Can Slowing Down Your Practice Growth Lead to Higher Profitability? | Joshua Scott | MME

Could intentionally limiting your practice's growth be a good thing? In this eye-opening episode, I'm sitting down with Joshua Scott to discuss some unconventional but powerful advice for practice owners. Joshua reveals how focusing on controlled growth can actually protect cash reserves and stabilize operations. Drawing from his experience with Studio 8E8, he explains how capping client intake helps manage expenses more effectively and enhances profitability. We dive deep with Joshua into identifying early warning signs of unsustainable growth and effective strategies to manage them, offering you insights into managing your own business effectively.

As we break down these concepts, Joshua sheds light on the typical cycle of increasing expenses tied to rapid growth, from hiring more staff to expanding facilities. We also cover the critical role of marketing investments in ensuring long-term stability and how priorities should shift once a business reaches the $1 million revenue mark. Rounding it all off, Joshua shares thoughts on self-awareness and continuous personal growth, emphasizing the importance of not becoming an obstacle in your own organization's path to success.

What You'll Learn in This Episode:

• Why limiting growth can lead to greater profitability.
• How rapid expansion affects your cash reserves and expenses.
• Key strategies to recognize and manage symptoms of overgrowth.
• The importance of investing in marketing for business stability.
• How to adapt your role and focus as your business scales.
• Insights on building infrastructure and effective scaling.
• The significance of self-awareness and personal development in leadership.

Ready to discover how smart growth can transform your practice? Listen to the episode now!

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Sponsors:

Studio 8E8: Dentistry’s story-driven marketing agency. Traditional marketing repels. Story-first dental marketing attracts.

We bring your story to life in a way that captivates and connects: https://s8e8.com/affiliates/tdm?utm_source=tdm&utm_medium=affiliate&wc_clear=true

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You can reach out to Joshua Scott here:

Website: https://s8e8.com/

Instagram: https://www.instagram.com/joshuascott/

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Mentions and Links:

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Terms:

EBITDA - earnings before interest, taxes, depreciation, and amortization

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Books:

Scaling Up: How a Few Companies Make It...and Why the Rest Don't

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If you want your questions answered on Monday Morning Episodes, ask me on these platforms:

My Newsletter: https://thedentalmarketer.lpages.co/newsletter/

The Dental Marketer Society Facebook Group: https://www.facebook.com/groups/2031814726927041

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Episode Transcript (Auto-Generated - Please Excuse Errors)

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Michael: hey, Josh will talk to us. What's one piece of advice you can give us this Monday morning?

Joshua: Hey, Michael, this is for our business owners out there. And it's probably going to be a piece of advice. That's definitely unconventional, probably a little controversial, but I'll tell you, it's based in my personal research.

It's based in my personal experience. I've done this. I know people that have done this, it's limiting your growth. In order to be profitable. Now, as a company and you're growing a business those two things sound at odds, right? You're like, no, I'm trying to grow because I want to be profitable and have a profitable business.

But often what happens, especially in the dental profession, because practices can grow and they can grow quickly. And we begin to Keep up with that growth and chase that growth, which just sucks cash out of the organization. we have so many expenses and we're hiring new team members. Andwe've got 30 new patients a month, but we could probably see 45.

So now you're looking at bringing on an associate. We're expanding, you're remodeling, you're renovating. All these things continue as we chase growth. And what that does is it just eats up the cash from the organization. the upside is you're growing a more valuable organization. So I get that we don't need to talk about, equity all that stuff.

I understand that's one side of it, but in order to actually see profit, you know, when we talk about EBITDA being 10%, 20%, pushing 30 to 40 percent of dental practice, that's like super amazing. You oftentimes have to get to a place where you're limiting your growth in order to let the fixed expenses kind of cap and the profit begin to rise.

Michael: Interesting. Okay. So then how does growth suck cash from the initial start? What are some of the early symptoms where you're like, okay, maybe we need to start slowing it down. And then what are some of the barriers or boundaries we can put to start slowing it down properly?

Joshua: Yeah.

No, it's such a great question. And a lot of times we get into the cycle before we even realize it, you know, like you've got to start up a lot of times it can be you and a clinical assistant, and then all of a sudden you start getting patients. You're like, okay, I'm gonna stop doing my own hygiene.

I'm gonna hire a hygienist. that's a financial commitment, early on you're wondering if it's even the right time. Do I have the money to do that? And then more new patients come in. So you hire another assistant and then you hire front office.

Then you hire another hygienist. And this whole cycle keeps going as new patients start coming in. The patient base is growing because now all of a sudden you're like, I only had three ops outfitted. Okay. Let me get the next two built out. Then you're like, okay, now we're full again. Now let me bust out through the side and add, another, three ops and rent that space.

Then you're like, okay, now I need an associate. the more you grow, almost the more big ticket these expenses get, because now you're hiring an associate. Now you're expanding your space. Now you're moving locations. Now you're buying a building to do it. And so you just get all these expenses going.

