This week, Prav and Payman take a deep dive into a different side of dentistry as they delve into the numbers with accountant David Hossein.
David tells our hosts how it was that he came to specialise in dental and healthcare accountancy.
He talks about some of the most common financial mistakes made by dentists, old and new – dispensing a boatload of financial wisdom along the way.
“Banks love dentistry. They will give you money.” – David Hossein
In This Episode
01.04 – Backstory
06.27 – Structures
10.55 – COVID accountancy
14.06 – Starting out
16.47 – Beyond business
18.25 – Theoreticals
38.12 – What dentists should know better
44.02 – On tax avoidance and tax efficiency
51.55 – Out of the office
52.37 – Last days and legacy
About David Hossein
Manchester-born David Hossein is a chartered accountant specialising in the dental and healthcare sectors. He practices with the Macclesfield-based Bennet Brooks firm of accountants.
Prav Soulanki: You know, I think what’s really important here is that they have that true moment of realisation themselves that if this is their dream and this is their ambition and this is what they want to do with their business then switch that bloody aggression on and give it 110% and I’ve always been one of these people who believes that if you really want to succeed, you really want to do it, you need that pig-headed discipline and aggression to attack it with and if that is distracted with two thirds of your week, or whatever it is, somewhere else, being told what to do, working in a way that you don’t want to work, it’s just going to kill your energy for growth.
Speaker 2: This is Dental Leaders, the podcast where you get to go one-on-one with emerging leaders in dentistry. Your hosts, Payman Langroudi and Prav Soulanki.
Prav Soulanki: Gives me great pleasure to introduce David Hossein to the Dental Leaders podcast. Me and David have had a few conversations over the last year or two, just sharing mutual clients and we just started talking about treatment of dental accountancy and I’ve spoke to a lot of dental accountants over the years and on the whole, they tend to bamboozle me with the language and I’ve found that speaking to David, he seems to break everything down really simply to understand and just full transparency here, David’s not my accountant, but I do respect him and the advice he gives out there. So David, if we just kick it off with just a brief history of where you grew up, what your upbringing was like, and then how you then got into your passion, which is crunching numbers for dentists.
David Hossein: Thanks Prav and thanks Payman. So Manchester lad, grew up in Stretford.
Prav Soulanki: Red or a blue mate?
David Hossein: I am a blue, even though I grew up round the corner from Manchester United. I think for me when the Glazers came in, it became less about football and more about money. Yeah, I think at that time, I was just quite impressed by the loyalty of City fans, how crap their team was but they still stuck by them. So that won me over and it worked out well in the end, so not a bad story. Yeah, grew up in Manchester, never really lived anywhere else apart from a short stint in London and did a bit of travelling, like you do in your youth. How did I get into accountancy? Well, my father encouraged me to take it up, it was something he did as well. So yeah, I think it helped me make my decision because it wasn’t something I would have ever chosen if I’m honest with you, but it turns out I’m actually good at it, so I’m happy for that.
Prav Soulanki: When you were at school, were you one of these numbers guys? Like top of your class at maths and maths geek, not great at English, sort of thing and just accelerating in one subject? Was that your strength?
David Hossein: No, no, not at all, not at all.
Prav Soulanki: No?
David Hossein: I don’t see accountancy necessarily about numbers. I think the software and a calculator will do a lot of the maths for you, I think to be a good accountant, you should be [inaudible] minded and that comes with experience.
Prav Soulanki: So what was the pathway? What was the pathway for you? Did you do GCSEs, A Levels or O Level, whatever the equivalents were back then and then …
David Hossein: Yeah, did GCSEs, did business studies at A Level and as I say, my father guided me into that. Passed my exams, got a training contract and the rest is history and here I am today.
Payman Langroud…: So are you a chartered accountant?
Prav Soulanki: So after you became a qualified accountant?
David Hossein: Yes, I’m a qualified accountant and I also sat my chartered taxation exams as well. That was really helpful for a lot of what I do now, because being an accountant and being a tax advisor is … they’re similar but different. A lot of the transactional tax advisory work, you’ll only get that if you’ve done the tax exams. So that does help in a lot of my work, yeah.
Prav Soulanki: How did you get into dentistry?
David Hossein: Funnily enough, I was at uni, I’ve always had friends who are dentists and naturally they became clients and just did more and more of it until that’s pretty much 95% of what I do now.
Payman Langroud…: So David, there’s more to it than just working out accounts for associates and practises. I mean, tell me about the scope of business. I guess you’ve got that self-employed bit, you’ve got the business owner bit, what else?
David Hossein: Well, most of my work is in the transactional side. So I call myself a commercial dental accountant, which is somebody who … There’s accountants who will say, “Well, here’s your accountant, here’s your tax bill and here’s my fee for the bad news.” Or there’s someone who’s like, “Well actually, where are you in your business and where’s it going to go, and how do I fit into that and how can I support you in that?” So it’s things like business plans and cashflows for new start ups, helping a first time buyer appraise the practise and helping them through to completion really and helping mini groups with their acquisition programmes and helping them through to sales. So that’s really the majority of my work. I can do accounts and tax because obviously I’m a qualified accountant, but my main focus is working closely with my clients.
Payman Langroud…: So give some examples David, of big mistakes you’ve seen clients making that you’ve had to fix?
David Hossein: Yeah, having no accounts, not done by a dental account and it can cause problems further down the line, I think as … So dentistry performs to a very predictable format in terms of fee [inaudible], cost of sales, gross margins and KPIs. Just the accounts I’ve seen, I’ve just been like, “Well actually, this doesn’t make any sense.” In some ways, you have to start again, really then to start to understand how the business is actually performing. That can be more common than it should be. Things like flawed incorporations, so people saying, “Well, I want to have a limited company because it’s going to save on tax.” But then it’s not done by a dental accountant, they don’t understand that you need to have the contracts [inaudible] properly, otherwise the tax man will just cut through it and say, “Well actually, you’ve not done it properly, therefore no you’re not having these tax savings.” Then when you’re coming to sell, that’s another problem that then the buyers can’t understand the structure because it’s not done properly. So I think having somebody who understands the specifics of your area and your business and dentistry, I think is valuable.
