Build the Practice or Build the Life? The Reinvestment Decision Every Dentist Faces

One of the most persistent tensions in dental practice ownership is deceptively simple: should you reinvest surplus cash back into the practice, or distribute it to yourself? In this executive roundtable, Wes, Michael, and Megan break down the capital allocation framework every dentist-owner needs, from defining “enough” personally and professionally, to tracking ROI on every dollar invested in people, equipment, and marketing.

Key Topics & Timestamps

• Capital allocation is the most important strategic decision every dental CEO makes
• Why every financial plan starts with a personal budget
• Defining “enough”, lessons from Jack Bogle’s book, and the Shelter Island story
• Why money becomes psychological and “enough” becomes a moving target
• Treating your dental practice like a micro-stock, when the internal ROI beats the S&P 500
• Where the first dollar of surplus should go: people, systems, or equipment?
• The CBCT trap, six-figure equipment sitting unused because training was skipped
• Working capital “sleep insurance”: how much cash to always keep on hand
• Tracking marketing ROI and holding your agency accountable like a CMO
• The annual practice roadmap: aligning personal goals with business investment
• Practical example, how to allocate $200K as a growing dental practice
• Why maxing your 401(k) early outperforms most practice reinvestment past the optimization point

Key Takeaways

• Personal financial planning should drive the conversation before practice investment decisions are made.
• Every practice has a breakeven point, 100% of collections cover overhead until that’s met. The surplus is where strategy begins.
• Your practice is a micro-stock. A dollar invested there can beat the S&P 500 until the practice is fully optimized.
• Invest in people before equipment. Great team members multiply results; equipment amplifies existing leaks.
• Working capital target: 75–100% of one month’s collections sitting in the bank at all times.
• Track ROI on every dollar, marketing, equipment, coaching, or you’re flying blind.
• Start your 401(k) early. A 40% first-year return from tax savings is nearly impossible to beat.
• Attack one bottleneck at a time. Spreading dollars too thin creates friction, not momentum.

Transcript

Wes Read:  Welcome everybody to another episode of the Dental Boardroom Podcast. We continue on with the executive session. And if you're a regular listener, you know that in the executive session, we have Michael Anderson with Wondrous Marketing Agency specific to dental. And we have Megan Shelton with Shelton Solutions for Practice Management Consulting.

And I just love this sort of panel discussions that we have from the finance side, from the marketing side, and from the operation side, all different perspectives here. And the cool thing about Megan, as well as she is a former dentist, so she really knows what it's like boots on the ground inside of a dental office.

The subject today … Well, let me just first say welcome back to the show, team.

Yeah, it's good to be back.

Thanks for having

us. All right, let's make this productive for our listeners. Today's a subject that I love to talk about because it's squarely in my world, so I'll probably hog the, the mic a little bit.

It is on, um, when to reinvest in your practice versus reinvest into yourself. So when to keep money in the practice versus when to distribute money out of the practice to yourself today or to yourself in the future through an appropriately designed savings plan like a 401k. Now, every CEO … I'm just gonna give a little backdrop on this.

Every CEO of every company has to make some of the most important strategic decisions in that business, period. One of those most important decisions is what's called capital allocation strategy. And capital for you, doctors, just think of capital as money. Capital is what you use as your oxygen to get things done.

It lights the fire in all the different systems in your practice. That's money. And you need capital to run your practice. You need capital to run your personal life today, and you need capital to stage for living your life in the future. So I'm gonna kick off, guys, with just a little, uh, intro paragraph here.

One of the most persistent tensions in dental practice ownership is deceptively simple. Should I reinvest this cash back into the practice or should I pay myself? The reality is that this isn't just a financial decision, it's a strategic one that sits at the intersection of operations, marketing, and long-term wealth planning.

At its core, this question only exists when there is surplus cash flow. After recovering overhead, debt service, taxes, and baseline compensation, what remains is the true lever of ownership. This is the moment where surplus capital allocation becomes intentional rather than reactive. Okay, let's open it up for discussion.

And let's … Here's how I approach it when a, when a new client comes to us. The very first thing that we have them do. The very first thing is we have them complete a budget. And I know it sounds boring and horrible. None of us like keeping receipts, looking at bank statements, all that stuff. But it is one of the most valuable exercises that we as humans can do because we need capital or money to sustain our life.

