Travis Slade was born and raised in Las Vegas, Nevada. His parents were significantly impacted by the housing crash of 2008 and lost every dime to their name. Seeing poor business decisions mixed with some bad luck inspired Travis to study accounting and bring sound business principles to small businesses. Soon after graduating with a degree in accounting, he worked with his brother’s dental practice and learned first hand the challenges a new dentist faces in running their practice. After working with his brother, he joined Thomas Wirig Doll, a Bay Area Dental CPA firm that serves over 1,000 dentists. It didn’t take long for Travis to realize that his passion in life was helping dentists make smart financial decisions. He is a CPA that specializes in accounting, taxes, and business planning for early-stage dentists.
VIDEO - DUwHF #1068 - Travis Slade
AUDIO - DUwHF #1068 - Travis Slade
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Howard: It is just a huge honor for me today to be podcast interviewing Travis Slade of Thomas Doll. Thank you so much for coming over.
Travis: Thank you.
Howard: I'm a lucky guy on this deal because his wife was born and raised right here in Ahwatukee and you're out of Walnut Creek, California and that's a suburb of San Fran?
Travis: Correct. Thirty minutes east of San Francisco.
Howard: So he was down here visiting the in-laws and I talked him into, “Well, when you're visiting in-laws, stop by my house.” So what are your in-laws live in Ahwatukee, what part?
Travis: So close to where Chandler and Ray meet. Vendor Hill road.
Howard: Very nice. So let me read your bio.Travis Slade was born and raised in Las Vegas, Nevada. His parents were significantly impacted by the housing crash in 2008 and lost every dime to their name. Seeing poor business decisions mixed with some bad luck inspired Travis to study accounting and bring sound business principles to small businesses. Soon after graduating with a degree in accounting, he worked with his brother’s dental practice and learned firsthand the challenges a new dentist faces in running their practice.
After working with his brother, he joined Thomas Doll, a bay area dental CPA firm that serves over one thousand dentists. It didn't take long for Travis to realize that his passion in life was helping dentists make smart financial decisions. He is a CPA that specializes in accounting, taxes and business planning for early stages.
So I want to tell you, Travis, in 2008, right here in this house, right over there on that couch, I had several dentist bawling and crying and they lost everything. I mean, I don't want to give away too much of her story, you figure it out. But a great friend of mine who was an orthodontist for thirty years lost it. So in 2008, 2009, when was Lehman's day? September? Ryan, when was Lehman's Day? I think I'm going to guess September 15, 2009.
Travis: Yeah, it's pretty crazy how many people went back by this.
Ryan: September 15, 2008.
Howard: Oh, I said September 15, 2009! I was off a year. Pretty good for a fifty-five-year-old morbidly decrepit brain filled with atherosclerosis and plaque. So September 15 to the young kids, basically, the Fed could not just bail everyone out because then it would incentivize them that they can take even higher risk because they'd always get bailed out. So the Federal Reserve chairman knew, Ben Bernanke, knew that he had to wait till the first one fell and when it fell oh my God because it's a leverage thing and so you're leveraging up the market and then when it goes down you’re deleveraging and it crashed and we lost, there's various numbers depends on Dr. Patterson or Schein or Burkhart or the Arizona Dental Association, but somewhere between sixty-five and eighty-five dental practices and there were two types.
Travis: You’re saying in the Phoenix area?
Howard: In the Phoenix valley and I’m not talking about Tucson and Flagstaff, I'm talking about right here in Phoenix and in suburbs. Half of them were cosmetic specialists up in Scottsdale and what happened to those guys is they lost all their ability to pull a wisdom tooth and make a denture or a partial, do a molar root canal, everything. All they did for years is you would come in rich, they take everything out of your mouth, all your crowns, amalgams, fillings, redo everything in glass like (unclear 00:03:41), bleaching, bonding, all that stuff for the average case is like twenty-five grand. That market went to zero and these guys are telling me face-to-face, “I can't pull a wisdom tooth. I can't do a molar root canal. I can't do a denture.” They were as old as me and they'd lost all their skills except bleaching, bonding, veneers. When I talk about diversified I talk about being able to do a lot of dentistry stuff.
Then number two was the young group who had just started because they thought before 2008, you just open up a dental office in any retail center and do a bunch of direct mail and a bunch of Facebook ads and a bunch of advertising, you just get a bunch of new patients and the dentists back then who had bought an existing practice, they survived, but the Denovo's no patient flow, no cash flow, went under. and then here's the other thing I want to tell you. Talk about how he ruined my day, so I opened up my practice in Ahwatukee September 21, 1987, he was born a month before on August 22nd.
Travis: That’s why I say we’re the same age.
Howard: My God, we're the same age. So actually now my dental practice looks younger to me, it’s a [studio?00:04:58]. got a hopping young practice. So your brother is a dentist and then I want to make one other point before I let you talk and that is the fact that I've been telling you that in 1900, there were no specialties and the doctor, physician, whatever will deliver your baby and do your eyes, ears, nose, it’s crazy. Now the MD’s have fifty-eight specialties and dentists have nine and I'm telling you that just switching to a CPA that only does dental. I mean, dude, I've been watching you guys for thirty years, that alone is a deal breaker because there's an art and science. And I know you make the right decision, you go to your Catholic church, you go to the Mormon Ward and you ask somebody, “Well, who's a good CPA?” So he gives you a name of a good moral man. Well, I don't care if he's a good moral man who didn't know anything about dentistry and then you go to a firm that only does dentistry and there's no black and white answers on something. Like you might say, “Well, if I buy a CEREC machine, I won’t have a lab bill so la di da di equals this” and they're like, “Well, slow down, Spanky. We have a thousand clients and we got fifty of them that did this.” They might look at you and say, “Well, in this area we notice that the general dentists that take Medicaid have this overhead in that versus that don't take money.” So there's an art and a science. It's not all black and white and so you're always dealing with imperfect information. So when you got someone who's a CPA, his brother's a dentists and he works in a firm of what, eighty employees?
Travis: Eighty employees, yeah.
Howard: Eighty employees and they got a thousand dentists, you're just getting better information. So I'll shut up. Thanks for coming on the show today.
Travis: Yeah, thank you.
Howard: Actually, you didn't want to come on the show, you just wanted to get away from your in-laws for now.
Travis: Yeah, I'm out working in the garage. That's my office. So it's a little cooler in here than in their garage.
Howard: So we can talk about anything. I just read your blog this morning on Dentaltown. Thanks for posting your blog on Dentaltown and I just pushed it out if you’re on there, but what advice do you have for dentists? How do you spend your day helping dentists?
Travis: Yeah, so part of, me personally in my motivation for what I want to do comes from my experience of working with my brother. So I got my degree in accounting and that's how my brain is wired, but after I had been doing a finance job in San Francisco for a little while and my brother talked me into coming and working for him. So I went to work for my brother.
Howard: Where does he practice?
Travis: He's practicing in San Luis Obispo.
Howard: Slow they call that, right?
Howard: I call it slow because I can't say that San Luis Obispo.
Travis: Correct, yeah.
Howard: How do you say it?
Travis: How do I say it? San Luis Obispo.
Howard: San Luis Obispo. That is a weird name, but everybody calls it slow.
Travis: Everyone calls it slow.
Howard: So your brother’s in slow.
Travis: Yeah, anyways, I went to work for him and not to get too personal, but he was having a lot of challenges with his practice and was having a hard time and I was able to be there while he was going through some hard things. He bought a practice he shouldn't have purchased, got some bad advice and cut insurances maybe he shouldn't have, did a big remodel, was taking expensive CE courses, doing all the things that I've heard on your podcast say “Don't do” but he was doing them mainly because he thought that was what he needed to do.
And I realized after a little while that that wasn't the right place for me, but I wanted to be in a position to help future dentists so that they didn't make the same mistakes he did and I specifically sought out the firm I met because I wanted to be the best dental CPA in the world to help dentists not make simple mistakes.
If everyone listened to your podcast, we probably wouldn't have a lot of problems that we have.
Howard: Well, thank you.
Travis: But I also want to do my part with accounting and I like accounting because you can hate accountants, you can hate the government, you can hate taxes, but you still have to file them every year. So even if our clients don't like accountants, they still have to come to us once a year and we get to talk to them and it kind of forces us to give them some advice. Whether they want it or not, whether they listen to us or not, I like being in a position where I feel like I can help dentists and they have to talk to me once a year because you have to file your taxes.
