They Have Effective Patient Communication and Team Leadership Skills:
What is communicated to patients, and how it is communicated, may be the most important factor. Patients say "no" all to often to the treatment they need. Without treatment plan acceptance, it becomes very hard to cover fixed costs and personal budget needs. Leading a team goes hand in hand with patience communication since staff members are speaking with the patient as much, if not more than the doctor.
They Learn Business Management Skills:
Business management is all about just that, managing the affairs of your practice. Successful doctors review their financial reports provided by their dental CPA monthly, they understand their total overhead costs, their debt, their personal budget needs, and taxes. They define a collections goal needed to cover these financial obligation as well as create a surplus for savings. They have a tax plan and cash flow forecast completed at least twice annually.
They Understand the Psychological Side of Money:
These doctors know that income does not necessarily translate to wealth. Wealth is built by converting income into net worth
. For example, spending money on a car, travel, or restaurants, doesn’t increase assets or decrease debt. Therefore, it has no effect on net worth. However, adding money to a 401K, paying down debt, buying real estate, or reinvesting into the growth of the practice, all increase net worth. And net worth is the primary indicator of financial independence.
Additionally, on this topic, they understand that the stock market is not risky, it’s only volatile. Consequently, they understand a buy-and-hold approach with regular rebalancing is the most predictable path to stock market investing.
They know that the future will come sooner than they think, and deferring gratification is required in any sincere effort to getting ahead financially.
Lastly, they understand that debt is not the enemy. They know that debt, when properly used, is an enabler. It enables graduation from dental school, buying a practice, and obtaining necessary equipment. In this same vein, they don’t rush to pay down low tax-deductible debt, such as a practice acquisition loan or home loan when they can use the same money to receive needed tax deductions and build a tax-deferred or tax-free asset, such IRAs, 401Ks, or Defined Benefit plans. They know there is no tax deduction for paying down the principal portion of their debt. That said, they also know that high-interest debt, especially non-deductible debt, is cancerous, and should be paid off as soon as possible.
If Married, They Have a Shared Financial Approach with Their Spouse and Don’t Support their Capable Children Past 18 Years Old Other than for Perhaps College Expenses.
I hope you enjoy this newsletter. All articles are written in house and with our specific client needs in mind.
-Wes Read CPA, CFP®, PracticeCFO