As humans, we tend to believe things that may not necessarily be true because they fit our view of the world. These “lies,” or innocent self-deceptions, may seem harmless, but can in fact be very costly to a professional practice in terms of time, money, and satisfaction. As advisors to dentists, we have found the following to be the most common “lies” dentists tell themselves:
1. I am a doctor, not a business owner. Success is guaranteed.
Many dentists struggle with the challenges of owning a business. Some will proudly tell you that they didn’t become a dentist to make a profit, but rather to help people by treating dental diseases. Being a financially successful dentist and being a good doctor are not mutually exclusive. In fact, in order to be there to treat your patients, you or your employer must make a profit. In today’s world you must devote time to the business side of your practice.
2. Budgets are a waste of time. I just check whether I’m doing better than last year.
Just the sound of the word “budget” sounds confining and restrictive. We all want the freedom to spend as we please. Ironically, when budgeting is proactive, the process “frees
up” money that tends to get wasted. Budgets provide the dentist three significant benefits:
- Budgets set revenue and expense goals. Studies have shown that people are more likely to accomplish goals that are written compared to those that are not.
- Budgets ensure the efficient use of resources. Setting and reaching revenue goals ensures that cash is available to meet all obligations. Expenditure goals ensure that resources are directed toward those activities that will move the practice forward toward a well-defined goal. Finally, a dentist is less likely to impulse buy because expenditures have been determined in advance.
- The budgeting process helps the dentist internalize the practice goals, resulting in better practice management decisions.
Simply depending upon last year’s numbers to manage one’s practice is like driving a car by looking in the rearview mirror. Start budgeting and experience the freedom.
3. Scheduling for production is all about money.
One of the most dramatic improvements you can bring to your practice is to learn to schedule for productivity. Often, practices confuse being busy with being productive. Scheduling for productivity is about time management. A good scheduling system maximizes the efficient use of both doctor and staff time. Done well, scheduling can reduce stress of patients and staff, improve patient satisfaction and reduce the time a patient will need to spend in your chair. A few dollars spent with a qualified consultant can pay big dividends.
“One of the important lessons doctors must learn is that each and every one of their staff contributes to their success or failure. […] Being appreciated is one of the top reasons employees continue to work for a particular employer.”
4. I have more important things to do than plan my equipment purchases. I can wait until it wears out and then buy what’s currently “hot” at the dental convention.
Planning equipment purchases seems like a mundane task. However, the money saved by doing this planning can be pretty exciting. Most practitioners finance the purchase of dental equipment if the amounts are significant. However, by planning ahead and saving rather than borrowing, the results are positive and dramatic. If a dentist expects to acquire $50,000 of dental equipment in three years, simply setting aside the funds in an equipment reserve account can save $8,200 (assumptions are 5% rate of return, 40% tax bracket, 7.5% interest rate, 60-month repayment term for equipment loan). Money-saving ideas occur when the dentist develops and works a good business plan in partnership with an accountant that understands the dental industry.
5. Staff are all overpaid and don’t appreciate their job – or me.
One of the most important lessons doctors must learn is that each and every one of their staff contributes to their success or failure. Studies have shown that 68% of patients that leave your practice do so because of something your staff has done. You need to create a culture where everyone works towards the practice success. Being appreciated is one of the top reasons employees continue to work for a particular employer.
6. Leadership training doesn’t apply to our practice. We’re all professionals and know what we’re doing.
How would you feel if you were boarding a flight to London and overheard the pilot say, “We don’t need a flight plan today; we can just ‘wing’ it?” Most people would feel nervous and uncomfortable because they want the pilot to know the best course, be aware of bad weather, and anticipate air traffic conflicts so they arrive at their destination safely and on time. Likewise, patients and staff want the dentist to have a clear idea of where the practice is going and to assume a leadership role. When everyone is pulling in the same direction, astounding results occur. If each person on your dental team cannot clearly articulate and enthusiastically support the practice goals, then the practice has a leadership vacuum. You are the person responsible to fill that vacuum. Improve your leadership skills and your practice performance will soar.
“Waiting even five years [to plan for your retirement] can cost you a large amount of money, and putting off funding retirement indefinitely will most assuredly put your ability to retire at all in jeopardy.”
7. Staff meetings are a waste of time and money.
One of the symptoms we see when a practice is struggling is the lack of communication between the doctor and staff. Well-run practices understand the value of staff meetings. Staff meetings take several forms. Each day should start with a morning huddle to review the day about to take place. At least monthly, the practice should set aside a couple of hours for a full staff meeting. The staff meeting is a great opportunity for training, problem solving, review of systems, and holding team members accountable.
8. Our practice is not experiencing any problems. We can afford to coast.
After working hard to build a practice, a dentist must guard against complacency. Little thoughts creep into one’s mind, “Everything is going well. I think I’ll coast for a while. I deserve it.” In times past, people manufactured horse drawn carriages, steam locomotives, slide rules, and typewriters. Today all of those once-useful products are obsolete. We sometimes forget that the world is constantly changing, and if we are not constantly changing, our dental practices become obsolete. If your practice looks the same as it did three years ago, is likely a red flag warning you to innovate, upgrade, and improve. A dynamic business plan will include innovation and improvements. Create or update your plan, and use it as a daily guide.
9. Our practice will never be embezzled. My bookkeeper has worked in our office for 20 years and is totally trustworthy.
Of course we trust our employees; we would never hire a person that we don’t trust. Trust is crucial to running a successful business. As prudent business owners, we always insist on honesty and ethical behavior. Despite the best of intentions, a substantial number of dental practices (15% to 20% by most estimates) unfortunately experience fraud or embezzlement. In order to protect business assets while simultaneously maintaining high employee morale through mutual trust and support, a dentist must implement and maintain “internal controls.” Internal controls are simply self-checking systems that constantly alert the owner whether business assets are being handled in a responsible manner. Internal controls can include a record like a day sheet, a procedure such as checking daily production totals against the schedule, or a policy such as “checks must always be signed by the dentist.” If you are unsure whether your internal controls are protecting you, contact your dental CPA.
10. I can wait until later to start funding my retirement.
We believe the first day a dentist should begin planning for his or her retirement is the first day of practice. Developing the discipline to save for retirement early is the best way to meet your retirement goals. Consider five different dentists who each contribute $25,000 per year towards retirement but started at different ages (35, 40, 45, 50 and 55) and earn a rate of return of 6%. The dentist who starts at age 35 contributes a total of $750,000 and accumulates $1,976,455. The dentist who waits until age 40 only accumulates $1,371,613. Waiting to start at age 45 only allows the dentist to accumulate $919,640. Waiting until age 50 results in accumulating only $581,899, and $329,520 if you wait until age 55. Waiting even five years can cost you a large amount of money, and putting off funding retirement indefinitely will most assuredly put your ability to retire at all in jeopardy. There are many qualified plan choices for dentists today that provide flexibility and tax advantages. Your dental CPA can help you choose the best plan for you to meet your retirement planning goals.