[VOICE]: This [00:00:05] is Dental Leaders. The podcast where you get to go [00:00:10] one on one with emerging leaders in dentistry. Your [00:00:15] hosts Payman Langroudi and Prav Solanki. [00:00:20]

Payman Langroudi: This podcast has been brought to you by Mini Smile Makeover. Mini Smile Makeover [00:00:25] is a two day anterior composite course led by the extraordinary talented [00:00:30] doctor Dipesh Palmer. Two days of full on, hands on composite training, [00:00:35] purely focussed on anterior work composite veneers, polishing, finishing, [00:00:40] shade matching. You also get a free enlightened kit. Plus we have a great time and a party [00:00:45] in the middle. Find out the dates. Mini smile makeover.com. Now let’s get back to the podcast. [00:00:50] It gives me great pleasure to welcome Bilal Ahmed onto the podcast. Bilal is a chartered [00:00:55] accountant, tax advisor, business consultant to dentists. White dentist [00:01:00] buddy underserviced community.

Bilal Ahmed: Uh, massively underserviced so happened [00:01:05] purely by accident. If I’m honest, my wife’s a dentist and then I was employed at the time [00:01:10] we got married, moved up to the northwest, and, um, as any sort of 30 year [00:01:15] old man at the time was looking for a football game. And then my wife was like, well, my friends husbands all play football. So she put [00:01:20] me in touch and it was the same conversation I was hearing time and again is I don’t [00:01:25] know what my numbers are. I can’t doesn’t tell me anything. I was like, well, this is nothing like the accounting that I’m used to because I’m used to working the [00:01:30] accounting corporate sector, which is you look at your numbers regularly, you use those to plan to move forward and do something [00:01:35] with. I’m saying if you’re using your numbers for his tax, why is it so late in the game? Is [00:01:40] it the accounts fault? Is it the dentist fault? Is it a bit of both or is it just [00:01:45] broken? Is the system broken? So as more and more I looked at it, I was like, this is super underserviced. There’s [00:01:50] an opportunity here for me to take what I’ve learned in my corporate career and apply it to a [00:01:55] demographic of people that a, you know, have money to do something with, so the decision making is rewarding, [00:02:00] if that makes sense.

Bilal Ahmed: You know, there’s more you can do with someone who earns more money. And then the linear [00:02:05] progression is then I’m a dentist, I make good money. I [00:02:10] want to jump off that journey and do other things. I might want to invest in other areas, that kind of thing. Or I want to go open up a practice. [00:02:15] Not that I think it’s a logical progression, but it seems to be the case is and then it’s, well, right. How do we [00:02:20] now help you do that? How do we help you make that successful. And it’s been that’s been our journey to to [00:02:25] date. And it’s been it’s been quite fun to be honest. And I don’t see us stepping outside of dentistry for a while. [00:02:30] And in all honesty, one of the reasons why I like working professionals is they’ve got as much [00:02:35] to lose as I have. And you’re not going to ask me to do something we shouldn’t be doing, because if your GDC registration [00:02:40] is on the line.

Payman Langroudi: From a reputational perspective and all that.

Bilal Ahmed: You know, if you seem to be doing something, [00:02:45] you know, downright dishonest, could, could could you be struck off the register? Theoretically. Um, I know [00:02:50] I can if I’m doing anything that so if someone’s got something to lose, um, who’s who’s going [00:02:55] to toe the line a bit better? Look, I’m okay with pushing thresholds and getting as far on the right side of the line, [00:03:00] but I don’t want to cross that line.

Payman Langroudi: And professionals understand that more.

Bilal Ahmed: Understand that more.

Payman Langroudi: Yeah, [00:03:05] it’s an interesting point. Yeah. What other nuances are there about dentistry? I mean as [00:03:10] far as yeah, we know the, you know, the kind of nuances you [00:03:15] have to understand about associates and principles and those things. But, you know, I [00:03:20] find dentists are sort of large small businesses. Yeah. You know. [00:03:25]

Bilal Ahmed: There’s some cool nuances. And I use the term cool because I know that all of this stuff. [00:03:30] So there’s certain things like how you can even come to acquire one, um, [00:03:35] practice. Yeah. So if you acquire a practice, um, with [00:03:40] a partnership, kind of an incorporated body, be a partner within a partnership. And what impact, what [00:03:45] impact does that have on the partnership? So if you’ve got, let’s say, husband or wife who’ve been operating [00:03:50] as a limited company for however long, use that money to then go buy a partnership. Partnership, dental practice, [00:03:55] and the contract can’t be incorporated because it has to be the name of [00:04:00] the dentist and has not been incorporated. Contract. How can you still use the money in the limited company tax efficiently to buy the practice? The [00:04:05] short answer is you can, but it gives you a knock on long term implications, which is like you can’t claim capital [00:04:10] allowances. I’m not going to get too into the weeds of it, but there are specific nuances specifically around things like [00:04:15] trading status, Ir35 and more. So things like, you know, if [00:04:20] you’re a female dentist, I’m not to be misogynist. If you’re a male dentist and you get pregnant and [00:04:25] you’re, you’re party to to to the maternity pay scheme, then is it worth incorporating at all? [00:04:30] And, um, if you do still want to incorporate, how do you split your income so that the NHS goes [00:04:35] into the sole trader so you still benefit from paying superannuation? Private goes into the limited company, but then is it still [00:04:40] worth it. Um, and then you’ve got, you’ve got the things like the nuances around training [00:04:45] and development because you know, I think there’s an amount spent by every [00:04:50] dentist every year on further education, on training and enhancing their skills. But [00:04:55] there are certain nuances as to what is tax deductible and what isn’t. Um, so if you’re enhancing existing [00:05:00] skill that is tax deductible, if you’re learning a brand new skill, then no, it’s not.

Payman Langroudi: It’s not tax deductible. [00:05:05]

Bilal Ahmed: It’s not. You can’t claim the tax relief on it.

Payman Langroudi: If I go to a implant course and I have never done implants [00:05:10] before, well.

Bilal Ahmed: See, this is where this is where the line starts getting a bit fuzzy. Now is [00:05:15] could you theoretically place an implant outside of outside of university? [00:05:20] You’ve been to dental school. Could you theoretically place an implant? Would you place an.

Payman Langroudi: Legally I.

Bilal Ahmed: Could [00:05:25] yeah. So that’s where the, that’s that’s where the definition comes into it. Now your own your own skill, [00:05:30] your own, you know, patient care. You want the best possible outcome for your patient means I don’t [00:05:35] think I should do it because I don’t think it’s the right outcome for the patient. So therefore I will go enhance that skill [00:05:40] so that I can ensure recovery time is kept to a minimum. You know, the trauma is kept to an absolute minimum. And [00:05:45] I’m paying the patient’s leaving with the best possible care. And that would be an example of enhancing existing [00:05:50] skill. Now where you’re learning a brand new skill would be, I’ve left dental school. I cannot place an implant. [00:05:55] They did not teach me how to place an implant, and I should not or I can’t, or legally, I’m not allowed to [00:06:00] place an implant. I now have to go train to place an implant that is now learning [00:06:05] a new skill, not enhancing existing skill. So when you ask about nuance, yeah, [00:06:10] there’s nuance. Uh, so there’s nuance and that’s where that’s where this [00:06:15] whole thing becomes quite fuzzy. And then you’ve got things like VAT, for instance. So if Payman [00:06:20] is a dentist and he operates via a limited company and he works at a practice, and that practice [00:06:25] treats him as a franchisee, and I, you gross the income, they take their licence fee [00:06:30] and so on and so forth. And I’ll talk about that a bit more detail. But if you’re going [00:06:35] in and you’re just doing day rate dentistry and you’re doing whatever’s put in front of you, they [00:06:40] tell you how to do it and you go in and do it. Are you now a contractor and is your limited company [00:06:45] now an agency which is now subject to VAT? So [00:06:50] you’ve got to make sure your contracts are set up the right way, because you know, the way the contract should be [00:06:55] set up. Is Bilal’s a dentist for for Payman. Yeah. And, um. [00:07:00]

Payman Langroudi: The associate contract. Right?

Bilal Ahmed: The associate contract? Yeah. So when we’re talking about associate contracts, we’re talking [00:07:05] about, um, the true nature of a contract, right? So it’s the practice is the practice is the practice is [00:07:10] the lead funnel is the source that brings all the patients, puts that patient into dentist chair. From that point [00:07:15] onwards, it’s all dentist. So the dentist decides whether they’re going to see a dentist, decides the treatment [00:07:20] care the course and course of care, the materials they used, how they do it, when they do it, and [00:07:25] it’s all within them. So what happens then is dentist says, I’ll do all this treatment plans five K [00:07:30] and of that five K there might be £1,000 worth of lab bills. We take half the lab bills and we [00:07:35] take half the revenue share. But then your accounts have to reflect that. So most [00:07:40] most accounts that we see don’t gross up the revenue. They will they will record the revenue in the accounts [00:07:45] as a net payment to them. So if they did like 12 grand and two grand was labs and five grand. [00:07:50] And then they’ve hit five grand, hit their bank. But that’s not the true reflection of their contract. True reflection. The contract is I know I [00:07:55] generated 12 grand, I’ve paid £1,000 out in lab bills because I paid £2,000 [00:08:00] at lab bills, got a grand back and I paid five grand out in licence fee. That’s how the contract should. That’s how your accounts [00:08:05] should be reflected. Because if HMRC ever investigate the first thing they’re looking at, show [00:08:10] me the contract, just show me the contract. Because now we’re looking at substance over form. We’re looking at nature. [00:08:15] We’re looking at is is is what’s represented represented [00:08:20] in the contract and does it match. If those things don’t match then you get into the realms [00:08:25] of HMRC compliance checks, which is not a fun process for anyone. So we make sure that everything [00:08:30] is above board and as it should be and as it should be presented.

Payman Langroudi: So we took like a tax investigation, [00:08:35] right? Let’s talk about those while we’re there. While we’re here. Yeah. What triggers [00:08:40] a tax investigation. So is it like a statistics thing.

Bilal Ahmed: So it’s statistical. Yeah. So there’s [00:08:45] a couple of things. So um I think it’s like 1 in 50 will be completely random, so it will be computer [00:08:50] said this year we’re just going to check Payman. Yeah. There’ll be no reason. There’ll be no rhyme or reason. Nothing. [00:08:55] So how that journey looks, how that journey goes, is somewhere something is triggered, a tax investigation. [00:09:00] We’ll go through what triggers it. First one is completely random. Yeah. Second is the [00:09:05] data you’ve presented on your self-assessment is not consistent with other dentists in your area, [00:09:10] in your demographic. So if you’re a dentist in central London and all [00:09:15] dentists have a have an expense base of 12% of their revenue. So if you’re showing £100,000 [00:09:20] revenue, your expenses are about 12 grand. Therefore you pay tax on the other 88. But [00:09:25] if your expenses are coming out like 30 grand and you’re an associate, then why is it so out of [00:09:30] kilter? Yeah. Now, bearing in mind the way the accounts are submitted, it’s all digital and everything’s put into neat little tranches [00:09:35] anyway. So if in that year you’ve done, um, let’s say you’ve done loads of training that year that [00:09:40] gets represented in staff costs. So it’s just staff costs that are out then HMRC. [00:09:45] Well, well we know. I don’t know that the algorithm will say something like I don’t know. We know statistically over [00:09:50] a three year period it bounces back to this number. So if we just look at this year and now look at the year before and the year [00:09:55] after, it all bounces back, nothing will to do.

Bilal Ahmed: You won’t even get you won’t even get anything communicated to you. But [00:10:00] if it’s consistently high, how can one person be spending so much money as an associate dentist when nobody [00:10:05] else is doing it? That then results in something called a knock letter. Knock letter is, um, [00:10:10] Payman. We’ve had a look at your accounts. Are you happy with the numbers you’ve presented? And [00:10:15] it might just be as broad as that. So are you happy with the numbers you’ve presented? Are you happy with [00:10:20] the numbers in your limited company accounts or your partnership accounts, or your self-assessment? The [00:10:25] answer is binary, right? It’s either yes or no. And if it’s no, I’ve noticed an error. Let me fix it and I’ll [00:10:30] put it right. Yeah. If it’s yes, I’ll send it off. Yes. Completely. Fine. That’s when they come back to you and [00:10:35] say hold on. Why why is this number now out? And they want to say, give me all the invoices, give me all the receipts, give me [00:10:40] all the proof of these costs for these areas. And then they’ll come back. And either you can prove it or you can’t. [00:10:45] And if you can’t prove it, that’s where you get into a world of hurt. Because now you’re looking at 100% fine on the outstanding [00:10:50] tax, due interest and penalties charged backdated from the time when it was due. So [00:10:55] does it pay? Was it worth it? Probably not.

Payman Langroudi: Is it only financial or [00:11:00] is it? For instance, I went through a period of, uh, [00:11:05] parking my car wherever I wanted, wherever I wanted. I mean, I wouldn’t park in a disabled bay. [00:11:10] I wouldn’t be a dick about it. I wouldn’t park in some stupid place where it’s going to stop buses [00:11:15] from. But I did the calculation that I’d rather park wherever I want, save [00:11:20] the time on that. But for me, time was the most important variable. Um, [00:11:25] get a ticket once every 4 or 4 weeks because the, you know, the enforcement [00:11:30] wasn’t there. Yeah. And not pay parking at all. And [00:11:35] for me, it worked. Now you. Some people could say you should never [00:11:40] park in a double yellow or double yellows are there for safety reasons, and I’m doing something immoral. [00:11:45] Yeah, yeah. But I’m saying from the accounting perspective, if someone says I’m gonna [00:11:50] cheat, if you like, on my taxes, I’m not going to spend the money, I’m going to invest [00:11:55] the money. And if I get caught, I’m going to pay the fine. Where [00:12:00] do you stand on that?

Bilal Ahmed: So there’s probably three things we need to go through there because there’s like three.

Payman Langroudi: It’s a bit off [00:12:05] the wall.

Bilal Ahmed: Yeah. So so I’ll go through the first one. So. So I do this sometimes. So let’s say um [00:12:10] I’ve got Team Day in Manchester and the nearest bit of parking I can get is, is the one right [00:12:15] outside the building. But it’s got a two hour limit. So I’ll say I’m here for six hours. It’s two [00:12:20] hours. I don’t want to get out. Move my car. It’s not worth it. I’ve got all my team here. There’s great expense incurred here for me to then [00:12:25] dip out and go find somewhere. I’ll just take the ticket. So I’ve overstayed my welcome in a bay. [00:12:30] I’ll take the £25 ticket because it’s cheaper. Because realistically, I’d rather pay that £25 ticket than someone [00:12:35] dinged my car in a car park and pay a £200 repair shop bill. So that’s so, yes. [00:12:40] Is it tax deductible? No. It’s never taxable. Fines and penalties are not tax deductible. [00:12:45]

Payman Langroudi: So you know. But I mean I’m there there I’m not paying my parking. What if I decide I’m not going to [00:12:50] pay some tax.

