874: Metric Mondays: True Profit: What You Actually Take Home – Dr. Barrett Straub

Gross profit and net profit both sound great. But there's one key difference you need to know! In this episode of Metric Mondays, Kirk Behrendt brings back Dr. Barrett Straub, ACT’s CEO, to break down true profit, the amount of dollars you get to take home to your family, to invest in your practice, and to plan for your future. To learn how to analyze and increase true profit, listen to Episode 874 of The Best Practices Show!

Learn More About Dr. Straub:

• Send Dr. Straub an email: barrett@actdental.com 
• Join Dr. Straub on Facebook: https://www.facebook.com/barrett.d.straub
• Send Gina an email: gina@actdental.com 

Learn More About ACT Dental:

• ACT’s webinars: https://www.actdental.com/136
• ACT’s website: https://www.actdental.com
• ACT’s Instagram: https://www.instagram.com/actdental
• ACT’s YouTube: https://www.youtube.com/actdental
• ACT’s Facebook: https://www.facebook.com/actdental
• ACT’s LinkedIn: https://www.linkedin.com/company/3137520/admin/feed/posts/
• ACT’s Twitter: https://twitter.com/actdental

More Helpful Links for a Better Practice & a Better Life:

• Subscribe to The Best Practices Show: https://the-best-practices-show.captivate.fm/listen
• Join The Best Practices Association: https://www.actdental.com/bpa
• Download ACT’s BPA app on the Apple App Store: https://apps.apple.com/us/app/best-practices-association/id6738960360
• Download ACT’s BPA app on the Google Play Store: https://play.google.com/store/apps/details?id=com.actdental.join&hl=en_US
• Join ACT’s To The Top Study Club: https://www.actdental.com/ttt
• See the ACT Dental/BPA Live Event Schedule: https://www.actdental.com/event
• Get The Best Practices Magazine for free: https://www.actdental.com/magazine
• Please leave us a review on the podcast: https://podcasts.apple.com/us/podcast/the-best-practices-show-with-kirk-behrendt/id1223838218

Episode Resources:

• Register for ACT’s To The Top Study Club (July 25, 2025): https://www.eventbrite.com/e/climb-with-us-register-for-july-25-2025-ttt-study-club-tickets-1205497959849

Main Takeaways:

• Your financial story goes beyond just the P&L.
• Understand the difference between revenue and profit.
• True profit is the dollars you can put in your personal checking account.
• Analyze your cash flow statement expenses — things that are not on your P&L.
• Ensure you have enough for Tax Day. Identify how much to put aside each month.

Quotes:

“[True profit] is the amount of dollars that you can actually put in your personal checking account. So, let me start here with true profit. Let me describe a scenario that I experienced as a dentist. And I can almost guarantee every private practice dentist-owner listening has experienced this. You meet with your CPA after the first quarter of a year. He or she brings a P&L, you sit down, and you look at it. You look at revenue, and overhead, and all the different percentages of each category. At the very bottom of this financial statement called the profit and loss statement is called net profit. Often, that number is good. There's a lot of money there, and you're like, ‘Wow.' He or she says, ‘You're doing great. You are right in the average where you need to be for overhead. You have a nice salary here, and there's a lot of net profit left over.’ You're like, ‘Wow, that's awesome.’ But there's this little anxiety that's creeping up because you're thinking, ‘That says $100,000. I don't have that in the bank. What's happening? Am I being embezzled? Am I a bad businessperson? I don't know where that money is going. He's saying I should have $100,000 left over, and I don't have it. Actually, I'm struggling to make payroll.’ So, there is so much of the financial story beyond the profit and loss statement.” (1:53—3:25) -Dr. Straub