Howard: Ryan, can you go get me that accounting book? There's a subject in MBA school where people have a hard time educating people on, basically it's the theory of constraints and nobody could really teach that in MBA school. So Einstein said that if you can't explain your subject, you don't understand it well enough and then you should make everything as simple as it can without being too simple.
So this guy named Eliyahu M. Goldratt wrote a book and it's called The Goal and what was neat about that is he did it—the way your teachers teach you is they had to just show they don't know anything, so they waste all their time on all these formulas, have to bring in algebra and calculus and geometry and trig and all this bullshit and you're applying all this math stuff you don't even know.
So he said, “I'm going to do this book on the process of ongoing improvement, but I'm going to write it in a love story and there's not going to be any math or pictures.” It was amazing because you were reading your book and that professor, by the way, if you really want to understand the basis, go read The Goal by Eliyahu M. Goldratt.
So I went home that night and I started reading it and it was so amazing love story, awesome book and by the time you've finished the book, you understood supply chain management like that. Then when your dumb ass instructor was adding algebra and trig to it, you already understood it.
So many dentists don't understand accounting and there was this history book of Double Entry that just talks about the history of accounting. So you don't understand what he does and I see—I mean, they only make you three statements of the balance sheet, what balance is equal sign equals balanced with what you owe your liabilities minus directly what you have into it. A statement of cash flow. They don't even send you those, all you get is a P&L, a statement of income and profit and loss and it's got artificial double Ds, deferred taxes, depreciation and all you care about is how that is going to affect your taxes.
But that CPA doing a P&L and filing your tax form, that's easily navigating your relationship with the IRS unless you probably traded the SEC. I want to know managerial accounting. That's why a firm that does a thousand dentists, does managerial accounting and I've got a lot of success with getting dentists who don't know squat about accounting just to read the history of accounting, Double Entry: How the Merchants of Venice Created Modern Finance. Have you read this book?
Travis: I have not, but need to.
Howard: Well, how long have you been in town? Well, how often do you visit your family?
Travis: I'll be here two more weeks.
Howard: Have you read my book?
Travis: I have not.
Howard: Give him my book, too. I'll put congratulations, Travis on all your success. Thanks for helping my homies.
Travis: That’s awesome. Thanks, Howard.
Howard: So I want you to read this and then you'd have to do this; if you thought my recommendation was right, you have to write a blog on this book and then you've got to write another one on this one, too.
Travis: When did this one come out?
Howard: Last year.
Travis: Okay, so this is a fresh.
Howard: But I think if you read the history of accounting because you don't know what a double entry means and it doesn't even make sense because it's all backward and this and that. But you read those two books, you read Double Entry, you read my book and then you switch your CPA from a really great guy that’s sitting next to a church to a firm that does a thousand dentists and start listening and you go to way too many courses on bleaching, bonding veneers and again, I'm just going to sit there and say that if the company sells a billion dollars’ worth of it each year to dentists who works. If you're 3M, if you're Ivoclar, if you're Dentsply Sirona, really you're going to go to a course on their bonding agent when you don't even know what your overhead is? So I'll shut up.
Travis: No, I think it's actually something on my to-do list is to come up with a concise way and maybe a curriculum of some sort to teach dentists the basics of accounting, not so that they can do their own tax return or do their own accounting, but so that when we're having discussions about depreciation and section one seventy-nine and in other accounting related topics, I think it helps the dentist if they have just a big picture understanding of how things work. I think it helps them make smarter decisions instead of just blindly following someone else.
Howard: I mean, you don't have many of this dumb question I get all the time where they'll say what percentage of revenue does a practice sell out? So they don't even know EBITDA. So it's like, okay, so you have two practices of salary. They each collect a dollar a year and one makes a quarter profit, one makes thirty-five cents profit and one makes 10% profit.
So why would a percentage of collections have anything to do with anything? I mean, nobody on Wall Street gives a shit about your yearly sales. They want to know do you make any money? Would Warren Buffett buy any dental office based on sales or would he buy it as a multiple of net income?
Travis: Yeah, he would look at net income. I think he even has his own special calculation; he doesn't like EBITDA because it ignores operating expenses but side note.
Howard: Yeah, no side note that. Email me at Howard@dentaltown.com and tell me how old you are because I'm getting a lot emails say, “Dude, I'm as old as you, I got yesterday, I'm sixty-two years old.” So for the older guys talk about why Warren Buffett doesn't like EBITDA because it doesn't cover operational expenses. What does that technically mean?
Travis: So you mentioned accountants have three statements, the balance sheet, the income statement which a lot of dentists called the profit and loss statement and then the statement of cash flows. So EBITDA is something that you get from the income statement so from the profit and loss statement. But if you bought in Warren Buffett's example, if he's looking at a company that just invested a lot of money into a mill or they bought a lot of equipment or something like that, that item is going to be on the balance sheet.
So you won't even see some of these operating expenses and maybe they have their servicing the debt on those or maybe not, maybe it's pretty valuable or whatever. He just feels like if you only look at the EBITDA, it ignores the balance sheet and a lot of other complicating things that can happen in a company by just looking at that one multiple. I think a lot of people like EBITDA because it's simple, easy to understand, you can drive a lot of comparisons with other companies on it.
Howard: Well dentists, they don't even know EBITDA they just know sales and they brag, “My office collects a million dollars a year.” So? Maybe you're running eight operatories on a Medicaid factory and you didn't make a hundred grand last year and you know where the sweet spot for my thirty-year observation has been for bankruptcy? Between the two and four million mark because when you're in an office and you're hustling, you can muscle it. And then you get an office that's five miles down the road, the next town, overnight; now you're muscling back and forth, but by the time you have the third one, you can't muscle it anymore. You don't have the management team, you don't have the systems, you don't have the policies and seriously, between the two and four-million-dollar mark is when most people declare bankruptcy. So I always tell people that when you're in one office, your big problems are a barking Doberman in the corner. By the time you open up your third office, it's a Tyrannosaurus Rex and it's going to eat you alive.
Travis: So just to go back real quick on your comment about looking at a practice and being obsessed with looking at the sales multiple, right? Everyone always talks, oh, it’s selling for 80% of collections or it’s selling for 70% of collections. 80% of collections is kind of the industry standard that people talk about, but when you're looking at a practice and you are going to go in and you're going to assume those patients and assume the staff and you're going to take over that selling doctor’s location. I am more concerned about the cash flow you're going to generate from that practice more than the purchase price and what percentage it is.
So we have an analysis where we can do a quick and dirty, not dirty, but a pretty quick analysis of buyers that are looking at a practice and they send us the historical tax returns for that practice for the last three years. That's pretty standard to get the last three years’ tax returns for a practice you’re looking at. You send that to us and in a matter of an hour, we can have a pretty good idea on how much cash flow you're going to generate by going into that practice.
Howard: Just by three years’ tax returns? I mean, do you need to dial into their Dentrix, Eaglesoft, Open Dental?
Travis: Well, if we can look at the cash flow. We can get a pretty good idea on the cash flow with just the tax returns because that will tell us the collections and the expenses, but we also want to get some of that Dentrix information to see—
Howard: So for the summary cash flow, three years’ tax returns which is standard and three years’ tax returns is going to give you a pretty clean shot as to the statement of cash flow?
Travis: Yeah, I mean there's always more information we would want and typically if a broker's involved they have their perspective and stuff.
Howard: So graduation time. God, this is June 5th. What is today? June 6th? It’s June 6th so we just had six thousand dentists graduate. Let me just give you some red flags, two biggest red flags. If you're going in with mom, your little Susie Q and you always want to be your mom and your mom says, “Hey, come practice with me.” Okay, that's the date you need to talk to these guys and you're going to start getting it in writing and you're like, “Well, I don't need anything in writing. It's my mom.” Oh yeah, you do because here's what you're going to do. Mom's collecting $700,000 a year and by the time that she wants you to buy it, it's going to be collecting one point four million a year and guess what she's going to value the practice at? What you built and you're going to say, “Mom, well it's worked out today, but it doesn't work back then” and what are you going to do? Get in a fight with your mom and have all this family drama?
So if it's not in writing, don't do it. You do this when you get married to. Did you have a prenuptial agreement?
Travis: We did not. I know you're trying to—
Howard: Can I beat you now? Ryan, give me a stick. We need a baseball bat. So I understand it's hard to get a prenuptial with someone that's the love of your life, I get that. But you're not sleeping with your mom. So when you go in with your mom and dad, before six months, you need to tell them, “I will not be working here one year until we at least get some things in writing and one of the things I want to get in writing is, what is this practice worth?” What is this practice worth? I don't want to be here four, five years later and find out mom's delusional thinks that she's going to retire on selling me this for a million dollars in cash and what happens if you quit? Go across street? Are you going to you ever a covenant? You need in writing before you get married and before you work for your mom and dad/
Okay, now let's take away the prenuptial agreement and no one even should ever get married anyway until you make a baby. Now you got one on the ground and one on the way?
