe some job sharing or filling in for somebody. If it's an assistant, you can think about we need to bring somebody in to do sterilization. We're still going to be an assistant short. But if we have somebody doing nothing but sterilization, it frees up the other assistants, the ones we know, the ones we trust, the ones we work with to work chair side. And if it's a hygienist, we say, look, we're going to get somebody in to do hygiene, but then we're Going to have somebody call and say, you know, the regular hygienist isn't going to be here today, but we wanted to let you know. And maybe one or two people will say, oh, I want to wait, I want to reschedule and get my regular hygienist. The rest of them will say, fine, and we. And we don't lose that production. So I think the temps and flexibility are. It's here to stay. And it hasn't penetrated the dental market to the extent it could, and it's going to very shortly.

I think one of the ways that a doctor could capitalize on temps and there are, the main advantage of temps is that you have access to resources almost on demand. But I think one of the ways to actually capitalize on that, to actually make it not just satisfy the deficiency, but also make it and addition to your practice culturally is I think they have to have really well documented processes and define what is easily tempable, for lack of a better terminology. And there's a lot of softwares out there. There are so many softwares out there around creating processes here at practice cfo, we've used Trainual, which is one. We're now using one called Suite Process. And this is where a dentist has to almost come out of their comfort zone. Have somebody like you, David, come in and help out. I'm sure you consult on creating processes within the office as a business consultant for them, but you define everything that's done and delivered inside of a dental office and then stratify what is easily delegable to somebody that they can be up and running fairly quickly. Now, these processes like Suite Process, you have step by steps, click here, click there. It points to specific resources like a Word document or a PDF and you can put videos in there as well. And if you can really create those out, it's like you're creating many assembly lines throughout the company. And so somebody can come in and work that assembly line without having to spend months and months and months trying to figure it out on their own. Because it has not been documented, then I think the temp situation can be much more of a viable option in a dental practice.

You know, it goes back to that famous book, the E. Myth. You know, David Gerber. Yeah, Michael Gerber. Michael Gerber. What does Gerber talk about? He talks about run your business as though you were going to sell it tomorrow. And that means you have to have all the systems in place so that that potential buyer could come in and just plug into all those systems. That's you're running your business according to systems. And we too many practices, I think, that say we've had one person who's been with us forever and it's all in that person's head. Well, it needs to all be on a computer somewhere. It needs to be written down, needs to be in a spreadsheet, it needs to be in a program so that when somebody else comes in, they just plug in and they don't have to rely on somebody's memory or whatever to do that. So, yeah, that's happening a lot. And then some of the other parts are. You talked about hardware and software a little while ago. You can hire great people with great character. Of course that's essential. But then they still have to be trained. They have to know what to say and how to say it, and they have to be coached in that so that they're comfortable. Because a word here and a word there, if it's the wrong word, doesn't work in dentistry. If it flows smoothly, it leads to less stress and leads to more production.

Yeah, I think that's especially true around the dental chair, for sure. But throughout the office. I also think that temp can help solve the sick problem. How do you address employees who are just chronically calling in sick because last minute it's just so detrimental to the day and the flow and even the income?

Yeah. First of all, I always encourage doctors to look at their employment policies and some of them have sick days. They have a personal time off. There's a trend in business to combine sick days and personal days together and call it, you know, personal time off pto. They use that abbreviation in the HR world sometime. And so if they're combined into one pot, for example, most employees are not going to tell their boss, their dentist, you know, next Wednesday, I'm planning on calling out sick. They're not going to do that. But if they have a personal day coming and it's all together, it doesn't matter. You don't have to call on the phone, pretend that you're coughing. You just say, I'm taking a personal day. Then, okay, they don't come in on Wednesday. The more notice the doctor gets, the better. So we combine the two we have. And it's difficult now because I get people asking me, well, should I require a doctor's excuse or whatever? Well, combine it into one. Let them use up those days. And what happens if they become sort of chronic with this? You know, we have people who, who do get sick. We have. And we, if they are sick, we don't want them in the office. We have people who have child care responsibilities, people who are taking care of elderly parents. And it's hard to tell people no. So what I think we have to do is to say we're going to monitor this and if somebody is chronically not there, we're going to have to sit down and have a conversation with them and say that your job requires showing up and work with them. But we're going to try to be as flexible as we can. And if it's something like, I'm not sick, but I have to take my mom to the doctor at 9 o' clock in the morning, maybe we go back to it, depending on the job, wouldn't work for an assistant or a hygienist, but, but maybe we go back to the virtual employee and say, well, do that. And then when you're done with that, you can work the rest of the day from home and get a lot of things done for us. So we're trying to maximize our people the best we can.

