The Top Twelve Mistakes Dentists Make
By Ken Rubin, CPA, PFS, Broker
During a recent Academy of Dental CPAs (ADCPA) meeting we had a fabulous brainstorming session on ways to help our clients during these current difficult economic times. As a result I put together the following list of The Top Twelve Mistakes Dentists Make. Knowing what mistakes to avoid is very powerful knowledge, but unfortunately sometimes people have to still learn the hard way from the experience of actually making their own mistakes.
1. Waiting too long to purchase a practice
Many young dentists make the mistake of thinking they cannot buy a practice because of their debt load and lack of professional experience. The income differential between an owner dentist and an associate is usually huge. The truth is most young dentists can obtain a loan to purchase a smaller practice right out of school and can obtain a loan to purchase a typical dental practice two years after graduating.
2. Building the Shrine to Me
Over-improving the build-out of a practice can cause real problems for years to come. We have seen dentists forgo funding retirement plans and being financially strapped for years because they built a Taj Mahal practice
3. Using old technology and not upgrading
This results in less production per hour and a lower sales practice sales price down the road. Usually an investment in your education and your business is the best investment you can make. Embrace change or become a dinosaur!
4. Inadequate Marketing
This includes both external as well as internal marketing. The lifeblood of your practice is new patients and the importance of good marketing cannot be over-emphasized.
5. Being reluctant to raise fees
Healthy practices bump up their fees on an annual basis. Over time the compound effect of raising fees annually is staggering, the absence of annual fee increases will prove to be devastating.
6. Lack of leadership
Dentists are trained to do dentistry, not to be a business owner and be a leader for the staff. Practices that have a team atmosphere invariably do better.
7. Making Payroll Mistakes
For example: Improperly paying workers as Independent Contractors rather than employees; Improperly paying on salary rather than hourly; Improper exemption of overtime premium when using four day work schedule; Improperly accounting for benefits; High staff turnover due to unwillingness to pay reasonable wages; Etc.
8. Failure to Maximize Tax Savings
For Example: Improper use of accrual instead of cash method; Improper choice of business entity; Wrong depreciation methods; Wasting first year (Section 179) depreciation on low tax bracket years; Not being aware of dental specific tax deductions and credits. Failing to write off costs of tuition for specialty school and a portion of general dental school, Etc.
9. Making Financial Planning Mistakes
For example: Failing to maximize retirement plan contributions early and consistently; Lack of proper investment diversification; Making bad investments; Not having a financial plan or not properly implementing an existing financial plan; Living outside of their means; Too much debt, especially credit card debt; Lack of proper amount, or type, of life and disability insurance; Failing to plan their estate; Etc.
10. Making Accounting Mistakes
You can best manage your practice by looking a monthly report which clearly provides you with useful information and Key Performance Indicators (KPIs). For example do know how much you produce per hour, or how much how much your hygienist produces per patient? Not using a CPA that specializes in dentistry would be like not using an endodontist (specialist) to do a very difficult third molar root canal. Even with the right advisors in place many dentists will even neglect to check with the advisor before making big decisions. Sometimes a five minute phone call to the right advisor will prevent you from making a $100,000+ mistake!
11. Lack of Safeguards against Embezzlement
Statistically, at least one out of every six dentists will be a victim of embezzlement at some point during their career. Think about it!
12. Getting a Divorce
The old joke is the easiest way to lose half your assets is to get a divorce. Ending a marriage or business partnership can have devastating results for the dentist. Over the years Ive seen many dentists that have started a practice together as the best of friends. They had no written agreement ahead of time to address the what-ifs that invariably come up, and it sadly ended up ruining their friendship. With San Diego being a navy town, this occurs more often here than in other parts of the country because dentists become friends in the navy and end up practicing together later.
San Diego dentists face profit challenges due to managed care and and high rent and labor costs, so they cant afford to make mistakes. Hopefully this article will help make a positive impact in your life!
It is said that only 4% of dentists will retire with an adequate retirement savings. This same statistic is true for factory workers. With a little planning, and avoiding mistakes, you can be part of that successful 4%.
Ken Rubin has been helping dentists since 1984. He owns and operates both Ken Rubin Dental Practice Sales and Ken Rubin & Company, Dental CPAs. He is a frequent author, lecturer and co-founder of the Academy of Dental CPAs (ADCPA). He can be reached at (619) 299-6161 . Websites are www.krpracticesales.com and www.kenrubincpa.com