Prav Soulanki: David, I’ve got a situation where I co-own a group of practises. I was advised by an accountant, non-dental, or we were as co-owners, of how to structure our company and then how to extract those funds personally, appropriate times and when we declare our divs and whatnot and just maximise on that position, right?
David Hossein: Yes.
Prav Soulanki: However our accountant advises us. Anyway, time went on, the practise moved to another accountant. We got the news that had we had a different structure, i.e. and I’ll just give you an overview, we’ve got a holding company, an LLP and two limited companies that sit under the hodling company because when profits get pushed up to the LLP, we’re paying tax at source, rather than deciding what we’re going to do and how we’re going to plan that. We’ve got no control over that, it’s like, boom, it goes straight onto your-
David Hossein: Tax return.
Prav Soulanki: … you know, your personal-
David Hossein: Yeah.
Prav Soulanki: … and you get leathered by it, you haven’t got as much control. That cost us a lot, a lot of money over the years, but as somebody who’s not accountancy-minded, or clueless about that, we trusted our advisors and we ended up going that and it was very clearly explained to us by the other accountant that, “Look, we could have saved you … ” it was in the region of multiple hundreds of thousands over years, right?
David Hossein: Yeah, yeah.
Prav Soulanki: Can you give me your insight into … Well, do you come across things like this in terms of flawed structures? Also, just a bit of advice out there, imagine you’re starting up a squat, or you’re thinking of growing a group, or whatever that is. Is there an ideal structure to operate under, depending on, I’m assuming what your goals are, whether it’s growth, where it’s acquisition by other people, or acquisition for yourself. Do you want to just run us through structure?
David Hossein: Yeah, absolutely and 100%, that’s a problem. The problem you’re talking about is where does the money go? When it comes to tax, the first thing you always have to answer is start with the end in mind, so what are we trying to achieve by this? Where does the money go? Where does the profits go and where does the capital go? Once you can pinpoint those two things, then from there, you can then map back, well how should the structure work to achieve the income distributions and the capital distributions in the future? You’re quite different Prav, because you’ve got LLP with a company, it’s probably more common where you see, say an associate first time buyer who’s buying a limited company and they have the debt held personally and the company is repaying the loan repayments and they just get hammered for that capital repayment as a dividend. So heavily taxed on it, they’ve got massive bank repayment, and they’re just left very poor from the actual residual profits. It’s entirely avoidable by having a hodling company above the practise that you’re buying, so the debt is held in there, dividends are paid up but the cash stays within the corporate structure to repay the debt and then you’re not having to pay tax on the distributions, it’s only after the bank has been repaid, so lots of structural issues to be very careful of in that scenario.
Prav Soulanki: Is there anything that you guys can to do almost unwind this?
David Hossein: It’s difficult with the bank.
Prav Soulanki: Let’s say something’s happened and you think, “Do you know what? If only the structure was like this.” Is there any point where it becomes too late, or is there a point where you say, “Actually, come and speak to … ” yourself, or somebody like yourself, who’s a commercially-minded accountant, ” … and we may be able to improve your position.” Even if something’s happened in the past the A was either structurally wrong or accounting, cost centres have been done differently, or like you said, the debts going in the wrong direction?
David Hossein: Yeah, it’s harder to fix once it’s in place. First of all, if the debts in the wrong place, then to move it, the banks have to be onboard with refinance and if you lock in at a very good rate, that’s a problem because they’d want a new rate. On other structural issues, yes, it’s possible but you just have to mindful of HMRC’s transactions and securities legislation which is designed for an entirely different purpose, but can tarnish other things when they have unintended consequences, but it has to be looked at on a case by case basis.
Prav Soulanki: What are the main things that you’ve noticed when speaking to clients during this whole lockdown COVID situation at the moment, in terms of the support they’ve needed? Obviously there’s been loans and things like that, cashflow forecasts and things like that, I’m assuming you’ve had to be working on, but what’s your general sense of the market now in dentistry, especially you say you help with people who are starting up new practises and you also help with acquisitions and sales and stuff like that. Can you just give us a temperature check of what’s going on in the market at the moment at both ends of the spectrum?
David Hossein: Yeah, sure. So on new side, I am seeing a lot more interest. I think associates are questioning where they are with life generally, it’s obviously been a mad time we’ve been through so people are saying, “Well, actually you know what? I’ve been through this, I’d like a bit more independence, is this quite right for me?” So I’m getting a lot more inquiries and I’ve seen a lot of people going down the squat route. I think if it’s executed correctly, I think it is a very good return on your money. So I’m seeing more on that side. On the private side, I think the first three months are quite scary for private practises, there’s a lot of uncertainty, so there was a need for, “Well, let’s have a look at the cashflow, let’s see what the situation is.” I’m very lucky that none of my clients had to close because of it, they’ve had to come through and are probably having now, couple of months, best months they’ve ever had because it’s quite difficult to get an NHS dental appointment.
David Hossein: On the selling side, there was, I think it’s fair to say, a lot of acquisitions were paused, so some of the corporates just slowed things down a bit, saying, “Well, hang on a second, let’s let the dust settle and let’s see where we are.” But that’s picking up now. So I think we’re moving towards normality now.
Payman Langroud…: Okay, how long have you been just working with dentists?
David Hossein: With just dentists, about 10 years, 10 years.
Payman Langroud…: So how would you rate the industry compared to other industries, as far as the health of the businesses that you see? Would you say it’s an easier business overall than others, or more difficult?