So that is tethered somewhat to performance reviews. And I believe you have your own system of performance reviews. Tell us a little bit about that. David.

It's funny, Wes. Performance reviews, I call the dreaded performance review. It's like they say that on if you watch Jeopardy. The dreaded opera category, because nobody wants the opera category unless you happen to be an opera buff. It's hard for everybody else. So performance reviews, just briefly, are usually the most awkward thing ever invented. They are, you know, people sitting down across from each other, neither one wants to be there, and it becomes this sort of halting, awkward conversation. And what it should be is a learning experience. So my.

System is, I call it the open book test system. And what happens is, and what part of this is not new or original. And part of it is we give the employee a form and say, fill this out and rate yourself. We're going to rate you. And then we're going to come together, we're going to have a conversation. But then what we're going to say is, if there are certain areas that you're doing great, keep it up. Other areas where, gee, you're rating yourself a little high, we're rating yourself a little lower. But rather than say, well, too bad, you know, I'm the boss, since one person, one vote, I'm the person, I'm the vote. So we're going to this is going to be your performance review and we'll see you next year. And too bad you don't like your raise. Instead of doing that, instead of making a performance review like a lawyer going through a contract looking for problems, make it a learning experience. What's an open book test? Open book test is where the teacher says, use all your resources, take all the time you need, and if you work hard enough and use all your resources, you'll get an A. So now we say the employee, okay, look, look, here are areas that we're not on the same page. And it all comes down to expectations. So many employees say, if I had only known, well, okay, now we're going to spell it out. We're going to close that gap. So we're going to meet again in 60 days. And during those 60 days, it's an open book test. You can come back to me as many times as you want. Am I doing it right now? Do you need me to emphasize this? Do you need me to prioritize that? And if you show improvement, and they will, because they're getting guidance on the specific things they need improvement on, then we'll raise your ranking, we'll give you a higher mark for this particular parameter, and then we'll close out your evaluation. So that's the open book test. It's more of a learning tool and a motivational tool than an awkward sort of not to be looked forward to experience.

Yeah, I've mentioned a few times on podcasts, we here at Practice CFO a couple of years ago adopted a business management system called the Entrepreneurial Operating System, or eos, and it's becoming quite popular. I've gone to the conference the last three years, their annual conference, and every year they're having more and more business owners. It's designed for small business owners and the whole purpose is to create an operating system upon which you can manage and lead in your dental practice, which, by the way, I find is the primary indicator of a financially strong practice is highly tied to how well you manage and lead your practice as a business and a little bit less tied to the clinical, even though the clinical is clearly foundational and indispensable. And in this entrepreneurial operating system eos, the feedbacks are critical. You have what they call quarterly conversations. And they're very much tied to this thing called the gwc. The GWC is the criteria upon which a position is assessed. And GWC stands for does the person get it, do they want it? And do they have the capacity to do that criteria in the job? And they need to have all three of those. They may get it, but they don't want it, they may get it and want it, but they don't have the capacity for it. And if they have all three of those now, you have found somebody who's going to thrive in that. It's called a seat or in that role. And it took a long time and we're still in the process. To be honest, I don't definitely don't want to claim that we are, we are flawless here. But as I built out that seat profile, it's a lot easier to have the conversations. And then one of the things that I've done that has made it a little bit softer to approach the feedback is by calling it Feed Forward. It's just so much easier for somebody to receive. When I say, in this context, here's what happened next time, let's role play next time. Here's how we may go about this. That could improve it or take it to the next level. It's just so much easier to digest a feed Forward than a feedback where it just feels so critical. Where feed forward is more about, I want to make you better, I want to improve you so that you find more success. And I'm here as more of a mentor than I am your boss, so to speak. Just a few thoughts on that. Now, usually out of reviews come at some point, at least the request for raises. Now, this is probably the most dreaded moment for a practice owner is when they are approached and asked for a raise because the earth went around the sun. Yet one more time, what do you recommend doctors do to respond to those asks?