Well, what life is that that needs to be sustained? So the question is, what becomes enough? Now, I know you both aren't on the financial side, but you both have your own business, so inevitably, you have to think about financial decisions as well. How do you guys define enough, both in your business and in your personal lives by way of sort of cash in the bank and spending?

I'll let you start, Michael, if you want,

or- Everybody wants to jump on this one. All right. Lots of opinions until it comes down to the money. Yeah. You know, I, I think it's, it's definitely seasons, right? So I look at the early part of Wondrous. I still remember the first check we cut for ourselves. You know, it was $333.

Um, and, uh, you know, up until that point, we were investing all the money that we earned into hiring other people, into the expenses we had in the business, and I think anyone that has a startup kind of like knows that's the mode you're in, right? And then, and then you get beyond that, and that's where it gets difficult, because there's so many things to chase in dental terms.

Are you gonna get that cyric mill? Are you gonna get a cone beam? Are you gonna, you know, you have two ops that are plumbed and let's, let's build those out. And like you just keep chasing that growth, right? So I like the idea in a business of knowing what your ceiling is, right? So for example, my dad owned Burger Kings.

Like at a certain point, a Burger King is only gonna earn so much. A dental office based on the number of chairs is only gonna earn so much. Um, a, a marketing agency is a little different, right? You can keep gr- we've grown every year. That's, that's tough. There's the … I would say there might not be a ceiling.

That's, that's even harder. You can keep reinvesting. I think for me, chapters of life, when we were, uh, we didn't have a family, we had the ability to really tighten the belt. And as we've gotten more into family mode, um, and sort of establishing our, our life, we've had to bring more into our, bring more from our business into our personal life.

But I would say that as a business owner, we have invested in our business far longer than most people would expect. We've taken less out of the business than people would expect. And, uh, even today, I think I often err on the side of, let's invest in our business over let's take personally, but our ceiling continues to grow.

And so that's different for dentists, right? I think for a dentist, if you know what your max ceiling is, you need to find, you need to get there and then you need to start to create efficiency and try to max earning potential.

Megan, what's your take on enough?

What's enough? Well, I don't like being, uh, railed in by a balance sheet, but we live by it.

So I operate my business like a business and I operate my house like a business. I have a budget for both and I understand the roles of every person showing up and, and what we need to survive. And so there's, there's two things that I see in practices commonly, and one is that docs are overpaying themselves or severely underpaying themselves.

And my problem with the severely underpaying yourself is when you don't know how much you need at home to support your family or your mortgage, you bring that personal financial anxiety into your business. And now you're making business decisions based on personal home finance issues. So, um, I really think you have to get that under control to be able to pay yourself, um, the appropriate amount.

Uh, enough in the business, same. It's like capacity, right? Is, is the dollar that you put back in, is it going to get you a return? And do you have a system set up for that? So I think really first is like honing in what is the absolute amount my practice needs each month? Do I have that? And then what do I need at home?

Like have you actually sat down and listed out what all your overhead at home really is?

And I would say- All

right, Wes, those are our answers. Tell us what the real estate is. Tell us what's

right.

All right,

Jess.

Michael, you got a B, you got a B plus and Megan, you got an A minus. All right. Here, let me, let me share.

I

was generous.

Let me share it. No, you both did great. Let me share with you. Um, something I've shared on my podcast in the past, I have this, this book from Jack Vogel. It's literally called Enough. And Jack Bogle is the founder of Vanguard, that a sort of very large investment institution. All of our clients are, are at Vanguard or moving to Vanguard on their 401K.

Well, Jack Bogle, I love this guy. He, he passed away, but he's a legend in, uh, in, in, in Wall Street. And he, he coined index funds, basically, which is why Vanguard has so many great index fund options over there. And one of the reasons why we use the 401 uh, because of the low cost. But here's this book he wrote in the very first paragraph in the introduction, it's about a story.

