Surviving Slow Seasons – Ep. 299

Welcome to the Accumulating Wealth podcast. I’m Hunter Satterfield. And I’m Judson Crawford. We’re CPAs, wealth advisors, and partners at Cain Watters and Associates, a financial services firm here to help you navigate the decisions you face every day. Today, we’re talking about something every practice owner feels at some point, the seasons when production slows down, cash flow tightens up, and the calendar does not quite look as full as it did a few months earlier. 

Whether it’s a seasonal dip, summer vacations, back to school schedules, or just the normal ebbs and flows of running a practice, the key is not waiting until the slowdown is already here to start making decisions. So today, we’re walking through how to plan ahead so the slower months feel less stressful and a little bit more manageable. All right, let’s do it. 

Okay, Hunter. So, to timestamp ourselves, it is towards the end of June, June 25th. And I feel like we’ve found ourselves almost in the middle of summer almost. Indeed. And this might drop in a few weeks, folks. We’re just recording ahead because we both have our own personal travel. 

But I think what we’re talking about today is both not just reactive to sort of what our clients are feeling most acutely right now, but also, Judson, something that we just tend to see, as we mentioned in the intro, this type of thing tends to happen every once in a while. And really, I think it’s a good sort of concept to think about as we maybe head toward the latter part of the year. 

And maybe the best place to start is kind of what our clients are maybe feeling broadly right now. Yeah. I think that as you point out, there are ebbs and flows in every practice and seasonally we see it all the time, right? I mean, I think notoriously, May and September are just not busy months, right? 

I think that over the last couple of years we’ve seen a lot of slower November and Decembers as well, right? Towards the end of the year things slow down, and that… And I think that’s both patients, but I also think it’s the schedule of the doctors. We’ve got the holidays, we’ve got stuff like that in there. 

And so, to act like it’s not going to happen this year would be silly. And then on top of that, I think we probably need to bring up some things in this economy and some challenges that are just out there. It’s not anything that we need to go crazy about, but just the facts of what’s going on. 

Yeah. I think this May has been coined the term now Maycember this May I definitely have had more clients than usual reach out and just say, “Hey, that was really tough.” It was rough. Are other practices having that? And we can go in and look at our own internal data on financial statements and things like that, and we are seeing similar things. 

To your point, I mean, maybe some of it’s – it’s probably all these things. May has gotten more and more compressed with events in people’s lives. More and more folks are traveling now during the summer than ever before. I also think macro and geopolitically right now we’re dealing with a difficult environment. 

So just as of today, May PCE inflation came back, which is really the preferred inflation metric for the Fed. And it rose to 4.1, which is the highest reading since April of 2023. And Judson, in 2021, 2022, 2023, we were still dealing with an environment that was coming off of a stimulus period, whereas we don’t have that same macro right now. 

And so, for inflation to be where it’s at, which is over two times the Fed’s target, right? The Fed’s target is two. And not have stimulus, I do think it’s pinching consumers’ discretionary flow. 

 Yeah, and I think we’ve heard this from you, our clients, for a while. We see it in our own business. But I think we hear it first from employees, right? They’re feeling it in the grocery store and have been for a while. Housing costs are high. Gas prices are high, and hopefully we’ll see a little bit of relief from that coming. But with all of these high costs, I think that eventually, you’re going to see that in your patient base as well and making decisions that are a little bit harder to make than they were a year or two ago. 

You know what’s interesting for myself personally is I just paid my May credit card bill off, and I remember back in March and April sort of having an internal conversation in our household with Carrie and the boys about just how crazy expensive things were. Yep. Right? I mean, Chipotle bowls to batteries at the store to whatever else it is that we buy, dog food or whatever. 

And I remember saying, “Hey, let’s just see what we can do if we go for a month where we don’t spend unnecessarily.” Cook more at home and those types of things. It was the lowest credit card bill probably in the last 10 years for us for the month. But I actually think that’s happening across the entire economy right now. 

Folks are- we’re still spending in the areas that are important to us, but we’ve also dialed back in other areas just to sort of see, okay, what are the impacts if we make these key strategic decisions? I think our concern and this is why we wanted to record on this today, is that as that inflation number continues to be high, if it is continuing to force consumers into some of these decisions, we could continue to see a tougher period as we head into the fall. 

And so today, folks, we’re going to cover just some things that you can do proactively to sort of continue to prepare for this. I think one of the important things, Judson, Brad Sanders covered this on a podcast a few episodes ago. Even if now that Iran is settling and we are seeing gas prices come down, energy’s still the number one thing that pushes inflation where it is and that’s not going to go back down anytime soon. So, I do think these things are going to persist through the fall, which is why we want to talk about some preparation for our clients. Absolutely.  

