Episode 57 – Mission: Maximization
“The million-dollar associate should be the goal” – Dr. Victoria Peterson
You are in your early 40s, and you have owned your practice for about 10 years (or less). While the entire country talks about selling, your practice is on the rise and you’re finally able to enjoy a little bit of profit.
So what’s the smart move for a mid-career dentist?
- Invest in real estate?
- Pour more into your 401-k?
- Sell to private equity now while the money is good?
The answers will vary depending on what your life goals are… but the one thing all of the guests of this episode agree on: The greatest investment you can make is to double down on the operational excellence of your practice.
In this episode of the Investment Grade Practices Podcast, host Dr. Victoria Peterson is joined by ProFi2020 Partner and Strategic Growth Financial Consultant Chris Sands; IGP Business Advisor Joanne Miles, MAADOM, RDA; and owner of Kuna Dental (Kuna, Idaho) Dr. Daniel Haws. Following a mastermind, Dr. Haws asked questions about his strategy and what he should be focusing on as a dentist and as the owner of a dental practice. Buckle up, because you’re about to get a crash course in the importance of employing dental associates.
Among the dozens of priceless nuggets you’ll learn in this podcast, pay close attention to:
- The worth of your business when it’s less reliant on you
- Risk diversification, debt payment, and self-insurance of associates
- Scaling your practice means maximizing the production of your associates
- The risks of the solo doctor practice
Hi, Dr. Regan, Robertson, CCO of Productive Dentist Academy here and have a question for you. Are you finding it hard to get your team aligned to your vision, but you know, you deserve growth just like everybody else? That’s why we’ve created the PDA productivity workshop. For nearly 20 years PDA workshops have helped dentists just like you align their teams, get control of scheduling, and create productive practices that they love walking into every day. Just imagine how you will feel when you know your schedule is productive. Your systems are humming, and your team is aligned to your vision. It’s simple, but it’s not necessarily easy. We can help visit productivedentist.com/workshop that’s productivedentist.com/workshop to secure your seats now.
Victoria Peterson 0:46
Because that’s the thing I hear from owner doctors is, “I don’t have time, I don’t think I’m a good mentor. I don’t want to do it, they got a degree, they should figure it out,” but here’s a reality check, during COVID, they didn’t even have to take dental boards so you may want to do some mentorship.
Welcome to Investment Grade Practices podcast, where we believe private practice dentists deserve to get the lifestyle today while building an asset for tomorrow. Join your host, Victoria Peterson, to design the practice of your dreams and secure your financial independence. Let’s get started.
Victoria Peterson 1:28
Welcome to a very special edition of Investment Grade Practice podcast. I’m your host Victoria Peterson and with me today are Chris Sands from ProFY 2020 Dental CPA for welcome Chris.
Chris Sands 1:43
Hi Victoria. It’s great to be back.
Victoria Peterson 1:45
Great to be back with you as well. This is your second time, you might be my first repeat. I’m so excited about this.
Chris Sands 1:48
I feel honored.
Victoria Peterson 1:49
I also have Joanne Miles. She is a MAADOM Fatum which means she is Queen of all things practice management and one of our top IGP Business Advisors here at Productive Dentist Academy. Welcome, Joanne.
Joanne Miles 2:05
Hello! Thanks for having me.
Victoria Peterson 2:08
Thank you. Thank you. And we’ve got a really special guest Dr. Daniel Haws from Kuna Dental. Hi, Daniel.
Dr. Daniel Haws 2:15
Victoria Peterson 2:15
So we were here on a mastermind tonight, and as it turned out, it’s the four of us in this room and Daniel is asking really great questions. So I want to dedicate the whole podcast to this one focus. If you are a youngish dentist and I’m not gonna say younging because if you’re young and you just got out of dental school, and you’re figuring out what it out, but you’re still you’ve got some, you’ve got some mileage on the tires but you’re still young, you’re in that 38 to 45 bandwidth, where you probably been at it for a decade and you’re looking at what is the smart move today as a business owner? What is a smart move in dentistry? And Chris, I can’t think of a better person in the country to tackle this question. So Daniel why don’t you ask specifically what your question is, and we’re gonna, we’re gonna let Chris just start chiming in.