Howard: So you should be married because a child is a twenty-five-year commitment. It really is. But if you're not going to have any kids and you're going to have dogs and cats then why do you need a lawyer? Does your dog need a lawyer? Then why does your spouse?
So now you're going to go work for another practice, say you're going to work for a DSO and they're going to give you all these fancy contracts; Aspen and Heartland and all these deals and you don't have an attorney to read that over? Are you out of your flipping mind? And they tell me, “Well, the lady to the office manager says that it doesn't matter what my attorney says because this (00:21:54 unclear) and eight hundred dentists to sign it.” That is bullshit, that is absolute bullshit. It's a lie. You need lawyers, you need CPA, you need CPAs that only do dentistry, you need lawyers. In my backyard, there's a lawyer named Jeffrey Toner; all he does is dental, he doesn't do anything else. He knows every dental thing that's ever happened with dentistry, the law in Arizona for the last thirty years. That guy can solve more of your problems in a ten-minute phone call than your favorite lawyer.
Travis: Just to piggyback on that, I think sometimes people think “I'm going into business with my parents or my dad. My dad's cool, we don't need any written agreements because we get each other” or “I'm working for this boss, he sent me a contract. I know the guy personally, he's a nice guy and I'm not worried about the details” and even if that's the case and nothing is going to change by having a contractor having things run, I think it sets the tone for people's expectations.
So that at the end of the day, let's say you buy the practice from your dad and your dad gives you a value of $700,000. He might do that because he's your son and he feels bad for you and he's doing you a favor and the rest of your life he might hang that over your head? Subconsciously. But if you have those things set in stone, I think it manages the expectations for both people, even if you're both cool people and you understand each other well. It does not hurt to manage expectations of relationships.
Howard: Yeah. I was telling my boys, “I only have two goals for you: I want you to be happy and healthy. I didn't have you for me, I had you for you” because remember when I grew up in Kansas, those big dairy farmer families? They needed people milking the cows. I mean they told Mama, “We need ten kids” and so it wasn't a choice thing, you need them.
Well, that was an era where you had kids because you needed them and now it's like, no, I don't need you, I want you to know—again, it's always communication. It's always communication, communication, communication.Another accounting deal that I get to because I'm trying to think of fun things to get you motivated in accounting, like reading the history of accounting. Like where did it come from? Venice. I mean, it's so cool. It's a story. I've read that book twice and it's just that cool.
The other one is if you buy one share of a publicly traded stock, they have to send you—that's what you should do, you should start the dental stock index. That should be your claim to fame where every month on a thread you show the publicly traded dental companies. Because what's so cool about that is you do Invisalign, Well, do you own stock Invisalign? You buy stuff, you have a CEREC machine. Well, Dentsply Sirona on Aztec, it's X-ray. You buy Dentsply, Patterson or Schein, they're publicly traded because they're going to, every quarter, give you their balance sheet, their statement of cash flow, their income statements. So now you're in an interesting—but why do you think is the coolest thing is they know no dentist on earth reads that stuff.
They're talking to Wall Street about you and then you get a year of them say things like, “Yeah, we buy this from Germany for $80,000. We mark it up forty grand because we have an exclusive” and then your rep's telling you at the convention, “Well, we're having a Labor Day special and you have 10% off” and you say, “No, I want 20% off.” “Oh, we're losing money.” Really? Well, you told Wall Street that you bought it for eighty and if this is a lie, the CEO and the CFO are going to go to jail. It's securities fraud. Are you saying that they're lying to the Security Exchange Commission? Because if so, that's breaking news and we should call CNN or Bloomberg.
But what I think it's fun is you will get (00:25:42 unclear) and like Warren Buffett said, “Know about companies you bought, know the company.” He said, “If you can explain it on a business card, on one index card in a number two pencil, if you can explain how this company makes money, then you don't know what you're doing and I'm not investing in it.”
Well, how Invisalign makes money, how Schein and Patterson and Dentsply Sirona X-ray. But what I love about it is the dentists I talked into doing this over the years, a lot of them have become fabulously great investors in dental stocks and they've learned a lot about accounting. But nobody in dentistry does that. That can be your claim to fame.
Travis: It’s a great idea, yeah.
Howard: There's not that many. So because like Ivoclar's public, that's a family-owned business, but they'd only be like a dozen and then maybe each month you could do like a spotlight. Pull one out; we're showing examples of basic accounting because if you can teach these guys basic accounting, they won't ask questions like, “Well, what percent of sales is my dental office worth?” They'll start to become sophisticated and then Warren Buffett and Peter Lynch in his book Beating the Street would all be telling you only invest in things you know.
And by the way, has Invisalign been a rock star stock or what?
Travis: Yeah, totally.
Howard: I mean, my gosh. So anyway, I'm sorry, I keep getting on so many tangents.
Travis: Yeah, no, that's good. So we were talking about this all started with looking at a practice and what to look at when you're buying a practice. One other thing I would say, and you mentioned getting the Dentrix reports, so you want the historical tax returns, but you also want to have a list of the procedures that the selling doctors doing. That's pretty standard for most cases, but you want to make sure you're looking at how many implants is the guy doing, how many root canals is he doing for two reasons. One is can you do those procedures and two, is there an opportunity to add new services that I can do as an associate that he's not doing right now as an owner?
Howard: He just told you something so profound that if you miss that, it’s going to kill you. So in the Valley, I saw a dentist in Glendale buy a practice and this guy that did full-mouth rehab implant cases, this little kid didn’t. Not only did he not know how to do it, sure as hell couldn't sell it. So he bought this million for office and within a year it was doing $700 a month and what was he doing? Just stuff he could do.
Versus I had another friend who went into Palm Springs because he found a guy who didn't do any extractions, no molar endo, no Ortho, no kids, no pedo and he didn't even like crown and bridge. He’s just basically cleanings, exams these big old amalgams. So he bought that practice knowing that the numbers this guy’s doing, which is only a half million year which a lot of dentists don’t even look at a practice doing that well, is doing a half a million dollars a year. For the next twenty years on average per day, one of his MODBL amalgams would break in half and he'd just do a thousand-dollar crown and he was referring out a couple of hundred thousand dollars a year in molar endo which he did. So he could pull teeth and just so, he bought a half million-dollar practice. He had that thing in a million two and three ops with two hygienists in one chair and I mean, I think he was taking home $400,000 a year for the next twenty years. So buy hidden value.
Travis: We have a client who is a dentist but really just likes doing cleanings and is a glorified hygienist that has a DDS at the end of her name and her patients love her, but she refers out everything and that's just a gold mine. The practice is probably worth $100,000 if you bought that practice—
Howard: Is she selling it now?
Travis: She wants to, but she can't get that much money for it. Anyways, she's not in place where—
Howard: Is she in California?
Travis: She's in California, yeah.
Howard: Because one of the biggest business models is that you might advise her is these specialists are coming out of school and they're like, “Okay, I'm a periodontist and do I want to go by land, building and build a million dollar Taj Mahal?” and have all that debt when they're already $400,000 of debt at the end of dental school and $750,000 debt at the end of oral and maxillofacial.
So what they do is there's firms now that are just sending in a specialist and usually you're paying them 40% of what they do. But here's where it's really interesting, the DSO who are doing this because they're aware of what PPOs are doing. PPOs, we'll pay you a dollar for this procedure, but they'll pay a specialist a dollar fifty. So when you have the specialist endodontist come into your practice every Friday or every other Friday and do all your endo, you're billing that for a dollar five, you're paying him 40%. These PPOs are saying, “Guys, with a higher fee and what we pay the specialists, it's like we're getting it done for free and we're not even having to pay the general dentist 25%.”
So a lot of those offices, you can stack up all your implants at the end of the year and (00:30:55 unclear) one day a month. I see a lot of practices do an oral surgeon or a periodontist do implants one day a month and endodontists depending on how much volume you have or a pediatric dentist. But these specialists are coming out with so much debt, they know that going into your office and getting paid 40% and then your office gets to bill a much higher fee for that and everybody wins.
Travis: No, that's not a bad a situation and that's a good idea specifically for this time.
