Ever get the feeling that you’re not seeing the income you spend your days trying to produce? Despite all the tricks you learned in school and all attempts to create an efficient clinical practice, if it often seems like you’re doing little more than treading water financially, you’re not alone: Even dentists with good business sense struggle to understand why they have so little revenue to show for their work.
“I’m a dentist, not a banker!”
If you’re serious about improving the cash position of your dental practice, a good first step is to admit what you know–or more likely, DON’T know–about the financial side of running a business. This is no place for your ego: you are far from being the first person to go into business knowing your business … but not knowing the ins and outs of running one. Surviving in your own business is already statistically dicey … there’s no point in raising the odds just because you don’t want to ask for help.
Even you do have a head for business, personally handling everything from billing to collections to chargebacks eats into your time. Hiring a financial expert frees up all the time you’re currently spending managing tax, investment, and other financial matters: an expert will handle it more quickly and efficiently, you’ll have more time to actually earn revenue, and you should end up seeing more of the revenue you earn.
What to look for in a financial partner
The thing is, being a great financial advisor isn’t necessarily enough. While they may know the basics, it’s rare to find a personal financial advisor with the specialized knowledge and experience needed to navigate the particular waters associated with the management of funds for a dental practice. Think of it this way: if you’re a general practitioner, you probably know the basics of how braces work … but you’re smart enough to know you’re not really an orthodontist.
By the same token, the revenue streams and tax strategies that dentists typically employ in their practices are a bit different from, say, a law firm or an advertising agency. If we’re honest, most of us probably haven’t totally kept pace with the latest trends in dentistry–and if we aren’t totally up-to-date in our thinking, why should we expect it from someone in a completely different industry? The only reason to be an expert in both finances and the peculiarities of dental practices is that someone chooses to specialize in financial management for dental clinics–hard to find, sometimes, but that’s who you should be looking for.
A quick look at the resume of a dental-focused advisor or CPA should immediately tell you if a person has the necessary expertise in the world of dentistry. Experience will make all the difference in the world, in terms of the advisor’s ability to guide you with advice specifically tailored for your dental practice–and that should result in a dramatic positive impact on your bottom line.
When you retain–and learn from–a finance whiz who knows his or her business as well as you know yours, any fees paid to that person should ultimately produce a measurable ROI. Even your own efforts in financial management can be substantially more effective when backed by expert support. And as we mentioned earlier, you’re also creating extra time to work chairside, which should feed your revenue stream.
Immediate action, long-term results
You may love dentistry, but do you really want to be doing it forever? If you’re running your own practice, you need to make sure you have a proper retirement plan for yourself and your staff. Many dentists and advisors use off-the-shelf (or off the internet), boilerplate plans that are not customized for the specific needs of your practice. That’s less than optimal, at best.
How so? Well, an artful financial advisor will know when a defined benefit pension plan might be a better option than a defined contribution plan, for example. He or she will also understand how a custom designed retirement plan can be used to create the best balance of benefits, cost, and tax savings. That in and of itself can save you a bundle. Finally, your advisor should be able to set up your plan so the maximum payoff goes to you–not Uncle Sam.
Putting money where the mouth is
The physical assets required to operate a dental practice are not cheap … and trying to GO cheap can do more harm than good. Again, we’re talking long-term here: assessing financing for equipment, evaluating real estate holdings, establishing and managing credit lines for your practice … these are all areas that can impact the cash flow of your practice. The shortest loan term at the lowest interest rate may seem like the least hassle for you, but it isn’t always the best way to finance for maximum cash flow and accumulating savings.
A good adviser knows that a higher interest rate and longer term can mean less monthly out-go and savings that can be funneled into savings or retirement. Like we said, managing that would be a hassle for you, but hiring an expert to do it can save you stress and money.
And, too, sometimes it makes better financial sense to lease equipment, especially highly technological equipment with its constant upgrades. Same goes for office space. Doing the legwork on all this is what you pay the advisor for … and as we keep stressing, that will more than pay off in the long run.