Mastering Dental Finances: Revenue, KPIs, and Beyond

What's up everybody and welcome to another exciting episode of the navigating dental insurance podcast. I am your co-host today, Jordan. With me as usual, Ben, what is up dude? How you doing? >> What's up Jordan? >> Excited for the episode today man. Getting ready for Thanksgiving here in the next couple days and I have no plans for Thanksgiving which is amazing. >> [laughter] >> Yep. Well, there's something to be said about a staycation, you know, with busy professionals that travel quite a bit. >> Yes. >>

Staying at home for a holiday to me is the best. >> It's so refreshing. Like I was just talking to my wife last night and I'm like isn't it so cool that like we literally don't have to do anything? >> Mhm. >> It's going to be so good, right? We've been doing a lot of traveling here this year for fun and for business. So just excited to avoid the travel rush for the Thanksgiving holiday, you know. So. >> Yep. >> Okay, today we got an awesome

guest. His name is Austin Moffitt. Austin, welcome to the show brother. >> Hey, what's going on guys? Pleasure. Thanks for having me on. >> Yeah, we're just we're just chilling man. I'm super pumped for today's episode because you and I have been talking. I met Austin at a mastermind with Dr. Eric Roman at his house. Ben, I believe you've done some of Eric's masterminds in the past. That's where I That's where I met Austin and um in this mastermind we did some hot seats and we

collaborated on helping each others out in our business. The other day we we jumped on some calls and we're we're having awesome conversations on what we're going to talk about today. Austin owns a company called DSO CFO. So Austin, if you could give us an introduction of who you are, how you got in the dental space and how you started DSO CFO. Then we'll get into all the fun stuff. >> Yeah, I know. Appreciate it. Yeah, thank you. Well, kind of started, you know, honestly before

I even graduated school. >> [clears throat] >> My actually in the early 2000s really so I was actually in high school so My grandfather was an orthodontist. He owned three practices in the Los Angeles area in the early 90s he did great very successful almost too successful if you will made a lot of money and [clears throat] he chose to make not awesome business decisions with his money. >> [laughter] >> Unfortunately going bankrupt and so he he did his stint of bankruptcy and then he just

had a knack for going multi-location again honestly really but kind of before multi-location was was kind of a hot thing yeah totally. And so he did it again in the late 90s early early 2000s he actually went he got three practices excuse me five practices three in LA and then two in Riverside if any of you guys know where that's at in Southern California and he lo and behold went bankrupt once again and and so he went he did it twice kind of just proving that

you know he he could make the money but but maybe not just for him personally maybe not the best business decision-maker unfortunately had a stroke later on and and didn't have the finances to be able to support himself and his wife my grandmother right in Los Angeles had to sell the house that they they their kids grew up in right so it kind of just financially kind of fell apart honestly and so that's where my dad was already financial advisor working with doctors my brother Jonathan

Moffatt of Align Advisors of those of you know him, he works he's a wealth advisor for dentists, only dentists cuz this has left such a dent, like a mark in our family, right? This whole experience. And then lo and behold, as he was working with doctors, he said, "Hey, look, I'm going to help them retire, make really good business decisions. Their golden nugget is their practice, right?" He's like, "Well, I'm not an accountant. My little brother, me, up 10 years, you're an accountant." So, he kind

of swindled me in about 10 12 years ago into that into that the dental side. >> And now you're stuck in dentistry for >> And and here we are. It's been honestly it's been awesome and the the ups and downs and the honestly the maturity of the industry in the last few years has been has been kind of crazy to be totally honest. Private equity coming in the last couple years, right? DSO's sprouting up like crazy. So, it's been a it's been fun, but like a

a wild experience, to say the least. >> Yes. Yeah. >> [laughter] >> Welcome to dental. >> Yeah, it's it's interesting >> Here we are. We're we're here to stay. >> [laughter] >> You can't escape ever. No, with our our conversations the past uh several weeks uh was super excited to bring you on the show today to discuss your expertise and how we how you can better help practices with finances because it is a big it is it a big it's a great big issue. And like

just from my perspective, uh when a practice is with like a PPO plan, they are literally writing off what, 40 to 50% a year? Which over a lifetime for like the average practice is like $18 million in revenue that is just goes uncollected because of the the invisible write-offs that's happening. And man, what could they do from a wealth building perspective um and even like a reinvestment strategy over the course of their career if they understood the finances a little bit better than what they currently

are taught. So, this is why you're here today and from my my own look in the industry and and interest in how to help practices, first question for you, Austin, how should a practice owner look at their finances? Like what KPI should they be looking at? Give give us the kind of the weeds of that. >> Yeah, totally. No, this is a great question. I I I would say I would start with first um practice owners should be reviewing their financials regularly, at least monthly. >>