There are two types of asks. There are the ones that come at the end of the performance review, which is when they should come and people should be prepared to give somebody a raise. First of all, we disassociate these two things. In time, we have the performance review and then we're going to talk about money at a separate meeting. Otherwise, the person just spends the entire meeting listening to see what the percentage is. So we say at this meeting we're talking about helping you become a better employee. And in the next meeting we're going to tell you what your percentage, percentage increase is, assuming there's one for this year. So that's one. The other one is somebody who sort of comes out of a clear blue sky and says, you know, it's a sunny day in June and I've decided to ask for a raise. But to get ahead of that, I believe in bonus programs. And, you know, there's all kinds of numbers you can put on this. But just basic structure is to Say if we produce X dollars per month, the doctor says, whether it's one doctor, two doctors, 10 doctors, we produce X X dollars per month. That's going to be our goal. And as long as we hit that, we're happy. And if we go over that, we go over that, we can take some of that pot of money and we can distribute it to the team members as a bonus. Now, sometimes you work backwards. You say, well, how do you figure out the math work backwards? Do I want Everybody to get $100 a month, $200 a month? How much do I want them to get? Well, then we, once we know that, we can work backwards and put in a math formula. But the concept is really good. And I've seen offices where the staff, they get a good salary, a competitive salary, but they get a really nice bonus because they're hitting this goal, they're surpassing this, and the practice is growing and they're making some money. And if they wanted to go somewhere else and they said, well, how much are you making now with salary, bonus and everything else? Oh, well, I can't touch that, I can't give you that. But. So they don't want to leave, they want to stay where they are. Now, this is kind of a wonderful system because I'm not predicting economic downturn, but I know the economy goes up and down. If one day there's a recession and the economic cycle has not been repealed, if one day there's a recession and we're not meeting goal and there are no bonuses, that's just the way it is. It's a math thing. It's not that we like you or don't like you, it's just based on a trigger. On the other hand, if we had kept raising people's salaries higher and higher and higher and we didn't have a bonus system, and then all of a sudden we've got this sit, we have no safety net. We've got to pay this overhead even though we don't have the production. So it's a nice system for both parties, I think. And anytime somebody says, I need more money, great. We're growing. And you have the potential to make more. That doesn't mean people don't get raises in salaries, but the bonus is nice because Rising Tide raises all ships.

Yeah, I'm a little bit of a believer in, at least, at some level, open book management. And open book management is the concept that you let your team in at some level to the economics of the business so that they can feel at least a Little bit the pressure that you feel as the business owner, it gives context, I find to helping them see or understand the decisions that we make as a business owner. Owner and team members won't understand that. Let's say you're in an area where PPO has just got a stranglehold on the economy. And it's so difficult to have healthy expense ratios inside of your practice so that your profit margin is ideally around a 40% plus or minus for a general dental practice. Well, if your collections aren't going up or even going down because reimbursement levels are declining and you're ahead of PPO practice, your team are still wanting raises, your supply costs are still going up. Inflation is causing all of this to go up. Your lease rate on your rent is going up 3,4% every year built into the lease document. So what's happening is that you are becoming more and more poor which with each subsequent year because we're not right sizing or better said, because our collections are not going up commensurately with are expenses at a minimum. So at least you're maintaining your lifestyle. Now if you're like most people I know you're wanting your lifestyle to improve even after the effects of inflation from year to year. That's how it should be to be honest. And so this concept of open book management for me is I will compensate you as a team as the practice, not me, as the practice can compensate you. This is the practice compensating you. And we're all in this together as a practice. Not me, Dr. Reed, compensating you. And here is based on my meeting with my CPA and understanding the industry benchmarks of what's healthy and what I believe we need to do. Here's our collection level. And if we meet this collection level, our supportable labor costs, our supportable team costs are within alignment for a healthy dental practice. And we need to run a healthy dental practice. Now most GPs my understanding as a dental CPA, we compare our clients financials every month against the industry is we usually say right around 28 to 30% for all in, that's payroll taxes, that's benefits, that's all in labor costs for your team, excluding the doctor him or her self. And so if collections go up and let's say it's $100,000. At $100,000, $29,000 of my collections go to my team. Great, that's healthy. Well, if my team can help me get collections up to $120,000, that extra new $20,000 times roughly 30%. So $6,000 could be allocated over to my team in the form of bonuses. And that's just the basic math behind it. And you sort of have to have some spreadsheets or tools to track this, but if you can have a good system there, then you have something to point to to say, yes, I can do raises or no, I can't do raises. Yes.

