“I Hate Paying Taxes…”

Nate Williams General, Taxes 1 Comment

Congratulations to those who survived the tax deadline and thanks to the IRS for extending the deadline to April 18, 2017! I specifically want to acknowledge Chad Rogers and the rest of the tax team at PFG (Josh, Sara, Kate, Ryan, and Naomi). Most of you who are reading this benefited personally from their tireless work, laser-like attention to detail, and unnaturally high level of ownership. I wish each of our clients could see the inner workings of the well-run machine that Chad and his team have created. We’re always striving to get better, but wow! Good work guys. We’re all better off now that I’m not running that part of our business.

After delivering the final news of how much one client owed to the IRS, he responded via email with this phrase:Tax

“P.S. I absolutely hate paying taxes, about more than anything!”

This year we found this sentiment to be quite prevalent. Did you feel this way?

On the other end of the spectrum, a dental resident called me in a panic on April 10 saying that he had earned a small income ($24,000) and hadn’t withheld any federal or state taxes. He was scared at the thought that he would owe a small fortune. We quickly prepared his return and I delivered the news that he would get a refund of almost $5,000 due primarily to the Earned Income Credit (gov’t welfare delivered via the tax code). This guy was happy to be an American on that day.

Overall, we too feel our clients carry a very heavy tax burden with many of you paying over 40% of your income (that means you work almost to the end of May for the government, then June through December for yourself). I don’t know what to tell you about this – um, vote?Read More

Nate Williams“I Hate Paying Taxes…”

Should I Invest In…?

Nate Williams Financial Planning, Investments 2 Comments

One of the most important things we do for our clients is talk them out of bad decisions. In life, the decisions you don’t make are as important as the decisions you do make. Like the decision not to do meth. Likewise, the investments you don’t make are as important as the investments you do make.

We were recently introduced to a 65-year-old dentist who doesn’t have anything saved for retirement. Admittedly, he spent his life keeping up with the Jones’. Additionally, he blew his entire life savings (several million dollars, he told us) on a bad investment with a friend. Very sad.

My father-in-law, a physician, told me that when he graduated from residency, the director of his program told him to “take the first $500,000 you save and burn it!” When he was asked why, he simply said, “well, that’s what you’re going to do anyways, so just get it over with.”

Doctors are big earners with targets on their wallets. For the person who needs cash for his next gig, doctors are the perfect prey. On the flipside, I think the intelligence of most doctors can hurt them when it comes to investing – they are smart people, but unfortunately many don’t know or admit the limits of their knowledge and experience in this area. And besides, who wants to admit they lack knowledge in matters of finance and economics; or worse, that they can’t be trusted to spot a good investment opportunity? That would be like my third grader admitting to her friends that “she’s just not a very strong reader.”

So inevitably we get a lot of phone calls from our clients asking some variation of the same question: “There is this really good investment opportunity that we’re really excited about. Do you think we should do it?” I should say that I admire our clients who call and ask. Wisdom, as it turns out, has more to do with our ability to seek and receive instruction than knowing all the answers. 

If you’re already bored reading this blog post, I’ll summarize my answer to the question of whether or not to invest: No. No, you should not invest in this or that. Yes, let this one go by…and the next…and the one after that. Let me tell you why…

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Nate WilliamsShould I Invest In…?

Dental Marketing Gold – ASKING for Google Reviews

Nate Williams General 2 Comments


I recently met with a new client of ours; a very successful pediatric dentist with a thriving practice. I have learned a lot from this client about how to successfully run a practice, but one thing stuck out to me more than anything else…

Upon reviewing his website, I noticed that he had over 100 5-star Google reviews (the Gold of marketing). He also commented that Google had recently removed an additional 100 of his 5-star reviews (for what reason we’re not sure).

Then I asked the million-dollar question: “How did you get your patients to give you so many reviews?”

I loved the simplicity of his two-part answer. He said: “We work hard to give our patients the best experience possible, and then we ask them.”

