Dental Unscripted

Dental Unscripted, Mike and Paula break down the ownership journey one episode at a time. How to start up, buy, and run a successful dental practice. And now, your hosts, Michael D'Incio and Paula Quinn. What up, what up, guys? This is Mike Densio. As you guys know, Dental Acquisition Unscripted. Welcome to the show, guys. I'm super excited about today because I have a longtime friend. I feel like I say the same shit every time. Luke is actually a longtime friend. All these folks are my friends, but... Luke, we go back a long time and I'm excited to have you, but give me a minute. I'm getting ahead of myself. Guys, a little housekeeping. This is Dental Unscripted. We are merging or moving our podcast into one brand called Dental Unscripted. I've been prepping you guys for the last few episodes. We're going to keep prepping you, but at some point we're going to stop publishing on this channel that you're listening to. And we will be publishing on the one that's called Dental Unscripted. It's a turquoise blue and navy blue logo with a big tooth. And Paula Quinn and myself are running a new program there. We will still be doing these episodes, startup-focused, acquisition-focused, but we are splashing in practice management stuff. So... As you all know and have followed me for many years, if you've been with me for years, gosh, we've been doing this for like two, three, four years now. A lot of you are in ownership. And so it makes sense for us to start talking about ownership stuff. And so here we are, Dental Unscripted. So guys, go over there, subscribe to the new channel called Dental Unscripted. With a big tooth, navy blue and turquoise color. And then at some point we'll stop publishing on this channel. So without further ado, again, thanks for letting me get that out, guys. I have Luke on the other side of this. He works for Huntington Bank. Um, he's probably an SVP is what I'm guessing. And if you're not, you should be basically a high level vice president at Huntington. Um, he and I used to work for, uh, another bank and that's where we knew each other. And Luke taught me a lot about this lending game and he still does today. Um, and, uh, I'm, I'm lucky to have him on the show. Welcome buddy. How you doing? Doing well, Mike. Thanks for having me on. It's a pleasure to be here. Yeah, buddy. Yeah. No, we're probably going to get into all kinds of stuff. Like today, you know, we talked about it before the show. It's unscripted as always. But we're going to make this a little bit more fun, I think, for you, other than talking about the traditional rates and lending, la, la, la. But we're going to get into some other unique stuff that I feel like Luke and I get questions all the time about. And before we get into any of that content, Luke, tell me a little bit about you, a little bit about Huntington Bank. Just kind of give me like, I don't know, a ten second, thirty second kind of like elevator. Hey, what are we all about over here at Huntington Bank? Yeah, rock and roll. Well, Huntington Bank's been around since just after the Civil War. It's a regional bank based out of Columbus, Ohio. We kind of alluded in the intro that we go way back. Back in twenty seventeen, a couple of execs that are former employer saw an opportunity to do some different stuff in the dental lending space, and Huntington was ready to put some of that in their portfolio. So went over, crafted a program that's similar but different in a number of ways and in positive ways to what was on the market. So they've really identified a couple of little niches that they can deliver to the marketplace in a very competitive manner. And we're pretty excited about the trajectory we're on. Personally, I've been doing the dental thing now for just over fifteen years. Long time. Participated in roughly It's been a long time. It was definitely not one of those things in fourth grade. They said, you know, what do you want to be when you grow up? And you're like, oh, I want to lend a dentist. That's kind of... I want to be a dental lender. I want to be a dental lender. Yeah, exactly. But it's an amazing industry, right? Heck, my dentist growing up... Oh, I mean, I wouldn't change it for the world. I mean, but, you know, from my context growing up, my dentist had two operatories in his house. He had, like, the spit bowl. So, I mean... When I went to Ohio and I went to like an actual dentist with a lease space and all that fun stuff, I'm like, what's going on here? Yeah, this is fancy. This is fancy. Super fancy. I mean, what is this gonna cost me? Right. Um, so yeah, anyway, I've been doing this for fifteen years. I love it. Hopefully there's another. Fifteen years. Again, it seems like just when you think you've seen it all, like something else happens. Right. There's a housing crisis. There's a pandemic. There's all these different things. And, you know, dentistry has shown a lot of resiliency despite some of these headwinds. And, you know, it's interesting because it never gets stale. Yeah, no, that's that's so true. Like when I met you, Luke, back and it was actually longer than that. Two thousand twelve is when I started at that at our former employer. And and, you know, we're I wouldn't say we were coming off of like that two thousand nine recession. But but but we definitely kind of had some like stories like they were telling me stories about, you how during that two thousand nine kind of crash, if we want to call it that, that that the bank was still lending. And that's a tribute to how solid dental is. And you were lending in two thousand nine, I think, with that bank. Right. So is that true? So like why? Because