Dental Unscripted | Getting into Ownership and Practice Management Insights

Welcome to Dental Unscripted.

Where Mike Dinsio and Paula Quinn break

down the practice ownership journey,

one episode at a time.

Starting up,

buying and running a successful dental

practice.

Hey, hey guys,

welcome back to another episode of Dental

Unscripted.

As you guys know, I'm Michael Dinsio,

one of the owners of Next Level,

and we are missing my co-host Paula Quinn.

She couldn't make it today,

but I feel like she would totally be

bored in this conversation.

So she's probably...

happy she's not here.

But she did go through a couple of

transitions herself,

so she understands this stuff.

But I think today's topic is going to

be really interesting because it's all

about value.

And we have the perfect guest to talk

about this valuation.

And when you are approaching buying a

practice,

it's like I get a lot of questions

as a buyer rep of like,

what's an appropriate value and how

What's your methodology?

And, you know,

is this overpriced and blah, blah, blah,

blah, blah.

And so I think this is a really

good episode today.

I have someone helping me with the

conversation.

Her name's Marie Chatterley.

You all might know her.

She is the owner of CTC Associates.

What you might not know about CTC

Associates is they've been around since

nineteen eighty eight.

That's a really long time.

I had the pleasure of working with her

dad, Larry.

And yeah,

just a fantastic firm they cover.

So it's a practice brokerage firm and

other things they've done over the years.

But they cover the areas of Colorado,

Utah, Montana, Idaho, Wyoming.

Washington, I miss New Mexico and Alaska.

So essentially like that Rocky Mountain

region all the way up to Alaska.

I had to remind her that she's got

some clients in Alaska even,

which is super cool.

So welcome to the show, Marie.

Nice to have you on.

Yeah, thank you for having me.

So you and I go back...

I mean, I can't believe it, but yeah,

it's been a while.

We did some stuff together when I was

at B of A,

when I lived in Colorado.

And CTC was a force to be reckoned

with in Colorado.

And the reason why I felt like you

guys are perfect for this topic is because

I actually really love your valuations

almost every time.

Thank you.

Yeah.

Tell us a little bit about CTC.

I know I kind of set it up

a little bit,

but anything else that you would add about

the company and how you guys help your

clients and all that good stuff?

Yeah.

Just my dad started brokering dental

practices in

We primarily represent sellers in our

markets,

but we occasionally do some assistance

with buyers.

But even though we represent the sellers,

we certainly answer a ton of questions

about valuations with the buyers that are

looking at our prospective opportunities.

Totally.

Yeah, no, I mean, it's a big, big,

big decision for those buyers.

well, every doctor buying a practice,

a big decision,

but for like those first time buyers, man,

there's a lot of questions around that.

And the poor sellers too,

let's not forget them, your clients,

they've worked their entire life sometimes

building this phenomenal business.

Sometimes they start and build it from the

ground up.

They didn't even buy it themselves.

And

And then it's time for them to walk

away.

And it's like they put their blood,

sweat and tears and they probably think

it's worth a bajillion dollars sometimes.

And so it's like bridging that scare,

you know, do it, dare I say, scared,

kind of more nervous buyer.

And then you've got this seller that,

you know, has expectations.

So hence the topic today, valuation.

Right.

So, yeah.

Walk me through a little bit like I

don't think I've ever had this question

asked to practice brokers on the program.

Like walk me through that listing process,

because most of my clients are like,

as you know, buyers and, you know,

a lot of work goes into getting a

practice prepared for sale and.

And I think the audience needs to hear

that because sometimes and some brokers do

just slop it together for sure.

You guys don't.

But like a lot of work goes into

preparing that seller and like how you get

to that value and the whole thing.

Can you just walk us through that that

protocol,

that process that you've been doing since

nineteen eighty eight with your clients?

Can you just walk us through that?

Yeah.

Sure thing.

I mean,

typically people reach out to us anywhere

between one and seven years before they're

ready to transition to practice.

So there are a lot of things that

can be done in advance to prepare to

have your practice just looking and

appearing, not just on the financials,

but also from other elements of the

practice to be prepared and at the highest

end of a practice value range per se.

So it's little things like not just

cleaning up the financials,

removing discretionary expenses,

but it's also setting up your software.

So you're tracking collections by

insurance provider,

little things that buyers are going to

say, gosh, that,

tends to influence my perception of value.