David Hossein: I’d say it’s actually more difficult because you’ve got the challenge of in many … Well, most of my clients anyway, are bringing in the income. So you’re having to work in the business and be responsible for all your admin and be responsible for all your marketing, and be responsible for all your team training. It’s very different, whereas other people who’ve got a business, they’ve got a corporate structure, where managing director manages the business and that’s not the case with dentistry, I think … Yeah, I don’t envy a lot of my clients. I think it’s quite a hard sector to be in, the hours they do, the responsibility they’ve got, the constant threat of litigation, so something going wrong. It’s a difficult business to be in.
David Hossein: I think that on the other side, if you get past that and you’re commercially minded and you want to go and grow something for creating value, well as a sector, healthcare, but dentistry in general is a great way to grow and build something that can generate future value but in the meantime, be careful of your mental health. Have the right people behind you, it’s a lonely, lonely sector.
Prav Soulanki: You spoke about starting a squat and it being a profitable thing if you do it right and I guess the flip side, if you’re somebody who’s just staring out and you think, “Okay, do I buy in on going concern and buy into cashflow so I hit the ground running? Or do I set up a squat and just set up a business from scratch and I’m not whacking a load of money in,” and bank finance might be easier if you’re buying a business that’s already got a proven cashflow. What would you say are the pros and cons from your perspective of saying, “Right, okay I’m going buy a practise and just … ” shall we say, hit the ground running, but I’m sure you’ve seen all the problems that come with that and then stand squat?
David Hossein: I look at it slightly differently in that what’s your natural … I think people should do what they’re naturally inclined towards. I think you’ve got natural personality times, some people are entrepreneurial and really enjoy rolling their sleeves up and doing things themself. I think that type of personality should go for a squat because if you’re buying a practise and you’re coming in and you roll your sleeves up and try and change everything, everyone’s going to be pissed off at you, and you’d have no friends and it’s going to cause you problems. And then you’ve got the other type of personality which isn’t like that and just wants to come in get started from day one with regular cashflow.
David Hossein: So I think I always look at the personality type first, but to answer your question, I think it’s less cash intensive on a squat but you’ve got to get your marketing right, you’ve got to have that right. So there’s more risk with potentially more return if it does pick up. On the acquisition side, you’ve got the benefit of walking into something that has got a cashflow, a regular income, so you’re not having to work in two places while it’s picking up. I do spend a lot of time convince people not to buy practises.
David Hossein: I think that I’ve had clients and they’ve paid too much for something that it just wasn’t right and after you’ve paid the bank back any tax, you can be actually worse off and the first thing I do when an associate’s looking to buy a practise is well, let’s please look at the numbers closely, let’s compare the post-loan repayments cashflow to what you had before and are you better off or are you worse off? If you’re 10 grand worse off, you’re comfortable with that, you’re happy that it’s tied up in the equity of the practise and as long as you’re going into it with your eyes wide open and you’ve understood, I’ll support you but if then it’s like, well it’s going to be worse off for you, I will try and get that across. The last thing I want is a client that’s miserable because if the client’s miserable then I’ll be miserable and it won’t be a healthy relationship.
Prav Soulanki: Does your role extend above and beyond business and stuff like that? I often find that when I’m speaking to clients, often bleeds into a conversation more than just marketing and you talk about work/life balance and stuff like that and sometimes I’ll have people approach me and say, “I’m thinking of buying practise two.” Because practise one is going really well and I’ve just [inaudible]. We all know that’s not reality, not for most people anyway, or somebody who’s grossing really well as an associate and they think, “Hold on a minute, the practise that I’m working for is taking 60% of the dough, I want it all.” So then they go down that route. Do you find yourself in those situations? Do you find your role extending above and beyond commercial dental accountant? Have you got any stories that you can share with us?
David Hossein: Yeah, sure. I mean, to answer the first question, absolutely, it’s not just about your numbers, it’s about where you are and where you’re going and how you feel and what’s driving you. Yeah, absolutely I think … Yeah, the second thing you mentioned there about the associates not happy about the 60% going, that’s very common and what I always say to people who are thinking of buying is just let’s talk it through beforehand to be clear on what your reasons are for doing it. Do something like that for the right reasons because it is a very big thing to take on and if you’ve not done it for the right reasons, it will make you unhappy. Any stories? What would you like to know?
Prav Soulanki: Summat juicy, mate.
David Hossein: Summat juicy.
Prav Soulanki: Any big names in dentistry who mucked it all up? No, I’m only kidding. Do you know what? Just something out there where you’ve seen perhaps something go wrong or that could have gone the right way, or just stories of where for example, people have bitten off more than they can chew because they didn’t quite know what they were getting into. I often find that, especially with a lot of associates, a lot of them don’t know what they’re getting into and they think grass is greener on the other side and then they realise, “Hold on a minute, I could wake up, stroll into work at 9:30, go home at half five, have my tea, watch a bit of Netflix and go to bed and now I’m doing the 14, 15, 16 hour shift and the majority of that shift is at home, stressing and thinking, or dealing with someone’s going to be off sick or whatever.” Have you had any of those scenarios perhaps, or stories where someone’s bought in and they think, “Oh my God, I can’t do this any more.” Or someone who’s been even braver and said, “Do you know what? I’ve made a massive mistake, I’m getting out of this.”
David Hossein: I have, many years ago, I do try and avoid my clients putting themselves in that situation because I’ve been through it before and I’ve had a client who really overpaid for what this practise was worth. It wasn’t my client at the time, so he came to me after he’d bought it because I would have stopped him doing that but every year, every January, it’d come to, “Here’s your tax bill,” and I won’t mention any names but it was soul destroying for him, said, “Where am I going to find this money from? I’m being taxed on this.” Don’t forget you’re taxed on your pre-bank loan profits. So if you’ve got 100 grand profits but you’re paying the bank 50, you’re only seeing 50 of that, but you’re being taxed on 100. Then if you’ve got a 40 grand tax bill on the 100, then there’s 10 grand left for you and your family. So you’ve got to really make sure you can avoid those capital repayments and yeah, he did come out, he had to cut his losses, but it’s like you say, you don’t throw good money after bad, there is a bad where actually this is not working and luckily, he could sell. He didn’t make a massive loss on it but compare that to where he is now, he’s an associate earning 100 grand, so it’s-
Prav Soulanki: A month?