At least monthly. >> At least, just to know what's going on and and I I would say, you know, what one of the and this is probably for for smaller practices. I think you get it in like the multi-location. I think you have a little bit of these uh I think I think these these individuals know, right? And they're probably already looking at their financials right on a regular basis from a multi-location multi-location, but but stop just looking at your bank balance and wondering if you're

if you're okay, right? It's You can certainly do that, but in conjunction of doing that, look at your look at your financials. And then and and so then when you're looking at them, you know, this is this is what what I would at least suggest is identify those goals that you have, you know, that that you've set for your team, right? From a from a financial perspective. The number one, and just starting at the top, right, is a revenue, right? So, like what is your monthly

revenue goal for your practice and is that being tracked, yes or no? Right? That's that's number one. And then number two, >> I would I would I would add to the revenue side. Uh we've interviewed people like Gary Takacs. Been a lot of the times they they will have these revenue goals, but they're not tracking they're not tracking the write-offs. Uh they're just tracking what's collected uh after the write-off. So, it's like, "Oh man, there's so much data that you can be looking at like, 'Oh,

we're writing the this [clears throat] amount off like $400,000 a year on just because we've signed up for every PPO under the sun. We're we're writing off 400k a year whatever it may be. What um that's that's an interesting thing to be be tracking that most practices don't track is the the the What do you call that Ben? Um like Where you write off production? I don't know. I don't know the official >> Yeah, you you have production production and collection numbers. But that's the other

thing is you know, the write-offs I'm curious to see what Austin has like in his metrics for key performance indicators. Um write-offs don't always come from PPOs, you know, and it's they they could come from professional courtesies or other things. >> Ah, sure. Yeah. >> But I agree I agree that you have you have to sort of identify those those write-offs in an effort to figure out where you need to plug the holes. >> Yeah. >> Well, I I think to to to that and sorry

Ben, so sorry to to interrupt that. I we have there's this there's an example there's story we spoke with one of our clients. Want to say the begin it was probably Q1 of this year um and they they owned a multi-location um on the East Coast and um it was a it [clears throat] was a husband and wife ownership and um the one of the spouse members was giving away like like doing write-offs like crazy and and like just had huge heart huge heart wanted to

just do good right with almost like I don't not necessarily homeless but those that just that they needed the help. Right? But maybe they didn't have the the finances to to back it up and he would write off some I think we calculated in just eight eight months time uh about $600,000 and I'm not joking. Well, that's probably a little too high. It's probably probably it's closer to 400, but it was absurd across all all all three locations. All all three mind you. So like combined.

>> Combined. Okay. >> And yeah, yeah, yeah. And maybe it's a little bit longer than than 10 months span but but it was a lot it was significant to say the least. And we're like, well, we we know why uh you know, you're feeling a little bit tight because there's a good portion of your money that's just not going not going to the administrative. [laughter] >> Yeah, there's costs associated with serving patients. It's like, man, just write it off. There's Now, I get there should be

a you know, you could put a charity aspect of the practice like a Hey, we can only we'll for write-offs that we control >> [laughter] >> we'll do x amount of money each each month to write off versus letting it kind of get out of hand. That's interesting. Wow. >> Yeah, it was interesting. Unique conversation. I offered to have the conversation with the spouse and I said, "No, I should probably do it." >> [laughter] >> Yeah, that's wild. Great point, Ben. Let's go back to that

question again, Austin. So so you mentioned key performance indicator-wise, revenue is number one. >> And >> Revenue is number one. Yeah, and that I'll be super honest. Um that gets tracked, but I I don't know the accountability factor, right? Because um because I I think I think that's a layer kind of that goes above, you know, the financials, but that's kind of why why you ultimately review the financials is that if people aren't hitting goal, right, then where's the accountability, right? And if you're below goal,

you know, I think a lot of questions that um are there some questions that maybe don't get answered or maybe not even understood initially is why didn't we hit goal, right? Is there a reason yes or no, right? So, um anyways, yeah, sorry. Back to revenue though. It Again, it it goes back to tracking at the end of the day and and holding others accountable. So, from from revenue immediately down to clinical-related expenses. And now we kind of start getting into like the expense factor, right,

of the financials. So, now you have clinical-related expenses where and this varies per per practice, per location, right? But generally speaking, right? You want to be about 6% five or six I'll call it 6% of your revenue in dental supplies, right? So if you're if you're pulling $100,000 just easy numbers $100,000 a month in revenue, you don't want to be spending more than $6,000 a month in dental supplies. For labs, again, it all this is this all varies, right? 5% four or five but I'll kind

