Dentistry Uncensored with Howard Farran

Chris Pistorius talks with Dr. Howard Farran, the founder of the incredibly popular online dental community, Dentaltown. Chris & Howard have an open and honest conversation about all things dental.

First you need to stop doing it backwards. If you get the wrong person you spend all your time managing that person, you get poor results, and then you look like a bad manager. Get the right person who is already internally motivated, loves to work, loves their new job, who gets along with people, now you barely have to manage them and they’re making you look like a pro, because that’s how the pro’s do it. Sporting teams couldn’t manage me to be an NFL quarterback or the next ballerina. Your new hire has to already have the natural ability first. As far as turnover, it should mostly be at the new employee beginning as you and/or the new hire find out the new job isn’t a fit and then at the other end have employees that have been with you since the beginning. Whenever the person doing all the hiring is the only person in the company who’s been there for more than five years and no one else has made it five years then the wrong person is doing all the hiring.

What is the best use of my dental office profit dollars?Only 60 of the Fortune 500 companies in 1955 were still listed in 2017. Over 50% of the S&P 500 has disappeared since 2000. Economist Joseph Schumpeter called this creative destruction in 1942. Mufasa called it the circle of life in the 1994 Disney children’s movie Lion King remake of Shakespeare’s Hamlet in 1603. This is why how you allocate your capital is not only the most important business decision you’ll ever make, it’s also the most important financial life decision you’ll ever make. Retained Earnings (RE) are those net income profit dollar earnings that you decide to reinvest into your dental office by adding another operatory, laser, CAD-CAM, CBCT, oral scanner, 3D Printer, continuing education, or marketing campaign, as opposed to taking it out by paying it to yourself in income to reinvest or consume. Would your profit dollar be more likely to turn into two dollars of capital value creation if I deployed it in my dental office, or should I extract it and redeploy it by investing it in another business, real estate, stock or bond? Or, should I just consume the dollar myself with a new house, car, boat, or toy? Obviously the dentist that needs to learn a new technique, and hasn’t taken the time and invested the money to learn it, is already paying for it, but eventually you’ll want an exit strategy from working with your hands all day to having your money work for you. Debt reduction is always a great idea considering it’s guaranteed that the 18% you’re paying on your credit card is a sure bet use of your capital because that is certainty as opposed to the inverse of making 18% in a stock is not. But over the long run, having an investment portfolio which you can retire and live off is very likely given a dentists income given a few decades of time with the miracle of compound interest which Einstein called the most powerful force in the universe because not only can money make money, the money that money makes, makes money, so you can do other things with your time than drilling, filling and billing.

Dentists could learn a lot from Pizza Hut. Founded in 1958 by two brothers Frank and Dan Carney who borrowed $600 from their mom. They named it Pizza Hut because their sign only had room for eight letters, whereas dentistry has nine. I want to personal thank Dan Carney with a shout out for making a religion out of availability to the young entrepreneurs, always making himself available to young dreamers like me and my High School buddies listening to all of our ideas, always adding constructive critiques to our business plans. Dan was a firm believer in investing his returns into the business and not the real estate.

Dentists could learn a lot from Sonic Drive-In delivering service with the speed of sound. Founded in 1959 in Stillwater, Oklahoma by Troy Smith based on a new technology speaker box allowing you to stay in your car to order with your food deleted by a carhop. Today Sonic has over 3,494 locations in 46 U.S. states, and is owned by Inspire Brands which also owns Arby's, Buffalo Wild Wings, Jimmy John's, Rusty Taco, Mister Donut, Dunkin' and Baskin-Robbins. The franchise fee for a single SONIC restaurant is $45,000, with a total investment ranging from $1 to $1.75 million not excluding land. To all the Holier than thou Hypocrites, Gallup surveys show over 80% of Americans eat fast food at least once a month. In 1991 Kentucky Fried Chicken shortened its name to KFC because “fried” was a bad word. Sonic, which is America's fourth-biggest chain.