David Hossein: No, not 100 grand a month, 100 grand a year.
Payman Langroud…: David, you know it’s a good exercise, yeah? Because a lot of dentists, like Prav said, want to open their second or third, or fourth sites, and in those sites they’re not going to be there, right?
David Hossein: Yes, yeah.
Payman Langroud…: In the end, they’re not going be the fee earners. So as a thought exercise, if you were going to open a dental practise, bearing in mind you’re not going to be there earning as a dentist, what would be things you would look for? Let’s say, begin with the end in mind, you want a three practise group, what would you do?
David Hossein: Man, that’s a really good question. I think it’s easier if your first practise is an NHS practise that doesn’t need to do a lot of marketing. If you can convert practise, an associate-led practise, sorry build it into an associate practise that doesn’t need you there, they often say the shift from one to two is harder than the shift from three to 10 because once you’ve three, you’ve got the seeds in place and it’s replicating the business model and the business isn’t contingent on you at three. But going from one to two is where you get cut down the middle, so you really want to make sure that practise number one is very, very self-sufficient and it’s the least of your time. It’s great if you’re not then working in it at that point and then it’s great that you can then work in the new site. Somewhere not too far, so your practise manager from site one can help and come over but yeah, it takes time and I think that’s … I think if I was giving … Go on.
Payman Langroud…: First one’s the NHS, what would your second one be? NHS too?
David Hossein: Well, if it was me, I think that it depends on the location, but a second one that’s private, is a private squat, would be attractive to me because I think your investment at that point is less but at the same time, if the cashflows work to buying another practise, then obviously go for that, but as you know, valuations aren’t very high, so you’ve got to make sure that cashflow works and then when you’ve got two and you’ve got a third one, then you add in then, do you need centralization of your processes and that’s another headache. Do we need a head office?
Prav Soulanki: Do you know, what I find about that, you say practise one NHS, practise two private, but systems and processes in place for expansion-
Payman Langroud…: They’re different types of practises aren’t they?
Prav Soulanki: Yeah, so surely in my … I’ve only ever known, in terms of ownership, private and I’ve worked with practises who are mixed and the processes and the systems are entirely different. I mean, NHS dentistry and the way that’s handled and stuff, it’s a whole world I don’t really understand but when I do get let into it, it feels like chaos. The only reason I say that is because when I communicate with the team members there, it is like they’re going 110 miles an hour and when you’re in a private practise, it feels like the music levels just toned down and you’re just coasting along and it’s smoother, do you know what I mean? Because you’re more in control of everything, rather than being dictated, so the systems and processes will be different. But is the logic NHS first, private squat second?
Payman Langroud…: Well, it’s a very common way of doing it Prav, because you’ve got the guaranteed income first.
Prav Soulanki: Not so much guaranteed moving forward though maybe?
David Hossein: Yeah the question was only two sites and I’m just going off what I see as most common for what I see but I think start with the end in mind. If your goal is to have one and two, then having one that’s self-sufficient and the second is your private where you generate high level returns, that can work. If your goal is, “Actually you know what? I’m going for 10 practises here.” Then yes, acquire several ones, acquire similar ones.
Payman Langroud…: Let’s take it forward then. Yeah, let’s saying we’re going for 10 practises, now you’re at three and you’re saying we’re now looking at some head office staff. Let’s walk through it. How do we get more money? How does it work? Are you in the cash raising side of these businesses too, or not?
David Hossein: I work with the lenders on behalf of the clients but the banks love dentistry. They will give you money.
Payman Langroud…: All right.
David Hossein: So it’s entirely up to you whether you take that on. Yeah, have that now very large debt above your head.
Payman Langroud…: Let’s talk systems then, go on. Let’s say you want to go from three to 10, what should be our systems? Who should we be looking to hire? How much money should we be looking to borrow and then what’s going to be our exit story? From your perspective?
Prav Soulanki: One at a time mate?
Payman Langroud…: Yeah, yeah, yeah, I know.
David Hossein: I have to say, there’s a line that I don’t cross. I don’t step into the business and put an operations person in and there’s a line I can’t go past. Prav’s probably better placed to answer that side, being on the inside, but from the outside, from what I see with my clients, then you want to have your accountancy function centralised. Associate pay, have your payroll, your associate pay centralised so take as much off your practises, have it all centralised. What else? Do you need a HR person at that point? I don’t think so, I think that having an external company can still help, you don’t need to have a HR person centralised. So when people talk about head office, we often make that into a really big thing, when in reality, it doesn’t have to be. I’ve got a client who’s just sold for a very, very good sum and their head office was very loosely put together with laptops and people working from home. It’s how you design it and what the point of the head office is. So if you can take off the payroll, take off the associate pay, paying of bills, having your accountancy function, your purchase ledger, if that can be centralised, great. Doesn’t have to be.
David Hossein: I think it also, again, going back to structures, it depends who you’ve got in the business. If it’s just you, and you want that all in once place and you pay the bills then yeah, centralise it. If you’ve got partners involved, and I think partnership models will become a lot more common going forward then you might … It depends what you agree with the partners and what you want to do, what they want to do and they might say, “Well actually, you know what? I want to pay the bills and I’ve got visibility on that.” I don’t think there’s one size fit all, I think there’s flexibility to what it actually needs. Obviously a big corporate would need to have purpose built offices and an in-house legal person and so on but I think for the smaller size clients, you don’t need something like that.