There's a hedge fund manager and, uh, the hedge fund manager is throwing this party on, on, uh, where was it? Shelter Island and there's a couple authors there, a guy named Kurt Vonneg- Vonageu and Joseph Heller. And here's what it says. "At a party given by a billionaire on Shelter Island, Kurt Vonague informs his powell, Joseph Heller, that their, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel Catch-22 over its whole history.

"Heller responds," Yes, but I have something he will never have enough. "And the research is in. The research is in. Money creates happiness, or I should say it contributes to happiness at significant marginal gains in the early income phase. So up to, you know, 150,000 plus or minus, that's where most of the happiness gains are made, because if you don't have, you know, food on the table and you're always stressed about money, then that's a problem.

But once you sort of get that past that point, and now your money is basic, whatever's left is basically toward, uh, entertainment and luxury items or the nicer car, the marginal gains on happiness declined significantly at that point. The unit of happiness you get from every new dollar above that goes way down.

And so, uh, I think what Jack Bogle is saying there is enough, which is critical for our happiness, is so flexible, and it's so, um, psychological to what we feel is enough. And it's too common that the dollar starts to own us and enough becomes a moving target like a game. It's, it's not about enough for what I need, it's enough comparative to what I see other people make, and I wanna compete at that level.

You literally will have billionaires worth hundreds of billions of dollars competing against each other to get … Who's gonna be the first trillionaire? I mean, it's insane. No matter what level of income you're at, you can still fill that need for more, sometimes increasingly more, even though you've blown past what you actually need to live on.

That's why money is so psychological in our lives. All right, let's jump back into, in, into this. Here's the way I look at this. I think that personal financial planning should be the primary initial driver of the conversation. What capital or money do you need in your life to meet those things that you have intentionally thought through and defined as your creators of happiness?

And the research shows that its relationships is the number one driver of happiness. Those in your family, your core c- circle of friends, and then maybe a second layer of a community type organization, that's the primary driver of happiness. And if that's true, I don't think you need a million dollars a year to spend to say, "Okay, I, I can be happy now."

It can be substantially less than that. Doesn't mean you don't wanna make a million dollars a year, I'm just saying that millionth dollar doesn't necessarily contribute to significant gain on the happiness scale. So when I meet with a doctor, they come in and I have them do a budget. And Michael, let's say you're the doctor, and I say, "Michael, how much do you need to live on?

I, I wanna know your, your, your, your basic living costs." Well, with, with, with my student loan and my mortgage payment, I need $12,000 a month. Okay, great. We shake on that number. We shake on that number because then we deposit 6,000 twice a month into your personal account from your business. Now, if your business isn't generating enough money to do this, we have a problem.

So this is where I start. I say 100% of your dollars from patients, from collections, goes first to cover your fixed and variable costs in your business. So your capital surplus decision, whether to reinvest in the practice or take it out of the practice isn't even a decision up to a certain point, unless you want to close your doors and go bankrupt, every single dollar, 100% of your dollar is going to overhead.

Your overhead is 100% of collections, and that's gonna be your labor lap, supplies, facility, marketing, and admin, and your debt payment. Tho- tho- those seven things right there. That gives you what is the keep your doors open, breakeven, I call it, your practice breakeven. Then above that, now you start to have some surplus money to go out of the practice into your personal life, and you need a basic amount there.

So if Michael, you say 12,000, now we need that 12,000 because you're not gonna pay your mortgage, your student loans, you know, food on the table, et cetera. And so up to that point, you really don't have much decision making. I mean, if 12,000 truly is your minimum that you need, there's no decision making.

It's not even a choice. The, the, the, the, the effort therefore is to get collections up. That's your only job. And I'll say, I'll tell some people, "Don't hire me yet. Don't hire me. I, your collections need to go up before you start worried about an organized financial ecosystem." Your financial ecosystem isn't that complicated because 100% of your dollars have to go just to pay in your basic bills and debt.

So you don't, you don't really need me and you're probably not in a very high tax bracket either. Just save some money, get a, you know, a tax person down the street. But when your business fixed variable costs are met and your personal basic living expenses are met, now you enter this new territory where you have to make the strategic decision of, do I keep that next dollar in the practice or do I keep it out of the practice?

