If I knew then what I know now…Reflections on Practice Management
March 3, 2016
David Chong Yen, from DCY Professional Corporation of Chartered Accountants, comes back with few rare pearls on practice management accounting. David spoke with Dr. Suham Alexander about common unintentional mistakes dentists do in managing their finances and how they could best avoid them.
Interview Highlights
After more than 30 years of experience working with dentists and in the dental industry, David Chong Yen sits down to share his reflections of lessons learned and insights gained.
- Invest wisely: Typically, the best investment is in what you know and in yourself and your own practice.
- Create your own vision: If you don’t know where you are going, you may not get there in due time. Visualize your ideal outcome and set your GPS accordingly
- Safeguard your investments: Protect yourself from known or potential liabilities. Proper planning and appropriate advice can save you from headaches down the road.
Mr. Yen , I always look forward to your advise. When you say the “own the building” does it mean the space for clinic alone or the other shops and retail along with the clinic in the plaza complex?
Secondly I was discouraged from buying the building or the clinic suit as the evaluators were putting forward the real estate perspective of suite cost outdoing the yearly productivity of the clinic. Can you please advise.
I find your words of wisdom very very helpful.
Thanks for your comments; if you will be practicing as a dentists for many years, decades, then request an analysis be prepared to determine the number of years it would take to recover the investment, using the rent you are currently paying adjusted for rental increases in this analysis. We have found that when dentists buy their own building which accommodates their practice, it is a form of forced savings, which is a hidden side benefit especially for individuals who maybe impulse spenders. When you own the premises where you practice, the risk of encountering a demolition or relocation clause in your premises lease is significantly reduced or may be eliminated, thereby enhancing the value of your dental practice. We have represented more than a hundred dentists who own their premises where their practice is located, and none have regretted it. When you sell your practice, the rent from the building provides you retirement income.
Thank you for investing your time and invaluable knowledge with us dentists.
It is a pleasure and privilege to share my experience.
That was a video well worth watching for all young dentists. At the mid point of my career, the best investments have been in my two dental practices and in upgrading my skills to allow for efficiency and procedures that allow higher hourly return on my time. I have lost bundles of money paying for other people in other industries to chase their dreams with promises of great returns. Stick with what you know as a dentist and you will do fine.
As for owning your own space, it really depends on local cap rates in the real estate market that you are in. Carrying large real estate debt as well as owning a practice can add tremendously to stress levels. My recommendation is to pay off the practice for at least 5-7yrs prior to buying space. Then buy the office, if you can, or relocate nearby where you can own if the math makes sense. Passive retirement income is definitely appealing but it must be weighed against the changing dental markets in the areas where you are located.
I agree with Geoff to buy your fishing rod(practice) before buying other things including your home, cottage and premises where your practice is located. Why? Buying your fishing rod first, enables you to test the depth of the water before you dive in. If you buy your practice and it turns out to be a bad investment, then buying the building will compound your headaches. Soon after you know your practice is a gem ie your practice is generating significant cash flow and has a record/history of being a good investment, I suggest looking to protect this investment by buying the premises where it is located or possibly relocating the practice close by to a place where you own. By analogy, some dentists suggest a crown to protect the patient’s root canal. Prior to doing this ensure that the cash flow justifies this action. Also if you vacate a premises where your practice was located, try to have it occupied/rented by someone who is not a competitor (say MD, specialist, etc.)