Prav Soulanki: When people are looking to set up a squat, I’m sure loads of mistakes are made, just the treatment of things financially I’m thinking about, rather than other operational business-type stuff. Are there three big tips you can give from a financial perspective? For example when people have questions like, “Buy equipment outright or lease,” for example. Can you tap into that but also maybe a couple of other for examples where you can just give some advice of what are the best ways to treat different areas of your business from an accounts issue, a tax perspective, to maximise things for you moving forward?
David Hossein: Well, for a squat, the absolute priority is not to spend all your cash and be as pessimistic as you can on how long it will take you to get new patients. If you’re over-confident with it, “You know what? I’m going to have 20 grand a month from day one,” then you’ll base your decisions on that and over commit your cash. Cash is the blood of any business. When it comes to a squat, I always say well, “Well, do you need to do two surgeries from day one?” If you’ve got a certain amount of cash, let’s do one surgery, wait for that to be full before committing to the second and third and so on. So doing things in a staged process if very common, so should I buy something on hire purchase or cash? If you’ve got the cash and you’re 100% certain you don’t need it, and you’ve got a bit in reserve after that, because always have something for a rainy day, then if you’re buy it cash, then you won’t have to pay the interest charge, which although it is tax deductible, then if you’re a company, let’s say it’s 19%, 81% is still a real cost to you, so that’s worth considering.
David Hossein: However, from a tax point of view, doesn’t make a difference. Whether you buy it cash, or whether you buy it on hire purchase, let’s say your year end is the 31st of March and you sign the contract on the 31st of March, you will get the full tax relief on that asset in that financial year. So if there’s no real tax, it’s more about, well can afford to lose that-
Prav Soulanki: Cashflow.
David Hossein: … yeah, cashflow and the extra cost of the interest. It’s what’s the best use of your money.
Prav Soulanki: Any other sort of … So, that’s many one example where I’ve definitely heard questions in Facebook forums and groups where people say, “Should I buy, should I lease … ” are there any other examples of those type of scenarios?
Payman Langroud…: Very commonly people overestimate how quickly business is going to come in, right David? But it’s interesting because if you’re an associate and you’re going to do your first squat, I mean, how you going to even get anything accurate on how quickly you’re going to get patients in? I mean, you’ve never run a marketing campaign, what would you say? If someone says to you, “Look, I’m going to open in Manchester, how many patients a week can I expect?” I don’t know, I’ve never done it before, so what do you do? You say pessimistic, what’s pessimistic?
David Hossein: The way I work my financial models are how many surgeries are you going to put in and what’s the capacity? So I know the question you’re asking, is it five patients per week, or is it 10. I tend to work on the high level perspective, so if that surgery can generate £200,000 worth of revenue, then in month one I would assume zero percent, month two, maybe 5% and then 10% and so you build it up so to the end of year one, hopefully we’re 30% capacity, so 30% of £200,000, 60 grand income. So it’s a staged over. I think I would start with a really pessimistic perspective because if we beat it, that’s great, but if we’ve over egged it, we’ve all got egg on our face. I think it’s very important to have the right marketing team behind you and I think people like yourselves are very valuable to a new squat. I think that like you say, as an associate, you’ve probably never done marketing, you’ve never done an SEO campaign, and I certainly don’t, if I need doing, I’ll go to an expert. I think that’s where you and I probably worked a bit closely Prav, where clients have needed the help and you’ve been very helpful.
Prav Soulanki: Do you know what David? The one thing that I come across a lot is I run, call it a clinic or whatever, but I give up say 15 minutes of my time to speak to people, they can book that through my website and one of the most common inquiries, or let’s say conversations rather than inquired because they generally tend not to lead to me being able to represent them, but it’s somebody who’s a practise owner who’s working at his own practise two days a work, working as an associate three days a week and then comes to me and says, “I want to grow my practise and blow it out the water.” And they have these massive ambitions. The one thing that I find is fundamentally broken there is that job that they’ve got three days a week because that’s holding their practise back from growing, 100%-
Payman Langroud…: You mean their attention, Prav?
Prav Soulanki: Pardon?
Payman Langroud…: You mean their attention isn’t 100% on the practise?
Prav Soulanki: Well, there’s a few things. One of them is the reason they’ve got that three day a week job is they need to put food on the table. Now, the majority of people I speak to about this, they will say to me, “Oh well I’m grossing big numbers at the other practise but I want to grow this so I can do it for myself.” So then I break that down and say, “Okay, you’ve got an associate in your practise, let’s assume you change your two days to three days and gave one day up there, do you think you could make that income that you’re making there in your practise? “Oh yeah, yeah, yeah, I think I could do that.” All right, so we’re moving this conversation along, but I think it’s almost like that comfort blanket, in order for them to do that, there needs to be a point where you just say, “Do you know what? I’m going to tuck my balls in and go for it?” Like an element of risk. I find in that situation, I’ve come across so many dentists who’ve got that associate job, in order for them to get to the next level, they need to commit with 100% aggression and-
Payman Langroud…: Prav, it’s like every moment of growth in a business though, yeah? It’s scary.
Prav Soulanki: Yeah, course it is. Course it is.
Payman Langroud…: We’ve both been in the same situation ourselves. Not from a two days a week perspective but there are things we could both do which scare us and I hear what you’re saying about … skin in the game you’re basically saying. If your life depended on it, you’d really go for it, but you’re almost too comfortable in the associate job, is what you’re saying.
Prav Soulanki: Like cutting your lifeline off isn’t it?
Payman Langroud…: Yeah.
Prav Soulanki: So often the conversation we have is around life, so I will ask that dentist, look-
Payman Langroud…: It takes a personality type though Prav?
Prav Soulanki: Yeah, no, 100% mate, 100%. But if you think, if you lost that job tomorrow, is it going to change what you eat for your next meal? Is it going to change the roof over your head and is it going to change how you commute? If the answer to that question is no, and you’ve got enough ambition, just cut the cord. But if you’re depending on it for survival it becomes more difficult but those two things, the associate job and growing your practise to your dreams, they’re just incompatible. Do you come across any clients, or have you got any clients who are in that scenario or situation, where they’re just ball and chain with the job?