it because it is solid. But. That doesn't mean it's easy. And it's always been my story on this program that that ownership is not easy. It's difficult, but it's it's almost fail proof. That's that's a true story, but it's not easy. And so that's a really cool background on a hunting to make. I didn't know as old as the Civil War. Fun fact. Really interesting. Well, let's get into some like meat and potatoes. Thanks for indulging us on who you are and what you do. Just as always, guys, we'll have his contact information down in the descriptions and stuff. Luke, one of the questions that I wanted to ask because I get it all the time is like, how do you guys come up with this rate stuff? And it's kind of timely that I have a lender on the show and that I get a chance to ask you because you're going to probably get into it way deeper than maybe I even know. But where does rates come from? It's not really about your credit score when it comes to... It is, of course, a little bit, but it's not really about your credit score as a person, right? So how does that work, dude? How does the banks come up with this... this situation with rates and all that. Are you familiar with stair method, where you just write a bunch of numbers on a piece of paper, you throw them down the stairs, and then you have a target on one of them? Yeah, that sounds right. Is that it? I mean, that's how it feels some days, right? Seriously, though, I mean, it's a complex question, right? Because I mean, I can't tell you and going back to your lending days, how many times you asked the phone and like the first question, you know, what's your rate? What's your rates? Guys, don't ask that when you call a lender. Little fun Mike D'Inzio tip. That's literally the equivalent of walking into dental office and saying, how much is your crown? And then that's it. Like, or how much is your crown down the street? Yeah. Yeah. Oh, that's even better. The crown down the street. Are you pricing that crown down the street? Even worse, how much is your cleaning? Like a crown actually might be something that you're researching and shopping. It would be like, how much is a cleaning? It's that bad. Anyways, don't lead with that question. Go ahead, Luke. Sorry, I saw your thunder there. No, no, you're totally fine. And right now, I think that question has been as complicated and as complex as at any time in my career. Because right now, you know, Everyone knows that the Fed just dropped rates half a point, you know, fifty basis points. Everyone to say that. And so they're like, oh, yeah, rates are going down. Yeah. Well, one of the things that's kind of interesting right now is, you know, what does that mean, right? Because a lot of folks, you know, just see what they hear on the news or read on Twitter. And sure, there's some prime rate loans, right? So the Fed is influencing prime rate when they do that. Primarily where you're going to see that show up is going to be things like your credit card. In our world, SBA loans typically vary off of prime as an index. You know, conventional loans where the bank is taking the risk on it. It's not backed by Uncle Sam or anybody. It's going to correlate more closely to what you're going to see in the mortgage market, the residential mortgage market. Right. And right now, I can't remember the exact date, but I think it was early September. The Fed dropped rates and we actually did see related activity. going on in the conventional markets where we are going to be more close to like a ten-year treasury, like what that's going for. Or if you're familiar, it used to be called LIBOR, now it's called SOFR, S-O-F-R. Those indexes are probably more reliable if you're trying to see trends in the banking market versus the SBA market. So to dummy it down a little bit, like we're talking about markets right now and there's probably one percent, maybe five percent of you that are like totally on. on target right here with what you're saying, Luke, like, is, is there something to search on Google? Because, because you're right. I do see this on proposals, prime live or wall street journal. Yeah. Yeah. Like it's all over the place. Yeah. So like when you talk about these things, you're talking about an, an index that, Why don't you take it, like bring that down for us? Yeah. So most banks, right, they have money they can borrow, but the idea is I'm going to go out on the secondary market. I'm going to acquire capital to lend out, dollars to lend out. I don't get it for free. And then I'm going to make, just like any other business, I'm going to sell it to you for a little bit more than what I'm buying for. And that's how I make a profit. They're brokering cash. That's effectively what's going on. And so right now, if you think about ten-year treasuries, they're a good number because, you know, it's essentially a note you can take out the U.S. government ten years. There's a yield on it, which is a fancy term for the interest rate that the bank's getting paid. So when you look right now at kind of where our trough or bottom was on those ten-year treasuries, it came mid-September and it was like three point eight six percent. Crazy. That's right after the rates got dropped. Okay. All right. So that's kind of what the banks are buying money for right there. That's the Fed's income. That's the Fed's yield. That's what their profit is, right? So right now, what you're looking at is if you look at the prime rate, we're still showing that half point cut and they're talking about more cuts, whether they come or not. No crystal ball, not sure. Probably going to be driven by unemployment data and inflationary activity or lack of