Bilal Ahmed: That’s a separate attacks. On what. Whatever it is. Okay.

Payman Langroudi: Whatever it is I’m going to [00:12:55] I’m going to start expensing family holidays for the sake of the argument. And [00:13:00] if I get caught, I will pay the fine. So is is it does it [00:13:05] go beyond the financial. Do I now have some sort of criminal record sort of thing.

Bilal Ahmed: So it depends on what [00:13:10] it is. So um, it could be a slap on the wrist or it could be, you know, fraud. [00:13:15] Yeah. We’re talking about different things. So, um, with things like, [00:13:20] you know, we we do see it. We, you know, why are you putting this through the business? Like, you know.

Payman Langroudi: And what are the limits? [00:13:25] What are the limits? I mean.

Bilal Ahmed: So the definition of an expensive business is something that’s wholly and exclusively incurred for business. [00:13:30]

Payman Langroudi: Wholly and exclusively.

Bilal Ahmed: Now.

Payman Langroudi: So I buy a laptop. If I use it at home, it’s not [00:13:35] wholly.

Bilal Ahmed: No. So there’s certain things that aren’t, um, that say like Incidental [00:13:40] additional use is by the by like a mobile phone is really good example of this. So [00:13:45] I as I as an employee give all my staff mobile phones and they have unlimited, unlimited, [00:13:50] unlimited minutes texts and data if they use that whilst they’re out and about. I don’t really care because there’s no [00:13:55] incremental cost to me. And if they use it for personal gain, there’s not they’re not subject to benefit in kind tax because it’s incidental [00:14:00] that they’re using it for, for for the purposes intended. And if they’ve done something personal it’s incidental.

Payman Langroudi: Yeah. [00:14:05]

Bilal Ahmed: Where something that’s wholly and exclusively like where in your podcast studio right now, if you bought [00:14:10] a Ferrari F40 and parked it in the background, use as a prop that’s wholly exclusively [00:14:15] for business. The moment you drive a single person a mile in that car now is now subject to benefit in kind [00:14:20] tax. But if you drove that to business meetings and you drove it to client meetings or supplier meetings, business [00:14:25] expense, completely fine business vehicle. But where where someone like me, for instance, [00:14:30] that works from home. If I went and bought a GT3 Rs and said I only used it for content and [00:14:35] I rigged it up for cameras. That said, every time I get in the car, I press a button. I’ve got camera one, two and three set up, and [00:14:40] it records me as I’m going. And I only use it for business purposes. And I’m well within the realms of what I’m [00:14:45] allowed to do, because it’s parked at my house means it’s available for personal use [00:14:50] by virtue of the fact that now it’s available for personal use, I’m subject to a benefit context [00:14:55] whether I do it or not. So it’s it’s where things where you start toeing the line look. And [00:15:00] I had a conversation, I had a consultation with someone last week. The consultation lasted six minutes. [00:15:05] The reason why the consultation lasted six minutes because he hit every single red flag. And the [00:15:10] call started with, this is how much I earn. Um, I can’t get Ahold of my account. He’s moved [00:15:15] to Dubai. I’m looking for a new account. What do you want from an account? Well, before he left, he said I could set up [00:15:20] a child trust fund in my grandparent’s name. And, um, declared dividends up to the trust [00:15:25] fund, and then that could pay for my kids private education, well known tax avoidance scheme. And so well known [00:15:30] that HMRC are now saying if I know about it and I don’t report it, even if [00:15:35] I didn’t set it up.

Payman Langroudi: Yeah, yeah.

Bilal Ahmed: I’m. I’m liable for £1,000 a day fine for [00:15:40] not reporting it. Well, personally. Well, not personally. My business is but £1,000 a day. Fine. I’m [00:15:45] reporting you because I’m not losing £1,000 a day. But I also said to him, I can tell you how that [00:15:50] conversation went because he didn’t put it in writing, did he? No. He told you a phone call, didn’t he? Yeah. He told you how to do it as well, [00:15:55] didn’t he? Yeah. Anything. Tie it back to him. No. So he walks away with his hands clean. You pay [00:16:00] a nice, handsome fee for the tax advice. Tax advice and where this scheme falls down. And this is the conversation [00:16:05] we were having before we hit record is when this tax avoidance. Tax avoidance or when is it effective tax planning. So [00:16:10] that scheme means what happens is you have you set up this um trust fund [00:16:15] in grandparents name and instead of you taking dividends personally, you declare dividends [00:16:20] up to the trust. And the trust uses that to pay for the child the child’s education. So quite tax efficient scheme to do [00:16:25] that. Where that whole thing falls down is there is no reason for you to have just given shares [00:16:30] to somebody in your business. You wouldn’t just give me 20% of your business now would you? There’d have to [00:16:35] be a commercial reason for you having done that. Yeah. So when we were talking about substance over form previously, is [00:16:40] HMRC want to know the commercial reason for why you did what you did? If you can prove commerciality [00:16:45] then it’s fine.

Bilal Ahmed: There’s a commercial reason i.e. my grandparents stumped up the cash originally [00:16:50] to pay to help me run my business instead of taking loans from the bank. I took it, took [00:16:55] from my grandparents, and instead of them paying me back, we did a debt to equity conversion and the debt was equal [00:17:00] to 10% of the business. So I gave them 10% of the business. What they do with their money thereafter is up to them, and [00:17:05] that’s completely fine. But if there’s no commercial reason as to why you’ve just given somebody shares, it makes no sense. [00:17:10] And that’s where HMRC will get you. So as I said, there’s three things to unpack. Is [00:17:15] is there’s a lot more to this. There’s a lot more nuance to go through than just to say yes or no and just sort [00:17:20] of go back to the start of this conversation was there is a third reason that might lead to a tax investigation. Someone’s [00:17:25] dobbed you in. If someone just does not like you and they it [00:17:30] could be a disgruntled employee. It could be someone that knows you’re doing all and sundry through your business, and you [00:17:35] run it through and off it goes. And you know, then they’ve got something. And then now people are incentivised because [00:17:40] the whistleblower scheme now means people can get paid a proportion of the reclaim and the whistleblower [00:17:45] gets paid and protected throughout, throughout the entire process now.

Bilal Ahmed: Yeah. So those are the three reasons that [00:17:50] you might end up with a tax tax investigation from HMRC. And from our perspective, just [00:17:55] to go back to that conversation that was having with the guy last week. So that was the first red flag [00:18:00] and the second red flag is, well, how do I not pay any tax? I was like, well you can’t because tax [00:18:05] is a proportion of profit. So if you want to pay no tax, make no profit. So if you’ve made 200 grand profit, [00:18:10] go spend 200 grand and you’ll have no tax to pay. Super legal but I’ll pay tax. I [00:18:15] pay VAT every quarter. We work with dentists. Dentists aren’t that registered. So that’s 16.6% of my top line [00:18:20] that I’m just giving to HMRC. Hmrc probably make more for my business than I do. So 16.6 of the top line and [00:18:25] then I give them 25% corporation tax. I still pay employers National insurance, and I still pay income tax on the money that I take out. And [00:18:30] I bought a house this year, so I paid him a whopping bit of stamp duty as well, and if I could have made that zero, I [00:18:35] would have done. But it’s not zero. It’s a stupid number and I hate it, but I pay it.

Payman Langroudi: So [00:18:40] I mean, you make an interesting point right around the [00:18:45] question of, you know, what is the difference between a good accountant [00:18:50] and a great accountant? Yeah. And I just want to I know, [00:18:55] you know, you’ve got your own sort of area sector specific answer to this, but [00:19:00] but what is the difference between a good lawyer and a great lawyer. Yeah. For [00:19:05] me is the great lawyer says the good lawyer says these are your four options. [00:19:10] Yeah. The great lawyer says these are your four options. I would pick option three. Yeah. [00:19:15] If it was me. Yeah. Um, and it’s almost around the communication [00:19:20] sort of area. What would you say if I said good, good [00:19:25] accountant. Great accountant. What’s the difference?

Bilal Ahmed: So my background’s corporate finance and I’ve only ever reported at board [00:19:30] level. So it’s if I’m working with decision makers, really why I enjoy what I do now. [00:19:35] So why I hated the corporate world was you’re steeped in bureaucracy. Yeah. There’s layers of people that want to [00:19:40] take credit. There’s layers, layers of people that has to go through. You’ve got to have.

Payman Langroudi: Conversations.

Bilal Ahmed: In corridors. It’s slow, it’s laborious. [00:19:45] The right person has to get the right credit before something moves on. Everyone’s so risk averse and nobody wants [00:19:50] to do anything. And then we end up getting sort of paralysis through analysis. Hated it. Would really enjoy what I [00:19:55] do, what I do now. So it’s as you’ve said, that’s what we stamp on. So that’s what we work on. So if I’m [00:20:00] working with subject matter experts is I will say these are your options A, B and C. This [00:20:05] is, this is then we quantify a b and C then we rank them that says if [00:20:10] you want to do A these are the approaches to A. If you want to do B, these are the approaches to B. If you want to do see these approaches [00:20:15] to C. C is a vanity project. Put it to one side, throw it in the bin. It’s not worth doing. Now everything [00:20:20] that C is categorised under is long grass. We’re talking about if the business succeeds you want to [00:20:25] do this well let’s focus on that. So that takes a and B a and b. The options are and if we if we [00:20:30] achieve A, then it might be worth an extra 100 grand to your bottom line. If we achieve B then it’s extra 50 [00:20:35] grand. Well the answer is now super obvious. It’s A. That is the one that we should go for with a now [00:20:40] is then. It’s not not just option. It’s option to implementation [00:20:45] is how do we now take a and put it into reality. So we take all of A [00:20:50] and we run that into a Gantt chart for the year that says what are the code dependencies for a. [00:20:55] So there might be six objectives that we want to achieve on A, but we can’t do 4 or 5 and six until we’ve done one, two and three.

Payman Langroudi: To [00:21:00] make it an example. So A might be.

Bilal Ahmed: I’ll give you a real example. So we’ve just done this [00:21:05] with a practice. So we they I call it silly season. I call Covid silly season [00:21:10] because pre-COVID you could go buy a practice as a principal. And the evaluations were pretty, pretty [00:21:15] sensible around that time. And the debt factor was really low. You could go buy practices as principal and still cover [00:21:20] your income, what you’re earning as an associate. Yeah, and you’d be fine. Covid knocked all that out the wall. [00:21:25] Then you had the the economic or the sort of economic within dentistry factor where you had dentists [00:21:30] and Portland fighting for every purchase and then skewed multipliers. So, you know, there’s people [00:21:35] getting ten times multipliers on exits that shouldn’t have been ten times multipliers. That factor was still really [00:21:40] low. Now, what you’ve done is set an unrealistic expectation for what practice is worth. And everything was [00:21:45] just on this adjusted EBITDA figure. So it says if it did this, then it’s worth this. Well, [00:21:50] if my Ford Fiesta had a Ferrari engine, I’d sell it as a Ferrari. But it doesn’t. It’s a Ford Fiesta. So you’re going to buy it as a Ford [00:21:55] Fiesta. So this is where this is where the numbers got a bit got a bit wayward. So [00:22:00] what then happened is private dentistry went crazy through Covid again.

Bilal Ahmed: Economic factors. You had furlough, you had [00:22:05] free money. People sat at home doing nothing, and those that were working were on zoom calls looking at themselves, wanted all the [00:22:10] cosmetic work because it was free money. The bills got to come due at some point, right. So [00:22:15] people are then stocking up for all this work. What you’ve got is where we refer to as [00:22:20] teeming and lading, where new money is paying for, um, past costs. So Invisalign [00:22:25] is a really good example of this because I refer to Invisalign as a Ponzi scheme, and I think it’s [00:22:30] a I think the only person that wins out of Invisalign Invisalign labs. The reason is you go, you [00:22:35] go price something at three three and a half grand for Invisalign Payman Invisalign take a third of that, [00:22:40] the associate takes a third and you’re left with a third. But you’re left holding the baby for 18 months because you’ve got to do all the treatments, [00:22:45] all the chair time, all the nurse costs, all the overhead costs. You really don’t make that much, much out of it unless [00:22:50] you price it correctly or you’re the one doing it. Or you can close that treatment down about 3.5 hours. But that’s a whole [00:22:55] different conversation for another day. So if you’re now doing all these Invisalign open days and you’re [00:23:00] using all that money that’s coming in to pay off yesterday’s debts, it’s fine.

Bilal Ahmed: As long as the revenue [00:23:05] keeps going up the moment that line flattens, now you’ve got an issue. The bigger issue [00:23:10] comes when the revenue starts decreasing, because now you haven’t got new chair. Time to pay for all debts and you start building up [00:23:15] all your liabilities. So to give you an example of how we would do this and what a real world example is, we went in and looked at a business, [00:23:20] and we identified about £1 million worth of business that wasn’t worth them doing because it was losing their [00:23:25] money on, on, on every treatment. So if you’re discounting your top line just to bring the money in [00:23:30] and we can work out your profit margin historically was about 13%. It’s actually lower. It’s about 9.8%. [00:23:35] And you’re discounting everything about 20%. You’re losing money on every single thing on [00:23:40] for this, for this million pound. So what was the solution on the back of that solution? On [00:23:45] the back of that is you close your three surgeries, you stop discounting and then we can lose the associate overhead [00:23:50] cost. So what does that mean then? We’ve lost £1 million of revenue. Business must be crippling. No, because [00:23:55] now we’ve we’re not losing money on those treatments.

Bilal Ahmed: Now we’ve shut down the surgery. [00:24:00] So we haven’t got the corresponding overhead cost. So we’re now five surgeries. Profit now increased on less revenue. [00:24:05] But that’s pure that’s action down to implementation. And even to the point where [00:24:10] we introduced a sliding scale payment that says look we want to rationalise want to bring this number [00:24:15] down, but the sliding scale has to be at these rates. We will now work out at what point the sliding scale [00:24:20] pays up. So you can have 40%, 42.5%, 45%. And we’re paying accelerator. So [00:24:25] if you’re now if you’re over. So if you’re revenue prior exceeds a certain amount for the month, then we’ll pay you 50% [00:24:30] everything. Because we know once you get past the point of revenue, the incremental cost doesn’t move with it. So now you’re [00:24:35] more profitable. But it also prevents sandbagging, which is. So if I’m currently at 45%, [00:24:40] why would I start this treatment this month? Why wouldn’t I do it for next month. So my revenue so I’m bolstering my [00:24:45] next month. So by paying the accelerator you stop sandbagging. So it all goes into the month that it should go [00:24:50] into. So so it drives the right behaviour and it rewards the right behaviour. But this is a conversation [00:24:55] we were having offline.