of go on the higher end five 5% so $5,000, you know, of a $100,000 month revenue. And those are big >> [clears throat] >> those those are actually really big. I'll keep going down and then I'll actually identify like the areas where I'm like, "Look, I'll I'll just tell you whether you're having a hard time breaking even or not if if you're overspending in some of these areas." Marketing is another one again varies it's a range between 3 to 5% I'll I like to kind of

hang our clients back to 3% so 3,000 of 100,000, right? And then the big one is is payroll, right? So you don't you don't typically want to exceed 50 50% of your revenue in in payroll, right? And and you can you can bring that down, right? What is an associate get paid hygiene, right? And and we have those but kind of the overall umbrella, if you will, is 50%. Now if you just take clinical expenses dental supplies at six labs at five there's 11%, right? Throw

marketing on there there's 14% throw payroll >> Adds up fast, yeah. >> Yeah, you're at 64% out the gate, right? Just in those areas and you're trying to like >> What about property or lease >> Yeah, yeah, so so so rent, right? It's 6%, right? You don't want to exceed six. So so I I I would say we try to get our clients their net operating income. So that's like the meat and potatoes, if you will, of the practice, right? Expenses and and revenue. We try

to get net operating income to 20%, right? So, that's like a 20% profit margin, if you will. So, like, you know, things are pretty tight out the gate and and and back to what I was initially saying is I I we have clients that give us an um financials to like do analysis if they want to like acquire them or or what. I I just did one just the other day and uh I always say I'm just going to look at um first the first things

first, I'm going to look at where they're at as a percent of revenue on clinical expenses. If they're over 11%, then, okay, let's see where, you know, that's that's not awesome out the gate. So, let's just take a look at payroll. If you're over 50% without even looking at the bottom line, um I I jokingly tell my clients, like, I'll go to Vegas. I won't I won't even look at the bottom line. I'll go to Vegas and I would put money that these guys are having

a hard time cash flowing or breaking even period, in just those two areas alone. It's a And so, that's that's where we kind of consult out the gate with a lot of um potential clients that we start we start working with or or maybe we start kind of, you know, should we work with you? Now, are we good fit? Yes or no, right? Um it's those two areas out the gate cuz just those two is 61%. Just those two KPIs, 61. And if you're trying to

squeak a 20% profit margin, you're really operating on 19%, you know what I mean? In in between just those two areas. So, it's, you know, it it can get squirrely, you know, pretty quickly if you're not um it A, if you don't have goals. B, if you're not tracking goals. And then C, if you're not really doing anything about those goals when maybe you're a little bit too high, right? On lab fees, for example, right? So, that that that accountability factor. >> Yeah, that's interesting. I

would imagine, too, like if you're investing into a practice or a second location as a practice owner, uh it's really easy to look with what you just laid out there. It's like, oh, cool. These are the areas where we can optimize. >> Correct. >> We know that this could be a good investment once it's optimized correctly. That's how That's where my brain is going. I'm like, oh, cool, they're paying 11% at in supplies or whatever and needs to be at What do you say? Six? >>

Six, yeah. Yeah, supplies, yeah. >> Cool, we're just over ordering. This [clears throat] practice is over ordering. I I know we can fix that easy, right? And you can create a playbook for like, oh, if I were to invest in this practice, okay, this would be my strategy based off of the data. That's where my >> Yeah, no, no, absolutely. And and you're you're absolutely spot on because if you know your model and you know that your model works, you can feel confidently going in and

replicating your model. Right? I mean, I mean, it's going back to and this isn't necessarily model, but it's just it's just being aware, right? I just client >> It's percentage-based budget model. >> Correct. Yeah, correct. >> That's how I operate my company. I've done it for years. If we go over a certain budget of a certain category, I say, that's too much, cut it. >> Yeah, right. Right, right. And and but I think the percentages of revenue, it provides Excuse me, it provides like leniency almost

in those months that are tough like September is is really funny. You and I had an email going back and forth a couple weeks ago and I said, oh, September and you got, oh, yeah, I know, we actually call that September. So I Yeah, I thought that was great. I I I copied that saying to a couple of our clients, but but but look, that's a tough month for a number of reasons, but um you know, that's a good opportunity to track, you know, lab lab

fees, dental supplies, what whatever. You know what I mean? Um so, it's it's a good opportunity and and it should show it should show exactly kind of where you're at, no matter where you're hitting from a revenue perspective. >> Well, yeah, I like the reason why I've operated and love the percentage-based budget model, I guess you can call it. You probably have a better technical word. But I've always liked that cuz it scales up and down, right? So, if my revenue is scaling up I I

can look at it and it it's a it's a model that is super easy to understand and to analyze. If my revenue is going down, I can be like, "Okay, well, we need to cut these areas cuz we're spending too much, right?" It's a scalable budget model, which that's why I've loved using something like that for for years and years and years. So, >> Right. Right. >> No, that's great. Um any other KPIs that you need to be tracking or looking at? >> I would say