And I'll tell you from personal experience, what we did with Studio 88, this was about three years ago. And I was having lots of conversations around this with other business owners way ahead of me. And I said, how do you grow and be profitable? Cause we were growing, but man, it was almost like expenses and revenue were just in line with each other.

We were never seeing that separation. But we were like having to hire people like, Oh my gosh, we got these more new clients. We got to hire all these other people. So I had these conversations with about three or four business owners. I said, how do you grow and be profitable? And all three of them were like, you can't.

There's seasons where you're profitable, but usually it's because you're spending less money. And then there's seasons where you're growing and you're really spending, you're investing in the business and putting out capital. And those are very hard seasons to be profitable. So what we did about three years ago was, said, okay, we're going to cap our client growth at eight a month.

I already have a team in place. We can handle eight a month. So let's go this entire year and let's just do eight. Okay. And see what happens. And all of a sudden when we controlled that fixed cost that kind of leveled out and then our profit began to rise. And then by the end of the year, I think we were hitting like 12 to 14 percent profit.

And I was like, Oh my gosh, this was amazing. And then we added more team to go to 10 new clients a month. expenses kind of jumped up a little bit, but again, we became. And so there are seasons like of growing a business and then you may just be like, man, I just need to grow. Cause I'm trying to hit some like number and I just want to build a million or 20 million organization.

Cool. But then there's some of us where it's like, we're growing, but we want to be profitable as well. How do we do that? And it could just be looking at your new patients and going, It's okay if we cap it at 25 a month, at 30 a month. And I maintain that team. And let's just have a year where we grow and you control those fixed costs.

Don't renovate. Don't hire an associate. Don't bring on another hygienist. Just serve that patient base really well for that year and let that profit begin to expand.

Michael: Interesting. Okay. So then real quick asking you, what made you come up with eight

Joshua: Oh, like eight new clients a month.

Michael: Yeah.

Joshua: It had nothing to do with our name. It was just, I was like, yeah, no, it honestly was like, that was the capacity of the team. I went to our creative team, photographers, videographers, designers, developers, account managers.

And I said, what do you guys feel comfortable with us taking? And we kind of reverse engineered it. We were like, I think if we did eight a month. We would feel great about the level service, the level creativity, and not overwhelming our team consistently. And so we said, great. And that's kind of how we capped it.

organizations that go from zero to 1 million. it's a whole different dynamic. key is selling. when you're growing from a startup to a million in revenue, it's just sales. And we don't like to talk about that in the dental practice, but it literally is get as many new patients in as possible, create revenue, like just go, go, go.

It'scall it like sell like hell, man. You just like it all to get the revenue in. But organizations, once they get above a million, they start to switch. now you've proven a market fit, you're doing a million dollars in your community. you're a solid practice.

You've proven your practice fits in that community. You've got something. Now you've got to start focusing on scalable infrastructure. Now you've got to realize that growing like that begins to suck cash. But as you go from like 1 million to 10 million, the complexities increase a ton. you need cash not only to grow, but you got to bring on somebody for HR.

You got to bring on somebody for as like a practice administrator, of a sudden youhave people on your team that are now making six figures. and it's just infrastructure. It has nothing to do with selling or creating revenue. These are just people that the structure needs.

And so you realize a lot of times when practices get above a million and they're just grow, grow, grow, grow. All of a sudden they find themselves strapped for cash because they never created profit. And now they've got to invest in infrastructure and how the organization begins to scale towards the next complexity.

Michael: So then what do you recommend when we pass that million, Mark, can we start looking into books or instructions or advice where it's like, Hey, help me to build infrastructure? Cause we don't I wouldn't know that. Once we hit this specific amount of employees and numbers and you know what I mean, kind of a thing.

Joshua: Yeah. No, it's interesting, Mike, because work with larger groups and you can be acquiring practices. Okay. A million dollar one here, a 1. 5, 2 million one here. But all of a sudden you're like, Oh crap, I need a CFO. that's a high level want to call it an expense because I'm a P and L it shows up as an expense, but it's really an investment in your leadership team. But like, that's, a hefty, person, a COO. All of a sudden you're sitting on three practices doing 12 million in revenue.

And you're like, I need somebody to run all this. You need a COO. These are high level people. And my point is if you've been buying practices nonstop, renovating them, hiring teams, putting in high paid doctors, all of a sudden you're in a situation where there's no cash. To bring on the COO, the CFO, the people you need.

And so part of this is yeah, it's a race to get to a million, Get all the revenue and get all the new patients. But once you get past that point, start to figure out how to build a profitable organization because you're going to need it for the next step. And the thing I have found that I've seen proven I can't write a book on it yet.

I don't have that body of like research, but I've seen it over and over again is if you can limit your growth. Then you'll start to see that profit increase. And so don't keep chasing that expense structure. Go, okay, we're going to be good for this year with this team. And we're going to serve 30 new patients a month.

And that's just how it's going to go in the next year. We're going to expand or hire more team and we'll take on 45 a month, but begin to put that in place to create that profit.