Bilal Ahmed: Right. Which is what is the point of a KPI. A KPI is only as good as the action you can do on [00:25:00] the back of it. What is the KPI here? Revenue per hour. What is revenue per hour? Tell us, how much money are we going to make? [00:25:05] How profitable we are in the period, how much cash we’re going to generate and how much money I’ve got to do all this stuff. But if you’re [00:25:10] only going to look at revenue per hour and do nothing with it, then it’s pointless. Kpi is nothing without the action you can take [00:25:15] on the back of it. Yeah, and that’s a real example that says implementation to action. And that’s [00:25:20] what we do as a business. So we’re kickstarting a project with one of our clients down in Essex who’ve [00:25:25] decided they want to sell, and we’ve worked out if they sell today, they’ll get about 1.5 million. If [00:25:30] we can achieve everything we want to achieve over the next 12 months, they’ll get about 1.9 million. So there’s a there’s 400 [00:25:35] grand on the table. They will decide where they want to get off that journey. Because even if we get halfway through, [00:25:40] still two grand more than they would’ve got if they didn’t do it. And it’s worth it for them.

Payman Langroudi: And is that [00:25:45] in, in in essence, sort of every pound you save in cost becomes [00:25:50] £7 in. Yeah. It’s in multiplied EBITDA. [00:25:55]

Bilal Ahmed: Correct. There’s a bit more to that. So this practice that we’re doing it with. So they’ve tried to [00:26:00] sell it previously. And the feedback they had from the brokers was you’ll get you’ll cap out at about three, three [00:26:05] and a half times EBITDA because it’s principle led. So what we’re saying is over [00:26:10] the next year, what we’ll do with you is, is make it more associate led. So how we’ll do that is they’ve [00:26:15] got five associates across. The practice is we will monitor the the profitability of each associate. [00:26:20] So we can do panels and profitability per associate, which now drives [00:26:25] the principles objective, which is don’t worry about your pocket over the over the short term, [00:26:30] because yes, your revenue will drop, but the outcome is more money to you at the end. So all you do is you’re deferring it [00:26:35] now for for this project, your time and energy should be now on systems and processes and [00:26:40] building up the capability of your associates, because that’s what gets us the best multiplier after [00:26:45] the fact. Because if we can now prove to a buyer that it that we’ve done all these systems [00:26:50] and processes, then we’re pushing beyond seven times EBITDA, we’re probably in the realms of 7.1, 7.2, 7.3. [00:26:55] And then we’re taking away less deferred element of that of that purchase as well. [00:27:00] So someone, you know, one of the big corporate buyers will say, well, if it does this, this and the other will pay you eight times, but we’ll defer this [00:27:05] bit of it. We can argue, no, we’ve done it.

Bilal Ahmed: So you can see we’ve done it. We can demonstrate we’ve done it. [00:27:10] We want to defer less, which is a conversation we’ve had with buyers that says, no, we can evidence we’ve achieved this [00:27:15] and go, yep, we can see it. We can see it in the numbers. We can see your logic. You can see how you’ve come to that assessment. So when they’ve done [00:27:20] their financial due diligence it ring fences. How we’ve done it. Because I’m used to having all my numbers audited. [00:27:25] So when I worked in corporate Deloitte came and checked my numbers. So financial and non-financial. [00:27:30] So my process is always logical, which is can I prove it? Can I substantiate it? Can [00:27:35] I take you on a journey of how I got there? It wasn’t just a finger in the air job that says, this is how I got it, because then it’s not. [00:27:40] It’s like doing your math, your math test, right? If you can’t show your working, then the answer is useless. You have [00:27:45] to show your working. So the idea in the background is, how do we take all of this? Present it in such a way [00:27:50] that you can buy it or the seller can get seller can have confidence in what they’re buying, and it makes that entire process [00:27:55] really good, because the other side of it is, and we’ve been on the right side or the wrong side of the [00:28:00] table is without having done all the PhD, the buyer will pull in an 11th hour move.

Payman Langroudi: Sorry. [00:28:05] The 11th hour.

Bilal Ahmed: Yeah. And say X and Y Z’s happen. We’re paying you £1 million less, or [00:28:10] we’re going to defer an extra million pound to, you know, if you achieve x, y, z objective. No. Not doing it. So we can [00:28:15] pre-empt that. So we can we can pre-empt that at the start of the journey. So that doesn’t happen. But then [00:28:20] if I’m on the buy side and I know there side hasn’t done any of this, I’m ripping the whole thing apart. [00:28:25] And I’ve just done this with one of my clients who buying a practice. We’ve just got 150 grand off the asking [00:28:30] price, so it was on the market for 1.25 million. We’ve got it for 1.1 million. Still 50 grand more than [00:28:35] I wanted to pay for it, but it’s not my money. So went to my clients and said, look, this is what this is what it’s doing. Currently, [00:28:40] I can’t see a 1.25 valuation. I can see 1,000,050. Any [00:28:45] overage is is up to you guys, but I think you can get it to a £1.7 [00:28:50] million in about a year and a half, two years by doing X, Y and Z. And they’ve gone, well, we’re [00:28:55] happy to pay 50 grand over because we can see the trajectory now to 1.7. So we’re then giving our buyers confidence. [00:29:00] But conversely is I did one about [00:29:05] six months ago, one of my clients, I told him to walk away from it. That’s not worth buying. [00:29:10] Don’t even pay for the bank valuation because it’s two and a half grand bank bank valuation, and I know what it’s going to come back [00:29:15] to. It’s not worth doing because the business has been in decline for about three years, and [00:29:20] some of the information that we had in the background was the reason why the.

Bilal Ahmed: So this singular practice [00:29:25] was a part of a group of practices, and we were selling it separately because it was pulling down the EBITDA of all the other practices. [00:29:30] So what does that tell you about the shape of the practice? And then when you start running the data in the background, you can [00:29:35] just see decline year on year, decline year on year decline, year on year decline. And it’s not worth it. So you’re almost better [00:29:40] off just setting up a squat at this point. And in that case, the practice isn’t worth any more than its underlying squat value. [00:29:45] So fixtures and fittings and anything there’s no goodwill you really. And so client yet and [00:29:50] walking away from it bumped into the person that went and bought it. They’re not having a great time with it [00:29:55] and they’re not having a great time because they’ve overpaid for it. And they they thought the package was going to be busy than [00:30:00] it was and it wasn’t. And as they’ve come in, the staff have now left in the background as well. So what was the point? [00:30:05] Now you’ve got this big debt over your head with no corresponding revenue and [00:30:10] not the thing that you even wanted, and you haven’t got enough revenue coming in to even change it the way you want it to look. So there’s all there’s [00:30:15] all these, you know, depending on what side of the table we’re on, we behave and act different ways. Obviously we can’t [00:30:20] we can’t be on both sides of the table because we’re negotiating.

Payman Langroudi: The same deal. They can’t know.

Bilal Ahmed: We’ve [00:30:25] got a weird one at the moment where we sort of are, but we’ve had to create walls [00:30:30] in our own business that says, I can’t see Southside. I’m not allowed to see Southside. So my.

Payman Langroudi: Direct. [00:30:35]

Bilal Ahmed: Yeah. So my directors, my fellow director Kieran is looking at Southside and we’re doing that through [00:30:40] our other business, Intel Beacon, where he’s acting on sell side. So Heath or green which is the accountancy [00:30:45] firm is acting on buy side. So I can’t get involved in that. I can’t look at how he got his [00:30:50] numbers. So and I would approach it, I would evaluate it in the exact same way I would do any of the business. We’ve had to go back to our indemnity, [00:30:55] even our governing body, the ICW, to say, can we even do this? And I said, look, as long as you’ve, you’ve, [00:31:00] you’ve met your ethical constraints. So that threat to independence, subjectivity, objectivity, [00:31:05] and as long as you can prove you’ve done that which we have, then it’s fine to do it. But that’s where the ethics then comes [00:31:10] back down to it. That says, as a chartered accountant, I’m bound by a set of ethics, and I have to take the right decision. [00:31:15] On the back of that says this isn’t the right thing to do, but it is in this case.

Payman Langroudi: Look, obviously in the [00:31:20] in the buying of a practice, you’d like to know as soon as possible that someone’s thinking about buying a practice, right? [00:31:25] Yeah.

Bilal Ahmed: I want to know whether it’s a fleeting thought.

Payman Langroudi: Yeah, yeah, yeah. And the same on the sell side. Yeah. You want [00:31:30] to know as soon as possible. So you’ve got that runway of time to prepare the thing, not [00:31:35] just for sale.

Bilal Ahmed: So it’s. We can demonstrate time and again is, is [00:31:40] if you’ve got up and you’ve lost a love for it, sell it. Because every month that goes by, every [00:31:45] pound, you now start losing in efficiencies. Now you’re losing £7 on exit. So if you’ve got to the point [00:31:50] now where you’ve lost the love for it, sell it and we can package it up to sell it straight away.

Payman Langroudi: Yeah. But what I want to [00:31:55] know is let’s say I’m not looking to buy or sell. I’m running a business. Yeah. How often do [00:32:00] I consult with you, my accountant? And how involved do you get in, in [00:32:05] in the, you know, showing me what to do? Yeah.

Bilal Ahmed: So the day to day stuff is, is really where our [00:32:10] bread and butter is. So most of what we do is the in life management. So we’ve been working with a [00:32:15] one of our practices in the Midlands. Fantastic clinician. And she’s she’s absolutely amazing [00:32:20] at what she does. And I’ve got a lot of love for her. And she’s taught me loads. And the way she looks at her business is phenomenal. And then [00:32:25] I’ve got a practice in the North West across three sites that does the same thing. And the way they look at the business is [00:32:30] fantastic. So what we’re doing with them is understanding the what next bit. [00:32:35] Yeah. So in life don’t want to sell. We’ve got we want to exit. We want we want maximum [00:32:40] value so we can do something else. So we’ve we’ve we’ve been on this journey with this practice now to go from two surgeries [00:32:45] to five. And one of the things was, is then at what point do we incorporate into a limited company? Because [00:32:50] all the money we’re making at the moment is getting plugged back in to take it from two surgeries to five. So we can now help you understand [00:32:55] when to recruit, how to recruit, how much to pay. Because if we’re now, we can then say, right, [00:33:00] we’re all all the numbers are green, all the KPIs are where they are. Budget says we were going to do [00:33:05] surgery three in August. You’re actually beating budget. You need to start now. And by start now, you need to go recruit [00:33:10] now. Because what we can’t have is surgery three open and then surgery three is now open.

Bilal Ahmed: Now you’re going to go [00:33:15] find a nurse because. Too late. What we almost want to over recruit slightly beforehand. Get them [00:33:20] to know these systems and processes and get them. We can help you identify that. But then what was cool about this one was [00:33:25] so this was a different one. In the same sort of thing though, is we did a walk through the practice and [00:33:30] we said, for you to do surgery 3 in 6 months later, do surgery four, that’s twice you have to shut [00:33:35] down the front of the practice. I’d rather you did surgeries three and four now and take and [00:33:40] not take the the sunk cost or the opportunity cost. Don’t don’t take the opportunity lost down the road. Go through that pain [00:33:45] once and we can do it. And surgery five is going to be an annexe at the back anyway. So it had no had no impact on the main [00:33:50] building. This is what we would get involved in at the start that says and then one of our practices [00:33:55] in the Midlands is now come to the end of building a mega site. So eight surgeries, [00:34:00] we’ve done a walk through and worked with the builders, existing practice and their second [00:34:05] site. We’ve done a walk through the builders to help identify what they can, claim capital allowances, and [00:34:10] make sure they get the maximum tax deductibility because not everything is tax deductible when you build your practice out. So if you’ve got [00:34:15] things like disability ramps can’t claim not tax deductible. Can claim. Yeah. No [00:34:20] claim on the back end when you sell the practice.

Bilal Ahmed: Can’t do anything about it up front. Now they’ve got like a ten foot [00:34:25] drop on the front where they’ve had to dig it out and then landscape it so it’s safe. But [00:34:30] that on its own you can’t tax deductible because it’s got nothing. It’s not holding exclusive. [00:34:35] Your business has no impact. But when working with the contractors we identified, they would have had to have done that. So [00:34:40] we can so where all the irrigation for all the surgeries runs through, runs through the practice, [00:34:45] down the middle, at the front and out to the side, well, we would have had to have dug it up so [00:34:50] we can put irrigation in. So we’re going to so again we, we we speak to HMRC beforehand that says look this is [00:34:55] what’s happened. We had to do this to put it back. It’s going to cost us this. Yep. Fine. Tax deductible. So if I [00:35:00] know about it beforehand then I can deal with it where you’ve got the relationship with the contractors and it’s happening. I can do something [00:35:05] about it because I can get them to make sure their invoice, their statement of the statement of work or reflects what [00:35:10] I need to reflect. If it’s after that, you’re never going to get hold of the builder afterwards. They’re not going to change anything afterwards. They got no incentive [00:35:15] to do anything afterwards. So whilst the relationship is good and they’re still working for you and they’re still doing things with [00:35:20] you, is we can make sure that it reflects the nature of the work and you get the maximum tax deductibility. [00:35:25]

Payman Langroudi: But can you play the other side of it for me, whereby can [00:35:30] you tell me about an example of where the numbers are saying do x, [00:35:35] y and z? But the immeasurables said [00:35:40] do something else. And I mean, you look [00:35:45] at you look at a business purely, purely through through the numbers. If if you look at the business [00:35:50] purely through the numbers, you could say the cost of, I don’t know, whatever it is isn’t [00:35:55] worth it. Yeah, yeah. Whereas in a business and especially in a service [00:36:00] business, some of the gold, some of the most important sort of cornerstones of success [00:36:05] of that business are immeasurable. Yeah. Agreed. Yeah. So if an [00:36:10] accountant or someone, you know, someone who’s looking at numbers and KPIs is [00:36:15] allowed to make the decisions. I know, you know, you’re you’re an advisor. Yeah. But let’s say that [00:36:20] the principal is making decisions based purely on numbers. Have you you know, there must be examples [00:36:25] of where it’s gone wrong. Yeah.

Bilal Ahmed: Yeah. So. So to [00:36:30] ring fence, what you said before about what makes the difference between a good and a bad lawyer.

Payman Langroudi: Yeah. Well, good and great.

Bilal Ahmed: Good [00:36:35] and great. Yeah. Sorry. Good and great. By the time you need a lawyer, you’re already [00:36:40] in a pickle. A great accountant should be putting out fires before they become fires. That’s [00:36:45] what a great account should be doing for you. So before it becomes a problem, they should have put out the fire and fixed it and given it to you. [00:36:50] Where? Where the immeasurable, where things haven’t gone right or [00:36:55] wrong is. I think it’s down to an expectation gap is we can’t come in and run your business for [00:37:00] you. We’re not allowed to. There’s a specific, specific bit of legislation called client managed services, where if I’m now seen [00:37:05] to be running your business for you, I’m personally liable, not Heath or green bill ALS personally reliable. [00:37:10] Well. So that’s my personal assets at risk. That’s my that’s my livelihood. That’s everything. So we don’t cross [00:37:15] that line. So accountability is a big thing here that says we can show you the path. We can illuminate [00:37:20] it. And we do this through our company called Intel Beacon, where we use power BI to rip all the data out [00:37:25] your PMS and show you. But we spend a lot of time on the educational side of things.

