Six Mistakes that Can Lead to Operational Misery

In this episode of the Dental Boardroom Podcast, Wes Reed dives into some of the most common and costly business and practice management mistakes dentists make. Drawing from years of experience working with hundreds of dental practices, Wes explains how strong clinical skills alone aren’t enough to build a sustainable, profitable, and stress-free practice.

He breaks these mistakes into six core areas, covering everything from management systems and PPO economics to lease agreements, partnerships, financial planning, and KPIs. Throughout the episode, Wes uses practical examples and real-world analogies (including agile software development) to show how intentional systems and financial clarity can free owners from burnout and help practices scale intelligently.

This episode is a must-listen for practice owners who want to stop managing reactively and start operating with structure, clarity, and long-term strategy.

Key Topics Covered

1. Not Adopting a Management Process

Many dentists manage by instinct instead of by process. Without a clear management operating system including defined roles, meeting cadence, accountability, and decision-making frameworks, practices become reactive, inconsistent, and owner-dependent. Wes explains how adopting even a simple system and iterating over time can dramatically improve operations and reduce burnout.

2. Not Understanding the True Cost of PPOs

PPOs often increase top-line revenue but quietly erode profitability. Wes breaks down how fee schedules, write-offs, chair utilization, and hygiene profitability impact the bottom line. He emphasizes that PPOs are essentially an expensive marketing channel and that growth without profitability can lead to exhaustion, not success.

3. Not Understanding Lease Terms

A lease is often the largest non-clinical financial commitment a dentist makes, yet many sign without fully understanding the implications. Wes discusses escalation clauses, renewal options, relocation clauses, and why poor lease terms can hurt practice value or even prevent a successful exit.

4. Partnering Without Profit-Split Modeling

Partnerships often fail not because of personality conflicts, but because of unclear financial structures. Wes explains why production, ownership, expenses, and profit splits must be modeled and stress-tested before forming a partnership and why aligning accounting execution with the partnership agreement is critical.

5. Lacking Financial Planning & Analysis (FP&A)

Most practices rely only on historical financial reports, such as P&Ls, which show where the practice has been, not where it’s going. Wes explains how FP&A (or a CFO model) helps dentists forecast cash flow, plan strategically, and turn financial anxiety into financial control.

6. Not Using KPIs or KPI Software

Without key performance indicators, practices lack visibility and accountability. Wes highlights the importance of both leading and trailing KPIs, the value of KPI software, and how daily or weekly team huddles around metrics create a culture of ownership and consistency.

Key Takeaways

• Clinical excellence alone doesn’t guarantee a successful practice; systems and strategy matter.
• A management operating system frees the owner from being the bottleneck.
• PPO participation must be understood at the procedure- and profitability-levels, not just at the collections level.
• Lease terms can significantly impact long-term practice value and exit options.
• Partnerships should be treated like financial marriages, with detailed modeling upfront.
• FP&A helps dentists make forward-looking decisions instead of relying on gut instinct.
• KPI create clarity, accountability, and better team alignment.
• AI should enhance well-designed systems, not replace leadership, processes, or strategy.

Transcript

Wes Read: Welcome back everybody to another episode of the Dental Boardroom podcast. As you know, I've been talking about mistakes that dentist makes, and I've been grouping those mistakes into different categories. Well, the one I want to talk about is mistakes made in the area of business and practice management.

So what are the risks? What are the challenges in this area? And if you're watching on YouTube, you can see on my screen I've got six areas that I want to just take a few minutes each and talk about what I have seen working with hundreds of dental practices as some of the areas of neglect in this category of business and practice management inside of the dental practice.

So, operationally speaking, so lemme go through these, the first one. The first one is not adopting a management. Process. Yes. This is a very specific discipline. It's not this amorphous concept. It is a very specific discipline that has key concrete areas of expertise and systems and protocols that, uh, if used correctly, produce very targeted outcomes.

Many dental owners are clinically ext excellent, I'll say, but they tend to manage. By instinct instead of by process. And so without this clear management operating system, which let me sort of outline some of those, uh, areas of a management operating system, defining roles, meeting cadence. So how often and when are you meeting and with whom?

Accountability decision making frameworks as well. These are just some of the variables inside of a good practice management system. And without those, the practice becomes extremely reactive. So fires are being put out, but root causes are just never getting addressed. And over time, this leads to burnout for the owners.

