570: How Many Days Are You Working for Free? Dr. Barrett Straub

How Many Days Are You Working for Free?

Episode #570 with Dr. Barrett Straub

Every dentist is working some days for free. If you don't like the sound of that, don't miss this episode! Kirk Behrendt brings back Dr. Barrett Straub, CEO of ACT, to explain what it means to work for free, how it’s not always a bad thing, and how you can track your numbers with ACT’s Effort Quotient and PPO Roadmap. To start aligning your practice and your life, listen to Episode 570 of The Best Practices Show! 

Episode Resources:

• Dr. Straub’s email: barrett@actdental.com 
• Dr. Straub’s Facebook: https://www.facebook.com/barrett.d.straub
• Dr. Straub’s social media: @bstraub10
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Links Mentioned in This Episode:

ACT’s PPO Roadmap: https://www.actdental.com/free-resources/ppo-roadmap 

Main Takeaways:

Follow the money in your practice.

Understand the effort gap and the energy gap.

Make incremental progress. Success isn't overnight.

Doing more and adding more isn't always the solution.

Your goal isn't to drop all PPOs, but to shrink the effort gap. 

Quotes:

“[If you're asked how many days you're working for free,] most people hearing that would say, ‘I'm not working for free any day. We’re charging for our dentistry.’ But in many cases, you're not on some of the days. We find that just about every dentist is working some portion of their month for free. Meaning, there's no revenue coming in for zero to three days, maybe if you're a fee-for-service. We’ve seen up to seven to ten days for some practices that are heavily in PPOs. And the whole idea is that we want to minimize the amount of time we’re working for free. We love write-offs. We love being charitable. We want you to keep doing that. But we want you to know, and your team to know, how many days are you actually working for free. And my guess is, most dentists don't know.” (2:19—3:07) -Dr. Straub

“There are gaps in every dentist’s practice where money is leaving. And that doesn't mean it’s all bad. It just means that it is getting harder, and harder, and harder for dentists to know and follow the money through their practice. So, if you start at the top with gross production, there is the first gap. We call it the effort gap. And that is the gap between your gross production and your net production. And so, that's the one we’re going to focus on today. That's the one we have been focusing on with our PPO Roadmap. It’s very, very important. And that's the difference between the dentistry you produce and the dentistry that you can actually collect on. So, your net production is your maximum collectible amount. So, we see practices producing $2 million writing off, the national average is 42-ish percent of write-offs if you're participating with PPOs. So, you could produce $2 million of dentistry but have a net production of $1.2 million. And you can only collect on that. So, you might have an $800,000, $600,000 effort gap. That's huge.” (4:14—5:34) -Dr. Straub

“One of the challenges, one of the pain points, one of the realities that we see — and I've experienced this. We all have — is we all graduate from dental school with some assumptions, with some thoughts of how we need to practice dentistry, ‘Well, everyone else is doing it, so we have to do it that way.’ And what a lot of people find themselves in is we get out, we go into private practice, we have to be contracted with X, Y, and Z insurances. And we get 15 years out of school, and we're like, ‘I am working really hard, and I thought I'd be making more.’ And that realization, that's what these gaps are for, is for a dentist one day out of school or 50 years out of school be able to follow the money in their practice.” (6:33—7:24) -Dr. Straub

“You're going to hear us talk about getting out of PPOs. And we’re actually not ever going to say like, ‘Every dentist needs to get out of PPOs.’ We’re more of the mind that, ‘Let's track the numbers. Let's know what our effort gap is. And then, let's make some decisions to shrink that gap to where we’re most comfortable.’ So, we see our top-performing, fee-for-service practices in the five, six, seven percent write-off range, and most of that coming from charitable, or what I call elective, write-offs. Mrs. Jones has fallen on hard times. I want to give her this dentistry for free because I can. That's fun. That's a great write-off. That's where you're impacting lives to give away dentistry. That's awesome.” (7:24—8:13) -Dr. Straub

“Our highest PPO practices, yeah, they're upwards of 40%, 42%, 43%, even 50%. That's a lot. They're working really, really hard to have the same collectible amount or less than some fee-for-service. Now, we have tons of practices in the middle. So, you don't have to be either/or. We have lots of practices that have gone through our PPO Roadmap and lowered their worst PPO-performing contracts. Instead of 40%, now they're sitting in 25% and they're feeling really good. Maybe they drop one more, and they're sitting in 18%, 15%. And maybe they’ll never go lower, because going from 40% down to 20%, that's a lot of profitability that you just put in your pocket.” (8:14—9:02) Dr. Straub

“The older you get, the less you have of this very valuable thing called time. So, what you realize is it’s not so much the money, but you're giving away days, and days, and days, and days, and days of your life that you never get back. You never get them back.” (9:49—10:05) -Kirk

“You've got the effort gap at the top, gross production, to actual net production. Then, you've got another gap in there, which is net production, collectible production, your actual collections percentage, which I think should be crazy high. And so, you're losing money there. Then, you've got your overhead percentage down to your net profit. And you've called it out best. Most dental accountants look at the bottom line of a P&L statement and go, ‘You're doing good! Wow, there's $274,000 in here! You're doing great!’ And you're like, ‘But I don't have any money.’ And then, there's one other gap that falls below that, which is cash that goes out that you don't see on a P&L statement like loan payments, like taxes. And so, you've got to be cognizant of these gaps so that you can play with these dials and enjoy your life. Otherwise, your only goal or plan is just more, more, more, more, more, more, more.” (11:07—12:03) -Kirk