those are the big ones. I mean, you can certainly drill in. If you want to get granular, you can certainly drill into, you know, what what are you doing on, you know, repairs and maintenance, right? You can get into the individual payroll, you know, uh employee position, right? But, that's probably for another time. But, tho- those I would say you know, if I I would have bumped into, you know, a doctor on the street and we just started chatting, and those would be the the primary

ones I'd say, "Hey, look, >> Yeah, that's great. >> this is what you got to focus on. You have to." And it has to be number one, revenue. Are you hitting that goal, yes or no? Clinical and payroll. I would just those three, if you can marry those three, uh you you have a pretty good recipe for some healthy cash flow. >> I would imagine too, Austin, um to if we can go a little bit deeper for 2 seconds, um revenue is really important, always will

be. Um but, then there's quality of revenue. So, >> Right. >> what's the patient acquisition costs? And am I am I my am I breaking even and getting the the quick payback periods on that cost in a in a certain time frame? That those are those are things that naturally where my mind goes when it comes to revenue. It's like, "Cool, revenue is great. Now, let's talk about quality of revenue," which uh I think leads us to the this next phase of our conversation. You're going

to you're going to show us a Let's do a practice uh revenue review. You've got a document that we're going to look at. So, share your screen. Let's Let's get geeky. >> [laughter] >> Yeah, let's do it. If I can find where to share my screen here. Okay, I got you. All right. Yeah, let's get geeky. >> I think I know what it is, so. >> Yeah, you're good. This internet is so wonky here. Uh It's like not showing me. Oh, there it is. Okay, jeez.

Okay. >> [clears throat] >> You guys see this, okay? >> Yep, practice A profit and loss January 2024 to October 2024. >> That's it. So, this is year-to-date. This is year-to-date. Uh is this is this just a is this just a practice? Is that is that that what this is or not? Are we we live? >> Uh we're live. You're Yeah, you're good. >> Okay, [laughter] okay, good. Sorry. Sorry. Sorry. Um >> We're hot live, baby. >> Oh, baby. [laughter] Sorry. Sorry. Sorry. That was my

fault. Um yeah, so this is this actually a real practice. This is a real practice here. Um >> So, real data. We're looking at real data here. >> This is real data, real practice. Nothing has been tweaked other than I've only I've only hidden some of these uh these cells just to simplify um just to for for this for the podcast, right? Um so, again, real numbers here. So, what I've done, it's it's actually pretty healthy healthy practice. Going back to kind of what I was

initially saying, dental supplies, you know, goal six. These guys are doing, you know, two and a half, call it, right? Lab fees, kind of almost [clears throat] three, right? Overall, they're at 6%. Really good. Like really, really good, right? Um cost of goods, right? Here you they're a little bit high on marketing. That but that is totally their like that is their goal, right? Like they're choosing to go high because they are pumping marketing capital into this practice to like grow the practice, right? So, like

this is intentional. But guess what? They can do that because they came under six points or five points, if you will, in clinical. So, they still they're able to kind of hey, you know, we've done well in here, so let's maybe use that extra capital >> yeah. >> it to reinvest it into the business, which is brilliant, right? So, that's that's what these guys are doing. Down to payroll, they're all in. They're at 51, call it 52%. You know, maybe a little bit higher, but yeah,

but it's not really that big of a concern. You know, they're they're pretty consistent. They're good everywhere else. Rent, they're at 5.2, so they're a little bit below that. Overall, and again, no numbers to eat. Net operating income, so again, the meat and potatoes of the practice, just operational related revenue and expenses. They're at 29.5%. They're very, very healthy. Nice Nice throwing your EBITDA. You throw in a couple outback related expenses, right? They're ending about 18.8, call it 19%. So, very healthy practice. >> Yep. >>

Mind you, they're not pulling in like 3 million, you know, 3.5, 4 million, right? It's 1.2, right? >> Is that Is that Is the 1.2 after PPO write-offs? >> This is Yeah, yeah, so this is just cash. Just cash. Just cash collected. Right? It's like proper, proper cash. >> Mhm. >> So, this is their cash flow year-to-date, right? Or in Again, mind you, January through October, so 10 months. >> of profit. >> Yeah. Yeah. Yeah. 227 So, look, I mean, it's $200,000. Maybe you'd want 500,000,

especially if you're doing about 19%, right? But regardless, again, back to kind of the scale and the size of of a practice. Um Anyways, so >> Carson, is that is that after the bottom line number, is that after doctor salaries? >> This is after doctor salary. This is all in. All in, 19%. That's That includes taxes, all right? That includes like any travel, legal fees, right? Donations, things like that, right? So, you're you're walking away all in. Now, what this doesn't include, I I I have

