The Cultivating Business Growth Podcast by PJS & Co. CPAs

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#62: Avoiding Common Mistakes in Business

#62: Avoiding Common Mistakes in Business

We want to start 2021 off on the right foot, so to kick off our new year we are talking about common mistakes in business and how to avoid them! We want you to run a successful business, which means avoiding the pitfalls that can be easy to miss when you’re stuck in day-to-day operations. We are regularly involved in strategic planning, forecasting, cash-flow analysis, etc. so we get front row seats to all the action. Today is all about helping you be cognizant, and avoid, the mistakes we often see as virtual CFOs and CPAs working with owners of growing businesses. 

What we cover in this episode: 

  • 00:30 – Introduction
  • 01:57 – Mistake #1 – Not trusting your gut
  • 05:48 – Mistake #2 – Lack of knowledge about business structure 
  • 12:40 – Mistake #3 – Letting daily issues distract from long-term goals
  • 16:56 – Mistake #4 – Failing to invest
  • 17:43 – Mistake #5 – Inability to adapt
  • 20:16 – Mistake #6 – Not asking questions

    Mistake #1 – Not trusting your gut

    Personally and professionally, people don’t trust their gut. Whether you call it your gut, intuition, we have this feeling in our body when we make decisions. That feeling is there for a reason. Many business owners have a gut feeling that guides them, but it’s also important to recognize when you don’t have all necessary information or knowledge to make an educated decision.


    Proactively seek information from professionals in order to get the full picture so you can follow your gut. Go to people you trust and who will give you honest opinions, like your advisory team. We’ve said it before and we will say it again and again, your advisory team is very important. Your advisory team can help you get a feel for whether you’re off or on the right track. They can give you things to consider that you may not have thought about previously or offer a different perspective. Your advisory team should not only consist of experts in their field, they should be people you have a certain level of comfort in and trust. Without trust, a good relationship, and comfort level with your advisory team, you might be afraid to ask certain questions, or neglect to ask questions completely. Communication between you and your advisory team is key. They need to know your expectations so they can openly provide guidance and add value that can enhance your business. 


    After you consult with trusted advisors, it’s easy to do what everyone else says because of self doubt. Somehow, you have to remain confident in what you’re doing and your abilities. You have to trust that the work you’ve done to gather information is enough to lead you to make the best decision possible with the information available at the time. Part of that decision-making process is trusting your gut instincts. At the end of the day, after you’ve done your due diligence, it’s important to go back and trust your gut because it’s there for a reason.

    Mistake #2 – Lack of knowledge about business structure

    Talking about business structure isn’t the most exhilarating topic of conversation, but don’t fall asleep on us. We often see business owners with a lack of knowledge and understanding about their business structure and we don’t want you to fall victim to this common mistake in business. Let’s start with the basics. With any business structure there are three main considerations, including a business side, a legal side, and a tax side. All three have to work together in order to find the best fit for you, your business and your goals. 


    For example, a partnership is a form of business in which two or more people share ownership. Partnerships are the stickiest business structure entity that you can elect, meaning they can be great when things are going well with your business, but can get tricky when issues arise. So, it’s important to completely understand the implications of the structure you’ve elected and what that means for each owner involved.


    The importance of the trifecta (business, legal, tax)

    In any business structure the business side, legal side, and tax side have to work together. This may not be something you focus on when business is going well, but when things aren’t going well issues will quickly rise to the surface. In order to ensure the least amount of heartache, it’s important to completely understand how your business structure works in all three key areas.


    When things aren’t going well, what does your partnership agreement say? What if two people have signing power on the account, you don’t have proper internal controls and one partner liquidates? What does your partnership agreement say? Are you going to go into arbitration? 


    These difficult conversations must happen when things are going well in order to safeguard your business and everyone involved. No one makes the best decisions in crisis. You want to ensure that all parties understand the risks and benefits, and how the business structure, tax structure, and legal structure work together. Once you have your structure and organizational documents completed, there should be transparency for how the business operates and ownership structure, etc. That way if an issue does arise, the business structure and all legal documents are in black and white, which can greatly reduce stress and anxiety amongst all parties.


    Mistake #3 – Letting daily issues distract from long-term goals

    Another easy pitfall business owners find themselves in is getting caught in the day-to-day fires that need to be dealt with rather than focusing on what’s important long-term. In order to know and understand what’s important for your business over time, you need to have an established vision with long-term goals. If you have not defined your vision, or want to review information about setting your long-term goals, check out our very first episode of our entire podcast episode #01: Strategic Planning – Vision & Long-Term Goals.


    With your long-term perspective clearly defined and on top of mind, you can make appropriate business decisions. At times, there may be a short-term sacrifice in order to achieve your long-term goal. The issues you’re dealing with today are important, but don’t get so wrapped up that you can’t keep sight of what you truly want to achieve in the future. The key is having a clear understanding of your short- and long-term objectives, balancing the two, and remaining flexible. 

    Mistake #4 – Failing to invest

    The concept of focusing on long-term objectives ties directly into the next mistake in business – failing to invest in their business. When we say investing, this can encompass investments in money, time and effort.

    A lack of investment can lead to larger issues down the line. In business, every dollar and minute of your time counts. That means you have to be strategic about what you choose to invest in when it comes to the future of your business. We’ve seen time and time again, business owners who want to succeed but aren’t willing to invest upfront to lay a foundation that will help them reach their long-term goals. You have to determine what you are willing to risk to obtain the reward, which involves some cost-benefit analysis. 

    Seeking solid business advice from a knowledgeable professional costs money. This shouldn’t cost you your life savings, but if you are looking for good advice for $500, it doesn’t exist. If you’ve received business advice at a price that seemed too good to be true, you may want to consider a second opinion. For instance, we (PJS & Co. CPAs) provide significant service to our clients. We pull industry-specific statistics, review and understand their differences, and identify where you need to make improvements, lending decades of experience to the process. This kind of work takes time, knowledge, and expertise, which will take an investment but will also provide the data and guidance needed to push your business forward. Become knowledgeable about what your business needs, what that costs, and when it’s the right time to act. 

    Mistake #5 – Inability to adapt

    The inability to adapt and make adjustments in your business can stifle success. 2020 is a great example of a time when businesses have had to take detours to keep their business afloat so at some time in the future, their long-term objectives can be reached. No one expected businesses would be forced to close their doors for an extended period of time. Some businesses who adapted to the “2020 normal” and were able to reach their customers differently than they’d planned, survived. Remain flexible, because in times like this your adaptability can give you a better chance of survival. When you acclimate and adapt, you face better odds of meeting your goals. 

    Mistake #6 – Not asking questions

    Not asking questions is the last common mistake we will talk about today. We are ending with this mistake because we run across it quite often. In fact, not asking questions impacts all of the other common mistakes we’ve talked about already because it prohibits you from discovering other potential mistakes too.

    One reason people don’t ask questions is due to fear. That fear can stem from a place of insecurity and self-doubt. Maybe you think you won’t sound intelligent since you should already know the answer. Maybe you already know the answer, but it’s not what you want to hear. In business, you have to be bold enough to walk through the fear. Be willing to ask, and to be asked, difficult questions. If you get an answer you don’t like, step back and really reflect on that from an all-encompassing perspective.

    Be honest and respectful

    Not everyone has to see eye-to-eye all the time. However, as professionals you and your advisory team should operate from a place of honesty and respect. You’ll feel more peace and function efficiently when you are honest. If you’re willing to ask, and be asked, hard questions there’s a mutual respect that develops between you and the other parties involved. Open, honest communication can open the doors for value and knowledge to be transferred between all parties. Sometimes questions can’t be answered right away. It’s more than acceptable to ask for time to process the question and think through how to best provide an answer. 


    As we start off a new year, we want to thank all of our vendors, clients, podcast audience members, friends and family. Because of you, we’ve been blessed with the ability to learn an incredible amount of useful information that we get to share with others, like we did today. We hope you enjoyed hearing about common mistakes we’ve seen in business, and ways to avoid those mistakes. As virtual CFOs and CPAs, we want to equip you to trust your gut, seek valuable advice from professionals, understand the nuances of the different business structures so you can choose what’s best for your company, balance what’s important right now with your long-term objectives, and take necessary steps to invest at the right time and right areas, of your business. If 2020 taught us anything, it’s to remain flexible and make adaptations when necessary. Lastly, don’t be afraid to ask questions. You are your business’ biggest advocate.


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    #61: Managing Work-Life Balance

    #61: Managing Work-Life Balance

    We’re excited to wrap up the year by talking about one of our core company values; managing work-life balance. PJS & Co. CPAs was born out of a desire to improve the balance of professional and personal life. We knew there had to be a better way for our team and clients to integrate personal and professional goals.  There are ways to integrate your personal priorities into your business growth plans if you have clear priorities and consistently stay mindful of managing work-life balance. 


    What we cover in this episode: 

    • 00:30 – Introduction
    • 05:29 – Identify your purpose and priorities
    • 10:14 – Managing work-life balance isn’t about perfection
    • 14:57 – Caveats of work-life balance
    • 21:25 – Honor your commitments
    • 24:33 – Scheduling buffers and managing transitions
    • 30:28 – Setting and respecting boundaries

    When it comes to work, family, personal lives, hobbies, who wouldn’t want it all? There is no perfect solution for balancing home-life and work, but we continue to remain forward-thinking and respect the fact that everyone has different priorities. Today we want to share with you some things we’ve learned on our journey to achieve an effective balance. We don’t want your work owning your life. We don’t want you missing out on important family time. We don’t want you neglecting your health. We want what’s best for you! To end 2020 with a bang, let’s focus on how you can live a whole, complete, and happy life. 

    Identify your purpose and priorities

    When we consult with anyone, the first thing we recommend is identifying your purpose and priorities. You have to identify what is important to you. When we talk about purpose, this differs from the vision or mission of your company and is more internal and personal. You have to establish your personal purpose and personal priorities in order to build your business and growth plan to incorporate those things.


    PJS & Co. CPAs partner Jami Johnson shared that one of her priorities is to take her kids to school and pick them up every day. Owning a successful business and being there for her family are two main priorities in her life. Those are no small tasks. It takes hard work, giving everything you have, to run a small business AND be there for your families. But, the reward is worth the work! For Jami, sometimes those school drop offs and pick ups mean she’s up at 4:00 am, or burning the midnight oil after the kids are asleep, getting work done. In order to get the best of both worlds with your career and your family, there is give and take, which is easier to digest when the things you are balancing are the things that fulfill you. Once you determine what is most important to you and understand what fulfills you, you’re on the right track and can start to integrate them.

    Managing work-life balance isn’t about perfection

    Reality check. If you think of work-life balance as a 24/7 party, sipping a cocktail on the beach, while working on your laptop in a lounge chair, you need to snap out of that dream. Work-life balance is more about reprioritizing your life, your work, and doing what you can to gain flexibility. We started with identifying our purpose and what is truly fulfilling because once we know that, we can determine the areas of give and take. Jami reflected on her time in corporate America and told us how there is no amount of money that is worth all the things she would have missed out on with her family if she would have stayed in that job. “Maybe we’d have a nicer house. Maybe we would have stuff. But, I now have time with my kids that I will never get back.” 

    You have to be forward-thinking and understand the short-term sacrifice is for the long-term gain. We live in a world where we are always connected and sometimes that means work priorities can reach you at all times. It can be difficult to ignore an urgent email or a text when you are at the park with your kids or at dinner with your family. The work priority slaps you in the face, and it’s easy to think “I’ll just handle this really quickly.” The next thing you know, you’re an hour into work, food is cold, and your kids are heading to bed. Making decisions on what is priority at the moment can be difficult. Take time to reflect before you take action. Sometimes work needs immediate action and that may mean your child gets a little more iPad time than you’d like. Other times, that means you’ll get back to a client the next morning. 

    Don’t get overwhelmed worrying about what you should do and how you should do it. Step back, determine what’s best for you in that moment, and take action. Sometimes our feelings of guilt and our overwhelming sense of obligation are self-imposed. This is another reason we emphasize the importance of reflecting before making decisions. We aren’t advising you to ignore your obligations. We are saying weigh your options and take action based on what is best at the time. Some decisions are more difficult than others, especially when others involved don’t understand your perspective. Let what is best for you and your family be the driver and be okay with the fact that others may not be on the same page.

    Caveats of work-life balance

    Once you’ve taken that time to reflect and establish your priorities, what they mean to you, and what the ideal work-life balance looks like, it’s time to implement work-life balance in your day. To do that, we need to first address the elephant in the room. There are only 24 hours in a day. Everyone has the same amount of time, but everyone’s 24 hours looks different. Unlike some celebrities, we don’t have personal chefs, au pairs, or unlimited resources to delegate responsibilities. If you do, that’s wonderful, and we are probably jealous. Regardless of how you operate your home, family, and job, everyone only has 24 hours each day to get it all done. 

    Everyone has different thresholds. Be mindful of those thresholds and when you are approaching them. There will be days where you think you’ll get everything accomplished and the day just won’t go as planned. When that happens, do your best to be flexible and rearrange your responsibilities to meet the demands of your day. Recognize that each day will be different. 

