Secure Dental-Steven Huskey: Audio automatically transcribed by Sonix

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Nazish Jafri:
Hello and good morning. Again, this is Nazish Jafri from the Secure Dental Podcast, where I bring in topics that are for everyday clinicians just like me and you. We talk about strategies, mindsets, and real business tools that help doctors thrive both inside and outside of the clinic. We are really good at thriving inside in our clinical work, but sometimes we fail to look outside with our business structures that we have. Today, I'm talking about a topic which we should be talking about when we get our licenses. The first thing, and if you don't talk about it now and think about it now, we get stressed out when we're 50 and 52, or we're ready to exit. We're talking about wealth management, cash flow, and practice transitions. Our guest today is Steven Huskey. He is a certified financial planner and a certified exit planner who heads up Huskey Financials. And his entire practice is centered around helping high-net-worth business owners, especially those running medical and dental practices, which is just like me, just like you. And hey, Steven, today I think we're going to have like a lot of good conversation that we lack. And I'm going to give you a welcome today to the show, and let's start.

Steven Huskey:
Awesome. Thanks for letting me share my wisdom with you guys.

Nazish Jafri:
Absolutely. You know, the first thing I wanted to talk to you about is the misinformation that comes from gurus online nowadays, from the social media. They make it so glorified, they make it so easy. But what do you see as a common one-size-fits-all piece of advice that is dangerous?

Steven Huskey:
Well, thanks for the question. You're right. I mean, you know, with the presence of social media, people trying to get clicks and views and selling something, they're going to try to fit everyone into one product or one solution versus understanding everyone's got unique circumstances. Everyone has different financial situations and in different snapshots of time. So, what I'm trying to share with all my clients and even people who just want the education, you know, I had my own podcast for 4 or 5 years, just sharing some strategies. But for instance, there's people who are only licensed in insurance, and that's all they want to sell. And so, they're giving you reasons why you need to buy specific types of policies and how it can get rid of other strategies that you might want to consider. So, I would never consider putting all of your eggs in one basket being a good deal. You know, diversification is the name of the game. And then there's, you know, your white coat investors and your Dave Ramsey people and all those things where they do have great knowledge, they have good strategies, but they're also selling something, right? They're selling leads to advisors. They're selling term insurance, they're selling programs. Everyone's got something to pitch. And so, I kind of see it as a guise to pitch their own stuff. So, what I would say is like, if you're interested in a financial plan or understanding where you are today and how you can become your best self in the future is interview financial advisors, interview CPAs, interview attorneys, and make sure that you have a dental specific team that you can run ideas by, that you can share scenarios like if you want to own your own practice or buy a new home or put your kids through college, whatever it is, you have unique circumstances and that needs to know can give you a better plan. AI is another thing because you can go on a Claude or ChatGPT and build a financial plan. You can give them as much information about yourself as you can. But a lot of that information isn't correct. Like I've gone through and done my own financial plan on there, and there's a lot of stuff that's from 2023 that they're trying to use in 2026. And so, you could get yourself into trouble if that's all you're using. I mean, you can use it as a guide, maybe to compare what your advisor's doing, or bring that to your advisor and say, this is my rough draft. Like, help me figure this out. You can pay them by the project or whatever, but I would recommend someone who spends every day reading about this stuff, someone who's licensed in it and has made it their career and has gotten credentials behind their name. That's what you're looking for.

Nazish Jafri:
Yeah. And you said it so right. If they have just one kind of skill, they'll sell you that product. I would analogize it something to ours. If you just know how to do root canals and you don't know how to do implants, you're going to just offer that one treatment because you're good at it. And you just don't know that there are other things that can help this person's need in a different way. Because we as dentists, we have like so many different LLCs, so many different tax structures. And if you put yourself in one bucket, you're not maximizing it, or you're not efficiently using it. So, you're right.

Steven Huskey:
If you only have a hammer in your tool belt, everything's a nail.

Nazish Jafri:
Yes. Exactly, right? Dental practices, like I know through experience, have a high overhead. And your philosophy also focuses on cash flow optimization and tax efficiencies. When you look at a successful practice generating like solid revenue, what are the most common areas you think doctors are leaving on the table when they're overlapping taxes?