So when you look at a practice,

it's not just value that's on the net

income.

That's where we really focus a ton,

total collections and net income.

But when you're looking at it from the

standpoint of something being sellable and

something being deemed of high value to

another person,

there's so many things that encompass that

value that are not on the tax returns,

that are not on your profit and loss

statement,

and that you can make changes within your

practice within a short window of time.

you know,

one to two years if needed so that

it looks so different to a buyer coming

to look at the opportunity.

And then when I'm appraising a practice,

it helps me out as well because when

certain things are organized really well

for at least a year or more if

possible,

then it allows me to showcase all of

these amazing things that I would say add

value to a prospective buyer

that maybe you're not thinking of when

you're just considering listing a practice

most people just send me their financial

statements so i can give them kind of

an estimate of value which i don't charge

for that but it's just kind of a

snapshot of what's kind of the approximate

range but i have to say with the

caveat there's a ton of other things that

could influence that perception at the

higher end or a higher or lower value

of that range so do you that's perfect

because

ex banker talking,

I go I go to the financials,

you know, like if I'm buying a business,

I.

I want to know

within reason what the ranges would be of

how much money i'm gonna make or could

make right and um that's where my eyes

go to but i think today's buyers they

look at a lot of other stuff um

what are some of those more common things

i mean you get calls from buyers literally

every single day

What are some of those things that you

feel like are really important for a buyer

when they're looking at that you're

hearing?

Not so much your perspective,

but what you hear every single day is

important to a buyer.

What do you tell your clients?

I'll tell you what I hear,

but then I'll tell you what I wish

buyers would be asking.

I'll give you both.

The first thing that I hear the most

common is what are the collections?

What's the number of operatories and how

many new patients are coming into the

practice?

Those are the three most common questions

I receive.

Most people want over five operatories.

Most people want this gigantic number of

new patients coming in.

And most people want to know exactly what

the practice is being, is collecting.

I'll just tell you really quickly why all

three of those can be problematic.

They don't ask how much they're making.

They just ask how

No,

those are the three most common questions.

So the first one, collections,

I would argue that can be problematic

because you can have two practices

collecting a million dollars.

One doctor's taking home two hundred

thousand.

The other doctor is taking on four hundred

thousand.

Those are hugely different in the

opportunity.

The second one is the operatories.

This one is interesting to me because if

I have a fee for service practice in

a middle to high income area where a

doctor is.

you know, collecting, let's say,

one point eight million.

Let's say this is this office is cranking.

And I had one of these just a

year ago.

Guess how many operatories they had for

three.

So I think our perception of how many

operatories we need needs to go back to

what type of business plan you're planning

on implementing.

Are you going to have a Medicaid office,

a PPO practice fee for service practice?

And then let's narrow down what makes

sense for operatories based on the type of

business model that you're that you're

hoping to.

I love this.

I love this because there are some

podcasts and some other consultants out

there, I won't name names,

that talk about what you just said,

like don't buy anything less than five

ops, blah, blah, blah, blah,

bigger the better.

And I feel like...

everybody's just chasing this like really

big DSO sale and that almost never

happens.

And also, do you really want that?

So like I'll go into what I think

I wish buyers would ask me more because

I think that's relevant because usually I

also get asked about like the number of

new patients,

which I just want to say as a

side note,

If a practice that's been around for

thirty years is getting fifty new patients

a month, that is a red flag,

not a green flag.

If a practice that's been around for

thirty years is getting fifty new patients

per month, that is a red flag,

not a green flag.

Why do I need that many new patients

per month for a practice that's existing

with one provider?

One doctor can only see so many patients.

So that tells me you have a lot

of attrition and a lot of people leaving.

Unless you have substantial growth to go

along with those new patients,

the average practice needs five to ten new

patients to just replenish average

attrition.

That is it.

They don't need to have twenty, thirty,

forty new patients per month.

So I get asked that question a lot,

but I think I'm being asked that question

without the context of why we need new

patients.

If it's a startup practice and it's been

around for three years, yes,

one hundred percent.

Let's buy the one that is seeing fifty

new patients per month.

They've been around twenty, thirty years.

That to me is a scary figure if

it's that high.

But what I wish buyers would ask me

is more about the production by procedure

code.

There is so much to be said for

what you're producing as an associate,

and if you can duplicate the production of

the practice that you're acquiring,

or if you can add production to this

practice.