to just be transparent. Um And this is where the accounting nerd in me kind of picks up, so forgive me, but but >> [laughter] >> This it does not include principal loan payments, right? So, if you have a loan, right? The principal belongs on the balance sheet. That's a story for a different day. And this does not include any owner draws, you know, that So, if it's owner doctors like, "Hey, I got paid, you know, X, but I'm going to take $5,000 and just give it

to myself as owner draw." That also does not impact here. But, so I have to convey that. So, outside of those two areas, yeah, this is proper proper cash flow 19% all in. >> So, there's plenty of cash to do whatever they decide. >> Correct. Correct. >> interesting. Okay, so $1.2 million practice after PPOs, do we know Do you know how many how much in write-offs that these guys are are doing? >> I I don't I don't have that data in front of me. I I

am happy to pull it up. I have to pull pull that from them. But, I do have to say these guys um >> [clears throat] >> These guys are really good. These are I'm using them as an example for a reason. They're one of our more high-performing >> I'm sure there's other messes out there that you're trying to solve for. >> Yeah, yeah, I know, but these guys are good. I I I don't know, to be totally honest. I don't know what that percentage looks like.

But, I do know I have to know they're on it. >> I know Ben sees that a lot with practices. At 1.2 collected practice, what is the typical write-offs that they're what you've seen, Ben? >> It depends. It depends on how much of that is insurance-related revenue. And forgive me, I I >> I know you're >> I got to jump off for a little bit. >> You're good. >> You know, the the screen is way too small on my phone. >> so it's it's a $1.2

million practice that's on collections. Really great numbers if you look at all the details. But, that's kind of where Yeah, we don't know if it's if they're heavy PPO or a fee-for-service with or a hybrid type practice. Typically, Ben, though, when you when you see like a $1.2 million collected practice and they're with PPOs, what what should their top line could have been? Does that make sense? >> Yeah. >> Yeah. So, among the PPOs So, every practice is different. Like some I review [clears throat] some

reports like a $1.2 million practice, 33% of the practice is from insurance, the revenue is from insurance, and then another practice, 95% can can come from insurance. >> Sure. >> So, you see So, with a practice with limited in uh participation with insurance and limited number of patients, you would see a significantly smaller write-off compared to a practice that's doing the same revenue but has 90% of their patients on insurance, right? >> Yeah. >> So, with 90% of your patients on insurance, I mean, you're writing

off anywhere between 30 to 50% of your revenue depending on where you're at in the country, right? >> Sure. Yeah. >> Uh and and the same is true for a practice that's $1.2 million and 33% of their patients are insured where they're they're still writing off on the insured patients, yeah, between 30 and 50%. So, in most states, you would have you would have your write-offs hovering insurance write-offs hovering between 30 and 40%, right? And that's without having any negotiated fee schedules. So, for this particular

practice, hard hard answer that question without having the specific details, >> don't have all the data. >> Right. Right. Right. >> Yeah, that's interesting though. Uh imagine though if if these were if this practice was you know, had 90% participation in PPOs, that could be a 30% more top line increase that goes most likely straight to the bottom line with a negotiation. >> Yeah, I've seen practices uh submit $3 million worth of claims insurance and they only get paid $1.2 million. >> Oh, interesting. >> Yeah,

that's [clears throat] wild. You know, but at on the same at the same time, I've seen practices uh uh submit $1.8 million and still collect $1.2 million, you know? after write-offs. [clears throat] Yeah. And so, but what's and and and in terms of write-offs, the biggest write-off that you'll ever see is Well, the biggest write-offs that you should see is coming from being in network, right? >> Yeah. >> So, if if you're seeing write-offs that are not associated with insurance, that that means you're you have

a financial policy where you're giving discounts willy-nilly to everybody, you know, or not collecting correctly or whatever the case may be, but >> Yeah. >> this this seems like a pretty reasonable practice to where I mean, at 1.2 million, the the the dynamics I'm I'm I'm seeing on the screen is that uh this practice could have a relatively smaller component of insurance. Who knows? I I I don't know those >> Yeah, who knows? But just looking at it quickly, yeah. Right? Not going to know much,

but uh just yeah, I thought it was interesting cuz I guess the easiest way to optimize revenue here would be renegotiating insurance contracts so that you get more. Or going out of network, right? And uh you influence you influence top-line revenue and bottom-line revenue by going out of network in most cases. I know there's some nuance to that uh strategy, but that's probably the easiest way to impact revenue and bottom line um just re- just by re- renegotiating insurance contracts cuz most of the time, Ben,