Howard: There’s a firm coming to Arizona and I wanted to podcast him because he was coming to Arizona and I wanted to talk to him about him doing that in my office and he never made it out here because California is 10% of the country and he's like, “Dude, we're growing so fast in California.” He was going to do California, Arizona and Texas, that was his launch and he crossed off Arizona and Texas because he can't grow fast enough in California.
So the PPOs are doing this by paying the specialists significantly more, the general dentist wins because I wouldn't want to be your first hundred implant cases. So when your mom comes in, dentistry is very different on your mom than your mother-in-law. Wouldn’t you agree?
Travis: Yeah, definitely. I know from doing taxes.
Howard: So when you can get a periodontist to come into your office who's placed five thousand implants I mean, why not? But anyway.
Travis: I think it's important when you're looking at a practice to look at the procedures, you want to know what the person's doing and generally, with a lot of the baby boomers that are retiring, they are referring out a lot of things that a millennial will want to do.
Howard: Yeah. I love that you’re talking about the five financial blunders of a first-year dentists.
Travis: Yeah. So let's say you are graduating right now, you're getting ready for your first-year. Most of you will probably be associates, it's not common to buy a practice right out of school. Like you did.
Howard: I graduated May 11, 1987. I had that office. You've seen my office, right?
Howard: Had that open September 28. Ryan, how many days is it from 5/11/87 to September 21? So I got mine open in a hundred and thirty-three days and my dad didn't give me a dime because I don't live in fear. They just live in fear. I mean, go to Dentaltown and just start a thread: Hey, tell me if you graduated dental school and started your own practice from scratch? Oh, there'd only be a thousand people, but they all want to just live in fear and live in fear and live in fear.
I have had on the biggest bankers from Chase and Bank of America and all that stuff, I was just talking to one the other day, they have a 99.6% success rate, they have a 0.4% default rate, last year only for dentists in my state had their license taken away; that's the only way you go bankrupt and when you have your license taken away, guess what you're never? You're never a girl, you're always a boy and it's always substance abuse and 85% of the time it’s alcohol, 15% of the time it's opiates and so if you're just a girl, do it.
I think in Arizona we have to go back into the 1980s to find a girl who had her license taken away because boys are just dumb or they take more risks. Thirty thousand people die from accidents each year. How many of them are men? Who’s on the roof cleaning the gutter, who's up in the tree with a chainsaw? I mean, men are men. Take crazy risks. So just open up your damn office and if you have a problem with beer and opioids and whatever, fix that. Go get dreaming, join AAA, fix that, that's the only thing that's going to take you down.
Travis: And generally speaking, we find that if you're able to buy an existing practice versus starting one from scratch, that's usually a better way to go if you can.
Howard: Explain why.
Travis: Well, you're buying patients so right from the gate you have patients coming in the door and you have cash flow from day one.
Howard: So you're saying patient flow is cash flow?
Howard: Patient flow is cash flow and let me tell you more hidden value to that. So you need demographics. Well, when you're looking at existing office to buy, you don't need demographics because it's already working. Like if you're going to come to Ahwatukee and start a new Mexican restaurant, you really need to do a demographic analysis. Can Ahwatukee really take? We got Macayo’s, we got Arriba’s, we got several. Is that your genre of food?
Travis: Yeah, I like Macayo’s, I like their chips and salsa.
Howard: You'd really need to know if I Ahwatukee can handle another Mexican restaurant, but if you were going to buy Macayo’s, Macayo’s has already been working for thirty years. So now you eliminate all these risky variables.
Travis: I mean, it's not to say it will work as a startup it, there's just more risk associated with them.
Howard: Far more risk and we saw that in the last financial bubble, Lehman's Day September 15, 2008 where forty cosmetic dentists working in north Scottsdale went under and the other forty were scratch practices and the kids that got out of school and bought a practice, they were fine. So you eliminated a ton of risk and one more thing about the art and the science where since you guys do a thousand, if I only do one dentist, I could learn all the science, but by you guys doing a thousand, you know all these art things that just work and don't work but can't really quantify it mathematically.
It's the same thing on the economy falling. I can't tell you why the economy is going to crash, but I graduated high school in 1980 and it crashed and it was 21% interest rates, double digit inflation, unemployment. Then I got out of school May 11, 1987 and that October it crashed again and then I had the longest good period all the way to March of 2000 when the Internet bubble popped. Horrible and then it happened again in 2008, Lehman's Day September 15th and that was in 2008. What year is it today?
Travis: Ten years later.
Howard: Ten years. The longest I've ever seen it not crashed in my entire life was thirteen years from 2000 to 2008, but all the other crashed in every like seven years. So I'm already smelling the top of the market. Amazon is almost a worth $800,000,000,000 and doesn't even have profit. That reminds me of the Internet days. Netflix is now worth more than Disney. Did you know that Disney has three theme parks? They have cruise ships. They own ESPN.
Travis: Another one is Tesla. Tesla has a higher—
Howard: Tesla! Oh my God because it's Elon Musk who needs profit? Who cares he’s losing a million dollars a second and it's the same irrational exuberance and I'm telling you. And then what do we see in here in the backyard when people start to see fear, they start seeing where can me and the wife save money? Well, you don't have to eat out a $9 Applebee's lunch, you can take a ham sandwich, Applebee's are closing. What's that other one? The another I'm seeing oh gosh, I forgot the name of it. It's another Mexican—Z’Tejas. That’s closed down three or four local. So I'm starting to see people start saying, “Well, I'm not going to cut back on my iPhone and my car payment so I'm going to cut back on eating out lunch.”
So the Wall Street multiples for companies that don't make profit are insane. You see the lunch crowd shifting from Z’Tejas and Applebee's down to the $1 Taco Bell menu. You're seeing people take the lunch and again, art and science, I can't tell you why it's going to crash, but I guarantee you this. I'm fifty-five years old, the longest I've ever seen it work is thirteen years. Most time the corrections every seven or eight and it's crashing right now. Do you believe that or not?
Travis: I mean there's a lot of analysts out there that are predicting a correction by 2020. I mean, no one knows, but there are a lot of signs that are pointing that things are a little too good right now. It almost feels a lot like 2005 and six in some ways so. Well, I don't know, but as a dentist I think the fear of the market crashing, I don't think that should stop you from buying a practice or becoming a solo practice owner.
I know there was some comments on Dentaltown about the future of the markets, the future of dentistry. Should I just be an associate the rest of my career? And I think for some people, maybe it does make sense to be an associate for their career, but just the fear of what's going to happen in the future should not stop you. If you deep down inside want to be a business owner and run your own practice and have pride in being a business owner and a dentist, which is an awesome thing; if you want to do that, you should go for buying a practice and you shouldn't be scared of all the things that are out there.
Howard: And when you buy a practice, you talk about your brother wanted to do cosmetics and high-end and built a big office. Another thing back to that 2008, remember I told you that forty of them were in north Scottsdale? A weird thing about dentistry is everybody wants to sell a Mercedes and does America sell more Mercedes or more Chevy's.
Travis: Yeah, more Chevy's for sure.
Howard: My gosh and it's so overcrowded at the top and I get it, you want to build a Ferrari. Who would not want to build a Ferrari as opposed to a Chevy? But there's this little thing called a reality check and the markets. Who's the number one airline, the low cost leader? Southwest Airlines. Who's the number one furniture store? Ikea. What is the number one distribution groceries? Kroger, Walmart, Costco. The low cost taking insurance is the monster market and if you want to do that high end you can, but you're going to have a lot of car companies at that top.
Travis: I think you have to know yourself when you're looking at what kind of dental practice you want to run. If you're going to run a high-end, high-touch dental practice, you have to be somebody that knows how to put up with those personalities and is able to cater to the high maintenance type patient. But if you're kind of that's not really your style, then you shouldn't build a practice [inaudible 00:41:53]
Howard: Here’s another thing I want to talk about, when you go around the Valley, like here, like who's the number one cosmetic plastic surgeon? Lauren Shaw. Who's the number one cosmetic surgeon? Joyce Bassett. In Beverly Hills, it's Bill Dorfman. What do those three all have in common? They’re all really good-looking, hot people and then you got some Elmer Fudd here with crooked teeth, yellow. He’s short, fat, bald, he's like, “Oh, I’m a cosmetic dentist.” He doesn't work at the yoga. Have you ever gone to a yoga class and it's some lady who can't do the splits with a big old beer belly?