    Honor your commitments 

    There will be days where you approached your threshold, but you’ve got a deadline to meet. When this happens, do what you can to honor your commitment. Communication is key in working with your deadlines and letting others know if there is a chance you might not meet an established deadline. In business, trust is extremely important. You want people to know when you say you will do something, they know you will follow through on that promise. 

    One way you can improve your chances of honoring your commitments is to “under promise and over-deliver.” For example, if you have a task you think you can complete by Wednesday, set a deadline of Friday. This way, if you deliver the product on Wednesday, the other party is pleasantly surprised. If the task takes longer than you expected, you have a bit of time to work and still meet the deadline. When establishing deadlines, it’s good to be optimistic but always keep in mind there are outside factors that may unexpectedly impede your progress. One way to plan for the unexpected is to give yourself a bit of a buffer with your deadline. 

    Scheduling buffers and managing transitions

    In addition to buffers associated with deadlines, buffers are also nice to have in your day-to-day routine. One tool we use to create those daily buffers in our schedule is our calendar. Each of our clients and vendors are important and we want to give everyone the respect and attention they deserve. That’s why we try to set aside at least 15 minutes on our calendars between meetings. A buffer like this gives time to wrap up one meeting, and prepare for the next. We all know some meetings can run longer as well and this can decrease the stress of having to reschedule.

    We should also note that buffers can serve as transitions from one type of work to the next or from work to home, etc. For example, some meetings may involve very intense conversations. It can be very helpful to have a few minutes to wind down, take a breath, take follow-up notes, etc. after each phone call or meeting. Plus, if it’s on the calendar, you are more likely to dedicate that time. If you don’t have a buffer to help you transition smoothly from what task or meeting to the next, that can be a recipe for disaster. Currently, many of us are juggling our careers while being responsible for teaching our kids at home. Transitions from working (answering emails, making business decisions, etc.) to being a teacher, parent, husband and wife can be more helpful with a buffer. If you’re looking for more tips on productivity, we share some great tips in episode #17.

    Setting and respecting boundaries

    Setting boundaries will help you keep your personal and business life separate. Respecting your own boundaries isn’t always easy. This is going to be a practice that some business owners may have to consistently work on in order to maintain balance. One way to be intentional about working and intentional about your time with your family is to have the right space when doing each task. What we mean by this is to have a home office or specific desk or table that is designated for work, for example. Laptops are great because we can easily work anywhere. But, this can be a blessing and a curse. If your internet at home goes out, you can pop over to a Starbucks for some free wi-fi. On the other hand, you may find yourself on your living room couch working while you are supposed to be enjoying a movie with your family. Another way is to turn off notifications on your phone and put your phone down. 


    Managing work-life balance isn’t an easy task. Our lives demand so much from every aspect that it can easily feel like you’re being torn in many different directions. This can cause stress, anxiety and can lead to missed deadlines, overwhelm and ultimately can impact your life in many ways. We began our conversation about work-life balance with determining your purpose and establishing your personal priorities. Once you are clear on those things, you can begin to integrate those with business growth goals and other professional goals. It’s important to look at your personal and professional goals together and list out your priorities so you may marry them for a comprehensive and more complete plan that works for you. 

    We then discussed some ways to manage work-life balance effectively by leveraging your calendar, setting boundaries, honoring your commitments and managing transitions. If you’re looking for more information on how to better manage your work-life balance, reach out to speak with one of our vCFOs for a business growth plan that makes sense for you. 


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    #60: Year-End Planning and Strategy with a Virtual CFO

    #60: Year-End Planning and Strategy with a Virtual CFO

    This past year has been one for the books! We’ve been through some uncharted waters and many are still weathering the storm. Today we are going to put the chaos of this year to the side for a few moments as we discuss how to execute some year-end planning and strategy with a virtual CFO. Right now is the perfect time of year to start planning so you can get a leg up on things because the new year will be here before you know it.

    What we cover in this episode:

    • 03:42 – Start with an agenda
    • 04:23 – Year-end planning and reflection
    • 13:42 – Revisit your why, core values, and vision
    • 16:07 – Complete SWOT analysis
    • 18:04 – Creating a financial model
    • 22:50 – Create a key issues list
    • 24:44 – Identify quarterly “Rocks”
    • 28:54 – Review budgets, forecasting and cash flow projection
    • 29:51 – Create a marketing plan

      At PJS & Co. CPAs, we are fresh off the heels of our own strategic planning meeting so we are excited to get you prepared to conduct your very own year end planning!  Right now is a good time to get something on the books where you and your leadership team can reflect on last year to see what worked well and what needs improvement, and then get a plan in place to turn a new leaf in a few short weeks. It’s beneficial for your business, and it’s fun, to look into the future to think about where you want to go, and how you’re going to get there. 

      We have referred to the book Traction by Gino Wickman in our podcasts before but will be using some of the terminology from this book. Traction provides excellent tools to help you as you prepare for this end of year, strategic planning meeting. If you haven’t done a formal strategic plan in the past, this really is the time to put that in place. 

      Start with an agenda

      When you sit down to think about a strategic plan, start with preparing an agenda, even if attendees are limited to you and your virtual CFO or advisor. This way, you have a plan for how the meeting should run. It’s good practice to share this agenda with other meeting participants in advance so they, too, can have expectations heading into the meeting. If needed, they can run reports, digest the information, formulate questions, and prepare discussion points. Keep in mind, as you move through your agenda, there may be some back and forth taking place. The agenda may not always just flow in one direction. You’ll see this a bit when we talk about establishing goals for next year. While establishing goals for next year you may need to know what the key issues are first, but our agenda shows that establishing the goals comes first. So, just remember to be flexible and know this may not be a simple fluid process.

      Year-end planning and reflection

      Looking over last year, there are quite a few pieces of information you need to make sure to review. We want to give you an overview. Depending on your industry and business, the details of these areas will vary.


      The first thing on your agenda, which might actually take the longest amount of time, is to review the financials. During this time you should discuss in detail where things went well, what worked, what didn’t work, and why it didn’t work. Overall, review your performance and have conversations surrounding how the prior year went to date. Some may recommend doing this at the beginning of the following year, but we want you to be a bit ahead of the curve as you head into the new year. If this review takes place in the fall, you should be far enough into the year to get a good idea of whether or not you are on track with what you are trying to finalize by the end of the year. Make sure your financial statements are solid and in good order. Someone on your team should be tasked with ensuring their accuracy in order to be utilized to their full potential. If you don’t have good financial policies in place to produce accurate reports, your financial statements won’t help you much from a strategic perspective. 

      Budgets vs. Actuals

      You want to take a look at your budget and compare it with actuals. This should be done on a regular basis so you are able to determine if your initial budget needs to be adjusted. For example, we had an initial budget for 2020 and after things went crazy, we decided to put our initial 2020 budget to the side and moved forward with a revamped budget. In this case for our strategic meeting, we looked at both budgets as well as the actual is to see how things lined up. During this year-end strategic planning meeting you will want to take a step back and look at the big picture when you are comparing your budget with actuals to identify how the business performed overall. Take time to review each budget line item to identify what went the way you predicted and what didn’t. This will allow you to budget better going forward because you’ll have more insight as you make adjustments for the next year

      Key Performance Indicators

      You also want to look at the key performance indicators (KPI) you established for your business to see how they line up and how well your people performed. In case you missed it, we covered KPIs in depth in episode #08: Strategic Planning – Digging Deeper – KPIs. Ask yourself and your team, how are the percentages coming out? You may realize some tweaks are needed moving forward, or maybe even identify process changes that need to be implemented to achieve the original KPIs if they haven’t been reached yet. 

      Prior Year Plan vs. What Happened

      Next, it’s time to take a look at the 2020 plan. We recommend separating the 2020 budget from the 2020 plan, or whatever year it is that you are reviewing. This is to differentiate the financial side from other plans you had in mind for the year like expanding your team or changing software systems. Use that information to find out what you accomplished and what you didn’t. What stopped you from accomplishing anything that didn’t happen? In 2020, it’s likely that you may have changed direction in some areas.

      Tips to use when reflecting on last year! 

      • It’s important to step back, look at the big picture. Acknowledge where you were trying to go and where you are right now. 
      • Take an honest, realistic view of all that happened over the year regardless of whether it was good or bad. 
      • Encourage your team to be transparent about what worked and what didn’t. 
      • Create a culture where your team will openly communicate with you. You can’t solve problems and address areas of concern if no one is honest and brings those items to the table. 
      • Talk about the things that didn’t work, but we also want to look at the things that did work and the things that were accomplished. You have the ability to set the precedent with honesty and transparency, and when you do this it is going to drive conversation, ideas, and resolution of problems. 

      One way to implement these tips is to have each person attending the strategic meeting list out three accomplishments the company achieved throughout the year. We learned about this practice from Wickman, implemented it in our company, and recommended others do so too. Even in a tough year like 2020, there are still good things that happened in the business and things that you accomplished. You may have pivoted, changed product lines, changed delivery systems, you worked virtually, etc. Whatever the accomplishment, it needs to be acknowledged. If nothing else, to bring up everyone’s energy and motivation. As humans, we tend to focus on the negative. Your honest review may reveal how tough the year was, but identifying the positive parts of the year provides you an opportunity to give yourselves credit where it is due. 

      Revisit your why, core values, and vision

      Once you’ve completed your reflection of the year, it’s time to move on. You want to always make sure you know what your path is, that you are remaining on the path, and that you still like the path. To do this, you have to discuss your core values, your vision, and your company “why.” These topics are easy to skip over unless it is purposefully added to the agenda. For more about finding and discussing your why, listen to episode #12: What’s Your Why? Your why, core values and vision should be revisited at least annually because you want to make sure that if something has changed, you’re reflecting that in your internal vision and external mission that is shared with your customers and clients. Your core values and vision are good gauges to use when making decisions for your business. If you are drifting away from those, find out why. Sometimes you are drifting away from your core values and vision because you simply aren’t holding true to them and you aren’t using them to help you make decisions. Or, it’s possible things have changed a bit and you actually need to change your core values, vision, and “why.” We talk about establishing a vision and actually utilizing it in decision-making throughout your organization in episode #47: A Vision Shouldn’t Be a Mirage

      Complete SWOT analysis

      After revisiting your why, core values, and vision, you should brainstorm all of the strengths, weaknesses, opportunities, and threats of your business. With this SWOT analysis and brainstorming session, you can discover concerns that were overlooked previously. These revelations could be very important things you need to work into next year’s plan. For more information, check out episode #15: SWOT Analysis, where we cover this process in detail. 

      Creating a financial model

      A financial model is a tool that can help you look at your business model, big picture, and play with the numbers to see where your business will be as you grow and ensure stability as you move forward. It’s helpful to include someone with a financial background, like a CPA, business advisor, or vCFO who can provide the financial model of your business. It’s beneficial to have the current year financial model available as you establish goals because you can use it to project for the upcoming year. With the guidance of your financial expert, you can create a financial model using programs like QuickBooks, Spotlight, or even Excel, if you don’t have one. 

      When planning for the future, things to consider include revenue, staffing, new locations, and software upgrades. With an efficient financial model, you can start with identifying and setting your new revenue growth goal. Revenue drives how many customers/clients you need, your marketing plan, how many people you need to have on staff or on your team, and much more. To determine staffing goals, identify the number of team members needed to accomplish a particular task. For example, if you know you need 60 clients to reach your new revenue goal, approximately how many people do you need to service 60 clients? How many support staff do you need? You want to make sure you have enough staff on your payroll at the right time to ensure you are delivering the quality of service to your clientele. As you review last year’s plan, or even a key issues list, you may identify your software isn’t working well, a process is clunky and needs redesign, there is a hole in your reporting, or you just need information on a more regular basis. If so, you can plan for upcoming software upgrades. This is one area that is non-financial in nature that can improve your business.

      Create a key issues list

      Key issues are key priorities, they are things that are problems or things that need to be accomplished in order to achieve your goals. All of these challenges, roadblocks, and issues need to go onto one list. The items included on this list can come from many different places like the SWOT analysis or the review of the current year’s plan. Once you have that list, it’s time to prioritize. Ideally, you want to have between five to seven key issues. These should be things that, once resolved, will allow you to achieve your goals. Then, your leadership team determines who will be in charge of tackling each key issue. Assigning these tasks does not necessarily  mean they’re doing all of the work, they may be delegating it. But, they are responsible for making sure work is done and steps toward resolution are taking place. 

      Identify quarterly “Rocks”

      Once you have the key issues list, you then filter it down a bit further into what Wickman calls “Rocks.” Stephen Covey popularized the term “Rocks” in The 7 Habits of Highly Effective People. It essentially means prioritizing your issues to emphasize importance on the actions that will solve your largest problems. You need to do this because one key issue may have many actions that need to be addressed. In order to resolve the items on your key issues list for the year, you need to identify what needs to be done in the first quarter to move in the right direction. Those particular steps are the quarterly Rocks. Each of those Rocks should then be assigned to an individual, but no individual should be assigned more than five to seven Rocks. Each Rock should also be very specific and measurable. A Rock shouldn’t be something general like, “increase sales.” Instead, the Rock should be something more like “increase sales by X amount by doing X, Y, Z.” When you monitor these Rocks monthly and quarterly you need to be able to measure if you are on track so the person in charge of that Rock can be held accountable. 