The first part of his answer is the most important – actually giving your patients the kind of experience they can tell their friends about. This is obvious. Everyone knows that you need to give your patients amazing service to be an experience worth telling about.

This VIP-level service is something you should talk about frequently in your office. The ideas on how to do this don’t have to be yours. In fact, the best-implemented ideas may not be yours, but will come from your team. You need to be the one though to ask the question again and again and again: “What can we do better to deliver an exceptional experience to our patients?” And “how are we doing on delivering an exceptional experience to our patients?” And “what can we improve on to deliver an exceptional experience to our patients?” You get the point.

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Nate WilliamsDental Marketing Gold – ASKING for Google Reviews

Sage Wisdom from the Greatest Investor of All Time

Nate Williams Investments Leave a Comment

Annually, the world’s single greatest investor, Warren Buffett, writes a letter to the shareholders of Berkshire Hathaway, Inc. For decades, this letter has been a much anticipated, widely read treasure for business and investing minds as Buffett shares deep wisdom in simple, witty terms. Click here to read the entire letter.

In this year’s letter, Buffett praises the American economy and gives sound, common sense reasons for optimism. This principle — optimism, or faith in the future — is the first great principle necessary to achieve actual investment success. The whole idea of investing is that your capital will be used in the creation of something better. Without faith in that process, you might as well eat, drink, and be merry today, for tomorrow you’ll be broke.

I wanted to share with you an excerpt of Buffett’s letter discussing this principle of investment optimism. Pay particular attention to what Mr. Buffett says about fear – both widespread fear and personal fear. We have long advised that the widespread fear causing declines in market prices should gladden the hearts of investors as it allows them to purchase larger numbers of shares for less money. What you should experience when the market declines is akin to what a shopper experiences during a clearance sale. Read here for more on this topic.

At Practice Financial Group, we will forever recommend a long-term, buy and hold strategy of a broadly diversified, low cost, tax efficient, passive investment strategy. Why buy and hold? Because we have no idea when the next market swing will happen and trying to guess when is akin to gambling, which we reject on the principle of mathematics (among other reasons). But real wealth will be delivered, over time, to the patient owners of the most predictable and productive assets of all time: publicly traded businesses.

And now, Mr. Warren Buffett:

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Nate WilliamsSage Wisdom from the Greatest Investor of All Time

The Art of Selling Dentistry

Nate Williams General, Practice Management 1 Comment

Recently I met with a client who had an amazing experience. He lived close to a military base and years prior to our conversation he had landed a government contract to provide dental services to returned veterans. This was a lucrative contract as these vets needed a lot of dental work.

Then one day he got a call from the program director; they were cutting their budget and they would no longer be sending patients to my client. Overnight almost 50% of his practice literally disappeared.

Fortunately, he had been wise in his financial decisions and was able to absorb the shock without going bankrupt. But for the next several months his practice struggled. Business was slow and he was not producing. Finally, months later, his lead assistant asked to speak with him in private. She told him she knows why he is struggling and how to fix the problem.

“You just need to recommend treatment,” she said. That simple: recommend treatment.

Most doctors struggle with this concept. They don’t like to actually recommend treatment. So many doctors live under the fallacy that telling a patient “we’ll watch it” is a higher virtue than actually providing treatment. Sometimes it is, sure. But always?

Why? What is the problem?

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Nate WilliamsThe Art of Selling Dentistry

How to Get a Bank Loan to Purchase a Dental Practice

Brian Hanks General 4 Comments

Buying a practice is, hopefully, something you’ll do just once in your lifetime and you’ll probably need to know how to get a dental practice loan to make it happen. Some dentists fear that, with how much they owe in student loans, they’ll never qualify for a practice loan.

The truth of the matter is, that if you’re a dentist with at least a year of experience, a decent credit score, and demonstrated ability to produce some dentistry – chances are good you won’t have a problem getting a loan.