If you want to be a yoga instructor, you should kind of look Yogi. If you want to be a bodybuilder personal trainer, you should kind of look bodybuilder and dude, if you want to be that high-end cosmetic dentistry, you should look in the mirror and say, “Do most people think I'm rocking hot because I'm not seeing a lot of non-rocking hot people crushing it in the high-end cosmetic services?” Like you have a face for YouTube, I have a face for iTunes. You could probably be a cosmetic dentist in Scottsdale, but I knew that when I came to Phoenix … I was from Kansas. I’m one of the born in the barn people like people always ask me like, “Are you in Scottsdale, Paradise Valley?” “No.” “Where are you” “Phoenix.” I'm across the street from the Guadalupe Indian reservation where they got twenty-five thousand people that don't speak English. Those are my favorite patients. Those are my yardman, my maids, my nannies, so you're saying know yourself?
Travis: Yeah, you have to know who you are. So I think if you're coming out of dental school and you're not thinking about your future practice that you want to own and what kind of practice that is, I think that's a mistake and you'll get to a point later down the road where you find yourself in a high-end practice that really doesn't fit you or maybe it's a low-end practice that doesn't really fit to you. But I feel like if you're right out of dental school and if you don't already know, the first thing you should do is trying to plan on that kind of practice that you want to buy and along with that is trying to decide where you want to practice. I know you mentioned your story of out of dental school you wanted to go where there was a growing population and where there's going to be a need for a dentist. I think that's a great thing for dentists to focus on and nowadays, dentists would need to go a little more rural to find more favorable demographics. But if you are a new dentist and you know no matter what your wife is not going to live anywhere else besides Utah.
Howard: Perfect! Now just don't marry her. You got a reason to call off the wedding. See you! You go to Utah and I'm going to go—when you drive from Phoenix to LA at the California-Arizona border on I-10, you know what that city is called? You ever driven there?
Travis: Yuma, oh wait, Phoenix.
Howard: No,Yuma’s going down 8 to San Diego. I'm talking about going 10 to LA, the Arizona-California border I-10. What's that city there?
Travis: I don’t know, is it (00:44:55 unclear)?
Travis: Oh, Blythe.
Howard: Doesn’t even have a dentist. You go to Maricopa. I mean, Stevie Wonder could open up a practice. Have you ever got a text from Stevie Wonder? It's just a bunch of letters that I don't know. He'd do fine,but they don't want to go rural and the craziest ones are, they don't want to go rural, but their mom and dad came from India and Pakistan. So your mom and dad came fifteen thousand miles and you can’t go fifty miles out of town and you know where you’re getting the best demographics? From Pew, because Pew’s the one doing all the research because they're trying to get past dental therapists even though they're completely delusional about that. Because all the dental therapists I've seen so far, when they graduate, they all go work for a high-end dental practice or the dentist doesn't want to do the fillings so he hires a dental therapist and then while he does implants and crowns and all the high-end stuff, they're not going to go to rural areas, but they got all the research on every state.
So you pull up Pew research for Arizona, it'll show you every county and city underserved. It'll show you every city that has a donut, a donut, which means you go here, you don't take insurance and PPO’s and Medicaid and Medicare. You don't have to advertise and you'll say, “Oh, that town's only got fifteen hundred people.” Dude, there are counties in there where the city's fifteen hundred and the county’s seven thousand and there's nobody there and you just go there and you just become a millionaire.
Travis: So let me ask you this, Howard, I agree with you that if I was a new dentist coming out of school I would find a rural location that I wanted to work out. But let's say you're in a situation where you really, more than money, is living in the bay area or somewhere, LA.
Howard: You said Utah.
Travis: Utah, where there's a ton of dentists. They don't make a lot of money.
Howard: They're fifty out of fifty. The average median income for a Utah dentist is dead last fifty and they got two dental schools.
Travis: Yeah, recent dental schools.
Howard: And the reason is because certain cultures love physicians, dentists and lawyers; Jewish people, Mormons, Farsi, there's just certain cultures. Remember that South Park joke where the dad comes down, the kid’s like eight years old, playing he goes, “Are you a doctor yet?” He goes, “Dad!” What episode was that?
Ryan: That’s Family Guy.
Howard: Family Guy! What did he say? “Dad, I'm ten!” Dad said, “Huh!” and he went out and he slammed the door. Some cultures are just telling kids at that age, “Are you going to be a dentist, a physician or a lawyer?” So you go to Utah, everybody's a dentist, a physician, a lawyer, a programmer. There's Silicon Valley, now they're calling it Silicon Slopes, there's like fifteen different dental startups up there. They’re crushing it, but they don't need another dentist.
Travis: Yeah, so I think if I'm a new dentist, I would want to be thinking about this now. You don't want to go to Utah, look for a practice for three years to buy, not be able to find a practice so you open up your own practice, struggle for three or four years, realize you're not making any progress on your student loans and you have your practice debt and then you're like, “Holy crap, I'm just going to move to the middle of Iowa and make $500,000 a year and get out of this financial hole I’m in.” Well, I think you should plan on that and if you are saying I want to practice in a competitive area, you need to have a game plan and you need to know what you're doing going into it and you need to have a—
Howard: Okay, but here's reality. You're in that small town in Iowa and you're taking home $400,000 of debt and you're rich. You can fly your wife and kids home to Utah three, four times a year. You can meet them at Breckenridge and pay for your parents to meet you up there. You can pay for your mom and dad to come spend a week and babysit your kids while you go to Breckenridge. I'd rather be rich in rural than living down the street from my in-laws, broke.
Travis: Yeah, I agree with that. I think dentists come to that realization later instead of sooner. So start now doing the research and looking at practices and what it's like to own a practice and how much practice owners make in certain areas so that you're not six, seven years out of school when you realize you want to go to the middle of Iowa. I think you should start now developing a plan for the kind of practice you want to buy.
Howard: But I'll even say it one step further, even when you go to Utah, look at the Pew research. I mean there's stuff, it's like Warren Buffett. I mean there's the Russell 2000, the S&P 500. He's always finding something everyone looked over. I mean Eloy, Arizona I can drive there thirty minutes from my house right now, they don't have a dentist and then the dentist on—what's the next junction where 8 meets 10? Is that Great Bend or—Gila Bend! Gila Bend, the dentist there is on Mondays. He comes on Mondays, guess what the people in Gila Bend need the other six days of the week? A dentist. You know how long it would take you to drive from Gila Bend to Phoenix? I mean, you go right up through Maricopa, what is that an hour drive? So demographics matter. But I'm sorry, I've interrupted you so many times you should just start slapping me.
Travis: No, man. You're awesome.
Howard: You were talking about the five financial blunders of a first-year dentist.
Travis: So we talked about one of them is waiting too long to plan for your practice, so we talked on a lot of those points but I think sometimes because—
Howard: Boy, I tried to do my notes for you. Which one was that one?
Travis: So number two.
Howard: Okay, not preparing for a future practice, okay so not preparing.
Travis: So I just see people, you mentioned fear but for whatever reason, some new dentists say, “I'm just going to put my head down and to be in an associate for a few years” and then when they put their head up and they say, “I want to own a practice,” they're kind of behind the game in buying a practice and they've potentially lost out on some money, but then also if they start looking for a practice, it's not like you find a practice like that.
It takes some time to find a practice and I know dentists that have looked for years to find a practice and they've learned a lot through the process and they've made progress and I think they wish they would have started that sooner.
Howard: In thirty years seeing top some markets, like you put up a dental office for sale right now in Phoenix and Scottsdale and the Valley, boom. So that's what you call a seller's market and then what happens when it crashes, then those practices don't sell and then it's a buyer's market. So that’s another thing. I'm getting offers on my dental office, unsolicited offers, just people sending me letters and emails. They just want to buy a practice and it's not because I'm me or have a podcast or anything like that. Some of them don't even know who I am; they just moved here, just want to buy a practice. So they don't have a plan?
Travis: Yeah. So another thing we'll talk about that obviously, I think about because I'm an accountant and I do taxes, is we get a lot of people who it's usually not their first-year because this first-year you're going to work for maybe you'll start working in September and you'll work for four months this year in 2018. But next year is going to be your first full year working as a dentist and you're going to make a hundred and fifty, hundred and eighty thousand,whatever you make as an associate. After that first full year we always get people coming to us saying, “Hey, I need someone to prepare my taxes. I used to do turbo tax, how much do I owe in taxes?” Well, at that point we realize they're an independent contractor, they really should have been making estimated tax payments.
If you made $150,000 and you owe 30% in taxes, which is not unheard of, that's going to be what, $45,000 in taxes. So they come to me, they say, “Hey, prepare my taxes.” So I go back to them, “Okay, you owe $45,000 in taxes.” How many first-year dentists have $45,000 in cash sitting around to pay in taxes?