I would imagine these practice owners will sign any PPO contract under the sun without looking at the details of what they're actually doing to their practice. And then years down the road, they're like, "Oh man, we need to we need to fix that." >> Oh, that happens all the time, even from for our own clients where they'll get you know, they'll get in network with a PPO plan cuz that PPO sent the documents to them directly, and then they just sign it. You know, they don't

they don't review it or have somebody else review it. Um and and we have to get out of that habit because I imagine from Austin's perspective when it comes to reviewing financials is that um we tend to skim through these things fairly quickly as busy professionals, right? >> Right. >> The mis- the mistake that we make is that we don't really scrutinize the numbers from the perspective of how do we fix how do we meet goal, right? Or how do we reduce these percentages? So, I

think going back to your question for me, Jordan, is if I'm looking at this P&L and if I had the production numbers and they they're producing 1.8 million, but they're only collecting 1.2 million and they participate with every dental plan. In my mind, I'm thinking they have to evaluate their PPO write-offs. They need to look for negotiating opportunities. And then the fact that they have zero membership revenue >> [laughter] >> Yeah, that's another easy win. >> The next thing I would look at Yeah, like for

the the membership plans, if it's zero, I would immediately go and look at the uninsured part of the practice, right? The patients that don't have insurance. It's like what are we doing there? >> A practice this size, I would say we see this all the time, especially if they're investing into marketing. Um in a in a 6 months to a year time, they probably can add about 400 active membership patients with the right marketing engine and the right to Ben's point, if they got a good

base of uninsured patients that they could convert to subscribers to subscription patients. Add in that column there where it says membership revenue. Um so, we'll do 400 active patients times that by the average rate of $45 per patient. That's $18,000 in MRR. Um so, monthly recurring revenue. >> Is that so, 18,000 a month? >> Yeah, that's a month. >> You're doing 18,000 times 10, right? 10 months out of the year. >> Yeah, in this case since it's 10 months analysis. Yeah. Yep. >> It's doing that

about buck 80 additional revenue. >> And out of that cohort of the 400 active membership patients, Times that by um Let's do So, I'm I we did an analysis uh several weeks ago with one of our top clients here at BoomCloud, and we saw that uh their membership, on average, their membership patients spent two times more uh than their PPO patients, which is obvious. Um and so, let's add this a thousand to the So, from a treatment revenue perspective, now, obviously not 100% of the membership

patients are going to get treatment in a given year, but that cohort uh that membership patient cohort can be driving even more bottom or even more treatment revenue >> Right. >> in addition to the subscription revenue that we just put down here is that we put down $180,000 in subscription revenue in a in 10 months. Um I would argue that the the projected value of that cohort of patients could be anywhere to additional 400k in in in treatment revenue. Right? So, if they were to get

most of those if if they were to get a good chunk of that uh patient revenue of that the subscription revenue from new patients coming in, right? They can really grow super fast because the ideal patient profile in a practice is typically a membership patient because you're not dealing with PPO write-offs. Uh they're they're acquiring them through marketing channels that and and then those patients are committing to they're financially committing to the practice uh versus a PPO patient, they're they're really just financially committed to a

limited PPO plan. It's not really adding much value both to the practice or the patient. So, um I would argue if they if they can hone in their marketing to attract more membership patients, um invest their money there, they'll see faster growth than they they will with a with a PPO or even a cash patient. So, that's kind of where I look at this. >> I I I think this is interesting, right? So, here here's where my mind goes. So, if you did if you did

180,000, excuse me, 180,000 right? >> Yeah. >> I'm just taking that >> revenue? >> In just subscription revenue, excuse me, year to you know, for 10 months. You know, on average these guys are doing about $100,000 a month, roughly, right? And just just mind you, just collections, right? So, it's after right? Um you know, this 180, that's al- almost two times your monthly revenue, >> Yes. >> so you're you're almost you're giving yourself a two-month boost in revenue from just going through, you know, getting the

those monthly memberships in place. I'm just going to jump down again. Here's where my mind goes to >> Is that after 14.148 14.8% in in in bottom line? >> Correct. Yeah, yeah. Well, yeah, well, close. Oh, yeah, actually it was 10 uh and it 10 Well, let's see here. Depending on what number 38 So, where were we where were we at beforehand? It was I can't I can't remember, but I know the bottom bottom line was 19% and we're at 29.4%. So, >> After adding that.

