Dental CEO Podcast #39 – Understanding Your Financials: The Path to Lower Overhead & Higher Profit

So when you look at your financial statements, if you do, do you understand what's happening? Have you thought like, man, we're working so hard, but I just don't seem to be making as much money? Maybe your solution is, I, I just need to squeeze more people into the schedule. We need more new patients. But I want us to take a step back. Let's have a little bit of a reset on our expectations of what it takes to run a good dental practice from a financial standpoint. What should that financial statement look like? What should we be looking at every month? How do we get it clean? What are the right percentages? And damn it, we need to have overhead less than 50% mandatorily, it needs to be under 50%. That is what this podcast episode is about. I've brought in Morgan Hamon from EAG Dental Advisors, a partner of the company who has more experience than almost anyone else I know in looking at practice financials, not just of practices that dentists own, but Also of practices dentists want to buy. And we are going to be walking through, what should we spending? How much money are people making? How do we clean these things up? Why do financials look the way they do? And how can you have a new chapter start tomorrow where you understand the money side and get what you need? That is today's episode on the Dental CEO Podcast. If you like what you're hearing on the Dental CEO Podcast, please take a few moments to leave us a review on your favorite podcast platform. All right, Morgan, so again, thank you so much for joining us on the Dental CEO Podcast. I have known you for a long time. I have watched your career, your entrepreneurial journey just blossom into huge amounts of success. But a lot of people maybe don't know who you are. So if you could, in a couple sentences, just kind of give us an idea of who you are and what you're doing. All right, well, thanks for having me, Scott. It's a privilege to be here. Appreciate it. Yeah. My name is Morgan Hamon. I'm the partner in charge of Eisner Advisory Group Dental Advisors, and we support private dental practices across the country. And we've been at it 16 years and counting. It's been an incredible journey and looking forward to a lot more years. Yeah. So EAG Dental Advisors, a lot of what you do is bookkeeping and accounting for practices on a consistent basis, right? Correct. So we do monthly financial accounting, what we call profit advising, and then tax planning and of course the tax compliance. Excellent. And you said for private dentists, so your clients are owner operated practices for the most part. We're not Talking about large DSOs, these large kind of groups. These are for the dentist that owns their practice and they don't have a whole bunch of locations. Correct. That is us. Yeah. It is the doctor that enjoys having their name on the door, being the clinician, the business leader. Private dental only. Yeah. Excellent. Okay, so there's a lot of things I want us to talk about because I feel like there's. There's been so many changes in dentistry in the last 10 years. Business models have changed and evolved. I'd love to get kind of a state of the industry, any sort of like industry update. How are things going from your financial viewpoint? Things are going good and I'll say steady. So we measure this every month and full disclosure, our window into the private dental world. We support about a thousand private practices coast to coast, all 50 states and year over year growth. Revenue is up three and a half percent. And so we do this on A on a rolling 12 month measurement every month. And so top line revenue up 3 and a half percent, total overhead up about 3%. So if you think about it, your revenue number should be bigger, right? That's growing a little faster. What that equates to is industry on a whole, profits up about 5% year over year. You know, I view that as healthy growth is out outpacing inflation. Okay. And you know, you're getting this information again for listeners that those of y' all listening, you have not seen what I've seen. So you guys are reconciling, you know, all the bills that are being paid are being properly allocated on financial statements for practices and these practices are getting super clean monthly financial showing the percentages of all the different kind of expense categories and ultimately of course what the overhead is, take home pay is what EBITDA is and you know, balance sheets as well. And so you're looking at a thousand practices of that data to let us know, okay. Year over year, collections or revenue collections are up three and a half percent and overhead is also creeping up a little bit, but a slower pace. Did I say that correctly? You said that correctly. So what we look to provide the clients is a dashboard style report. So it's not just the raw financials. And just like you said, we'll aggregate it and then show them so they can focus in on what matters. But yeah, we see that every month, as I explained to the doctors, every dollar that moves in and out of that dental practice, we're going to code, reconcile and organize into financial statements. So it's very clean and it's up to date practices. We all kind of have financial statements. But I call on most accountants helping dentists because those financial statements are not accurate. They're not even usable to run the day to day. It's basically just a duct taped together set of records to maybe