And I always say less is more. If you can spend less personally, you have more money to stay in the practice to grow it. And this is the last thing I wanna say that I wanna open up for a conversation. I, I think doctors should look at their practice as a microstock. They can invest in Apple, they can invest in NVIDIA, Microsoft, ExxonMobil, whatever.

They can invest in those companies and get, or even an S&P index fund, and let's say they can expect over time a 10% average rate of return on that. For most doctors, a dollar invested efficiently in their practice is going to produce a better return than the S&P 500. Up to a point, and Michael, you, you, you mentioned this earlier, that you get to a point where the cash in the business, that the operations is really optimized, and then every new dollar that goes into more equipment, more marketing, I think you may, maybe need marketing on a continual basis to constantly feed the pipeline, but, but new dollars tend to not produce the same return when you get to this optimized state.

Now, that's kind of a gray area because you may use new dollars to pivot to go to fee for service and get out of PPOs, for example. But you get to this point where your dollar is optimized and a new dollar may only get you five to 7% returning your microcap stock known, known as your dental practice, or maybe even nothing, you're just literally throwing money at what you think you need to do it, but it's not actually producing results.

That's when you pivot and you start to invest in these outside companies that are passive that will give you a better return on that capital. Okay, so let's say they're gonna invest money, they have surplus, and they're gonna invest it in the practice. They're still early enough that there's a lot of gains to be had by investing in their practice.

Where do you both think that first dollar should go? And we've talked about this a little bit in the past, but where do you think that first dollar should go?

I think, and so much of it depends on where the practice is at, right? So for me, the, the foundation of every business is the people. And I think that I see it for a lot of new businesses because of either perception or reality, like it's tough to invest in hiring the talent you need at first, right?

You're really focused on expenses and, um, I think there's ongoing talent conversations in dentistry and, and tension, you know, we, we see it all the time online. So for me, finding a way to establish your core team is, is like just so essential. And, and that speaks to so many of the things we've talked about on previous episodes, having great process, being able to track data, you know, being able to, um, have systems that can repeat.

If you don't have good people, you cannot have that. And so I would say in our business and in many businesses, I see the impact of having great people and I also see people struggle to pay them, uh, and retain them, right? That is such a problem. And so I love the mindset of understand what the market is and pay a little more.

Be that business, pay a little more, create a little inefficiency there. Don't, don't squeeze on your people. That's the biggest point of investment. And if you can lock that down, it opens the door for many, many other good things.

Well, let me share a comment on that. Here at Practice CFO, I don't really have equipment.

You know, I don't have certain expenses that dentists have, but my labor cost is over 60%. Same. I'm a services business, right? My, my, my biggest asset is, is really all of our biggest asset is our reputation, but next to that, it's, you know, it's our people, which feed that first one. And s- what I've found, fallen subject to is just saying, "Here's how I solve the problem.

I hire more people. I just throw more labor dollars at it, thinking that that's gonna solve the problem, but if the underlying core economics isn't solved, you may just be scaling the problem when you do that. " So Megan, let's talk on the operational side. How does a doctor know when to reinvest that dollar in the practice into people versus into processes, systems and, and workflow?

Right. So if, if what you're doing with the people you have, if you have the right people in place and you know that they're bought into your philosophy, that is your time to be pouring into them through leadership training, through things that take decisions off of your plate as a business owner.

Because if we go back to what you were saying, Wes, and I was a firm believer in this early on was I knew my margins for my practice were really healthy. So if I'm gonna bet on my dollar, I was gonna bet on it in my practice on me. And there's a cap to that though because I can only do so much. So my next investment after investing in me, getting the training, the coaching and really maximizing what I can do as a dentist is my leadership team who supports me because I, the dollar only goes so far, my time can only go so far.

And so being able to have other people make those decisions so that I'm not the bottleneck anymore, um, that's the way that you can continue to expand. Uh, most, most dentists turn to equipment. They think equipment or a new procedure is going to solve- mm-hmm. … the revenue issue. Yeah. And it's not. It's going to amplify whatever leaks they already have.

And most likely in most practices, I see it all the time. I'm like, "How often do you use your CBCT?" "Oh, not that often. I'm scared to use it because then I'm liable for the image. "Wait, you spent 70 to $120,000 on a piece of equipment that you are fearful to use, yet you're not investing in training.