Bilal Ahmed: So when [00:37:30] any any client joins us on this journey, I spend two hours with them on a strat call. We don’t talk numbers. I [00:37:35] want to know why. I want to know what’s motivating you. Why do you want to do this? [00:37:40] Because I’ll be honest. I talk a lot of people out of doing this stuff because I can’t see it. I can’t [00:37:45] see how they’re going to make this successful because there’s there’s there’s a negative there’s no correlation [00:37:50] between a great clinician and a great practice owner because there just isn’t. I like eating at restaurants. Does not [00:37:55] mean I should open up a restaurant, because if I don’t understand, you know, turnover rates, dinner [00:38:00] service, recruitment, marketing, HR, legal, then those things aren’t going to correlate. So, [00:38:05] um, where we’ve taught clients out of doing stuff is because we just can’t see [00:38:10] how they want to do it, but then they go, sod it, we’re going to do it anyway. Fine. If you’re going to do it anyway, it’s not [00:38:15] like I’m going to wash my hands of you. I’m still going to be around. I’m still going to be on your side, because I still have an obligation to.

Payman Langroudi: Make what I mean, what I mean, [00:38:20] though, what I mean, maybe you’re your KPI tells you this [00:38:25] associate is earning less per hour than this associate. Yeah, but [00:38:30] maybe in if you qualitatively looked at it. Yeah. [00:38:35] This associate is building trust. So so that in six months time he can [00:38:40] present gigantic um treatment plans. And the other one who’s earning more right now [00:38:45] isn’t being great with his patients. He’s overcharging or whatever. Now, from the stats, [00:38:50] it looks like the one earning more is doing well. And we need to go talk to the one earning less. Yeah, yeah. [00:38:55] And when you do that, if the guy is doing what I said, if he’s, if he’s going [00:39:00] slow, building trust, you know, small bits until, you know, later [00:39:05] on he’s gonna he’s gonna present big treatment plans if a, if [00:39:10] a, if the principal comes to and says, hey, my accountants told me you’re not making enough money, that kid [00:39:15] who’s probably a really great dentist, is that that nuance, right? That nuance. And I can [00:39:20] imagine principals beating the heads of associates with the stats. Now, [00:39:25] sometimes it’s correct. But I’m saying examples of times when it’s not correct.

Bilal Ahmed: Advice, [00:39:30] though, that if an accountant does that, they’re not in the right. They should not be advising you. Because if [00:39:35] all they’ve done is look at the numbers, I’ll I’ll give you I’ll give you a real world example. So when I was employed, I worked for [00:39:40] National Express. I worked in group finance for National Express. There was a team of six of us that looked after about £2.2 billion [00:39:45] worth of business. This is where I trained. So I trained as a pure technical accountant at National Express Group finance. [00:39:50] I got to do some weird and wonderful things. I got sent out to the Middle East to go help build a bus network in Bahrain, [00:39:55] build tenders for projects out in Mecca, you know, tendering for a fifth of [00:40:00] the bus network in Dubai to go private. Got to do some weird and wonderful things. One of the things I got to [00:40:05] do was work alongside the health and safety director of the entire group, and one of the key [00:40:10] metrics before any of the board of directors got paid their bonuses was, did we kill more people [00:40:15] this year than we did last year? Now, you can imagine how popular I was around bonus season, because my number then quantified [00:40:20] whether they got paid their bonuses or not. So again, qualitative information an [00:40:25] absolute number is pointless. Did we kill more people than we did this year versus last year? [00:40:30] No. But if you put 20 people more in comas and lifelong care, did [00:40:35] we do better or worse? So the rail uses something. Rail network uses something called an fwi [00:40:40] fatalities weighted index, which weights every last time injury, minor or major injury [00:40:45] as a percent as a proportion to a fatality.

Bilal Ahmed: So fatality is one. A major injury is 0.1 [00:40:50] a last time injury is 200th and a minor injury is 1,000th. So we’re taking all of these things in aggregate. Now [00:40:55] that says why is this happening? So I then had to go back and do three years worth of data and restate [00:41:00] prior two years data with this new metric, with this, new with with this, with this new figure. And it [00:41:05] got checked by Deloitte. Yeah. So again numbers numbers on their own are pointless. [00:41:10] They do not tell you anything. So where you’ve got America that’s telling us every single thing that. Why [00:41:15] is America. Bear in mind we’ve got the biggest bus network out in in Spain. [00:41:20] So ulcer bus network out in Bahrain. Um. Not Bahrain in Morocco. Rail [00:41:25] network in Germany. Rail network CTC in London. Um National [00:41:30] Express coaches. The the bus network out in the West Midlands, the West Midlands travel [00:41:35] and then all the little yellow American school buses in America. And you think all these stats coming [00:41:40] out of America are crazy? Like why is there volume of injuries so significant, lost [00:41:45] time, injuries so significant? When you take a step back and you start looking at root cause you’ve got first principles they [00:41:50] have to report last time injuries so they can go to the doctor and the insurance will pay for it if [00:41:55] you just go to the doctor and don’t report it. That comes out of your pocket.

Payman Langroudi: Insurance doesn’t pay.

Bilal Ahmed: Correct. So you have [00:42:00] to report it. Yeah. So now does that mean we’re hurting more people in America? No. It just means there’s more incentive for them [00:42:05] to report. Yeah. So. So we normalise that data. So that sort of answers your question that says a number in isolation is [00:42:10] pointless. Yeah. So let’s take associates. Let’s take an associate an example here. So we [00:42:15] had an associate finish a qualification. And he said I now I [00:42:20] now want to earn 50% of everything I do. So we had a conversation with associates. Right now you [00:42:25] lose this money by being here. So your average average revenue per hour is £850 [00:42:30] for you to break even. I need you at £1,400 for you to be viable, and I need you to do it in about 18, £1,900 [00:42:35] a day. So let’s work out how we’re going to do that. So mine isn’t to [00:42:40] now tell you how to do dentistry, because I’m not a clinician and I never stop and never cross over that line. But I want to show the associate [00:42:45] what this actually means. From that, we work with the principle that says, you’ve got [00:42:50] to make a decision that says you’ve got to work with your associates because that’s part of your job. But if you’re stuck in surgery, then you’re doing [00:42:55] wrong by your associates.

Bilal Ahmed: You keep beating with a stick when you’re the one not showing them systems and processes. So have they [00:43:00] got the right training? So do you want to sell? Do you want to send them on a bedside manner? Course. You [00:43:05] know, effective effective communication course that helps them get to where they want to get to. But what we know with dentists [00:43:10] and it works really well is look, I’m just going to assume you’re all really smart because you had [00:43:15] to be to get to where you where you got to. And one thing for certain is you’re super competitive because you want to get to where you are without [00:43:20] the competitive gene. They shy away from numbers because it’s something they’re not certain on and [00:43:25] with anything. If you’re not happy with it, you’re not certain with it. You bury your head in the sand. So let me take you on that journey of certainty. Let [00:43:30] me show you how I’ve measured. You tell me it’s fair. Tell me it’s unfair. Tell me the nuance that I [00:43:35] don’t know behind what you do. Because if I can see your hourly rate currently is 850 an [00:43:40] hour. But I can see all these.

Payman Langroudi: Daily.

Bilal Ahmed: Hourly rate. Sorry. Yeah, a daily rate. But if I can [00:43:45] see. Thank you for correcting me because that.

Payman Langroudi: Would have made.

Bilal Ahmed: A difference a big difference. But if I can [00:43:50] see your open treatment plans in six month time are going to turn this around, then that’s a [00:43:55] different conversation altogether, because now it’s a conversation of who’s going to speak to the open treatment plans. Do we need a pico? [00:44:00] Do we need a patient coordinator treatment coordinator to do this? Because one of the key metrics for us for [00:44:05] any practice isn’t the number of big ticket items. It’s your number of distinct patients and number of new [00:44:10] patient assessments. Because new patient assessments tell me what the business is going to do six months from now. Your big ticket items [00:44:15] are going to tell you you’re gonna pay your bills at the end of the month. So so your best barometers, especially this time of year [00:44:20] where everyone’s trying to do offers, I really want everyone to come in for assessments because then you [00:44:25] can treatment plan them. You can get them booked in for the end of Jan into Feb. And that then tells me you’re gonna have the best Q1 you’ve [00:44:30] ever had, because it’s not about beating people with sticks, it’s about showing them how we’ve how we’ve assessed [00:44:35] it. Because if you can’t improve, if you can’t measure it, you can’t improve it. But this is where the skill is. We’re not just we’re [00:44:40] not just here to look at raw numbers, because if the world was left to accountants, we’d all we’d all be on the trains and buses and nobody would [00:44:45] enjoy cars. Right. So, so like, sports cars aren’t built by accountants. Ferraris aren’t built, built, by [00:44:50] the accounting team, built by people who are enthusiasts, who love what they do and engineers. And sometimes [00:44:55] you can tell the accountants get out of the way.

Bilal Ahmed: Mine isn’t to stop anything. Mine is to quantify that says, if [00:45:00] I can show you and then you as the entrepreneur, you as the CEO, you as the person who’s got the feel of your business and your [00:45:05] staff tells me to go stuff it. You’ll see it work. By all means, let’s do it. And then now, if you’re [00:45:10] going to do it anyway. All I’m trying to do is mitigate the risk. That’s all. I’m trying to look as accountants, we’re all risk averse. We [00:45:15] have it drummed into us. If it can go wrong, it probably will go wrong. So when I’m building a business plan for a practice [00:45:20] I’m not looking at, best case scenario, I’m looking at breakeven points. Your job is to look at best case scenario, [00:45:25] because if things are now going better, we now need to recruit. But I need to know you can pay your bills. I need to know you can pay [00:45:30] yourself. I’m not trying to. I’m not trying to say each surgery is going to do 2 to 5 per day for five days, because [00:45:35] we’re all living in la la land there. But I can show you what that journey looks like. So look, it does go wrong, but [00:45:40] it’s how do we mitigate the downside. And by accountants we’re super pessimistic. So [00:45:45] a lot of the downside is mitigated just by us being pessimistic anyway. And sometimes, you know, [00:45:50] have we made wrong decisions in the past? Yes. Can we recover from them? Yes. [00:45:55] Is there anything we’re going to do that’s going to put your business on its ass? No, we don’t get into any of that. It’s not. We wouldn’t [00:46:00] we? We’d be out of business.

Payman Langroudi: Associates retain you as well.

Bilal Ahmed: Associates do retain us. Yeah. So [00:46:05] I’m meeting with one Tuesday evening, do some forward planning. So 12, 18 months. [00:46:10] He’s had a couple of he’s had an expensive two years. And now he wants to know where he can put his money thereafter. [00:46:15] So I won’t get into financial advice. I won’t say.

Payman Langroudi: So. What are common mistakes associates [00:46:20] make from the from the, you know, tax and business?

Bilal Ahmed: Two I mean, [00:46:25] two things. One is they don’t treat themselves as a true business. They treat themselves as contractors. Because [00:46:30] if you don’t know what goal you’re setting yourself, then what are you working towards? [00:46:35] You’re just sort of ambling through and then and then you’ll let’s [00:46:40] say the associate journey is you’ll qualify, you’ll probably do. First year will be, what, [00:46:45] 7% NHS, 30% private, it’ll start petering out towards more private by about 30. You’ll do mostly [00:46:50] private. It’s certainly the journey that we see with our associates. Our demographic is skewed because they’re [00:46:55] the more entrepreneurial dentists who want more hands on. We typically don’t deal with like 100% dentists because [00:47:00] their needs and wants are different to what we can offer them. But then you’ve got what now? So a [00:47:05] lot of them will now start focusing heavily on the hourly rate and reducing the amount of clinical days. So they’ll [00:47:10] want to get to about three and a half days clinical maintain income level. So that then says specialism. How [00:47:15] do I value my time. What courses should I be then going on. Then they’ll hit a point that says I’ve got this excess liquidity. What do I now do with [00:47:20] it? I can’t tell you to invest in. Well, I can tell you to put money into your pension. I can’t [00:47:25] tell you what pension product to use. I can’t tell you to invest in property. But if you wanna invest in property, I can show you the best way to do it. [00:47:30] And then the idea is, as long as we’re talking ahead of time, then this is the journey you should take.

Bilal Ahmed: The [00:47:35] biggest mistake associates make within this is not looking at it like that. It’s not looking at the hourly rate, not valuing [00:47:40] their time discounting and then not planning ahead, not looking beyond month by month. Because [00:47:45] I asked this every time I do a presentation is not show of hands. If it’s around a bank holiday, how [00:47:50] many of you planned your bank holiday weekend? Hands go up. How many? You know how many times you planned your birthday? Hands go [00:47:55] up. And how many of you go on holiday? Hands go up. Have you planned for that? How you get to the. How you [00:48:00] get to the airport. Um. Where are you going to stay. What flight you’re going to take? Where are you going to eat? Yeah. Yeah, yeah. How many [00:48:05] of you planned your businesses? Crickets. Crickets. And you’ll 1 or 2 hands [00:48:10] go up. So why are you not looking at it like a business? How are you? Why are you not valuing your time? Why [00:48:15] are you not looking at things like marketing for your own, for your own social media, or your own marketing endeavours [00:48:20] so people know who you are, what it is you do? Because there’s 43,000 dentists in the UK, there’s 55 [00:48:25] million people over the age of 18 in the UK. And that’s what, 1300 people per [00:48:30] dentist in the UK. How are you speaking to your 1300? Because you only really need five of them to come see you, and [00:48:35] then you’ve got a rolling, you know, you’re seeing them on a on an annualised basis.

Bilal Ahmed: And then then we’re looking [00:48:40] at lifetime journey. We’re looking at patient recalls. How many of your patients are you actively bringing back in? [00:48:45] Because once you start getting into the weeds of that, that’s when you become a principal. Because once you’ve exhausted [00:48:50] all of that as an associate, and now you’re frustrated with the practice because it’s not on the same journey as you, that’s [00:48:55] when you should open your own practice because you’ve done what you’ve done it, or you’ve treated yourself as a business within a business, and then [00:49:00] you should do that. That’s what that’s the biggest issue that associates aren’t making. But again, financial literacy [00:49:05] is low because they’ve never been taught it. They’ve been dropped in at the deep end. They uncomfortable [00:49:10] with it. So they bury their head in the sand. We chase. We want we you know, we want to be speaking to our clients [00:49:15] on a rolling six month basis the same way. Look, you want me to brush my teeth twice a day and come see you every six months? But [00:49:20] you’re not going to be in my bathroom checking my toothbrush is wet, right? I want you to speak to me every six months. Speak to me three months [00:49:25] before the end of the year so we can plan your year end. Close what options you can take before the end of the year to maximise tax efficiency. [00:49:30]

Bilal Ahmed: Talk to me three months after so we can use so we can wrap up the year that was we can set the scene for the year [00:49:35] that’s coming. You get into that tax becomes a known certainty, then put your money aside. Don’t worry about it. [00:49:40] And then we’ve got associates who take us on and engage basis. We want to speak to us every single month. We want to [00:49:45] go through the numbers. We want to go through how much money they should have set aside for tax. But we’ve got we’ve got one associate who [00:49:50] just pays his money. He’s just got HMRC on a direct debit that says I’d rather just pay them [00:49:55] and not have to think about it and not have to think about a lump sum that goes out. So I just pay them an amount. If I’ve overpaid, I get it back. [00:50:00] If I’ve underpaid, I top it up. That’s a good way to do it. Because they pay you interest. They pay you interest on it as well. So. Oh do [00:50:05] they. Yeah. Yeah. And it’s not taxable I don’t know don’t quote me on that. I don’t think it’s taxable income from HMRC [00:50:10] anyway. So it’s quite cool from that perspective. So you know where this goes. Well is [00:50:15] we sat down with one of our orthodontics orthodontist clients and we worked out once [00:50:20] he gets beyond 250 starts well we worked out on his own. He can’t do any more than 250 starts.

