Dentaltown October 2014 - (Page 12)

howard speaks column Debt and Cash Flow There is not a billionaire on earth who doesn't use debt to beneﬁt business. Even if you started saving money the day you were born and never spent a penny, you'd die before you'd ever see your bank account reach a billion dollars. Billionaires borrow other people's money (OPM), whether through stock or bond offerings or a bank. They buy or build something and then they pay back the loan. You could have worked a minimum wage job for 40 years, saved money and paid for dental school in cash. But instead most of us took out student loans. You may not be a billionaire, but you used OPM to build your career. This was smart debt. The same goes for purchasing equipment in the practice. The adage "you have to spend money to make money" is true, and it often entails other people's money to get to that point. This isn't to say you should blindly go into massive debt. Analyze the ROI on a piece of equipment. What will the beneﬁt be to your practice and how long will it take to pay back the loan? don't want to go into that kind of debt. You have to look at a number of other factors besides the sticker price of a piece of equipment like that. What will having your own CAD/CAM unit do to your lab bill? If you're doing more crown and bridge work and slashing your lab bill in half, how long will it actually take you to pay the loan off? Does the technology attract more new patients because of same-day appointments? Does adding a CBCT unit mean you can start performing more complex implant procedures in your practice? Work with a dental CPA Work with a dental CPA to see if a big purchase is a good move. When I say dental CPA, I mean a CPA who works exclusively with those in the dental profession, not a CPA who has one or two dental clients. To ﬁnd one, check out: The Academy of Dental CPAs (ADCPA.org) and The Institute of Dental CPAs (INDCPA.org). These professionals specialize in dentistry and can help you to best determine if a purchase will be beneﬁcial to your individual practice. It's a privilege to borrow It's a privilege to be able to borrow money. Thirdworld countries don't have this option. Debt is leverage, but it's treated as an emotional decision. I graduated from dental school in 1987 with $87,000 in student loans. That's in the $220,000 range today. I paid it back after graduation while working as a dentist because the lowest-paid dentists made $50 an hour. That's 10 times what I would have made working and saving money at that minimum wage job. If I hear one more dental school graduate whine about his $300,000 in student loans, I'm going to slap him! Those loans took him from earning $5 an hour to $50+ an hour! I often hear dentists say they don't want to purchase a CAD/ CAM or CBCT unit because they Look at the reports that matter There are three main reports when you're looking at your practice ﬁnances: the statement of cash ﬂow (Fig. 1), the balance sheet (Fig. 2) and the statement of income (Fig. 3). They'll all reﬂect debt differently. Your statement of income (P&L) shows numbers like depreciation, deferred taxes, etc. It's mostly used for tax purposes. Your balance sheet is only used when you're trying to get a loan. It's not used to make business decisions. Debt will always make your balance sheet look ugly. The statement of cash ﬂow is what actually matters. This statement is what really shows what's happening in a business. As humans, we tend to be emotionally connected to the debt on a balance sheet. But your statement of cash ﬂow can be solvent. It's what makes leverage out of debt, and debt is what separates the billionaires. by Howard Farran, DDS, MBA, Publisher, Dentaltown Magazine continued on page 14 12 OCTOBER 2014 » dentaltown.com http://www.ADCPA.org http://www.INDCPA.org http://www.dentaltown.com

Table of Contents for the Digital Edition of Dentaltown October 2014

Dentaltown.com Highlights
Howard Speaks: Debt and Cash Flow
Professional Courtesy: The Amazon Question
Continuing Education Update
According to the AAP, Periodontal Disease is Associated with Heart Disease
Teach Me Ideal Dentistry for Veneers
Appointment Flow
HIPPA, HITECH, ePHI: OMG, What a PIA
Second Opinion: The $63,750 Obamacare Incentive — Is it Worth It?
Doctor’s Biggest Financial Mistakes
CAD/CAM Dentistry: Exploring the Possibilities
Productive CAD/CAM Dentistry
Product Profile: Bluephase Style LED
Product Profile: Enamelon Preventive Treatment Gel
Product Profile: G-ænial Bond
New Products
Composite Materials for Optimal Restorative Results
A Step-by-Step Guide to Developing, Promoting and Staging a Successful Community Event
Better, Faster, More Effi cient Dentistry
Industry Leaders on Industry-leading Handpiece Manufacturers
You Should Know: PACE Marcom
Poll
Ad Index
You Should Know: Triology
Digital Marketing by the Numbers
Perio Reports
How to Perform a Painless Perio Probing
Step 5: Refl ect on the Program
Dentally Incorrect

Dentaltown October 2014