Dr. Daniel Haws 3:13
Well, thanks. I think for me, I was a little bit later to the game when it came to practice ownership, just with, I was in the military for a while, got into an associateship moved, and then now got into another associateship. It took me a while and I think it was kind of like that, that typical, ‘Oh, yeah, you can buy in, yeah, you can buy in,” and you just keep going and just keep going and you’re finally like, “Okay, when is this gonna happen?” And so, finally happened about two years ago, I purchased the practice, and now the other doctors working back for me, and we have, now have another associate and so I’ve kind of gotten to this point, I’m 43 now, where I’m thinking, okay, like, I got 20 years of this, but I’d rather exit a little bit sooner than then kill myself and break my body and everything. So what’s, what’s my strategy here? Where am I? Where am I going and what should I be focusing on as a heavy debt load? Youngish dentist, you know, not right out of school, but kind of in the prime of my practice as far as abilities and, and knowledge and stuff that I’ve learned. So I think that for me is where should I be focusing? I think there’s probably quite a few other people that find themselves in my range of maybe they weren’t the business guy right off the bat, but now they’re interested in, you know, focusing on that end game in and making sure that it’s a possibility.
Chris Sands 4:41
So, you know, Daniel, I would say that, number one, while you still own the business, you always need to be seeking to maximize it, maximize the space that you have, if you can. I use a metric of revenue per chair, somewhere between 35 to maybe up as high as 40,000 but typically around 35,000 of revenue per chair per month, multiply that by how many chairs you have no matter how many your hygiene and how many are dentistry, and multiply that by 12 months, and that will give you the revenue capacity of your space. You have, it sounds like you have the seller and then one full-time associate, is that right?
Dr. Daniel Haws 5:19
Part-time associates a couple of days a week, so yeah.
Chris Sands 5:23
So associates are, you know, a lot of things, associates are risk diversification for the business and I think that it should be your mission as a practice owner, to build million dollar year producing doctors that are all doing over 80 or 85,000 a month and there’s an art and a science to that, you know, the science is the easier part it’s maybe you have to invest in their clinical skill set, maybe you hire for clinical skill set that the practice currently refers out but the art side is case acceptance, and how they connect and, you know, influence people to move forward with the healthcare that you are, you know, ethically diagnosing, and recommending your treatment plans. I would, I think one of the most, the one of the biggest leakages is doctors or practice owners not tracking all doctors’ total, you know, case acceptance and how much treatment has not been delivered. Unfortunately, I think a lot of especially young doctors think that the job is just to diagnose. So, it’s really, you know, making sure that you do get case acceptance. That, dentistry, dental production, is really the core way to grow profit margin or thereby EBITA, which, which increases your valuation. So there’s only really, you know, two or three variable costs in general dentistry. I can name the three that it’s doctor pay, you may be paying them a percentage, and it’s labs and supplies, and all three of those things track with how much dentistry gets produced. Everything else you have in the business is pretty much a fixed cost. All other employees are fixed costs, whether they’re paid hourly or salary, your rent, everything else is a fixed cost. So the definition of scaling and dentistry is getting more dental production, you know, out of each doctor maximizing each of those doctors. I said earlier, you know, associates are a lot of things that, I like to think of associates, you brought up your debt. Associates are your debt payment plan, you know, there’s what you produce and then there’s the profit that you get off of those associates and what they’re producing but ultimately, associates, the best thing about them to any third party buyer, is that you have diversified the risk by creating some clinical duplication. If you’re a solo doc, you are the riskiest form a business owner, you know, you’re the company’s strongest employee, and also the company’s weakest link, and if you go down, game over, and so if you’re the, you know, I think a lot of practice owners take a lot of pride, sometimes it’s a misconception, but they take a lot of pride sometimes saying, “I’m the, I’m the big producer here, right?” It’s little bit of ego, and you don’t want that, you want all the associates to help produce