      Rocks should be revisited in leadership meetings and adjusted on a quarterly basis. Then, set new Rocks for the next quarter and keep updating milestones toward the key issues you came up with for the company. If someone is constantly paying attention to each Rock and tracking it, you’re going to do what needs to to meet the goals. For more about Rocks, you may find them in Chapter 8 of Traction.

      Review budgets, forecasting and cash flow projection

      In order to accomplish the goals you’ve established, and get those key issues under control, you need to lay out budgets, forecasts, and cash flow projections into the next year. Determine what you want the budget to look like so you can run those budgets and actuals to make sure you’re on target. We recommend looking at forecasts in different ways because the budget shows what you want to happen. What’s shown in the forecast may be a far reaching budget, but it will take longer to get to that number. You always want to have a good cash flow projection to foresee any potential problems in cash flow. The help of a financial advisor can be helpful for this part as well. 

      Create a marketing plan

      The last key component you need to address is creating a marketing plan of attack. What you do on the marketing side is a huge component for all business. Once you set your goals for revenues and established your Rocks, you need a clear, defined plan for marketing. Whoever is handling your marketing needs to be a part of this whole strategic planning process because much of what’s being discussed and established for your strategic plan is going to play into the marketing plan of attack. For the marketing manager to create an effective marketing plan, they need to know details like the revenue goals, sales capacity, who is handling sales, staffing, etc. There are many moving parts to consider as far as capacity and goal setting. Your revenue goals are going to impact the budget and also will affect client acquisition goals. 

      It is helpful to run through similar reporting of current year marketing KPIs much like you did for the financial side. This will help project where you’re headed for the next year or two. Look at your client acquisition numbers historically so you know your sales conversion numbers. Those will be helpful in knowing what is needed to hit your new client marks. The marketing plan is part of the larger strategic plan, but the marketing plan itself is a strategic plan, with a budget, analysis of reporting and projections and then execution. All of these things need to be measurable and specific in order for the marketing plan to be successful. It is helpful to incorporate marketing into year end planning and strategy so everyone is on the same page and moves forward as a united front, including all owners. Everything takes time, so consider everyone’s capacity when adding to the plan. 


      Year-end planning and strategy formation improves your business and mindset. You’re going to feel so much more under control, so much more just on top of things rather than scrambling all the time because you have that foresight of where you’re heading.

      We hope you enjoyed this speed round discussion where we shared some high-level information with you on planning for next year with a virtual CFO. Don’t be overwhelmed with all the important information we provided today. Instead, take action and get a meeting on the calendar! Once it’s time for your meeting, you’ll be fully prepared to reflect on the good, bad, and ugly of last year, discuss your company “why”, core values, and vision to ensure they’re aligned with how things went this year and how you want them to go next year. Then, you can move on and tackle the SWOT analysis. Identifying the issues, strengths, weaknesses, opportunities, and threats of the business helps you to create your key issues list and identify your “Rocks” and plan of attack. This plan of attack should align with the goals you set for the following year.  To accomplish these goals, you will want to review the numbers – budget, forecast, and cash flow, projection, and then create your marketing plan. We often encourage you to involve your virtual CFO in important conversations, and this strategic planning meeting is one of those conversations.  


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      #59: What You Wish You Knew About Payroll Services featuring ADP

      #59: What You Wish You Knew About Payroll Services featuring ADP

      Today, we’ve invited one of our good friend from ADP, Heather Sperduto, to talk about some of the helpful solutions they offer for clients, specifically ADP payroll services, and to give you some ideas on ways you can streamline your payroll and Human Resources (HR) processes. No matter how much we’d like to have one, there is no “easy” button for life or running a business. However, there are services and processes available for business owners that can take some of the pressure off! Our goal in distributing content for business owners is to offer solutions that give you the ability to focus on continued growth and strategy. After today, you should be better equipped to tackle all sorts of tricky terrain in your business.  

      What we cover in this episode: 

              • 01:08 – Introduction to Heather Sperduto
              • 03:52 – Most common payroll issues for small businesses
              • 10:15 – How can ADP payroll services benefit businesses? 
              • 16:25 – Best practices to attract and retain top talent
              • 18:20 – What’s on the horizon in payroll and HR?
              • 21:49 – Where to get help and other resources

      Introduction to Heather Sperduto

      Heather Sperduto, the VP of Sales Operations at ADP, runs point on the design and execution of ADP’s program within the sales operations team that captures the accountant community. She describes the accountant community as those “who are really the heart and soul of advising business owners.” Heather also enjoys leading speaking engagements and interactive workshops to foster attendees’ personal and professional development. 


      Heather’s entire professional career has been with ADP as she started with the company immediately after she graduated college. Being able to grow with ADP over this span of time allows Heather to have a breadth of knowledge about the company and extensive, intimate business knowledge with business owners and accountants. When talking about her time with ADP, it’s clear she has a passion for her work. She shared, “I’ve traveled all over the country in and out of accounting firms and business owners, and really look to have a pulse as to what’s going on out there in the market so we can really fuel business owners to operate in the best fashion possible.”

      adp payroll services

      Most common payroll issues for small businesses

      Payroll is a topic that’s shrouded in mystery for many business owners. Payroll can be scary to think or talk about because of the myriad of potential issues. We could spend days picking Heather’s brain about business payroll and ADP payroll services. Instead, we asked Heather to share the most common issues small businesses are seeing regarding payroll. 

      Complexity and constant change

      Business owners and HR professionals have to keep abreast of the complex and rapidly changing legislation. To give some perspective, ADP has had to make a thousand changes to their system based on the 2,000 changes that have occurred in more than 60 countries

      over the course of the last several months. The high volume and increased complexity have been unprecedented this year, which can be nearly impossible to navigate alone as a business owner. ADP has been instrumental in helping businesses to solidify 115 billion dollars worth of PPP loans through the reporting they made available. 

      In-house vs. outsourced payroll services

      Business owners, especially when starting their business, want to do payroll themselves because they don’t know the value of an outside service. Sometimes they don’t have many employees and others don’t think they have the money to pay for the expense. 

      Heather shared her insight on this topic by stating, “Business owners are great at their craft. For example, there are doctors who own their own practice and those exceptional doctors are who I would want to visit if I needed help from a medical professional. But, the complexities that surround payroll are time-consuming and focusing on the payroll can ultimately drain the business owner of time and energy they should be putting into their business.” 

      Jaime then chimed in about this topic adding, “At PJS & Co. CPAs, we typically recommend outsourcing payroll to experts such as ADP. As CPAs we have the ability to do payroll; it’s just really not our wheelhouse. ADP and companies that provide similar services know how to handle payroll issues. They are up to speed with legislative changes and are familiar with all of the ins and outs of payroll. If we were handling payroll, it would take significant time and effort to dive into things that take the ADPs of the world a fraction of the time. That is why we recommend a partnership with someone like ADP.”

      Ultimately, ADP can help business owners simplify because they will help guide you through the process. This kind of service can often be undervalued until the business owner is the one who has to put in the time and effort themselves, which takes them away from other parts of the business. Bringing in a partner to ensure payroll is taken care of, your people are getting paid, and your business is protected offers multiple advantages. 

      Answering the payroll question, “What is reasonable compensation?”

      It’s common to see business owners who are unsure of what to pay themselves. We asked Heather to speak to this and share how ADP can help provide advice in this area. Heather speaks to the pure volume of data to which they can access, “Over time through our data, we started to realize that we could pool from 90 thousand different organizations and more than 30 million records. So… we’ve built a compensation benchmarking explorer tool. If someone is looking for a benchmark number on the client side or even on the accountant side, we allow our clients or their accounting professional to come in and look by industry or job title in geographic area so they can hone in on what that benchmark really looks like from a salary or compensation perspective.”

      Having access to this amount of data can help you establish reasonable compensation for not only yourself as the business owner but other members of your team. By leveraging numbers like this, you can ensure you’re within the proper thresholds and running your business appropriately.

      How can ADP payroll services benefit businesses?

      Most people would agree that payroll isn’t exactly fun. But, the ancillary services are where creativity comes in. That’s where you can position yourself in the market to seek out exceptional people. You only get one chance to make a first impression, so bring people into your company, give them an onboarding experience that’s seamless, pay them, and then on top of that offer them strong benefits. Give them reasons to want to stay with your organization and thrive in their environment.

      Time tracking and attendance

      With ADP payroll services, time tracking and attendance is built in. This is critical when you look at regulations for exempt versus non-exempt employees. Without this type of service, someone like an office manager would have to compile time and enter it. Compiling and entering time is important, but it also doesn’t need to be a manual process eating up administrative time that could be better spent doing other higher-level tasks. If you can implement a system with time already entered, you can quickly review the reports, click a button, and be ready to process payroll. This is such a time saver and your office manager can be doing other value added tasks. 

      Integrations with ADP payroll services

      Another great feature of ADP payroll services is the number of time-saving integrations. Currently, there is a tremendous amount of technology available. Business owners tend to need different services, product lines, or technology. Once they seek those and put them together independently, there is a tendency to get a vast amount of data coming from different places and none of the information is communicating. Important data can easily get lost in translation. ADP offers a suite of services that ideally is able to pull all of the information together. This ability to integrate systems is where you ultimately get to design the way you want to work. You have a menu of options to select from based on the needs of your business. Your business can also grow, earn revenue, and add employees which means things may get more complex. But that complexity doesn’t necessarily mean more difficulty for you. These services are built to grow with you. 

      Another example of integrating payroll is the seamless interface into an accounting package, which fuels the accounting professional with the ability to make good business decisions, and receive guidance based on their accounting needs. 

      Best practices to attract and retain top talent

      We asked Heather to share some best practices to attract top talent and retain exceptional employees. In addition to the compensation aspect she mentioned earlier and paying the industry averages, she recommends a speedy process. Heather adds, “The faster you can find quality talent, get them screened, and have background checks completed, the better.” ADP has a partnership with ZipRecruiter to help facilitate a quick and seamless hiring process. Using tools on the front end to automate as much as possible can contribute to seamlessly getting a candidate working and becoming a productive member of your team as soon as possible.   


      What’s on the horizon in payroll and HR?

       In our final question to Heather, we ask her about what is on the horizon and what we need to be thinking about as business owners when it comes to payroll and HR. Since she is in the know, she had some great insight to share with us regarding hot topics you’ll want to consider.


      On-demand pay and payroll services

      There is so much on the horizon with technology, automation, and also the gig economy in general. According to Heather, there are 55 million gig workers today, and these are individuals that jump in and engage in a project that they’re passionate about and it aligns with their strengths. She adds “What we are seeing is employers are starting to hire differently. Instead of hiring a full-time employee, they are hiring a gig worker that comes in for this specific job. These workers are so talented at what they’re going to do, they’re going to be able to do it with speed and excellence. When this is the case, pay shifts to on-demand pay.” This transition to an environment where people bank in non-traditional financial transactions like Venmo and instantaneous payments presents a new level of complexity because payroll services are pushed to figure out what that looks like and how that can be facilitated from a payroll engine. 


      Operating in the new world 

      We’re all operating in this new world of work, which really could be exciting and is forcing business owners to re-imagine how they operate. Whether it’s restructuring the workplace (redefining roles) or navigating the rapid pace in which we learn and innovate, business owners need guidance. ADP is working on tools and resources to help guide business owners on how best to take care of their employees who are working virtually or are back in an office or business environment.


      Heather adds to her sentiment of excitement for what’s to come by stating, “There are a lot of businesses out there that have something in the market that people are craving and they’re running to their organization in droves. And if you’re evolving, that just means that you’re continuing to hire and add some additional aspects to your business. And to me, I think that just paves the way for a level of excitement, as here we are in 2020 doing work very differently than many of us have ever really truly done before.”


      Where to get payroll help and other resources

      If you’ve heard something today and want to get help or are just tired of doing things on your own, we get it.  If you are interested in ADP and the services they offer, visit They have dedicated associates that span the world, as they operate more than 100 countries. Heather explained that ADP engages anyone seeking guidance with a professional and offers an exploratory conversation to understand your needs. From there, they can make strong recommendations. Heather also shared with us that ADP offers, what she calls, “CliffsNotes” on changes happening in the market. These can be found in their SPARK blogs, HR Tip of the Week, and Eye on Washington and can help you gain insight to better position yourself in the market. SPARK blogs are available for anyone, even those who aren’t ADP clients. To receive Eye on Washington, scroll to the bottom of this page, enter your email address to subscribe to SPARK updates, and select the Legislation/Eye on Washington radio button. The Eye on Washington can be accessed by subscribing, but the HR Tip of the Week is currently only available to ADP clients. 

