Q and A Session with Steve Hudson www.gdpresources.com
Financially, what is the most serious mistake you see dentists make?
The failure to appreciate the effect of reducing pensions contributions after conversion to private practice. In common with many small business owners, dentists often fail to take financial control or make adequate financial plans. You either control money or money controls you. It is vital that each practitioner works out exactly what he needs/wants to achieve in terms of financial reward and work life balance and then structures the practice accordingly. Now that government control is lessening there are tremendous opportunities for every dentist especially over the next ten years.
As a financial adviser, what do you think to the present fashion of getting heavily into debt that exists in this country?
It never was and never will be a great idea to borrow beyond your means to repay easily and all borrowing is costing you money. That said, in the modern financial world it’s almost impossible to adhere to our grandparents’ saying "never a borrower be". Interest rates are at low levels we wouldn't have dreamed of a few years ago and controlled, well planned borrowing can buy assets that can provide you with a living now, plus boosting retirement income later. The flip side, which is good news for dentists, is that patients without ready cash will borrow to buy that all important smile!
How much should the average dentist (NHS or private) take home a year before tax?
If you consider the average earnings of comparable professions such lawyers and accountants I don't believe any practitioner should be expected to survive on less than £100,000 p.a. before tax.
When should a dentist be looking to retire?
With our help, many dentists actually start to enjoy their dentistry again and are more than happy to work to age 65 and possibly beyond. That said it is vital that if you want to retire you can. That takes adequate and accurate financial planning, not just a vague conversation with the accountant about tax planning. Many of our clients will be financially independent and able to retire by age 55. The most usual is 60.
Do you recommend practice owners work within fixed and set budgets?
Certainly a well run practice will have known budgets and should be looking at benchmarks to ensure that no single cost is running out of control. The most common pitfall tends to be wages. There is a trap here however for the unwary. It can be mathematically proven that even quite a large saving on costs will have only a very small increase on the bottom line net profit. So it could be argued that practitioners can almost ignore costs if they have adequate turnover. I did say almost! In any event working on practice strategy and marketing will have a much greater effect on profits in the short, medium and long term than spending time making sure you are buying gloves 2p a pair cheaper.
When you buy a practice should you should already have your exit strategy outlined?
Yes. The financial decisions we make when we qualify, and before, can have a direct effect on our life style in retirement as well as throughout our working lives. Buying the right practice in the right location can create a financial asset for life. Get it wrong and it might just turn out to be a millstone. Time is of the essence and as a rule of thumb any retirement plans will double in cost for every five years delay. Plan your work and work your plan.
Many people reach a certain income and a certain level of wealth and never seem to get beyond this. Do you believe there is a psychological limit to your income?
I feel it is a comfort zone that people hit where as long as they are paying the bills that's OK. However this means it only takes a small wobble in the finances to cause much pain and the need to run a littler faster. Then having run a little faster the bills get paid and the cycle starts all over again. Breaking this cycle takes effort, not least because many practitioners feel guilty about their earnings. They shouldn't, their patients don't, nor do those working in allied professions. Plan all your costs, including all insurance and retirement costs, work out how much you and your family needs/would like and then structure the practice accordingly. It really is as easy as that.
There are many treadmill practices out there, where the dentist works too hard, seeing too many patients, working too many hours. In your experience what happens when dentists work less days, and spend more time with patients?
They make more money! Many practitioners were told as they qualified that all they had to remember was keep the book full and everything will be fine. Wrong. A full book with too many patients means no space for emergencies, no time to talk to patients and no time to plan. In short a treadmill - and the problem with treadmills is that somebody else is controlling the speed. For years it was the government, now all too often it is simply patient numbers. The "I must see as many patients as cheaply as possible" ethos is a one way ticket to at best dissatisfaction, at worst serious ill health and marital breakdown. When dentists work with fewer patients over fewer days they are working smarter not harder. They are more efficient because they don't keep deferring work and they actually get time to discuss a patient’s dental needs. If you make time to discuss a treatment plan with a patient you can identify a wish list, and, surprise, surprise, patients start to buy interesting and sometimes expensive treatments. This means more satisfied patients, more money and more fun for everyone in the practice.
Do you have any ideas of how many dentists are in financial trouble?
No. It would also depend on how you define financial trouble. Some would say it’s when the bank is likely to foreclose on the overdraft but I would say it’s when money is always tight and there is never enough left over for the things you know you ought to buy, like health insurance, but don't because you cant afford it. If you feel too hard up to plan your life financially you are already in financial trouble!
Finally, what do you offer that can make a difference?
You can have the biggest practice and plushest house in town, but if you lose your income through accident or illness it all comes down like a pack of cards. So first and foremost within budgets, age and infirmity we hedge that income around with a carefully structured insurance and financial plan. We look at all aspects of what happens to everything you hold dear if things go wrong. This leaves you with peace of mind. We then get to work on the overall plans, savings, school fees, retirement, holiday homes, larger Practices and maybe buy to lets. We are fees-only so you won't find commissions reducing your savings and retirement plans. There is no fund-based commission either so you won’t find us dipping surreptitiously into you retirement and saving funds every year whether or not you have seen us. I have also spent years networking to assemble a group of likeminded professionals that feel as enthusiastic about dentistry as I do - so if we can’t help with an issue we always know someone else who can.