“If you're a practice owner, the thing you're worrying about most is, ‘Of my gross production, how much do I actually get to put in my bank account?’ And you're going to realize soon that there are these gaps where money goes out. And as long as you know that, you can make some improvements. The alternative solution has always been, do more, do more, do more. And every time you do more, add a practice, add an op, add a team member, add more capacity, start working Fridays, Saturdays — we’re not saying that's always bad. We’re just saying that adds complexity. And complexity adds more effort, and effort adds energy, and more effort can add more stress. And we’re saying, before you make any of those decisions, know what your gaps are.” (13:45—14:34) -Dr. Straub

“If you truly graduated from dental school and said, ‘I can't wait to work six days a week,’ then go nuts. But no one’s said that.” (14:59—15:12) -Dr. Straub

“You have a life, and you have a practice. And if they're not aligned, you will always default, and your practice will make your life worse off. But if they are aligned and you say, ‘I'm only doing this dental practice thing to have a great life,’ then you get to design your practice. And that may mean not working Fridays, not working Saturdays, not working nights. And that's awesome — if that's what you want to do — which is what I want to do, and you want to do, and most of our clients want to do.” (15:15—15:42) -Dr. Straub

“You have your gross production. That's your one, true master fee. That means everything you've done, you build it out correctly. You then wrote off, whether it’s a PPO write-off, whether it’s an elective, charitable write-off — when you do those six veneers on your mom, actually bill it out and write it all off. You can't put zero in the ledger.” (15:52—16:14) -Dr. Straub

“Simple math, if you have a 25% write-off, you're working one week out of your four of each month for free. You're working until that second Monday before you're even making any revenue in order to pay your team. And now, you have the overhead, so now you're going to pay your team for a while. And you just hope that there are some days left in a month where you, doctor, get some. And for most of us, in most of our careers, we didn't really know those gaps. But where the gaps are going to come in is we’re going to know, our clients will know, exactly what our write-offs are, what those gaps are, how many days they're working for free, and not to beat themselves up.” (17:32—18:11) -Dr. Straub

“What happens when you're more profitable, when you have more money? Does your life get better? Do you get more charitable with your team? Do you have less stress and you have more smiles? Everything gets better.” (18:28—18:40) -Dr. Straub

“At the end of the day, it’s not money. Money allows freedom. That's really what it does. When you make enough money, you go, ‘I'm good.’” (19:06—19:12) -Kirk

“If you are part of PPOs, what we want you to do is bill your true, one master fee. Write it off, what the contracted amount is, just so you know. So, then you know in X, Y, Z PPO plan how much per month, per year are you writing off for that plan. You do that for all your plans. You do that for your membership plan. And you do that for your elective, charitable care, guaranteed services. You set it up so that you charge your full fee, write it off, and just start tracking the numbers. Nothing more.” (19:27—19:58) Dr. Straub

“We don't ever want to say it’s bad to have associates, or partners, or multiple practices — no. However, you have to go in with the knowledge of, ‘Where are my gaps? Why am I adding this capacity? Would it be more intelligent to shrink our gaps before we do that?’ We’re always going to say yes. But just this concept that there are some intangibles. There's stress. There's blood pressure. There's heart rate. There's more blood being given on some practices than others for the same potential collections.” (22:52—23:23) -Dr. Straub

“You're not really creating any more value unless you're getting, essentially, time back. Why would you add six more ops if it doesn't give you six more days?” (23:40—23:50) -Kirk

“Somehow, the message is getting across to young dentists and graduates that the way to a predictable, great life is multiple practices as quick as humanly possible. And once that happens, they will have more time. And I was in those shoes. When I graduated from dental school, I remember saying, ‘I'm going to own five practices. I'm going to run the business. I'm going to get out of the ops.’ And I soon realized, ‘Holy cow. Running this one practice is super hard, and I don't have it figured out.’ I would rather the mindset be, yeah, if you want to do that, go nuts. But get your first practice tight. Get it predictable. Then, use the franchise theory on those best practices. I think it’s opposite to say like, ‘I'm only going to get that life predictability once I have enough practices and enough associates and enough doctors and enough hygienists where I can take time off.’ Again, the more complex, you're going to have less time off.” (24:46—25:42) -Dr. Straub

“I would've originally said maximize your net production with minimal effort. So, we say effort equals time, which I love. Then, it becomes, maximize your net production or the amount you can collect with the least amount of time.” (27:04—27:21) -Dr. Straub

“There's no dentist out there flying from city to city on Fridays going, ‘I built an amazing fee-for-service practice. I work 162 days a year. I came all the way here to show you how you can do the same.’ Because any dentist that has ever done that is not speaking at state meetings anywhere. They're on a boat, or at a golf course, or at a curling tournament on the weekend, or you have a camp way up north. You are not thinking about, ‘How am I going to spread the message?’” (28:00—28:31) -Kirk

“The Effort Quotient is basically saying, how many days per month are you working for free? So, there are four numbers you have to pull. One is, how much did you write off last month to all your PPOs combined? That is the contracted fee, the difference between your one true fee and your contracted fee. So, all your PPOs, how much did you write off to all of them? Number two, elective write-offs, your charitable, your guaranteed service, all the stuff that you have some control over, you're not contractually obligated. That's number two. Those are dollar values. So, dollar values for all three of these. The third is your collections gap. So, if your collections was 95%, then I want you to put a...