Howard: Okay, but I want to argue with that because I think they weren't independent contractors and I think I would get an attorney and sue the bastard because this has gone to court. I've been saying this for thirty years: an independent contractor is set up for construction. So I'm building a house, I don't know crap about plumbing so I have a plumber come in and he says, “I'll do the plumbing for ten grand.” I gave him ten grand that he needs to go file his taxes and put away quarterly deals and everything. Then I need an electrician, then I need a yard guy, I need all these people and that's what an independent contractor is.
So now you go work for a dental office. Well, did you bring all your own supplies and knowledge? No, he had all his supplies and he already knows everything you're doing. Did you set your own hours? I mean, did you say I'm an electrician, I'll come in and lay all the electrical wire out for four days straight? No, no, he set your hours. Did you bring in all this stuff to do the dentistry? No, he provided it. You're not an independent contractor. He did that to save a mere 7½ % FICA matching. And then you’re a young dumb punk ass kid getting these big paychecks so you're going to Scottsdale and buying the fancy restaurant food instead of home cooking Spam and Bologna and Rice-A-Roni because you don't realize you got to pay all this money in taxes and the older guys are intentionally screwing you and if enough of them got their face shoved in some shit and slapped, and I'll tell you who does get slapped. I can give you names of dentists, I can give you a half dozen just around here, had an associate five, six years. The guy was kind of aloof guy, turns out he wasn't even calling you, he wasn’t even file his taxes. He was just taking his paychecks, cashed them and living.
Five, six years later he gets picked off as an audit, he don't have crap. Well, what's the IRS agents say, “Oh, well who's the millionaire you're working for because you're not an independent contractor.” Then that guy not only has to pay seven years of back taxes plus payments, penalties and he went and got himself a lawyer from a deal and now his paid off house, now he has a huge mortgage on his house again and then he's crying to me. I'm like, “Why are you crying to me?” First of all, it's not legal.
So like you said at the beginning, I don't care if you like the president, don't like the president. If you don't like the law then you need to change the law, deal with the law or move to another country. The law is your associate’s not an independent contractor. The deal is every time he goes in front of an IRS court, there's no jury, by the way. It's not going to be the OJ trial with the dream team. When you go to IRS court, it's just you and the IRS judge and you're going to lose and so the dentist employer is breaking the law and going to get screwed if it goes on too long and the kid is young and dumb. Think of your own kids, they're not going to do—oh, I’ll shut up. Well, they're not independent. Do you agree that they're not independent contractors?
Howard: Absolutely what?
Travis: They are usually maybe in a rare case, they're an independent contractor, but usually they should be a W2 employee. The only problem I see is for those associates that’s not necessarily, unless they sue the guy they don't have a lot of control over that and these associates are coming out and they're getting offers as independent contractors and they're taking those offers.
Howard: Well, they shouldn't take those offers. You’re an employee. A quarter of the people listening are still in dental school, they don't even know what you're talking about. So tell them the difference between an independent contractor and a W2 employee.
Travis: So if you're a W2 employee and you get paid from your boss, you’re an employee and your boss, the employer, has to pay employer taxes. So of the first $127,000 that anyone makes in one year, there's roughly 15% in payroll taxes. So this is separate from income taxes that you pay in April. This is social security, Medicare, unemployment; we call them payroll taxes that the burden is on the employers. Half of it goes to the employers and half of it goes to the employee.
Howard: So if you make a dollar of that 15%, they're going to take 7½% out of your dollar and pay that social security, Medicare, unemployment. But the employer has to match 7 ½, that's how you got to the 15, correct?
Howard: So two things are happening. Number one, you're cutting that bill in half because instead of paying 50%, you're paying 7½ and your employer/boss the other 7½, but that's not even the biggest part. The biggest part of it, it's getting done every time you get paid.
Howard: Whereas when we pay you, you're like, “Oh my God, I'm going to the mall and I'm going to have Sushi tonight and I'm going to go buy a new Gucci purse” and you don't realize that (00:58:16 unclear) Sushi, that ain't your money. That's the government's money, that's social security money and you don't know it, you don’t have the discipline to do it and the independent contractor is throwing you off a cliff for a mere seven and a half cents on the dollar. It's unethical, it's bad business and everyone should stop doing it.
Travis: So just to reiterate, for the kids in dental school. If you're an employee, you are going to be paying 7½% in payroll taxes. If you get paid as an independent contractor, you're paying all 15% in payroll taxes. So it's a bad deal and usually the boss, you can't call him an employer when it's an independent contractor, usually the boss will pay you a little more to make up for that as an independent contractor, but it doesn't necessarily make it right.
Howard: Now do the big chains do that? I mean do the big DSOs like Heartland, Aspen, Pacific, Western Dental, are they doing that?
Travis: Some of them are; they're doing some weird things.
Howard: It's Dentistry Uncensored.
Travis: Yeah, so Smile Brands does some weird things. I think it’s Smile Brands. So we have one guy who gets paid as a, I forget which one, so he gets paid as a W2 employee for federal taxes and an independent contractor for state or maybe it's the other way around, which is totally like it doesn't make sense.
Howard: What about the biggest ones? What about Heartland, Aspen, Western Dental, Pacific Dental, are they paying everybody as a W2 or are they doing independent contractors?
Travis: I think most of them are W2s at this point, but I can't speak for all of them. Just because I think they are learning that—
Howard: So every year, we have a new grad edition and that goes to all the juniors and seniors in dental school. Why don't you write the five financial blunders of a first-year dentists for next year's new grad edition?
Travis: Yeah, it’ll be awesome.
So just to carry on with that. So if you're an independent contractor, no taxes, which if you're an independent contractor you shouldn't be, but let's just say you are. No taxes are being paid throughout the year unless you manually do that.
So the best way to do that is to contact a dental CPA and they can give you a pretty quick estimate on how much you should be making in quarterly estimated tax payments so that when April comes around you don't have a big tax surprise.
Howard: And what percent of these kids did not do that?
Travis: I think they're getting better, but they're still 30% that are just getting slapped in the face in April.
Howard: And the old guys like us should be looking out for the young kids joining the profession.
Travis: Because the old guys like you learned it the hard way, usually. No one's ever teaching these kids to do this. You learn it when you have a bill in front of you and you say, “Holy crap, how did this bill get here?” and then you don't make that same mistake again. But I think we can get on the frontend of that and avoid having a surprise.
Even if you're a W2 employee though, real quick. If you're a W2 employee, taxes are withheld from your paycheck, but sometimes that might not be enough taxes. So when you're a W2 employee, you fill out this form called the W4 form, it's kind of confusing and you might fill it out in not the most advantageous way and as the year goes on, you're not going to have enough taxes withheld and you're also going to get a tax surprise.
Howard: So I opened up my office a hundred and thirty-three days after I graduated because when I walked down the sidewalk, my balls are dragging on the sidewalk and they went and became an employee. Who has more tax deductible things: the person who owns her own business or the person who is an employee?
Travis: Own your own business.
Howard: The tax code is sixty thousand pages and it was written for the employer not the employee. So when you bought a practice or opened from scratch, approximately how many more things are possibly deductible as opposed if I was just a straight out W2 employee for a big DSO?
Travis: Oh, it's like hundred to one. It's unreal and especially, there used to be a miscellaneous itemized tax deduction for W2 employees that they could get a sliver deduction for, but that got taken away with the new tax code. So there's really not a lot a W2 employee can do as far as tax strategy. There are some things that they can do and we try to do those things for them. But when we're working with a business owner, that's where it gets fun.
Howard: I’ll just say one last thing on this. I know I repeat myself and you should shoot me, but the tax code is sixty thousand pages long. How many of the pages are for the employer versus the employee, would you say?
Travis: I mean, most of them are for the employer.
Howard: Number two, if you working as an employee for someone else is so great then you should go forward to the classes that graduated five years ahead of you and look at your graduating class and see how many of them are still an employee. They just don't like it; you know why they don't like it because we're humans.
Humans don't like to live under your thumb. Humans don't like to live with their parents, they want their own car and their own house, they want freedom and the freedom is just worth more and you're going to go work at associate and all they're going to do is tell you got to do this, got to do that. (01:03:40 unclear) and that's why they are jumping from associate to associate for two, three, four years so they finally realize they got to do the dirty thing and just buy one or open one from scratch. So why don't you get rid of that four year I told you so and just go buy one straight out of school? Demographics matter. Find the hidden value. The banks say the problem is never getting a loan, the problem’s paying it back and you don't have a dental license. So if you're not going to lose your—I mean this is just no brainer, no brainer, no brainer, no brainer, no brainer, but we've got to keep telling him.