run taxes at the end of the year with no proper planning. You said it exactly right there at the end. And that is the CPA world. Most accountants are very tax oriented. They want to do tax planning, a little bit of tax planning at your end and do a tax return. So most of them won't do bookkeeping. They don't think they can do that profitably. If they do bookkeeping, they view it as a loss leader. It gets farmed out to the back room, which is why it's always out of date. It's generic and like you said, it's not really that usable. But it's, it only exists to basically crank out a Tax return. So I coach clients one on one and it's a pretty big program we have. And the first thing I do in our relationship is I get a copy of their financial statements and I go through them and we find all kinds of areas that need to be addressed that can make them money very quickly. I'm always annoyed because I can't. It takes multiple rounds of cleanup for me to even get a question answered. Like, how much did you spend on supplies? Right. Like even that simple question. It's I've got small tools and equipment mixed with supplies mixed with, you know, or got office supplies and software costs mixed together and you know, even how much did you spend on staff? Oh no, they, they lump the payroll for the doctor and the staff just in a payroll expense, like payroll tax expense I can't see is a mess. What do you guys see when you get a new client coming in and you. We, that's exactly what we see. And you know, we support a lot of dentists who are doing a first time acquisition. And so sometimes they will ask me, when they're in that process to just be a second set of eyes over the seller's financials. And that's where I see it. And what I'm trying to do is tell them. I think what you're trying to tell them is, you know, what is a reasonable expectation of what's going on in this practice. And so I have to go through and normalize it. And I see all those same frustrations, particularly with payroll. They're lumping everything together. If there's even sometimes don't even have dental or lab costs, supply costs. So, you know, we have to do our best. And sometimes I just have to tell the doctor, look, based on everything I can determine, this is what I think it is. But ultimately, you know, without detail, you can't get there. And so when those clients come on board with us, they go to our onboarding crew and that's where we just have to tear it apart and redo it basically. Yeah. So as a consultant and as a practice owner, there's some specific categories on the financial statement I need to see every month. I need it perfectly clean because these are areas where things can get out of hand. And I've got percentage goals that, that apply to kind of the private practice dentist. If you go into DSO models, the goals start changing a little bit. But I'm just going to list them off for the listeners here. Office supplies and dental supplies combined, not including implant parts, but everything else combined should be less than 4%. Top performers are less than 3% collections lab which does not include invisalign fees, just everything else on the lab should be less than 5%. Top performers are less than 4%. We've got merchant fees that should be zero. Merchant fees should not be lumped together with carecredit fees or patient financing fees. That's something separate it costs in this day and age. You know, it support should cost about 500 bucks a month. Unlimited it support depending on of course the operation of the practice. And then we got non doctor payroll costs that should be 20 to 25%. Top performers are closer to 20, especially if they're got some out of network, they do some specialty procedures. And the overhead of a practice as a traditional dentist would kind of calculate it should be less than 50% if it's a single dentist. If it's multiple dentists, we should be closer to 40% overhead. So that take home pay is going to be 50 to 60%. But that take home pay includes discretionary spending. So you paying for the vacation to the Bahamas to take one course, that's take home pay. That's not a business expense, that's just a discretionary thing. You're running through the company for tax benefits. So that's not part of overhead. And so those are just a really quick example of things I look at. In almost every practice I see there's $100,000 plus of just thrown away profit and the dentist doesn't know because their accountant isn't organizing in the way where the dentist can even see it. So it's just by gut they'll go a decade overspending and it's just frustrating to me. Is there anything I've said that you would disagree with or something that I've. I haven't talked about that, that you. Look no, those very much in line. What you described is very similar to what we call our chart of accounts which is how the books is organized. And you have to have clarity on all those accounts. You the one account that we probably invest the most time scrubbing, for lack of a better word is the dental supplies. Because let's you know, we all know Shine Patterson, they sell everything under the sun. And sometimes if they are, you know, power buyers of like Patterson for example, we'll actually ask for their login. So at the end of the month we can just go in and see what all did you buy. Particularly if they're paying off the statement and they're just writing a huge check once a month. So we'll have to go through and just specify that, because it does matter. The last thing we want