Podcast Episode with Adam Cmejla: Time is Your Frienemy
This week Dr. Ted McElroy and Adam Cmejla sat to discuss how you view money, how you make it, and what you with it after you get it. Adam Cmejla is a Certified Financial Planner who specializes in financial advice for Optometrists.
Read the full transcript below:
[00:00:00] Dr. Ted McElroy: All right. Yeah. I decided I was gonna have to stand up this time cause I was getting tired and you know, I don't have a fancy studio like you with a nice arm and everything. I've got my stuff sit on top of two plastic boxes in them and my brand new laptop.
Adam Cmejla: So this is by no means a fancy studio. This is a $10 Mike arm.
That's bolted onto the side of my desk right here. That it is nice. Cause I can just kind of swing it out of the way and then pull it back in when I need to do, uh, either interviews or, or zoom calls. So that's, that's really good that in the, in, at home, sometimes when I'm pressed for an episode and I have to do a solo episode where I don't have an interview lined up in the basement, I have the same type of arm that's mounted basically on this cabinet, which is basically like our Costco overflow storage area.
And I may or may not have recorded podcasts with the boom over, you know, a couple of Capri sun boxes and my laptop stacked up on honey nut Cheerios. Um, uh, dual pack. So yeah, you do what you need to do to record an [00:01:00] episode, right? Yeah, absolutely.
Dr. Ted McElroy: Absolutely. I mean, nobody, I mean, there's like you said, nobody's actually sees this.
Thank God, but it's a, it's a lot of fun doing this kind of thing. Yes, it
Adam Cmejla: is. Yes, it is.
Dr. Ted McElroy: welcome to the vision of leadership podcast. I'm your host, Ted McEvoy. This podcast is dedicated to helping you find your wins. Have a better quality of life and become the best leader you can be. Hey, have you subscribed to this podcast yet? Don't miss an episode they're worth every single thing you paid for, which is nothing you're free.
I invite you to subscribe to the podcast by hitting the subscribe button, give us a rating and a review on your specific podcast player. This helps us with our podcast rankings and makes it easier for people to find this. And as always, please support those who help support us.
[00:02:00] On episode 102 of this podcast. Chris interviewed Justin Quan, Michelle Andrews and Richard Ruth. They pointed out that as a profession, we have done a great job of letting our patients know that myopia is not a big deal. If you can see 2020, there is no worry. It is the high myopes that are more danger.
And as they said, that message is tragic. Any myopia has a higher risk of maculopathy glaucoma and earlier cataract development in the, my site one day clinical trials, only 4% of study participants who got procure one days stayed stable in their myopia progression over the three-year period. That means you can confidently say parent [00:03:00] by not going to assist them gear to slow them out of your progression.
There is a 96% chance your child's vision will get worse. This may take away some of the choice your child has in the future as to how they will correct their vision choice. Not fear of the disease associations with my OPA is what best resonates with parents when it comes to my opiate control for their children.
And with Cooper visions my site one day, we now have an FDA approved, single use contact lens to lessen the progression of myopia in our patients. Contact your CooperVision representative to find out more about my site. One day contact lenses. Welcome to the vision of leadership podcast as Ted Mack, Roy and I have today, a really intriguing guest, Adam Shalala.
Uh, he is, and I apologize. I've gone blank on the, uh, it's the 2020 money, uh, podcast. Um, and it is a really fantastic podcast as far as learning how to truly get better finance [00:04:00] control, financial control over your practice over your regular life, which this is all what this is all about. Adam, welcome to the podcast division leadership.
And I'm so tickled that you're here with me today.
Adam Cmejla: Thank you, Ted. I appreciate, and I'm privileged to share in the conversation with you. So thanks again.
Dr. Ted McElroy: Uh, certainly, uh, the, to give you guys a little bit of background, um, Adam and I met at a state meeting for the West Virginia meeting. I was up there to do a speaking engagement and he was there as a vendor, um, to talk about his business and.