“Find true profit. Meaning, what is left over after I paid the overhead, after I paid myself the W-2 payroll salary, after I paid tax obligations, after I paid loans, after all of the outflows? There's a dollar figure left over where you're like, ‘That's mine. After tax, I can take that, and I can put it into my bank account.’ Now, why is that important? This is the link between your practice success and your personal financial success. We see it all the time. We coach hundreds of dentists throughout the country every year. We see it all the time with what looks like — and is — a killer practice, and the dentist-owner does not have a personally successful financial model. There is a link between them. There's more detail than any of us know in between it, and unless we know how money flows from production, to collections, to overhead, to net profit, to gross profit, and into true profit, we can't successfully plan. True profit is what you pay your house mortgage with. It's what you pay the soccer fees for your kids with. It's what you pay the voice lessons for your daughter with. This is how you pay for your vacations. This is your money after tax. So, it's maybe the most important metric that we're going to talk about in this whole segment.” (3:32—5:03) -Dr. Straub

“Early in my career, more than 15, 20 years ago, I got into what's called a tax snowball. I was pulling money out, and my accountant was like, ‘You're doing great.’ Well, I thought I'd just pay taxes later and save some money. I found that I got into the next year, and I owed a tax bill for last year. My accountant was like, ‘You’ve got to pay that now!’ So, I was taking money I was earning this year and paying last year's taxes. Now, the money I'm earning this year, I have to pay taxes on it. I'm using that money to pay last year's taxes that also has a percentage built on it. He looked at me, and he goes, ‘This is the most expensive money you'll ever spend, ever.’ And I realized I've got to get out of this. What's really important is you have to understand what's below your profit and loss statement. This is a lifetime study. You don't just get this in a podcast. You've got to work it, rework it, know what it means, and evaluate it.” (6:22—7:19) -Kirk

“After your net profit on your profit and loss statement, there are what we call below-the-line expenses. So, last Monday, I challenged listeners that had any sort of loan through the business — meaning a practice loan, a technology loan, or any capital expense — and I challenged them to . . . go find it on your P&L. It's an expense. It's an outflow. It should be on your P&L as an expense. I also said you're not going to find it there. The reason is that the money you are paying for any loan through your company is being paid with profit. It is not reducing your taxable income at all. It is paid with profit. So, I talked about that scenario where this net profit number, I don't know where that is. It's because that number is now going and paying your practice loan, your CBCT loan, and oh, by the way, you take $10,000 in a distribution every month. That's pre-tax, so that goes against the distribution. So, this is all IRS stuff. Your CPA didn't make this up. We're not making it up. This is how complex the IRS is, and that's a whole other debate that it needs to be this complex.” (7:54—9:07) -Dr. Straub

“You have deductible expenses which are on your P&L, and you have below-the-line or cash flow statement expenses that are outflows of money but they're with your profit. Those include any loans, they include quarterly tax distributions, and they include your distributions. Meaning, when you pay yourself through W-2 through payroll, that goes through payroll. It's taxes withheld, etc. But when you just go take $5,000 out of the bank account, that's called a distribution — which is well within your legal means to do it, and you should do it. But we have to plan for taxes on that because unless you're a C corporation, which you shouldn't be, everyone is going to be a pass-through entity. Meaning, the IRS says a pass-through entity means the income of your business is no different than your personal income. The income of your business is your personal income. The IRS, however you want to take that money, are going to apply personal income taxes to it. So, if you take money in the form of distributions, you haven't withheld any taxes and you owe that. So, this is where it gets complex, and your head is going to hurt.” (9:09—10:23) -Dr. Straub

“If we leave this podcast with nothing more than like, ‘Ooh, I'm armed with some really good questions for my CPA next time. In fact, I'm going to call them today and have them explain this,’ great. Then, we've succeeded in this podcast. But if you look at that net profit and you're like, ‘I don't know where that money is,’ I guarantee you have some loans or other cash flow, whether it's personal distributions or other cash flow statement items, going out. You can determine that by printing — you've already printed your P&L. Now, I want you to print your cash flow statement. Part of that cash flow statement is going to say financing activities. That's where you're going to find all this stuff. You're going to see like, ‘Oh! That's where it all went,’ and you're going to see exactly why your bank account doesn't match the bottom of your profit and loss statement.” (10:24—11:10) -Dr. Straub