      If you are looking for additional information regarding HR and strategic planning, please feel free to listen to the HR episode in our strategic planning series. 



      ADP’s Heather Sperduto was such a wealth of knowledge as our guest! We are grateful she could join us to let us pick her brain and talk about all things payroll. Heather’s credentials at ADP speak for themselves. Today, we started out our episode by learning about Heather’s expertise and her background with ADP. She talked to us about constant changes in payroll and then dove into the topic of businesses handling the payroll in-house or outsourcing it. We asked her what would be considered reasonable compensation and that’s when she scratched the tip of some of the amazing data ADP has at their fingertips. She then talked about services ADP offers, like ADP payroll services, that can really help business owners better manage their time. They can help with almost everything under the sun. As a business owner, think about how beneficial it would be to have someone help with everything from hiring employees all the way to retirement. Heather advised one way, in her opinion, to attract and retain good talent for your business is to have a speedy recruitment and hiring process. Once that happens, you just need to take care of your people. Sounds easy, right? It can be, with help from companies that offer services like ADP. At the end of the episode we tried to keep Heather on her toes by asking her about what’s on the horizon. She was ready to respond and quickly started talking about adapting to the ever changing business environment including the topics of gig economy and on-demand pay.  

      Links mentioned in this episode:



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      #58: The Power of Numbers – Profitability Ratios

      #58: The Power of Numbers – Profitability Ratios

      Profitability is usually one of the top concerns of business owners. Today we are bringing you a tool that you can use, relatively easily, on a regular basis to keep better tabs on the profitability in your business and ways to benchmark against not only yourself but others in your industry! In the last episode, we scratched the surface of liquidity ratios and the importance of reviewing your business data. We are going to take this topic a step further and cover another ratio because your numbers provide tremendous insight on your business’ performance. This time we are talking about profitability ratios. As a business owner, profitability is critical so we are concentrating on the importance of profitability ratios, goals for your profit margins, and practical measures you can take to increase your profitability ratios.


      What we cover in this episode: 

      • 01:16 – Profitability ratios defined
      • 05:02 – Profit margins
      • 05:10 – Gross profit 
      • 06:30 – Net profit
      • 11:17 – Return ratios 
      • 14:03 – Improve profitability ratios

      Profitability ratios defined

      Profitability ratios are financial measures to analyze the ability to earn a profit. These ratios can be used to assess a business’s ability to generate earnings relative to various things like revenue, operating costs, balance sheet assets, shareholders’, and more. Today, the two main profitability ratios we’re going to dive into are margins and returns.

      Comparing profitability ratios to gain insight

      Understanding your profitability ratios, like liquidity ratios, helps you check the pulse of your business. This data, like liquidity ratios, lets you know where you stand in relation to other businesses and displays that data with trends. This information plays into the bigger picture and gives you an overarching sense of how your business is functioning. The profitability ratio calculates a percentage, which you can use to compare your business with others in the industry, regardless if your business is the same size.  Comparing percentages levels the playing field with other larger or smaller businesses. Your profitability ratio may reveal you are just as profitable as other larger companies. Comparing profit amounts simply by looking at dollars and cents does not give you the same insight.  

      Comparing profitability ratios to trends from the past and previously established goals helps you uncover areas where you need to shift your focus and attention. Additionally, having solid profitability ratios can help attract new investors. When your business has a healthy profitability, investors are more likely to be interested. Generally, for profitability ratios, the higher the ratio, the better. This makes sense when you look at your profit and loss statement; the higher the net income or profit, the better.

      Profit Margins

      There are two types of profit margins, gross profit margin and net profit margin.

      Gross profit 

      To calculate the gross profit, subtract your cost of goods sold, or cost of sales, from your net income.

      EXAMPLE: Company Z had $2.5 million in annual sales and the cost of goods sold was $1.5 million. The gross profit for Company Z is $2.5M – $1.5M  = $1M


      Gross profit margins

      The formula to calculate your gross profit margin is net income minus the cost of goods sold, or the cost of sales, divided by the total annual sales amount. 

      EXAMPLE: Company Z had gross profit of $1 million and $2.5M in annual sales. The gross profit margin calculation for Company Z is $1M / $2.5M = .40. This means the gross profit margin is 40%.


      The gross profit margins are then used to compare with your prior year to determine if your percentage is improving and if you are meeting your established goals. For instance, if Company Z set their gross profit percentage goal at 50%, they would see they haven’t reached their goal. If that’s the case, they would then want to look further at the data to identify where they fell short. However, if Company Z set their gross profit percentage goal at 35%, they’d be in good shape. A general guideline for gross profit margin is 50 percent because you want to have enough revenue left to cover all the other important operating costs, like marketing, rent, staff payroll, etc. that are not included in your COGS. However, the goal of your gross profit will vary from business to business, so we recommend taking these types of generalities lightly and instead focus on concrete information. 


      Net profit 

      To calculate the net profit, subtract all expenses (including depreciation, amortization, and taxes) from the gross profit.

      EXAMPLE CONTINUED: Company Z had $750,000 in expenses and taxes. Gross profit, as calculated above, is $1 million. The net profit for Company Z is $1M – $750k = $250k


      Net profit margin

      The formula to calculate the net profit margin is gross profit minus the cost of expenses, divided by the cost of goods sold or cost of sales. 

      EXAMPLE CONTINUED: Company Z had a net profit of $250,000 and total annual sales of $2.5M. The net profit margin calculation for Company Z is $250,000 / $2.5M = .10. This means the net profit is 10%.


      Like gross profit margins, your net profit margins should be compared to your goals and historic net profit data. The general guideline is that a net profit of 5 percent is considered low, 10 percent is average, and 20 percent or better is good. No matter what, look at your industry to see what is acceptable instead of relying on general rules. For our example with Company Z, since we don’t have industry specific information, we would use common knowledge and determine that the company is performing about average because their net profit is 10 percent.


      The gross profit margin and net profit margin should be reviewed often, maybe even month-to-month, quarter-to-quarter, and then year-to-year to know how your business is functioning, specifically in relation to its profitability. You want to know what kind of sales you are generating and begin to see trends as they relate to any changes you’ve made, operational improvements, etc. 

      Return Ratios

      There are two types of return ratios, return on assets and return on equity.

      Return on assets

      Return on assets, often referred to as ROI, tells you if the company is turning investments into profit efficiently. To calculate ROI, divide net income by total assets. 

      EXAMPLE CONTINUED: Company Z had total assets of $3.5 million. Net income, as calculated above, is $250,000. The ROI is $250K / $3.5M = .07, or 7%.

      Company Z has an ROI of 7 percent and in general, an ROI of 5 percent or more is good. If the ROI was below 5 percent, you’d want to conduct research to determine the areas that need improvement.

      Return on equity

      Return on assets, often referred to as ROE, tells you how well the company can use shareholder investments to generate profits. ROE measures the shareholder’s return on investment. To calculate ROE, divide net income by average shareholder equity.

      EXAMPLE CONTINUED: Company Z had $2,000 of average shareholder equity. Net income, as calculated above, is $250,000. The ROE is $250K / $2K = .125, or 12.5%.

      Company Z has an ROE of 12.5 percent and, in general, an ROE of 15 percent or more is seen as a good return on equity. In this example, Company Z is a bit shy of 15 percent but they are headed in the right direction.

      Compare your return ratios to historical company data, industry data, and your established goals to help you see if your assets and shareholder investments are turning into profits.  


      Improve profitability ratios

      Once you calculate your profitability ratios, you may notice things aren’t where you need or want them to be. If this is the case, you’ll want to consider taking action. 


      Options to improve your profitability and your ratios: 

      1. Look at your services or product lines to see if any are unprofitable. If so, remove those services or products. In turn, this could result in rapid improvement to your bottom line and profitability.
      2. Find more customers to increase sales, although sometimes this can be costly. 
      3. Consider increasing your pricing. If you haven’t increased prices annually, you may be under-pricing your services or products. 
      4. Review expenses and reduce them. Determine your highest expenses and see if it’s possible to decrease them. Some expenses, like salaries, can’t be reduced. Your employees are those helping you produce a good or service, and you need them. Other expenses can be reduced, even by a small amount. Find out if you can get volume discounts. Determine if you’re paying for things you don’t really need. A difference of 1 or 2 percent of the bottom line can make a big difference in profitability ratios. 


      If one of your main goals is to improve profitability, we recommend reviewing your profitability ratio on a monthly basis, at least. If profitability isn’t an area of concern, it doesn’t need as much time or attention but still should not be ignored. It’s more important to find areas that need work because they aren’t meeting your goals, and focus efforts there. It is a good idea to keep an eye on profitability ratios no matter what to ensure they are trending in the right direction. If you make changes in other areas, profitability can quickly turn around month-to-month, and you’ll want to notice this right away. 


      If you’re looking for help with getting a handle on your ratios, profitability and more, reach out for a free conversation and strategy session! We are happy to talk with you and discuss goals and learn more about your business. Book your session here.


      Industry averages

      Some of you may be wondering what you can do to obtain industry averages and other industry-specific information. There may be free resources online that give industry benchmarks, but some information may need to be obtained through a third-party service. You can pay companies like ADP to provide industry-specific reports. We suggest talking with your business advisor, virtual CFO, and networking with people in your industry to see if they have recommendations for where to seek information pertaining to your industry. 


      The power of numbers is real! If you take away one key piece of information from today’s episode, we hope it is KNOW YOUR DATA! Ok, maybe we need you to take away more than just that because knowing your data is important, but understanding it and knowing how to use it are also crucial. Today, we talked about ratios, specifically profitability ratios. There are two profitability ratios, profit margins and returns. These show you if your business is profitable. Every business owner has the goal of being profitable! There are two types of profit margins, gross profit margin and net profit margin. Your net profit margin is the bottom line because it is calculated without including expenses. There are also two types of returns, return on assets (ROI) and return on equity (ROE). These show if you are making money on investments, and if that money is being made effectively. Next, we shared with you some figures to help you loosely identify if your business is healthy or if you need to take action. As always, we recommend doing industry-specific research when comparing your data. What we share with you is just a guide and guidelines vary widely between industries. We talked about actions to consider if your data isn’t what you hoped. You may need to make changes in your business to increase your profitability so we provided a few options for consideration. Lastly, we talked about utilizing your resources wisely, tapping into your advisor, virtual CFO, and your network to determine the best place to obtain industry-specific information.


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      #57: The Power of Numbers – Liquidity Ratios

      #57: The Power of Numbers – Liquidity Ratios

      You know that numbers are necessary for the success of your business, but may not love talking about formulas and ratios. In this episode, we are talking about the power of numbers. More specifically, we’re breaking down liquidity ratios in your business. But, don’t run yet! We promise we will make it easy for you! We are giving you the formulas to calculate your ratios, common ratios to review, and, most importantly, we give you action steps you can take to improve your ratios. Another ratio you may want to consider measuring is your profitability ratio, covered in episode #58.

      What we cover in this episode: 

      • 02:30 – Using ratio data (liquidity ratios) to gain insight
      • 03:56 – What are liquidity ratios?
      • 05:10 – Current ratio
      • 07:13 – Current vs. Long-term
      • 09:26 – What should my current ratio be?
      • 10:24 – Taking action based on current ratio
      • 14:29 – Specific actions to take
      • 16:11 – Quick ratio

      Using ratio data (liquidity ratios) to gain insight

      The reason to look at ratios is because they provide insight into the performance of your business. This valuable data enables you to interpret trends and can reveal emerging problems. Ratios can help you see areas in your business with room for improvement so you can take action. On the flip side, seeing evidence of success and knowing your strengths can help build your confidence. In order to know where you stand with your business, you have to start by looking at your balance sheet. As we’ve talked about before, we recommend reviewing your balance sheet on a regular basis and understanding all of its content. The ratios we are talking about today come from your balance sheet.  

      Gain insight through comparisons

      Once you are familiar with the information provided on your balance sheet, including the ratios, you can compare performance to prior time periods. Comparisons allow you to see if your business is improving or declining, if you need to refocus your attention, and how you measure up to industry benchmarks. Essentially, analyzing the data from your ratios allows you to recognize trends and see the big picture.

      Common ratios include liquidity, solvency, efficiency, and profitability ratios. Today, we are going to be focusing on liquidity ratios. These are the most common because they tell business owners if they have the ability to quickly generate cash from their assets. 

      What are liquidity ratios?

      Liquidity ratios are the most common and relate to the ability of your business to quickly turn some of your assets into cash. When looking at your balance sheet there are only two liquidity ratios, the current ratio and the quick ratio. These ratios are similar. In simplistic terms, both ratios give you the ratio of what you own, compared to what you owe. 

      Current ratio

      The formula to calculate your current ratio is: TOTAL CURRENT ASSETS ÷ TOTAL CURRENT LIABILITIES. 

      • Current assets include cash, accounts receivable, inventory, and even some of your prepaid expenses. 
      • Current liabilities are things like accounts payable, credit card payments, payroll taxes payable, sales tax payable, and client deposits you’ve received but may not have earned yet. These are things you may have to pay back quickly. 