And what would that $70,000 do over a 20-year period at a 10% compound growth rate in a-

Right.

In the market?

Yeah.

That'd be awesome. I mean, shoot. I have practices that I've started working with in January and their, their opinc is up over 60%, you know, and now they have that much more cash flow to pour into a 401 which goes back to our employees too, right? We can set up multiple profit sharing buckets.

We can, we can do defined benefit plan. There's so much that can be done if you're strategic about your ROI. So I agree with Michael, investing in your, your people, but investing in the people that take things off your plate as the owner is really, really critical. Um, but you have to be very clear on what, and we've said it so many times, what is success for them if they're doing that?

Like they have to have a standard that they know to achieve.

Mm-hmm. So

training them to be able to do that.

Yeah. I, I, when you mentioned earlier, Megan, about some doctors take too much out and some take too little out, I think that is so true. I have plenty of doctors whose personal spending is sucking all the oxygen out of their, out of their practice.

And then I have some doctors who are like, " I'm gonna build an empire, it's gonna be worth so much money down the road, I'm the best at deferring gratification, you know, I'm like the king of, of deferred gratification, so I'm gonna keep reinvesting and reinvesting and reinvesting, and revenues keep going up, and they get to this four- Yeah.

$4 million practice, $5 million practice, and their profit margin-

OP Inc. Is decreasing. …

is 18%. Yeah. I would rather have a 40, 45% profit margin on a million and a half dollar practice than, you know, a 10% profit margin on a $4 million practice.

Well, yeah, because then you're getting 40% back on your practice on every dollar.

On top of that, you've put money in something that's getting a 10% return and you're not using any time or stress or effort to generate that. So it, it is really hard to know when to do that. And I think the first time you start doing that, it is such a, a shift in mindset because you're giving your money to something that you have no control over and dentists are control freaks, so investing in the market is really scary for them.

I've noticed that. So, some people would for real estate every time, and we talk about diversification. Go ahead, Michael.

Yeah, so, Wes, I like what you're saying, and it's kind of bringing a question up for me, right? I think there's this, the, there's always excitement about investing in your business, right?

It's, uh, getting the CBCT, doing more continued training, invest in marketing, invest in coaching. From your perspective, you know, when does reinvesting become over-investing? How, how do we … I'm sure you see this all the time, right, where you look at someone's books and you're like, "What, tell me about this.

What are you doing here and what, what are you doing here?" Are you even tracking whether you're getting ROI back for this? How do you help work with people so you understand when they're over-investing?

Great question, yeah, because some, some dentists, uh, uh, come in and they say, "This, this is a lifestyle thing for me.

My life is all I care about and this is just there to service that lifestyle." Other people are like, "My practice is a huge part of my life and my existence and my identity, and it's much more about just something that sustains my personal life." And so if on the one hand, you have those huge empire builders that want to grow something huge, maybe even go DSO.

And on the other hand, they're like, "I just want to work as, as much as needed and as little as needed to have this lifestyle that I want. " And I've seen both of these types of, of practices. I think to answer your question, going back to my concept of, if there's a lot of marginal gains to be had by reinvesting that dollar in your practice, then let's do it.

But you have to be intentional about what it is you're investing in and tracking the return on that investment. So, um, if, let's say you have your, you, you have, you know, you've done a forecast and you know you're gonna have an extra, let's say $100,000 to invest for the year. And that forecast isn't that hard.

Every time we meet with a doctor, we'll forecast out eight to 12 months, their collections, all their overhead, their debt, their personal spending, their taxes, everything. And then at the bottom, it shows what's gonna happen to your bank account. And if the bank account is going up, then we get to now have this discussion of where that extra up goes.

And one, I think one thing I should mention here is that we always have to define in their practice how much cash they should be sitting on at all time.

Mm-hmm.

And the formal term is you're working capital. The informal term is your sleep insurance. If there's one thing that causes doctors to lose sleep, it's having a very low cash balance in their personal checking account.

So once that's met, which I usually say is about 75 to 100% of average annual collect- uh, monthly collections, once that's met, so if, if you're not there, every dollar needs to go just to building that sleep insurance. Once you're there, everything above that should have an option A, B, C, and D, almost like a decision tree.