Steven Huskey:
I mean, number one, being a business owner is the best tax deduction machine that you could possibly utilize. So, if you're an employee for the rest of your career. You know, that's great. You can build wealth that way, but you're not getting the full advantage of the tax code. So, being a business owner, number one is important. Working with a really great CPA, I think that would also you need to have someone that's probably dental specific also because number one, the reason you want to work with someone dental specific is they know your industry, they speak your language, and they see this stuff thousands and thousands of times. So, nothing's really new to them. They've seen it all. I liken that to, you know, someone who goes to an estate planning attorney to draft up an LLC. I mean, they could probably do it, but you don't really want them to do that. No. So, for tax strategies, it really again is dependent on the way that you generate revenue in your practice. You know, the different types of equipment that you have in there, how many OR and hygiene you've got. So, I think working with someone who can look at all the different types of commonalities in your practice, as well as what's unique about your practice, and understanding that can help you figure out different tax strategies. For instance, the IRS, you know, allows for bonus depreciation on assets that you have. You can get a large tax deduction in a year when you've got a lot of income. That's a way to reduce what you pay the IRS. And I think that everybody wants to do that. There's cost segregation studies. You can reclassify equipment in your practice and even the commercial building itself to get a large deduction in those years. The only thing you have to consider is, you know, when you get a deduction in year one, at some point in the future, you're going to be repaying that in some form or fashion, whether it's ordinary income tax or depreciation recapture tax, which is, you know, right now 25% of every dollar. And then there are capital gains whenever you sell that. So, just think about this. Every year, the situation needs to change because income can change. Would you rather pay the tax today and not have to worry about the tax in the future when you might have more income? Or would you like to take the deduction and pay it potentially when you have less or more income? So, there's always a trade-off. You're never not paying taxes. You're just avoiding them for a while.

Nazish Jafri:
Yeah. So, that is where the strategies come in. And the skill of a certified planner like you come in because you can help them navigate it. Just like you said, you have to pay now or later down the road. But is it beneficial for you at this time?

Steven Huskey:
Yeah. And I have a real quick point to make about that. And CPAs are worth their weight in gold. However, their job is valued on the amount of taxes they're able to save you every year. So, they're looking at cash flow and taxes from a rear-view mirror, whereas advisors are looking at taxes through the windshield. How do the taxes impact you in the future? Because my job is to save you money in the future, and then the CPA can save you money from last year. So, you need to have both.

Nazish Jafri:
Yeah, that's a very good distinction and understanding because even when we were growing up in our business journey, we couldn't understand the difference between the two. And we're like, okay, do we have a CPA? It's okay. What is the difference?

Steven Huskey:
People call me a CPA all the time. I'm like, no, I'm a CFP. It's close, but.

Nazish Jafri:
CFP yes, yes. And there are two separate skill sets. And you're absolutely right. One is looking for you for the future planning. And that is really important because that's how you want to grow.

Steven Huskey:
CPAs are compliance-driven, and financial planners are creative-driven. We can be creative with what we know.

Nazish Jafri:
And that's what you want. Yep. That's what I want as a business owner, because I want somebody who is on the side who is telling me every year, every quarter, hey, you know, this is what we can do. This is what we can do. Your income is increasing. How can you mitigate it? Yes. And then give it to the CPA so they can do that part of the work and sign it off.

Steven Huskey:
Yeah, exactly. And you know, there are a lot of clients that send me their tax return drafts before they sign them to see if I can locate anything that maybe the CPA hasn't. And it's nothing against the CPA, is that they're just filing massive amounts of returns, and they have deadlines where I don't necessarily have those deadlines. And I have much fewer clients than a CPA would because they can take on hundreds, and I can take on maybe up to 200.

Nazish Jafri:
200 is still making their future roadmap is tough. Everybody has different unique skill sets. Also, team retention. You talk about it like losing a key hygienist, losing a doctor, key doctor, or I think losing an office manager is devastating. A really good one can disturb the whole practice. What kind of benefits do you talk about in compensation, or what kind of golden handcuffs can a dentist implement to attract top-tier?