      EXAMPLE: Company Z has total current assets of $100,000 and total current liabilities of $75,000. The current ratio for Company Z is $100,000/$75,000 = 1.33

      Essentially, the formula divides the amount of what you own by the amount you owe. 

      Current vs. long-term

      In the accounting world, the word “current” is relative and actually refers to the time frame of less than one year, so it’s not actually current. Any time frame longer than one year becomes “long-term.” For example, if you owe something that isn’t going to be paid off for more than one year, that would be a long-term liability.  

      What should my current ratio be?

      The current ratio is a calculation that shows you if you have enough assets to cover your liabilities. The current ratio is important because it helps you see how you will be able to manage if everything has to become liquid and you have to pay off all your liabilities suddenly. A healthy current ratio is also needed when you are trying to get a loan. The bank looks at these ratios to see if your business is in a good position to be able to pay on the loan. Ideally, in regards to the overall health of your business you want to have more current assets than current liabilities. A general rule is that your current ratio should be two to one (2:1) or better. We’d like for your current ratio to be two or higher. If your number is at least more than one, your business has more money than you owe. This number gives you a sense of how liquid your business is. If you owe quite a bit more than you have, your business is not very liquid. You want your business to be in a good, stable financial position; that’s where the two to one, or better, comes in. 

      Taking action based on current ratio

      If you discover your ratio is not where you want it to be and there are potential issues, you can put plans in place. There may not be an issue today, but it could become an issue in the future. When you have a sense for where your business stands, you can make changes before things become catastrophic. 

      Specific actions to take

      If you run your numbers and the result is 1.3 or less, there are things you can do to increase your current assets without increasing your current liability. 

      Options to increase your current assets:

      1. Increase your current assets from a loan. 
      2. Increase cash by contributing cash as the owner of the business. This would increase your cash and impact your equity in a positive way which would improve your liquidity ratio.
      3. Convert some non-current assets into current assets. If you have older equipment that has been capitalized over lots of years that you don’t really need anymore, you can try selling it. When doing so, sell it for cash instead of taking payment as a long-term asset, sell it. You can gain a current asset when you sell something like this for cash. 
      4. Pay off short-term debts or at least come up with a plan to get those debts paid
      5. Use some earned profits to put back into the business if you are doing well and have extra money. 

      Current vs. long-term

      In the accounting world, the word “current” is relative and actually refers to the time frame of less than one year, so it’s not actually current. Any time frame longer than one year becomes “long-term.” For example, if you owe something that isn’t going to be paid off for more than one year, that would be a long-term liability.  

      Quick ratio

      The quick ratio is a bit different than the current ratio. It is for companies that have a substantial amount of inventory on their balance sheet. If you don’t have inventory, this ratio is not going to be any different than your current ratio.


      The only difference between current and quick ratios is that the quick ratio removes inventory. Inventory can fluctuate from time to time and may throw off the current ratio, which is the purpose for this ratio. So, the quick ratio allows you to pull inventory out of the equation to determine the rest of the current assets over current liabilities. With this ratio, the general rule of thumb is to have the result be one-to-one. For companies with inventory that fluctuates, reviewing and comparing your current ratio and quick ratio is helpful to give you a different perspective. 


      Today seemed like a quick episode, but it was packed with useful information to help you understand your data. We started with reminding you to review and understand your balance sheet because that is where your ratio data comes from! The data provided in your balance sheet allows you to analyze the overall health of your business. There are only two liquidity ratios on your balance sheet, the current ratio and the quick ratio. These ratios show you what you have compared to what you owe. We care about this because it shows you the overall health of your business and whether or not you need to take action. If action is needed we shared some specific things you can do to increase your current assets, which will adjust your current ratio. Lastly, we ended the episode talking about the quick ratio which is similar to the current ratio. The only difference is the quick ratio is beneficial for businesses with significant inventory because the equation factors in inventory. All in all, take time to look over the information you have at your fingertips and know what it means. The success of your business could depend on it. 


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      #56: Save Time & Reach Goals with Effective Reporting

      #56: Save Time & Reach Goals with Effective Reporting

      Access to data in today’s environment is becoming increasingly easier, but now we are faced with the task of sifting out the information that is crucial to the development of our business. Just because we can access a report doesn’t mean that it will ultimately give us the information needed to effectively lead our business and team to reach the goals we have set. In today’s episode of the Cultivating Business Growth Podcast, we are talking about effective reporting for business owners. Your friendly neighborhood virtual CFO sits down to give you the tips you need to find the right information at the right time.


      What we cover in this episode: 

      • 02:39 – What reports should I be analyzing? 
      • 06:12 – Company snapshot
      • 14:15 – Examples: Reports and frequency
      • 19:11 – Ensuring accuracy through processes
      • 19:49 – Industry reports and comparing to industry standards 
      • 23:21 – Consistency is key
      • 25:46 – Establishing accountability

      What reports should I be analyzing?

      The short answer is, it depends. It comes down to focusing on what reports give you the data you need to press into your goals. There are an endless amount of accounting reports available to you as a business owner – cash flow reports, accounts receivable aging reports, your standard P&L (profit and loss) and balance sheet, and the list goes on and on. To determine what reports provide beneficial information for you, start by looking specifically at your business. In order to avoid the overwhelm that can come with looking at all available information, focus on priorities in your business. 


      To get the information you actually need, we recommend first thinking about your business triggers and pain points. Is cash flow a common area of concern? Are you finding yourself tapping into a line of credit and then paying it back? When you think of accounts receivable (AR), do you immediately get a headache? What are the uphill battles you face? Once you answer these questions, you’ll have a better idea of what reports you need most. Now, this isn’t to say you can completely ignore everything else, but a cursory look at numbers will help you identify that they are remaining on track. For example, if your AR isn’t a pain point, you don’t need to dig into it. You should still take time every week to look at the receivable reports but there’s no need to analyze this further. 


      Next, look at what motivates you. If you are someone driven by goals, you’ll need to pull reports that show you if you’re hitting the mark. You may need to enlist the help of your advisory team to talk through the metrics you’d like to measure and a certain timeline in order to achieve your long-term goals. Once you’ve gone through all of this, think outside of the box and identify any other information you want to know. 



      Company snapshot

      At PJS & Co. CPAs, we have compiled a custom report that we review weekly in what is called a company snapshot, or company scorecard. We have boiled down the items that matter most to our business and our goals so that we can discuss them amongst our leadership team and ensure we are on track or taking action to fix areas that can improve.


      What’s included in a company snapshot report?

      This report can highlight things like how many business leads we have in the pipeline, how many accounts receivable we have outstanding, how many accounts receivable are outside of 30 days overdue.  Other things you could consider including in a snapshot are revenue, expenses, and debt. If your goal is to grow your business, you’ll want to see your revenue increase week over week and compare that to the goals you’ve established. If needed, shift things around. For your expenses, you may want to see how they are moving. Seeing the principal amount of debt regularly can keep you aware. In a nutshell, a report like this gives you a snapshot of line items where you can see how you are trending. In order to determine what all is in your snapshot, you need to know what you need to know. 


      How to create a company snapshot report

      Although typical accounting reports are good, you should get a snapshot set up as a custom report. This report should be very focused and specific to your business and strategic goals. The person to set this up should be someone who’s experienced and involved in your business strategy and overall goals of your business. This person can work together with you, like an advisor, to help you put together the customized business snapshot that includes all of the appropriate data points. This will allow you to measure progress to see if you are achieving your goals. Want to talk about how to do this? Reach out to us.

      Examples: Reports and frequency

      As virtual CFOs and experts in providing business growth guidance, PJS & Co. CPAs has helped a variety of businesses approach, and establish, effective reporting. There isn’t a one-size fits all solution when it comes to reporting for businesses. That’s why we help businesses figure out the frequency, consistency, and timing for their reports. 


      Daily reports 

      In our experience, we don’t often advise pulling daily reports. However, you may need to do so depending on the type of business you run. Our advice is, know your business and your needs. If you are a transactional business, like a retail store, paying attention to daily revenue is important. In retail, daily revenue is a key indicator for trends, identifying the best sales day during the week, and taking that information to then build upon it. For our CPA business, and many other service-based businesses, daily reports are not as intuitive as they would be for someone in a transactional business. 


      Keep in mind, the more you touch data, the more work it creates, which will increase costs. If cash flow is an issue, you may want to look at a cash flow report daily in order to really understand the fluctuation and where the cash is going. Once you become more knowledgeable about your cash flow situation, you can switch the reporting to weekly. Understanding cash flow movement and getting that under control will help you much more than feeling the need to run daily reports. Essentially, let your reports change with how your business changes. The needs upfront aren’t the needs that you might need a few months from now.


      Weekly reports

      A common theme in this episode is to focus on your business, specifically. Your weekly reports will be highly focused on your business, the challenges you face and the goals you have set in your strategic plan. We highly recommend pulling the typical reports, like Accounts Receivable aging, keeping an eye on cash flow, sales reports, etc. You may see a benefit in creating a custom company snapshot (company scorecard), discussed earlier. If you need help analyzing 


      Monthly reports

      Typically, monthly reports include your balance sheet and P&L (profit and loss) statement, budget, cash flow, and industry benchmarking to name a few. Monthly reports are great tools for identifying trends. Monthly reports and comparisons will help you understand and analyze seasonality and recognize more challenges and opportunities within your business. It is essential for your business that you are able to identify and expand on what you’re doing well and continue to innovate. 


      Ensuring accuracy through processes

      Having a solid accounting process is critical because in order for the reports to accurately reflect where your business stands, you must have some way to know that the books are closed out for the month and all work is done prior to pulling reports. If you’re pulling reports without the knowledge that the information is complete and accurate, your information will be useless. Someone, or a team of people, should be tasked with completing all necessary reconciliations, ensuring checks and balances are complete, and knowing the timing and type of reports needed. Whoever holds this job has to be accountable and be involved in the entire process. This can be a CPA, CFO, or even a higher level accountant. Regardless of who holds this responsibility, their skillset needs to be primarily understanding analytics and reporting needs. Identify a specific date on your calendar each month that your books are closed and have a designated time for reports. 


      Industry reports and comparing to industry standards

      As a business owner, it’s normal to feel like you should be looking at everything in your business. That’s not always the case though. Some reports are important, but don’t need to be reviewed as frequently as others. The numbers you need to review directly play into your business goals and what you are trying to achieve. At PJS & Co. CPAs, we don’t have a collections problem or an AR aging problem. So, on our snapshot we look at our full balance and then, if needed, we dive in and ask questions. There may be things you need to monitor weekly, but then really dive into it monthly. The decisions regarding what level of analysis needed should be made with your accountant.


      When doing industry comparison, it is also important to understand the similarities and differences of your business compared to the industry.  For example, as a virtual CFO and virtual CPA firm, we can’t look at our industry averages and expect our business model to match others. We don’t have a building. We all work from home and we don’t have the overhead of rent, utilities, and phone systems other CPA firms have. We had to identify how we are different from industry norms from an accounting firm perspective. We match up similarly to accounting firms in regards to paying our team, software costs, etc. 


      You may have an idea of what industry information you need to obtain like net profit margin and sales growth per year, in order to determine how you compare. However, many times we suggest tapping into a virtual CFO, advisor, or other specialist. An expert in this area can help you decide what industry reports and averages need to be pulled, and work with you to analyze and improve if needed. 


      Consistency is key

      Once you establish the reports you need, the work isn’t done. You actually have to review them! Consistently obtaining your reports, reviewing them, and using that information plays directly into the overall strategic plan of your business. Establish a process to run reports, review them, and compare them with trends in your strategic business plan. If you pull them once, understand where you are and what is needed, but then never check in again, you are doing yourself and your business a disservice. Inconsistency with reporting and analysis will hurt you in the long run when it comes to business strategy.


      Establishing accountability

      The reporting needs that you have from a leadership perspective, and how you use them to lead your business into its next phases, are really important. With something that important, it always helps to have someone else take a look at the data. A second set of eyes can spot something you missed and sometimes they can even point out something good that happened when all you can see is bad. Advisors can bring confidence to areas where it is lacking. 


      A virtual CFO, business advisor, or CPA can benefit you and your business by providing ongoing monitoring of your reports. They can hold you accountable by making sure you review your reports, understand them, and make changes if necessary. Not only that, but they can be the ones who push and encourage you. We understand some people need a little nudge, positivity, and accountability with their business, not someone dictating how to run their business. A virtual CFO can be that person! We’ve seen business owners try to tackle everything themselves, from start to finish. It can be done, but it’s extremely taxing and can easily lead to burn out. Instead, invest in a virtual CFO who can encourage you and remind you that there is someone else taking on some of the burden.


      Find a virtual CFO that works for you; the one who helps you understand your business and the one who knows how to push it forward based on your needs and your goals. We’d love to hear from you and offer a free consultation. Reach out if you’d like to discuss your business and how working with a virtual CFO could help you.