>> all all in all in after EBITDA after add backs, right? You know, after you add all that back in, uh you know, that's 29%. I'll be super honest. A 29% profit margin all in, we don't we don't we don't see that too often to be >> Yeah, sure. >> completely transparent. It's This is a a a a rare bird, you know, if you can find practices that are kind of floating in the high 20s, low 30s uh all in. And so, it That's wild That's

wild to me. Can I ask Can I just ask cuz cuz right, this this is the area that you know, is not my expertise. How difficult is it, you know, to for these practices to be getting these these membership revenues? Like just like you know, this is a pretty average I'd say this is a fairly I'd say small-to-average, you know, size practice, right? Just in terms of of what it's doing in in in revenue here, you know, doing doing 180 in 10 months, you know, how

difficult is that for a practice of this size to get? >> Yeah, well, can I answer that, Jordan? >> Yeah, go ahead. You've managed the membership plan for uh multi-locations. >> [laughter] >> You're You're the ultimate expert, Jordan, but since I don't earn any revenue from membership plan uh designs, you know, as a as a pure um uh student of the game, this is what I'm seeing and this is So So So to answer your question, Austin, it is not any more challenging or difficult to

get a patient enrolled on your membership plan than it is to acquire any patient, you know, and especially like an insured patient in the market today, the low-hanging fruit uh is membership plan patients because there are so many more of those patients compared to people that have insurance, right? But the challenge that we experience in the industry is that people with insurance are the most motivated to go and get their dental work done consistently, right? >> Yeah. >> And And that is why we want to

get our uninsured patients and even people that have insurance switched over to a membership plan cuz it's it's it's it's so much less expensive to a practice long-term to have people on a membership plan because you have more control over the income, right? You have more You have significantly more control over the plan design, which results in the write-off that you're giving to these membership plan patients or write-off {slash} discount, right? So, with that said, as it pertains to effort, resources, and money, you know, in

in acquiring new membership plan patients, the vast majority of practices, they already have patients that are candidates to be on their membership plan. Yeah. But they're But But they're they're viewing the opportunity loss in the in the wrong way. Like a lot of practice owners would look at uninsured patients and say, "Why would I want to start giving these patients discounts when they're happy coming and paying my full office fee?" But, Jordan will tell you that membership plan patients do what? Three times more dentistry? >>

They anywhere from two to two to four and a half is what we've seen. >> Yeah. >> times more. >> See, so now you have a motivated patient, right? And so, the real answer on how much how difficult it is to get people on a membership plan, it's not. We all have patients in our practices that could be easily converted to plan. And and here's why. Nobody's going to say no to a discount. >> [laughter] >> Right? Right. >> Well, and if if I literally was

talking to Jean, her name is Gina. Gina, what's up? This is one of our top practices that they just started a membership program from scratch this year. And they're adding about 30 membership patients a month, right? In about a little over 12 months, call it 14 months, they'll be at 420. I gave four 180,000 in yearly subscription was off of a of 400 active patients. >> Did you just say 420? >> Uh yeah, I did. >> [laughter] >> No, I'm referring to the number, not the

time of day. But, now that you brought up the time of day, I'm going to start thinking about that. >> Yeah, right. >> [laughter] >> Yeah, so they've they're they're signing up 30 patients a month to their membership program, right? And it's as simple as just talking about it. Uh in addition to that, they do have a wonderful marketing engine that's working for them, right? That it that allows them to have more conversations aside outside of their existing patient base. That's That's That is the the

the trick, right? Uh you got to talk to your existing patients, and you've got to have a marketing function that's working. Which if practice at this this size and they're spending what? 6% on marketing is what you said? Austin, that's that's a really that's a really good investment. Now, just start talking about uh if I were these guys, start talking about the membership plan to those new cut those new patients coming in and how much they can save, right? Um and yes, it's a win for

the patient and for the practice cuz they they they save more, but they the practice the patient also says yes more. We looked at these the the case acceptance rate between these cohorts. PPO patients say yes about 30% of the time. Cash patients say yes 20 to 24-ish percent of the time. So, cash patients are actually They're great, but only 24% roughly say yes to treatment. So, you're only collecting 100% on the 24% of that base. >> Yeah. >> Um and then membership patients say yes

40% of the time. So, if you look at those cohorts, you can easily see which one is the winner. Um and then I would add that we we didn't put here is renegotiating those insurance fees is a massive win. Ben, I don't know what you see typically um If I were operating a practice, I would be calling Ben up and saying, "Hey, bro. >> [laughter] >> I'm writing this much off with these specific PPO plans. I'm a $1.2 million collected collections business. Um the easiest way

to grow my company is is yes to turn on the marketing engine. You always want to do that. But then there's something that I call revenue per patient. It um How How can we optimize the revenue per patient? Well, one of the quickest ways is yes, a membership plan. In addition to that, or the same time is that you want to look at your PPO contracts and renegotiate or or go out of network if possible, if that doesn't scare you cuz I know that can be

a scary thing for some practices. That is the quickest way to increase your revenue like a light switch. >> Oh, yeah. >> That's light switch revenue is how I look at that, Ben. So, when it comes to like negotiating, what do you typically see, Ben, uh for from the revenue uh conversation of this profit and loss statement, like when it comes to turning on that negotiating uh plan, how much revenue can they add just by doing that without adding more patients? >> Absolutely. So, let's take