you, you know, and the business is probably worth the most, when it’s not reliant on you at all and that also means the less reliant it is on you and your production, the less time that you’ll have to hang around and be tied to the sale with any kind of tail there that you have to work for the buyer. So in terms of what you know, inside the business, and what should you be doing, to maximize things I go through the normal checklists that I have. I always start with marketing, most dental practices, private practices, very pathetically do 10, excuse me, 2% or less in marketing. Meanwhile, DSOs reinvest at a rate of six to 8% and I’m just trying to get most private practices to do like three to 5%. That’s got to be strategic you got to track you know, where are the new patients coming from what’s working, what’s not working, but then making sure if the phones are ringing, what’s the conversion rate on the phones and then you know, what’s the new patient flow maximizing new patient flow, you know, per full-time doctor. By the way, you said your doctor is part-time, a little bad news. I find that part-time doctors are not profitable, pretty much at all. You know, you gotta go all in, make them come full-time. They, there’s reasons maybe, the one that you have as part-time for a reason, maybe they only want to work part-time but you know, go all in let them be full-time. Give them all the new patients instead of adding them to your schedule, maximize them and put the pressure on yourself to refill your schedule, right, but um, new patient flow is important you know, re-care rate and then like I said case acceptance rate but as associates, they are like your, here’s another thing, they are to you, they’re your self-insurance. If you’re a doctor out there that hates paying for your disability insurance, well, self-insure by getting associates and I usually say that for everyone large producing doctor, you need three full-time producing associates to replace yourself, just from a numbers standpoint, because you’re typically paying them that you know, 30 to 35%. Make sure that you have all the standard operating procedures documented, the, you have a clinical standard of care. Hopefully, I would, I would hope that diagnosing and treatment planning is the same or very similar across all doctors. I think, I think by the way that the solo doc office is the riskiest to the to the patient, by the way, because there’s nobody looking over their shoulder, looking over their X-rays looking over their work and in multi-doctor practices, there’s sometimes you know, better collaboration and discussion around what’s the right thing to do but that should be hopefully that same standard of care. I know, I’m the accounting firm, and I’m talking this
Victoria Peterson 11:07
This is amazing. This is amazing. Yeah, and I want to I saw Daniel taking a ton of notes, Chris, but I love the first three that you put out there. Number one, maximize your space and have a per-operatory goal. I think that right there and Joanne, I’m gonna have you weigh in here a little bit too. We’re working with a ton of doctors right now, who’s like, “I can’t get a patient in for two months, three months, four months,” and so what you’re talking about Chris, is, if you’ve got that fifth operatory or six operatory plumbed, but you’re sitting in an Azure office, it’s costing you 40 grand a month.
Chris Sands 11:46
Yeah, nothing, nothing good happens in that, out in a dental office, you don’t need that office, make it operatory.
Victoria Peterson 11:50
No, you need you to stand up, put a computer desk somewhere with a laptop on it. So I love that and because I expected you to go to some sort of external, you know, investment, if I’m doing the smart move, but
Chris Sands 12:06
No, the best investment is your business by far none and that’s everything that I just said is what a DSO, when they buy, if they buy a practice, that’s exactly what they’re gonna come in and do anyway. So why don’t you do it yourself, right, and a lot of doctors, you know, if you achieve that, if you get all of those associates in place, and you’re not required to be there clinically that often and that, that preserves your body, you know, you may delay the sale, you know, or, or you may, you may capitalize on this opportunity in this market now and exit and learn from it, there’s a lot to learn, if you sell to a DSO, learn, learn what like, learn with what I’m saying is actually true. If they come along and do those things and then, you know, after your kind of tail is over, you might go repeat all of that, because you realize, I have a lot of doctors who have sold to and have worked for a DSO for two or three years and they said, “The thing I learned was my business wasn’t so bad, after all, you know, they were asking me advice and maybe I could do this again.”