But how do you make sure you’re getting the right loan? And how do you know you’re getting the best deal?Read More

Brian HanksHow to Get a Bank Loan to Purchase a Dental Practice

The Multi-Practice Model: An Epidemic in Dentistry

Nate Williams Practice Management, Practice Transitions 28 Comments

At PFG, we hold the view that the multi-practice model doesn’t generally work. This is despite the fact that we could earn a lot more in fees helping doctors pursue their dreams of having 3, 5 or even 10 different locations – all needing bookkeeping and tax services.

And it’s time we raised our voices that the multi-practice model is an epidemic.

I remember when I had my first exposure to the multi-practice business model – 2008, pre-crash.

I was a young associate financial planner and I had spent several days working on the complicated financial plan for this husband and wife team in FL, who owned 3 separate practice locations. When they came in for their consult they acted like they were on top of the world, and I thought they were – Rolex watch, tan skin, designer jeans, good looking couple, they had it all.

They were success personified.

Within the previous year, they had purchased office #2 and they had just finished building out office #3, which was big and beautiful. They had $5 Million of debt. But nobody cared because they were building an empire. “Something bigger than themselves,” as we so often hear.

Plus, they could produce. They both put up big numbers.

$100k of monthly production seemed easy for them. And then they had this new associate who was “a perfect fit” and who would buy in one day for a big price. I couldn’t stop thinking about the $5 million of debt. It seemed crazy that they would have to pay it off, one filling at a time. That’s a lot of dentistry.Read More

Nate WilliamsThe Multi-Practice Model: An Epidemic in Dentistry

Why Dentists Should Avoid Chasing Past Investment Performance

Brian Hanks General Leave a Comment

Most dentists make the mistake of chasing past investment performance. How do I know? Because dentists are just like other investors, and the data overwhelmingly show that investors consistently, year-in and year-out, make the classic mistake of chasing the last hot investment trend or fund manager.

How do you decide how to invest your money?

At PFG, we have a very defined, time-tested investment process that uses history, science and Nobel-winning research. We take that process and combine it with our knowledge of our clients to come up with a strategy that — while not guaranteed — is the best available option to help their investments grow over time. We believe you should avoid chasing past investment performance.

But that’s not how most dentists do it. Not you, of course. I’m talking about those other dentists.

How do I know?

Because I see the IRA, 401k and investment account statements from dentists who ask for our help after years of under performance in their investments.

The results are sad. And it’s because their method of choosing how their money invested ignores data like the graphic below.


The graphic to the left shows how many out of a pool of 2,758 mutual funds beat the market in the 10-year period between 2001-2010.

Only 541, or 20%, did.

Not great odds.

Then, of that 541, it shows that only 37% beat the market during the next 5 years. Yikes. 

Professor Burton G. Malkiel wrote in A Random Walk Down Wall Street, “I have become increasingly convinced that the past records of mutual fund managers are essentially worthless in predicting future success. The few examples of consistently superior performance occur no more frequently than can be expected by chance.”

Let me illustrate my point with an imaginary conversation happening between me and some other dentist.

See if you’ve ever seen other dentists think along these lines.

The Other Dentist: “Okay self. Nice work. You’ve saved up some money and you’ve got it in your Roth IRA (or 401k, or brokerage account, or whatever). You are handsome and wise.

Me: Yes. Wise and handsome. Don’t forget humble.

The Other Dentist: “Now, I know I need to get this money invested. Hmm…stocks are probably the right way to go. And I know buying ONE stock is silly, so I’ll go with a mutual fund. I hear mutual funds are a good way to get diversification at a pretty low cost.”

Me: Excellent! Diversification! Costs! You’re on the right track and thinking about the right things. Have you read this blog before?

The Other Dentist: “Okay, well, I’ll just browse this (magazine, website, dentaltown post, etc) list of top performing mutual funds. I’ll find the fund manager that’s the best and see if that’s a good option.”

