Why you Need to Attach Passion to your Numbers for Growth.
-An Interview with Eric DeVriese.
CPAs understand the financial aspects of business better than most business owners. They thoroughly go over your financial reports and prepare your taxes. Yet most business owners only meet with their accountant once a year.
Today we have Eric DeVriese who has over 20 years of experience in finance and taxes. He has worked in one of biggest firms, which has averaged over $34 billion in the year 2015. He understands the bigger picture of how businesses grow and the systems and processes needed for growth.
He will speak on general business life cycles, growth and how to get your business to where you want to be.
In this interview learn:
- Why you need a specialized accountant for your business
- Why targeting Key Performance Indicators is critical
- How to bring deeper meaning to your Financial Statements
- Why Vision is Key for growth
- How understanding business Life Cycles can bring you Clarity
Can you give us a background story on how you came about doing what you do today?
I’m a CPA. I’ve worked with PricewaterhouseCoopers and helped to create and start new technologies for many years. Later worked with Deloitte on large scale projects and businesses as well.
After working with large firms for several years, I had a longing to connect and work directly with individuals on a more personal level, instead of working with processes and big picture items.
So I went out and purchased a small firm in Florida and built that accounting practice into a Dental Specific Accounting Firm. Our focus was on helping dentists to set their vision. We would help them to monitor and achieve their goals. We’ve had great success helping our clients set and reach their goals, from starting a business to retiring with passive income streams.
Can you explain the difference between a regular accountant and a specialized one? How much more can a specialized one help?
I’m convinced that you cannot be all things to all people. It just doesn’t work.
By picking a vertical or niche, you become a subject matter expert.
Case in point, we only work with Dentists. As an accountant, we have charts of accounts and financials for all the different fields of dentistry, from general practitioners to various dental specialists.
Basically we see the same labs, same supplies, the same metrics in the field of dentistry. So we can tell you very quickly the ideal benchmarks. That employee payroll costs for a GP should run between 25-30% of their gross revenue, lab bills should be at 7-10%, supplies are 6%, etc. So we got really good at knowing what benchmarks are.
We also know the whole business process from their point of view. We understand when they hire and fire people, where they need to go to recruit people. We can help them with staffing. We know the whole process of establishing a practice: from acquisition, growth, and sales.
We know the Key Performance Indicators. We can guide them in the targets they need to shoot for, what they should be averaging in production per hygienists, what the average production should be per operatory, and what they should be paying for rent and fixed costs.
When you reach a finite granular level of understanding, you can start to sit on the client’s side of the table as opposed to across from them. You can line up to the same thought processes and see things from their side, becoming one. This is really important in order to better help your clients.
It’s important to find somebody that works with what you do. Whether that be a restaurant, coffee house, real estate, manufacturing, or in our case dental practices.
You need to partner with a subject matter expert that can understand what you’re trying to accomplish, and get you there.
Can you go over a before and after case of a client you’ve worked with?
We’ve had clients come to us that are performing at a 20% return on profit and not understanding their financial statements.
The problem is that financial statements don’t mean anything unless they are attached to a Vision or a Goal.Business Financial Statements don’t hold any value until you attach them to your Vision.Click To Tweet
They need to help you accomplish something. When you look at a financial statement, a lot of times, they are just numbers. They are dead unless there is passion behind them.
But when you attach them to Vision and goals such as:
“We are going to retire by this date.”
“I will go from working 5 days a week, to 4, to 3, to 2 days.”
“We’re going to bring an associate to back fill those times.”
“We need to get to the proper production level to bring on that associate”
Now these numbers come to life. The financial statement will have deeper meaning. So you’ll understand that to get to where you want to be, you need to do X, Y, and Z. These financial statements will show you how far you are from your revenue goals, days worked, averages per operatory, etc.
When we work with our clients, we’ve found that Dentists help everybody else but themselves. They often pay generously to everybody else and often get the least for the amount of work they put in.
When it comes to having a vision of where they want to go, they get lost in the shuffle. They are clinical and very good at chairside procedures, but not very good at business modeling and strategies.
A lot of our clients come to us burned out. They should be having more money than they do. Often times, there’s been problems with internal controls within the practice. Whether it be embezzlement, or staff turnovers, a spouse doing the books that no longer wants to do the books. All these different kind of pain points.People don’t want to change for the sake of change, until there is enough pain that warrants it.Click To Tweet
We help people when they’re ready to be helped. So what ends up happening is that they come to us with no vision and in pain.