Steven Huskey:
So there are two separate thoughts of thinking here. There are attraction tools in the financial planning world. And then there's retention tools. And really, attraction tools are great for business owners because number one, it makes you an eligible employer to hire good staff and good talent to your organization. And things like that would equate to, you know, 401 (k) or employer-sponsored retirement plans of some sort that can save for their retirement. You can match that or not match that, you know, whatever their contributions are, there are great benefits. From what I know about the dental world, you know, it's very male-driven from an ownership perspective, and it's very female-driven from a rank-and-file perspective in the office. And so, those benefits I'm talking about cannot be gotten out on the open market like health insurance. Sure, you can go out to the open market and get it, but for these benefits, you need a plan sponsor. You need someone who's able to offer them through their place of employment. The rank and file can go get them things like short-term disability insurance. If you've got females that are wanting to do family planning and they're going to be out for a while if they have children, those are really important pieces of insurance and benefits. You know, there's critical care, hospital identity, all those things that are great to have, and then, paid time off market comp wages, all those things are great attraction tools. Retention though you can be extremely creative with how you create these strategies for people in your office that you've identified as key to the success of the practice, whether it's through a growth period and they're driving revenue, or if they're great leaders amongst all of your rank and file people, and they keep everybody rowing in the same direction on the ship, or you're kind of gearing up towards an exit, and you want to have those same staff who are generating your cash flow stay two and through that exit because it makes you more viable and valuable to any buyer who wants to purchase your practice. So, things like that include deferred compensation arrangements for 57 plans. But the main theme about these plans is they're not what we call qualified. Qualified means everyone gets the standard same treatment across the board and nobody can be excluded. Non-qualified means that it's open architecture. You can make whatever you want, and you can identify people in your organization that you want to keep around and incentivize and reward above and beyond everyone else. So, I'll give you an example. You use Office Manager earlier. Let's say you have an office manager. She's 42 years old, and she's got two children. And those kids are about to go to school, to college in eight years. And you do not want to lose this person. People say to me all the time, well, culture is great. I pay them well above what everybody else is paying them. But I guarantee you these plans will make them recruiter-proof. No one's gonna be able to snatch them from your practice. You can create these plans to, number one, address an emotional milestone that is very important to the individual you want to retain. We've identified that this individual has two children about to go to college. They're roughly the same age, and maybe they haven't had the means to save for college themselves. So, you're able to create that awareness of like, hey, I will help Johnny and Susie go to college in eight years. If you stay with me through that period and you help me through this growth transition we're about to go through, they're elated because they're like, okay, you recognize my skill set? You want to help me with my kids' college? That takes a burden off of me. And it makes me excited to come to work every day. Number two is it's different than paying out a sales bonus, or a quarterly bonus or a Christmas bonus. You give them that cash, and they're already disgruntled. They're going to leave once they get that cash. Like, there's no real staying power beyond 12 months. Yeah. So, these benefits have to be completely deferred. And there is an obligation. There is a legal document that makes sure that both you and the party that you're benefiting are aware of the parameters. And it's a legal binding agreement, but it's completely deferred. Let's say that you've given it eight years. That's the term before they can get this benefit. Let's say that this employee leaves in the seventh year. Well, they get $0, and it becomes an asset on the business's balance sheet. So, you can do whatever you want with it. And you didn't lose any money. And then once they've hit that eighth year, you have the choice of how you pay them out. You can give them a whole lump sum of that benefit that you've been saving for, or you can pay them out in tranches over a multitude of quarters or years to keep them on longer if you want, or you can give them the option to say, hey, this thing's going really well. You were able to save for your kid's college. Let's push this out. Let's stay another five years, and we'll continue to add to this every year for you. So, there's multiple ways you can do it. And then thirdly is it's got to be simple. It cannot be complicated. They have to be able to be excited about it, go home and tell their spouse about it, and the spouse understands it. And then if they ever decide to go look elsewhere for another job, that spouse is going to make them see the light and say, hey, Johnny and Susie are going to college because you work here, you're not going anywhere else. So, you have another advocate at home helping you make sure you keep that employee. So, that's how they work. I mean, I'm being very, you know, 30,000-foot view here with it because again, they're customizable. You can make them any way you want, but they're extremely powerful and very rewarding for you and the employee.

Nazish Jafri:
This is very interesting. I wrote it down because we have like associate compensation plans, something similar to this. And I would have never thought that this would be a way to help a manager as well. And you're right, they're females, they have kids, they're looking out for their future, and this can really help.