to do is point out, like, a high supply cost if, like, you said it like, they bought new handpieces. Okay, we don't need to go on that mission. There's other things we can focus on. All those cat. One of my favorites, one of the worst I've seen is, to your point, $100,000. I was doing a pro forma analysis on a doc looking to buy a practice, and the accountant had, I think it was $80,000 in reconciliation discrepancies. I mean, what do you do with that? You can't run a business with that. Another area is a lot of dentists buy things on Amazon for themselves, but they run it through the practice, right, to try to play. Play a game with their taxes. So a way that we can make that a lot easier for the accounting firm for bookkeeping is we could have kind of a discretionary business credit card so that those statements come in and we know, okay, that's going under the discretionary category inside of our business. Is that something that you've seen, or are there other ways to handle something like that? So, as their CPA advisor, I tell them, look, I. We ask that our clients keep some disciplined separation between their business and their financial personal life. So, look, if you're paying the shine bill, pull out the business card, you're on Amazon or at the grocery store, pull out the personal card. I mean, that. That's the best way to have the cleanest records. And IRS audits are fortunately very rare. But there's a few things they'll look for immediately, like cash skimming and then also just using the business as a piggy bank. And if you do that, you're really. You're playing a risky game. And so I think to your point, yes, we have an account for that where if we see a lot of personal items where we just can't sign a tax return with that, we basically count it as a profit distribution, which is appropriate. But that separates it to your point, out of the overhead, so that the numbers are clean. Okay, so I want to go down another path here. One valuable thing that we need as dentists is when we buy a practice, when we're looking at practices to buy, we need an expert helping walk us through what to expect financially from this acquisition. And I don't think I've ever seen a set of financials that a selling dentist has that they're using to market their practice that has been scrubbed and pro forma Doubt to be representative and factual on well, what happens if we buy the practice? Right. So their financials haven't normalized paying a dentist or you know, haven't normalized all kinds of expense categories and so it always looks so confusing. So can you walk us through the process of how you kind of help someone in analyzing an acquisition? So I'll ask for the most recent profit and loss. Sometimes they'll want to give me the tax returns. Just keep in mind the seller's tax situation is not related. The reason you look at a tax return is to make sure they're telling the government the same thing they're telling you. But I'll ask for just a current P and L and then I have a worksheet where I will go through and it's a template and I'll go through to start normalizing. I'll start picking out as best I can and putting it in the categories that I have. And occasionally I'll have to do some homework. So if I see look all the payroll costs are lumped together. If it's an S corp I'll go jump on the business return, pull off the officer wages. Then I have to estimate payroll taxes which I'll do. And if they're paying the kids or they got the car or we see 50,000 in legal expense that's probably not going to be applicable to the buyer. I just pull all that. I add it back to profit trying to normalize it. Then I'll take the dollar amount that they're going to pay. I'll work up an amortization schedule assuming they're financing and I'll build that interest expense and deb service in just so that we're painting a reasonable picture that if they bought this practice and continued to operate it just like the seller. Keep in mind we're not paying the kids and writing off the car and doing all the other stuff that's all been added back to profit. This is what you could expect for some baseline take home income with a huge caveat is that with an asset purchase they're not buying that doctor's business, they're just buying their stuff and they might practice differently. So if it's a retiring dentist that isn't that's referring a lot of stuff out. And this new doctor has a more expansive skill set that's now going to keep all that in. Guess what? That's production they're not paying for and their financials are going to a whole lot better. But that's my process is I just I line them up and I just go normalize it as best I can. And if there's any assumptions, I'll communicate those to the doctor. Just trying to give some clarity on what they could expect. So what I'm thinking about when you say this is, you know, first we need to understand, if I buy this practice and nothing changes, for better or for worse, do I have enough money to make the loan payment on the practice and take home enough as the owner, right? Then I need to ask myself, am I paying the right price for this thing? Because sometimes the price is too high or really low. Once we do that, that exercise, the pro forma, right, Scrubbing of this whole thing. So once we normalize the data, we should know, can I afford to buy this? And is it the. And, oh, my God. Those are very important things to know, right? Can I afford to buy it? Is it the right price? Then we want to, if possible, scan their practice management software and get a sense on, you know, what their case acceptance is like, what's the reappointment rate like? Are they diagnosing dentistry? What kinds of dentistry are they doing? So the operational numbers, not the financial numbers, but the operational numbers. And that gives us a very good kind of look into where the problems are. And how can we better this? How can we grow this thing? And if we can grow it without adding staff, almost all that growth is profit. 