how important is the business aspect of dentistry?

[zbruinz]

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I think this aspect is very important to dentistry, what if you aren't good at the business aspect, can you learn to be better at it and still be successful in dentistry?

 

[Mackchops]

You could always work for a mill. They'll give you a quota and manage the office for you and give you a salary.

 

[DrJeff]

The business side of dentistry is a HUGE thing, but often the one that many of us are the least prepared for😱 Afterall, even if you have a small solo practice, you'll likely be having a gross practice revenue of $500,000 for the year, and then you have to start paying employees, suppliers, the gov't😡 , and most importantly yourself😀 If you then start to think about things like health insurance, retirement savings, the depreciation schedule of your office equipment, etc, etc, etc, your head will start spinning.

Unfortunately, most of us in the dental profession don't have an MBA or a CPA to go along with our DMD/DDS degrees, so we to very often rely on outside help to manage the business side of our practices. That outside help may be in the form of continuing education courses, an office manager with ALOT of business experience/ expertise, an accountant that specializes in the dental/ medical fields, or a business consultant(often the final result is a bit of everything I listed above), and you'll likely change advisers/staff/personel a few times over the years you'll practice to get the advice you need.

Currently in my practice, we have an office manger who previosuly actuary work for an insurance company, we have an accountant who specializes in dental practices, and utilize 2 attorneys who specialize in dental/medical fields (1 attorney handles financial planning areas, and the other is basically a contract law attorney). Addtionally my partner and I are currently redoing all of our disability insurance/life insurance/practice buy-out insurance (life insurance on each partner)/retirement plans utilizing the help of 2 other insurance specialists/financial planners. And then throw in some continuing education classes, and it can get quite scarry.

I like to think of the business side vs. practing side of dentistry as follows. Physically I spend about 85-90% of my day with "the gloves on and my fingers in people's mouths"😀 and about 10-15% of my physical work day doing practice management/paperwork stuff. Mentally, I spend 85-90% of my work day doing practice management/business stuff and 10-15% of my work day doing dentistry with the gloves on.

 

[PlanB21]

That was a great post Dr. jeff. Can I ask how much money is taken away for overhead and payin all the salaries of those people helping your practice? Is it 60-65%. How on Earth can you generate money if you bring in 500,000 dollars and do 65% overhead with a partner?

 

[DrJeff]

That was a great post Dr. jeff. Can I ask how much money is taken away for overhead and payin all the salaries of those people helping your practice? Is it 60-65%. How on Earth can you generate money if you bring in 500,000 dollars and do 65% overhead with a partner?

Overhead numbers can vary a HUGE amount depending on where you practice (i.e. office space/employee salaries tend to be more expensive in an urban setting comapred to a rural setting, how much new technology you incorporate into your practice, etc). On average most practice's overheads will be in the 55-65% range, and I've seen ranges on overhead anywhere from the low 30% range all the way upto the 80% range.

As for my $500,000 example, that would be for a small SOLO practice (such as 1 dentist, 1 hygenist, 3 or so operatories, etc) In group settings, the numbers, can (and do) get much larger, and hence the business headaches can get alot larger

 

[PlanB21]

Oh ok.. Thanks for the clearup. This is the best post I have ever seen on SDN. Thanks alot Dr. Jeff! Very informative and eye opening.

 

[S Files]

Oh ok.. Thanks for the clearup. This is the best post I have ever seen on SDN. Thanks alot Dr. Jeff! Very informative and eye opening.

great post and all, but aren't we being a little dramatic 🙂

 

[I'mFillingFine]

How does distribution of benefits to hygienists, assistants, managers, etc. differ if they are all considered part-time, as many in a dental office might be?

 

[DrJeff]

How does distribution of benefits to hygienists, assistants, managers, etc. differ if they are all considered part-time, as many in a dental office might be?