      Today was all about being effective in reporting! We talked about reports, how they can benefit your business, and how to identify what reports you actually need to review and how often. We discussed how we can best use the data and information provided in your reports to not only see how successful your business is running compared to your goals, but also how to use the data from your reports to see how you measure up to industry standards and trends. We shared with you some of the ways we, as virtual CFOs, provide service to our clients as advisors and wrapped up by talking about the benefits of a virtual CFO partnership. We absolutely love what we do because we find joy in seeing our clients succeed.


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      #55: Core Values That Mean Something

      #55: Core Values That Mean Something

      Core business values are an important component of your company and very pivotal in communicating who you are with the world. We’ve briefly talked about core values in prior episodes, including episode #01: Strategic Planning – Vision & Long-Term Goals and episode #47: A Vision Shouldn’t be a Mirage. However, today we are diving deeper to define core values, identify why they are important, and discover how you can use them in your business. 



      What we cover in this episode: 

      • 01:11 – Why core values matter
      • 05:31 – Establishing core values
      • 08:53 – Our core values
      • 15:30 – Core values are established, what now?
      • 21:33 – Podcast updates

      Why core values matter

      Our frequent listeners and readers know we typically start our podcasts with pointing out the significance of our discussion topic because we want you to know what you are getting into and why we are even broaching the subject. The topic of core values often gets muddled into the mission statement, vision, and other building components as you establish the culture of your company. Although these components correlate and, in some ways overlap, they do exist on their own and for good reason. So today, the spotlight is on core values. 

      Establishing what your company stands for

      Referring back to Traction by Gino Wickman, a great foundation-laying book, your core values should drive everything in your business. If they don’t, take time to figure out why. We all have inherent individual core values. As business owners, we also need to identify our business core values. The core values for your business might not be exactly the same as your individual core values and that’s ok. It is likely they will be similar because our businesses are extensions of ourselves. Without knowing those core values, it is difficult to take the next steps of defining your mission, vision, and then make the daily decisions necessary to run your company. Ideally, you should know your core values so you can ensure your leadership team and team members have the same core values and are on the same page. 

      Mission and vision

      Ultimately, your mission and vision can be crafted as you identify who you are, as an individual, who you are as a company, and how you want your company to operate. A main part of identifying who you are and how you want your company to operate is discovering your core values. Your vision and mission have to align with your core values in order for your business to function properly.  

      Culture and retention

      We recommend sharing your core values with potential team members prior to hiring them. This gives people the opportunity to see if they are a good fit for your company. Innately, people want to align well with their work culture and team. When team member values mesh with the business core values, people have a natural excitement and dedication. One of your goals should be to hire team members that fit into your company culture and environment. When this happens, it will be reflected in their work product and you will also be more likely to retain these team members. Retaining solid team members keeps your operation sustainable and gives you the opportunity to continue hiring and growing a strong, united team. 


      Understanding your core values gives you an automatic filter when making business decisions and helps you stay on track. This knowledge should also allow you to easily identify what will or will not work with your company. When you have talking points and monthly/quarterly meetings, it’s beneficial to revisit your core values to ensure you are staying true to them and that they are still relevant. 

      Establishing core values

      It may sound like a simple task to identify the core values of your company, but when you start making your list it’s easy for it to get lengthy in a hurry. Nailing down the core values that are truly relevant and highlighting what you want your company to stand for can be a tricky endeavor. If you already have leadership partners, it’s best to work with them during this process. If that’s not possible, consult with a mentor or advisor who can give you honest feedback and additional insight. In Traction, Gino Wickman recommends your list should boil down to between three and seven core values because they start to lose meaning when you have more than seven.

      The process

      With your entire leadership team present, start identifying what is important and write those things down. This may include things like integrity, professionalism, timeliness, etc. If you are struggling in coming up with an initial list, look at your current team members or team members you’ve worked with in the past. Start brainstorming by asking yourself why you enjoy working with them, what makes them stand out, and what attributes they have that are admirable. Then, write those down. At this point in the process, your list does not need to focus on your industry or your specific business. You’ll have time to work with business-specific information when you create your vision and mission. For now, core values are values you hold personally and in business. 

      Once you have an initial list, review it and identify what items on the list can be pared down and combined into one core value. For instance, there may be a number of items on your initial core value list that are related and can be combined under something like ‘professionalism.’ This part of the process allows you to review your list of attributes, determine the core value underneath, and decide which are most important to you and your company. You want your leadership team and team members to possess those attributes and operate according to them. 

      Mission and vision

      Plenty of businesses have created a mission or vision prior to identifying their core values. We just don’t recommend it. Your core values tell you, and everyone else, what your business is about. They help you maintain focus on what is truly important and keep business operations running smoothly. Once you’ve established your core values, you can then move onto creating your vision and mission. If, for one reason or another, you already have your mission and vision, just check to see if they align with your core values. If not, make some adjustments!

      Our core values

      Our PJS & Co. CPAs leadership team recently went through this process and redefined our company core values, so we are right here with you! We are hoping our experience can help you as you go through this process.  

      Previously, our leadership team had a relatively small list of core values and decided we wanted this list to be easily understood and more transparent in communicating broadly with those outside of our organization and to our own clients. We took that short list, honed in on what we could expand upon to provide more clarity, and then expanded on those values. From that expanded list of established values, we then boiled it down to six core values – integrity, relationship-focused, proactive communication, collaboration, service-minded, and lifestyle. For us, the process of redefining our company core values boiled down to taking a short list, making the list  bigger, evaluating the list, and then condensing it again.

      When you make your list, the title of your core values may not be clear as day. For instance, your list may include something like “truthful, hardworking, do what’s right.” When you think about all of those things, they define someone with integrity. It’s ok to tweak your list and change the titles of your core values. Once we finalized the title of each, we wanted a specific catch phrase for each individual core value that can be shared frequently, so we generated those. 

      PJS and Co. CPA core value catch phrases 

      • Integrity: “Doing the right thing, even when it’s the hard thing.”
      • Relationship-focused: “Creating a partnership mentality and fostering an environment of teamwork.” 
      • Proactive communication: “Make things happen instead of waiting for them to happen.”
      • Collaboration: “Working with others to achieve something great!”
      • Service-minded: “Advocating for and creating peace of mind for our clients.”
      • Lifestyle: “Cultivating life in balance.” 

      All of our core values and their corresponding catch phrases are important. If you asked our leadership team and team members, they’d probably tell you the “lifestyle” core value and its mantra is one of the most important. We are very focused on and intentional about business and lifestyle integration. We expand on this value by saying, “We cultivate lifestyle by fostering a landscape of change for our team and for our clients to be able to create a wondrous blend of business and personal lives, encouraging personal and professional growth is a vital part in achieving health, success, and happiness, striving to forge a new path for generations to come where living lives is not in conflict with being in business, but is in harmony with it, welcoming others to join with us on this journey.” Lifestyle has always been a high priority for us. Having a business, growing it, and being able to live life without missing important things outside of work, like family and friends, is what we strive for. For more information about PJS & Co. CPAs and our core values, visit our about us page

      Core values are established, what now?

      Keep your core values alive! 

      As you are going through business, strategically planning, looking at operations, etc. check to see if they align with your core values. Keep sight of your core values as you go through your day-to-day routine. Establish your core values as filters for decisions you are making as a business owner. One easy way to incorporate your values into regular business activity is during employee performance evaluations. Do the employee’s values align with the business core values? If not, it may be time to let them go. 

      Another time to review your core values is when you are looking to expand your team. You can have a checklist of your core values at hand, and when hiring or during the onboarding process, use that checklist to see where the new hire aligns with the business. We are hiring right now, so this is top of mind for us. We are looking for people to join our team and want them to align with our business. This is one of many reasons we communicate our core values on our website. The core values we hold innately creates a culture in our business and helps us attract like-minded team members who are a good fit for our company. When this happens, there is a higher likelihood of keeping them long-term. We try to use our core values to create cohesion in our business to help everyone grow in the right direction, simultaneously. Our goal is for you to do the same.

      Reassess as needed

      Like people, businesses evolve. We recommend, at a minimum, to revisit your core values, mission, and vision at your strategic planning meetings. (Really, our hope is that you are frequently integrating your core values in your business decision-making process, as we just mentioned.) Don’t hesitate to take time to review and redefine your core values like we did. At PJS & Co. CPAs, we saw a need to make some adjustments to our core values and took action. Just make sure if you change your core values, you also want to review your mission and vision to ensure they remain relevant. If your new core values have significantly changed, it might be time to do the same with your mission and vision statement. 


      Podcast updates

      Since we are talking about core values, this is the perfect timing to share with you some changes we are making to The Cultivating Business Growth Podcast. As we talked about earlier, one of our core values is lifestyle and we firmly believe in work/life balance. Currently, we release a podcast episode every Monday. This has proved to be quite challenging alongside distance learning with children at home. Starting in October, we are moving our podcast cadence to biweekly releases. So, have no fear. We will still be bringing you this beneficial content and building upon our 55 episode arsenal we’ve been working on since December 2019. You’ll just have to catch us every other Monday. You can ensure you never miss an episode by subscribing to our podcast on your podcast app. Every time we release a new episode, you’ll receive a notification! 


      Today we had the pleasure of discussing core values. We shared why core values are important and why you need to have them for your business, the benefits of having core values in place, when to establish your core values, and how to identify them. We talked about how we, at PJS & Co. CPAs just redefined our core values and dove into what those were. Lastly, we talked about incorporating your core values in your day-to-day business decisions so you can truly benefit from them. Let us know if you have any questions; we’d love to hear from you!


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      #54: The Dental Series – Selling Your Dental Practice with George Bozonelos

      #54: The Dental Series – Selling Your Dental Practice with George Bozonelos

      As we wrap up our Dental Series, we are excited to introduce an amazing guest! The past few episodes have provided a considerable amount of useful information for purchasing and operating a dental business. In episode #54 of the Cultivating Business Growth, we welcome George Bozonelos, an expert in the field of dental practice sales and director of practice sales at Joseph Rossi & Associates. George is a wealth of knowledge and during our time with him, he shares informative tips for those of you who plan on selling a dental practice at some point, even if it’s not in the near future. 


      What we cover in this episode: 

      • 01:47 – Introduction to George Bozonelos
      • 05:36 – The value of dental practices
      • 06:41 – Methods to value a practice
      • 09:55 – Are practices worth 70% of collections?
      • 12:48 – Length of time to sell a practice 
      • 14:40 – COVID-19 impacts
      • 17:27 – Making your practice more valuable
      • 26:03 – What happens to my staff when I sell?
      • 32:14 – Hiring an advisory team
      • 42:35 – Should I sell my dental practice?

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      Earn 1 CEU credit by viewing the on-demand webcast, 3 Ways to Lead a Profitable Practice While Working Fewer Hours through Dental Economics.

      Introduction to George Bozonelos

      Before we let George take the driver’s seat, we want to take a quick minute to share a bit about his background, education, and what brought him to his current role. His insight is top notch and his credentials speak for themself. 

      George Bozonelos earned an MBA from Loyola University and moved on to start his career at a media marketing firm, leading large teams. He then started his own marketing and advising firm where his clients were Fortune 500 companies. Later in his career, he worked as a director of sales and marketing at a Germany specialty tool manufacturer. During this time, his wife finished dental school and residency in pediatric dentistry, and was working as an associate in the dental industry. She made the decision to start her own dental practice and, in 2015, with the help of George’s extensive business experience, they began the journey of starting her practice from scratch. After about a year of hard work, and “a lot of fun,” George says, his wife’s dental practice opened up in Frankfurt, Illinois. A short year later, they expanded and hired two additional talented doctors, and they are still growing.

      selling a dental practice

      While he was assisting with her practice, many of his wife’s friends were seeking advice from George on opening their own practices and running their businesses. George enjoyed the business side of dentistry so much that he decided to work full-time professionally in this line of business, which is what led to his current role. Today, George is the Director of Practice Sales at Joseph Rossi & Associates. Joseph Rossi & Associates is a healthcare advisory firm that specializes in providing real estate and practice transition services to healthcare professionals, including dentists, physicians, and veterinarians. They are well-known in the Chicago dental community as ninety percent of their clients are dentists. As the director of practice sales, George is committed to helping doctors at all stages of their careers. He advises doctors on their long-term strategy of transitioning their practice to new ownership, and also advises doctors on their growth strategies through acquisitions and startups. He understands and appreciates the unique challenges doctors face as they start up, grow, and eventually transition their practices.

      The value of dental practices

      We were ready with a laundry list of questions for George and he graciously covered all of them, starting with the value of dental practices. 

      When thinking about the monetary value of a business, many times business owners have high expectations. When we asked George about practice values, he shared, “There is a saying. The value of something is the price at which it would change hands between a willing buying and a willing seller. That’s the value.” People don’t like to hear that, we are able to expand on that with technical information by sharing that the market is truly what dictates the price. Providing a practice valuation gives guidance and understanding. Then, we calculate the estimated earnings using a few different calculation methods, and determine the fair market price given the current market conditions. 