Me: Uh oh. You’re headed onto dangerous ground. That’s not quite how it wor…

The Other Dentist: “Hey, look at this fund! 20% rate of return in 2015. It outperformed the S&P500 by 7% last year! That’s incredible. And this article says the fund is the top performing mutual fund for its category last year. I read the fund manager’s biography and he’s a freaking genius! He even went to Michigan’s for his MBA! At 20% a year, I could retire in my 40’s. Investing is easy!”

Me: No. Don’t do it!

Time passes…

The Other Dentist, one year from now: “The S&P500 went up 8% but my fund lost 2%. What the heck happened?”

Here’s what happened. The other dentist chased past performance. Remember the disclaimer “past performance isn’t indicative of future performance?” Well, this is what it looks like in real life.

chasing-performance-graphic-2The graphic to the left shows the ranking of 254 mutual funds over a 5 year period best to worst.

If you’re the fund manager of the one on the left, you were on the cover of magazines. If you’re the guy managing the fund on the right, you’re looking for a new job.

You would think that is because the fund managers on the left are smarter, or have a better process, or something giving them an edge.

You would be wrong.

Keeping their relative position on the chart identical, the graph below shows those exact same mutual funds for the NEXT 5-year period. 

It’s totally random. 

Nobel-winning research points to the fact that “beating the market” as a fund manager is indistinguishable from luck.

The winning fund managers got lucky.

An anonymous Fortune magazine writer wrote in an article in their own magazine on 4/2/99, “By day we write about ‘Six Funds to Buy NOW!’… By night, we invest in sensible index funds. Unfortunately, pro-index fund stories don’t sell magazines.”

So what do you do?

You, dear dentist, need to act like a golfer and first and foremost avoid mistakes. In golf, the tournament winner is almost always the golfer who makes the fewest mistakes. And one of the most common investing mistakes is chasing past performance. Be like golfers and first try to avoid mistakes with your investments. 

It can be hard to do. There is even research showing we’re hard wired neurologically to look for past winners and choose them when making selections like investments.

Avoid chasing past investment performance.

Instead, work with an investment professional that understands the markets, and knows you personally. Work with an investment advisor who is fee-only, and not incented to sell you a product. Work with someone who has a process for educating you as the investor, keeping you engaged, and helping you avoid the common investment pitfalls as you work towards retirement. That is exactly what we do at Practice Financial Group.

There are ways of selecting investments that will provide a solid rate of return over time, while minimizing risk. We’ll continue to talk more about them here, and in other blog posts.

Give us a call anytime to find out more.


Need to have me talk to that “other dentist” in your life? Reach out anytime at brian@practicefinancialgroup.com to discuss your investments, or anything financial in your dental life because investments are too important to get wrong.


Like what you read? Please read these other blog posts related to investing and share with your friends!
The Two Best Investments for Dentists
The Millionaire Dentist Next Door
Why Dentists Should HOPE the Market Goes Down
5 Investing Principles Every Dentist Should Know and Follow

Brian HanksWhy Dentists Should Avoid Chasing Past Investment Performance

How Much is Your Dental Practice Worth?

Brian Hanks Practice Transitions 2 Comments

When buying or selling a dental practice, one of the key elements of the deal is the ability to accurately answer the question – how much is your dental practice worth?

For buyers, specifically, the answer to this question is the second of the three big questions we help them answer when buying a dental practice:

  • Is this a good practice to buy?
  • If yes, what price is fair to pay?
  • If I pay that much, how much should I expect to make?

As a seller, the selling price of the practice can feel like the culmination of a career’s worth of effort growing and developing a dental business.

When I help buyers consider the price of a practice, I remind them of a key fact: you don’t want to overpay for a practice, BUT wealth in dentistry does not come from buying and selling dental practices. The true value of a dental practice is the ownership of a stream of income – hopefully for a period of decades.

Still, as the buyer, you want to feel like you’re not getting ripped off.