Travis: So let's go to one other one. So student loans, obviously that's a hot topic with a lot of—
Howard: Okay, you did two, you did number two, preparing for a future practice or career.
Travis: And then getting a tax strategy.
Howard: And then getting a tax strategy. You did two and four, you see you're playing with my walnut brain you’re doing them out of order.
Howard: So now you're at number three, you did two then four then three. Now planning for student loans.
Travis: So student loans so I feel like most dentists coming out of school, I don't know if most, but there's kind of two trains of thought that dentists will have. One is they'll think I owe so much money in student loans and they get desensitized and what's another $50,000 loan? What's another $60,000, $70,000 Tesla loan? What's another million-dollar house loan? They get desensitized and they put their student loans on the back burner and they just kind of go with life as normal, but like they don't have this $400,000 and growing student loan.
The other spectrum is people that become paralyzed by their student loans and this isn't necessarily a bad thing, but they just become obsessed with them and every little dime they earn goes to paying down their student loans no matter what it is. And I think what you should do right away is you should come up with a plan for your student loans. So there's a dental or student loan consultants who specifically work on student loans. For $500, they can map out your student loans and tell you—
Howard: Do you have ones that you like that you work with?
Travis: So we work with Travis Hornsby.
Howard: We've had him on the show?
Travis: I don't know if you have had him on the show. I know he's posting on Dentaltown.
Howard: Is he Bruce Hornsby's brother?
Travis: I don't know who Bruce Hornsby is.
Ryan: Yeah, we did have Travis Hornsby on the show. (01:06:02 unclear).
Travis: So he's awesome. For about $500 he can unravel …
Howard: And also email me that, email and send it to me. Thanks Ryan.
Travis: Yeah, he can unravel your student loans and say, “Okay, here are the options.” Refi, pay as you earn, income-based repayment, whatever it is and let's choose this option because this option is going to save you …”—there he is. So that guy, we use him a lot and have had real good results.
Howard: Episode seven hundred, optimized student loans with Travis Hornsby. Ryan, wasn't there a Bruce Hornsby and the rock band? Are you familiar with Bruce Hornsby?
Travis: I'm not.
Howard: You got anybody on him? So for $500, Travis Hornsby, who we’re just going to fantasize is the brother of Bruce Hornsby and the Rangers.
Travis: Yeah, five hundred is the high-end and I think he has someone else that works for him, you could get it for around two hundred and fifty bucks. Anyways to me, that's like no brain decision to hire somebody who's looked at thousands of student loans to tell you what your best option is.
Howard: You never heard that song?
Travis: I have heard that song, I don't know it’s Bruce Hornsby.
Howard: You've heard that song, Ryan?
Ryan: It sounds familiar.
Howard: Yeah. See I'm turning the millennial kids on some good music. Okay, I'm sorry.
Travis: You're good. So I hear some new graduates come out of school and they say, “I know I want to refinance.” So then they contact SoFi and they refinance their loan. SoFi, just as an example of somebody that you can refinance your student loans with and I think that's fine, but a) is SoFi the best bank to contact to refinance and b) is refinancing really the best option for you right now?
Looking at a student loan expert, they can help you navigate that right from the start and we're talking thousands of dollars at the end of the day when your student loans are done that this is going to impact and you only have to spend a few hundred dollars for somebody to make sense of the student loan mess.
Howard: And by the way, you'd never given your contact information. Your website's Rooted Wealth. Rooted for molars, teeth roots?
Howard: Rooted Wealth. How do my homies contact you?
Travis: So probably Travis@TWDAdvisors.com. So Thomas Doll is the company that I work for and we're the ones that service over a thousand dentists.
Howard: So your email is Travis@TWDAdvisors.com. Do you realize there's a dad in the middle of that? This is a dad. So twdadvisors.com, Travis and then your blog is Rooted Wealth. R-O-O-T-E-D Wealth.com and then how much does it cost for them just to talk to you to see if you guys are a match?
Travis: Well, so it depends what you want to do; we have specific plans for associates. So if you're a W2 employee and you want to hire us to do your taxes and you want to do a student loan analysis and you want to do a practice analysis and you're planning on doing that, our monthly retainer is $95 a month.
Howard: Oh my God, they spend that much at a happy hour.
Travis: Yeah. So that's unlimited phone calls and emails and questions and we're not necessarily making money on those types of relationships and I specifically feel that sometimes associates and young dentists are ignored in the financial services world because they don't have a lot of money yet. So you're new and you have a lot of potential, but you have a lot of debt and you have a lot of questions and so a lot of times financial service people don't want to deal with you.
So we have this product, the associate plan $95 a month and that's just so that you have somebody to talk to. You don't have to do it, but I think it's good to have somebody in your back pocket. You can email us, call us anytime you need something and we can help you make these decisions.
Howard: Think of all the stupid things you spent $95 on last month and I want to say talking about the desensitizing. When they come out with $500,000 student loans, they don't blink and get $80,000 more debt for a beamer and a $5,000 purse and they just keep spending money. But you notice like once you have money like my Lexus is a 2004 with a hundred and forty thousand miles on it.
Travis: What kind is it?
Howard: GLS450. I have four kids, now I got a bunch of grandkids and I love it because it's 2004. I don't care if my grandkids throw Chicken McNuggets and spill their shake, I don't care. I was backing out the garage and one of my granddaughters, and I don’t want to say her name because I don't want Lexi to feel bad, opened the door so it caught the wall and vented. So what I do, I pulled forward, got back and just vented back shut it. I don't care. But it's so funny because if you have $500,000 student loans, you have to buy a new one. But when you have the money to buy a Ferrari tomorrow, I don't even wear a watch.
So I've always said that your relationship with money is always a very emotional. Who's that crazy woman on TV? Suze Orman, I mean that lady is so amazing. Remember that lady and she's made a whole living making the observation that all your decisions with money is so emotional. You just have to validate yourself with a big house and a fancy car and you make all these emotionally weird decisions and then once you don't have that unhealthy relationship with money, you don't need a $500 Gucci purse and you don't need a brand new—
Every time I go taking my car with oil change (01:12:23 unclear), he's like, “Well, if you gave me your car and a check for hundred grand, you could leave in a brand new car.” Why would I want to part with a hundred grand? I mean, isn't that like the dumbest thing and I live three point zero miles from my dental office. So the worst case scenario is the car dies halfway and I either have to walk the last mile and a half to work or walk back home for about a half. A mile and a half walk, is that going to kill you?
Travis: You're talking to somebody who owns a 1996 Toyota Tacoma, purple with a little bit of rust. So I feel you, man. I live two miles from my office and I'm not worried about it breaking down, it's actually an awesome car.
Howard: So you're emotionally validated so you don't have to prove yourself to your wife with a Birkenstock, what is that shoes and a Rolex watch and some fancy car. She just loves you for you and you love her for her, you don't need to validate yourself with trinkets.
Travis: Yeah and that's actually the next one. So living within your means.
Howard: They're never going to do that. We might as well just stop the podcast. It's great to have you on this show, Travis. Dentists, physicians, lawyers will not only will they not live below their means, they won't even get to the fiftieth percentile. Like if you say like, how many times do you eat out a month? Oh, that's higher than average. Vacations, are you camping at the lake or are you flying to Maui? Clothes, vacations, watches; they don't even get to the fiftieth percent median, mode, mean on any category. Every single category, they spend more than they should.
Travis: So here's what I'm hoping. I'm hoping there's still some hope for some of these young dentist who maybe they in dental school. Now I know there's kids in dental school who spend like crazy and just take out student loans for it, but I am optimistic there's still kids that are in dental school that are trying to be conservative with their money and pinch their pennies for when they start working as a dentist.
But I'm worried sometimes with the word dentist, there's always this stereotype that they make a lot of money, that they can afford a lot of things and maybe you've been telling yourself that as a dentist and you're waiting. It's two years out of school, “Okay, it's time for me to buy a Tesla.” But you can't afford a tesla, “Well, I've waited long enough.” So I feel like what needs to happen is you need to change your expectations and not set your heart on these objects of buying things until you can actually afford them. Because once you mentally go for that high-end lifestyle, it is so hard to come down and live within your means.
I had friends in the financial crisis whose parents were making a million dollars a year and spending a million dollars a year and then in the financial crisis, their parents were only making $300,000. So they had to cut back so many things because they're only making $300,000 and they want me to feel bad for them because their lifestyle went from a million dollars to $300,000. It's like, no way, man, you just got to live within your means. Don't spend more than you make.