Not, not a decision tree, more like, like a workflow. The dollars go into this bucket until that's met. Then they go into this bucket till that's met. Then they go into this bucket till that's met. So I think that what, where that dollar goes, what the bucket is, I don't have an answer for that because it depends where they are with their operations and with their marketing.

But they need to look at that and say, which one is the more pressing issue? Okay, if I have a good team and my systems can tolerate more patients coming in, then I would put that into marketing. If, if I have enough patients coming in, but if I took, you know, an increase of 15 new patients per month, can my operations support that?

And are we successfully converting those new leads in the chair and then case acceptance? In which case, I'd probably want to put that money into operations. So I think that's a, that's a discovery process for the doctor. I think my role, the, the, the finance person role is to define these inflection points as the collections go up every month.

What is the amount that covers your basic needs? What's the amount that covers you personally? And, and what is the surplus? I, I can calculate that surplus for the doctor. Then I need to sort of hand it back to the doctor and say, "You need to talk to Megan. You need to talk to Michael and you need to figure out what opportunity there is for that extra dollar.

I know if I put it in a 401k in year one, I'm gonna get you a 40% rate of return from tax savings, and then every year after that, I'm gonna get you, you know, anywhere from seven to 12% rate of return depending on your risk levels." That becomes easy for me, but I have to like hand that baton back to you- Right.

to you guys. So what do you do when a client comes to you and says, "My next dollar needs to go into you, Michael, into marketing." What happens at that point?

Yeah. You know, I, I wanna connect to something you guys said first and, and it's funny because I liked what Megan was saying about, you know, the CBCT machine and then you're like, "Yeah, what if you took that 70 or 100K and you put it in the market?"

And what it got me thinking about i- and on the marketing side for us, and we've talked about this before, it's so important that when you invest money in marketing, that you can measure the ROI, right? That's the easy thing. Yeah. We can talk tactics and strategy. Like at a basic level, you give me $30,000, I need to be accountable for saying, "Hey, you spent $30,000 and we made 70, we made 10, like whatever it is, so we know what the ROI is.

But here's the thought I had. I think there's this term floating around the world called Girl Math. You guys heard this before, right? Oh yeah. You wanna talk yourself into buying a nice bag? What's the cost per use, right? Yeah. And, and all of a sudden it gets real affordable. I, I think that's how we all think when we wanna buy Uteric mill, right?

Well, I, oh, I just, I can do this-

Oh, I think when I buy a handbag, Michael.

Yeah. Yeah. Well, how many people are auditing themselves afterwards? And I think this is more important in business, right? If you get that CBCT machine, don't you think you should set up a system or you should know, say, "Hey, listen, if, if I need to use this to place this many implants, and if I can, if I can hit 20, 20 implants I broke even, that's, that's probably not a right number."

But, um, that feels like a really important mechanism for me in investment in business to say, "If I do this thing, I know what I need to do to justify it. And, and I'm gonna audit myself." And so marketing is the easy one. I'm gonna spend $30,000. I, I hope I make 90. I hope I make 100, you know, like that, that's something we need to

But I'll ask you guys, how many of you are doing marketing right now and you have any idea what your ROI is? If you're sitting there saying, "I don't know, " that's a problem. It's time to go ask that company and say, "Hey, are we tracking that? How do I know? "

Yep. Tracking the ROI is generally ignored as a part of the overall process of capital allocation decision making.

And I think that every doctor should say, "Here are my various systems, here's my marketing system, here's my operation systems, here's my financial system, right? Here's my systems. I'm gonna, I'm gonna send over X amount to Michael every month." What I expect Michael to do is to provide me, I don't know, every month or whatever frequency you do, showing me how from where we started together, I was getting X new patients, X phone calls, X- e- et cetera, h- how that changed, and then Once those patients come in, a little bit, it sort of leaves your queue at that point, Michael, on the marketing side.

Now it's up to the doctor's ability to then convert what you've done. You've done your job, right? Now how do we convert that into dollars in the bank?

You know what? I've said that for years and, and there's certainly like responsibilities shift, but I will say this, like this is where marketing breaks, right?