They need change. We come in and work with them to get them where they need to be. We work on a dental specific chart of accounts and financial statements. Compare them to their peers. Identify any weaknesses.
Then we get them into a vision of what they are trying to accomplish. Their retirement dates, bringing on an associate, just bringing a better quality of life for them.
So you guys focus a lot on overhead and increasing profits. Can you discuss how to achieve the ideal 50% overhead? There are some dentists out there with over 90% overhead.
50% is just consultant talk. That’s not real life. But 60% overhead is definitely achievable, giving the owner a 40% benefit.
There are benchmarks to reach for. Offense and defensive measures you shoot for. There are two ways to drive your revenue.
You can either control costs or increase revenue.
There are two ways to increase revenue:
1. Organically by advertising and promotions, a slow generation lead.
2. Acquisitions. Buy a target practice from a retiring doc.
There are different ways to get your numbers under control. But acquisitions will give the fastest return on investment.
Sounds like you’re recommending acquiring more than one practice for growth?
The rule, or the Blanchard Theory would be to put it all under one roof. You want as many ops as possible under one roof to control costs. But you need the production to support all those operatories.
So ideally, you want to find a similar practice within 10 miles of yours. Buy a practice from a retiring doctor and merge those clients and patient charts to your existing practice. Then you’ll still have much of the same overhead. The same facilities, similar employee costs, maybe an extra staff or two. But a lot of your fixed fees will be the same.
So it’s a great opportunity to expand if the other practice is close by, doing the same type of dentistry.
This strategy would apply to a more mature practice. Can you discuss the different phases of growth in any business?
Every business has a life cycle.
The first is the Buy Phase. The young entrepreneur will purchase a business or the young doc a practice.
A fresh graduate will need to go through all the transactional measures. Needing quite a bit of advice. Legal counsel, getting the business loan, and finding the right practice that will work for them.
After purchase comes the Build Phase. This is where they need to get the numbers under control, understanding what their expenses and production should be. They’re paying off student loans, business loans, and other expenses. This should take about 5-10 years to get their debt load under control.
Then comes the Growth Phase. After they’ve got their numbers under control and their debt load under control, they can grow their practice organically or go for acquisition. After 4 years of ownership, banks will gladly lend to help the doc grow through acquisition.
This is a phenomenal opportunity because the fixed expenses will stay the same with or without that acquisition. There’s a big chunk that goes to the bottom line with these type of mergers.
In the last phase, and this is where we differ from our peers. The doc is ready to retire and to sell the “Golden Goose.” And my point of view is, “Why would you ever sell the golden goose?”
What we do is during that growth phase, we put in internal controls so that the doctor can run the office remotely without having to set in foot in the practice. They hire associates and still clear 10-15% of the revenue, without doing any clinical work at all. So now that they’ve created this annuity, they understand it inside and out. They spent all their life getting to this point. So now they are very comfortable with this type of investment.
This is their “Wealth” years. They slowly transition themselves out from the chair and into more of managerial role.
Lastly is the retirement years where they sell the practice and liquidate their holdings and turn it into an annuity or revenue stream depending on their choices of how they wish to build or run their portfolios.
At this point they are completely out of the field of dentistry and more into passive income areas such as real estate or other investments.
End of Interview Part 1 – Continue to Part 2 on “Vision”
Bio on Eric DeVriese, CPA
Eric DeVriese is the founder of RealTime CPAs and the man who recognized a shift coming to the accounting industry. He has over 20 years experience in tax, accounting and technology. Eric has enjoyed working at PricewaterhouseCoopers on their National team creating and implementing new technology. Later working with Deloitte for several years and then in the tax department with DaimlerChrysler’s North American Headquarters. He later decided to build a different kind of CPA firm.
In 2008, Eric opened DEVRIESE & ASSOCIATES, a full service CPA firm based on the coast in Northern Florida and has been building something different ever since. It has taken years of experience, knowledge, success and failure to finally bring to life RealTime CPAs. A truly one of a kind experience, giving their clients real time access to business advisor and financial statements. This will soon be the way that much of the accounting industry will be run in the future.