We struck up a conversation because of a mutual friend that we have, and actually one of Adam's, uh, clients, uh, Glen Bailey, uh, S Glen Bailey, I guess I should
Adam Cmejla: say there it is. There it
Dr. Ted McElroy: Yep. That's right. And, uh, Glen and I were on the board of trustees for CECO for many years together and have become, uh, very good friends over the years.
And. He was talking about this guy that was going to be there at the meeting and who was his financial advisor. And I was like, really? Yeah. So let's go meet him and I'm not joking. [00:05:00] Y'all in about three minutes. I thought we are going to have a lot of fun together. Very soon. I see this microphone on his desk, the booth.
I said, what's up with that? And he goes, I do podcasts that, Oh my gosh, I do too.
Adam Cmejla: And a bond was
Dr. Ted McElroy: formed, was formed. Then the next thing was, we started talking about our podcast and then, you know, doing some cross pollination and, and here we are. And so, uh, what you're going to see today are here today. Is, uh, uh, I actually, uh, continuation, we literally just got finished recording Adam's podcast.
Uh, went to the bathroom, grabbed some, something to drink and came right back at it again. And, uh, I'm I, again, I couldn't be more thrilled to have you here, Adam. Uh, today we're going to get into some really cool topics. Um, I guess the first thing is, do tell everybody a little bit about your podcast, about your business and what you do for ODS.
Adam Cmejla: appreciate it. And, and it's funny as you were just, as I kind of inflicted and a bond was formed, my mind [00:06:00] immediately went back to analytical kind of I'm thinking. So are we a covalent bond or an ionic bond? Because I think a covalent bond is stronger than an ionic bond. So which one did like, Hmm. I grew up, I graduated prevent, so my, my degree, both my wife and I, uh, Andrea and my wife is, is a practicing optometrist.
We live here in Indiana. Uh, we, we, what brought us to Indiana was she went to optometry school. She graduated in 2011. She brought us to Indiana. I kept us here. I've been an advisor. I've been a certified financial planner. I've I've been an advisor since 2007, uh, CFP since 2015 and run my own firm since 2011.
So a couple of dates, the business has gone through a couple of iterations, but. In short, what we do is we help optometrists around the country plan their on-purpose life. What that means and how we do that is we put intention behind the financial decisions that optometrists make both in their practice if they're a practice owner and in their personal life.
So again, we work with, with, with all ODS, whether they are. An associate in a practice in a [00:07:00] corporate affiliated sending like a Costco, Walmart, something like that, or your, your single or multi location doctor, uh, doctor owned practices. It is all about helping optometrists live their on-purpose life and spending money, investing money, making decisions with money, with intention behind, because so, so oftentimes what we see is when we ask an OT a question about how they made a decision with their money, there's a long pause and there's like, I dunno, Or that's what my friend did, or I Googled it or, or, or, or fill in the blue.
Right. There's there hasn't been that sense of planning. And so being married to an ODI, knowing the business of optometry very well. I joke with ODS that, that I'm, I think I'm about as close to one can be from a practice management side of things as being an ODI without actually having Odie after my name and, and, and I, I thoroughly enjoy working.
On the business of optometry more than I enjoy working in the business of optometry, the, the decisions that can be made and how a practice can be [00:08:00] used as a conduit of cash flow and a vehicle in which to build wealth. That is what just absolutely. I love working with Odis and that capacity. Yeah.
Dr. Ted McElroy: You said, you know, vehicle of creating wealth and that's something that rings, uh, I mentioned this same guy on your podcast.
Uh, Jerry per hall. Uh, quickly, little quick question. Uh Shamila is that check?
Adam Cmejla: It is Bohemian Czech Republic. Yep.
Dr. Ted McElroy: The reason I know that is because of my friend, Jerry per hall, P R C H a L. He has one less vowel than you do, but the same amount of letters. So, um, he is also checked and, uh, but he, he had said, you know, that, um, his father-in-law, who was also an ODI and his wife's and Odie and his sister-in-laws and Odie, his sons and Odie, they've got a lot of that going on in their family.
Jerry said that, um, one day that his father-in-law had said, you know, optometry will never make you rich. But what it will do is open the door for you to figure out a lot out other ways where you can get rich. Absolutely. And, and he meant that not just in [00:09:00] money, but he also meant that enriched Innes of life as well.