Now, in all fairness,

probably fifty percent of my buyers feel

that that's important to consider in an

opportunity,

but I wish it was

the first thing that we're talking about

is how does my production makeup compare

to whatever doctor that I'm looking at to

acquire their practice?

And then the second one is the income

after debt service after I've considered

what the buyer needs to put into the

practice.

So not just

income after debt service for the practice

itself,

like based on whatever the asking price

is,

but income after debt service also after

maybe it needs eighty thousand dollars of

new equipment.

Maybe it needs a whole revamping of all

the computer systems.

Maybe you want to go to a different

software system.

So taking into account what you need to

do to make the practice functional and

awesome for you,

And looking at that with a lender to

determine, okay,

what's my take home going to be with

this loan amount if I purchase the

practice and the additional items that I

need?

I love that.

I think that's so on point.

I coach our clients when approaching

practices with all of those questions.

I don't care about collections.

You said it perfectly.

I care about profit.

Um, new patients matters to me,

but you make a really,

really valid point that a lot of patients

is, is potentially a problem.

But I asked my clients to like literally

digest and stare at the provider report

code, the codes production by,

by code and seeing how often,

how many procedures they're doing of each

of,

of each procedure and making sure that

not only can they replicate the work but

what they could also keep in house versus

uh refer out so i love that i

think it's spot on i i i'm curious

taking a step back going back to that

listing process

we kind of went down that buyer path,

and I love that.

But I do want to focus on value

as this is the topic today,

and that is when you get a seller

to sign on with you,

what's that process feel like?

You obviously request a bunch of

documents,

and then your team goes and values it,

or maybe you do.

Can you walk us through that process?

process because a lot of work does go

into that analysis.

And sometimes I feel like buyers don't

give the broker the kudos they deserve and

all of that work that you do put

into it.

Does that make sense?

Does that question resonate?

Yeah.

So, I mean,

the initial process starts with we have a

questionnaire and depending on the

specialty,

the questionnaire is different for the

information that we're collecting.

And it's a lot of information about the

practice, the history of the practice,

what's going on with the systems,

the financial systems, the patient flow,

active patient count,

insurance participation.

We look at a lot of practice reports

from the software and sometimes we don't

get all the practice reports that we need

to kind of gauge certain elements within

the practice.

But we do the best we can to

collect as much information about the

practice as possible.

We do an equipment inventory.

and do demographic research on the area we

look at the real estate the lease if

it's assignable if the building's for sale

what the comps are so we're kind of

looking at the full business opportunity

as a whole and it is a lot

of information that we're gathering from

our prospective clients in addition to all

of the financials from a cpa and so

i am the one that does the appraisals

so my team helps me collect all the

information and we do to put it into

a formal report but there are three

different

appraisal methodologies that we use that

are standard so there's an income asset

and value uh income asset and market

valuations and you know depending on the

um

the timeline of the person considering

selling.

Sometimes we'll just give an appraisal to

have a snapshot of what it looks like

today and then reappraise it when they're

getting ready to retire or after we've

been able to give them some advice on

changes to potentially make either with

systems or protocols or within the

financials.

but it is a lot of information that

we go through to kind of determine what

this practice value is i would say the

financial analysis is what takes me the

most time going through every single line

item of expenses determining if those

expense categories are within industry

standard or if i see a problem somewhere

if i see that somebody's rolling a ton

of personal expenses in and i'm having a

hard time

you know,

being able to effectively adjust that out.

I was just going to make sense for

a lender.

I was just going to say when a

buyer, cause like ex banker, you know,

talking here, like the brokers,

in my opinion,

their job is to really flush out those,

uh,

what we're calling ad backs or

adjustments.

Right.

So it's really easy to see the net

profit.

It's really easy to see the owner's

salary.

Those are two simple numbers.

Hopefully that's the majority of the the

profit.

But then there's like all these other

things that I get a lot of questions

about.

I know you do as well.

I, I, the,

the broker really is the quarterback on

trying to flush out anything else.

And can you like describe some of those

maybe in more detail, like, um,

and how you go about like trying to

find those and, and validate those,

because I gotta be honest with you,

even if it's pretty creative, um,

creative accounting, um,

I love a brokerage like you guys.

I'm going to hold what you've investigated

and figured out at a high level,

meaning you guys are claiming that there's

X amount of dollars.

running through the practice that maybe

they're buying their toilet paper through

Amazon for their house, right?

