Fatal Illusion No. 1: Shedding 10 unrealities that will keep your practice from growing!
My four decades of practice and working with dentists suggests that this is the biggest and most common fatal illusion.
“You can run your practice on an accounting statement.”
Michael Schuster, DDS
My four decades of practice and working with dentists suggests that this is the biggest and most common fatal illusion. It sets up a dentist to be disconnected from reality. Allow me to explain. Think about it. When do you get your accounting statement or profit and loss (P & L) statement? You get it after the end of the month, or quarter, or year, right?
Well, that’s like driving your car at 80 MPH with your eyes on the rear-view mirror. You simply don’t know where you are or where you are going!
Let me be clear that I mean no disrespect to accountants. I have a great accountant and great respect for accountants. I have used the same firm since 1975 when I moved my practice from Iowa to Arizona. Accounting is great for managing taxes and depreciation, but you can’t run your practice on an accounting statement. Remember that like you, I am a practicing dentist, and my comments also pertain to me.
Running your practice on an accounting statement ensures that you will be disconnected from reality. There is no way to know what is actually going on! Accounting statements provide the history of what happened last month, last quarter, and last year, but they don’t give you what you need to run your business today! Accounting statements don’t give you the “truth” about your practice, so it is difficult to make good decisions with information you can’t understand.
You must run your practice on a percentage budgeting system. It is the heart of your cash flow system. You have to manage your practice on your real collections — the cash that you have on hand to pay your current payables and taxes, and to fund your lifestyle and savings plan.
With a cash flow system, you know precisely what your costs are. You also know exactly where your revenues are coming from, and you know your costs to create the revenue streams from the mix of services you provide.
- Alone, your P & L is not an accurate measurement of your current state of practice health.
- You’ll never create wealth on depreciation or write-offs.
You need a simple and exact cash flow system. Without a percentage budgeting system, you don’t know what your fees should be for the individual services you provide, or how to price total case fees or charges.
You can’t master money unless you have a percentage budget and a cash flow system!
Without a cash flow system that includes a fee setting system, a compensation system, a financial arrangement system, a payables system, and a receivables system, you spend your life chasing your expenses. You become a production machine trying to keep up with your expenses. Without a cash flow system, you never have control of money, so no matter how much you produce, you are always a slave to money, and you never feel free of money. This is the single most important reason why most dentists live in survival mode, in search of safety and security their entire careers.
If you don’t have a cash flow system, you can’t be in control of money! If you aren’t in control of money, you will live in fear, insecurity, and doubt. If you live in fear, you will never reach your potential as a dentist, and your life and practice will be centered on you and not on the well being of your patients!
Those who live in fear never move up to provide higher levels of dental care, in spite of spending thousands or even hundreds of thousands of dollars on advanced technical training. The vast majority of dentists never actually do what they know how to do because they are trapped in survival mode.
The surest way to get trapped into a commodity, single tooth practice is NOT to have control of money in your life.
A practicing dentist, Dr. Michael Schuster founded the Schuster Center in 1978. Guiding thousands of graduates to achieve wealth and freedom, the Schuster Center is the first business school created exclusively for dentists. Dr. Schuster is a cadre and former director at the Pankey Institute, and adjunct faculty at the Dawson Center, OBI, and LSU Cosmetic Continuum. He can be reached at (800) 288-9393, www.SchusterCenter.com, or email@example.com.
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