Does your bookkeeper sit next to you providing statistical analysis like NBA Dallas Mavericks owner Mark Cuban pioneered back in the day with coach Rick Carlisle sitting next to Roland Beech–like I’ve done with Lorie Xelowski since June 28, 1998?

How to buy a dental office with no money down. Back in the day, owners carried risk, but sellers had skin in the game. We didn’t have 3rd-party banks financing $1M+ dental practices to broke kids fresh out of dental school, getting their poor parents to co-sign, where if their kid couldn’t do the numbers and it went south, then it was an emotional disaster for the whole family. Greed sucks. Find a job as an associate where the owner/mentor Doc knows you want to buy it after an appropriately long courtship period. Have Doc finance it at 10% over seven years so everyone has skin in the game. If they don’t want to be on the hook for the whole enchilada, then stand your ground with the seller-Doc that they must at least carry half the risk. Otherwise, the seller doesn’t have faith in you like I do! You didn’t go to dental school for eight years to be somebody’s bitch. Just stop letting fear live rent-free between your ears and invest in yourself! If you work like no one has for a decade, then you can live like no one has for the rest of your life. Same advice for starting a family, I made my four boys in 60 months. So don’t overthink it, just get this party started.

Doc, I practiced through the 2008 bankruptcy of Lehman Brothers. I met the financial crisis that led to the Great Recession when investors withdrew a record $196 billion from their money market accounts. 2020, you're no 2008. I’ve been contacting my friends at Henry Schein and Benco. In 2020 Benco closed fewer accounts due to collections/payment issues than in either 2018 or 2019, in fact in 2020, the number of accounts closed due at Benco according to my buddy Chuck Cohen, the managing director at Benco Dental and the only man in dentistry smart enough to be published in the Harvard Business Review, said their practice retirement sale closure declined more than 20% vs. 2018 or 2019. Halfway through 2021, the numbers indicate that the trends from 2020 are holding steady. Why? The federal programs to support dentists, most notably the PPP - Paycheck Protection Program  worked, Benco had fewer collections issues in 2020 vs two prior years. Fears of the pandemic leading to either an exodus of doctors from the profession due to health financial fears or an overall consolidation wave due to DSO acquisitions are overblown, in fact, fewer dentists closed due to retirement/sale/closure than in the two prior years, probably due to a combination of a slowdown in practice acquisitions by larger players during and directly after the shutdown and dentists deciding to remain in practice post-pandemic, possibly because their net worth declined during/after the pandemic.

Millions are unemployed but dentists struggle to find new employees 

Who’s answering your phone? Funnel-y how most dentists don’t track their new patient journey from landing on your website to calling your dental office. On average 100 people have to land on your website for three to call. Three people have to call for your front desk to convert one into a scheduled patient. Three patients have to come in with a cavity for you to convert one into getting treatment. Combine every one of these underperforming aspects of your new patient dental marketing journey and the U.S. Bureau of Labor Statistics still shows an impressive 2020 median annual wage for dentists of $164,010 with the lowest 10% earning less than $79,000 and the highest 10% earning more than $208,000, showing the top 10% netting 2.5 times more than the lowest 10%. This clearly shows hope in the range of possibilities for any individual dentist wondering what’s possible. We’ve talked before how owner dentist net $100K more than non-owners. We know every successful business needs to get really good at one thing explaining why ADA economist Dr. Marko Vujicic shows average 2019 net income for general dentists was $204,710 and for specialist it was $343,410 illuminating the value of specialization. The world learned in 1776 when economist Adam Smith published The Wealth of Nations that specialization leads to an increased production of higher quality work predicting why centuries later an oral surgeon could take out four wizzies faster than I can turn a can of Cheese Whiz into Cheese Was. We know demographics matter and the importance of creating a supply of what people are demanding which is why dentists often move far away from where they were born for a better opportunity. Combine this with living below your means and saving and you have the recipe for early retirement.