And, but I'll have to say that Earl Taylor was probably one of the most incredibly, uh, unique individuals, for sure, with all these great little isms they had there that I got to learn through Jerry. Um, but you know, that's true. I think that's, you know, optometry is a great vehicle. Of creating wealth. It's not going to probably make you rich, however, but there are so many other things that it will lead you to.
And that's where you come into play. Because as you said earlier, I mean, we don't know what we don't know. Right. And so when you're, when you're having these conversations for the first time, uh, and, and what you're going to find out from this is basically all these podcasts that I do is just like $10,000 worth of free consulting.
So when you're having this discussion with someone for the first time, how do you lead them through the process of what you're going to do and, and create the value that they
Adam Cmejla: need? So [00:10:00] I found the same thing too, with 2020 money. Like if I ever like, I'll have a question, like, ah, that's a good podcast interview.
And then I can just ask the question as if I'm asking the audience as if I'm asking for someone that doesn't know, but guess what? I might not really actually know how it works. Right. So you get free education by hosting a podcast. I love it. I absolutely love it. So, uh, so there's, uh, we always, regardless of what decision that we're making in life, whether it is a financial decision, a career decision, Even down to something as menial and trivial as what are we doing for dinner?
The, the phrase, what are you solving for needs to be taken into consideration? And that's a fancy way of saying, understand your, why what's moving the needle. Why are you wanting to make a decision about your money in this way? What are you trying to solve for? What's the, what's the intention. That or what's the pain that you currently feel that you're trying to get a solution for it because what I've learned and I'm, I'm the same way I don't get excited.
Like the [00:11:00] first thing that I think of when I wake up in the morning is, gosh, today's a great day to work on my financial plan. Like that just doesn't happen. And, and for most people now there are people that love to plan in that capacity and they love to do it. And Godspeed, I'm so grateful that there are people like that.
I can tell you with a hundred percent authenticity. That's not me. I love financial planning and I love helping other people do that. And I take intention behind my own planning. But I love the result of what financial planning can do and where I find the most progress that is made with ODS is not in the answers that they give, but the questions that I ask them.
And so the first part of our entire process is just having some really good thought provoking questions around. Why is this important for you to take action on right now? What has happened that leads you up to this point of, I need to make a decision I need to fix. Whether real or perceived, right. You and I talked in our last conversation about the stories that we have in our mind are often a lot worse than [00:12:00] they actually are.
In reality. One of my favorite quotes from, uh, uh, the stoic philosopher Seneca, the younger is, uh, we suffer more. We suffer often more in our own imagination than in reality. And that's true in financial planning as well, because we've seen situations where an ODI brings their financials. They bring their practice financials to us and their personal financials, and they have it in their mind that.
I've got to do this and I've gotta do this and I've gotta do this. And, and, and we go through the analysis and we go through the process and we're like, yeah. Do you really, or do you, why do you feel that way? And so a lot of it is just having someone be a sounding board for them to give them permission, to think differently about the money in their practice.
The other thing that I've learned, and this was a falsehood that I assumed going into this business 12, or what are we at now? Um, Okay. 13, 12, 13 years ago, there is zero correlation between the amount of money that someone makes and their financial aptitude. I have seen people that make, you know, what some ODS [00:13:00] bring in in a month.
And I have seen them build a, build a very solid financial foundation and build good wealth for themselves. And I've seen ODS that are bringing in $30,000 a month. And be broke. And so the important thing is know, thyself know, and this is kind of what you and I talked about in our last conversation, as well as knowing where your limitations are, knowing that if you're not in the place that you want to be at this point in your life, to ask yourself the question, the hard question, the mirror of.
Why am I not getting what I wanted out of my practice, either from a financial standpoint, from a life and fulfillment standpoint, and then surrounding yourself with the people that can ask you the questions to bridge the gap between the things that you want to have, versus the things that you are currently willing to do to get those things.