Payman Langroudi: He [00:50:25] starts.

Bilal Ahmed: Starts. And then we’re looking and he works across five practices and Fridays [00:50:30] are sacred for him. This is where the human element comes into it is look, I could say, of course you could do more than [00:50:35] 250 if you worked on Friday but doesn’t want to work a Friday. So it’s like, well, I’ve got to work with those within those constraints now. Fine. [00:50:40] He’s got family. He’s got more. Things are more important to him. So he’s like, right when you because you can’t [00:50:45] do any more and you’re in five places. You need a, a, um, orthodontic therapist. But [00:50:50] then at what point do you need an orthodontic therapist? And at what point do you need more of their [00:50:55] time? Yeah. So if you get to 300 starts, you probably need them a day a week. [00:51:00] If you get to 310, you probably need two days a week. But then we can work out where you can be, because now you can theoretically [00:51:05] be in two places at once and it works really well. And what he’s got down to a T is [00:51:10] his his journey. So he doesn’t do any of the restorative, doesn’t do anything like that. So if it goes back, goes back to dentist, it comes back to him and [00:51:15] he does really well from it. But that’s really looking at your business as a business and now saying I understand [00:51:20] what I can do. He understands his pricing, understands what he can charge. What that then allowed him to do was [00:51:25] put some money into marketing for the year. So he then committed about 25 grand to marketing and then agreed [00:51:30] with the principle to split on the the orthodontic therapist. But then it also meant we could then negotiate [00:51:35] his fee, his split, because if he’s incurring 24 grand marketing, the the practice then benefits for. And [00:51:40] he’s paying half of the therapist. Why should he still be on.

Payman Langroudi: Based on stats, right? So it’s a [00:51:45] more sort of cogent argument he’s putting to the principle.

Bilal Ahmed: Win win win has to be [00:51:50] a win win. Everyone wins from that conversation.

Payman Langroudi: Tell me about squats, because they seem to be much more popular these [00:51:55] days. You know, the the goodwill values seem a bit, you know, inflated. [00:52:00] So a lot a lot of lot of squats I see opening up.

Bilal Ahmed: Not inflated at all. [00:52:05] Um, squat journeys work really well, so the best return on investment, pound for pound, is a squat.

Payman Langroudi: Yeah. No, [00:52:10] no, I mean, goodwill values for existing practices seem high.

Bilal Ahmed: Yes.

Payman Langroudi: So people are starting squats. [00:52:15] Yeah. But the, the sort of the pitfalls of that from the [00:52:20] way I look at it that don’t expect to make any money in the first 18 [00:52:25] months sort of thing. The cash flow sort of keep, keep staying alive in that period. Yeah. [00:52:30] Really is the key point.

Bilal Ahmed: So we do a lot of these. Yeah, we do a lot of these.

Payman Langroudi: Am I right about [00:52:35] that 18 months or.

Bilal Ahmed: It’s about 12 months. You can break even by by the end of month 12. And that’s with us being pessimistic. [00:52:40] Yeah. Um, we see them go really well, but the, the biggest, the biggest [00:52:45] factor.

Payman Langroudi: The marketing side, the money for that.

Bilal Ahmed: It’s the biggest success factor [00:52:50] for. And I’ll give you some I’ll give you sort of both sides of the coin. The biggest success [00:52:55] factor that we see with anything is someone who’s treated their associate business as a business, i.e. [00:53:00] as an associate. They they are responsible for most of their own patients and [00:53:05] will now convert that into a squat. The single best success criteria by the end [00:53:10] of month, by the end of year one, when.

Payman Langroudi: You say responsible is in their Instagram but brought those patients in. [00:53:15] Correct.

Bilal Ahmed: So their marketing, their Google, their website, their landing page. But I can tell you unequivocally, [00:53:20] by the end of year one, they will be a millionaire on paper. Because if you’ve got an associated practice [00:53:25] that generates 150 grand EBITDA at the end of year one, you’ll be worth just over [00:53:30] £1 million seven times. Multiply will see you do that if you’re a principle led practice. And then we’re looking at three and a half [00:53:35] times multiplier. You’ve got to be doing about 300 grand and you’ll be a millionaire by the end of year one. Now, [00:53:40] those those numbers aren’t aren’t unrealistic and they’re not crazy, but they are [00:53:45] the exception. They are not the rule. And everyone thinks, uh. Whenever [00:53:50] I have a consultation with someone that [00:53:55] opens a squat, my first question is, why do you want to do this? And if you say the words clinical freedom to [00:54:00] me, I will turn off the call. I will get off the call. I’m not going to spend any more time on this call. If you use the word clinical [00:54:05] freedom, if you use any antonym, anything, anything around the phrase [00:54:10] clinical freedom, you are not ready to open up a squat practice because it does not give you clinical freedom. [00:54:15] It doesn’t. You are beholden. Well, it might give you clinical freedom.

Payman Langroudi: But I mean, you can get clinical freedom from an [00:54:20] existing practice. What’s the difference?

Bilal Ahmed: It frustrates me. I think it’s a cop out answer. And I don’t think I think [00:54:25] it’s I think it’s I think.

Payman Langroudi: Maybe they didn’t understand your question.

Bilal Ahmed: No, no. I asked them the number one motivation and they talk [00:54:30] about clinical freedom. The principle doesn’t let me do the things the way I want to do them. I want to go do them myself. All right. Fine. Whose patients are [00:54:35] they? They’re not yours. You’re not on the patients? Yeah. So how many of those patients [00:54:40] came in to see you specifically? Uh, well, you know, I get a couple of referrals. No, no. How many? Quantify it. How many of the [00:54:45] patients that you saw last year. So I’ve got your accounts in front of me. You netted about £150,000 last year, and [00:54:50] now you think you grossed about 450. Therefore, the practice took all their bit. You’re now thinking about what you’ve [00:54:55] left on the table. And that’s why you want to open a practice. Because all the money that you left behind. Fine. How [00:55:00] much? How much do you think you’d make as a principal? Doing the same sort of thing? Well, I’d make more. I’d make 450. No, you’d gross [00:55:05] 450. You’ve still got to pay wages. You’ve still got to pay labs. You’ve still got to pay HR. You’ve still got to pay marketing. You’ve still got to pay legal. [00:55:10] You’ve still got to pay HMRC. You’ve still got to pay the waste, the waste waste disposal, [00:55:15] you’ve got to pay rent rates, all that kind of stuff. Yeah. How much you think you’re actually gonna be left with at the end of it? Because I can [00:55:20] tell you on about 450 you’ll be left with about 20% of it after you’ve paid the associate.

Bilal Ahmed: But if you’re the [00:55:25] associate, you’re left. You’re left with a bit more because you haven’t got that cost. But where are you gonna get that 450 from? So [00:55:30] that’s 2250 per day, four days a week, 48 weeks a year. The reason we use [00:55:35] that metric because it’s about 74% occupancy. Where are you going to get your 450 from? Where are you going to make [00:55:40] about 285 an hour. And then never got an answer. They’ve almost never got an answer. So that’s what [00:55:45] you should be focusing on because as an associate where you are currently, if you looked at it like that, [00:55:50] you’d make more money as an associate straight away. If you treat your business within a business, you’d make more money straight away, [00:55:55] because then you should then look at opening up a school principal benefits you benefit, everyone benefits. [00:56:00] You’re in a risk free environment that says if it goes tits. Pardon my language. If it doesn’t go very well, [00:56:05] then what have you lost? The 24 grand you might put in marketing. If it goes wrong as [00:56:10] a squat, it goes very wrong and your house is on the line. But where we can see for [00:56:15] squat journeys, we do a lot of this, um, with people that want to open squats is we get into the meat and [00:56:20] bones of why they want to do it. What are their motivations? Have they truly considered [00:56:25] what it takes to be a squat to open up a squat?

Payman Langroudi: Yeah. So what are the what do people not realise [00:56:30] that like the the how quickly they’re going to get patience piece. [00:56:35] I think it’s.

Bilal Ahmed: Honestly I think I’m going to get a lot of stick for this is I think a lot of [00:56:40] its hubris is I make this much money as an associate. I’m going to go do this for myself. [00:56:45] Yeah, but they don’t really consider where it’s going to come from.

Payman Langroudi: But let’s say they they want to do it. By the way, a lot of times [00:56:50] it’s a, it’s a control thing as well. Yeah. Like there’s a particular patient journey that [00:56:55] you imagined or even sometimes as ridiculous as not ridiculous as this [00:57:00] particular decor and building that you like, you know, that you want to make if.

Bilal Ahmed: Your [00:57:05] goal is that patient journey. Yeah, I’d say open up a squat. Yeah.

Payman Langroudi: Because now I’ve decided to do it. [00:57:10] What’s the common mistake that people make around like, do people overestimate how many [00:57:15] patients are going to walk through?

Bilal Ahmed: No. So they they underestimate the size of the probability [00:57:20] on the back of it. They underestimate the size of the task for marketing. They they underestimate when they should [00:57:25] be marketing. And this is this is where we’d put them in touch with someone at Prav, for instance, beforehand. [00:57:30] So when it’s a conversation, go speak to Prof. Because the reason why I like talking to Prof. Is Prav approach is marketing [00:57:35] the same way I do numbers that there’s a there’s a science behind it. There’s, there’s there’s a flow. There’s, you know talk to people little [00:57:40] and often and good things happen on the back of it. So I’ll give you some really bad examples where you’ve got, [00:57:45] um, four partners who’ve set up a squat and they’ve all they’ve [00:57:50] overspent, you know, they didn’t have a budget to start with. They’ve put about 500 grand into a squat. That should [00:57:55] cost them 350 grand. They’re going to open next week and they’ve not got anything. They’ve got no marketing. So how are people [00:58:00] going to know you exist? So, you know, by virtue of the fact that you’re on the high street, fine. It could [00:58:05] work.

Payman Langroudi: And they will come mentality.

Bilal Ahmed: Yeah. So that’s [00:58:10] where the frustration for someone like me is that says I can’t quantify this. I can show you what your run rate costs are. I can show you what overhead costs. [00:58:15] I can tell you how many patients you need to break even, but I can’t tell you how to get them. And now, where are you [00:58:20] now? Because they’ve overspent on the practice there now. Reluctant to spend any more money on marketing when they’ll have spent 25 [00:58:25] grand on a sign like, what good is a sign if nobody knows you’re there? Why, [00:58:30] why why have you used the most expensive tiles for your bathrooms when nobody knows you’re there? [00:58:35] So, you know, there’s certain things that you should focus on beforehand. So there’s things like if [00:58:40] you’re going to open a squat, do you do you recognise you’d have your staff in place of party staff probably three months [00:58:45] before you open. So they’re contacting all these inquiries and waiting list people so that you’ve [00:58:50] got someone to see from day one. And it’s not about doing Invisalign open days. It’s not about doing implant [00:58:55] open days. No, it’s about new patient assessments. Get them to come in. If you believe in your journey and you believe [00:59:00] in this beautiful thing that you’ve built, show people.

Bilal Ahmed: Get them in a new patient assessment and create a [00:59:05] compelling offer for the new patient assessment. Walk them through the journey, get them signed up to a plan, and then get them in [00:59:10] hygiene. And then when they come back in, do the treatment plan with them and show them. But don’t scare them with a 15 [00:59:15] grand treatment plan because it’s going to run away. But you’re now if you’ve done this badly, you’re trying to convert everything [00:59:20] that walks through your door. But it’s lifetime value of patient. We know if over a decade this patient’s going to be worth [00:59:25] 1015 grand, then let’s let’s focus on the reds. Let’s focus on, on on the restorative first. [00:59:30] Then we move into the ambers, the nice to haves, you know, a bit of amalgam that we need to take out. You know, there’s a crown that might fail whilst [00:59:35] we’re doing this one. We might as well. Do you want to replace both? We might want to replace some fillings. Do you wanna look at whitening, all that kind of stuff. [00:59:40] Fine. We’ve done all that. Now let’s look at the nice to haves, the cosmetic stuff. You know, the bonding, the veneers, the the Invisalign [00:59:45] or anything like that. But if you throw it all out right at the start, you’ll scare him off.

Bilal Ahmed: It doesn’t work. So again, [00:59:50] where does this go wrong? Is we were working with a practice that was musical differences [00:59:55] towards the end, where they were charging nearly a grand for three fillings. So you can’t charge [01:00:00] a grand for three fillings because that will be probably the first time the patients needed anything from you. They’ve [01:00:05] reluctantly paid it because there’s a reason they need those three things. There might be pain, there might be something that, but then they will go everywhere [01:00:10] else because you’ve immediately given an anchoring price to all your services. So [01:00:15] it’s like there’s no need to charge a grand for three fillings. It’s about 450, realistically. But if you’ve got now [01:00:20] every patient going on finance with fillings and declining or failing, then they go to practice [01:00:25] down the road that says, hold on, we’ll do it for £400. You’ll never see that patient again. So lifetime value is only as good as [01:00:30] the patients you can retain. Show them what you’re doing and show them what you’re doing in the back of it. So there’s the expectation [01:00:35] that we’ll do open days. They’re horrible. It’s a bad way to start. It’s about new patient assessments [01:00:40] slow burn, brighter burn. But marketing and then.

Payman Langroudi: A kind of dispute what you’re saying [01:00:45] there around the things. I mean, if my positioning is that my positioning is expensive dentistry, [01:00:50] then that’s my positioning.

Bilal Ahmed: Who are you telling? So if you’re if you’re if your position is expensive dentistry and you’ve done no [01:00:55] marketing.

Payman Langroudi: No, no, you’ve got to do marketing.