David Hossein: Yes, yeah I do and I think the point you’re making is valid, that it’s to the detriment of future growth in the practise. I think that there can be multiple reasons for it, if the associate’s got a small family, sorry, I beg your pardon, young kids, has got very young kids, then that situation’s giving them flexibility to spend time at home while the kids are young, then that can be one reason for it but I do agree, you look at it, that’s really frustrating because you’ve got this potential here that you could be developing and-
Payman Langroud…: It’s almost by definition the kind of associate who’s going to set up a squat has had to be quite successful as an associate to save up this money and all that, so that job then by definition is quite a good job that they had and breaking away from that is quite hard, I can see how it’s going to come up a lot actually Prav, you’re right.
Prav Soulanki: Yeah, no totally, totally and it’s hard to kiss goodbye to a regular, healthy, fat income right? That you’re used it. Whether you’re spending it or not is a different matter, what you do with it, invest it or whatever but to just cut that cord and then say, “Right, I’m going to … ” We spoke about this earlier, it’s up-climatizing is a lot easier than down-climatizing, right?
Payman Langroud…: Yeah.
Prav Soulanki: It’s much more comfortable and easier to go from a one bedroom flat to a three bedroom house but going in the other direction it’s a lot harder and the same thing, if you’re used to a juicy monthly income, no matter what you do with it, and all of a sudden you cut the cord, it’s got to be a hard pill to swallow.
Payman Langroud…: It’s interesting Prav that they’re coming to you at that point and not at the beginning. Maybe they think they can’t afford you at the beginning or something, yeah?
Prav Soulanki: I think it’s a combination a few things. A lot of people I speak to have said that they’ve been following me or blah, blah, blah, whatever, call it the long-term marketing game, where I’ll put a bit of content out there, I might resonate with some people and I’ll definitely turn a lot of people off as well. I’ll polarise people and so some people feel that I’m approachable and they can just book a 15 minute call with me, have a conversation, we have a nice chat and then going our separate ways and hopefully they walk away with some guidance or some advice or have one or two little ah-ha moments.
Prav Soulanki: Why didn’t they get in touch with me in the beginning? Maybe they didn’t know about me, who knows? But I think what’s really important here is that they have that true moment of realisation themselves, that if this their dream and this is their ambition and this is what they want to do with business, then switch that bloody aggression on and give it 110% and I’ve always been one of these people who believes that if you really want to succeed, you really want to do it, you need that pig-headed discipline and aggression to attack it with. If that is distracted with two thirds of your week, or whatever it is, somewhere else, being told what to do, working in a way that you don’t want to work, it’s just going to kill your energy for growth.
Payman Langroud…: Yeah, true. David what are the few things you wish dentists knew better?
David Hossein: Oh, good question.
Payman Langroud…: Apart from root canal.
David Hossein: We know they know that very well. What they knew better? I tell my team that if you’re waiting for someone to come back to you that’s probably because they’ve had a phone call that day with somebody in a lot of pain and they’ve had to rearrange their whole day for that, so you have to be patient with people, and try them on their lunch, that’s usually a good one.
David Hossein: I think that the benefit of being very disciplined and organised, I think that a lot of the problems that I see are rooted in … I mean, a client at the moment has set up a squat, used to have an associate limited company and it just needs closing down because he doesn’t need that company any more but it’s not been done and it’s racking up £100 a month late penalties and I keep saying, “Well look, we really just need to get rid of that because that is costing you a lot of money and you need that right now.” I think it’s very focused on, “Well, I’m in a squat now, I’ve got to focus on this.” But in the back of his mind, I know that that’ll be grinding him down. When he goes to bed at night, it’s there in the back of his head that, “I’ve still not dealt with that damn thing.” And that’ll be grinding him down. But I think the 15 minute phone call to me to sort it out for him would pay dividends mentally. So, having things that are bothering you and it’s not fun dealing with them, but not dealing with them, will cause you a lot more stress when you go home and you’re trying to relax.
Prav Soulanki: I’ve seen that and it’s something I’ve picked up on, definitely in the last few years, it’s the who not the how and I think there was a big Dan Sullivan thing that rather than trying to figure out how to do it and figure out, “Right, so I’m going to close this company down and I need to fill out this form at Companies House, blah, blah, blah, this, that and the other.” It’s like, “Who can just take this problem away from me and do it and does it every day?” And it’s that 15 minute phone call with you, is that you can take that pain away and that thing that’s holding them back from maybe just accelerating away.
David Hossein: And becoming a bigger problem because the penalties are still being … it’s more expensive not to deal with it, if it’s … You must come across that, Prav. Advice for people, one question I’ve got [inaudible] what advice would you give to dentists to make themself more, I don’t want to use the word organised because that’s condescending but as a dentist, you go into your practise and you’ve got patients, you’ve got responsibilities and there’s all this admin stuff and it’s of no value other than you have to get it done but you still have to deal with it, so switching your mindset into, “Got to get that done because it’ll just grind me down and become a problem if I don’t deal with it.” How do you coach people like that?
Prav Soulanki: I think my advice is, and I can’t remember the guy who came up … because I do a lot of reading, a lot of listening, a lot of watching and stuff and there’s this concept, it’ll come to me who the name of the guy is, there’s this concept called the three alarms and you don’t be restricted to three alarms, it could be as many alarms as you want but just think about, “Okay, this is what I’m going to do today, I’m going to wake up in the morning and I’m going to exercise. I’m going to spend some with my kids between this time and this time and I’m going to go into the office and I’m going to work efficiently like a ninja with no distractions.” Let’s imagine those are the three activities that you want to smash that day.