90% of that growth goes to the bottom line, right? So if we're buying a practice that has openings all over the schedule and they've got low case acceptance and low diagnosis, we can grow that practice and fill those holes and not have had to hire two more hygienists, right? And so it becomes very profitable, as opposed to buying a practice that's a top performer, that has no openings in the schedule. And now growing that thing is going to be a different strategy. You know, that is kind of going through my mind as you're, as you're describing this. But to repeat what you said, just because I know a lot of listeners maybe have never seen this, what we're calling proforma. That's when you take the seller's financials, the dirty financials. They're a mess. And you go line by line and you adjust them up or down, you adjust the expenses up or down, depending on what's appropriate. So your staff expense goes down. If they've been paying their kid who hasn't really been working, you're not going to pay their kid after you buy it. So we're going to adjust the staff expense down or the expense can go up if they had their wife working there and she wasn't getting paid. And now you buy the practice, you got to hire a scheduler and pay them right, those. So the staff expense goes up. So you go through that process and you make all of those adjustments, and now you've got a set of financials that are a lot closer to accurate or to what we could expect. Did I describe that correct? No, that was. That's exactly what we do. We go and we normalize it to show them. If you stepped into their shoes and did everything largely the same, this is what you could count on. You know, I don't want to go too deep into tax because that. Oh, my God, that's. There's a lot to talk about there. But, you know, we've had the new big beautiful bill thing signed with 100 bonus depreciation on leasehold improvements, I think, and on a bunch of equipment purchases and stuff like that. Have you seen a shift in the last few months of what people are doing today to try in dentistry to take advantage of that? Not really. It doesn't change. The advice, and here's how I've always looked at it, Scott, is that when we're talking about making those capital purchases, those investments, it's always the clinical and operational needs of the practice drive that, you know, we never want to just go buy things to avoid tax. So if you need it, if it'll help you practice the way you want to practice, your office needs it, then by all means, do it. What we're really talking about on these is timing, right? Because you still get to deduct 100% of whatever money you spend on a business expense. It's just all a matter of timing. So bonus, for example, means we can just take it now rather than waiting, you know, five years for that medical equipment. So I haven't seen a change because the advice largely stays constant. Like, if you're this time of year doing really well, you're looking at a tax liability. And you know you're going to make this capital investment in the next six months and you're doing it for the right reasons, you're doing it for the practice, then, yes, there's. We'll say, well, look, if you're going to do it anyway, like, let's get that placed in service this year. That'll be a nice tax benefit this year, when we already know you have a big tax liability. But keep in mind, you only get your party once. So if you ducked it this year, you don't have it next year. So it's all just timing. To answer your question, I've not seen any significant change in habits. I think the advice remains consistent. Yeah, that's really well said. Now there is a change I've seen outside of dentistry. So imagine we've got a big personal or imagine we got a big tax liability. Let's say we're going to owe $300,000 in taxes. I'm just naming a number. We could. Option A says, let's pay $300,000 tax bill. Okay. Then we spend 300,000 and we paid our taxes. Option B says, let me put $300,000 of cash down and get a loan on top of that to buy a business at cash flows. That will give me bonus depreciation and as long as the cash flow can at least cover the note on the business and then some extra cash for Buffer. I basically have also spent 300 grand in scenario two of my own cash. But now I own a business. Now, you know, and certain businesses are very asset heavy. Right. Like okay, you, you own a yacht charter business. All the assets are yachts or plane charter business or even a laundromat and even other dental practices. Any sort of new construction you do. All of that is very asset heavy and you get bonus depreciation on a lot of that. So I' that kind of bigger strategy of can I shift a tax liability into a cash flowing entity? Not an expense, just buying a toy or a piece of equipment. We're going to, only we're still going to spend so much money doing that just to save a little bit. But if I can buy a business that then pays for itself, that might be something interesting. Yes. I'd say the most common scenario we see along those