And there have been times in my journey as a, a practice owner where I felt that to be the case. And I've had to step back and revisit the source code of my own operating system. And also there tends to be confusion that arri that arises from the team and then there, out of all this becomes an.

Inconsistent patient experience and that's not a good thing. So a management process isn't about sort of this bureaucracy. I know a lot of dentists or small business owners tend to associate a management process with like big corporations, big companies, maybe DSOs to be specific to the dental space, but it's actually not.

A management operating system is about freeing the owner from being the bottleneck in the flow. Operationally inside of the practice. And if your practice runs on personality instead of process, it's eventually gonna break and the personality will burn out. So what is the best business management system?

There's a number of them out there, and there are some that are specific to a dental practice, but I will, instead of sort of promoting one or emphasizing another, I just wanna say that the most important thing. That when you find a management system, the most important thing is whether or not you adopt it and use it consistently.

Like it needs to become like your, like your 10 commandments. It needs to become your almost like doctrine in the practice. This is how we operate and exist as an organization, and then so much of the meetings and the culture and the communication needs to stem out of these processes. And so the question to ask yourself to determine whether or not you have good practice management systems in your business is, are the decisions being made consistent with your processes and your philosophy and your mission?

Are decisions being made consistently and accurately when you, the doctor, are not in the room? And those decisions are needing to be made autonomously, meaning without you, by other team members and through also technology, which can create sort of bumpers on the bowling alley lane in how decisions are being made if technology is adopted and configured as a part of that management process.

So I would say the biggest, and this is my starting point, my starting of the sixth. The one that's the most important that I see neglected in dental practice practices is that there's not. An intentional management system, like it's like an operating system and you're trying to code that operating system.

You know, in software development they have this thing, it's called agile development, and I love this concept. I actually think about this concept in various areas of my life, particularly around. How I operate, practice CFO as a business and agile development goes like this. Somebody has a great idea of a software that they can develop to solve a problem.

And so they go and they hire a development team and they pay the development team money, these engineers, these software engineers, to code out a system that solves that problem. In some form of sort of tech driven, automated way, it takes a complicated problem and it distills it down. So let's look at a simple example.

TurboTax. I remember TurboTax came out, I think it was like 2000, 2001. It was right around that time a frame that TurboTax was really coming on the scene. When TurboTax did is they said, Hey, let's take a complicated process and let's try to simplify this for the basic American. And they did, they did a good job.

So it's very intuitive and they solved a huge problem for many, many Americans is how do I get my tax return done quickly, accurately, and at a modest cost? And once the software is developed, that initial software developed is done, then it becomes less intensive to maintain the system. So there's a, there's sort of a construction cost, like you're building a building.

Usually the very first iteration, the very first release of that software is pretty janky. It's pretty crude, but it does the job. And I, uh, the, uh, in the, in the software development world, software developers everywhere, they, they know this analogy of agile development where they say, let's say you're trying to get from point A to point B, and you wanna make that more efficient.

So the very first thing you can do is get a little. A, a, a little piece of wood that you can stand on and throw some wheels on it. And now you start skating around and you get from point A to point B, and it's not terribly fast, but it's certainly faster than where you were before and it requires actually less energy to do so.

Great. Now fast forward and we go to the next release. Now let's put a handlebar on it. And so now you have a scooter, a little bit easier to push balance. Stay on it and you can now get there a little bit faster. Fast forward, put it go, go back into, into, into programming, go back into coating, and next thing you know, you're putting a little engine on this thing.

And now it's like a moped. Get some get, get some, uh, get some, um, um, you got the wheels on it and then the pedals. You get the pedals on it, and now throw the engine on. You fast forward until next thing you know, you have a small car, you now you got four wheels on it. Fast forward and now you've got a nicer car, an SUV.

Keep going. Eventually get to a plane, eventually get to a rocket ship. I mean, it sort of almost never ends there, that you're constantly, uh, iterating. We're improving that process and it gets better and better and better and better. And the key theme here, uh, that, uh, Silicon Valley will emphasize is that when you get that skateboarding and you put it out there to to, to be used.

You start to get feedback of what people like about it and um, and there's reviews and there's competition and all of that. And you realize everybody's asking for a handlebar on this thing because they're struggling to keep their balance. And so they, they, they, they go back to coding and they, they build that new feature on it, and then they release that.

And these are called roadmaps and there's roadmap releases and the roadmap is. We got a thousand things. We want to code into the software. All these people telling us what they want, but what are the top five things that we need to focus on now and release? In a month and that's called a new roadmap release.