Like just think about anything in life. If, if, if I can diffuse my responsibility and say, "Well, it's not really like systems break." And so my thought is, yes, we can't always be there to pick up the phone or, or to set your fee schedule or to do the need to need conversation or do the followup, right? But we can have real conversations as a partner and say, "Hey, we're spending $10,000 and you got $7,000 back last month.

Bad. Something's wrong." And then as the person who's in charge of looking at it, I'd say that CMO mindset, we could say, "Here's what we're seeing. Leads were the thing that were the problem. We got, we didn't get enough leads. That's on us." Or we could say, "We got great leads. They're coming in. Did you know that 35% of the time your phone calls are going to voicemail?

Now we're helping diagnose the problem or did you know we're seeing case presentation but not case acceptance and your case acceptance rate is lower than the rest of the clients we have. " So I think that, that for me, that's, that's where there needs to be partnership as opposed to just like, we're here to drive phone calls for you.

Like that, that's a recipe for disaster.

You know why I think of it is, uh, so I have this separate company, it's a tech company called Practice Orbit, which is like a, like a, like a Redfin for dental practice sales. And, um, and the way I work with the programmers is we have a, a huge list of everything we wanna do in this si- in the system, new features, new functions, et cetera.

You have to segregate that list out between urgent, like now, really important, but not necessarily urgent and something we'd love to get to maybe down the road. And this, it's called a roadmap and you have releases. This is why you get software updates. You know, there's new releases and there's new features like your iPhone.

I think every dentist, one of the most valuable things they could do is sit down every year and revisit that roadmap from top to bottom. And the roadmap can and should include personal goals as well as practice goals. Look at their life and say, "How much do I wanna reinvest in my practice to get to that next, next level versus how much do I wanna pull out to live on now today?"

And they have that full roadmap. And then I personally think every month or every quarter, they should revisit that roadmap and say, "What's, what's coming off the assembly line? What are the top three things that we're gonna do this quarter to move the needle?" What ha- I see is doctors are doing so many things at once a dollar here, a dollar there, $5 there, over here, that it's too scattered.

And the analogy I'll use is like s- like swimming. A swim coach once said, "Swimming fast is, you need to swim smooth." And you need to go slow to swim, swim spo- smooth and smooth is fast. And what he means by that is when you're sort of like flailing your arms and legs, you create all this water commotion around you that is actually friction to you moving forward.

Slow it down, be smooth and targeted, and that is fast. I think the same thing applies there as well. Um-

So I'm curious, you know, I love this idea of like zoom out and look at your roadmap. So I'm curious, Wes and Megan, you guys both work with clients to look out at that roadmap for their business, for their personal life.

If you had 200K to allocate today, what, what would you do? What's, what's the advice? And I know every practice is different, so it's almost like we need to think, think of an archetype here and say, "Okay, if, if you're like this practice, what, what would you do? "

Let's, let's, this is a great, uh, way to stick the landing here, an actual practical example.

Okay. Megan, do you wanna go first and then I'll go and then we'll end?

Yeah. I, I think the biggest thing is like, you have to get your emotions out of it because 200K might feel exciting if you haven't had that much, uh, capital sitting available to make a decision. So one, celebrate it for a moment and be done celebrating because celebrating too long will lead to, uh, irresponsible choices.

So that's, that's emotional. So get that out of the way, enjoy it, but it needs to be allocated based on readiness for your practice. And looking at, back to, you know, objectives and key results, what were the main things you wanted to achieve this year and what was the system readiness that you used to plan that?

So, um, fixing bottlenecks first is a huge one. So if there's a bottleneck that's preventing you from maximizing your capacity or reaching it, that would be a great place to look. Uh, usually, you know, if outcomes aren't predictable, uh, you know, it's training the team before you start throwing dollars at equipment, before you start throwing dollars at new things.

Are we doing what we already do well? Are we measuring it? Do we have clear success and accountability assigned to it? So I always think of the readiness test, you know, one, clarity. Do we know what our roles are, what our measurables are, and is success clearly defined? So if I were to throw my 200 at a CEREX system, who's gonna take it over?