Prav Soulanki: So your first alarm goes off at 6:00 in the morning, call it a mental alarm, or you can just set the alarm on your phone and have a notification with it and that first alarm says, “Linford Christie, Usain Bolt, I am a world class athlete.” So you wake up, call it positive affirmations or whatever, but you say, “When I’m going into that gym, there’s no distractions, no nothing, I’m a world class athlete.” You may not, million miles away from there but you’re positively telling yourself, “This is all I’m doing.”
Payman Langroud…: Bud, bud, bud the alarm goes off on your phone and you say to yourself, “I am Linford Christie. I am Linford Christie.”
Prav Soulanki: 100% mate.
Payman Langroud…: Is that what you’re saying? Okay, okay, go on.
Prav Soulanki: Right okay, but the point I’m trying to make is you put yourself in the shoes of-
Payman Langroud…: Linford Christie.
Prav Soulanki: Or I’m a world class athlete or whatever, but I’m going to approach this like one of the top professionals in the world
Payman Langroud…: Okay, go on, go on.
Prav Soulanki: So you’ve got that mental attitude where your next alarm goes off and it’s time with your kids, best dad in the world. So what does the best dad in the world do? He takes this thing and leaves it somewhere else, because that’s the thing that’s going to distract you and I’ve got my phone in my hand and then you give 100% attention, and you do whatever the best dad in the world does. Next alarm goes off, Elon Musk, you’re in the office so you sit down and buy loads of bitcoin, I’m kidding. But do you understand what I’m saying.
Payman Langroud…: It’s the alarm, so the alarm goes off at 6:00, you go for your run and then the alarm goes off at 10:00 you look after your kids, is that what you mean?
Prav Soulanki: I’ve got a schedule to my life, I’ve got a diary which says between these hours I’m working, between these hours, I’m spending time with my kids.
Payman Langroud…: [crosstalk] alarms are going off.
Prav Soulanki: Absolutely, yeah, it’s not random mate.
Payman Langroud…: Because I was thinking snooze when you said it, because I snooze my alarm three times.
Prav Soulanki: Yeah, yeah, yeah, I’ll give you some words after this call that will reinforce those habits mate.
Payman Langroud…: David, tell me about the structure of your organisation, how many people are you, how many clients do you have?
David Hossein: So I have about 90 to 100 dentists associate practise groups. My team is five people. We’re a unit inside a bigger unit, currently Bennett Brooks is a top 80 accounting firm so we can provide a very high level tax client where needed and some of the stuff that isn’t the general side, so if you need inheritance tax or … When it comes to the exiting side, there’s a lot of work that’s needed on the tax side, so that’s set. On a day-to-day basis, most of my clients don’t need that, they just need an accountant who can understand their accounts and talk to them about their accounts and their situation.
Payman Langroud…: How do you get over … Dentists are always coming up with crazy accountancy schemes to get out of paying tax.
David Hossein: Well, I think they’ve got a lot of help from people who want to target them and that’s the frustrating thing. If I take on a new client, it’s is there anything I should know and oftentimes, “Yeah, I’ve got this thing hanging over my head and how do I deal with it?”
Payman Langroud…: Is it always BS or are there some things that you could look at? I mean, I don’t know, there was the film schemes and there was this, that and loan yourself that much and pay it back. Is it always BS, should you just avoid?
David Hossein: Anything that has the word scheme in it, yeah, I would pretty much say, “No, no please don’t do that.”
Prav Soulanki: Scheme equals scam.
David Hossein: Scheme equals scam and I do feel for dentists because one, I think they are targeted on purpose, we’ve got very unscrupulous people out there who sit down and make a list of who are the people with money that I want to go after? That’s an unfortunate part of life. I also think that practise owners have this particular problem where if you took out a loan to buy a practise, you can on paper look very rich, but sometimes be cash poor because you’re having to pay the bank back so much and you only realise that value when you sell your business and you go, “Oh thank God for that, I’m out of this now and I’ve got my million pound in the bank,” or whatever it is. So it’s a combination of the two that puts people in that situation as well, “What can I do to get this tax down?”
David Hossein: First thing is, look for the structural things that you can do to make sure everything’s structured tax efficiently, without any schemes, and there’s lots that can be done. If it’s a company, having your wife as a shareholder, just seeing how the family’s income package looks like, to have income distributed in a tax efficient way. Do those things, but when it comes to somebody calling you and saying, “Oh I’ve got a way to get your tax disappear,” just don’t do it. If you really have to do it and you’re that way inclined, let’s say it’s going to save you 200 grand, you use that money and buy a house, don’t go to Las Vegas and blow it all. So if it ever does go wrong, you’ve got the house to fall back on, then you can sell and really pay the tax and interest that they’re going to come for you for.
Payman Langroud…: Yeah, I spoke to a dentist, that’s what he was saying. He was saying, “Take up as many of these schemes as you can and invest the cash and when they come for you, at least you invested the cash.”
David Hossein: Well, they’ll come for you plus interest and penalties and the penalties can be 100% of the tax sometimes, so it has to be a really good investment, put it that way.
Prav Soulanki: You just touched upon, I think Payman asked the question, is what one thing do you wish a dentist could do and the one thing that I often come across is a dentist will get their year end accounts, they’ll glaze over it and they won’t understand it and they’ll nod their heads and they’ll say, “Just give me the bad news, how much tax do I have to pay?” But they really don’t understand the numbers and whatnot and I think a lot of it comes down to the way it’s explained by a lot of people in your position, who just assume terminology is commonplace across borders and whatnot, do you know what I mean?