Bilal Ahmed: This is the other side. But if you’re doing any marketing. [01:01:00] So my wife and I, so my wife and I, we’re gonna open a practice. Every time we’ve gone to practice we’ve had another kid. So this is [01:01:05] probably it’s probably God telling us something here. So we were going to buy a two surgery. What in essence, [01:01:10] what was a squat in not off the high street. So it was recessed back. But we [01:01:15] were going to do it as super private private dentistry in Cheshire. Yeah, yeah. Inhale. So it had private [01:01:20] car park. You could drive in. You could drive in. We’d drop the shutters. Nobody know you’re there. Yeah. [01:01:25] Super private private dentistry is what we were going to do. But my wife has nearly 30,000 followers on Instagram. [01:01:30] She has been only she has only been seeing her patients for maybe the last five years [01:01:35] that see her specifically for what she does. So if we then created a marketing message around that, it [01:01:40] would have taken longer to achieve. But I was happy to bankroll it and cover the losses [01:01:45] up until we got it to where we wanted to get to because we knew it would work. I don’t know, the baby didn’t do it. No, [01:01:50] it’s God telling us other things, but this will answer your question. If that’s your offering, then fine, because we’ve [01:01:55] got clients who do this, but their messaging is on is on. That brand is on is on that. Yeah, it’s on message. But [01:02:00] this practice specifically, it wasn’t it was just we just put our prices up every year. There was no logic [01:02:05] behind it. There was no, no, no because their prices, their implants was really competitive. The price of their Invisalign was super competitive. [01:02:10]

Payman Langroudi: Yeah.

Bilal Ahmed: But it was like daft things like, why are your crowns 850 but your fillings are three crowns [01:02:15] up. Drop your fillings.

Payman Langroudi: Yeah, yeah. No, I see it sometimes in whitening as well. Sometimes. Yeah. Some [01:02:20] some are charging, I don’t know, £850 for enlightened, but then less than [01:02:25] that for a crown. You know, it makes sense. Yeah, yeah. What about treatment specific? Have you [01:02:30] found there are some treatments that the margins are higher?

Bilal Ahmed: Oh, absolutely.

Payman Langroudi: So we work with [01:02:35] obviously the corporates have these softwares that can tell them that. And whitening is right [01:02:40] up there. Right. In terms of huge.

Bilal Ahmed: So when we spoke previously about [01:02:45] one of the key success factors for practices is distinct patients. So a distinct patient [01:02:50] is let’s say for instance I’ve come in as a new patient assessment on that new patient assessment. I’ve then had hygiene and [01:02:55] then I’ve gone to take a treatment, let’s say filling for instance. And that’s three visits. We would only class that as one. [01:03:00] So a distinct patient would be one. Yeah. So one distinct patient. So over a 12 month period Bill’s [01:03:05] been in three times. We can’t use one. So what we’re always looking at is distinct patients in the period because it takes out the inefficiency [01:03:10] inefficient use of surgeries. Yeah. The other thing we’re then looking at is new patient assessments. Yeah. So those two [01:03:15] things yeah that then kicks down into two criterias is we’re looking at fillings and [01:03:20] whitening. So we’re looking at uptake on fillings of whitening and whitening. Because we know those two things are good, [01:03:25] then it means my treatments in about six months time are going to work, because we know the correlation between people who take whitening to then take on [01:03:30] cosmetic dentistry is quite high. The two things are correlated. But then we also know things like the relationship between [01:03:35] crowns or fillings is really high. So what we’re looking at is proportion of crowns to fillings. So before we get into the weeds [01:03:40] of all these KPIs, with the practice that’s done, none of this, we’re probably only looking at 3 or 4 things at a time. [01:03:45]

Bilal Ahmed: Once they go green, we just monitor and we go on to something else. So where you’ve got [01:03:50] the technical term is sensitivity is how much can I push a price on something before [01:03:55] it becomes a unethical and B reduces uptake. So a crown for instance [01:04:00] is something we refer to as being inelastic is the reason why it’s so. It is elastic. The reason why it’s [01:04:05] the demand doesn’t change based on price to a point. So if you’re charging [01:04:10] 550 for a for for for an Emax crown for instance, you really depending on outside London you could [01:04:15] get to 859 liquid and it doesn’t decrease uptake. But what is the cost of an [01:04:20] Emax crown? About 160. What is your margin on that now? Super high. How [01:04:25] much? How much time is that patient taking? Very little compared to everything else. Crowns [01:04:30] make millionaires more crowns you fit, the more profitable you are. We like good general [01:04:35] dentistry. As a firm of accountants, we like good general dentistry. If your good general dentistry is [01:04:40] operate in about 220 an hour and you’re overlaying it with big ticket items, you’ve got [01:04:45] a fantastically run practice and then you’ve got things like whitening. And we know the uptake on [01:04:50] the correlation between things like whitening and cosmetic treatment is high. So you don’t need to pull the pants down everyone that [01:04:55] walks through your door whitening.

Payman Langroudi: Yeah. Although, you know, let’s say I’m doing a crown for £600. [01:05:00] Yeah. And then let’s say that it was elastic. [01:05:05] And every time I raised the price, fewer people go for it. Yeah. Which isn’t the case. But [01:05:10] in health, in health and beauty, there’s almost an inverse relationship. But let’s say it was let’s [01:05:15] say I now start charging 1200 from my crown. Yeah. And let’s say [01:05:20] it’s directly proportional and half the people don’t go ahead because [01:05:25] I’ve doubled the price. Yeah, yeah, I’m still better off. Correct. [01:05:30]

Bilal Ahmed: Because you’ve got your increased share time maximisation. Because now you create capacity in your diary, which means you don’t need to open as [01:05:35] longer. You don’t need to run as many.

Payman Langroudi: Lab costs less. I’m still better off.

Bilal Ahmed: You are better.

Payman Langroudi: Off. It’s [01:05:40] important to understand that, right? You know, just the fact that some people won’t go ahead doesn’t necessarily [01:05:45] mean that I’m not better off.

Bilal Ahmed: So look, I’m probably going to piss people off saying this will upset people [01:05:50] by saying we put out prices, we’re going to go through exercise, we’re putting our prices up. So we’ve got clients who’ve been with us from when we opened [01:05:55] an obscenely low price. Yeah, but I know I could put my price up to a point where they’ll leave [01:06:00] and I don’t want them to go. Yeah, because we’re a service led business. Yeah, but I’m not expecting all of [01:06:05] them to take it up. And some of them will leave and we’ll wish them all the best. But in order to offer [01:06:10] the level of service that we want, we have to charge the price that we’re going to have to. Yeah, there’ll still be a discount on it for any existing [01:06:15] clients. But what it then means is, you know, we don’t we don’t need all of them to take it up. So if I put my prices [01:06:20] up, 20% and 10% of them leave still up, because I’ve got costs [01:06:25] as a business and my wages are increasing year on year, my corporation tax has gone up. Employers, national insurance, [01:06:30] pension contributions, all those things just keep increasing like HMRC have put up some of their baseline costs [01:06:35] nearly 100% and our AML and anti-money costs are going to go up 33% [01:06:40] this year just by HMRC taking it back in house, which is frustrating. So we have to review our pricing, [01:06:45] not because I want more money from it, it’s because I have to because our input costs have gone up. And that’s [01:06:50] the other thing is a lot of practices are resistant to put their prices up for that reason is, oh my God, people are not going to take it. But it’s [01:06:55] okay because you don’t need to convert everyone. You just need to know what your conversion metrics need to be so you can [01:07:00] have the confidence to make those decisions.

Payman Langroudi: Yeah. Is it true? Um, self-assessments changing. [01:07:05] Yeah. To what, four times. Five times a year.

Bilal Ahmed: Yeah. Yeah.

Payman Langroudi: So [01:07:10] it’s good for you guys. No no.

Bilal Ahmed: No. God, I.

Payman Langroudi: Don’t [01:07:15] want to do it. So that’s the high ticket items? No, it’s not even that. No, it’s.

Bilal Ahmed: Chasing [01:07:20] people once. They chase you five times now.

Payman Langroudi: That’s right. People ignore you to chase you.

Bilal Ahmed: Well, [01:07:25] exactly. So there’s.

Payman Langroudi: So how is this happening? For sure? Or is it something they think is happening?

Bilal Ahmed: Well, [01:07:30] 100% happening for sole traders currently. So if it will be based on [01:07:35] your 2425 return. So the returns that are going in now. Um, so if that figure shows more than 50 [01:07:40] grand from 1st of April, you will. Revenue, revenue top line.

Payman Langroudi: Oh, yeah. Yeah. [01:07:45] So that’s everyone, which is everyone.

Bilal Ahmed: Yeah. Every sole trader. You’ll have to do four returns a year, so it’s not as [01:07:50] ominous as it sounds. So we all of our clients are on bookkeeping software. So we [01:07:55] don’t do anyone on paper. We don’t. That’s part of our assessment criteria, is you’ve got to be comfortable using tech, [01:08:00] and you’ve got to be able to use it and make sense of it all. So we take a zero.

Payman Langroudi: Awesome.

Bilal Ahmed: Yeah.

Payman Langroudi: So it’s it [01:08:05] depends.

Bilal Ahmed: On complexity of business. So if you’re a practice we’d put you on zero. If you’re an associate we’d put you on something called freeagent, [01:08:10] which might suggest it’s free, but it’s not. It’s like, I think it’s like £20 a month, [01:08:15] unless you’ve got a qualifying bank account and then it’s free, which, if you don’t have to pay for something, don’t pay for it. Right. Um, [01:08:20] but we can then take a live feed from your bank account so we can then see [01:08:25] what you’re spending and what you’re what your income is. And that’s what we want to see on a quarter. That’s what HMRC [01:08:30] want to see on a quarterly basis. So it’s your income and expenses. Push a button. Send it up [01:08:35] there saying current release not going to change when you pay tax.

Payman Langroudi: Oh so it’s not like a self-assessment.

Bilal Ahmed: No, [01:08:40] it’s just a declaration of income and expenses on a quarterly basis. Then the fifth one is your [01:08:45] big wrap up and your tax is still due Jan and July. So that’s that’s remaining unchanged. [01:08:50] Um, and it’s trading income. And then if you’re a partnership you don’t have to go into it. Um, [01:08:55] but it’s if your income from trading income exceeds that, then you’ll do five returns a year. Yeah. [01:09:00]

Payman Langroudi: So a regular associate needs to.

Bilal Ahmed: A regular associate that operates [01:09:05] as a sole trader will have to do these from next year from from the 1st of April. So on a quarterly on a quarterly [01:09:10] basis. But if you’re you’re the type of associate that pays £200 [01:09:15] for your tax return and gives everything to your accountant in January, that you’re going to have to change. Yeah, that’s [01:09:20] not going to work.

Payman Langroudi: That’s not gonna work anymore.

Bilal Ahmed: Not going to work anymore. And then the threshold for the following year drops to 30 K. [01:09:25] The threshold for the year after drops to 20 K.

Payman Langroudi: One last area that seems [01:09:30] to confuse me and a lot of people is the question of expensing. [01:09:35] Like if I, if I take out 30 of my customers for dinner. Yeah. [01:09:40] Am I cool to expense that. So. Another [01:09:45] example we do a course. Yeah 30 people come to the course. The course the middle [01:09:50] of the course is dinner. Yeah I paid for that as the course organiser.

Bilal Ahmed: Let’s, let’s, let’s take those two examples. [01:09:55] So one one. Yes one.

Payman Langroudi: No okay.

Bilal Ahmed: Okay. So no if, if [01:10:00] you took me out for dinner now uh, actually let’s say.

Payman Langroudi: You took.

Bilal Ahmed: Let’s say, [01:10:05] let’s say you took you I don’t know, you had people come visit the site, and as part of the site, you went and took them out for dinner. [01:10:10] Five people. You paid for the dinner. That class is business entertaining. The company can pay for it, but you [01:10:15] have to deduct that amount from your tax return. Yeah, so the company can still pay for it. You still use company’s funds? Yeah. Company [01:10:20] can’t claim tax relief on it, which is weird, right? So it reduces your tax [01:10:25] bill. So accounting profit isn’t the same as taxable profit.

Payman Langroudi: Oh I see.

Bilal Ahmed: So let’s say you made a hundred grand profit this year. [01:10:30]

Payman Langroudi: Yeah.

Bilal Ahmed: Within that number will be things like depreciation amortisation and non tax deductible. So we add them all back [01:10:35] on and we remove your capital allowances. Gets us to taxable profit. So there is always a difference. So your [01:10:40] accounts might show a hundred grand profit of which you’ve spent five grand entertaining people throughout the year. You can’t claim that. [01:10:45] Yeah. So it just gets added back on. You pay tax on 105 K. Your course example for instance, [01:10:50] is different. Your course example is different. So where your course example differs is that cost [01:10:55] for paying for your delegate’s food is part of your PNL for your course. So they pay whatever [01:11:00] they pay to attend the course, and within that the enlightened will pay for, I don’t know, accommodation [01:11:05] and food and travel and everything else, and we’ll pay tax on the difference because that’s baked [01:11:10] into the offering. So it’s different. So where are you just taking people out for dinner willy nilly. Company can pay for [01:11:15] it. You can’t expense it. So it stops people doing things like, I don’t know, taking everyone out for corporate events [01:11:20] and then claiming the tax relief on it. So it stops people doing things like that. If it’s your staff, then [01:11:25] it’s different because you can do it for your staff. So there’s a couple of things you can do for your staff. First [01:11:30] is you have something called an annual party allowance. It’s referred to as Christmas party, but it’s not limited to Christmas parties. [01:11:35] You have £150 a head limit per year per staff [01:11:40] member, plus a guest.

Payman Langroudi: Really?

Bilal Ahmed: Yeah.

Payman Langroudi: So? So if I want to go £250 per [01:11:45] head, that doesn’t.

Bilal Ahmed: Know. So once it goes, if it exceeds £150 even by a penny, [01:11:50] then the whole thing becomes disallowable. And it’s the.

Payman Langroudi: Whole.

Bilal Ahmed: Thing. Yeah. Then it’s subject to benefit in kind tax [01:11:55] because it’s then you’ve seen to giving your employees a benefit.

Payman Langroudi: Is that.

Bilal Ahmed: Right? Yeah. So that £150 again [01:12:00] doesn’t have to be just on the part. So you might do two parties a year. Yeah. And then that might be split 7575. You [01:12:05] might do two parties a year and it’s 5050. And then you’ve got what do you do with the other £50? Because you use it or lose it, [01:12:10] you could give them a hamper. Yeah, yeah. So you might do 5050 and a Fortnum Mason £50 hamper. As long as [01:12:15] it doesn’t exceed £150 then it’s fine. It’s £150 plus [01:12:20] a guest. So in essence you’ve got £300 per pairing.

Payman Langroudi: Oh plus.

Bilal Ahmed: Yeah. So it does. [01:12:25] It does. I mean you’d be hard pressed. I mean you’ve got like ten staff, you’ve got like ten, 15, 20 staff. That’s quite a big budget. You [01:12:30] start playing with um, that’s what we do. So but then if you like, we’ve got on Friday [01:12:35] we’ve got a staff event and within that we’ll take I’ll pay for the dinner. I’m paying for [01:12:40] all the Ubers and trains and all that, all that’s tax deductible because it’s holding exclusively for business. But [01:12:45] if I was going to have some guests or clients joining us and I pay for their lunch, I’d have to discount that bit. [01:12:50]

Payman Langroudi: What about. I’m I’m I find a Dental course in New York. I [01:12:55] want to go to it. And how [01:13:00] can I what can I expense everything to do with that trip?