And you see it on your iPhone all the time. Every couple months there's a new release or your softwares you gotta reboot in order to use the new features. All of that, that same concept of agile development, of iterative growth, iterative improvement is applicable in so many areas of our life. But within business, adopting a management.

Process is absolutely. I think how that works. Just get something simple and basic in place. A cadence around your meetings. What are your agendas that you discuss in each of these meetings? What's the outcome? What's a new tool to, to track your new, your new clients or to get reviews and you just, you, you implement certain business features and processes just in small batches at a time.

You make sure it's running smoothly and then when it is, and it's sort of autonomous, now you go back and you release that next feature of processes, SOPs, et cetera, around the management process. And I love that concept of agile development. So everyone please. If you haven't done it yet, develop a really great practice management process.

Even if it's just a simple one to start, you'll iterate it and it will get better. Let's go to number two, not understanding the true cost of PPO. So this is a, this is a business management, a practice management issue that I think is not fully addressed in practices. And PPOs often treat, uh, often are, are treated as this kind of necessary evil, but many owners don't actually know the real impact of the PPOs.

Financially speaking, fee schedules, write-offs, hygiene, profitability, and chair utilization. These things all matter, and most practices don't model this at the procedure level. So when PPOs are misunderstood, growth can be deceptive. Collections might be going up. While profitability actually could be going down.

And the risk isn't being in PPOs, it's actually being in them blindly. It's not understanding them. And PPOs can get your top line up. And a quote I've often said on here, and I reiterate it again, is that top line is vanity and bottom line is sanity. I've seen practices that have a phenomenal top line too, 2.5 million, but the doctor's only taken home 200,000 pre-tax, pay their taxes on it.

You'd be much better off as an associate probably, and you wouldn't bear all that stress. So top line, although is the first step to getting a bottom line, a top line, meaning your collections does not guarantee you. Bottom line meaning profit. You have everything in between and that's your overhead structure, your debt.

Taxes, things like that, that need to be managed carefully. And what a good business, uh, management system can do is to help manage everything in between the top line and the bottom line. And I would say in that process, one critical thing to do as a dentist is to define your strike zone. Is your strike zone, the the PPOs.

If so, which are the PPOs that you're gonna be in network with? Is your strike zone fee for service? Is your strike zone all on fours? Is your strike zone, um, is it cosmetic dentistry? What is your strike zone? And although sometimes we can't narrow ourselves to one specific strike zone, you can narrow yourself to a type of client that you are seeking and.

One thing that's challenging is for a dentist to turn down a client or a patient that doesn't fit that strike zone. This is challenging for me to turn down a dentist that doesn't fit our strike zone because I want to help everybody, but. You need to focus on the impact that you actually can make and realize you can't help everybody and it's in your best business interest and financial interest, and I think cultural interest in your practice.

To define that strike zone really, really clearly, it should be written out. Your whole team. You should be able to walk up to your assistant at any given moment and say. Who is our strike zone patient and they should say it's this type of patient that needs to permeate throughout the culture of the practice.

The second thing I'll say here, uh, when it comes to understanding the cost of your PPOs, is to do a true cost analysis on a given crown. And the thing that you'll realize is that your cost structure that goes into producing that crown is the same. Whether or not it's a fee for service or a PPO client.

Now perhaps you, I don't know, send your crowns to a higher end lab if it's a fee for service client than a PPO client perhaps. But all things considered in terms of your team cost, your facility costs, a lot of your supply costs, and in many cases, even your lab fees. All of that comes with the same cost structure, your time.

Is the same either way, it's all the same. And if you could convert, theoretically, in a perfect world, a hundred percent of the crowns that you do into a full fee for service crown, where you're getting paid 1500, 1800, whatever, for that crown instead of 800, the economics is that your. Uh, your bottom line is going to dramatically increase because it typically takes, I find about four to five PPO crowns to, or to result in the same profit as one single fee for service crown.

That's why. I think it's incredibly important doctors truly understand the, what I say is a marketing cost of the PPOs because the PPOs are getting butts in your chair, and that is a marketing effort. These are just extremely expensive marketing efforts where you're essentially giving up 50 per or. Yeah, 50% of your UCR in order to get that patient in the chair in the first place, and doctors who are not able to develop the communication skills, the marketing and branding skills, the cultural skills needed to run a more fee for service practice are going to continue to have to use the crutch of the PPOs, and there's a lot of fallout from that.