But you are trying to go through that

with your client on the front end.

I'm not going to get an opportunity to

interview your client.

So walk us through that process.

Yeah.

So I'll clarify because a broker cannot

claim anything.

I think we lost Marie for just one

second and maybe it was a connection issue

or maybe not.

But what we are talking about and I'll

just keep keep kind of wrapping here while

Marie maybe gets reconnected.

But essentially,

Clients,

sellers have stuff on their financials

that need to be just flushed out.

And, you know, owning a practice,

I own a practice or a business.

I run things through the business.

It's not shady at all.

It's actually quite normal.

Medical insurance.

I run my car.

You can run your spouse's income if they

have a job, quote, unquote.

There's all kinds of things that you can

run through the practice that's totally

legit and above board.

But those are benefits to the buyer

benefits.

Like, for example,

when you take over the practice,

there's Marie's back.

I don't know what happened.

You're fine.

I just I carried it.

What I was trying.

I was I was discussing with the audience.

that it's not shady to run things through

that, that I'm as a business owner,

I run things through,

but it's flushing out those expenses to

make sure that they are legit.

And you as the buyer may not choose

to run your car or run your spouse's

income through.

So what the question was for Marie was

how do you guys go about finding those

and validating those?

Yeah.

So I was just going to say that

no broker should ever like say that

they're claiming any of these types of

adjustments.

So these adjustments come from a

bookkeeper CPA or the client or a

combination of all of them and from

financial records.

So if you can't show that to me,

I'm not going to adjust it for you.

So I realized some people might make a

blanket adjustment for something.

I am not going to do that.

So you give me your financials.

And if you rolled two hundred thousand of

Costco through your supplies,

unless you can give me the full statement

of those,

that I can then provide to a buyer

or the bank,

then I can't make that adjustment.

So I'll do all of the big ones

that are easy.

Like if you already categorize something

separately for auto, meals, entertainment,

travel,

those types of things are really easy for

us to pull out.

Like you just mentioned doctor's comp,

spouse wages, whatever it may be.

But if you have a category where you're

rolling something like I just described,

You could just start doing this today by

saying, okay, supplies, dental supplies,

supplies other,

and everything that's on the supplies

other is Costco and Amazon, let's say.

Maybe those are personal,

but then you can show us like those

expense reports so that the bank can say,

oh yeah, that's all Costco and Amazon.

So let's not stress about that.

But yeah,

you can't just pretend that you're going

to get some big adjustments on your

financials to industry standards just

because I know that

Your supplies are inflated by two times.

Okay.

So to dummy this down,

because Marie and I are like on the

same page,

not calling the audience dumb by all

means.

But why this matters is because valuation

is heavily dependent on how much the

business profits.

Marie talked about that.

Buyers are calling you, Marie,

asking how much the collections are when

they should be asking what the profit is.

Well,

the profit could be lower than it actually

is if we or the professionals,

Marie in this case,

doesn't find out with the bookkeeper's

help and the accountant's help to find

what those things are.

So you as the owner tomorrow taking over

the practice wouldn't have those expenses,

right?

You can choose to run Costco through your

business, sure,

but that's a benefit to you.

So really figuring out,

and that's why you need a good

professional team on your team,

is to really know exactly what that profit

is.

Okay, so Marie,

do you agree with that statement?

That value is heavily dependent on profit

or profit?

or no,

and it's okay if you don't agree.

I do,

because I feel like there are other

things, like I mentioned earlier,

that influence value, such as equipment,

systems, staff,

like all insurance participation.

But the profit is what is the largest

contributing factor.

So the profit is what I use to

kind of gauge this reasonable range in

which a practice might sell for.

But all of the other factors help

influence whether it's going to be at the

higher,

low end of that range or in the

middle.

Love it.

Okay.

So this rule of thumb,

let's debunk it right now.

A percentage of top line.

Everybody talks about it.

I'm sure your clients come to you and

say, well,

I was at a study club yesterday and

everybody told me I could sell it for

ninety five percent of collections because

that's what everybody's doing,

quote unquote, or I'm on a dental forum.

And it's they said a percentage of

whatever.

How do you handle that?

Because I hate I hate that comment.

I'm sure you do, too.

How do you handle that with your clients?

Because it's really not the full picture.

Yeah,

I think it's easy also to share that

there's a reason why there is a difference

in that percentage of gross collections.