Bilal Ahmed: I’ll give you a really interesting [01:13:05] case of this. So this is a HMRC documented case. And so the short answer is yes. So [01:13:10] if you go so go back to our start the conversation holding exclusively for business. It’s well [01:13:15] within the realms of your scope of practice.

Payman Langroudi: And okay what if I stay a few days extra. No. No [01:13:20] what.

Bilal Ahmed: Can’t claim the whole thing becomes disallowable.

Payman Langroudi: The whole.

Bilal Ahmed: Thing. Because now. Because within wholly, exclusively [01:13:25] comes the second rule that you’ve overlay called duality of Purpose. So what’s the main [01:13:30] premise of what you were doing was wholly and exclusively. Yeah. But now that you’ve added all this other stuff, you’ve now [01:13:35] crept into duality of purpose. When you creep into duality of purpose, you can do one of two things. You [01:13:40] can either claim proportionate amount or the whole thing becomes disallowable.

Payman Langroudi: So I can say those two days [01:13:45] were coarse, and those two days.

Bilal Ahmed: For business travel specifically. If it creeps into duality of [01:13:50] purpose, HMRC say no because everyone would, wherever they’re going on holiday, would go book a days course, [01:13:55] right. And so I’ll claim the proportion of that. So HMRC has cottoned on to this and [01:14:00] said no where business travel breaches duality of purpose. The whole thing [01:14:05] becomes disallowable.

Payman Langroudi: All right. I go to IDs in [01:14:10] Cologne with my business partner, and that night we go to Michelin Star restaurant and [01:14:15] have a £300 a head dinner. Yeah. Can. Can the company [01:14:20] pay?

Bilal Ahmed: Yes. Hmrc also then claim it has to be reasonable. But don’t give us a definition of what [01:14:25] is reasonable.

Payman Langroudi: Oh, so it’s just depends on what.

Bilal Ahmed: Yeah. Basically. Yeah. So [01:14:30] so with that. So business travel is really so it’s a it’s a question that comes up constantly. So it’s let’s [01:14:35] say you’re going to go to New York for a five day course. In fact I’ll use a real example. [01:14:40] Brazil. You know they do the implant course in Brazil. You go out, you probably out there for two weeks, and you’re probably doing 40 cases [01:14:45] because you’ll do all of that. Let’s say you’re out for the for two weeks. You [01:14:50] can claim the 14 days of the course a day before and a day after. That’s it. Yeah. Because we [01:14:55] recognise jetlag.

Payman Langroudi: Travel and jetlag.

Bilal Ahmed: You know, you want to get set up. You don’t want to jump into it. Knackered. [01:15:00] So day before, day after 14 days off. So 16 days you can claim in total. You [01:15:05] can claim all the associated costs. So the cost of travel, getting to the airport. If you’ve [01:15:10] had to buy stuff when you’re out there, you can claim all of that as long as you don’t take the piss. So there is certain [01:15:15] allowances that.

Payman Langroudi: I want to take a week’s holiday after that. Yeah. No, no, I know, [01:15:20] I know, I just don’t claim that week. Right.

Bilal Ahmed: I just bought the flight. The return flight then [01:15:25] is is incidental. Or are you now jimmying the return flight on the back of it?

Payman Langroudi: So [01:15:30] these are the areas here where you need your accountant to say look by the letter of the [01:15:35] law, you can’t do this, but HMRC aren’t going to come after you if you do some [01:15:40] stuff like that. No, no. If you’re if you’re going to.

Bilal Ahmed: If you’re going to go do another week, let’s use a Brazil example. Yeah. And then [01:15:45] you’re going to do two weeks of the course. And then you’re going to go shadow a dentist for the other five days.

Payman Langroudi: Yeah. [01:15:50] But I want to go like a week to Rio and enjoy myself. Yeah.

Bilal Ahmed: As long as you don’t tell [01:15:55] me. The short answer is the the truth is the [01:16:00] letter of the law is if you then do a week after to enjoy yourself, it then becomes the whole thing becomes disallowable. Um, [01:16:05] and in specific circumstances, we could do something called pre-clearance with HMRC. [01:16:10] So let’s say that whole thing, that whole course with the cost of everything is 50 grand and you want to take [01:16:15] that week we would write to HMRC and say we present the facts, this is what’s going to happen. And they would [01:16:20] say yes but or no but or we, we use a third party. So there’s accounts for [01:16:25] accountants. They only talk to accountants and you have to postulate your questions a very specific way. Highlight the specific [01:16:30] references the cases and the the the HMRC guidance and the accounting standard that you [01:16:35] want clarification on. We present it to them. If they come back and say yes, then it’s a then it’s a [01:16:40] yes, it’s indemnified. Yes. If it’s a no then it’s a no and it’s a no. It’s a short answer but there’s a cost associated [01:16:45] to that. So then there’s a time value that says if all of this I’m going to save a grand in doing it, but [01:16:50] it’s going to cost me two and a half grand to get an answer. Then is it worth it? Right.

Payman Langroudi: And someone told me about this. [01:16:55] This must be illegal, right? He told me. Yeah. Um. My nanny who [01:17:00] looks after my kids is an employee of my company. So is [01:17:05] that illegal? That’s a benefit in kind. Right.

Bilal Ahmed: Let me answer. Let me answer the [01:17:10] question. In the realms of legality. Yeah, yeah. So. Who [01:17:15] you employ becomes irrelevant. You are not penalised for being a bad businessman. So [01:17:20] if you’ve got 15 employees on your books, but you only need 12, that is not a penalty. [01:17:25] That’s just you being a bad businessman, right? Yeah. Not not not not what I liked at the start of this, you went into whisper [01:17:30] tone.

Payman Langroudi: So I’ve heard this.

Bilal Ahmed: And I think it’s a little bit. That’s how all the questions start.

Payman Langroudi: Getting.

Bilal Ahmed: Their [01:17:35] head bobbing. I’ve heard this and it’s a bit. It’s a bit illegal. Whisper tone. Start setting in because you’re waiting for [01:17:40] me to tell you you can’t do it. So the short answer to this look, as long as they’re treated [01:17:45] like any other employee and there’s a genuine role for them to do, and there’s a contract that [01:17:50] states, this is your work, can they look after your kids as an employee? No, of course not. It’s a benefit in kind. [01:17:55] You shouldn’t be going anywhere near the accounts, but if you’ve got a genuine job for someone at your workplace [01:18:00] that happens to also then look after your kids whilst they’re there for half an hour after they come back, but they’re in office and [01:18:05] their office.

Payman Langroudi: If they’re nothing to do with the office, obviously not.

Bilal Ahmed: You can’t put it through the business. No, no, we get this [01:18:10] a lot. So, you know, we we get this a lot. My mate, my mate Dave down the pub said I can [01:18:15] do this.

Payman Langroudi: But it must be super frustrating for you, right? Because a lot of people [01:18:20] equate a good accountant with one that you end up paying the least tax. [01:18:25] And you could say a good accountant is the one that keeps you out of trouble the longest number [01:18:30] of years. You know, like whether it’s from the investigation perspective or from the, you know, early [01:18:35] warning perspective. Yeah. But I guess it’s like any business, [01:18:40] isn’t it? Like some some dentists are massively talented and can’t haven’t got chairside [01:18:45] manner. Yeah. And then and then the opposite as well. Yeah.

Bilal Ahmed: Taxes. Taxes. [01:18:50] Heavily nuanced. And if you’re basing I’ll give you some real examples. And we’ve [01:18:55] had to tell clients we’re not going to work with them, because if I take on the engagement, you are now breaching [01:19:00] so many laws that I’m obligated to report you, and I don’t want to get there. I don’t want to get there. [01:19:05] So we’ve heard some horrible things, man. So I’ll give you a real example. Client clients [01:19:10] been with us for years, and when they came to us, their existing [01:19:15] account was, I think it was on his deathbed. He was on his way out. He wasn’t responding. I think he was his of ill [01:19:20] health. He didn’t want to leave him, but their business was they needed support with the business. Right. So [01:19:25] I’m looking at the business and I went, why is your NHS contract running through your limited [01:19:30] company? And they went the accountant told us to do it that way. I went, we’ve got proof. No. Your [01:19:35] contracts in your name. There is no reason for that money to be [01:19:40] running through the limited company. You’ve not incorporated them into his contract. There’s no subcontract arrangement. And then you’ve not incorporated [01:19:45] the business anyway, because there should have been a capital gains tax issue event somewhere. I said, [01:19:50] show me your show me the calculation. We didn’t do it. And I went, whose name is sexy in [01:19:55] our names. So your business technically isn’t registered, because if it’s a limited company [01:20:00] that’s offering all the services and isn’t registered, and you are, if you get inspected, [01:20:05] they’ll shut you down and then they’re gone.

Bilal Ahmed: Fine. Fix it. [01:20:10] So fixed it had to redo three years worth of accounts and contact HMRC and explain to them what’s happened. Four years [01:20:15] on, I’m still trying to sort this out with HMRC. Four years on so I’m still trying to get what what I did was [01:20:20] I worked out all the taxes and I said the account made them pay 20 grand worth of corporation tax, which shouldn’t be there. [01:20:25] It should be on the sole trader and they’re like, fine, we’re not going to change it because it’s too much time has elapsed. [01:20:30] Too much time has lapsed because you keep losing my letters that I keep writing to you. And I can prove to you because I’ve got I’ve got [01:20:35] you signed for them within the time frame. Payman three years, I finally got [01:20:40] them to accept. We’re going to change it over because all this accumulating interest, once they accepted the wipe off the interest. [01:20:45] So it is what it is. So they’ve had to back pay about three and a half years worth of taxes, realistically, [01:20:50] because they’ve taken all the money out of the business anyway. They weren’t better off operating as a limited company, so we’ve had [01:20:55] to undo all this headache. So it’s it’s why even get yourself into that [01:21:00] process in the first place? It’s frustrating. And then we see we see we see things like um, [01:21:05] VAT is a massive one.

Bilal Ahmed: So when it comes to facial aesthetics or even aesthetics led businesses [01:21:10] and, um, dentistry, VAT is a nuance when you’re asking about what the what the accountant [01:21:15] and the accountant, especially within this space, is. Do you understand the nuance of VAT? So [01:21:20] where if if my business was just to sell enlightened smiles and you allowed [01:21:25] me to do it as a non dentist, and I sold it without any sort of clinical back, once my revenue hit £90,000, [01:21:30] I would have to register for VAT and I have to start charging VAT on all my [01:21:35] whitening kits. But if I’m a dentist and I include the whitening [01:21:40] kits as part of an overall treatment plan where the underlying is to treat or prevent an underlying condition and [01:21:45] qualified to do so, then it doesn’t become viable. And there’s so nobody [01:21:50] likes paying VAT. And you know, we were with we were going back and [01:21:55] forth with his client about his VAT because we do like we do an assessment. So they say, yeah, we want to go ahead with you. We go through the business and we’re just [01:22:00] making sure we’re ticking all our boxes. He went, well, typically what happens is I get to the end of the period and I want to pay about [01:22:05] this much. So I make the numbers work and I pay this much out. No, you can’t [01:22:10] do that.

Payman Langroudi: That’s not how it works.

Bilal Ahmed: That’s not how it works. It’s like, if I could do that, I’d love to do that. You can’t do it that way. It doesn’t [01:22:15] work. That’s just. That’s just fraud. You get inspected, you’ve got no basis to how you come [01:22:20] up with these numbers. It’s not going to work. And then you’ve got things like and within [01:22:25] the scope of specifically around with associates. And [01:22:30] the accounting side of things is when they’ve switched to limited company and [01:22:35] their contracts still in their name, they’re still paying into superannuation. They’re still they’re still getting pension [01:22:40] contributions. Well, then the two things don’t marry up and it wouldn’t [01:22:45] work. And that’s where that’s where things become really unstuck. And it becomes really, really difficult for us to fix, [01:22:50] where we will just say no to that to start with and say, look, it’s not worth us even get involved in and it’s not worth [01:22:55] the time or headache. Go back to your accountant to fix it.

Payman Langroudi: What’s been the sort of the most [01:23:00] scary thing you’ve seen in a dentist from from these perspectives?

Bilal Ahmed: Hmrc [01:23:05] general attitude towards money.

Payman Langroudi: Well either.

Bilal Ahmed: So we’re [01:23:10] pretty good at spotting clients. So my initial assessments we give everyone a free consultation. Yeah. [01:23:15] And what I’m looking for is can I work with this person. And are we on the same ethical [01:23:20] wavelength. Are we are are we you know, is there goal congruence in what we’re trying to achieve? Because [01:23:25] if your singular objective is to pay as little tax as possible. I’m not the accountant for you. Look, [01:23:30] I don’t want to pay a penny more than I have to. And I can promise you, you won’t pay a penny more than you have to. But I’m not going to promise a crazy tax bill at the back [01:23:35] of it. It’s just not. It’s not how any of this works legally, because tax is a mathematical certainty. Once you’ve got your expenses. [01:23:40] So that’s what I’m looking for. And then if we can talk about growth, scalability, [01:23:45] investment, exit value, that’s I’m all game for that. That stuff, you know, is me as an accountant, [01:23:50] as a nerd’s dream. That’s that’s that’s the kind of business I want to get involved in.

[TRANSITION]: So all all the schemes. Are [01:23:55] they all dodgy?

Payman Langroudi: This is the word. There’s a clue in the word, right? Yeah.

Bilal Ahmed: Anyone? [01:24:00] Anyone that comes across a scheme. Get the promoter to put it in writing. If [01:24:05] they put it in writing, then it’s probably legit. If they’re not going to put it in writing, then [01:24:10] that that’s your that’s your that’s your acid test straight away. They’re not gonna put it in writing. Get away from [01:24:15] it. Had a consultation with someone who told me about a scheme that he was putting. Money. Oh, this [01:24:20] is a cool one. This is. Say you want to invest your money and you don’t want to pay capital gains tax on your investment. [01:24:25] There’s a scheme you can invest in trees, nurseries [01:24:30] where it can grow. They sell, they sell the wood off, [01:24:35] and you pay no capital gains tax on your return. But you’re locking your money away [01:24:40] for what could be a decade or decades. And there’s super risky [01:24:45] because what it one bit of it could. It could all go to. It could all.

Payman Langroudi: Go. Well that’s [01:24:50] legitimate.

Bilal Ahmed: Legitimate. No capital gains tax on it. It was at the time. I don’t know what the updated bit is, but we tend [01:24:55] to stay away from schemes. Completely legitimate. However, what there’s [01:25:00] a nuance to this is if you’re selling the wood untreated or unprocessed, and it’s free [01:25:05] of capital gains tax if you’re now part of the processing, um, i.e. you’re going to turn it into something, [01:25:10] then it’s not. It just goes. It’s not it doesn’t benefit from exempt. No. So you’ve got to grow it, [01:25:15] get rid of it. Take the money on the harvest. But they were told by their financial advisor, not even [01:25:20] an accountant, they could deduct the cost of the investment across their taxable profit. [01:25:25] So if they made 50 grand and spent 50 grand on the scheme, they could offset the profit. And off [01:25:30] you go. And you pay no tax. No, no investment works that way. Investments are made after tax, [01:25:35] the post tax and you take the money. Because if you take capital gains tax benefit you now you double dipping the tax benefit doesn’t work [01:25:40] that way. Another scheme and this is a horrible one. And I did a video on it where um, [01:25:45] about £60,000 worth of back taxes and fines, where [01:25:50] the total tax you would have actually saved was about 35. So she’s about 25 grand down. And [01:25:55] what what this scheme is and we see this a lot.