There's a lot of burnout. There's a lot of, just a lot of motion, a lot of commotion, a lot of long days, a longer hours in order to generate the same profit. Now, I don't want to be unsympathetic to the challenge that it is to go fee for service, and I know a lot of areas in the country. PPOs have a little bit of a stranglehold in that area because of the nature of the patients, maybe the economic situation and or maybe the employers in the air, large employers who have their Delta plans or whatever with their benefits for their patients, and you're sort of like stuck in their, but.

In every environment, there's going to be people who care way more about the clinical outcome, the health, the aesthetics of their smile and their teeth, and their overall systemic, uh, oral, uh, body relationship. I phrased that wrong, but how the whole body's health stems from, in many ways out of the health of the mouth.

There are many people who will be willing to pay your UCR fee in order to know that they got the best. And now how do you market that messaging to drive people? That's where you get the right management consultant, the right marketing company, and just trial and error and learning what works and what doesn't.

It doesn't come easily, but the benefits are staggering if you're able to infuse more fee for service if your practice. Let's go on to number three. So reiterating number one, not adopting a management process. Number two, not understanding the true cost of PPOs. Number three. Not understanding lease terms.

So as a business operator, dentists have a lease, they have a facility. You can't work just from home like a lot of America is doing these days. Not an option. So you have a lease, you need operatories. At times, you're gonna need to expand those operatories or remodel or add a room for, uh, a doctor's office or a.

A case presentation room or, or a a, a financial presentation room or whatever these needs are in your physical space, that is unavoidable. Now, the lease is often the largest nonclinical financial commitment a dentist will ever sign. Yet a lot of dental practice owners treat it like it's just a formality.

Yeah, yeah. Gimme the document and lemme sign. Um, and there's a lot of. Features or terms within these lease agreements that matter a lot on the sustainability and the financial outcome from your practice. So there's escalation clauses, cam charges, personal guarantees, relocation clauses, and renewal options, and these things can dramatically affect long-term practice value.

A bad lease can trap a profitable practice in a bad deal or even kill and exit. And I've been talking to a doctor over the past year where the, um, the landlord receives a certain percent of the sale proceeds if sold under the period of that lease. Now you don't see that very often. That's a bit of a, of a fringe case, but I have seen that, and landlords can get very, they can get very, um, I'll say deceptive.

Inside of these lease agreements. That's why it's absolutely critical that before signing an agreement that may lock you in for 10, 15 years plus, it's important that you have that reviewed by a good lease negotiator, uh, and or a good attorney. There are attorneys who do a lot of lease negotiations and then there are just some straight up sort of real estate professionals who do the lease negotiations.

There's uh, many out there and just do some due diligence and find somebody that is an absolute must. Before signing a lease agreement. And, uh, this is a legal document with real financial consequences, not just a monthly rent number and a bad lease can erase your clinical accidents in a single signature.

So here are a couple additional thoughts I have on this. In these leases, there's usually the base term of the lease, and then there's options to renew as if you're a practice owner and you're in a, a lease right now, which, which you are, you're gonna know what that, that you have these options. Options are good.

They're advantageous to you. In my perfect world, you'd have a whole lot of short term options, maybe a five year base with three five year terms for a total of 20 years. Now that's, that's very tenant friendly. A lot of times they'll see a 10 year option with one, maybe two, five year options to renew. Now, why do landlords sometimes not want to grant too long of a term?

Well, because what happens if, uh, they have, uh, a corporate buyer that wants to come in, pay 'em boatloads of money, and then kick you out and convert it to a retail center for selling I, I don't know, furniture and. Th and, uh, this is happening in the biotech space here in San Diego. I've definitely seen it.

We had a biotech company coming and looking at building out our, buying our building, which is a professional suite for CPAs and realtors are in here and financial. The people are in here, and they wanted to convert it into a biotech. Company, which requires certain sort of, um, structural features to satisfy that.

But they're, they can rent for a lot more money. And thankfully they didn't sell because I love my, my place. But you have to be very careful of that because if they did sell, once my lease is up, I'm booted out and I gotta go find a new home. Now, it's not that difficult for me as a CP and financial advisor, but as a dentist, that can be existential.