lines is practice number two or number three. Not. I've not heard the, the yacht, but. Well, I bring that up because my son just got in international captain's license to be a yacht captain. He's actually going to finish. Yeah. At age 16. He was in Spain doing this this summer and he, he's going to finish high school online so he can put more time on the water. And at 18 he wants to own a small yacht and charter it out and make the same amount of money a Dennis makes. And I'm like, well, I mean, I think I could take bonus depreciation if I bought the yacht, you know. Okay, so I'm on. So anyway, that's why I bring up the yacht chartering thing. Okay, so what are Some ways you've seen Dennis make more money. So you, you've got kind of this glimpse into their financials. And of course you've got so much experience working with private dentists. But are there certain things we haven't talked about that you feel like dentists need to think about as options to like improve their financial situation? For years I've, as the accountant, if we're looking for opportunities for profit improvement, there's really two variables. There's the expense side of the profit equation and the revenue side of the profit equation. We've talked about both of those. If we're diagnosing low profit, then in my opinion, more often than not, it's a collection challenge. We'll pull that profit down just equally, if not faster than expenses. Always healthy to go through the expenses, as we've been talking about. But we actually ask to see what the accounts receivable aging looks like every month. Most accountants don't because our clientele, these private dental practices are what's called a pass through entity. They pay income tax on a cash basis. Whatever lives in your curve or your dentrix has zero to do with your taxes. So most accounts just don't ever ask. I want to see what that AR aging looks like. Because if we see significant receivables that are old and getting worse, that indicates a collection problem. And I, Scott, I can't tell you how many times have been on the phone with a doctor. They're, they're stressed about their cash flow, they want their profit margin to improve. And they say, where am I overspending? And I say, well, let's look at your ar. I mean, there's a million dollars practice and you have $40,000 sitting in 61 to 90. You just saw those patients two, three months ago. If that 40,000 were in your bank account, Nike, we'd be having a different conversation. So I think, you know, safeguarding the revenue side of the profit equation is really important. Paying attention to that, if that production doesn't ultimately turn into a collection, you know, everyone's still getting paid except the owner. And so they just, they have to make that happen. Yeah, that's a very cool point. So it kind of makes me look at this slightly different now. Traditionally when I analyze financials, I look for over. Well, I first start with what's the overhead? To give me a sense on do we have a problem? Is there an overhead issue? Do we have a gap? Is the overhead More than 50%? We've got a problem. Okay, well, where's the Problem coming from, let's say our overhead, 65%. Well, that means I need to find 15 percentage points somewhere, right? Where am I going to find it? And so then we go to the expenses, and we're like, okay, there's three points on supplies, there's two points. There's overspending on lab, there's two points on this and that. And you add it all up and you're like, all right, I found eight points of overspend. Okay, well, where's the other missing seven points? That's a revenue problem or collections problem. No, that collection problem can happen. From what you said, we're producing the dentistry but not collecting it. So old ar, accounts receivable, or we might be really good at collecting, we're just not producing enough, right? And so that's operations. That's am I answering the phone? Am I converting? Am I getting case acceptance? Am I reappointed? Like, all the operational stuff. One quick and dirty way to get a sense on if you've got a production or collection problem. Dennis, listening to this, you can look at two categories on the P and L, your rent category, assuming you're not paying unusually lower, high rents. But if you're paying a typical market rent, that rent category is probably going to be around 5% of your collections. And if you're finding that it's at 12 or 15, it means you're not producing and collecting enough. Right. You haven't grown big enough to fit in your rent britches. Right. Another category like that is staff costs, assuming you're not overstaffed, assuming you've got just the number of people you think you need. In today's environment of paying people, if that staff cost is high, chances are you're under producing and under collecting. So those two areas kind of give you a sense. Then you go into your software and you say, okay, well, are we under collecting? What's my ar? And that was your point, Morgan. And you're seeing that as. As a major issue. I think more often than not that that is the cause. If we're diagnosing, why is, you know, why is profit low? Yeah. And, you know, we pay all of our people to produce, right? So. So we have a production demand. We have to process patients through the day and create dentistry. And that takes people to do. Right? So our production is a function, you know, or the people we have is kind of a function of how much production do we have to do. But if we don't collect it, that the collection