Steven Huskey:
Yeah, I agree. And you know, it also, it starts with a simple conversation between you and the employee. Like, hey, we're doing a quick review. I wanted to tell you how much I appreciate you. You've done excellent work. I want to reward you for the work you've been doing. And here's what I'm going to do for you. And it's specific to you, like no one else gets this. So, you can do three or 4 or 5 of these in your office at the time, but everyone's is different. I'll say this as well. You can also create a market for an inside sale. So, if you want to sell one of your practices to one of the associates, but they don't necessarily have the money to give you a check outright, you can use this deferred compensation arrangement to give them a down payment, to then return back to you for the down payment. And then it creates less of a term buyout that's generated through practice revenue to pay you back. It reduces your risk as a business owner as well, and it gives you a tax benefit when you give it to them.

Nazish Jafri:
Yeah. So, it has a lot of positives to it, actually, a lot of positives. Yeah. Thank you for that tip. It's very, very insightful. Very. And I think you don't need to be a DSO owner to do this. Even a one-practice owner can incentivize their best team players like this.

Steven Huskey:
It works very well for both them. And DSOs have been using this for a while. Actually, this started in the banking industry because they wanted to retain their executives because they were getting poached. So, they started this. And I mean, we just adopted it from them.

Nazish Jafri:
Yeah, no, it's powerful, very powerful. Dentists don't look for the retirement just like in clinics. And every day they're working, they're getting the money, putting it back in the business. And now they're 55, 56, and now they're thinking about retirement. If a doctor is considering like exit or selling to, let's say, DSO or another new grad, somebody else in the next two years. What should they be doing right now in their first five years?

Steven Huskey:
The best time to get started on your retirement is today. There's a vast difference between how much you'll have whenever you're finished working in two years, five years, ten years. And that's because of compound interest. It's because of time in the market. It's based on different economic cycles. I mean, I started at 22 because I just knew the value of that. It's never too late to get started though. Like, don't say, oh, I'm just going to bank on the sale of my practice giving me enough money, because you're not going to get all that money. No, you got a lot of taxes you got to pay. You got people to pay out, you got brokers, you've got folks that you promise things to. So, if you sell your practice for $3 million, depending on taxes and situations, you might get two, 2.42 points, whatever. But then that's got to last you another 20 or 30 years. And if it's all invested in the market, great. There's some risk involved with that. But we like to take chips off the table as well and do something that's like creative, but also gives guarantees. There are different ways you can do it. And one of the things that our firm specializes in is retirement income distribution planning, because it's just as complicated as selling a practice. Everyone's unique. So, I would say get started number one. Number two, you can educate yourself. There's a ton of resources out there on retirement planning. There's a lot of types of accounts and strategies for it as well. There are 401 Sep IRAs, there are traditional IRAs, there are Roth IRAs, you know, after-tax, pre-tax contributions. There are different rules about all of them. And some give you tax deductions today; some don't. But I think it's very important to get started. But also working with, you know, you can do it on your own. There's nothing wrong with that. I think working with a financial planner helps you see blind spots and can identify strategies and opportunities that you wouldn't have otherwise seen or had access to unless you went through an advisor. So, I think having someone on your team that you can count on, and I'd keep it dental specific because again, there's things that dentists have access to, especially with lending and things like that that other folks don't. So, I'd encourage that.

Nazish Jafri:
Yeah. Start now because you're right. I've had to review practices. We buy a few, and they might have worked in that practice for 35, 42 years. And they've built a beautiful practice. But it's not worth it at this market. And it's going for so low. And I feel really, because I am a business owner myself, you know how you've built it and you have dreams about it, and now you're selling it for such a low price. It is very heart-wrenching.

Steven Huskey:
I know, and they can't control that. So, I always encourage my clients to focus on the variables you can control. Like you can't control the real estate market, what the business market looks like, and what the investment market looks like. So, yes, save, save, save, be a world-class saver, save at least 20% of your personal income. And on the side, also save some of your business income in a separate account. Do something else with it. But once we get that down, that's why I'm so big in cash flow, we help these business owners identify money on their balance sheet that's otherwise being wasted or spent, and they can't even recognize where it's going. I find that money, and I put it back into their world, and we put it to its highest and best use and optimize every dollar for where it should go.

Nazish Jafri:
What is one thing that you see in their balance sheet that is like reoccurring in healthcare profession, that they can utilize it somewhere else?