      Methods to value a practice

      There are a couple of different methods to value a practice. One method is to gather and analyze data from the practice, including the three previous years’ tax returns, profit and loss statements, and practice reports. Another method George refers to is to figure out the profitability of the practice, or earnings before interest, taxes, depreciation, and amortization (EBITDA). This is followed by calculating the profitability for a solo doctor owner and for a hypothetical investor. This is important because there are very different types of buyers, and they look at the purchase quite differently. So, it’s very common for practice owners to run expenses through the practices like auto leases, travel, cell phone, family on the payroll, other items. According to George, their CPA will typically guide them through that, “…but it is our job to find those and make the adjustments. We call those addbacks because we go through and add those back into the profit.” And another method involves figuring out the weighted average over three years, using three different approaches, averaging those, and getting a final appraised value. These methods are all very simplified in this explanation and there are many more technical calculations behind it, but these cover finding the value very high-level. 

      Practice price subjectivity 

      Even though it is possible to calculate a value, there’s a bit of subjectivity to the practice price. There are certain things that can influence the practice price despite what is on paper. For instance, a desirable practice location, a good payer mix, and/or a good mix of procedures performed in the practice. George gave a personal example in which he recently had a desirable practice that was for sale and they got six offers in just a few weeks. On the other hand, they had another practice that was actually twice as profitable, but it was so unique that the buyer pool for that practice was very thin. Because of the unique aspect of the practice, that will impact the length of time needed to find a buyer and it could influence the price because the market is so thin. The valuation is only part of the process. It’s good practice to obtain expert advice on the market when determining a value for your practice.

      Are practices worth 70% of collections?

      At PJS & Co. CPAs, we’ve heard there is a rule of thumb that dental practices are worth 70 percent of collections, so we asked George about this and he said this is something he hears quite often as well.

      The 70 percent of collections rule of thumb is the simplest but least scientific way to value a practice. It is true that some practices do end up being worth that amount, but far more importantly is the analysis and methods used to determine that number. George illustrated this further by using an example of two practices. Each practice collects one million dollars. After all expenses and paying the doctors and staff, the profit to the owner (practice A) is $250,000 and profit to the other owner (practice B) is $50,000. Most people wouldn’t pay the same amount for these two practices. 

      There are times when a full valuation is done and the amount ends up being 70 percent of collections, but that number can’t be relied upon. “That’s not a method. That’s just the answer, and that’s not good enough for a bank,” declares George. Some banks do have a hard 70 percent or 75 percent limit, so that might be the extent of what you can get, unless you’re selling to a corporate type of group that can pay far more than the typical buyer.

      Buyers should be looking at the profitability of the practice so they can determine if they are able to afford to cover any debt and be fully aware of the financial health. This process is complicated. The process of selling your practice is multi-faceted and involves a bit of negotiation and persuasion, so try not to rely on just straight percentages.

      Length of time to sell a practice

      We asked George to educate us on the typical amount of time it takes to sell a dental practice, from beginning to end. He started by reminding us, “It’s important to have patience during this process. It can take anywhere from three months to a year, sometimes longer if it’s a specialty practice, but I’d say it takes on average six months.” George goes onto explain that if he received an offer on a practice today, it takes about two months just to sort out the legal paperwork that goes into the transaction which cannot be avoided. It takes time and depends on the motivation of the parties. If a seller is highly motivated, the transaction can move quickly. The key is finding the right buyer and then persuading that buyer to make an offer.


      George talks about a practice on the market right now. The only price to purchase is taking over the lease. Essentially the practice is free, but they do not have any takers yet because they have to make sure that it’s a fit for the right person, they’re ready to build it up, and that they want to be in that area. He goes on to explain that it is not as fluid as the housing market, where someone’s going to buy it if you lower the price enough, so it can take time. In summary, George explains “The record I’ve seen is 30 days. I’ve had a few that were 60 or 90 days, and some have taken multiple years.”


      COVID-19 impacts

      Dental practices were closed for several months due to COVID-19 and we asked George what impacts he’s seen this have on practice sales. He shared his insights, telling us that when practices were shut down, there was no cash flow because banks were unwilling to lend on any transactions, so it completely froze the market up for a brief period of time. However, the government stepped in and offered loans and grants. All the while, they were still able to continue showing practices and negotiating deals, but had to wait until they actually opened and could show the banks that there’s some revenue coming in so they feel comfortable moving forward.


      George continued, “Right now, the dental practice transitions market is very strong. We’ve had numerous doctors contact us to let us know that Covid-19 had finally pushed them over the edge to sell their practices.” Many new practices came to market over the summer, and buyers were also equally motivated, if not more. COVID-19 changed the employment situation, working hours, and maybe even compensation for many, so there were a number of doctors who were inclined to become owners. He also shared, “On the buyer’s side, they thought they were going to get a COVID-19 discount, but that really has not been the case, in our experience, because the practices have bounced back pretty strong.” At PJS & Co. CPAs we’re seeing clients have some of the best months in the past 6-12 months. Patients need their dental services and there is month’s worth of catching up to do. 


      August 2020 was Joseph Rossi & Associates’ busiest transaction month ever and George wrapped up this topic by stating, “The prices have been unaffected, assuming that they’ve recovered. As long as they (dental practices) recovered financially, COVID-19 has had no influence on the purchase price.”


      Making your practice more valuable

      There may be dental practice owners who are currently considering selling their business in the near future and we wanted to get George’s thoughts on what those owners can do to make their practice more valuable. So, we asked if there are changes or improvements practice owners should consider to increase their value. His recommendations are as follows:

      Figure out how to increase profit. 

      The largest influencer on the price is the profitability of the practice. To most buyers, that’s what matters. Most young doctors these days are graduating with hundreds of thousands of dollars in dental school debt. They might be working somewhere, making good money, but with the high debt payments along with additional debt incurred from the practice purchase they’re very sensitive to the financial performance of the practice. 

        • Analyze expenses and keep them under control. If you can do that for two to three years ahead of a sale, that helps because everyone looks at three years of tax returns. Depending on your specialty, ideally your supplies expense should be under 10 percent of collections and your staff wages should be around twenty to twenty-five percent, at the most. 
        • Work with an advisor to monitor trends. According to George, “The area where I see the biggest impact to the profitability of the practice is staff wages.” Over the years, it’s common to give many raises and lose sight on productivity. If you lose focus, the practice revenues might stay flat or even decline while your wages and other expenses are going up and up and your profit’s getting squeezed. Because this happens slowly over a long period of time, most people don’t realize it’s happening. George clarifies he does not suggest firing anyone or decreasing anyone’s compensation, but he does recommend working with an advisor to carefully monitor those trends and prevent them from getting out of control. Monitoring industry benchmarks can give you a sense of whether or not your expenses are in line. Buyers will want to see that your expenses align with the industry norms.
        • Keep the practice up-to-date. Just like curb appeal helps sell houses, the same psychological rules apply for dental practices. The look could make it more appealing and desirable for folks to come in and consider buying the practice. By virtue of having a higher quantity of people interested, you’re likely to get more offers and hopefully get more of a bidding type situation and a more competitive price. 
        • Determine if it’s best to bring on an associate. To some practice owners, it may seem appealing to hire an associate so you can train them and over time, sell the practice to them. George believes owners should hire associates if it makes sense for them and also thinks they should find a buyer, if it makes sense for them. George notes an important distinction, “When you combine the two, it really is a very complex situation that requires a lot of analysis and planning. I’ve seen some doctors romanticize the idea of hiring an associate and then expecting five to 10 years down the road the associate will automatically become the buy of the practice, and all will work out perfectly. For one reason or another, this may or may not come to fruition.” He then goes onto highlight some best practices, “If you’re planning on hiring an associate who you intend will eventually buy the practice, I would try to have everything in writing ahead of time like their compensation, the appraisal methodology, and the timing of exactly when the sale would occur. That way, expectations are clear, everybody knows where they stand, and there are no surprises.” In George’s experience, you’re better off hiring associates for the purpose of doing dentistry, and then when you’re ready to sell, go through the normal practice transition process. If you want to approach your associate at that time and it works out, great. If not, it’s not the end of the world and you can move on and find someone else. The bottom line is think carefully, plan, seek advice, and openly communicate. 


      What happens to my staff if I sell?

      A sensitive topic for both the buyer and seller of a dental practice is the staff. It’s common for buyers to be nervous about staff because many times they’ve never met the staff and they are unsure how the staff will respond to new ownership and all of the associated changes. Sellers can be nervous too because they want their dedicated staff to be cared for even when they are no longer the practice owner. There’s a bit of a finesse and you’ve got to make sure you manage the situation well. George shares, “I’ve seen with most practice sales, the staff remains the same for at least six to 12 months. Keeping things the same for some time is in the best interest of the buyer because when buying a practice you’re buying the goodwill of the practice; the cash flow and the stability.” Could it work out if you decide to completely change things when you buy a practice? Sure. But, George’s advice is plain and simple, “Just leave it the way it is for a bit and make thoughtful changes.”


      Telling your staff

      Buyers don’t necessarily get the opportunity to meet the staff of the practice prior to putting in their offer or finalizing the sale. This part of the process is a bit strange because it requires buyers to have a bit of faith because they don’t know the staff that will soon be the staff of their dental practice. 


      From a seller’s standpoint, George doesn’t recommend telling your team until the sale of the practice is almost finalized. The reason for this is most people don’t like uncertainty and change. If you share with your staff that you are putting your practice up for sale, they may fear their job is in jeopardy or their role will change. This may drive them to start looking for new work because of the uncertainty of their future. Staff turnover can scare off potential buyers and put the sellers at risk of losing sale opportunities. Communication has to be carefully managed. You shouldn’t do any of this abruptly. Once the majority of the paperwork is signed, you can then announce the sale to your team and invite the buyer to meet your staff. This gives the buyer the opportunity to provide some assurances to the staff that their role, and their plans for the future of the practice are aligned. Then, everyone can focus on establishing their relationships and building on that. 


      If the entire process is handled appropriately, much of the staff will stay through the sale of the practice and the new owner can decide how to integrate everyone. George has seen most people stay on for some period of time. It’s helpful to keep people on staff for the transition because the staff know the patients and the operation.


      There are a few changes that are common and should be expected, like turnover and system changes. Sometimes staff members don’t jive with the new owners or they are accustomed to doing things a certain way and are unwilling to adapt to new changes. In these cases, they will either leave or you’ll support them as you encourage them to find another opportunity elsewhere. You can then find someone who can do what you need them to do. In becoming a business owner, the buyer of a practice also becomes a manager, which means managing staff and emotions. Some conversations will be tough, but do what’s best for the practice and for the long-term success of the business.


      Hiring an advisory team

      Attorneys and accountants

      When buying or selling a dental practice, experts familiar with this process recommend hiring an advisory team that includes an attorney and an accountant. It’s not mandatory, but historically the process of buying/selling a business goes smoother when you have an advisory team of some sort. “My favorite practice transitions are those where the buyer and seller have hired a good advisory team and we all work together to get a deal done,” George shared. A recent transaction took place where the seller didn’t have an attorney and that process was “a little messy.” The deal ended up going through, but it wasn’t as smooth as it could have been. When there isn’t an attorney representing the buyer and/or seller, other advisors aren’t allowed to provide legal advice. In these cases, advisors can only deliver the contract and advise clients to read it. The clients then have to decide what to do with that information. Attorneys are extremely helpful when working with contracts and negotiating, but they need direction. 


      Having an accountant is also beneficial for many reasons, including the fact that they can advise you on tax implications of the sale. Clients need to understand what can happen after they have a windfall of income, or if they are working for a new owner and want to know how their tax situation is going to change. In your new situation, all deductions you were applying before when you were a business owner may not apply anymore as a W-2 employee or 1099.


      George enjoys working on transactions that have an advisory team with a good CPA, consultant, and banker. They can help clients analyze the financials of the practice they’re considering buying. For most buyers, this is their first time owning a business. It’s not easy to understand a business tax return, what all the numbers mean, profit and loss statements, practice reports, etc. It is much better when there is a third party who can independently review the information and give their unbiased advice to the buyers. An advisory team can help buyers and sellers avoid pitfalls they don’t know about. We discuss the importance of an advisory team in numerous episodes of our Cultivating Business Growth Podcast, including episode #51: What Dental School Didn’t Teach You and episode #52: Accounting for Your Dental Practice. We understand hiring a team can be an expense, but if you don’t have a team of advisors helping you make good business decisions, it may end up costing you much more in the long run.  Plus, we want you to spend your time doing actual dental work, not doing legal and accounting work! No one needs to be wasting time or money. Strategically spending your money on an advisory team also gives you peace of mind. Who doesn’t want that? 


      Who needs an attorney?

      George told us he’s never done a transaction in which the buyer did not have an attorney. He has, however, seen sellers get away without having an attorney. When we asked his thoughts on the seller not having an attorney, he commented, “You can certainly sell anything on your own. It’s just not as easy.” He equated some aspects of selling a business without an attorney to selling your car or house. For instance, it’s hard to tell who are the serious buyers from those who are just wasting your time. On the other side, selling a dental practice is different from selling an object like a house or car since it’s a business which is an ever-changing, living, organism. 