It all depends on how you as the boss wants to handle it and what you want to view part time/full time as. Technically, as long as you as the employer are paying the employees social security taxes, thats all that you need to do. If you decide to operate your practice that I will guarentee that you'll have a high employee turnover rate, and in all likelyhood, you want exactly be attracting the brightest/hardest working employees. You need to remember that in most areas of the country, the employees you're looking to hire are also being coveted by other offices, and in many cases, its not just the office but the benefits that will make/break your hire.

In my office, we pay a fixed monthly amount towards health insurance, a monthly uniform allowance, a yearly CE allowance and have a profit sharing plan where our employees get a yearly retirement contributuon (once their 2 year vesting period is done) that varies with the yearly office profits. This type of retirement lets me and my partner put away upto $44,000 a year each, but has some of our hygenists getting over a $10,000 a year retirement contribution (our retiremnt plan manager I've now heard on multiple occasions tell us how overly generous we are to our employees compared to other office fnds he manages). Thsi we find has allowed us to attract and retain very good, hard working employees, which then make our work lives easier.

 

[capisce?]

It all depends on how you as the boss wants to handle it and what you want to view part time/full time as. Technically, as long as you as the employer are paying the employees social security taxes, thats all that you need to do. If you decide to operate your practice that I will guarentee that you'll have a high employee turnover rate, and in all likelyhood, you want exactly be attracting the brightest/hardest working employees. You need to remember that in most areas of the country, the employees you're looking to hire are also being coveted by other offices, and in many cases, its not just the office but the benefits that will make/break your hire.

In my office, we pay a fixed monthly amount towards health insurance, a monthly uniform allowance, a yearly CE allowance and have a profit sharing plan where our employees get a yearly retirement contributuon (once their 2 year vesting period is done) that varies with the yearly office profits. This type of retirement lets me and my partner put away upto $44,000 a year each, but has some of our hygenists getting over a $10,000 a year retirement contribution (our retiremnt plan manager I've now heard on multiple occasions tell us how overly generous we are to our employees compared to other office fnds he manages). Thsi we find has allowed us to attract and retain very good, hard working employees, which then make our work lives easier.

Are you set up as an LLC or S-Corp? It seems like the s-corp is a big headache and a lot of work to save only a few grand.

 

[DrJeff]

Are you set up as an LLC or S-Corp? It seems like the s-corp is a big headache and a lot of work to save only a few grand.

S-corp. Basically, before I became a partner, the practice was an LLC (as are many solo practices). Now, with 2 partners, from a tax standpoint, an S-corp and all of the initial headaches in setting it up is a better situation for my practice in the long run and how we like to fund our retireemnt accounts. This is another one of those areas where getting outside help in the from a dental practice specific accountant, a tax attorney who specializes in dental/medical practices, and the financial planners who handle our retirement accounts was a huge help to basically spell out all of the pros and cons of a group practice LLC vs. S-corp and the long term ramifications of each, and it's alot more than just protecting your financial liability.

 

[You]

Do you have to buy mal-practice insurance? About how much? What does it cover?

 

[I'mFillingFine]

S-corp. Basically, before I became a partner, the practice was an LLC (as are many solo practices). Now, with 2 partners, from a tax standpoint, an S-corp and all of the initial headaches in setting it up is a better situation for my practice in the long run and how we like to fund our retireemnt accounts. This is another one of those areas where getting outside help in the from a dental practice specific accountant, a tax attorney who specializes in dental/medical practices, and the financial planners who handle our retirement accounts was a huge help to basically spell out all of the pros and cons of a group practice LLC vs. S-corp and the long term ramifications of each, and it's alot more than just protecting your financial liability.

If you have a moment, would you mind describing the differences between LLC and S-corp? Pros and cons? Thanks in advance!! There are probably many posts about this, but you certainly know what you're talking about and I'm starting with no knowledge base.

And You, I know that in some states, the local or state dental organization offers group malpractice and it can be quite cheap! (I know it happens in Massachusetts.)

 

[capisce?]

If you have a moment, would you mind describing the differences between LLC and S-corp? Pros and cons? Thanks in advance!! There are probably many posts about this, but you certainly know what you're talking about and I'm starting with no knowledge base.