Victoria Peterson 13:04
I love that. I also love that your second bullet point, I’m going to write an article or I’m going to totally rip off this headline from you, Chris, the million-dollar associate, like that should be the goal. There’s no reason and Daniel, I’m going to ask you and then I’m going to go to Joanne and ask how it’s possible. What did you think when Chris’ recommendation was put all the new patients with the associate?
Dr. Daniel Haws 13:28
You know, it’s really funny, because at first I wanted, you know, that was my first and at first I started thinking of how recently, it’s kind of gone that way. I’ve kind of backed off and found myself doing a little bit more of the administrative stuff in between and kind of doing some of the staff stuff in between which, and I’ve been like, wait, they aren’t coming to get me, they, wait, what’s going on? They aren’t getting me, like I should be, I should be running around and oh my gosh and then I realized I’ve gotten most of the day and I saw like two or three out of the, you know, the 40 people through hygiene or whatever and I’m like, wow, that just happened and I start worrying about okay, what’s gonna happen to my chair, but I loved what Chris said there, like force yourself, like, what, like, strain yourself to find the dentistry when you’re there and I think that that’s actually important, too. It’s not coming up with dentistry that’s not there. It’s actually forcing me to have those conversations with the people that I’ve been, I will just keep an eye.
Victoria Peterson 14:27
Because now you’ve got the time.
Dr. Daniel Haws 14:28
Now I have the time to actually take it with them and to say, “Hey, let’s actually focus on what needs to be diagnosed and making sure that I’m not just doing emergency dentistry for you.” So yeah.
Victoria Peterson 14:37
So yeah, I love that. Joanne, over to you, for all those doctors who are having a heart palpitation right now going, “Oh my god, I spend so much money on marketing, there’s no way I’m giving them to the new, to the new young doctor.” How do you help associate doctors build the confidence? What can Daniel do to support making sure diagnostics are high and case conversion is high, what do we need to focus on with the associate?
Joanne Miles 15:05
The one of the number one, when I’ve read several surveys of new grads coming out of school, the number one thing they’re seeking is mentorship and it really is all about from the first hello with this associate doctor, it’s the onboarding process and really getting them firm footing from day one, and it doesn’t mean, on day one, you’re putting a drill on their hand, and they’re starting to draw away on a patient in a brand new operator that they’ve never sat in before, you know, this is like cooking in a new kitchen. So there is a, there’s the right way to onboard and associate and that’s really taking the time, you know, showing in your tray setups, showing them old materials that you have, showing in the burger setup that you have, and making sure, “Hey, there’s all this work, this is what we do here, can you adapt to our system?” And then it’s, there’s a few little one-off things that they just really, really need to happen. You know, Dr. Haws could have that conversation with any new associate and then, and then show him the software. How do you read the X-rays? How do you, you know, get them comfortable with their surroundings, and then walk them through the actual patient journey in the process. “Here’s our paperwork, here are all the things.” So you’re really, you’re really going back to the basics with them, you’re not just throwing them into the deep end without a life preserver and then, you know, once they’ve kind of found their footing, and we start getting them with the patience, and you don’t know, the other pieces don’t overload their schedule, the first month that they’re there, let’s see how they’re feeling, maybe do a single column and see how their timing is, give them the time to breathe and then highly, highly recommend case reviews weekly with new associates. You would actually set aside that time, that admin time that you were talking about, set aside time every week minimum, and pull their new patients that they’re seeing, look at their X rays, look at the health history, look at their notes, and sit down with them and in the two of you have dialogue, you’re mentoring them. “So tell me what your thought process was when you were making going through this treatment plan? Where did you feel like you maybe got stuck? What can I help you with?” Particularly if you see a difference in how you may be with a treatment plan that maybe you would have done a crown versus a forced surface filling, something like that. So it’s really truly mentorship, mentorship and a dialogue back and forth and I will tell you, I haven’t met an associate that wouldn’t just be screaming for the rooftops rooftops with happiness to have an owner doctor that’s willing to invest in them and check in with them. They have someone that they can come to daily and say, “Hey, will you take a look at this X ray? Am I off base here?” Yeah, so it is an open communication relationship and then having the team be a part of that as well and there’s a trust factor between the associate and the team, and so the team could provide feedback as well in a respectful manner.
