874: Metric Mondays: True Profit: What You Actually Take Home – Dr. Barrett Straub

Gross profit and net profit both sound great. But there's one key difference you need to know! In this episode of Metric Mondays, Kirk Behrendt brings back Dr. Barrett Straub, ACT’s CEO, to break down true profit, the amount of dollars you get to take home to your family, to invest in your practice, and to plan for your future. To learn how to analyze and increase true profit, listen to Episode 874 of The Best Practices Show!Learn More About Dr. Straub:Send Dr. Straub an email: [email protected] Join Dr. Straub on Facebook: https://www.facebook.com/barrett.d.straubSend Gina an email: [email protected] Learn More About ACT Dental:ACT’s webinars: https://www.actdental.com/136ACT’s website: https://www.actdental.comACT’s Instagram: https://www.instagram.com/actdentalACT’s YouTube: https://www.youtube.com/actdentalACT’s Facebook: https://www.facebook.com/actdentalACT’s LinkedIn: https://www.linkedin.com/company/3137520/admin/feed/posts/ACT’s Twitter: https://twitter.com/actdentalMore Helpful Links for a Better Practice & a Better Life:Subscribe to The Best Practices Show: https://the-best-practices-show.captivate.fm/listenJoin The Best Practices Association: https://www.actdental.com/bpaDownload ACT’s BPA app on the Apple App Store: https://apps.apple.com/us/app/best-practices-association/id6738960360Download ACT’s BPA app on the Google Play Store: https://play.google.com/store/apps/details?id=com.actdental.join&hl=en_USJoin ACT’s To The Top Study Club: https://www.actdental.com/tttSee the ACT Dental/BPA Live Event Schedule: https://www.actdental.com/eventGet The Best Practices Magazine for free: https://www.actdental.com/magazinePlease leave us a review on the podcast: https://podcasts.apple.com/us/podcast/the-best-practices-show-with-kirk-behrendt/id1223838218Episode Resources:Register for ACT’s To The Top Study Club (July 25, 2025): https://www.eventbrite.com/e/climb-with-us-register-for-july-25-2025-ttt-study-club-tickets-1205497959849Main Takeaways:Your financial story goes beyond just the P&L.Understand the difference between revenue and profit.True profit is the dollars you can put in your personal checking account.Analyze your cash flow statement expenses — things that are not on your P&L.Ensure you have enough for Tax Day. Identify how much to put aside each month.Quotes:“[True profit] is the amount of dollars that you can actually put in your personal checking account. So, let me start here with true profit. Let me describe a scenario that I experienced as a dentist. And I can almost guarantee every private practice dentist-owner listening has experienced this. You meet with your CPA after the first quarter of a year. He or she brings a P&L, you sit down, and you look at it. You look at revenue, and overhead, and all the different percentages of each category. At the very bottom of this financial statement called the profit and loss statement is called net profit. Often, that number is good. There's a lot of money there, and you're like, ‘Wow.' He or she says, ‘You're doing great. You are right in the average where you need to be for overhead. You have a nice salary here, and there's a lot of net profit left over.’ You're like, ‘Wow, that's awesome.’ But there's this little anxiety that's creeping up because you're thinking, ‘That says $100,000. I don't have that in the bank. What's happening? Am I being embezzled? Am I a bad businessperson? I don't know where that money is going. He's saying I should have $100,000 left over, and I don't have it. Actually, I'm struggling to make payroll.’ So, there is so much of the financial story beyond the profit and loss statement.” (1:53—3:25) -Dr. Straub“Find true profit. Meaning, what is left over after I paid the overhead, after I paid myself the W-2 payroll salary, after I paid tax obligations, after I paid loans, after all of the outflows? There's a dollar figure left over where you're like, ‘That's mine. After tax, I can take that, and I can put it into my bank account.’ Now, why is that important? This is the link between your practice success and your personal financial success. We see it all the time. We coach hundreds of dentists throughout the country every year. We see it all the time with what looks like — and is — a killer practice, and the dentist-owner does not have a personally successful financial model. There is a link between them. There's more detail than any of us know in between it, and unless we know how money flows from production, to collections, to overhead, to net profit, to gross profit, and into true profit, we can't successfully plan. True profit is what you pay your house mortgage with. It's what you pay the soccer fees for your kids with. It's what you pay the voice lessons for your daughter with. This is how you pay for your vacations. This is your money after tax. So, it's maybe the most important metric that we're going to talk about in this whole segment.” (3:32—5:03) -Dr. Straub“Early in my career, more than 15, 20 years ago, I got into what's called a tax snowball. I was pulling money out, and my accountant was like, ‘You're doing great.’ Well, I thought I'd just pay taxes later and save some money. I found that I got into the next year, and I owed a tax bill for last year. My accountant was like, ‘You’ve got to pay that now!’ So, I was taking money I was earning this year and paying last year's taxes. Now, the money I'm earning this year, I have to pay taxes on it. I'm using that money to pay last year's taxes that also has a percentage built on it. He looked at me, and he goes, ‘This is the most expensive money you'll ever spend, ever.’ And I realized I've got to get out of this. What's really important is you have to understand what's below your profit and loss statement. This is a lifetime study. You don't just get this in a podcast. You've got to work it, rework it, know what it means, and evaluate it.” (6:22—7:19) -Kirk“After your net profit on your profit and loss statement, there are what we call below-the-line expenses. So, last Monday, I challenged listeners that had any sort of loan through the business — meaning a practice loan, a technology loan, or any capital expense — and I challenged them to . . . go find it on your P&L. It's an expense. It's an outflow. It should be on your P&L as an expense. I also said you're not going to find it there. The reason is that the money you are paying for any loan through your company is being paid with profit. It is not reducing your taxable income at all. It is paid with profit. So, I talked about that scenario where this net profit number, I don't know where that is. It's because that number is now going and paying your practice loan, your CBCT loan, and oh, by the way, you take $10,000 in a distribution every month. That's pre-tax, so that goes against the distribution. So, this is all IRS stuff. Your CPA didn't make this up. We're not making it up. This is how complex the IRS is, and that's a whole other debate that it needs to be this complex.” (7:54—9:07) -Dr. Straub“You have deductible expenses which are on your P&L, and you have below-the-line or cash flow statement expenses that are outflows of money but they're with your profit. Those include any loans, they include quarterly tax distributions, and they include your distributions. Meaning, when you pay yourself through W-2 through payroll, that goes through payroll. It's taxes withheld, etc. But when you just go take $5,000 out of the bank account, that's called a distribution — which is well within your...