uh the typical practice that we work with. Uh 90% of their patient base has some type of insurance plan. >> Sure. >> Um and and they collect 1.2 million a year. Um so, for a practice like that, they would expect a total revenue increase anywhere between 7 and 13% as a result of properly negotiating your PPO fees, right? >> Mhm. >> [clears throat] >> Um but the other part of that is >> Mhm. >> um out of network-wise, like a practice like this, let's say they're

maxed out on their hygiene appointments, right? They're booked out. You can't even get in as a new patient for a hygiene appointment for 4 to 6 months, you know? Um being being in high demand that way and taking every PPO plan under the sun, um one great way to eliminate the right eliminate the write-off altogether is just by going out of network. Jordan said that's easier said than done, and he's right. >> Yeah. >> But the reality is is that there are thousands and thousands of

examples of doctors going out of network with insurance plans where they're increasing global revenue well above 30%, and that's after the the attrition, right? After the patients that are that are going to leave. >> Sure. >> it look like after that? It's like, "Well, we've captured 30%, right?" That's a huge move, a huge plus. I mean, even if it's 20% and you lost 20% of your patients, you know? 20% of an increase in global revenue is a huge win, you know, as a especially for practices

that are so far booked out that they are cannibalizing their opportunities by those patients, you know, they're leaving. They're not coming for their appointments because you they're waiting too long, right? So, and maybe this is another question for us, and then I I got to hop off here in a second, guys, but >> Yeah, you're good. >> what I learned from from CFIs is that the numbers always indicate that if you're not accepting new patients for 4-year period, um you you will not have that many

production opportunities in 5 years, 4 to 5 years, because of the the work that you've done on the existing patient base has been for the most part maxed out. Now we're waiting for them to get unhealthy again, you know what I mean? >> Correct. Yes. >> [laughter] >> Great point. Yeah. >> So so that's that's great. >> So it sounds like you agree with that, Austin. I I >> I do. Absolutely agree with that. I mean, I I totally agree. I mean, hey man, you only

have so many teeth in your mouth, you know what I mean? >> There is a natural There is a natural limit. [laughter] Yes. There's a natural limit of revenue production per patient, absolutely. Oh, this has been awesome. Ben, respecting your time. Uh Austin, tell tell people This has been a great episode. Tell people how they can find you if if they're wanting to review their numbers and all this fun stuff that we discussed today. Where where can they find you? Do you have a website? >>

I do. Yeah, yeah. I'm I'm I uh you can find me uh on LinkedIn as well. I'm I'm I you know I I used to be more active, uh but I'm I'm on there uh weekly. LinkedIn Austin Moffit, or you can just go out to the the our DSO CFO um LinkedIn page and and message us. We have some pretty uh responsive people there. And then our our website uh dsocfo.com uh really great way to to get uh get a hold of us. Um but yeah,

I mean, look, we we're big. We we're more than happy to provide uh you know, free financial analysis for anyone, just so that they kind of know where they stand and where there's there's areas to uh improve in their profit margins. And that that's something that that we that we do complimentary. >> Great. So go book that. Oh, go ahead, Ben. >> Oh, sorry, Jordan. Uh if I can put another plug in there and just sort of clar- clarify Austin's uh We asked him this question

before we started recording. Is DSO CFO is not his business is not exclusive to DSOs. He works with all practice types. But but what came to mind is that you know, a DSO type every DSO has a CFO, right? >> Yes. >> And they have a very structured way of looking at the numbers, setting goals and things of that nature. So as a solo practitioner to me DSO CFO is sort of giving you the advantage as a solo practitioner by having pretty much a CFO that

would work be be a department in a in a DSO to help those of us that don't have a the CFO an accounting department or at least not a structured one help get organized in in a way that is meaningful for growth in a practice. And see a fractional CFO CFOs to me, they are sort of the key in terms of shaking up the business positively and and making some good things happens happen numbers-wise. >> Yeah. No, I appreciate that. Yeah, you're and you're actually spot-on.

We we try to give the the guys who maybe aren't in the position >> [clears throat] >> to offer a six-figure salary, excuse me, chief executive salary, you know, to someone. We're I fraction of the cost is probably not even doing it justice. Incredibly cheaper and we we we care about our clients being successful. When they win, we win, right? So it's yeah, so it's it's good. No, I appreciate that that shout-out. >> Awesome. We'll put the the website in the show notes so you guys

can easily get access to Austin's website and book a call with him to I would imagine it's a high value valuable very valuable call. So go to his website, check it out. With that said everybody, we hope you have a rocking day.