Victoria Peterson 18:22
I love that so much, Joanne, hardest piece of advice, and I’m going to stand by it. The whole time I’m in dentistry is you have to give your best most capable dental assistant to the young doctor and it makes every owner go, “Oh, no, it took me five years to get them,” and, but they will then and then you hire the new assistant, they get to work with you and it’s your senior lead assistants job to mentor that person. So just as you’re mentoring, the doctor, the senior assistant is mentoring the new assistant and she’s also making sure that procedures are being followed and good habits are being formed. If you give a brand new associate to a brand new assistant, you’re just you’re asking for trouble. Financially man, I love that we can put a metric to this, one column, one chair 45,000 a month, 500 grand a year, you’re gonna net 50% of that, you know for what would you do? How much time would you take for $250,000 a year? Would you do that one hour a week? Would you do that two hours a week? Could you go grab a beer after work? You know, if you had zero money in the stock market and all you had to invest was two hours a week and at the end of the year somebody gave you a quarter of a million dollars. Would you do it because that’s the thing I hear from owner doctors is I don’t have time I don’t think I’m a good mentor. I don’t want to do it. They got a degree they should figure it out, but here’s a reality check during COVID they didn’t even have to take dental boards. So you may want to do some
Chris Sands 20:00
To worship, I mean, if you don’t invest in them personally, you’re not going to get a lot out of them professionally. I mean, you need to find out, what their goals are, what their fears are, you know, what keeps them up at night? Well, first, you know, yeah, both, you know, financially relationally all that, like, they’re just like you, in that way, they’re just people, you know, they’re not like you in terms of lot of doctors will hire and say, they’re gonna get so upset that the associate doesn’t do everything like them. I mean, you may have, you know, 10 years in the game, and they’re gonna be, I think it takes 10 years before somebody becomes a true dentist, or any in any profession, it takes 10 years of doing something before you become really good at it. So I would totally echo the comments of the, even though your top dental assistant, you re retraining the new ones, because you’re the only one that knows how to do that and why you did it, they won’t, and the showing them all those dental hacks, and if and the real awkward one outside the box thinking here is I did this when I worked in a dental practice. We we recorded we put a cameras in the office and recorded the first few months of associates interacting with patients. Later, we didn’t do video, we just mic them up and we looked at we have the patient sign-off that was being recorded for internal training purposes only and it’s amazing when somebody sees and hears, you know, listen to them still speak, on camera or on audio. Tell you one thing, the next time they speak, it’ll be a lot better. I mean, it’s awkward, it’s very awkward, but if you record yourself and play it for them and beat yourself up in front of them first showing that, “Hey, I’ve been doing this for 10 years, but I’m still a student of the game. Man, I knew better than that. I should have said that differently,” and then you listen to them and you praise them for like three things that they’re doing really well. And then say, “You know, let me give you three things to add to your arsenal that next time we’ll get you better case acceptance or you know, you’ll find that people will move forward with treatment or whatever it is you want to work on.”
Victoria Peterson 22:04
You know, that’s pretty awesome. What uh. This is amazing. We’ve been going for quite a while here on one question, what should a mid-career doctor you know, who wants to maximize their return on investment for their practice be thinking about and, Chris, you’ve given us so many great pearls. I know we’re going to continue this dialogue probably go into podcast episodes 1.1 1.2 1.3 because this is really good stuff. Thank you all for being with me this evening. This is just amazing.
Chris Sands 22:37
Thank you, Victoria.
Thank you for tuning in to this episode of Investment Grade Practices podcast. If you find value in this episode, help us spread the word by passing it along to a dental friend subscribe and give us a Like on iTunes or Spotify. Learn more about building your Investment Grade Practice at productivedentist.com Today