And so make sure you know what your term and your options are and um, and when to exercise those options. If your lease ends, lemme give a scenario. If your lease ends at the end of 2028, December 31st. Usually these leases say you have a, a window to exercise any options, so it ends in 2028 and you can renew it for five more years.

Usually the renewal is like a year up to six months before the end of that lease or something around there. It's not actually up until the lease expires, and a lot of times the landlords aren't gonna notify you, and if the landlord for any reason wants you out, then all they have to do is hope that you don't reach out to them during that renewal option.

Period. And then once that's over, the landlord has legal right to boot you out, even though you may still have another three to six months in that lease. So be very aware of when that window is. Go in your calendar. And mark when that window starts and when that window ends, and make sure that it flags you at that time.

So you can bring in that attorney or that least valuation expert, that least, um, expert to review it, to prepare for the exercise of that option. Now, at that time, you don't have to exercise an option. You can go down the street. This is, this is an asset to you. This is not an as, this is a liability to the landlord.

You have unilateral discretion to exercise that lease option to extend your lease term. And uh, but if you don't want to for any reason, 'cause you wanna move down the street, maybe you need a bigger space, whatever, then you don't have to, you don't have to exercise it. And because you don't have to exercise it, it opens up a negotiation window.

That you could say, Hey, I'd like to renew my lease. I, most landlords want you to stay in there. I'd like to renew, renew my lease, but I would like a a few concessions. I'd like you to pay for $80,000 for a remodel. Uh, uh, since a lot of the remodel costs, uh, feed to the landlord by increasing the value of that property, it's okay to ask for.

That's called a tenant improvement. Now, I, this is not a podcast episode about leases and tenant improvements, but I do want you to understand the importance. Of these lease terms because I have found that practice owners oftentimes completely neglect an appropriate negotiation of the lease and understanding when to renew lease terms, and it's really been detrimental.

Alright, let's go on to the fourth item. For all you partnerships. If you're not a partnership and you think you'll never partnership partner, then go ahead and skip past this part. But for partners, uh, partnerships oftentimes will form without modeling out or forecasting projected ways of splitting the bank account between the owners who gets paid what.

And how, what does that look like? They go and do it with a handshake because they're friends, they feel really confident with each other, yada, yada. And that is a recipe for absolute disaster that people always underestimate because they think they have a great relationship with their partner. And I've seen a lot of, most, most lawsuits I've seen in dentistry, uh, have been around partnership issues.

All right, so a couple thoughts on partnering without profit split modeling. Partnerships often begin with this sort of optimism, this trust, but very few start with real financial modeling. And remember, this is like, this is like a financial marriage. And in some cases, in some states, it's harder to get outta this than it is an actual marriage with your partner.

So don't go into this lightly. Your eyes should be wide open going into this thing. And production collections, hygiene, contribution, ownership percentages, buy-in terms and future ghost scenarios, all need to be stress tested, scenario modeled. Without a clear modeling resentment builds, and trust me, this happens.

And you know why it happens, because we all have a different perception of the value that we put into something. And so in a partnership you have, you're putting in value, you're doing clinical work, you might be working on the, the marketing of the business, the HR of the business, yada, yada. And you're putting in this value.

What you perceive as your value, I guarantee you, is not exactly what your partner sees as your value and vice versa. And you can't, you can't get out of that. It's like the phrase I've read a, a lot. You, you can't read the label, you can't read the ingredients, uh, of a bottle from the inside of that bottle.

You have to be on the outside. And so you get this disparity of viewpoints on who's contributing what value to the practice. And that is why resentment often builds is when people feel that they're not getting back comme, uh, commensurate value economically to what they're putting in, um, with their efforts and their skills and, uh, their management, uh, contributions to the practice.

And so this resentment builds when, um. These expectations are not met. Now, most partnerships, failures, uh, they're, they're not personal. They're really mathematical. Because I always say there's, there's three things that make a partnership work, and I did, I think a six part episode on partnerships. If you go back, um, to, I think 2024 or 2025, you'll see those in there.

But the three main things are that, a, you have to get along, you gotta have good chemistry. That's obvious. Number two is that you have to have a shared clinical philosophy. If you don't respect each other clinically, that becomes a major problem, but most doctors get those two, right? It's the third one.

They don't go right, which is how do you split out the bank account? It's the financial consequence of being a partnership that often leads to the failure. And so this is just one of those things before you sign that bottom line on a partnership agreement and formally launch. Just this is like an ounce of prevention is worth a pound of cure here.