Michael: Do you think it gives you time to think time to plan look into the details of, Oh, we do need a COO or we do need an associate As well,

Joshua: made such a good point because oftentimes growth it controls us. we get caught up in it and we're just running. it really takes discipline because That scarcity mindset really kicks in when you go, we're only gonna take 30 new patients a month that freaks people out because they're like, I'm turning away 15 or we're scheduling 90 days out or 120 days out.

And I'm like, I know. you know what? They'll be there in the future. They will, you keep growing and make amazing organization. They'll be there. This is what's best for your organization right now. And even you create that head space to where you're not just chasing growth all the time.

You're now turning your eyes as a CEO to what the organization needs.

Michael: And then what if you're in a season where. You've already decided I'm only going to take in 30 new patients a month, but then something external happens, COVID, right? Or anything, right? I mean, something external happens where you're like, crap, I should have been selling this whole time. And now I'm like, you know what I mean? and maybe just for that season, how do you feel? What do you do? What should we? Look into it.

Joshua: Yeah, this is why I love talking to you.

I feel like you read my mind. You keep asking me like the next question and you and I didn't rehearse this, here's the thing when you're in that zero to a million, it really is about sales and it's about getting new patients in the door, create revenue, right? When you get past that million dollar mark, and now you're in that kind of million to 10 million range.

It has to shift to marketing. And here's what I mean by that. We often look at marketing as solving our needs today. Josh, I need 45 new patients a month. So I need the market. I'm like, okay, that's a need for today. And Michael, to be honest, marketing doesn't often solve that. We're not going to change that in the next 30 days.

You know, that we all know that marketing ispositioning you for the future. the reason why, like in the first phase of business, it's so important just to sell, cause you need revenue. You got to keep the lights on, keep people paid. The second phase is exactly what you just said. We don't know what the market's going to do.

We don't know what the economy is going to do. We don't know what the community is going to do. So you'll face these kinds of ups and downs, these dips and challenges. But if you're investing in marketing, you're securing your future, you're creating momentum and attention, not for today, but for 90 days, for six months, for a year, And so you begin to shift that, put it in the marketing and build this brand that becomes resilient during times like that.

So to answer your question, the best thing to do to solve a downturn is to have been investing in marketing six months ago to get you through that.

Michael: have to have man, I guess a lot of more insight when it comes to Passing this 1 million mark, When it comes to your team, what you need, profit marketing.

So what can help us with that? Cause we're not all. Immediately once a million passes, we know these things, right? We just continue to sell sometimes and that's it. So is there something specific kind of like a check Mark, a checklist or anything like that?

Joshua: That's a good question, man.

I think you're right. So much of this for me was trial and error. There's a lot of good books, scaling up as one of those books that I would say super impactful. It talks about these three phases of business and even gets into 10 million plus, and what we're trying to do at that level.

first step is probably just realizing the grind of a lot of us know how to grind out a million dollar business and to be honest as we're sitting here in 2024, I don't know that that's as unique and as special as it used to be. It's absolutely an accomplishment, 100%. Most people will never accomplish that in their life, but I think we realize with some humility.

A lot of people can just grind that out, but that skill set is not going to get you to the next level. And so people out there are going to be listening to this where it's like they've acquired practice two, they've acquired practice three, and they're trying to apply that same skill set, grind it out, sell, create revenue.

And you have this like sneaking suspicion that it's not going to work. It's not going to get you where you need to go. And at this level, it becomes leadership. It becomes marketing and it becomes a scalable infrastructure. So turning your eyes from those things. Onto what's going to get you to the next step probably the first step is just self awareness

Michael: Self awareness.

So noticing these things, cause a lot of the times I feel like you bottleneck yourself and then you're like, no, I can do that. you know what I mean? And then you're,why would I pay this associate this much? If I can just double down and block out my schedule and do this and that it might work, but I don't know.

Joshua: And dude, I'm so aware, Michael, probably one of the things I internally struggle with, not struggle with, but I'm very aware. Most founders of companies like agencies like ours. Only get to a certain level and they can't get to the next point. we're kind of at that point where like most founders kind of bail because they just don't have a skillset to go to that next level.

I know that I am intentionally investing in myself. Cause I want to get there, man. I feel like I can, and I don't want to become the main limiting factor of this organization. I'm investing in myself. I'm aware of it. I'm trying to grow. Cause I'm like, we can do this. I can do this.

Michael: Nice, man.

Awesome. Thank you so much for being with us. It's been a pleasure. I appreciate your time. And if anyone has further questions, you can definitely find Josh in the dental marketer society, Facebook group, or where can they reach out to you directly?

Joshua: Guys, I'm at Instagram at Joshua Scott. I'm still in my account.

So hit me up. Tell me you saw this, heard this episode. We'd love to hear from you, but also a website s eight e eight. com.

Michael: Nice. And at the same time, studio 88. Does have an exclusive deal for you. So if you want to go in the show notes below, click the link, check it out, if you are a need or a marketing company or a website, especially a website, if you like my website, studio 88 did it.

So go ahead and check it out. And Josh, thank you so much for being with us. It's been a pleasure. And we'll hear from you soon.

Joshua: Thanks man.

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