activity over the next couple of months. If you look at the treasury markets, which again is a market just like your stocks, right? It's only going to be worth what someone's willing to pay for it. So if there's more demand for it, price is going to go up, less demand, yields are going to go down. Yeah. Right now, I believe we just hit a three month high and I think yields on the tenure were like four point two percent. That was yesterday. I'm not sure what they're at today. Yeah. So what we're actually seeing is a little bit of a rate increase over the last three weeks simply because of what's going on. So and that's and that's and that's the highlight, though, Luke. Right. Sorry to cut you off, but that's the highlight, because in this moment right now, Luke's talking about current rates. shit guys, like in literally in a week, it's going to be different. You know, Luke's talking about these things that, that it does change, right? Week to week. I mean, it could essentially. And I think that's what really matters with some of our docs is like, Hey, I'm on dental town. I'm on dental unscripted. And I heard four point whatever. And you know, and I know that wasn't your rate. Cause you guys have to mark it up too. You haven't gotten to that part, but, but the point is, is like, whatever that rate is, it's, in the markets and the indexes it literally is changing like how does the bank I mean maybe this is maybe I'm just interested in this and my listeners aren't but like I mean it's a question we get asked ninety nine percent of the time so that at some level they probably are interested um and again like there I hate to say there's so much deception in there but it can be really complicated because there's so many different ways to complicate you know yeah create rate and the way that commercial lending is regulated compared to residential things are a lot looser, right? Like there's not a truth in lending requirements. So you have your rate, but that doesn't always correlate with an APR, right? So, I mean, not on an acquisition we're talking about today, if you're doing a startup and you have interest accruing at a certain rate, The end of your startup loan that gets rolled into your loan, it really isn't going to be a five percent rate because you have interest accruing upon interest. So it kind of changes things and, you know, makes it a little bit more complicated. So, I mean, for most of your listeners, nerds like you and I, you know, this is for us. I mean, I think at the end of the day, It really comes down to payment for most people. And it's, can you get a fair, you know, monthly payment that's going to position you for success? Because again, you know, and I know that, you know, whether you buy a practice or start a practice, there's literally dozens of different places where you can lose money outside of interest rates. Well, I'm glad you went there, buddy, because Now that we've kind of addressed rates, how the banks get them and any anything that you want to end on that, because I'd like to move to structure. Yeah, yeah. Fine. I mean, I mean, I think I think the the end is is like breaks are fluid. There's a lot of volatility right now. A lot of good dental lenders offer a rate lock, which lets you put a ceiling on the rate for a certain period of time. Now that's more important than ever. And the reality is the banks that do this are really almost doing it at their own disinterest because of that volatility. So, you know, say you get a five percent rate today and your rate lock, if rates spike and say they're six percent, a lot of times your lender is actually going to be losing a little bit of money on that loan. Yeah, because the fee never justifies what the bank's going to lose. So that's typically, you know, sometimes as a consultant, I feel like that's like, all right, guys, I'll just be transparent, you know, but I can have that conversation. Sometimes it feels like, OK, you're just trying to lock me in right now and you don't want me to talk to other folks or whatever. And I get into that little dance. But once you kind of get past all of that and you feel good about the lender you're going to go with, just forget about the game that you might feel because a lot of my clients feel like there's they're in a game. But once you get past the game and you choose like a Luke to partner with and he's going to do your loan and hundreds is going to fund it, it does make sense to rate lock to to. Right. That's isn't that the the the keynote there? Right. Ninety nine percent of the time. I mean, if you know you're going to have a quick close, you know, you and I've had some acquisitions where, you know, for whatever reason, the bank that originally approved it fell out for some reason or something changed. We've come in. We know we're going to be closing in two or three weeks. I feel comfortable in most of those instances, not rate locking someone. If this is something where you're trying to time up an end of year sale for tax purposes or something of that nature, everyone hates paying fees. I think that's one of those fees, especially right now with volatility, that kind of a no brainer. Yeah. So meat and potatoes there. If you're going to close fast, you might not need a rate lock. If you're not sure how long it's going to take to close, pay the five hundred to two thousand dollars or whatever the hell it is and lock that lock that up. Especially if real estate is involved. I mean, because. Oh, real estate takes forever to close on. Good, good point. And you do a lot of real estate, Luke. So so real estate's involved. You got appraisals and all the things you have no control over x