This is so AP that's so applicable in this situation. So meet with somebody who does partnerships, have them go over what are the different ways. That dentists split profits. If your two GPS doing essentially the same services, the same treatments, that's fairly easy. But if, if you're, if one of you is doing, um, Invisalign and one of you isn't, one of you is doing dental implants and one of you isn't that there's a disparity in the clinical, um, list of treatments that you do, and all of those come with different supporting needs, different cost structures around the supplies or labs, maybe you need to pay somebody differently.

Maybe one of the partners is a specialist. Maybe you got a, a peto and an ortho partnership going on. These are, these have nuances to them. And even a petto um, orthodontic partnership in one town may be different than a peto orthodontic partnership in another town. Not all two are alike, even when you have sort of, um, uh, uh, a UA unique style or, um, type of partnership there, every practice is a little bit unique, structurally and on an individual level.

So find somebody. And yes, practice CFO does this. We definitely do a lot of partnerships. This is a key thing that we do because partnerships went run well. It can be a wonderful experience in having somebody in the yoke with you, brainstorm kind of a check, uh, somebody to support you, to be there with you and also, you know, in terms of managing your calendar and, and time off.

And then of course, you can get two producers off of one overhead structure. So there's a lot of wonderful things about partnerships, but they're just extremely delicate. As you know, in certain relationships, marriages, et cetera, even though they can be absolutely wonderful, beautiful, rich experiences, they require very unique contributions to make them, uh, sustainable and healthy.

And so what a good consultant will do is say, what are you producing? What are you producing? Let me see your p and ls. Let me see your overhead structure, and then go through a few different scenarios. We, we will usually go over three different scenarios of ways to allocate profit, and then we project it out in a hypothetical first 12 months.

What's gonna be at a typical year going forward in terms of what you're producing and what you're producing and your cost structure. And so in Excel we create these columns and each doctor has their own column and we allocate production and, uh, expenses across to each of the columns. And typically hygiene or associate doctors are split.

Based on ownership. So if doctors are 50 50, they're gonna split the net profit, net profit, not collections, the net profit of the hygiene and of the associates across to the tune owners based on ownership. And once you sort of get through the algorithm of what makes sense. Economically based on those nuanced differences between the partners, and you do the forecast and it feels right now, you go to the attorney and say, attorney, draft us up a partnership agreement, and this is what we've agreed on, on how the profits are gonna be split.

Now there's a lot of other terms in the partnership agreement around exits and things like that that need to be addressed, but I'm really focusing on the financial aspect to it. And also the last thing I'll say, oh, and by the way, in that execution, this happens all the time that the doctors go to an attorney, they draft up the partnership agreement, all great, and then they click go and they start running their partnership and they don't have a CPA or somebody to take the partnership agreement, uh, profit split algorithm and actually implement it.

And so you get the, in so many partnerships that come to us, there's a, there's a, there's a, there, there, there's a difference between what their partnership agreement says. The way that people are paid, doctors are paid, and then there's what's actually happening. And when those are different, and one doctor that years down the road looks at it and says, wait, I've been underpaid.

Well, guess what? Lawsuits. Stemmed out of this issue. So you have to make sure there's an alignment in the accounting and the reporting and how much money is actually taken out of the partnership to each doctor individually, that that needs to align with what's in the partnership agreement. That's why I say the uh, doc, the CPA firm that's doing the accounting and the attorney should both be in the conversation at the inception of that partnership agreement.

Great. Okay. That is number four, partnering Without Profit Split Modeling. Let's now get back to any dental practice, not just partners. Number five is lacking FP and a. Now, FPA, FP and A stands for Financial Planning and Analysis. In my space as a financial consultant, advisor and CPA, this is a very common term.

FP and a financial planning and analysis here at Practice CFO, we've simply given it, given it more of a metaphorical term, and we call that the CFO model. And the CFO model is, as you know, all big companies have their CEO and then they've got their CFO usually, who's usually number two. And the CFO is the person who oversees all things financial.

The accounting and the reporting, dealing with shareholders, dealing with banks. That's what the CFO does it. They're really involved in the most important strategic financial decisions in that business. Well, most dentists don't have a CFO. Because, uh, it would cost, you know, 200,000, 300,000 to hire somebody who's got a few years of ex number of years of experience with an MBA in their background, or formerly A CPA, and that just doesn't fit a $1.5 million business.