I think there's a lot of people who—we have clients who are seventy years old, make $300,000 a year, have $0 in their savings accounts and investment accounts and spend every dime they make, have $80,000 in credit card debt.
Howard: And they’re seventy?
Travis: They’re seventy. Last year they bought two Teslas. Can't buy one Tesla, you got buy two Teslas. This is for the tax break; it was a tax strategy. So I think you got to start now and shift your mind to be like, you know what I don't need that huge house, I don't need that huge car right now; I'm not going to put a timetable on when I'm going to buy those things. That's not going to be my focus, I'm going to focus on doing dentistry and not putting that kind of stress—
Howard: Let me tell you how big your egos are because I'm talking about just my backyard. So when I got out thirty years ago, no fluoridated water, no dental schools. Now they got A.T Still in Mesa and we got Midwestern and Glendale. So they graduate two hundred and seventeen people for this valley every year and you know how many of those. I know them, I know their dad, their dad's a rich dentist, big house says, “You and your girlfriend, wife, whatever, you should move back home, save money. You got a job, you could ride your bike to work.” No, not only do they not do that, they go buy a $350,000 house. They whine to everybody about their $350,000 student loans, could have lived back with their dad, the dentist parent and now they just bought a $350,000? So now there are $700,000 in debt because they were desensitized. Like “I'm a doctor, I'm not going to live with my dad.” Really? Well, your dad would have liked it.
Travis: So there has to be a mind shift if you have that mentality and the sooner you make that mind shift I think the happier you're going to be in the long run.
Howard: So as you get more and more and more in debt, you’re just immune to it. So if you're already at three fifty, what's that $350,000 house, what's a Tesla and so you’re just doing this not realizing that those are decade long decisions. You just traded a decade of your life to make money to pay that back plus interest.
And I want to say something; this is Dentistry Uncensored so might as well go for total racism. You know who doesn't do that? Foreign born dentists from Africa, Asia and Central and South America. They graduate from (01:18:11 unclear), if they're from anywhere in Asia, they'll go buy a dental office and they'll live in their private office. Their mom will come and take care of the kid and I'll say, “What kind of car you have?” “I don't have a car.” “Where's your car?” “I don't have a car. I don't have an apartment.” “What are your office hours?” “Here's my office phone, I'm open twenty-four hours a day, seven days a week.” “How's that work for you?” “Well, San Francisco it’s really busy Monday through Thursday, but by Friday half the dentists don’t work and by noon none of them work and Saturday and Sunday we do $15,000 a day.”
You go back to that lady born in Africa, Asia or South America, three years out of dental school, no student loans and she's got $150,000 in cash. She didn't make any more money, she has worked harder and didn't spend a dime. I only see that if they're not born in America. If they're born in America, like you said, they’re seventy years old, they're still paying interest on other people's money. Credit cards, loans, cars, Tesla, GM; who doesn't do that? People not born in the United States living in the United States, they get it.
But the worst financial decision you could ever make is to be born in the United States of America because you just think you just should use other people's money for your whole life. Then you see what happened to Warren Buffet who didn't pay interest on other people's money and let his own money invest and multiply on compound interest and then you wonder why he's got $85,000,000,000 when he's eight years old. Because his money was growing with compound interest while everything you bought, you were paying other people money, interest and the difference between having a savings growing on compound interest or always buying everything on interest for other people's money.
I mean, that's the difference between the North Bank of the Grand Canyon and the South Bank of the Grand Canyon and across the Colorado River is when you stop using other people's money, you no longer have debt and now you are putting money in a savings account and it's growing with compound interest. Which Albert Einstein said was the what did he say the fifth greatest wonder of the world?
Travis: Compounding interest. So I want to do everything I can to shift a dentist’s mentality into not setting their hearts upon the lifestyle that they think a dentist live. I think that's a big mistake that new dentists are making. The last thing I'll say is I was talking to my grandpa, my grandpa was a dentist and opened up a practice in Vegas in 1959. He said there were twenty-two dentists then in Vegas. I was talking to him recently and I was telling him I'm an accountant and I specialize in dentists and he was like, “Oh yeah, there were always people coming around to dentists and trying to scam us money and we didn't take a lot of advice from different people.”
I think when you're in a position to be a dentist, sometimes you don't want to listen to other people, but I think it's important to surround yourself by mentors and a dream team of accountants, attorneys, insurance agents, bankers, whoever they are.
You can have a negative perception of these people, but at the end of the day, they're there to help you and the sooner you start to build your dream team, the better off you're going to be when you have a critical decision you have to make. You're going to have your dream team ready and you're going to say, “Hey, what should I do in this situation?” and you’re going to make a smart decision. But you don't want to wait until you get to that moment of crisis and you're not going to know who to contact and you're going to make the decision on your own and potentially make a bad decision. So the last thing is to form a dream team and look for an accountant and look for a mentor.
I think what Dentaltown has with the mentorship program is pretty awesome. Some people have a parent or a neighbor who was a dentist that they can reach out to and ask those stupid dental questions, but not everyone does. So for those people you can use Dentaltown or whatever other resource to find another dentist as a mentor to help you out, but you want to surround yourself by smart people who are in the industry and who can help you avoid some of the mistakes that they've made.
Howard: Yeah, I couldn't agree more. I mean, a dentist will have a nightmare. I just had one in town and it was just the roof was leaking and he couldn't practice. It turns out the lease he signed, he’s responsible for the whole damn roof. First thing I said was, “Well, what real estate attorney read this over?” “Oh, no one.” “Oh, I get it. You're not a doctor of dentistry, you're a doctor of everything. You're a DOE! I thought you were a DMD turns out you're a DOE” and then he has an implant failure and now the patient's going to go to the board. I'll say, “Well, who’s your implant instructor? Who taught you implants?” “Oh, some guy that I flew across the country to go listen to.” “Well, why didn't you go learn them from an oral surgeon or a periodontist up the street?” “Well, I figured he wouldn't want to teach me.”
Yeah, okay half. They think interference (01:23:23 unclear). “Why don't you have someone teach you who's in Ahwatukee or in Phoenix and then now he can bail you out, he's right here?” Your dream team, your CPA. “Oh, your CPA, I met him at church.” Who cares? I don't care what religion he is. Does he work at a firm that deals with a thousand dentists? Get your dream team and that's another thing about the top of the market. Remember, you can't quantify everything like I know you love your little two-year-old girl and she can't quantify it. I mean, do you love her $50 worth, $500 worth? You can't quantify some things and when these market tops, that's when commodity brokers and people start calling you, they start cold calling you saying, “I got a really hot deal on gold futures.”
I had a guy I remember the year before the Lehman brothers, I can't have all these guys want me to buy futures in soybean and what does that mean? That means nobody in Chicago will touch this stuff, it's a toxic asset. So when did they start calling? Dentists, lawyers, physicians and I'm getting that now, every time they start calling dentist to invest in some securities or some real estate deal, whatever that means all the smart money will not touch it. So they start going for dumb money. Well, who's the dumbest people with the most money in the investment world? Dentists, physicians, lawyers.
So every time they're calling you and you're thinking, “Oh my God, so no one else will buy soybean futures?” But then maybe you should just start sorting them. You should just take[ anti? 001:25:07]. But hey, I know you're on vacation. I know you’re seeing the family and the wife. I called you, you did not call me. Big fan of your firm. Who's the owner of this firm? Who's the top dog?
Travis: So there's eight partners. So Brent Thomas, one of the original named partners at the firm is still there, seventy-year-old guy and just as amped as anyone about dentistry.
Howard: Well, we can do the Brady bunch thing so when you get back home, we could do another one with the old dogs. We're going to have one, two, three, they could be sitting at a table, they could be at their own computer. But I want to be a leader in dentistry, I don't have to lead them to want to learn Invisalign and bone grafting I know, they’re dentists they're like chefs, you don't have to beg a chef to learn how to a new recipe for lasagna. A leader makes them learn the math and the algebra and the chemistry; the shit they don't want to learn. So if you get back home and any of those old dogs want to do another show, I'd love to do it because they need ten scoops of this and only one scoop on bonding agents.
Travis: Unfortunately, they don't get enough of this early on in their career.
Howard: Well, thanks for writing blogs on Dentaltown, thanks for coming by my house on vacation.
Travis: Thank you.
Howard: You were awesome. Thank you so much for coming by the show today.
Travis: I appreciate it.