There's a fine line between what we want and what we, and what we are willing to do to make those happen. And that. That bridge between those two is where you can see people really take the next steps towards financial independence and have their practice serve them [00:14:00] instead of them continuing to serve their practice.
Does that make sense?
Dr. Ted McElroy: You know, and I guess the struggle is if you've never done this before, how do you identify the right individual to lead you through this process? How do you, how do you find out. What you don't know,
Adam Cmejla: it's a hard, Oh, see, I'm going to stop now that we, in our, in our conversation, we both went on little rants and little tangents here and there.
We, you know, our profession and I, and I use the word profession very intentionally because our. W we as CFPs as a, and we are our firm, if an integrated planning and wealth management is a fee only financial planning firm translation, what that means we don't sell products. We don't sell investments. We don't sell insurance products.
We provide advice, period. It's one of our differentiating factors, but it's not the only differentiating factor. This profession used to be and still is largely in [00:15:00] industry. And I define an industry as someone that manufactures products behind the scenes to eventually sell to a consumer. The challenge is that our industry has done a very good job of making it very, very difficult for the common consumer to understand what they are actually getting when they align with a finance, with a financial professional, and I'm using financial professional and a very generous.
And, um, and, and open architecture type of way, because. And again, not to digress too far down that path, but I have a list of questions that I can send over to you if you want to post in the show notes or things, or something like that as a resource, a list of questions that I suggest people take to their financial professional, that will give you more clarity to understand what type of business model they're operating in.
And to what extent they have the legal obligation to serve in your best interest, as opposed to the firm that they work with. So, um, yeah, I'm, I'm happy to share a couple of resources, but it is. As I mentioned from a client perspective, the value is going to be in the questions that you ask the hard part, correct me if [00:16:00] I'm wrong here, Ted, is that we don't know what we don't know.
We don't really know what questions to ask. One of my favorite layup questions is how are you paid? Yeah, like
Dr. Ted McElroy: that's a, that's a really, really. Personal question. I mean, I hate to say it that way, you know, but, and I know where you're coming from on this, but I can, I can understand that's a challenging question to ask.
I mean, why would you want to know how they're paid? '
Adam Cmejla: cause it, it, it, the answer to that question will dictate where their alignment and their affiliation lies or where their loyalty lies. And in a sense, from a legal standpoint, who their master is. Um, when you look at it and I'm going to give the dissection or the dissection here, but I want to make the case.
I want to impress upon the listeners. This isn't a good versus bad. I'm not, I, I'm not degrading a different business model. I'm simply trying to bring awareness in the distinction between the two business models, because they both serve their [00:17:00] purpose. It's a matter of understanding, like I said, in the beginning, what are you solving for?
Because the biggest challenge and the biggest disconnect that happens is when a client goes into a financial professional's office trying to solve this. And the venture professional is trying to solve that. Like client is trying to solve X. And the financial professional is, is solving for why there's a disconnect in alignment of expectations.
And so when you ask the question, how were you paid? It is one of the easiest and rip the bandaid off type questions that will give you that understanding. So if someone's a first of all, if they say free, no, they are, they're not a not-for-profit. Right. So understand that there is. So there is an answer to that question and if they say, Oh, there's no charge for my services.
You have two choices here, right? It's either decide if you want to really dig deeper. Or if that's the first and only red flag that goes up that says someone is not being as genuine and forthright as they should be in their, in their, in their service model. If an [00:18:00] advisor, a financial professional and agent, how, what, whatever label entitled they're using sidesteps.
That question. One of two things I think is happening. Number one, they are either, they are questioning the value that they're delivering to the relationship. As ODS you make money, you're paid for your services as a profitable, hopefully a profitable practice owner, the money that you make exceeds your costs.
Therefore you get to make a profit same thing should be true for a financial professional. We are paid for our service for our advice to our clients. The value that we deliver both intrinsically and extrinsically, or I should say implicitly and explicitly. Our goal is to exceed that fee. And in the absence of value, that is where cost becomes an issue.
So if an advisor, if a professional for them, if a financial professional sidesteps that question, it either leads me to believe a they're truly acting from a place of being dishonest. And don't want to share with you how much they're getting paid off the [00:19:00] products that they're selling you from a commission standpoint.