And so what do they do is they revert to just sort of a bookkeeper or an accountant, and that, uh, is not prov providing any fp and a financial planning and analysis service. So here, here's my thought on this one. Most dental practices look backward. Instead of forward p and Ls tell you where you've been.

But FP and a financial planning and analysis tells you where you're going without cashflow Forecasting, scenario planning and budget variance analysis owners make major decisions like hiring expansions or equipment purchases based on what? Based on their gut fp and a turns financial anxiety into more of a financial control, financial clarity, a p and l, A profit and loss statement.

Tells you the story after it's over fp and a lets you change the ending of that story. And the way that I look at CPA services, your, your core CPA services of, of monthly financial statements of a tax return, of a payroll report, all of these sort of classical CPA services. Those do not give you, um, the ana, the, the, the takeaway analysis.

What do you do with this? They don't, they're, they're a visual, they're a financial X-ray is all they are. However, if you don't have those. You can't do good fp and a. In fact, I don't think you can do fp and a at all. It's like trying to do a root canal without having, or, or dental implant, without having a, um, without having the, the x-rays.

And so it, this is why in the beginning, initially at practice CFO, I did not have CPA services. I just had wealth management services and I was leveraging a dental CP in town to try to do the accounting. And I realized that until I fsed those inside of my own operatory. To create timely financial reporting in a format that gave me visuals to then do my fp and a work.

I was much less effective for these doctors. And if you're a dentist and you go to your financial planner and the financial planner isn't dental specific or doesn't really pair up closely with the cpa, the financial planner's gonna do some basic things. They're gonna do a retirement plan for you. There may do an IRA contribution or a Roth IRA contribution that might help you set up a 401k plan.

Um, and they'll talk about budgeting and some basic things like that, life insurance, disability insurance. But what they're not able to do to no fault of their own is they're not able to go and look at the heart. Of your cash flow, which is your practice. And this is where doctors, uh, this is why a lot of doctors I believe are not able to retire earlier in spite of a very strong cash flowing industry known as the dental industry is because they don't, they don't create the system, the financial system in their practice that creates additional surplus dollars.

To then invest in the stock market or in real estate, or paying down debt or their kids' education funds or their emergency reserves because they have to figure out how to create more blood flow. Out of the practice. And any financial planner can't go in and do that. It's not their language. And you may have a practice management consultant that helps you grow your top line, that's great, but you don't have somebody necessarily managing the bottom line.

And how that bottom line translates into your personal financial success. And that's where a model, and this is why I started practice CFO and eventually added on the CPA arm to it, uh, the most effective model is one that can understand both sides of that equation, the business and the personal and.

Bring them together in a holistic master plan that creates additional surplus and then uses that surplus effectively to build a personal balance sheet, which is the tool used to determine financial independence. Okay, that's number five. Let's go on lastly, number six. Uh, business and practice management mistakes is not using a KPI software or having team huddles around that software and KPI.

Um, are just key performance indicators. What are the sort of the primary numbers that tell you whether or not something is on or off track and good? There's KPIs that show you how things ended up, and there there are KPIs that show you how things are likely to end up, if not change. So sort of leading KPIs or leading indicators.

And then there are, uh, the. Sort of post KPIs, what's the end result? So what is a leading indicator? KPIA, leading indicator. KPI might be, how many new patients did you get? Or you can go more forward than that and say. How many new leads came to your website? How many new phone calls, uh, came in? So you could build original indicators outta your marketing program.

And then a trailing indicator is what's on your profit and loss statement. That's a trailing indicator. Or if you wanna go further downstream in KPIs, what does your personal balance sheet look like? How much do you have saved? How much debt do you have? What does your net worth look like? How do you measure your happiness in your life if you wanna go all the way downstream?

'cause all of this stuff ultimately is to lead that type of impact in the practice. So these are KPIs, leading KPIs, leading indicators, trailing indicators. You, you'll hear this a lot of times in the stock market, kind of leading indicators of future growth or declines in the stock market. So a couple things on this.

There are off the shelf KPIs that you could get, uh, or, uh, what's called business intelligent platforms that give you the KPIs. Dental intel is kind of a big one out there. And, uh, practice CFO has a number of clients on dental intel practice by numbers, and I've heard, you know, a lot of positive things on both of these.

And I, I've stated this before. The most important thing is that you adopt it, you use it, and you're consistent about it. So that you create a culture built on processes and methodologies and algorithms. Then decisions can be made without you because people have the framework. Your front office has the framework, your assistant has the framework, your hygienist has the framework to operate within that without you always having to sort of traffic control their, their behavior.