absolutely so rate locks a no-brainer in situations like that let's flip to structure which rate lock is part of that structure but Um, you know, guys, when I talk about structure, okay, let's rise above the, the, the rate conversation. As I know, it makes sense for all of you to want to feel great about rate. Totally get it. That's the cost of the money. Totally get it. But when I look at deals as an acquisition guy, a buyer rep guy, or a practice consultant for you, whatever, I'm looking at the deal itself and I'm What are you walking into day one? Is there gonna be a cashflow crunch? Is the practice not throwing off a lot of money? Is the practice throwing off a lot of money? Are you trying to buy a ring for your partner, a house? I mean, there's thousands of variables here, thousands between personal situation and the business. And the key is, is to know the business and then how that relates to the personal stuff. Right. So structure matters. And what, and Luke, what do I mean by structure? I want you to answer that because, because banks have different structure and I, and I don't think people really understand what I mean when I say structure. Yeah. And it's one of those terms, right. That you could take it a bunch of different ways. Um, my mind the simple version of that is simply all the other stuff that really isn't your interest rate right it's going to be the length of the term it's going to be do you get an interest only period you know what are kind of the support Okay. What are the supporting features of your loan that are going to position you for the best opportunity for success? Right. So, you know, one of the euphemisms that we used to hear all the time when I started out, right, is an interest rate's only as good as your ability to make that payment. And, you know, you also mentioned at the beginning of the podcast how well dental loans perform. An important point I think to make here is that I have yet to see a study that correlates a dental loan with the happiness of that dental dentist. Right. So really say that again. There's no study that correlates the happiness of a dentist with the timeliness upon which he pays his loan. So what I mean by that is, you know, my goal is when I work with somebody, I want the cash that's paying my loan to come out of the business that Dennis owns. I don't want him working at General Dental because his startup's taking too long and he's making somebody else money to pay the loan for the investment that's supposed to be making him the bulk of his income, right? So you and I have seen it all the time, whether it's a poor transition, a poor startup, and the guy's not charging the loan off But he's eating ramen noodles because he's working for, you know, twenty eight percent of production at some corporate gig for a startup loan. Right. Right. That's that's not uncommon and happens more than the statistics would indicate, I think. Mm hmm. Yeah. So like what are some structure like I think of term length of term? Yeah, I think of loan amounts. And then I think of like interest only periods, like those three amount length and like interest only periods or graduated payment period. I know we're not on the startup side. We're on the acquisition side, but like, like, like that is huge. Those three things are to me as, as a guy that tries to protect my clients at all costs. Rate is literally third. Amount is probably my number one. Sure. Length is probably two, and then rate's three, and then maybe an interest only is like a four. If you were on the other side of this table, you're not the lender, does that feel right to you? Do you have a different... priority than me like if you were borrowing the money as a lender yeah I mean the only thing I say I would the only thing from like a features and benefits I probably would chirp in there a little bit and this is a shameless plug but I say that's very sincerely softball right there right you know like our practice heartbeat team I'm sorry there's but there's a blitzer practice pulse team practice heartbeat is no longer a thing I believe yeah um but our pulse What's practice pulse? It's practice pulse? Yeah. So we have right now two individuals. One of them was an office manager for a number of years, ran five dental practices. The other one did the same, also did some training with Henry Schein on specializing in dentrics. This is a free feature that we put in our loans with these folks that are hyper focused on the business side, right? So the services that you offer, they're not going to go as deep. Like they're not going to help you do the actual credentialing. They're not going to help you. Do the actual day to day. Implement. Yeah. They're not going to help you implement, but they'll give you ideas. But they go pretty far. Right. And these are folks that all that stuff. These guys never learned in dental school. Right. Like that business class was on a Friday afternoon, one day a week. And. so well attended, right? Like you and I both presented in front of that class and it's a lot of pizza between you, me, and the professor usually. Right. Okay. So this practice heartbeat, it's like an add-on service. Our practice pulse team is basically there for you after the loan, right? Up to two years. So again, how many times post-transition does an office manager leave, a hygienist leaves? I mean, there's all these little things that no one's expecting that they know that can happen, but they're never fully prepared. So we put a team around you, right? So again, one of the stories I've told on other podcasts as well, that's really shaped me is, you know, my father was in banking when that, portion of his