And, or they're questioning and miss and misjudging the value that they're bringing for a relationship and advisers should confidently be able to articulate how they're getting paid and what, and what the client is receiving in exchange for that fee. Does that make sense and answer and kind of it completely
Dr. Ted McElroy: does.
And, uh, you know, you're not the first person I've heard this from. I'm a huge fan of Motley fool. Oh, sure. Um, uh, the guy was a guy named Robert Brokamp. Who's also a certified financial planner. He does their Motley fool answers podcast. He says the same thing a lot. You know, and it's, you know, it's, it's just like, we always like to get a second opinion because we're ODS and this kind of thing, how that works, you know?
So having someone else support what he said makes a lot of sense. So how do you, I guess the other challenge is, and this is something I don't really know what their PR I mean, hacking can meet you at a meeting, but how am I going to find. Uh, sir, how someone who does what you do, how would I go through that process of, of vetting out that individual, first of even find
Adam Cmejla: out where they are.
So again, I think there's a couple of [00:20:00] different ways that you can do that. And the, the answer or the direction that you go is to tie this back to optometry. Are you looking for a generalist or are you looking for a specialist? So if you're looking for a generalist, I am, again, I carry the marks as a certified financial planner.
So I am. Yeah, full disclosure. We're going to lean more towards that certification and finding an advisor with that certification. As a CFP, we are held to a higher standard than any other certified then than any other financial professional. If you're not familiar with the CFP marks, the best way that I can equate that is kind of like counting accountants versus CPAs.
All CPAs can do accounting. Not all accountants can call themselves CPAs. Right? And the same thing is true in the, and in the financial planning world, right? Someone can right now, technically legally put financial planner on their business card. There's no rules. There's no regulations that preclude them from doing that.
The extent of the advice that they give. Yes. Now we're getting into the legal weeds, but let's not go there. Right? So anybody can put [00:21:00] financial planner and a certified financial planner obviously calls themselves a financial planner. Not all financial planners can call themselves CFP. So there's a rigorous education requirement that you have to go through.
We are held to a higher ethical standard, and by definition, we are engaging in comprehensive financial planning, covering all aspects of someone's life, their personal and cashflow, planning, insurance, and risk management investment. Income tax estate planning and succession planning and businesses. Uh there's there's there's these key cornerstone Keystone areas of planning that encompass what a CFP will show up and do.
So if you go to let's make a plan.org and you can put a link to that in the show notes here, uh, you can search for a CFP that's local to your area. We work with clients all over the country. We have clients in it's over 20 States right now. So you don't have to be geographically constrained. It just depends on to what level of specialization that you're looking for outside of that.
Once you find a CFP, then I really think it's just a matter of interviewing them [00:22:00] and kind of like you and I talked about in our, in our conversation on 2020 money. Do you like the person you're going to know early on, do you trust them? And by them carrying the marks, that's, that's removing one barrier to entry.
And I think it also comes down to what are you trying? What's the biggest pain point that you're trying to solve if quote, unquote, all you need and that you're, you're savvy enough planner and you've done a lot. And all you need is, you know, some, some term insurance or you need to set up a five 29 for your kid's college or, or something in more of a transactional nature.
Then the type of person that you're going to be interviewing for and looking for is going to be different than if you're wanting someone to be in essence, your personal and potentially professional CFO to help you make the strategic big picture decisions on your finances.
Dr. Ted McElroy: So when it comes to finances, Um, this is one of those questions, you know, you always hear an attorney, never ask a question, you know, it isn't are, I know the answer to, we'll see if right, right about this one.
Um, [00:23:00] what's, what's the biggest piece of advice that you need to carry with you? Um, as far as when it comes to looking at, at your
Adam Cmejla: finances. Biggest piece of advice. You need to carry with you
Dr. Ted McElroy: to start with your financial planning. How did, how? I mean, what I guess is when should you start yesterday?