And You, I know that in some states, the local or state dental organization offers group malpractice and it can be quite cheap! (I know it happens in Massachusetts.)

If you would like to get some background I would suggest looking over at the DentalTown forums. There are a lot of great thread that go into great detail on the subject. Dr. Jeff will respond I'm sure as well. It's just not something that can be covered with one general blanket statement as it entails a lot of fine print. The threads over at DT are a really good place to start. It would take you hours to get through them all. Also, some states a dental practice is not legally permitted to be an s-corp.

 

[I'mFillingFine]

If you would like to get some background I would suggest looking over at the DentalTown forums. There are a lot of great thread that go into great detail on the subject.

Good advice....I've actually never checked them out. How does it differ from SDN, and what sort of tone does it take? (Before I sign up and post away)

 

[aphistis]

Good advice....I've actually never checked them out. How does it differ from SDN, and what sort of tone does it take? (Before I sign up and post away)

Most significantly, it's populated by practicing dentists (predominantly GP's), and it's devoted exclusively to dentistry. You can learn a ton just by lurking & browsing the different forums. It's a great companion resource to SDN.

 

[DrJeff]

If you have a moment, would you mind describing the differences between LLC and S-corp? Pros and cons? Thanks in advance!! There are probably many posts about this, but you certainly know what you're talking about and I'm starting with no knowledge base.

And You, I know that in some states, the local or state dental organization offers group malpractice and it can be quite cheap! (I know it happens in Massachusetts.)

Sorry it took me so long to get back on this one, i was away for the last few days and the only internect access I had was dial up and my level of patience for dial up disappeared about a decade ago😀

The short version as my accountant and tax atttorney explained to me and my partner as to why we're set up as an s-corp as opposed to a LLC is basically 2 fold. 1) An s-corp has less tax nuances than an LLC (frankly as I understand it these nuances are subtle at best, but then again, I specialize in cutting teeth, not tax law!) 2) Taxes. Basically, as an S-corp, what happens is my partner and I are paid an equal base salary(a "reasonable" number to keep the IRS happy) by the company (our s-corp), and then the remaining profits get distributed to the share holders(me and my partner) via dividends. The combined income then is taxed just once at our individual rates as opposed to first via corporate and then individual. The same basic set up exists via an LLC but with a slightly greater tax load to you (once again thats what how my accountant/tax attorney explained things), and I know that I like what the s-corp has done to my taxes.

As for liabilty insurance issues, "the company" caries our individual policies, a nd then this is one of the "bonuses" that the "company" offers to us. Numbers wise, what it would have cost the company to have us covered under a group policy vs. 2 individual policies was a nominal difference, so we stayed as 2 seperate policies.

Basically, being incorporated (whether an s-corp, an LLC, or whatever), your employed by "the corporation" which then seperates your own personal assets from those of "the company" so you get some liabilty protection, and then there are the various differences in how (and what) the company will pay you and provide benefits.

So unless you have an MBA or a seperate degree in tax law, it is highly advisable to seek advice/help from outside experts on how to handle the business side of dentistry and all of the tax ramifications that are out there!

 

[101160]

What could one study in undergraduate school to prepare for this?

I'm going to college next fall and I'm trying to decide whether I should choose finance or something like that as my minor.

 

[DrJeff]

What could one study in undergraduate school to prepare for this?

I'm going to college next fall and I'm trying to decide whether I should choose finance or something like that as my minor.

The more business knowledge you can get, the better down the road, since you'll see as you head towards dental scholl, that a d-school curriculum is so packed with the scientific aspects of dentistry that the business side of the curriculum is sparse at best at most schools, and is quite often looked at as an "easy class" so it doesn't get as much attention. When in reality in most offices, as a practicing dentist, you spend more "brain time" concerned with running the business side of your practice than the dentistry side of your practice.

Then, just when you think you may have the business side of dentistry figured out, the government will change a tax law or two, or you'll have a new type of medical insurance plan for your staff to deal with, etc, etc etc.🙄

 

[I'mFillingFine]

Thanks for all your thorough assistance, DrJeff.