pays for them. Right. So. So Then it's. It's out of whack. Now, the dentist that you've worked with that found that they have these accounts receivables problems, what are some of the ways they've gone about correcting that? Well, this is what I tell them. And I tell them full disclosure. I am not a dental consultant, so I can't go in and teach your people how to submit the claim properly. But first you have to just know. You have to identify the problem. So I tell them, go into your software. Print out every patient balance is currently 60, 61 to 90. And the reason I pick 61 to 90 is I'm not concerned about current. Like, we're happy we just saw that patient. Even 31 to 60, you know, checks hopefully in the mail. But 61 to 90, we saw them between two and three months ago. It's not piled up yet in 91 plus, which could go back 10 years, like this is happening now. Print every patient balance, get a highlighter and go one by one. If they're on an approved payment plan, like, they're okay to be there. Just highlight them. That one's good. But then you got to ask yourself for all those other ones, why is it here? Did they not pay at time of service like they should? Did we underestimate the patient portion? And we're doing that constantly. You know, is there. Is it. Maybe it's. You find it just one insurance provider, we got a problem. You just got to find out what. What's the systemic cause of this, then you can go fix it. And that also, I think, has the ancillary benefit. If you sit with your billing, an insurance person once a month, you do that for a couple. Couple months in a row that they don't want to sit there and show you all the stuff that hasn't happened. That's going to, I think, set that culture in the office. So that's what I tell them, Scott, is just as a place to start. First, find out what's broken. And so those of you all listening Morgan mentioned, are they on an approved payment plan? So, unfortunately, most dental offices are not using the payment plan function in their software. So when someone's on a payment plan, it looks like it's bad ar, but it shouldn't. So you should be using, you know, your payment plan function in your software so that your AR will be healthy, payment plan AR will be separate from all the other ar. And then going line by line, I would say let's add a little bit of wording to what Morgan Said there's going to be patient balances and insurance balances and the problems that create those are completely different from each other. And so as you create a strategy of how to fix things, you want to separate out patient from insurance balances. You want to look at patient AR, that is 61 to 90 and then insurance AR, that's 61 to 90 is differently. And then ask, like Morgan said, what's causing it. And you know, Morgan, I hope all of us are a little bit feeling ashamed because I bet hardly anyone listening has ever sat down with their billing and insurance person and done that. How crazy is that for us to not do that? That we just blindly trust that this person or these people are trained enough and have enough time and help and are on top of it and are just naturally doing the right thing to just take care of all of this with no accountability, no oversight. I mean, it's, I'm a little bit of ashamed for us in dentistry that we're not doing this. That gets me thinking, Scott, I've always thought there's two, we'll call it levers for profitability, expense and revenue, those two sides of the equation. But I think there's a third. And I've been to your seminar a lot of years and I know you talk about this as well, but when I think about the dentists, I've gotten to know some of them very closely over the years. I get asked a lot about, well, Morgan, like, where's the hot area? You know, where should I locate my practice or which specialties are most profitable. And Scott, I've come to the opinion, I don't think neither of those are as relevant. I think when I consider our clients that enjoy the most success, whether we quantify that as lots of money or lots of free time or sometimes both, I think it's the dentist that is really an exceptional business leader. And that's a totally different skill set from being a clinician that they've invested in to acquire those skills and maintain those. And obviously you can't connect those dots on a financial statement or on paper. But I just, I feel strongly when I'm visiting with a client and you can see they're just killing it. They've got the 50% overhead, they've got the money, they've got the time. And you know, these are the doctors that, I mean, you know, they are excellent operators, business leaders. Well, I mean, we call our coaching CEO coaching, right? I've given CEO seminars. We are aligned in that thought because, you know, the age old Analogy where, you know, we spent four years learning the clinical side, but we got one hour learning the business side. Right. That gets old to hear that from so many people so often. But it doesn't mean it's not true. And, you know, we kind of have to like, have a personal trainer teach us, train us on all of the different techniques we have to have as a CEO. Techniques around understanding the big strategy of insurance and location and expansion, techniques around leadership and communication around even the operational side of like, what are all the recipes to get higher case acceptance and better phone skill and so forth. Like, there are so many of those things that we, we have to develop. Just like as a clinician, we