Adam Cmejla: Financial planning. Okay. So yeah. So the old Chinese proverb, right? When's the best state. What's when's the best day to plant a tree 20 years ago. When's the next best time today. Yeah. Yeah. Time. The way I put it to two ODS is that. Time and money are your greatest assets. When you're your greatest allies, the younger you are, and they become your greatest enemy.
The older that you get and ODS are already, I kind of identified. They're already fighting three headwinds when they get out of school. Number one, just [00:24:00] purely compared to their peers that they graduated undergrad with. You're already four years behind. From a savings standpoint, assuming that most ODS are not doing a fair amount of saving as they're going through optometry school, because let's face it.
You're in, you're in school. You're not, you're either living off your loans or you're, you're stuck. You're uh, your spouse is supporting you in some contexts, but you're really not in your peak earning years where you're able to say, so you've lost four, potentially five. If you do a residency right there and you lost four years, that's one headwind.
The second headwind is again, optometry school is not cheap. As, as a, as a spouse of one that is chiseling through, uh, through four years of, of a commenter school. Yeah. It's not cheap. So you've got those headwinds that is fighting for your cash flow. At the end of the day, everything comes down to cash flow.
And then third with a little bit of an asterisk next to this third, if you start a practice or you buy into a practice, You have that potential headwind of debt as well. Now, the other reason I put the asterisk next to that is that buying into a practice should be providing you a [00:25:00] return on that investment.
So you should be getting cashflow from that practice, but there is debt associated typically with the buy in of a practice as well. So I joke with ODS that, and if you're a cold start, right, that's an entirely different conversation that is going to add an additional layer of complexity and, um, And, and challenge to work through can be done, but you need to be aware of it.
So those three headwinds make the make and emphasize the importance of planning. So, uh, so pivotal to the longterm financial success of an ODI. And what we find often happens is that by the time they're, there's a certain amount of catch-up that we find ODS play because. The cash flow has been spoken for.
You know, by the time you go to optometry school, you buy a house and you start a practice. There's two commas in your liability side already, right? You're over a million dollars in debt. And so by the time they come up for air and have some breathing room, production gets up, et cetera, whatever that might be.
You're now [00:26:00] 10 years, potentially five to 10 years behind where your other. Colleagues. And when I say colleagues, I'm talking non ODI friends, right. That maybe don't have the debt that weren't in school for eight years. They've had assuming they've done it right time to start that craziest law or that the eighth wonder of the world, the power of compounding interest.
And so just being aware. That this is not something that you can put off, you have to address it and you have to face it head-on because it will not solve itself. You know, w we talked, um, th th the concept of, if you don't plan your life, someone else will, and guess what? They don't have much plan for you.
So maybe someone else is implant is implanting your life in the absence of you planning it. But it's certainly not going to end up the way that you, like. One of my phrases that I've learned from, um, Uh, from the book, um, uh, who not, how by Dan Sullivan is one of our worst fears is our future self meeting.
The person that we could have become. If we just would have [00:27:00] understood what is possible, and that can be taken from a financial standpoint as well. If you, if you think about, gosh, if I just would have found someone to hold me accountable, found someone to give me tough love on the things that I do need to do right the first time and not think that I know how to do it, and then make the mistake that costs me not only the financial dollars, but also the time currency that I have in this equation as well to think about what I could have done.
If I just would have done X, Y, and Z meets the person that you ended up becoming. That's my biggest fear is meeting the Delta between what could be possible and where, where I end up.
Dr. Ted McElroy: So, I mean, we're a million dollars in debt. Um, What do we do about it? I mean, you know, declared
Adam Cmejla: bankruptcy. I'm kidding. No.
Dr. Ted McElroy: We're done.
Adam Cmejla: Thanks everybody.
Dr. Ted McElroy: I appreciate it once that ticket, but I mean, seriously, I mean, okay. I found, I found this financial planner, but I'm looking at this. I'm looking down. Double [00:28:00] barrel of a bill of a million dollars. I might as well be a billion. I mean, you know, it could be it's it's it's seems pretty unsurmountable.
What do we do? How do we, how do we go through that process? Because you know, I've got right now, my associate's been out of school for two years. I've got a son who is, is halfway through his first year of optometry school. That is a large, large undertaking, just that part of the finances. And then all those other things you talk about, how are you going to get that all under control?