“You mentioned something about distributions. That is a very dangerous process. I did what my accountant said. I processed my family payroll. I had my wife on the payroll. ‘We're paying taxes through this payroll thing.’ Then, I was grabbing money as I needed — $5,000, I needed $6,000. What I didn't realize is there were tax implications on this money. I had an accountant who was like, ‘Don't worry, we'll figure that out. You won't pay the regular rate at that.’ And you start to believe those things. You don't mess with the IRS. And what Barrett is saying is — I'm going to tell you right now. I've been here a long time. There's only one way to do this — the right way. You can't mess with it.” (11:31—12:14) -Kirk

“Let's consider one month in your dental practice. You have revenue, you paid your overhead expenses, and you paid yourself your W-2 salary. So, at the bottom of your P&L for the month of March, it says net profit, $10,000. Meaning, there's $10,000 left over after all your expenses are paid and you paid yourself. You're like, ‘Great. I made an extra $10,000 above and beyond my salary.’ Okay, but the IRS looks at that $10,000 as income. So, you owe $4,000 on that $10,000 already. Ideally, once we get further into this, we're going to say you're going to take $4,000 and you're going to put it in a separate bank account so that you have that money to pay taxes. So, now, your tax allocation is 40%, roughly speaking. Everyone is going to have it slightly different. Ten grand left over, but you know that, ‘I'm going to roughly owe 40% of that to taxes.’ So, there goes $4,000. There's $6,000 left over. Okay, but you bought a CBCT two years ago, and every month you pay $5,000 on that CBCT. That's paid with profit. So, now, that goes away too. Now, $6,000 minus another loan of $5,000. You have $1,000 left over in true profit. But last week, you went in and you took $2,000 for a quick distribution because you owed a little bill and you didn't quite have it, so you just took it out. Now, you're negative $1,000 true profit. So, that's a very real world — that I went through — example of, if we don't understand that we have taxation on our net profit, if we don't understand that that $5,000 loan actually reduces our true profit, if we don't understand that that quick $2,000 that we went and took out as a “distribution” reduces our true profit, we can get into some trouble.” (14:03—15:42) -Dr. Straub

“If you're listening to this, and you're driving to work, and you're dreaming of this beautiful building with a whole bunch of extra ops, and you haven't figured out the PPO thing, and you're going to get an associate to “scale”, I'm going to ask you to pause, and breathe, and figure this out. Here's why. We get dentists all the time that think, ‘I'm going to grow. I'm going to scale. I'm going to add other dentists,’ and they're writing off 40%. They add an associate that they have to pay on that, and a lab bill, and all these other things, and they are in shared agreements. So, they are now adding producers and subsidizing their own salaries to grow this big practice. Now, here's the downside. You can't unbuild these operatories. They're done. Once you build them, you've got to fill them. There's no turning back. I'm not opposed to having a great practice, a beautiful practice. But we want you to do this the smart way.” (16:19—17:18) -Kirk

“Progress, not perfection. Just a little bit of progress every day.” (18:10—18:14) -Dr. Straub

Snippets:

0:00 Introduction.

1:46 True profit, explained.

5:03 Kirk’s experience with the tax snowball.

7:19 Below-the-line expenses, explained.

13:57 Last thoughts.

Dr. Barrett Straub Bio:

Dr. Barrett Straub practices general and sedation dentistry in Port Washington, Wisconsin. He has worked hard to develop his practice into a top-performing, fee-for-service practice that focuses on improving the lives of patients through dentistry.

A graduate of Marquette Dental School, Dr. Straub’s advanced training and CE includes work at the Spear Institute, LVI, DOCS, and as a member of the Milwaukee Study Club. He is a past member of the Wisconsin Dental Association Board of Trustees and was awarded the Marquette Dental School 2017 Young Alumnus of the Year. As a former ACT coaching client that experienced first-hand the transformation that coaching can provide, he is passionate about helping other dentists create the practice they’ve always wanted.

Dr. Straub loves to hunt, golf, and spend winter on the ice, curling. He is married to Katie, with two daughters, Abby and Elizabeth.