Is that gonna fall on me on the Monday it gets delivered? Because if it is, that is not productive investment, right? You need to have the system below it. So is there someone that's test two, leadership, is there someone other than the owner that can ensure this investment will work, right? And so if I took, you know, if I said, "I'm willing to purchase this for the team for, you know, culture and patient outcomes, but who's gonna take it on?

And then do we have the workflow? Have we thought through what's that workflow gonna be for whatever the investment is, whether it's coaching, whether it's equipment, whether it's marketing, because it's not as simple as writing a check or swiping our Amex, you know, that would, that would be way too easy.

So it's, it's really being thoughtful and intentional. And the same goes to CE. A lot of people are, you know, they're, they're signing up to take courses with no clarity on what they're gonna learn from it, what they're gonna bring back to their practice and how they're gonna implement it. So I would say, um, yeah, making sure you have a system for when you do spend money even.

I like that. The, what is your algorithm? Have you defined what is your algorithm to, um, decide how that dollar plank goes through your whole financial ecosystem? You, don't let it just randomly Plink go down. You create the path for how that, that little thing moves down from top to bottom. You own that.

Otherwise, it will Plink go all over the place and be very inefficient.

And I know working with PCFO myself during my practice ownership season that I was always advised, you know, uh, if you can get 3X on every dollar you spend, that's going to be healthy. And I agree with that. And there was another layer and this is where the emotion comes in.

Like if it is going to make you happy and show up more professional, um, or show up at your best potential so that you can perform better, I do think there is value in that also, but maybe only, you know, 10% of that 200K should go towards that. But if, if you're driving a crummy car and you feel crummy when you get to work, you might show up that way.

It may transfer into your operatory. And so make sure you feel good about your deserve level and your presence and, and that money will also go further.

There's definitely a circular, circular relationship between dollars spent in the practice and dollars spent personally. It's, at the end of the day, it's two pockets on the same person.

It's you, it's your life.

Yeah.

They all mesh together into this thing you're trying to achieve, which is a rewarding, fulfilling, satisfied, and happy life. Here's how I'll answer that question, Michael, so 200,000. I will first look at the ROI, the return on investment. Where's the lowest hanging fruit to get the most ROI?

And if your practice breakeven is met, if you're, uh, uh, have money for your personal spending today, now what do we do with that? I really look at the ROI and the ROI is if you put money in a 401 and can get a 40% rate of return in year one from a tax saving standpoint, yes, it's deferred, but you're not gonna pay that taxes till decades later, most likely at a lower tax rate.

Uh, it's hard to beat that. So I usually will say early on, as soon as you can, max your 401k because money is like fertilizer and it will make your money grow. Time is like fertilizer. It'll make your money grow. Start early. So many of these empire builders don't start actually pulling money out and putting it in their personal balance sheet until they're in their early 50s.

And by that point, you've missed so much of the compound era of building wealth and they regret that. They regret that they didn't take chips off the table and just do singles and doubles and take that money out. So first, meet with your financial planner, do a life plan. It's all gotta start with a life plan.

What do you need to be happy in your life today and what do you need to save in the future? Once you know that, then you can start saying, "Okay, what do I need to get out of my practice to give me that kind of life?" Once I know that I need to get X out of the practice, now you have that roadmap of how that dollar is gonna go.

Is it in equipment? Is it in Megan? Is it in Michael? Is it in Wes and what ordering and is it a balancing act? Where does that dollar go to? And I will just say, identify the bottleneck in your practice. Just think of it that way. What is the bottleneck to your growth? And attack the bottleneck first, and then find the next bottleneck, attack that bottleneck.

So Practice CFO forces this conversation every time we meet, as you know, Megan, every single time we meet with our clients, we do that cashflow forecast, we look at their allocation, we say, "What are we gonna do with this extra amount?" That is the essence of why Practice CFO exists. How do you get all the levers lined up in that financial ecosystem to optimize the output back into your life for a good, rewarding, fulfilling life?

Well, thanks team for another really cool episode. It's always super fun to have you guys come on and we just riff on these different subjects. So we'll do- Awesome. We'll do another one next month and, uh, thanks for all the contributions. Until next time.

Yes. Thank you.