And, and how does, I guess the second question is sort of fit into this? How does debt figure in to your life? Is it, is it a terrible thing? Is it a good thing? Is it a, I don't know.
Adam Cmejla: Uh, there's uh, I'll, I'll, I'll try and be, my wife always says she has a high D personality and she's like, why do you say in 20 what you could say in five words?
Dr. Ted McElroy: all I have for you and onions. So that was not, that was the biggest problem right there.
Adam Cmejla: So we're only talking about one side of the balance sheet there, right? We're only talking about the liability side. We have to understand not only the [00:29:00] asset side of that balance sheet, and there are.
Tangible and intangible assets that can serve you in that capacity. The tangible assets that we're talking about are the vehicles that you have, that you've acquired to build wealth, the practice real estate that you end up owning your investments, as you continue to add to those and the power of compounding interest.
And then we shift over to the income statement every pro every year. You don't have to own a business to have an income statement, profit loss, call it what you will. When we say income statement, profit loss for the audience, we're talking about the same thing. A household is no different than an optometry practice.
Think about it. When we, when we think about the core three financial statements that every business should have buttoned up and understand, every practice should know how to pull, interpret, and make decisions off of your statement of cash flow, your balance sheet and your income statement. And your personal life should be no different from that on the balance sheet side of things you should know to not overleverage yourself.
And there's a bunch of ratios that we get into [00:30:00] on the practice side of things that help us understand the health of our balance sheet. But you should know the ratio of assets to liabilities and know whether you have an what's called a quick ratio. Right? Do we have enough assets to provide for the liabilities that we have in the practice, both from a cashflow and just a pure value standpoint on the income statement side of things.
Are we profitable? Are we, are we making more than we spend or on the personal side, what we more often hear that has spend less than you make. And so the Delta between those is how we prioritize, where we put that money to work. I am not one that says that you have to like Dave Ramsey becomes a verb, right?
I'm not saying that you have to Ramsey that debt because. Typically, when we look at that, the time value of money, my general rule of thumb is that if you can pay off your optometrist school debt, all unsecured credit, um, you know, all in secure debt in five years or less Godspeed, let her rip okay. Throw everything at it.
The only, the only way. [00:31:00] And the only Astros that I put X to that rule, even if you're going to do that, and you're not going to fund your Roth IRAs, you're not going to fund your 401k. I still recommend you do the 401k up to whatever the company is matching most practices. If they have a 401k, they have a safe Harbor 401k that allows the practice owner to fully fund their contribution while not being subjected to the ADP and ACP testing requirements that govern 401k's most 401k match formulas are.
The participant will get a 4% match if they put in 5%. If so, let me, let me rephrase that a little bit better. If the participant puts in 5%, the company will match 4%. So my recommendation that's free money on the table. Like what if I, if I, if I put a stack of 4% of your salary at the end of the table, On December 31st wood and let's use round math.
Right? I know D making a hundred grand as an associate. If I stacked four grand on the table, would you, or would you not take that money [00:32:00] at the end of the year? Of course, everybody's going to take it. And so that's the, that's the position that I say, that's the asterisk next to the Dave Ramsey. Dave Ramsey will say, don't put a dollar towards savings.
Don't put a dollar towards investment. Just pay off your debt. I don't believe that I don't believe that you should do that. Put that money to work everything else. If you can pay off your debt in five years or less than I will. Support. I don't necessarily always encourage it, but I will support the idea of just Ramsey and the rest of your debt and painted off if you can't then, and this is where advisors love it.
We can say it depends a lot and still, and still use it as a get out of jail free card because it quite literally does depend. It depends going back to that on-purpose life. What is important to you? How do you prioritize and organize the cash flow? We have some ODS that we talk with that are perfectly comfortable.
It's just a monthly expense on their balance sheet. They realize that the return on investment, they, they think about it. And quite literally it, even though it shows up as a [00:33:00] liability on your balance sheet, you can think about your ability as an ODI to produce the income that you have, whether as a practice owner or an associate.