So if I'm looking at the total income

in a practice,

it's like I just explained earlier.

If two practices are collecting a million,

one doctor takes two home,

two hundred thousand,

one doctor takes some four hundred

thousand.

Those should obviously not appraise for

the same price.

So that's my first example.

The second one is what is the business

opportunity?

Because if you're saying, oh,

I hear so and so down the street

sold for one hundred percent of gross

collections.

to a DSO and I'm saying, yeah,

that might be the case,

but they probably got sixty percent of

that cash at close.

Forty percent is withheld for bonuses or

potential equity.

So you have to compare apples to apples.

And the problem in dentistry right now is

we don't have apple and apple

opportunities.

We have independent transactions and we

have corporate transactions.

Those are two very different things.

Interestingly enough,

most of the time it's a very similar

dollar amount of cash that is at close

for both of those opportunities.

It's just one requires you to work back

for three to five years to get bonuses

and whatnot.

And the other one,

you can just exit and leave.

That's interesting.

I love that you bring this up because

you work in a market where there's a

lot of DSO activity.

There's DSO activity in all the states

that you cover, but I feel,

I don't know if this is true,

I feel like Colorado is a little heavier

than most.

Is that true in the markets that you

work in?

It certainly is.

I think the regulations with expanded duty

dental assisting in Colorado allows a DSO

to thrive a little bit more here.

You have an assistant in the chair doing

work and not the higher paid dentist.

So it just allows for more profitability,

but we've seen it cool down in the

last five years.

Yeah, that's really interesting.

I want to say that again because I

picked up on it.

I want to say it again.

It's interesting when a buyer is competing

with a DSO.

So, Marie, you're listing a practice.

Let's do this scenario.

Play it out.

I'm a buyer.

You have a listing.

And a DSO is interested in it.

And so you're looking at two buyers,

one that's corporate DSO,

one that's a private practice.

I feel like sometimes buyers,

they're naturally going to feel like they

don't have a chance.

And there's definitely some upside to a

DSO.

I'd love for you to tell us what

that could or couldn't be.

But there's also some really good things

about the owner, too.

And you just made the comment that the

cash at closing, ironically,

is very similar to what maybe a bank

could fund a private property.

private practice owner versus a DSO.

Something that I learned, sorry,

I'm bouncing around a little bit that the

DSOs also are dealing with banks too.

They make it sound like they have all

kinds of cash.

They're dealing with banks too.

So can you like, as a broker,

I didn't think I was going to go

here, but it came up.

I think it's a great question.

As a broker, a buyer comes to you,

DSO comes to you.

They're both interested.

How do you, how do you navigate that?

I mean, of course it's the seller,

your client's decision,

but

How does that usually play out and what

are the things that go into that?

I feel bad for buyers when they feel

like they're competing against DSOs.

There's very little competition with DSOs.

The reason being is what an independent

buyer is willing to offer is a pretty

high cash at close amount with very few

strings attached.

They just exit and go.

So if that was the goal of the

seller in the first place,

then there's no competition for that buyer

with a DSO.

They weren't planning on doing that

anyway.

If a client

has this perception that they're going to

have some big payout by going with a

DSO,

there's no price that a buyer could pay

to match that regardless.

Because that perception of what may be

coming in the future, that feeling of,

I'm going to get this big perk down

the road,

There's not really a lot a buyer could

do about that.

So that's why I feel like they're really

not in competition with each other.

When I have both of those offers come

in and I'm talking with a seller,

at the end of the day,

it's not usually about the dollar amounts

of that cash at close.

It's usually about the full picture of

what this offer is.

And a DSO does not come without strings.

So there are workbacks.

There are production bonuses that are

based on what you're producing,

the offices producing, whatever it may be.

And

You have to decide if you want that

or not.

The perk of whatever is coming in the

future is just like any other investment,

there's risk associated with it.

I think we're kind of having a cool

down window here in Colorado without

sharing too much information that might

not be awesome.

But I mean,

I don't want to be disparaging to anyone

considering the DSO.

However, you know,

we've got too many practices that have

closed that are corporate owned.

I don't know what a large number of

those sellers ended up doing if they lost

their equity and bonuses.

I know some have.

We definitely have had

number of clients that have purchased

their practices back from DSOs because of

poor performance on behalf of the DSO.

So I think that a lot of sellers

are listening to their colleagues,

like the good and the bad.

