In 1999, the Toyota Camry held the distinction of being America’s best-selling car. It boasted reliability, a spacious interior, and decent fuel economy, all at an affordable price. (Incidentally, it’s also the best-selling car in America today for similar reasons.) Let’s think back on that model from more than 20 years ago. Imagine you have one in your garage today, lovingly protected under a car cover. It’s waxed and shiny underneath, and miraculously, it has fewer than 15,000 miles on the odometer. If you listed it for sale, you could rightfully advertise it as “pristine” and “like new.”
You’d be lucky to get $4,000.
This hardly seems fair, considering you originally paid $20,000 for it. It’s still practically brand-new. How could it have possibly depreciated by 80%? The answer is simple—just pull up a stock image of a 1999 Toyota Camry. Perched on a winding mountain highway in perfect late afternoon sunlight with an impeccable sheen and without even the slightest ding or scratch, it’ll still look old to you. Frankly, it can’t hold a candle to the Camry of today, let alone one from even eight years ago.
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Innovation: Key for growth and profit
Innovation waits for no one. It’s the same in dentistry––and every other industry. If your practice relies on a business model identical to the one you implemented 20 years ago, then you’re losing money. A lucrative plan that brought in high numbers back then would yield a mere fraction of those dollars today. Even if your clientele remained roughly the same, which is unlikely, your costs will have skyrocketed. But more significant, the competition will have made a relic out of your once tried-and-true business method.
Some business owners, in an effort to play catch-up, yield to the temptation to increase profits through mere cost-cutting, which becomes a sort of affliction. Marketing budgets shrink alongside support staff. Owners pick up the slack doing tasks that would best be done by other team members. They skip making investments in new technology in favor of maintaining old equipment. Any savings automatically get routed toward retirement accounts that earn 6% to 7% interest. Or worse, they get funneled into lump sums to pay off a mortgage set at a lowly rate of 4%. Such a strategy, while well-meaning, will inevitably strangle both your business and any chance you might have at securing lasting wealth.
Don’t be mistaken. Invest in your retirement and pay down your mortgage, but not at the expense of neglecting the needs of your business. As a financial advisor who has guided countless dentists to spectacular profitability, I encourage all of my clients to see their business as the main pathway to financial freedom. When dollars are a finite resource, allocate them to where they can do the greatest good. Anything else will steer your practice straight down the road to obsolescence.
Getting to your goal
As a dental professional, you’ve undoubtedly heard the saying, “Diagnosis without examination is malpractice.” The same holds true for financial advisors. I can’t tell you where to focus your resources without first understanding your objectives. Your goal is your goal. The first step is to figure out the direction you’d like to take your business. The next step is to reverse engineer a course of action toward that aim.
Oftentimes, the best investment can be as simple as more business training. Early in my own career, I hired Gail Goodman, an expert in telephone etiquette. She coached my entire staff on how to properly manage the phone. Even on days when it rang nonstop, we made it our goal to answer it as if it were the most important call of the week. More recently, we brought in a group called Heroic Public Speaking, which served to vastly improve the ways in which we communicate––not only in front of large groups, but also with the individual clients we engage with daily.
Knowing where you need to grow so that you can get to where you want to be is key. As a dentist, you’re only able to assist your patients within your ability to treat. If you can’t perform a complex procedure, you can’t offer it. It’s the same way in any business, including finance. Advisors who don’t understand the true scope of a particular investment can’t recommend it to their clients. Allocating resources toward furthering your skill sets can have enormous upside. Become the most knowledgeable in your field and you’ll be able to offer the most lucrative menu of services.
When you can swiftly identify investments versus expenses, you have your head in the game. Those who want to grow their business exponentially (or geometrically as I often say) need an unlimited appetite for investments and no tolerance for expenses. When you discover any cost that doesn’t add to your business, it’s off to the chopping block.
Don’t leave your fate to happenstance
As for your business investments, seek those that yield a return of 400% to 500%. Does that seem overwhelming? Consider the alternative. I remind all my clients that when money is a finite resource, you can’t afford to major in minor things. Not only will your investments require financing, but they’ll also require time and effort, additional stressors for you and your team. Put your efforts only toward your best opportunities. Choose too many different ones, and you'll get diminishing returns.
Achieve the goal of doubling your business, and it will have a profound effect on your ability to generate substantial wealth. A dentist with a $2.5 million practice, for example, might take $250,000 in annual compensation. With proper investing, it’s not unusual for that business to grow to $5 million in revenue. In that case, the compensation doesn’t simply increase to $500,000. Due to economies of scale, it leaps to $1.5 million. What retirement vehicle can provide that kind of return? Clearly, the best investment dentists can make is in their own business.
All too often, people leave their own fate to happenstance. They fail to realize the power of a well-defined plan—not one from yesterday, not one for tomorrow, but rather a plan for right now. The most successful entrepreneurs pay attention to where they currently stand relative to their aim. Then, with a deliberate and tailored plan in hand, they invest accordingly. Most important, they do it now.