Is predicated upon you having the letters O D after your name, there was a cost to get those letters. And so the investment, the return that you're getting on that investment in your education is the ability to make the income that you make. So again, it's all about mindset and how you think about it. So some ODS will be comfortable keeping around 20 years of debt.
I will say that most relationships that we work with find a happy medium. It's an, an equation we're saving for the future. We're doing these, these low-hanging fruit strategies because we know the power of compounding interest and we are paying down debt. I will say the two things that get ODS in trouble when it comes to achieving a lot of these goals, they, they, they all their coverage on house and car.
If you can manage those two big ticket expenses in your personal life, you will put yourself in a, from a, from a probability standpoint, [00:34:00] you will put yourself in a much, much better position of succeeding than if you buy as much houses. Your mortgage broker tells you that you can afford and you buy as much car as you're qualified for down at the dealership.
Manage those two expenses. I'm not saying everything else will fall in place, but you're, you're giving yourself a much, much better chance at success.
Dr. Ted McElroy: So one of the challenges I also see, um, and, and I'm, I'm going to speak to them specific idea of practice ownership. I mean, you and I both believe in owning your own
Adam Cmejla: business.
Dr. Ted McElroy: Uh, you know, just the we've we've talked about how, you know, optometry is not going to make me rich, but it certainly will give me the tools to make me rich, like we've talked about and. Um, but let's say the challenge that I've heard a lot of I've talked to I'll call them what my different and I'll might Ralph John, a great American calls, reluctant entrepreneurs.
Yeah. These are people who have been working in or working for someone else, uh, as an associate, no matter [00:35:00] what level of whatever it is, it doesn't matter what it is. And they've decided suddenly that they're going to. Become a practice owner, and yet they've bought the house. They've got the car, they've got the family, they've got the school loan.
Right. And what they're now dealing with is this ball and chain around their ankle because they got, they really, they have a job it's paying them once. And now I'm going to take on more debt to have another, to have a business. What should be the thought process to making that? Because I see this is where I want to go.
How do I make this decision and make it make sense for me financially without going into the pool.
Adam Cmejla: So let me answer that question with a clarifying question. First, are they, are you talking about the associate having an opportunity to buy into the existing practice that they're working or are you talking to them?
Leaving, jumping off the proverbial ledge, so to speak and opening up their own practice and. Giving up their [00:36:00] income. Can I do a yes.
Dr. Ted McElroy: And yeah, of course, of course. Let's talk about both of those scenarios.
Adam Cmejla: So, so the first side of it, I'll go back to the idea of understanding both sides of the balance sheet and the relation of the income statement.
If you're buying into a practice, there should absolutely be a return on equity for that purchase price. Yes. You're going to have debt service, right. If, if you're the practice owner, like think about the seller in this situation at the end of the day, owning a business and the enterprise value that is in a practice is the predictability of future cashflow.
The more predictable that future cash flow is the greater valuation I get from my practice. That's why, when you think of startup practices, if you think of startup businesses in general, there's a lot of disconnect between investors, what they think, but an investor thinks a business is worth and what the founder thinks it's worth because of the intranet, because of just the confirmation and personal bias that we have towards this baby that we've nurtured called our business and optometry practice is.
And this, you know, like you had said it from a, from a vehicle [00:37:00] standpoint, it is a phenomenal cashflow generation machine. And the beautiful thing about it is from a, from a business standpoint, we're not making up a brand new product. This isn't some tech startup that created this product that we don't know whether the world is going to need or not, or want, or, or, or desire the business of optometry.
We know what the metrics should be. We know that owner's compensation should be in a low in between 25. And on the high end, we've seen practices in the 37% range. We know non-staff or non ODI staff should be 25%. We know that rent expense should be no more than seven to 8% of gross revenue. We know that like we know all these metrics, so the business plan is proven there.
And so if you're buying an existing practice, That already has the cogs of the wheel already in place. Then it just comes down to negotiating the purchase price and realizing that what we're buying. Yes, there's going to be a cost for it because my investor, the owner of the business wants to get a return.