And there's also, you know, I tell doctors to take the Pepto Bismol challenge, which is if they are taking antacid every night because they're worrying about their overhead and their staff is saying, oh, it's so busy, we have so many patients. What are we gonna do with all these patients? That's why you have to let them see behind the curtain a little bit and see the books. Cause they have to understand the overhead. If you ask staff who don't see the books, what do you think the practice is grossing? They can do a little, you know, back of the envelope math and come up with a pretty good guess. If you ask them what they think the overhead is, they usually vastly underestimate it. So let's have a little reality check here. And when you talk about bonuses, this gets more into your area, Wes. But you know, the last dollar the practice collects has lower overhead than the first dollar once you've paid all your fixed overhead. So we have doctors saying, I can't possibly give another dollar to my staff because I'll go over magic 29% or whatever it is and everything else. But wait a second, that last dollar, you've already paid all your fixed overhead. And at the end of the day, you're going to be keeping the lion's share of that extra, so called extra money. And so, you know, if you're keeping your staff and keeping them motivated, it's a good investment.

Yeah, that's a key concept. And I do talk about that periodically in podcasts. Is. Okay, doctor, here's, here's my question for you. What percentage of your costs as a general dentist, on average, are fixed from month to month? And think about that.

And what percentage, therefore 100% minus that are variable? Well, in a dental office, your primary variable costs, your big ones are labs and supplies. Now, you've got a few other things, like maybe collection costs, how much merchant processing you do with Visa, MasterCard, Discover, etc. But most of your costs, your team, is pretty much fixed. There may be some bonus there that's variable, but let's just say they're base, fixed. Your facility are Fixed. Your administrative costs are fixed, so it's around 80%, plus or minus of your costs are fixed. So what is your overhead rate up to? Your fixed costs? If your fixed costs in a given month are $80,000, well, your overhead is 100% up to your first $80,000 of collections. After that, your overhead is only 20%. And so that's where you make your money. So if your team can help you pierce that fixed cost threshold, then after that, even if you paid out 40%, 50%, you're still adding to your personal bottom line. Now, I'm not saying you should hand out 50%, but I'm just accentuating the concept there's. Of how critical it is to know what your fixed cost level is and break through that, because that's where the economics really come into play.

All right, let's finish off on this one question.

Here we go.

You mentioned this, and I want you to elaborate on this. Can you explain the Ritz Carlton concept of lateral service?

Sure. You know, Ritz Carlton is famous for having enough oars in the water, having enough people to do the work. And if you. If you've ever checked into a budget hotel and there's a problem at the front deck desk and the line goes out the door, you know, you're in a budget motel. But if you go to the Ritz Carlton and somebody has a problem at the desk, oh, the reservation is on the wrong date or wrong name or something, it doesn't stop everything. Somebody magically appears and takes that person on the side and works with them and is nice to them, and everybody else gets service. So what I basically say is two things. First of all, Ritz Carlton says, and you don't just give service to the customer, the person standing right in front of you, you give service to the person standing to the side of you. That's lateral service. Now, I'm not saying that in a dental office, if somebody's a slacker, if they're not doing their job, you should just do their job and smile and get over it. But if somebody's a conscientious person and they're struggling, they're having a problem. Remember, they're your customer, too, because by servicing them, you're servicing the patient. That's Ritz Carlton philosophy. The other thing I tell offices, and this is a little bit heresy, I know, especially in the accounting world, but. And maybe it fits in with our just previous discussion, I always say, if you can't be perfectly staffed, it's hard to be perfect. In this World, are you going to be slightly understaffed or slightly overstaffed? Are you going to have some cushion there? And the answer is to be slightly overstaffed because you don't want to lose a big case because you're just running around like crazy and you're dealing with some small issues when you really need to have somebody focused on the big issues. So when I get together with groups, we have team meetings, and we try to have esprit de corps. We try to teach them things, teach them verbal skills, get them excited about their work. I had a doctor who called me recently, and he said, my problem is I've got chaos. I've got all chaos in the office. I gotta get rid of the chaos. Well, that's okay. We'll take care of the chaos. And we'll also teach people how to get along with each other verbally and how to get along with the patients verbally. So at the end of the day, my motto is, less drama and more dentistry. Let's just get down to the business end, but make it fun for everybody and make everybody want to come back the next day.