Also, we’re now pricing upwards of three rate increases. Like, rate cuts are off the table at this point. We are now looking at rate increases to combat inflation, and they’re potentially up to three. That will impact everything, right? And so, some of those macro things I think we need to be prepared for as we head into it. 

So, I think perhaps, maybe it’s great, Judson, to just say we’ve got a handful of things, listeners, we’re just going to go down the list one, two, three. These are core strategies that have things that underpin them as well. So, Judson, let’s start, you want to start with strategy one on how we proactively prepare for this sort of fall period we’re coming with? 

Yeah, I think number one, we’re in the midst of summer, and summer, June, July, August, are typically going to be higher collection months than the average throughout the year. And so, I think that what we can think about now is what we do with those stronger collections in order to prepare for what may be more volatile months come the fall, right? And again, we had an episode not too long ago that was talking about spending and how spending affects your long-term financial plan. 

I think there are some lessons within that that we can use here, and one of those is don’t make any impulse buys, right? You have collections, you have a little bit of ease, you see your cash go up. Don’t make any impulse decisions to buy any equipment you don’t really need right now. 

Maybe don’t pay down some debt that you thought you might pay down in order to keep those cash reserves. Ultimately, what we’re saying is if you can build up a little bit of cash, that’s a good thing. 

Yeah, I agree. If normal operating capital in your business is X, maybe go X plus two, right? Try to build a little bit more. And if things don’t end up slowing down in the fall, well, great, you still have it. You can save. You can pay down debt. You can do that equipment purchase before the end of the year that you might have needed. But I agree, Judson, like, just kind of building this base of cash in the business, I think is super important, especially when it comes to, like, “Hey, ordinarily, I might do this purchase of a capital expenditure. Maybe I’m not going to do that right now,” you know? So, I think that’s a big one. 

The other thing I think is making sure you’ve got your liquidity from a lines of credit standpoint, right? So, if you don’t, if your planner… there’s several clients I’ve been harping on for years. Your planner’s been saying, “Go get a business line of credit open.” I think now is the time. It does take a little bit of time to get that established but get that open so it gives you a little bit of a backstop if things do slow down. Liquidity equals flexibility, period. And so, having that along with a cash cushion, I think is super important. 

Yeah, and it’s hard in the summer months because we have time and things like that, but now’s the time to really look at, like you talked about with your family in May, try to avoid that lifestyle creep in these summer months. It will really help out come fall. 

Okay, so that’s strategy one, build reserves. Really try to not do some of those purchases. Get your liquidity in order. Strategy two kind of goes alongside that, is adjacent to it, which would be to tighten overhead before we see those revenue drops coming, right? So, it’s all about making sure your expenses are controlled. 

And Judson, I think this dovetails nicely with hey, don’t buy equipment you don’t necessarily need this summer. But just really getting your profit and loss in order. Okay, where are places that I can do some minor cuts whether it’s supplies, lab costs, subscriptions, recurring things. I mean, we have time right now. 

Credit card fees is a big one. If you haven’t looked at it in a year or 18 months, it’s time to do it again. Totally agree. I mean, we have time right now to go through those things. So, I think those are big things that we can look at. 

How about getting our How Does Your Practice Compare? Report and review your expenses line item by line item. Yeah, that’s a great thing to do. So, I think the other thing, Judson, to talk about here, because those are all things that folks can go in and look at. 

What do we do with staffing, right? So, as we head into the fall and sort of try to tighten our belt a little bit, at the same time we have to take care of our team members who are also dealing with their own inflation. Like, how should clients prepare from a staffing standpoint?  

Yeah, it’s a great question, and I think that this can be two-sided. When it comes to staffing, it’s one of the hardest things that we often have to talk with our clients about because I think on one hand you want to review whether you’re heavy at staff and review hours and make sure that hours aren’t creeping. And that’s the harder side of things because that’s the side we’re talking about cutting. 

At the same time, we also have to take care of the staff, especially our key staff members that are really making our practice excel. I think that when it comes to making sure staff are paid appropriately, again, we have resources here that you can use to kind of help check on that. And if there are raises that are due, it may be that you need to look at fee increases at the same time to make sure that you’re keeping your staff up with where they need to be. 

Yeah, you talked about fees there and I do think that’s one of the places we can go and get staff and see some benefits to them. Fees are interesting, right, folks? And we’ve covered this in the past, but I think sometimes people think I’m actually … I’m fearful about lower patient acceptance, so I’m not going to increase fees. One strong reality though, Judson, which we’ve talked about before, is if one of the reasons why we’re seeing tightening is because of increasing inflation, if your fees are not also increasing as well, then you end up the one that gets penalized the most. That’s right. 