Analyzing Dental Practice Values

We’ve analyzed the data of the fifty+ transitions we’ve been involved with at Practice Financial Group recently and compared it to public data provided by Jonathan Martin, CPA in the McGill Hill Group Newsletter. Full disclosure: Jonathan and the folks at McGill hill did the heavy lifting here, and we supplemented with our own data. Their original article is definitely worth a look. The total number of transitions analyzed is 816 over the last 15-year period beginning January 1, 2003.


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Brian HanksHow Much is Your Dental Practice Worth?

Negotiate the Asset Allocation When Buying a Dental Practice

Brian Hanks Practice Transitions 1 Comment

When trying to negotiate buying a dental practice, it’s important to find ways to negotiate beyond just the price. A good negotiation is one where you can avoid simply haggling over one number. In last week’s post, we discussed how a buyer can get real dollars in their pocket by negotiating the purchase of the accounts receivable. Today we’ll discuss another great way to find real value when you negotiate buying a dental practice – the asset allocation.

What is the Asset Allocation on a Dental Practice Transition?

Asset allocation is an accounting term. Asset allocation is a fancy way to say how much value the accountants in the deal are assigning to the different items being purchased.

“But I’m only buying one thing,” you may say, “a dental practice!”

Not true, says the IRS.

When you buy a pair of shoes in the store you really are only buying one “thing.” It’s a one-for-one exchange. Money for a sweet pair of kicks.

When you buy a business, however, you’re paying for multiple different types of assets. You’re buying supplies, equipment, goodwill, and other types of assets.typical-asset-allocation-in-dental-transition

There are different accounting and tax rules around those different types of assets. If you’re savvy, you’ll look at the asset allocation as an opportunity to negotiate a win/win for you and the seller.

Depreciation is Why Asset Allocation Matters

The primary reason the asset allocation matters is the IRS allows different depreciation time periods for different asset types. Depreciation is easy to understand with a quick example. Pretend you stumbled upon a genie right after graduating dental school. One of the wishes the genie offered you is for your first job as a dentist to pay you for the next 5 years of work all in advance.

(Ignore for a minute your stunningly inept ability to think of better wishes and go with this example…)

There you are, the morning of your first day as a real dentist, gigantic check in hand and feeling good. You’ve got a pile of money and haven’t had to work for it yet. Honest person you are, you are still going to show up to work and work just as hard as if the owner was just paying you as you go.

But what about the owner? Does she get to say she had a gigantic expense in year 1 and avoid taxes that year?


The IRS would apply depreciation rules to my completely ridiculous example and only allow the owner to count 1/5 of that gigantic check of yours for each of the next five years. After all, the gigantic paid-in-advance check is for your next 5 year’s work.

The same principle applies to any asset you purchase as a business owner that has a value of more than $600 and a useful life of more than a year. For example, when you buy a computer, you’re probably going to use it for more than 1 year, and as such there are rules about how much of the computer’s price you get to expense on each year’s tax return.

Depreciation is the rule that allocates value to a tangible asset over its useful life. It’s an attempt by the IRS to match the expense of an item to the revenue that the asset helps you earn.

Typically, the depreciation rules break the assets of a dental practice into the three main buckets seen in the images below.  


asset-allocation-tax-treatment-to-sellerHow does this affect the seller? The seller doesn’t care about depreciation, so why not try and just load everything into the categories most helpful to you as the buyer? Let’s stick everything in Dental and Office Supplies and Dental Equipment!

Not so fast.

On the other side of the transaction, the IRS has different rules for the seller for the tax treatment of different assets sold.

How the Seller Gets Taxed when Buying a Dental Practice

The IRS has two ways to tax sales of assets where the seller makes money – ordinary income and long-term capital gains. Let’s look at ordinary income first. This is the type of tax most people are familiar with. The ordinary income tax rates start at 10% and go up to a whopping 39.6%!

The second way the IRS taxes gains on asset sales is called capital gains. The basic theory behind capital gains is the IRS wants to reward people who invested in resources productive for society, like a business, with a lower overall tax rate on any gains from those investments.

The difference between the two is substantial, anywhere from 0% for low-income taxpayers to 20% for capital-gains-rates-comparison-2017those in the top tax bracket.