Prav Soulanki: So I think that’s one thing that I think certainly from your perspective, when I’ve been speaking to you, I have found that you dumb things down for me and that’s helped me understand things better for sure, and I think that’s key but then just one other thing you touched upon when you said practise owners when they dispose of a practise and they realise that the fruits of their hard work over the years, is how do they deal with that huge injection of money, that lump sum? Especially if they’re later on in life, coming towards last 20 years of their life and whatnot and maybe they’ve been the sort of people who don’t spend money and are not going to spend that money in their lifetime. Any tips for inheritance tax and structures and things like that? I know you’re not an IFA or whatever, but just some general sort of things that people often, once again, have conversations, we’ve said this. I can’t advise them on this sort of stuff, so point them in various directions but is there anything you can do from that point of view? I look at it from this point of view and think, “I’ve been working all my life, I’ve paid tax on all that income,” you sell your business, you pay tax again and then you pop your clogs and they get another-
David Hossein: They take 40%, yeah.
Prav Soulanki: … they get another stab at it as well, and well, I don’t want that to happen. Are there any bits of advice you can give?
David Hossein: Advice that it has to be very specific to first of all, do you have kids in the first place? Are you married? How much do you need for yourself? You’re right, passing on … In some ways you look at it and suddenly, you’re 60, 60, 65, you’ve just sold your practise for £2 million, now you’ve got £2 million cash. If you die the next day, you’re going to get 40% bill on it, whereas if you would have held and passed it down to your kids and if they were dentists, let’s say, there would have been zero tax on it because it was a business that you passed on.
David Hossein: So you really have to map back and say, “Well, okay, how much do I need for my retirement? What do I want to do with that money?” I’ve got clients who’ve gone and bought a golf course and if that’s what you want to do, go and do that but once you know how much you need then it’s, “Okay, the rest, where do I want it to go?” Then you’re into thinking about your kids, if your kid is a dentist as well, “Should I help them buy a dental practise?” That’s a business to have, so it’s just seeing what’s right for your circumstances, or is it grandkids, “Do I want to put money into a trust for my grandkids?” There’s so much involved in that situation, it’s very hard to give one answer for it.
Prav Soulanki: Let’s assume it was just cash, let’s assume you haven’t got a business, you’re a training company or something like that, and you’ve just got cash for example, like you just mentioned, that dentists who’s got £2 million with cash or whatever, what would you advise them to do? Seek advice from a … who? What type of person?
David Hossein: I think your IFA, if you’re not interested … I think first question is, have you had enough? Are you out of it now? Have you got any energy left to do a business? If the answer is no, then it’s, well if it’s not going to be a business, could it be an investment in another business, because that’s the halfway point between well actually now I’ve got something that’s fully an investment. So fully-owned business, partially-owned investment in an unlisted company, because that qualifies for business property relief, or am I sick of all that and I’m going to go into properties, investments and trust. Depending on which category you fall in, if you’re in the category of investments, then have your accountant talk with your IFA, and see what they are advising you in the returns involved there and how that impacts on your estate.
Payman Langroud…: Cash, no? You can gift cash seven years before you die.
David Hossein: You can yeah, you’ve got lifetime gifts you can make.
Payman Langroud…: Yeah, I’ll set my alarm for that date. It’s been an interesting chat man, what do you do outside of accountancy?
David Hossein: Well, I’ve got three kids so I spend a lot of time with the family, enjoy that. We try and get out, we’re very lucky to live near some fields here so we try and get out as much as we can, walking. I like to hike when I can, when I can get away, like to go for a hike and that sort of stuff. And food, I like my food.
Payman Langroud…: Do you cook?
David Hossein: Yeah. Yeah, yeah I cook. My wife’s a good cook but I like cooking as well.
Prav Soulanki: What’s your favourite cuisine?
David Hossein: Steak.
Payman Langroud…: Me too, man. Prav likes to end it on his traditional questions, I don’t know if you’ve ever heard this podcast before David, but Prav likes to make our guest cry.
Prav Soulanki: [crosstalk] David, but look, I’ve got a few questions and it just taps into the person behind the voice really, so imagine it was your last day on the planet, you had your kids around you and you had to leave them with three pieces of wisdom, words of advice, call it what you want, what would they be?
David Hossein: Be honest, truth is important, work hard, because anything worth doing is usually hard work and find something that you enjoy, to make it worthwhile.
Payman Langroud…: Nice.
Prav Soulanki: Very nice. How would you like to be remembered? So, “David was … ”
David Hossein: I suppose, “There for me when I needed him.”
Prav Soulanki: Nice. Now, imagine you got a month left to live and you know you’ve got a month left, you’ve got your health and everything in place but you know you’ve got 30 days, what you going to do with that 30 days? Please don’t say, “Look at another spreadsheet.”
Payman Langroud…: He’s going to first of all look at his inheritance tax situation.
David Hossein: Well yeah, I’d do that quickly. I’d probably go to Everest mate, probably try and-
Prav Soulanki: Would you?
David Hossein: Yeah, I’d want to go and … I’ve never been, I’d love to go see the end of the world, that’d be nice.
Prav Soulanki: Nice. David, it’s been an absolute pleasure, I think there’s lots of advice and that’s come out there. If people want to get in touch with you after this and just maybe speak to you and get some advice, is there an easy way to connect with you?
David Hossein: Yeah, so my email address, my website, bennettbrooks.co.uk. I’m on Facebook, I’m on LinkedIn. Yeah, google me.
Payman Langroud…: All right mate, thanks a lot, lovely to meet you.
Prav Soulanki: Thanks David.
David Hossein: All right, cheers guys.
Speaker 2: This is Dental Leaders, the podcast where you get to go one-one-one with emerging leaders in dentistry. Your hosts, Payman Langroudi and Prav Soulanki.
Prav Soulanki: Thanks for listening guys. If you’ve got this far, you must have listened to the whole thing and just a huge thank you, both from me and Pay, for actually sticking through and listening to what we’ve had to say and what our guest has had to say because I’m assuming that you got some value out of it.
Payman Langroud…: If you did get some value out of it, think about subscribing and if you would share this with a friend, who you think might get some value out of it too. Thank you so, so, so much for listening, thanks.
Prav Soulanki: And don’t forget our six star rating.