Bilal Ahmed: And we’ve seen a lot of people get caught out with this because I think it was popular [01:26:00] maybe 10 or 15 years ago was remuneration trusts was you would set up a scheme whereby [01:26:05] you put money into remuneration trust. And I’m not going to go too much into it, but you [01:26:10] can then immediately borrow back off the trust. So let’s say on paper you put [01:26:15] let’s say your tax was 50 grand, so your taxable profit is 50 grand. And you want to wipe out 50 grand’s worth of [01:26:20] profit. You put five grand into the scheme, claim it as tax relief. Five grand comes back out and [01:26:25] you loan it back off the trust, and you put another five grand in, but another five grand in wash the same five grand around ten times. On [01:26:30] paper, you’ve made ten lots of five grand investments into the trust and then you claim it. But now you [01:26:35] owe the trust £50,000 and then you’ll never repay it. It’ll just falter. And then you claim the tax relief on it. [01:26:40] Bollocks doesn’t work. And a lot of people have been caught out with this and I’ve been stung with back taxes, [01:26:45] fines and penalties because like I was saying before, it’s 100. It’s up to 100% fine and interest [01:26:50] and penalties from the date first assessed.

[TRANSITION]: So what’s.

Payman Langroudi: Happened there? The guys asked his accountant [01:26:55] and his accountant said, yeah, go for it.

Bilal Ahmed: Probably two, probably two things is [01:27:00] I’ve heard from someone, you can do this. And then they put them in touch with their guy who’s gone and [01:27:05] done it, and they’ve got it done it through somebody.

Payman Langroudi: Just making a quick buck. Yeah. Sorting it out for people.

Bilal Ahmed: All the accountants [01:27:10] coming to them with a scheme and then putting me in touch with someone else to do it and saying, oh, look, I’ve got a [01:27:15] way you can do this. And then Teflon Don, they’ve got their hands clean of it. There’s no there’s no proof they [01:27:20] did it.

Payman Langroudi: There’s no link.

Bilal Ahmed: There’s no link. And your ultimate response because this is the thing that nobody really [01:27:25] gets it. Like if I went to a dentist and if I, God forbid, I took one of your kids and something bad happened, [01:27:30] you’re liable for that. You know, this is your product. It’s your name on your name, on your reputation, your brand, everything. [01:27:35] You go to an accountant to do your accounts. Unless you can prove they told you to. Dodgy. You’re [01:27:40] responsible. Especially with a limited company. As a director, you’re wholly responsible for those accounts. [01:27:45] You signed them off. You didn’t know what you were signing off. Hmrc does not accept ignorance as an excuse because [01:27:50] you have a fiduciary responsibility, a legal responsibility to look after the business [01:27:55] assets and the best interests of the shareholder might be the same person. Doesn’t doesn’t the letter of the law [01:28:00] doesn’t see it that way? So unless you can prove what the adviser or this person said to you, then [01:28:05] it doesn’t matter. But then if the other person’s got no legal recourse and it’s just a dude that does tax avoidance schemes, [01:28:10] what are they going to lose anyway? So if it sounds if it if [01:28:15] it sounds like if it flops like a horse, sounds like a horse, walks like a horse, it’s a horse. Let’s not [01:28:20] try to put it down as a zebra for tax purposes.

Payman Langroudi: And can we, can we finish with inheritance tax [01:28:25] or is that a lawyer thing?

Bilal Ahmed: No. Well, within the realms of what we do.

[TRANSITION]: So what’s [01:28:30] what’s a what’s a.

Payman Langroudi: Legitimate way to minimise inheritance tax.

Bilal Ahmed: There’s a couple of good ways. [01:28:35] So um, so inheritance tax, it should be on everyone’s mind. It [01:28:40] should always be on. Look, because every business you build, everything you acquire should always be thought to exit. And when [01:28:45] we’re talking about generational wealth, we’re talking about all the hardships of everything we’ve done has got to go somewhere, right? And we don’t [01:28:50] want the government taking 40% of it because it’s horrible. There’s a couple of ways to minimise inheritance tax. Effective tax [01:28:55] planning is really important to start with. So there’s certain allowances that you want to make use of. So everyone’s [01:29:00] got I think it’s 370,350 grand allowance everyone has. And then for your primary residence [01:29:05] you get another 1.5125. So theoretically husband and wife on the same house for £1 million. [01:29:10] Um, you can gift that to your kids and suffer no inheritance tax. And, you know, it’s not like when [01:29:15] Sonic gets hit, all the coins come out and then the government takes their bit. So there’s [01:29:20] effective ways to minimise this.

Payman Langroudi: Yeah.

Bilal Ahmed: So right now one of the.

Payman Langroudi: One the first million around [01:29:25] is, is is okay.

Bilal Ahmed: First million around that when when you consider primary residence. Yeah. Now we’re [01:29:30] talking about everything else. Okay. So there’s things like gifting. So the seven year rule. So what happens with the seven year [01:29:35] rule is that 40% diminishes across seven years. So by the time you get to the end of the seventh year, [01:29:40] there’s no capital gains tax to pay.

Payman Langroudi: And that’s completely legitimate.

Bilal Ahmed: Completely legal. Yeah, it’s effective tax planning. So [01:29:45] let’s say you’ve got a rental property and you want to gift it to one of your kids, gift it to one of your kids. And as long [01:29:50] as you stay alive for seven years no capital gains tax. Yeah. Perfect.

Payman Langroudi: And it tapers depending on how many years [01:29:55] you say correct.

Bilal Ahmed: It drops about 8% each year or eight points each year from about year two onwards. Yeah. [01:30:00] And then the there’s a specific bit of nuance around that. It [01:30:05] has to be a gift without reservation, i.e. I gift my kid [01:30:10] the property, but whilst I’m still around, I’ll take the rental income. You know, it’s your property. I’ll [01:30:15] take the I’ll cover. No, that doesn’t work. It’s a gift with reservation.

Payman Langroudi: Also the nuance [01:30:20] around if it’s the primary residence, if the place they’re living. Yeah, they have to start paying the kid [01:30:25] rent.

Bilal Ahmed: Yes. Yeah. Yeah.

Payman Langroudi: Right.

Bilal Ahmed: Yeah. Yeah. Because. Because if the reservation is, if I’m not now [01:30:30] if I’m. Because how HMRC rules work around buy to lets or residential properties or non-residential properties residential [01:30:35] property but for rentals. Is if you gift me the and [01:30:40] I’m connected party. If I’m now paying below market rate, I still pay tax on the market rate rent. So [01:30:45] so people think, you know I’ll give it to my sister for £100 a month. No, because if the market rate says it was a grand, you still [01:30:50] pay tax on £900, or if it’s done through a company, then that difference is then subject to benefit and contacts [01:30:55] to you. So there’s some weird, wonderful things around that. Now where you’re in business is specifically [01:31:00] for dental practice owners. There’s a couple things that you want to do for inheritance tax. Historically, one of the most one [01:31:05] of the most exciting schemes was like a small self-administered scheme pension scheme where [01:31:10] you could put in 60 grand a year, and if it was like you and your wife owned or you and your partner owned the practice, [01:31:15] you put 120 grand a year tax deductible pension contributions, build up the money and go buy the [01:31:20] freehold off yourself because then pensions were outside of inheritance tax. It’s a fantastic scheme.

Bilal Ahmed: But [01:31:25] Labour had brought it in. So Labour so pensions is going to be a horrible one because [01:31:30] what people don’t realise is the additional administrative burden that’s going to come with it. Because if you’ve [01:31:35] been like for me, for instance, I had a number of jobs before I became self-employed. Someone’s [01:31:40] got to find all those pensions. Someone’s got to pay for that. And the the, the amount of cost that’s now incurred [01:31:45] with the state or like, um, probate is ridiculous because they get paid first, right? So [01:31:50] pensions now come inside of inheritance tax. What does all this mean [01:31:55] for effective lifetime planning? One of the biggest changes for entrepreneurs [01:32:00] is something called business. Um, business property relief. So [01:32:05] historically, you could transfer 100% of your trading business into a trust and incur no tax [01:32:10] on that transfer. Yeah, that that limit is now being tapered to the first million. [01:32:15] And then it’s 50% relief on anything over a million. So if you now want to look at long term [01:32:20] planning before the 1st of April, you want to look at trusts. Because where trusts now work outside of inheritance [01:32:25] tax is, um, you move everything in effective trust. I’m not going to get [01:32:30] much into the weeds of it because.

Payman Langroudi: There’s different ways to set it up.

Bilal Ahmed: There’s different ways. But you need legal. You need accounting. [01:32:35] You need you need specific people. But like my structure, for instance, I have my holding company that [01:32:40] owns my trading company and my shares and my other investments, my holding companies owned by my trust. And if [01:32:45] I pass, everything moves over to my trust. Um, and there’s no inheritance tax, but every [01:32:50] decade, there’s a 6% charge on the underlying asset value.

Payman Langroudi: Every [01:32:55] decade, 6% charge that you pay the government.

Bilal Ahmed: Yeah, you pay the [01:33:00] government. So this is what people don’t realise that trust is this magic way of not paying any tax. But no, [01:33:05] they still pay tax. It’s just calculated slightly differently. And over time it will balance out because 6% over 100 years [01:33:10] is you know, you now pay effectively 60%, right? Whereas if you just pay the 40% upfront then [01:33:15] you would in the long term you’d have been fine. Math doesn’t work that way because you haven’t lost [01:33:20] 40% of the underlying asset value from day one. The idea is you should be able to cashflow your assets in the trust, and [01:33:25] then as long as you’re putting 0.6% aside every year, then you should have enough by the end of the decade [01:33:30] to pay it up. And that’s effective financial management where the benefit of something like a trust comes into it [01:33:35] is you have control, but they’re not classed as gifted reservation. So [01:33:40] things like bloodline clauses so only beneficiaries of your specific bloodline can benefit from from [01:33:45] the trust.

Payman Langroudi: Not husband and wife. Divorce protected.

Bilal Ahmed: From divorce. Protect from litigation [01:33:50] protected from any underlying thing. Protected from stupidity. So if you gift your kid a [01:33:55] property, you stay alive for seven years. But by year four, they’ve got themselves into a spot of bother and that [01:34:00] property now disappears with them. Something you’ve worked your ass off for? Yeah, a trust protection from that to an extent. [01:34:05] But what it also gives you is I said, I think I’ve said it offline is I’ve got three kids. [01:34:10] The goal for me, everything I do is to make sure they, they enjoy a life that I’ve set [01:34:15] up for them and it preserves and it continues. So the incentive is you do not withdraw from the trust [01:34:20] unless you absolutely need to. And then once they reach a certain age, [01:34:25] they remove the trustees, so they become trustees and beneficiaries. And one of the things in there is [01:34:30] they have to agree in on everything in unison. Everything in unison has to be 100% vote every single [01:34:35] time. They can’t outvote one another, they can’t mistreat one another. And it means that they protect that. Look, realistically, [01:34:40] what’s going to happen is if I’ve got three kids, whatever I build up might divide nicely between three. They then [01:34:45] have three kids. Is the pot going to cover nine ways? Probably not. But if you teach them good financial [01:34:50] education from the start and then they then they’re now incentivised to not [01:34:55] only utilise the pot but grow the pot and not just take from the pot. That’s how you maintain generational wealth [01:35:00] and maintain everything you’ve worked your ass off for. That can continue to stand [01:35:05] the test of time. I think trust is liquidated after like 120 years anyway. Is that right? Yeah. So they all [01:35:10] sort of moves out. Again, don’t quote me on that. But it’s by the time [01:35:15] it’s done anything, the people who benefit will be strangers to me. Right. So you know, as long if I stay alive long enough, [01:35:20] I might, I might meet my grandkids or my great grandkids. Beyond that, everyone’s a stranger to me. [01:35:25]

Payman Langroudi: I like that. Let’s end it there, man. It’s been a massive pleasure [01:35:30] to have you.

Bilal Ahmed: Thank you for having me. It’s been fantastic.

Payman Langroudi: I’m glad you look like the average chartered accountant. I [01:35:35] like that it’s like my dad’s a chartered accountant. Oh, nice. But he looks. [01:35:40] He always has looked like the.

Bilal Ahmed: No, I refuse to do it, man.

Payman Langroudi: This is your USP, huh? [01:35:45] Just like to. To be like, an outlier, I think.

Bilal Ahmed: No, look, I want to talk to people [01:35:50] like people. Right? And people buy from people. People have to trust people. And I just want to dress comfortably, [01:35:55] man. It’s like it’s taking me two hours to get on the train. Why not? And I want to be comfortable when I’m doing it.

Payman Langroudi: But even on [01:36:00] your content and stuff, you’re like, you’re not. You’re not the normal archetype you want, one imagines.

Bilal Ahmed: No, [01:36:05] but I don’t think I went through that normal, archetypal journey. So like my dad, my dad was a butcher. [01:36:10] First generation immigrants. And the only thing I know is business. And I didn’t really suit the corporate [01:36:15] world very well. Um, I did well at what I did. You know, I was I won [01:36:20] awards with places I worked, but I think I just wanted to go and do stuff, and I [01:36:25] liked the impact. And I don’t play the game very well. I can’t do brown nosing. I can’t do any of that. [01:36:30]

Payman Langroudi: I just can’t.

Bilal Ahmed: I can’t. I just want to see. Action result, action result, action result. [01:36:35]

Payman Langroudi: That’s so much better having your own than. Yeah, definitely.

Bilal Ahmed: It’s way more fun as well. Yeah.

Payman Langroudi: Amazing, [01:36:40] man.

Bilal Ahmed: Thank you so much. Thank you for having me.

Payman Langroudi: Really enjoyed that.

Bilal Ahmed: Appreciate you.

[VOICE]: This [01:36:45] is Dental Leaders, the podcast where you get to go one on one [01:36:50] with emerging leaders in dentistry. Your [01:36:55] hosts Payman Langroudi and Prav Solanki.

Prav Solanki: Thanks [01:37:00] for listening guys. If you got this far, you must have listened to the whole thing. And just [01:37:05] a huge thank you both from me and pay for actually sticking through and listening to what we’ve had to [01:37:10] say and what our guest has had to say, because I’m assuming you got some value out of it.

Payman Langroudi: If you [01:37:15] did get some value out of it, think about subscribing. And if you would share [01:37:20] this with a friend who you think might get some value out of it too. Thank you so so so much for listening. Thanks. [01:37:25]

Prav Solanki: And don’t forget our six star rating.