had to develop a lot of skills. And it's not a simple switch, although it is a hundred switches and we can switch them one by one by one by one. And it gets brighter and brighter for us. But I agree, and that is why I think we see sometimes dentists that are very financially successful that aren't really great clinicians, you know, and we see the opposite, unfortunately. Wonderful clinicians that are very nice people and they are burned out and struggling, they're not very successful. And when we get bogged down with less profit, with more stress, that weight is so heavy that we just start seeing things oddly, we get burnout. We don't want to be in the chair anymore. We think, or we think the solution is let me hire another dentist. Or, you know, like we started saying weird things that don't align with what' logically correct. Now, you mentioned models. You know, what I've seen lately is this wave of practices that are doing full arch dentistry. And it seems like when they've achieved like the, the patient flow coming in for that, their financials look completely different because they're doing $50,000 case on one patient, not $50,000 for the entire month they're open. Right? And we saw a little bit of that like a decade ago when more and more general dentists were doing implants. But man, full arch has completely changed the game for some dentists. Do you have clients that you know of that are kind of doing the full arch game? And, and if so, what have you seen? We do. But full disclosure, we don't always know what the source of their fee for service revenue is like. We can see them doing well. We don't know exact was the composition of that treatment result in that revenue. Where I know they've started is sometimes we'll be on a call and we'll see some enormous volatility in month to month revenue, like big time. And so we'll ask like, what is happening here? And he said, well, they just got started in full arch. They had a few months, but then they went a few months like without one and it was just a big drop. And so when you have, I guess we'll call it all of your eggs in that basket. If you're used to Those couple of 50,000 cases showing up, when they don't show up, it results in some tremendous volatility in the month to month revenue. So that, that's a recent conversation I can recall. But otherwise we don't always know what they're doing to generate the revenue. I got another question for you. What are you seeing right now for people, your thousand private dentists, what are they taking home? What are some kind of on the edges of what you see? What are some of the high dollars of. Where are we at right now with that? So our client average is about a $1.4 million solo doc office average profit margin, about 35 to 40% is what we see. So a little lower than the numbers you're talking about. That's the data that we see. So you know, I tell our dentists 35 to 40% should be your profit minimum. Which means that I think on average our clients are, you know, they're making half a million dollars. Is. That's pretty typical of our world. Yeah, 5, 600,000. Now that isn't to say, you know, we have every, we work with a lot of de novo scratch start practices. Obviously they take a while to get going. And we have clients on the other end of the spectrum where they're definitely seven figure earners, but I would say baseline taken home more than, more than a million profit, 1 to 2 million. We have plenty of clients that are at that 50% margin, but that's a smaller club. They work real hard to get there. But I would say, you know, 35 to 40 is baseline for what we see. Yeah. And it's unfortunate because we teach like one model where it's actually very easy to get there, like super simple to get to less than 50% overhead. And you basically only work part time as well. So it's just frustrating sometimes for me because the average dentist out there is working hard, trying to do the best they can, dealing with their schedule every day secretively. They hope the next person doesn't even show up to their schedule because they're so tired and you know, they're trusting their team to do the right thing and they're not making a lot of money, their overheads really high and they're not tracking any of their numbers properly because they know their tax guy, they've known him because he did the taxes for his brother and like. And so they'll go 30 years that way. 30 years. Yet someone will come out of school, get the right training, have the right experts along the side with them, and they will be taking home more than $1 million take home pay un hours early in their career. And every year the veteran dentist didn't learn, that was a year they paid the universe an extra 700 grand because they chose to not learn it that year. Right. That could have been more money they had. So it's frustrating. So you're seeing at the kind of the top level performance dentists are taking home between 1 to 2 million dollars a year. And a typical dentist of your client base has taken home about 500,000, which is about 35 to 40% take home margin off of a $1.4 million practice. Right. And I don't know if, I guess you wouldn't have any visibility into what associate dentists are getting paid. So we don't. This question comes up because we benchmark on our, on our report. So this is, you know, the benchmark. I don't benchmark profit margin because you really have to have an understanding of what's the associate participation in that practice. Because we all know it, it changes. So, you