Principle number 3 of the Profit First for Dentists system is to remove temptation.
Once an entrepreneur begins to fund the Profit Account and the Tax Account, money will begin to accumulate. Over time as this cash grows, it might be tempting to want to use it all and plow it back into the business. Please don’t do this! This action of plowing back into the business all your profits will actually cause the overhead to go way up and it totally defeats the purpose of the Profit First method.
If you find yourself tempted to use the money in the Profit Account or the Tax Account when the Operating Expense Account gets a bit low, then determine straight up that having the No Temptation Accounts will be your friend. The No Temptation accounts are established at the bank across town. The No Temptation Accounts hold the money in the Profit and Tax Account in a place that is more difficult for you to access. This is a no frills Savings account...
There are four core principles in the profit first system.
The first one is the principle of Small Plates. Since the early 1900’s the size of a dinner plate has changed from about 8 inches in diameter to now about 12 inches in diameter. Think of the amount of food on an 8 inch plate versus a 12 inch plate. If we want to eat less, it makes sense to use a smaller plate. Now translate this into a bank account. By using multiple bank accounts and dividing the money into these accounts, there is less money available in each account for a specific purpose. It’s been proven by having less available, we spend less.
The second principle is to Serve Sequentially. This means the order of things matters. If we eat the healthy good food first our appetite will be satisfied and we’ll eat less of the unhealthy food. Likewise order matters when dividing your money into these multiple bank accounts. It’s important to...
Here we are at the last blogpost in this series, The Business of Owning a Dental Practice. I can’t believe it’s been nine weeks now. Thanks for hanging with me and if you haven’t yet read the previous eight posts, please go back and check them out. You’ll find some good stuff.
Today’s topic is all about GAAP and the Profit First Equation. You know by now, I’m the Profit First for Dentists lady. Yes, I do teach and coach dentists using this method. I also wrote the book and my hope is that more and more dentists will read my book and implement this cash flow system in their practice.
Why? Because it works! And I believe dentists are some of the most hard working people out there. They deserve to be paid well and I don’t always see that happening.
Let's get to the topic today. GAAP stands for Generally Accepted Accounting Principles. These principles were created and put into law in the...
I’m grateful for you today as you are here reading this seventh of nine blog posts in my series, The Business of Owning a Dental Practice. I’ve been sharing a new blog post each week here on my website (blog tab).
Today’s topic is ‘More New Patients.’ Every practice out there is always working on their New Patient numbers. It’s a given, there will always be the need for more new patients. I’m going to address this topic from a Profitability perspective.
I believe it’s important to have a specific target number for new patients. This will depend on the size of your practice and the number of providers. If you are in rapid growth mode, you may be hiring more providers as you increase the new patient numbers. You must know what you and your team can handle without any service failures.
One of the biggest issues I see with a practice in hyper focused rapid growth is the sudden increase...
This is number six blogpost in this series The Business of Owning a Dental Practice. If you haven’t read the first five blogs in this series, please take some time and check them out.
Todays topic is all about dealing with Benefit Plans. I know this is such a hot topic these days. There are specific coaches and consultants out there who’s sole mission is to help dentists get completely out of these Benefit Plan contracts and others who help dentists increase the payments they receive from the insurance companies, and yet others who help with efficiencies and team training. Nothing wrong with any of these approaches and in fact these consultants do good work.
My approach here will be purely from a profitability perspective because that’s what I do. I believe good business decisions are made from true data. It takes some work to make sure the data you are analyzing is true data. It’s only true if the...
This is blog five in the series The Business of Owning a Dental Practice. Todays topic is to discuss a Production Model or a Profitability Model of business and why more production doesn’t always lead to more money in your own pocket.
The prevailing theory of most dentists I speak with is the belief that increasing Production will grow their practice. The dentists I speak with usually have an annual number as their set goal for Production. And I fully support setting a production goal but it’s not the measure of practice growth I would choose to use.
That’s because I’ve worked with way too many dentists who came to me because they had done everything possible to increase Production and Collection only to find their expenses increased too and they themselves did not really make much more. They were frustrated with all of the extra work it was taking to make the increased production happen and then not see the reward for...
This is blog number four in the Business of Owning a Dental Practice series. So far we’ve talked about Technical Training vs Business Training in the first blog and last week was all about Debt in a Dental Practice and how to pay it down quicker.
Today’s topic is for any Dentist who feels stuck at the chair having to produce more and the idea of beginning to plan for an exit strategy some day – so you no longer keep feeling stuck.
If you’re beginning to feel some burnout, think back to when you first started or purchased your practice. Remember how exciting of a time it was. Your energy was probably high and you were willing to do anything to get this practice producing more. Then comes the day when you realize the daily grind is getting to you. Maybe you feel tired. Maybe your back hurts. This is when you start to feel stuck at the chair. And it’s common to start wondering about how...
This is the third blogpost in the Business of Owning a Dental Practice series. Today’s topic is Debt. Primarily I’m going to talk about Business Debt but you could apply the same principles to personal debt as well.
Owning a dental practice generally comes with acquiring debt, at least for most dentists. Whether you do a scratch start or you purchase an established dental practice, to pay for it, there will likely be a loan.
Add to this business debt, any personal debt you may have such as dental school debt, a home mortgage, vehicle loans, and possible credit card debt, and you find yourself swimming in debt.
It can feel heavy or even stifling to think about all the debt.
Let’s first break it down into ‘good’ debt and ‘bad’ debt. Debt incurred that increases your revenue and does not cause a bigger burden for your business could be considered ‘good’ debt. ...
I’m a Recovering Perfectionist!
However, perfectionism doesn’t really exist! Being hard on yourself because you’re not perfect is just wrong. I am a person who strives to make things perfect and what I’ve learned is this is a big ol’ Rabbit Hole! It’s never ending! And it's never going to be perfect.
So instead I’ve changed my mindset to be one of ‘Doing my Best’ rather than thinking it needs to be perfect. It’s so easy to get caught up inside the mind replaying conversations and actions.
With Profit First I’ve found many dentists think everything has to be perfect before they can get started. And that’s just not true. Waiting to begin only puts you behind on the increased profits you’re going to realize. Why would you want to wait on that?
Dentists tend to be analytical people. They like to check, and re-check everything before making a commitment....
Once you have taken stock of the debt situation you are in, it’s time to make a plan for Debt Reduction. In order to pay down your loans quicker, you must have additional cash flow (profit) in the business.
The Profit First model is great for this because you are already setting aside money in the Profit Account. Once you really get a handle on the overhead it’s simple to put more in the Profit Account.
The Profit Account is used for quarterly distributions to the owner doctor. Remember, this is the pay for doing dentistry in the practice. The Profit Account may also be used to pay additional principle on any business loans or credit card balances.
When you decide to use part of the distribution for debt reduction, the owner will now take less in distribution for personal use. For example, the typical owner distribution would be 50% of the Profit Account deposits for the quarter but with focused debt reduction, the owner might...