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...
Dentistry is an expensive profession. It’s costly to go to dental school. Then to either open or purchase a practice is another significant investment. It’s very likely that debt will be incurred in this process.
Most dentists I work with are still paying on debt. These monthly payments can become drudgery in a short time. It can seem never ending! And on top of practice debt, there’s personal debt. Whew! The pressure to produce is real.
With the profit first model, debt can be factored in when considering profitability. What I mean is this. A portion of the Profit Account distributions may be used for some additional debt reduction if that is the goal of the owner. A system may be put in place with a plan to eradicate debt sooner.
First, begin by taking stock of all debt. What exactly are you paying out in payments every month? What percentage of collection is this? Is any of this bad debt, like credit card debt that...
If you think about your dental practice, I’m sure you’ll find you have a daily rhythm to things. Most of us would say we have personal daily rhythms as well.
We tend to rise and start our day very much the same from day to day. The rhythms of our life provide an unwritten structure that actually then perpetuates the rhythm to continue.
The same is true of your business, your dental practice. When implementing a pattern of behavior in a rhythmic cycle, we are much more likely to continue to take action. Taking action is where the magic happens with Profit First.
A weekly rhythm of allocations and transfers seems to work best for a dental practice. Income flows into the practice daily and then once a week, it’s time to allocate by percentage and transfer money to the additional bank accounts set up for a specific purpose. Those accounts are for Profit, Owner’s Compensation, Taxes, and Operating Expenses.
As money flows into each account, it is...