If you are a seller, the obvious takeaway from this difference is that you want as much of your income to fall in an asset category where the IRS will tax it as capital gains, and not ordinary income. Doing this could save you as much as 20% on whatever money you can move from an ordinary income category to a capital gains category. Huge savings!

The Amounts are Negotiable

An important point to consider is as long as the buyer and seller are both consistent in how they treat the values in the different categories (they are both required to report these numbers to the IRS independently), the actual amounts allocated to the different assets is negotiable.

What does the law say? According to the IRS, the technical way to allocate the purchase price among the different assets is to allocate the Fair Market Value to the identifiable assets (patient records, equipment, supplies, etc.), then the remainder, if any, is allocated to Goodwill.

Many buyers assume the values assigned to the different categories are predetermined and set in stone. However, the definition of “Fair Market Value” is the price an independent buyer and seller can agree upon. So basically as long as you and the seller agree on the price allocated to the assets, that price is correct.

How to Negotiate Asset Allocation when Buying a Dental Practice

So what’s the point? As the buyer, you’re looking for opportunities to negotiate with the seller on more than just the asking price. Ideally, there are lots of different areas where your interests overlap or, at least, aren’t directly opposed to one another. We now have three categories with significant dollars behind them where the buyer and seller can move levers to find the option that works best for everyone and leaves everyone happy – price, accounts receivable, and asset allocation.

For example, Dr. Seller could feel very strongly she wants a full-price offer on the practice she’s worked hard to build over the last 25 years. Dr. Seller is going to be on the golf course a lot with her dentist friends and wants to be able to say she got a full price offer for her practice.

Dr. Buyer could ask if she would be willing come down in the percentage of the sale in the goodwill category and increase the amount allocated to equipment to allow her to depreciate the total cost of the sale more quickly.

Alternatively, Dr. Seller might be very sensitive about the large tax bill coming when he sells his practice. “No problem,” says Dr. Buyer, “if you can come down in price a bit, I would be willing to increase the asset allocation of goodwill to allow you to have more of the sale taxed as long-term capital gains.”

I’ve seen this happen frequently. Everyone walks away feeling like their needs are addressed and ultimately more satisfied with the deal.

Other Things to Negotiate When Buying a Dental Practice

Purchase price, accounts receivable and asset allocation are not the only items you can negotiate when buying a dental practice. They’re the main items with real dollars behind them. But what if you need a little more ammunition as the buyer? What if you need a little extra push to get a seller on board with a plan that works well for you?

Other common areas of negotiation include:

  • Start Date
  • Letter to active patients
  • How to handle current employees
  • Right of first refusal on the purchase of the building
  • Redos
  • Restrictive Covenant
  • Deposit


If there’s one eternal truth I’ve seen when helping buyers purchase a dental practice, it’s this: The more knowledge and more options there are, the higher the chance of pulling together a deal.

Ultimately, most buyers and sellers want the same thing. They want to successfully transition the business into new, responsible hands that will take great care of the staff and patients. They want to be rewarded for all the hard work they’ve done to that point – the seller with a gigantic check and the buyer with a steady income stream from a healthy business.

You’re more likely to get a win/win with a seller if you know what you can negotiate. Price is always negotiable. Purchasing the accounts receivable is a good negotiating point too. A great third option with real dollars behind it is the asset allocation. Know a few of the basics and work with your dental accounting firm to advise you on how you can profitably negotiate with the seller and create a situation where everyone wins.


Know someone about to buy a practice? Share this article with them! Or, have them reach out directly to me via email: brian@practicefinancialgroup.com to help them through the process.


Read more below about dental transitions because you want to negotiate a great deal!
Four Things Your Attorney Should Do for You When Buying a Dental Practice
A Letter of Intent Should Include This When Buying a Dental Practice
Why You Should Buy a Dental Practice BEFORE Your Student Loans are Paid Off

Brian HanksNegotiate the Asset Allocation When Buying a Dental Practice