Steven Huskey:
Well, I was going to say, well, debt is one of them because dentists specifically have the highest student debt rate in the country. I mean, the average is $300,000, but for good reason. I mean, you guys have great education, but they charge you way too much for it, which is insane. So, that's one of the first things we knock out is student loan planning and going through income deferment plans and all the different things that you have to your availability like public loans, service, loan forgiveness, all those things that are there. But what they can use to their advantage is I don't like the term be your own bank, because I think that's just not realistic. However, I think you can bank on yourself a little bit more, which means have assets, have assets that you can use as collateral, versus having to go to an institution who controls all the terms and controls the rate of return and all those things. And when you owe it back, if you have assets on your balance sheet, you can use those as collateral. Let those assets continue to grow and borrow against those. Understand the value of ownership. You can lease a place for about five years, maybe ten years, while you're getting going. But your ultimate goal should be to own your own building in which you work out of, because you can use that to your advantage by paying rent back to yourself, getting a deduction for that, building equity in the value of that commercial practice. And when you sell, you can sell just the practice, its patient base, and its goodwill to the new owner. And you can keep the commercial property. And it's basically an annuity that pays you guaranteed income. So, there's lots of good reasons for ownership to be the number one key.

Nazish Jafri:
Very true. When we were building our practices, we just rented a space from a plaza, a strip mall. We didn't want to take the headache of being a landlord or rent. It was a different mindset when you're coming out of school, but I resonate with what you're saying.

Steven Huskey:
Yeah. You're basically like your landlord for yourself and your first guest. But I mean, a lot of times too, because of the student debt and then the practice debt that you now have incurred, it's not viable to buy a place. So, I'd say get started somewhere. Just take it on the chin for five, ten years and then save up enough to be able to buy your own commercial place.

Nazish Jafri:
Yeah. Right, right? Can you talk a little bit about cash balance plans? It is a new term that it's coming up and it's very vague in the dentistry world business owners.

Steven Huskey:
Yeah, we do this a lot, actually. I've presented two separate times to other advisors at different firms about how these things work. And if you've ever heard of a pension like all these Fortune 500 companies back in the day, you used to have pensions, and the employees loved it because if they stayed there and stayed loyal to the company, they got a retirement payout whenever they got out of work, and they didn't have to contribute to it, which was great. It's different from a defined contribution plan, like a 401(k). So, for one, they call it a defined contribution. Because the IRS defines how much you can contribute on an annual basis. They're not worried about what the actual payout is in the future. Defined benefit plans are, they tell you, okay, you have this target at the end of, let's say 15, 20, 25 years that we need to pay out from this pension. And at the front end varies on how much you can put into it every year. Some folks, depending on your revenue and how many employees you have, you can put up to like $250,000 a year and defer that amount of income, so your taxes go down a lot. But what you need to know is it's not great for big companies. It's great for smaller companies. And it really favors the business owner first and foremost, because we want to put as much money away as possible, because we're the highest earning person in our business. And if the ratio that I like to use is, let's say you're putting in $200,000 this year from your income, you want at least 80 to 85% of that $200,000 to go to your account. You still have to contribute for your employees. You know that 15 to 20% goes to them. But if you can put away 80 and $100,000 or $200,000 and keep 80% of that for yourself, that's a win. And you're able to deduct all of that contribution. So, it's huge. You need to have a conservative rate of return in it, because if you have a big spike in the market and the balance is higher than it should be based on what the actuary looks at, that means you have to put in less next year to keep up with it. So, you want very consistent 4 or 5% growth in this thing so that it stays on track and your contributions can continue to stay large. The other thing is you need consistent income. Like if your income varies wildly, it's not a good plan for you. But if you have consistent income that you're going to need to continue to defer into the future, that's what works best. So, they're great plans. They just there's specific parameters around them. And you got to work with someone who knows what they're doing.

Nazish Jafri:
Yeah. And you're right, it has to have a consistent income because you have to fund it. All right. Stephen, a lot of work that I have written myself. Thank you so much for your time today, and I hope the listeners got a few really good tips from today. It was eye-opening for me as well. A huge thank you, Stephen, for breaking down the exact financial framework, making it easy. You want to connect to him directly via an email. We'll have the email and his bio at the end of the podcast. And to our listeners, thank you so much for spending your time with us today. If you find value in this episode, please share and like. Until next time, this is Nazish Jafri from Secure Dental Podcast. Thank you. Have a great day.

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