And when you're on just a general forum,

please keep in mind,

this is somebody that just needs to boast

to the world that they got a hundred

percent of gross collections.

They're not telling you all of the other

stuff that came with that.

They're not saying, yeah,

I only got fifty percent cash at close

though.

I always say that.

When you're in a room and you're hanging

out, you're at a baseball game,

and your buddy tells you that he scored

three X on an investment on his Robin

Hood app on his phone,

he'll tell you that story,

but he won't tell you the five that

he lost his ass on.

So it's the same scenario.

It's like all the chatter, all the things.

It's like, oh,

I sold a DSO and I got all

this.

They're bragging.

It's not the true story.

There's a lot more to it.

I think...

I think it was super well said there,

Marie, that when you sell to a DSO,

there's a lot of strings attached where...

If you as the buyer come fully prepared

to buy,

you're pre-approved from solid banks that

Marie or I totally endorse.

You've got some cash in case you had

to go a little bit over what the

banks could give.

Your clinical skills are dialed.

You write a CV.

You do some research.

Maybe you went to the same school.

All these things play into a seller's

oh, I like this person.

I would like to pass, right?

I mean,

you're the one having those conversations.

That matters, right, Marie?

I think so.

But I mean,

ninety-five percent of my sellers just are

interested in selling to an independent

buyer.

Wow.

Ninety-five percent?

Yes, that's a majority of the market.

See, I love that.

And guys,

Marie moves a lot of dental practices.

I hear that.

And it's my favorite thing to hear.

All the big brokers nationwide will say

something like that,

that statement right there.

And it makes me feel good that private

practice dentistry is still very strong.

Of course,

you'll sell to a DSO from time to

time,

but the vast majority are selling a

private practice.

That's great to hear.

That's really great to hear.

Well,

because when you're talking about

practicing,

Oh, we lost her again.

Ah,

we were going to say something really

good, I could tell.

Whatever you did, Marie,

to leave and come back,

because I want to hear what she has

to say.

The bottom line, though, is, folks,

with value,

and let's take it back to value,

you can compete against the DSOs as far

as a purchase price.

You absolutely can.

Go ahead, Marie.

She's back.

What were you going to say there?

Sorry,

I was just going to say back to

practice value.

I think it's important to realize that a

DSO looks at a practice the same way

you do as a buyer.

They're looking at all of the same

components of the practice and

opportunity,

what will make it successful under their

organization,

just like you'd be looking at.

So it's not like there's some big

difference in the perception of value

between these two buyers.

And in all fairness,

the DSO is going to pay the lowest

price that they think you're going to take

for it.

They're not here to make everybody

millionaires.

They're here to make profit and money.

And if they're not going to make money

off of you,

it's not a desirable transaction.

So that's why I don't feel like there's

a huge comparison for an independent

versus a DSO.

I think you have great opportunities.

I think for the most part,

you're not going to have to pay over

what a lender can provide for you to

acquire practice in most markets.

I love that.

OK, so to start,

let's finish the topic here or the

conversation topic on value on what you

see is happening right now.

Now, podcasts live forever, folks.

So we are timestamping November twenty

twenty five heading into twenty twenty six

or Q three of twenty twenty five.

the market doesn't dramatically change in

two, three year increments,

but what have you seen in the trends,

Marie?

As you approach those values and those

appraisals,

have you seen anything change in the last

five, six years?

Yeah.

Okay.

Yeah.

I've seen some awesome changes and I am

speaking for the Rocky Mountain region.

So I apologize if you're in other

locations where maybe this feedback

doesn't quite apply, but the most...

awesome change I'm seeing is the

transition from insurance participation.

I've never seen this like I've seen it

in the last five years.

I've never had so many clients transition

off of PPO participation and go to a

more fee-for-service model.

I think a lot of that was due

to the increase of supplies as well as

the increase of staffing in our region,

as I think that's the same nationally.

And it kind of forced people to have

this hard look at what they were billing

out to

insurance providers and when you really

analyze that it's likely that twenty

percent of the procedures you're

performing in the office you're paying the

patient to perform them you're not making

money off of it it's like in the

reverse you're in the red so it ends

up not being as hard of a decision

you'd say all right i'd rather risk some

attrition than um then continue to you

know

not be making money or losing money and

so there are quite a few people that

are starting to assist with that type of

a process but where this is having such

a huge impact is in practice value because

where i had these offices previously that

maybe their net was like two hundred

thousand three hundred thousand i could

not be more excited for independent

practitioners right now our younger buyers

if you're listening i'm excited for you

like i'm excited for you to be in

the marketplace now where you could

potentially acquire practice where you're

going to be paid and compensated for all

of

what you've put into getting your dental

degree, all of the experience you put in,

all of this stress that you've gone

through to be this fantastic clinician,

there's opportunities now where your net

income could be six, seven, eight,

nine hundred thousand.