And so there's some off the shelf ones or you can add. You know, build a a few custom items. I would say don't build out a practice management software that's not your lane, but like I have a practice management tool. It's called Carbon, K-A-R-B-O-N, and it has a built-in business intelligent aspect to it.

I've used Microsoft Power BI in the past, and then I've created an Excel spreadsheet that has a few inputs that I have a team member fill out every. Month that I call it my CEO dashboard. And it kind of feeds me some high level key numbers so I can track how well we are on progress with our goals. And a good practice management consultant is gonna have some tools for you to use to track, um, your, your kpi.

Um, a few other things. I would say that you're huddles with your team. This isn't just about you leveraging KPIs. This is about your team leveraging KPIs. And one thing I love about a software like Dental Intel or practice by Numbers is you can use it in your huddles. To measure these KPIs in a very practical, daily way.

And I'll just sort of end off going back to what I started off in the beginning, that as a business owner, you do the thing that you do that you went into business for. In your case, that's dentistry. Giving people healthy, wonderful. Teeth and smiles. That's what you came into business for. For me, it's came in.

I came into business as a wealth manager and as a CPA to help people organize their e, their financial ecosystem and have a strong life financially, how to tether meaning to their money. That's why I came into business, but behind all that. Or the logistics of the business. This is why Amazon is incredible.

This is why Costco and and Walmart are behemoths, is because they looked at themselves not as a product provider, uh, but more so as a logistics company, and logistics is the reason for their success. That's the reason for their success. And now they're embedding ai. I mean, Amazon just fired how many thousands of employees because they now have AI and robots doing a lot of the in factory or the in warehouse work.

And, um, and I'm not, and and I will say in your own practice, I think in time, AI's gonna take a little bit more of a role, but don't let AI drive your operations. Create design blueprint, your operations, build it out in processes and people and systems. And then where AI can be layered inside of that to make that more efficient, great.

But don't think AI is gonna go out and solve all your problems. And that's why here we are today, February 5th, 2026, today and yesterday the stock market has been tumbling. Specifically the nasdaq, which is a tech based, um, set of companies, is because there's now a lot of people feeling like ai. Is going to, um, undermine what these software companies like Salesforce, for example, or QuickBooks, do they think that AI is gonna actually, uh, overtake some of those to do it faster?

And so there's a lot of fear around that. I believe the reality is that AI is not gonna, um, uh, take down Salesforce or take down QuickBooks, but instead AI will be layered inside of them to do certain functions and enhancing them. So the market is, the market is trying to figure out right now exactly. Um, how AI is gonna impact their portfolio over time, and that's for a separate podcast.

But since AI is such a hot topic right now, I feel like I can't talk about business processes and operations without injecting my view of the role of AI in all of that. And my view is that it is a supplement, an enhancer. It is not a replacement for. Good. Classic processes, tech stack, leadership programs, management systems.

Alright, everybody, just to summarize this episode of of financial mistakes that dentists make. Number one, not adopting a management process. Number two, not understanding the true cost of PPOs. Number three, not understanding lease terms. Number four, partnering with another dentist without profit splitting models.

Number five, lacking financial planning and analysis, lacking an FPA or as we call it here at practice, CFO, lacking a CFO model around the management view and decision making from your numbers, financially speaking. And the last one, not using KPIs which are more operational numbers and not using maybe a KPI software or simply put a set of tools and, uh, habits around measuring.

The progress of your practice as you build it out operationally and not having those, the cadence or pulse of those team meetings to layer on top of those KPIs so you're all operating together. That is it for this episode of the Dental Boardroom co, uh, podcast. Uh, I have next time. I'm gonna talk about leadership and oversight failures.

I'm gonna talk about assuming the front office manager, uh, won't commit fraud or mistakes, or not focusing on leadership and management skills, not using certain, uh, tech. Protective measures around your technology. I've had a few unfortunate cases of hacking into dental practices. I'll, I'll talk about that.

Not getting proper protection around insurance, uh, getting permanent insurance instead of term or at least at the wrong time. So these are some, some other areas I want to focus on. And then, uh, some also some personal growth, financial awareness. Uh, income structuring and compensation design for the doctor.

So stay tuned for more mistakes that dentists make as practice owners. Until then, have a great one.