      The entire buying/selling process has to be completely confidential. Your patients, staff, and competitors shouldn’t know you are selling. Keeping this news confidential is difficult when you may be the person taking calls, responding to emails, and attempting to vet potential buyers. It’s not hard for people to make the connection that you are the one selling your business if you are answering calls and using your own email address to communicate. George said, “if you are interested in maintaining the confidentiality of your identity and financial information and if your time is extremely valuable to you, then I just recommend hiring someone to represent you by bringing in only credible, vetted buyers and just helping shepard the deal through.” 


      Should I sell my dental practice?

      In George’s role and with all of his experience in this field, he’s often asked by practice owners whether or not they should consider selling their dental practice now or later. Often, his answer is, “It depends on your priorities.” Always start exploring the idea of selling before you’re cutting back your schedule, changing your lifestyle, or doing anything that dramatically reduces revenue of the practice because fixed costs remain the same or increase due to raises and increased rent cost, but your revenue will be decreased. Profits get squeezed over time and the changes you make impact the value of the practice. There are ways to get the most money for your business by cashing out when the practice is at its peak. For example, you can structure a deal so you can stay on with the new owner, work for them for a few years, and potentially reduce your schedule over time. All the while, you’re able to work, earn a living, but are no longer responsible for all aspects of the practice. This gives you the opportunity to maximize earnings, phase out at your leisure, and make the most of living the lifestyle you want.   




      We are extremely thankful for our time talking with George Bozonelos, the Director of Practice Sales at Joseph Rossi & Associates. He has a wealth of knowledge and was so kind to speak with us today about buying and selling dental practices. We learned about how to determine the value of your dental practice, what methods are used to calculate that value, and even ways to increase the value of your business if you are considering selling in the future. We gained insight on how long dental practices take to sell and how the COVID-19 pandemic has impacted buying and selling over the past few months. We also talked about how to best work with your staff as you are selling your practice and when the right time is to announce the sale. As we neared the end of our time, George shared with us his thoughts and advice on hiring an advisory team to assist with the buying and selling process, and lastly he made sure everyone understood if selling their practice is being contemplated, lots of planning is needed.

      Looking for CEU?

      We are excited to share an opportunity for you to earn one CEU credit. View the on-demand webcast on Dental Economics, called 3 Ways to Lead a Profitable Practice While Working Fewer Hours. You can find this through the Dental Economics website or visiting This course is free and available immediately. Don’t forget to register!


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      #53: The Dental Series – Purchasing a Dental Practice

      #53: The Dental Series – Purchasing a Dental Practice

      Gain insight from a virtual CFO, CPA and business advisor with years of dental industry experience in today’s discussion about buying a dental practice. If you are considering purchasing a dental practice, or specialty practice, today’s podcast is for you. We are talking about where to start, finding a location, some of the nitty gritty details like letter of intent and due diligence and more. Don’t miss this walk through with virtual CFO, Jaime Staley, who breaks down what you need to know.



      What we cover in this episode: 

          • 01:19 – Where to start – vision and goals
          • 04:57 – Location and demographics
          • 05:45 – Advising team
          • 07:56 – You’re ready to purchase – letter of intent
          • 09:05 – Due diligence 
          • 10:46 – Purchase agreement
          • 11:21 – Further considerations
          • 14:27 – Final thoughts

      As seen on:

      buying a dental practice

      Earn 1 CEU credit by viewing the on-demand webcast, 3 Ways to Lead a Profitable Practice While Working Fewer Hours through Dental Economics.

      Where to start – vision and goals

      There are many things to think about when considering purchasing a dental practice. The very first item on your to-do list should be the task of identifying your goals. You have to know what you want to accomplish, why you want to be in this business, and what is going to set you apart from other dentists and specialists in your area. Before venturing out to purchase a practice, you should take time to think about your goals and long-term vision. In episode #01: Strategic Planning – Vision & Long-Term Goals, we share useful information and a free workbook download to help get you in the right mindset to determine where you really want to take your practice. If you missed this episode and are thinking of purchasing a dental practice, this is a great place to start.

      It’s important for you to know your professional vision, where you want to go, and how you are going to get there. Ask yourself, does this practice I’m looking to purchase reflect my professional vision and where I want to take my career? 

      Additional questions to consider include, is this practice compatible with my goals? Does this practice have the same quality of care philosophy as I do? The quality of care philosophy varies from doctor to doctor. When purchasing a practice, you want to ensure you’re in alignment with the same care philosophy because existing patients are going to be accustomed to that and expect it regardless of the practice owner. Additionally, you want to be comfortable with the way you’re going to treat those patients. If what they are used to doesn’t mesh with your vision of patient care, your philosophies probably aren’t in alignment and this may not be the practice for you.    

      Location and demographics

      When purchasing a practice, ideally you want to look for a practice that is in a highly visible location, can be easily accessed, and has a significant amount of traffic. You may want to reconsider if you’re looking at a practice that is hard to find, doesn’t have much parking, or is in the middle of nowhere. You’ll also want to do some research to determine if other dentists are in close proximity to the practice. It will be harder to stand out if patients have multiple options to choose from in one small area. 

      If you are a specialty dentist, proximity to other dentists is important. Consider a location closer to dentists you have established relationships with, or a location that has multiple dentists nearby so you can start to develop relationships with them. Ideally, you’ll want to be their specialist of choice when referring patients. 

      Advising team

      At this point, your mind may be going 90 miles an hour. Before that speed accelerates any higher, pause and get a team of advisors on your side. With all of the nuances of buying/owning a business, it is wise to have knowledgeable professionals supporting you. Plus, there is no need to do work that someone else, who is qualified, should be doing. The type of advisors we recommend include:

      • A lender to get the banking and financing settled for the purchase of the practice. This will be an ongoing relationship throughout your business ownership journey that is important to establish in the beginning. 
      • An attorney to help you through all steps of the purchase agreement and due diligence with all legal aspects. Again, ideally this attorney becomes someone you rely on when any legal questions arise over the coming years.
      • A dental-focused CPA to help you get set up, choose your financial systems to manage the business, and get your employees paid! They can even help you during the purchase process and should be very involved in your ongoing business strategy.
      • A practice management consultant to assist you with setting up a practice management system. You and your team need to understand the practice management system and they can assist you with the setup and training. 

      Buying a practice is a big decision that you don’t want to take lightly. It is likely a long-term endeavor. Your team of advisors can help you consider details, large and small, you may not even be aware of so you don’t miss something important. The cost for a team of advisors may be a concern for you, which is understandable. However, investing in an attorney, good lender, and/or good CPA can help you succeed in the long run and can help you avoid costly issues and common pitfalls other people, unfortunately, run into. They’ve seen it all before and, as your supporters, they’ll have your best interests in mind. 

      You’re ready to purchase – letter of intent

      After you’ve done your homework, consulted with your team of advisors, and found a practice that seems to be a good fit, it’s time to move forward. When you’re ready to purchase the practice, you’ll need to draft a letter of intent. A letter of intent is not an official offer. It is put together and presented to the current owner, including information for them to review to determine if there is going to be an agreement. 


      The letter of intent details your interest in purchasing the dental practice and outlines terms of the prospective deal. The letter of intent details:

      • The purchase price
      • The assets included with the purchase
      • Whether or not the accounts receivable are included 
      • If you are purchasing the property/office or renting it
      • The transition process, including if, or how long, the existing dentist will remain working
      • The staff and whether or not anyone will remain with the practice
      • Any restrictive covenants
      • Whether or not you are purchasing the name of the business


      Typically, if the current practice owner receives the letter of intent and is interested in what you are offering, negotiations will begin.  


      Due diligence

      After negotiations end because you’ve come to an agreement on the terms of the letter of intent, you need to get more information. Likely, you’ll have to sign a non-disclosure agreement because you’ll be looking into information on how the current owner runs their business. 


      Financial review

      It is absolutely necessary for you to review the practice’s financial information. First, review the production reports and collection reports to see how the business is performing. Then, obtain and review balance sheets and profit & loss statements from the past few years to see how they have been, and are, managing their business. We always recommend consulting with a professional (CPA, CFO or other trusted accountant) since they will have the experience and insight to recognize any potential red flags and consult with you about what these financials mean.


      Legal review

      Your attorney will be another important advisor in this process. If the purchase of the business includes purchasing the name, they will be able to determine if there are, or were, any legal issues or lawsuits against the business name that may make the business a less desirable purchase for you. 


      Practice management review

      You’ll want to review reports that show information about their practice and their patients. Locate the number of patients listed in the reports and then verify that number accurately reflects their active patients. Some reports may list a total number of patients that have been seen at the practice, historically. This number could be different than active patients. Your accountant can help with this as well.


      Ask questions

      As always, be inquisitive and ask questions. If you see something you don’t understand or makes you pause, get more information. The goal is for you to know what you are getting in return for the money you are paying for this business. If you have asked all of the questions, received truthful answers, and obtained all of the information you need to feel comfortable with this purchase, great! That’s the goal! The last thing you want is to purchase a practice and be blindsided with information you could have known prior to purchasing if you would have simply asked a few questions.  


      Purchase agreement

      If you feel comfortable with your due diligence, you are ready to draft a purchase agreement. This is a legal agreement that details out all purchase terms you established in the letter of intent. Some things may have changed based on information you gathered during the due diligence process, which is fine. This document may go back and forth between attorneys until both parties determine they agree on all terms. Once you have an official agreement in place, the purchase agreement would be signed. 


      Further considerations

      Buy or lease

      We briefly mentioned earlier that you should consider whether or not you want to buy or lease the property or dental office. Many times, dental practice owners will own the office. If so, they may be interested in selling it to you, or keeping it and renting it to you. This is a big detail you’ll want to discuss with them. If you decide to purchase the property or dental office, there may be additional loans you’ll need to obtain in order to complete the purchase. Ask questions and consult with your financial advisors to determine if this is something you should do right away, or something you can do in a few years once you’re more established.


      Entity structure

      You will need to determine the type of entity structure your business will be. Thinking through what legal entity you want is important so you can be protected, both personally and as a business owner. Episode #51: What dental school didn’t teach you dives into some of the first steps you need to do as you create your business, and why those things are important. It’s a great resource to check out as you get your business started. 


      Bank Accounts

      You’ll need to set up a business bank account and a separate business credit account. Whatever you do, avoid commingling of personal and business funds. This topic is also discussed in Episode #51, mentioned above.


      Your team

      Another consideration you will have is your team. You can keep the existing team from the current practice, if the purchase agreement dictates this, or you can hire your own team. It is common for dental practices to bring on some, if not all, of the existing team. Even though the dental practice owner will be different, having the same staff helps with continuity. They are already familiar with the patients and they understand how the current systems work, which can be an advantage for you. Their experience can be invaluable. Over time, you’ll determine if everyone from the previous practice fits well with your new practice and can then make any necessary changes.  


      Marketing and advertising

      How are you going to get your name out there? How are you going to start to build up new clientele? You may have patients from the current practice, which is great. However, you don’t want to rest your hat on that alone. There have been times when a practice owner announced his retirement to his patients and then a new dentist purchased the practice. Since the dentist had planned on retiring, his patients already started seeing other dentists. Plan ahead and get a marketing plan in place. 


      Final to-dos

      One of the last things you’ll want to do is create a long-term strategic business plan for your dental practice. Before you start working on that plan, we recommend listening to our first ten podcast episodes, our Strategic Planning Series. They provide helpful information and dive deep into what you need to do to get your strategic business plan in place. 


      If the strategic business plan seems a bit overwhelming, take baby steps. You can focus on shorter-term cash flow projections and budgets for next year. At some point though, you’re definitely going to want to look at those longer-term goals and figure out how you’re going to get there. A written strategic plan will help you take steps in the right direction as you progress and grow as a dental practice owner.


      We started out today with stressing the importance of knowing the vision and goals you have for your business. Once those are solidified, you can decide what type of dental practice you want to purchase, or establish. You may be tempted to buy the first practice you find, but before you jump this long-term decision, make sure what you are purchasing aligns with your vision and goals so you have the best chance of success. Then, if you’re ready to move forward, start doing your homework. You’ll need many details about the practice before you take another step. After gathering all of the necessary details, you can begin the necessary step of analyzing the data, seeking the opinions of experts and eventually may choose to move forward with the purchase. The steps we suggest here are to save you the headache or heartache of missing information in the process of purchasing a dental practice.  If you get stuck at any time, utilize your network of trusted advisors. Our podcast has many great resources as a starting point but please consult an expert for your unique situation. Before you know it, you’ll have your own practice and be on your way to achieving your goals. 

      Looking for CEU?

      We are excited to share an opportunity for you to earn one CEU credit. View the on-demand webcast on Dental Economics, called 3 Ways to Lead a Profitable Practice While Working Fewer Hours. You can find this through the Dental Economics website or visiting This course is free and available immediately. Don’t forget to register!


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      10-Part Strategic Planning Intro Series

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