It's interesting to me that that's

becoming more

a normal thing that I used to not,

I mean,

I didn't see that ten years ago.

I would not have said that having a

net income above four hundred thousand was

common.

And now it's becoming pretty common.

I'm seeing it quite regularly with

practices that have transitioned off of

insurance in the last two to five years.

I think it's an awesome thing.

I love that you're saying you're seeing

more offices fee for service than ever

before.

I love hearing that.

I haven't seen it personally,

but I love that you're saying it because

you have all the listings.

I love that.

Today,

there is a movement there and that doctors

appreciate the conversation that we had in

the beginning of this conversation.

And that is you don't have to go

so big to make good money.

Five ops, four ops.

We have a client in Colorado that did

a scratch startup.

He actually hit a million bucks his first

year.

it was his second year.

He hit one, two or one, three.

And he,

he asked me before I go to the

fourth day, cause he stayed three days.

I was so proud of him for staying

three days, hitting one point two.

Um, he asked,

should we start looking at dropping

insurance now?

Cause we're full before you add that

fourth day.

These are the kinds of conversations that

I love having because yes, you,

you don't have to be, um,

you don't have to be on, on that,

uh,

I don't know what that have the pull

of being successful there.

Marie, let's debunk the theory right now.

I know we both will agree.

Is it risky to buy a fee for

service office?

And I already know the answer is no.

Why?

Yeah.

Why?

I agree.

I mean, yeah,

I think there was the perception that that

was risky maybe ten, twenty years ago.

I haven't had I mean,

those are my most desirable practices that

I get the question still, though.

Like, oh, I heard that.

I mean, that is interesting.

But like, I think the worry is,

is if a new person comes in that

maybe people just go to whoever's in

network with insurance.

But we forget there's a lot of loyalty

in dentistry.

I really am sad when people think there's

not loyalty,

because when you're in a middle to high

income area,

I'll see anybody at the dermatologist,

but there's only one person I want in

my mouth.

So we feel differently about dentistry

than we do a lot of other things.

So we have to remind ourselves of that,

that patients feel that way too,

and that they have a lot of loyalty.

And there's a lot to be said for

a seller endorsing that next person coming

in.

So but you get one shot.

That's true.

Patient comes in.

They will give you one try.

So it's true.

And your team will give you a short

window to.

Yeah.

Right.

Treat your patients really good within the

six months.

And.

I always say like,

just chill out on the operation stuff.

It's important unless it's like a risk to

your license or a foundational issue.

Just win over patients,

win over team and you're smooth sailing.

The attrition conversation is interesting.

I don't know why people still bring this

up to me.

Like I heard that you could lose twenty

percent is average.

That's not true.

I don't see twenty percent attrition.

But the funny thing to me about this

conversation is there's not a single

practice management software program that

tracks attrition.

So who made up all these numbers?

Where did they even come from?

I know.

So if you want to say volume transition,

because that's a better,

you could gauge that.

The collections are different.

The production's different.

fewer number of active patients,

fewer number of new patients,

but attrition itself,

there's no way to quantify that unless you

sat down and tracked every single person

that called for records to be transferred.

But that isn't even true attrition because

some people don't even call you.

They just go somewhere else.

That's right.

They don't have records.

That's right.

Yeah.

I mean, I have very few, sorry.

It's been a long time since I've had

this conversation with a buyer where they

said that they were worried that patients

were leaving.

It's only on the fee for service stuff

that I get that question.

But I'm just sharing with the audience

that in twenty years of being involved in

transitions,

I think I've had one person that said,

hey, I'm a little bit stressed.

Some patients have left.

So that's a lot of transitions that are

fee for service, PPO, Medicaid,

everything.

And to have that not be a common.

Yeah.

problem?

I think it's in their head.

It's not necessarily what the experience

is.

And I agree with you that the collections

may be where people's heads at,

but collections is attached to a lot of

things,

your ability to produce or not produce,

your ability to be nice to your team

members or whatever.