know, let's just say typical associate, you know, where the office has two doctors, one owner, one associate, the owner still largely they're running their schedule and the associate is reasonably productive. So we're talking, you know, $2.5 million size office. And in that case, you know, we'll see margins like a really well run office be like 30, 35% associate cost will average out, you know, 12 to 14%. And so they're making, you know, a few hundred thousand dollars. But that is if we really want to get into the mix on like what they're getting paid. I don't always know like we know what the numbers are because we do. Per our earlier discussion, the associate pay absolutely has to be completely broken out with all their benefits and payroll taxes and all that. So we know what those numbers are, but we don't always know what the agreement is. You know, is it a daily guarantee? Is it eat what you kill? Is it 30, 35? We don't always have that information. Yeah, My opinion is that it should be pretty simple for a lot of associates to make 250 grand. A year as their associate dentist salary. And that's a rough life because you still have all the school debt. You're not working for yourself, which means you're working with people you didn't pick on, software you didn't like in a location you're not proud of of. And I think it's for an owner taking home 500,000 a year should be a pretty straightforward task. You know, our benchmark is if owners are taking home less than a million a year, we feel like that we've got some sickness that we need to go heal and cure. But if we just use the numbers I just said Associate Taking home 250 is reasonable. An owner taking home 500 is reasonable. Why the heck would we not be an owner? But because the difference between the two is completely life changing very soon after you make the change. Okay, so we got to wrap this up here. And man, I appreciate kind of the look inside of this. Those of y' all listening to this, what are you getting from your accountants? Are you getting incorrect financials with no kind of expertise and help? No dashboards, no analysis, no pro formas on acquisitions. You're just kind of getting duct taped together financials and some tax work at the end of the year. That's not the right thing to do. And I hope meeting Morgan and understanding how much deeper we should be going is a wake up call to someone that they're not getting what they need to get and that you're basically doing things blind, which feels like no matter where you walk, you'll run into a problem because you're blind. You don't see it. Right. All right, Morgan, before we wrap this up, is there anything that we haven't gone over? Some important point that I missed, or is there anything else you'd like to leave us with? With? You know, it's been super interesting discussion. I've learned a few things here which I really appreciate. It's been fun to share. We, we covered. I'm very passionate about business ownership. You know, my baseline expectation for somebody moving from associate ownership is yeah, two to three times. We just went through that math. But you have to prepare yourself for that. You have to educate yourself for that. I'm super passionate about it. It's the favorite part of my job is especially if a doctor is stressed, they don't know what, what, what the issue is. They're managing their practice. As I know you've, you've described previously of just logging into the bank and seeing how much cash is in there when you can make that diagnosis and give a couple different action items. They can actually do it. It's very rewarding. We definitely touched on all the, the main points that we look at for profit improvement. It's been, it's been real good. If I'm a dentist listening to this podcast and I'm like, yeah, I, I need help, how would I contact Morgan to have the conversation of like, I don't know what to do, Morgan, where do I go? What do I need to do? How would I contact you? Well, they can always email me directly. So my business partner and I, Courtney, we still do all the initial consultations personally. Always still do that. So that they could just email me or they just go to our website, eagdentaladvisors.com you can check out what our reports look like and just about on every page you can directly set an appointment, appointment with me on any of those pages. So very, very accessible. That's one thing that I've always been impressed. I tell people throughout the years I've owned a bunch of practices and sold them and, and we used you guys for all of this financial work. And of all the companies I've ever used in my entire career, you guys gave me the highest quality of service. That's a really hard thing to do. And so I've just always been impressed as your customer by the service you provided. But the point of this podcast was maybe to kind of get a reset, a little wake up call to dentists that have not been looking at or understanding their financials and to also hear kind of what the latest stuff is. And Morgan, you've done a wonderful job helping, you know, navigate that conversation and leading us to some of these take home lessons. So I really appreciate that. All right, listeners, well, I hope this was interesting to you and remember to subscribe. Make this video a regular weekly habit as you drive to work or work out. Listen to the podcast and if you need to get a hold of morgan, it's eag dental advisors.com and my name is Scott Leune and this was the Dental CEO podcast. Thank you everyone.