Transcript
Speaker: Dental fuel. The podcast that focuses on what no one else is talking about. Mistakes. The dental world is full of before and afters and no one is talking about the middle. Dental fuel brings you the unspoken in between. Our conversation continues with Dr. Bell where she talks about a financial mistake and how it ties in with taxes. Let's listen in.
Speaker: Transitioning over from clinical practice to finances, what has been a financial mistake that you have made in your career? That's a fantastic question. Mistake, I don't know if it's a mistake, but something I think probably I wish we had had better guidance on early on. When you're opening a practice, there's a lot of pressure for this like depreciating assets and sort of chasing this
Speaker: Unicorn, if you will, that as you acquire things and purchase things, it helps reduce your tax liability. And so there's sort of this constant desire to say, okay, well, what do we need this year? And early in practice, there's generally a plethora of things that you want to acquire. And so finding those things year two, year three, not an issue.
Speaker: And then your four, your five, you're like sort of scratching your head going, is there something I want to have fun with or invest in that would be outside of my normal scope? And maybe you do that. The nasty piece that nobody really talks about is eventually those depreciating assets go away and you're still stuck with the mortgage payment on these lovely things that you've acquired. And you don't actually get any tax breaks. So not to get too heavy in the financial weeds on this, but let's say your practice is profitable, 500 grand.
Speaker: You don't get to reduce that 500 grand by the 250 ,000 that you spent on mortgage payments. You might get to write off the interest, but that's it. That mortgage payment is coming out of your profitability. So that's money not coming home to you, but you're paying full tax burden on it.
Speaker: So any young practices starting out, they start chasing this unicorn investment of the Section 179s and rapid depreciation because they don't want to pay the tax liability. But the reality is, after you've acquired all of these assets, the mortgage payments will still be due, most likely, unless you just happen to have a trust fund and you're paying for all of it in cash. The mortgage payments are going to start to be due, and that is coming off of the profitability line, not the top line.
Speaker: Definitely were some lean times for my business partner and I when we finally grasped the reality of the fact that we had these huge mortgage payments on all these things. We upfitted a cold start practice that had no patience. We had to build the infrastructure.
Speaker: and we bought a CERAC and we bought a CBCT and all the things that we really wanted to have accessible, it wasn't wasteful spending and they are all assets that we use, but there definitely were times where our mortgage payments were 20 grand a month working through all of these different assets that we had acquired
Speaker: And all that is doing is coming off the profitability of the owner dock. So it's just really important to understand you cannot keep chasing that. So you have to have a pretty good understanding of what your expense line items look like. Otherwise that's coming out of your pocket. That means year three, four, five, your salaries are going to go down in order to service that debt.
Speaker: Yeah, I was just talking to Dennis and I told him how Dennis are just so attracted to shiny things and they are nice and they're very useful to in the practice. But knowing when to acquire them and when the appropriate ROI for your practice will be there, I think is really important.
Speaker: Absolutely. And making sure that you are giving it enough time for onboarding, that you've got enough time to train your team because you don't want it to be the treadmill that you bought that sits over there and you hang all your clothes on, right? We are attracted to those things because I think we have a desire to stay new and fresh in our profession. And quite frankly, class twos get pretty boring. And so for those of us that are, the majority of us in this profession are intelligent, driven,
Speaker: entrepreneurs to some extent. The idea of mundane work every day is not satisfying, so bringing in scanners and technology is what actually gets us excited to put our feet on the ground and go to work every morning. But there is a financial responsibility that comes with that.
Speaker: I wouldn't qualify it as a mistake because we worked ourselves through it, but I definitely would qualify it as maybe a regret of not fully understanding the total picture of what the financial liability would look like. Interesting. Yes, very well said. I think that was very insightful. No one has gone that direction yet, so I appreciate that. Yes.
Speaker: Yes. I'm only a little competitive. It's fine. And if Chad says it, I want you to just edit it out so that - Yeah, for sure. I'll be so interested to see what he says and how in tune the three of you all are in your responses. I know. Will his biggest financial mistake be Dennis in the know? It's possible. Yeah. That would be hilarious. Yeah. I look forward to talking with him. Thanks for tuning into this episode. Be sure to follow Dinks on Facebook and on Instagram.
Speaker: And don't forget to follow us as well at Dental Fuel and at Ignite DDS. If you're interested in the Ignite DDS Masterminds program, be sure to check out the show notes for more information.