So that could translate in so many ways

other than, oh,

I shouldn't have bought

a Medicaid, a PPO, or a fee-for-service.

I don't see the correlation.

So that's really interesting and exciting.

I agree with you that fee-for-service is

more prevalent than ever.

I think that's great.

And yes,

that's how it used to be as far

as profit goes.

Profit was so amazing for dentists when

they weren't so attached to the insurance

companies.

So that's awesome to hear.

Any other trends that you could think of

that you would share before we shut the

program down today?

um i mean probably i'll give the sad

trend on the other side which is the

increase of debt of our buyers just keeps

going up and up and i mean i

think my average buyer is four to five

hundred thousand student debt if they're

specialists it's usually seven to eight

nine hundred thousand so i think that is

definitely creating anxiety with our

And I can empathize with why they're

choosing to work for somebody for a window

of time,

maybe three to seven years to just feel

some financial security before buying a

practice.

And I don't think there's anything wrong

with that.

I think you're coming into practice

ownership, very experienced,

very financially stable.

So that trend, I would say,

has changed the dynamic of buyers.

So I no longer have any buyers right

out of school.

Most people are pretty experienced.

um i think that's a positive trend from

the standpoint of having a very successful

transition where i'm no longer stressed

about a buyer's speed or you know

competency um that those concerns have all

like gone away with in transitions because

everyone is very experienced by the time

they're acquiring a practice

I love that.

Are you seeing that the values,

since we're on a valuation topic,

do you see that the values have held

about the same over the last twenty years,

decade, pre-post-COVID?

No,

I would say most areas have two markets

with practice values.

So there is practices that cash flow over

two hundred fifty thousand after debt

service or higher,

and then practices that cash flow under

two hundred fifty thousand or lower.

Those are two different markets.

The ones that are lower,

like if your cash left or debt service

is one hundred fifty thousand,

I may struggle to even find one buyer

for you to look at the practice,

let alone sell it.

If your net income after debt service is

eight hundred thousand,

you're going to have multiple offers

within a couple of weeks.

So those ones are going to sell at

a higher premium.

The ones that are kind of in that

average range,

one hundred eighty to two twenty

something.

Those are kind of average,

but they sell it kind of an average

range.

An average range of profit,

let's be clear,

not a percentage of gross collections.

So if you want the basic rule of

thumb,

most practices sell for a hundred and

fifty to two hundred percent of profit or

net income.

Just get the adjusted,

just get that total percentage of gross

collections out of the equation.

I love that she again, you said,

one hundred and fifty to two hundred

percent.

I like the way you said that.

I've never heard it that way of all

these years.

I love that one hundred and fifty percent

or two hundred percent range.

Somewhere in that range of what the profit

is.

The net is where is where the practice

values typically like ninety percent of

the time they fall within that range.

Yeah.

In your markets.

In your markets.

Yeah.

That's a good point.

In my market.

But I will say it's not too far

off.

In some of the really, really...

Some markets that are a lot more

aggressive,

you could see two hundred and fifty

percent.

But I will... That range is right there.

And I love that it was all based

on income.

So...

I don't know, folks,

I hope this debunked or I hope this

was a really good conversation as you

approach brokers or even sellers directly.

I always love when brokers are on deals

because the deal is so much more

organized.

It's easier in so many ways,

which is why I appreciate my partners like

Marie out there doing the work that they

do.

But value is such an important thing.

But don't forget the fit matters most,

right?

The practice has to fit you and vice

versa.

And so that's what me and Marie try

to do on a daily basis.

If you are a seller,

reach out to Marie.

She can help you get that game plan.

together within five, seven years.

If you need help growing over that two

fifty mark that she had the higher market

for, reach out to Next Level.

We'd love to help you do that.

Anything else, Marie,

that you'd love to share with the audience

before we shut this thing down?

No,

I just want to say thank you so

much.

You've worked with a number of our clients

and certainly appreciate your expertise

within our market as well.

Yeah, no,

it's always awesome working with you guys.

So thanks for being a guest and giving

us your time and sharing your big brain

and tell your dad I said hi and

all the things.

Thank you.

You're welcome.

All right, guys,

we'll shut the program down.

Another episode of Dental Unscripted.

As always, like, subscribe,

do all the things.

We love doing this and we're going to

continue to do it.

So thanks again and have a great day.

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