Amen to that. One of the themes we have around here at practice CFO is the concept of abi, which stands for always be interviewing. Because even though I'm not a dental office, the accounting industry and the tax industry is suffering equally from shortages. Just not as many people who want to go into that space, especially tax, because the IRS is. Is making the tax world extremely difficult, especially since COVID And so ABI is. You're always interviewing. Now, maybe not literally on, indeed, always interviewing, but you're always keeping your eyes out for potential candidates. For example, here, on the other side of this wall here is my cousin, Justin Reed. He's one of our partners, one of our CFO advisors. He's somebody who worked in the accounting space, and. And I recruited him because I know him personally. My son's tennis coach was a Cornell grad in finance, and about two years ago, he and I were talking on the court, and I said, hey, why don't you just come in for an interview? Well, here he is on the other side of the other wall from me. I have two people from a faith organization that I found through them, and they were very capable people. I knew them already on a personal level, and now they are with practice cfo. And so for me, it's like, you're always on the lookout. Your radar's always got to be out there because it is hard to find good people. And if you Have a handful in the wings when the moment arises that you need one. Now you've got someplace to go. Always be. Interviewing Abi well, thanks for being on the podcast, David. You know, in the beginning I was going to ask you to elaborate a little bit on your background and profile. And then we, my fault, we just jumped right in. So tell us more, a little bit more about you and what you're doing for dentists these days.

Sure. Well, you can find me on my website, David schwab.com and my background is I have a PhD in English from Northwestern and I got into the dental business early on. I was still at Northwestern and I went to work for the ADA in Chicago and I was in charge of the accreditation of specialty programs and GPR programs. And then eventually I was in charge of seminars. And that was really interesting, finding speakers and organizing that whole program, not the annual session, but everything else. Then I as a consultant went to work for the American College of Prosthodontists. I was their first executive director. And then I sort of segued out of that even though I had a great contract. I was just so busy doing all my other stuff. We parted very amicably. I said, listen, you guys are great, I appreciate all this, but I'm going to give you lots of notice. But we're going to, I'm going to have to let somebody else turn the dials. After we had got gotten them recognized as the specialty organization co equal with Amos and AP and the others, we'd accomplish that. And I'm just going to do the consulting and the speaking full time. So I've been doing that and lately what's up? People say, what's new? What's exciting? Well, a number of people call me and say, I want to get off of insurance. I never push people to do it, but if you want to get off of insurance, you need to know how to do it. I do that. I do a lot of zoom training in terms of verbal skills and what to say, but I also do a lot of, you know, more involved long term visit the office sort of thing. So if it's business related, communications related, interpersonal related, then I usually am the right person for it.

And you're working with dentists throughout the country or locally?

No, all over the United States and Canada. Great.

And you're in Florida?

I'm in Florida on the eastern time zone. But you know, it's a big country. But we have a great airline system here.

We sure do. Well, David, thank you again for being on the show. This was such a vital topic. I think it's going to be one valued by a lot of listeners.

Yeah. Thank you. And I do have information on what our topic today as far as, you know, what are we going to do about having a deeper bench? On my website, I think you can find it pretty easily@davidschwab.com and I also do a free consultation. If anybody calls and says, hey, I got a question, I never sell anybody anything. I just say, well, we'll talk, we'll listen and, you know, we'll form a relationship. And that's the best way to work with anybody, I think.

On that note, getting in contact with you just on your website. It's got your email and phone number, I believe.

Yep. Just go to davidtroab.com call to PET. So I remember it and it all works out. All right, Dave, we'll have you back.

In the show in the future as well.

Thanks so much, Wes. It's been a pleasure. Thank you very much. Appreciate it.