And you are absolutely right about the "peripheral classes" of dental school. Even though I entered absolutely positive that I would take a well-rounded and interdisciplinary approach to dental school, when we get a guest lecturer talking about insurance or tobacco awareness education, I savor the chance to just relax and zone out. I suppose it's a matter of selective information and survival in getting through the curriculum! Add that to the list of actually useful knowledge we'll get in CE credits. 🙄

On the topic of incorporation...how did you decide to do that in the first place? I do see a lot of single dentist offices that still incorporate, but in that case, wouldn't it be your family that is affected by a loss regardless? What is the benefit of sepearating self from corporation, and is it cost-effective for a small practice?

 

[diagnodent]

I just had to reply to this based on todays experiences. First of all dental schools don't teach you business. I went to the best business teaching dental school of them all, UOP, and don't feel like I was adequately trained. It comes with experience.

In terms of incorporating, its easy to do. Costs like $300. It protects personal assets from business assets as long as you don't co-mingle funds. My wife is a big time corporate attorney and did this for me.

The business aspect is the most important aspect of a dental practice. You could be the best dentist in the world, but if no one knows then it doesn't matter. Or if you have the worst staff, worst personality, worst whatever it doesn't matter. You have to understand what type of dental practice you want and lead it to that direction.

Running a business has to do with leadership. You can be a micro manager or macro manager. As a dentist you will typically be a micro manager like most dentists b/c you are so detailed focused as a dentist. I am a macro manager strangely enough and have been extremely successful at it and believe this is the way to be. You have to be strong enough person/leader to empower employees to think which is extremely difficult. (As I had to let some one go today who didn't do that)

Just remember it all starts with you.

 

[I'mFillingFine]

I just had to reply to this based on todays experiences. First of all dental schools don't teach you business. I went to the best business teaching dental school of them all, UOP, and don't feel like I was adequately trained. It comes with experience.

In terms of incorporating, its easy to do. Costs like $300. It protects personal assets from business assets as long as you don't co-mingle funds. My wife is a big time corporate attorney and did this for me.

The business aspect is the most important aspect of a dental practice. You could be the best dentist in the world, but if no one knows then it doesn't matter. Or if you have the worst staff, worst personality, worst whatever it doesn't matter. You have to understand what type of dental practice you want and lead it to that direction.

Running a business has to do with leadership. You can be a micro manager or macro manager. As a dentist you will typically be a micro manager like most dentists b/c you are so detailed focused as a dentist. I am a macro manager strangely enough and have been extremely successful at it and believe this is the way to be. You have to be strong enough person/leader to empower employees to think which is extremely difficult. (As I had to let some one go today who didn't do that)

Just remember it all starts with you.

Thanks for your reply!

What are some examples of micro- versus macromanaging?

 

[DrJeff]

Thanks for your reply!

What are some examples of micro- versus macromanaging?

I'll handle a little of this one since I tend to be more of a macro-manager whereas my partner can fall into the category of micro-manager more often than he would really care to.

As a macro-manager, I am more likely to empower my staff to take the initiative to complete the duties of their jobs without me supervising their every move. For example, 1 of my assistants is responsible for the supply ordering for my office. I have told her that whatever system she'd like to integrate to enable her to keep track of what needs to order and make sure that the supplies are in the office when we need them is fine with me. I will at months end take a look at how much we ordered and spent on supplies, and a few times a year take a quick look at our supply inventort to see if the quantity we order is too much/too little, and then if needed make some comments to my assistant about it. My partner when he is in his micro-mamnger mode will want to review each and every supply order (typically 3 to 6 different orders per week from multiple vendors), and verify that the quantity being ordered isn't too little/too excessive each and every time.

As the macro-manager, I find that once I trust the performance of my employee, that by "staying out of their way" they tend to accomplish more. When my partner starts to micromanage I tend to see less being accomplished by my staff. You need to have a staff that you trust in general to macromanage, or else your staff may very well run you.