Which, I mean, the patient is not making a choice to upgrade their Chipotle bowl because things are more expensive, but they’re still getting the Chipotle bowl. They may make that same decision for you, but if the core things you’re still increasing your fees on, they’re still accepting, that allows you to continue to see growth in your practice. 

If you avoid increasing fees because you’re fearful about patient acceptance, I think what you end up doing is you permanently create an issue for your practice because it’s really hard to increase all the way in the future. Yep, absolutely.  

Before we move to strategy three, I do think this is a good time also to talk about, like, in strategies one and two, they kind of both go along with this, is just making sure that you’re staying on top of your tax projections. So, if you’re a Cain Watters client, then you’ve had proactive tax projections put together by your team. If not, you can talk to your CPA. But know what those are because if you’ve already had some tough periods maybe in May or April of this year and maybe there’s going to be a slowdown in the fall, knowing what that number is that you need to hit from a collection standpoint to keep paying your tax payments as they are is important, right, Judson? 

Because if you see a slowing, one of the first things we do is often back down tax payments for clients and then that gives them the free cashflow they need to take care of some of the other things in their practice. Don’t need to be paying in for a refund next year if you don’t need to. That’s right. 

Okay. So, strategy three Judson, is to proactively drive patient flow. You want to talk about that one? Yeah. This is big I think, and it’s something that you should always be mindful of. And one way to think about this is having a full schedule is really your best defense against volatility, okay? Well, how do we do that? I think there’s two sides to this. It’s easy for us to talk about marketing because I think that when we have these types of environments, you are fighting over a smaller population base that is ready to say yes, okay? And so, you can’t ignore the new patients side of things. 

You want to make sure that marketing dollars you’re spending are good dollars, that they’re giving you a return on your investment. You want to look at other ways to be creative on that. But on the other side, you don’t want to ignore what you already have in your own practice, right? 

 You want to be reaching out to those patients that have canceled hygiene appointments or that haven’t been in in 6 to 12 months. Reactivating patients, looking at unaccepted treatment and calling those patients to see if you can get them on the schedule. This is going to take a full office effort. You really want your front office to be in tip-top shape when you’re going into volatile months because they can really help you pad your schedule. 

That’s right. I think if you’ve got openings in your schedule and you’ve got a slowdown in the practice, well, that means your staff have time to go do these things, right? And so rather than sitting and sort of sulking around it or thinking, “What could I possibly do?” Just go do it, right? I mean, just go engage on those things. Build the systems in your practice if they’re not already there or reactivate those systems if they’re not there to go grab those patients. 

And I say this a lot, and I know it’s something that not a lot of people love doing but it’s important, and that is mind your own patient population for referrals. If you’re not asking for referrals, you’re missing an opportunity because, and I’ve said this before on the podcast, your practices always look busy to your patients. If you’re not telling them, they don’t naturally always know that you want their friends and family as patients. Please tell them. Amen. 

So, strategy one, build cash reserves while times are good. Strategy two, go ahead and look at tightening overhead before times get tough. Strategy three, go and grab those patients that might be out there. And then I think last but not least, strategy four is to plan. 

And we would say, like, stress test the practice here. And I mentioned already, like, go ahead and make sure you’ve got your tax projections built, which is part of the plan. But I think really, Judson, it’s being prepared, right? 

So, it’s like, okay, what happens? What is my roadmap if the practice this fall does see a 10%, 15%, 20% dip? How am I going to be able to manage liquidity? How am I going to be able to continue to make sure my staff are getting what they need? Go ahead and build those adjustments now so that you’re not in that moment when you’re already emotionally struggling with what’s going on. You already have your plan. It’s built, right? And you know the steps that you need to take in order to sort of execute and get to a positive place from a cash flow standpoint. Yeah. 

Once again, I want to go back to this is about us helping you prepare for some of the things we know that are coming. We’re not saying that we’re calling for the worst fall ever, but we also know that those months come with volatility. So don’t wait too long to adjust, look at overhead, look at your patient flow and let’s just make it a fall without stress. Exactly. 

And if it doesn’t slow this fall, that would be amazing, too. Guess what? That’s great, and you’ve been proactive in things. You already know what your plan is. You already know where you need to be, and that extra cash flow that you might have because the fall actually was quite strong can lead to, “All right. Well, now I can go do that equipment or facility upgrade I’ve been looking to do,” or, “I can get my debt reduced that I might have elsewhere in my plan,” or, “I can actually go and make that additional investment that allows me to prepare for my future retirement as well.” 

So, so many great things that come from creating discipline and a system and a process in your practice because if it doesn’t happen, again, I think the results overall are pretty good. Absolutely.  

Well, Hunter, I think that’s a great episode. And we’ll be back with you throughout the summer, bringing you more both fun and topical things to learn along the way.  

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