career ended. He went to start a restaurant. Long story short, didn't go well. I'm fully convinced that if he had a team of people behind his loan that started that restaurant that had run restaurants, I'm not sure that outcome is quite the same as it was personally. But you know, We started talking about like where I'd rank stuff. I think that interest only period for just those same reasons we were talking about, you know, we'll go up to usually eighteen months of interest only. I really feel like that twelve to eighteen months gives a new dentist enough time to kind of get in there, clinically figure out what's going on from a business sense, figure out what's going on. And again, if you're buying a practice for a million dollars, you know, your payment principle and interest in most cases is going to be probably seven, eight grand a month. If you get away only paying interest and you're, you know, only paying five thousand dollars a month, I mean, whether it's Transition consultants like yourself. I was actually going to tell you. Tell me of places where you can get a better ROI than whatever, the five percent, which really is point six percent per month. Right. When you divide five by twelve, they're just such a better place for a new business owner to be putting their capital to work. You know, I that's that's so key. Not not because again, not because of me. Here we are. You're like, let me tell you about my pulse program and self selfish plug. Let me do my selfish plug. One thousand percent. Like I had a doctor yesterday just tell me like, yeah, you know, I'm going to bring you in in three months. But let me just settle in. And I'm like, dude, you know, you do what you want. But if you're going to bring me in, you got to bring me in day one because so much is going to happen in ninety days of ownership that, dude, you're not even going to know what to do, how to handle it. The front office gals is a wreck on this office. You're going to have so many questions. And that's that's this office. That's not every office. But this particular office, the front office was a hot mess to your point with the practice pulse and your team having that experience. So having not only that, but also having the extra cash for marketing, a lot of offices acquisitions don't have a marketing budget. Like the seller didn't have any marketing going. So you have to incorporate a marketing plan, which shrinks the cashflow that you projected before you bought the practice. So having a marketing budget, The other big one is ARs. If you buy the ARs or don't buy the ARs, there is a natural ninety day cash crunch in the first ninety days that nobody really appreciates or recognizes. We know it because we do billing and we're in offices post close. But imagine for the first ninety days you are broke and you and now we're getting to that amount here in a second. Right. but, but having more cash because of an interest only period or a longer term, like a year term or something crazy like that, a longer term gives you more cash in the first year or two, which helps you beef up that foundation year, the first two years. So, um, Yeah, sorry, I had to jump on that, Luke, because you teed it up perfectly. Let's actually pivot to loan amount, because I'm finding that with valuations... Actually, I wasn't going to go here today, but with valuations, I don't want to piss off all the brokers out there, and I'm not intending to. But with some of the valuations out there, it's squeezing the amount of cash lenders can lend. Can you actually... Talk about that as a lender and how that all works. Because again, if you don't have enough cash to run the business after you close on it, don't buy it. Like there's not enough money here. Like what are we doing here? And you have to dig into your retirement to make it work. Please explain like how that all works. Yeah. I mean, I think, you know, my favorite analogy is just to liken it to like a car trip, right? Like you're going on a journey. And money is gasoline. That's what keeps the car going. That's what's going to get you to your destination. And if in your war chest there's not enough money, It's kind of like that. I'm going to date myself here a little bit. Do it. I do it all the time. It'll feel good if you do because I always do all the time. Where Kramer's driving around with the car dealer and the Volkswagen and the gas hits the light and he just wants to see how far he can drive with the light on. And they end up stranded in the middle of nowhere, right? Freaking Kramer. Yeah, it's awesome. So yeah, I think it's absolutely... key with loan amounts. And to defend the brokers, right, it comes down to supply and demand. I mean, there's a ton of people looking at practices. I think the selectivity has been a little bit higher recently because rates have been higher than they were two, three years ago. But again, similar to housing, there's still demand there. So there's no reason really for prices to solve. Yeah. It's true. It's true. Even with all the inflation and weirdness with, again, timestamping this episode with, with all the weird politics going on and the inflation and, all the wars going on and the immigrants stuff and it just throw it all in, right? Economy questions. That's the hottest election thing coming up too. I don't, I mean, I'm not sure. That's what I mean. Like, like forget what side you're on. The two topics of this particular debate has been the economy and immigration. So if you just talk about the economy, only people are concerned about the economy. So with just that little time capsule practices are still selling for premium to your point, a premium facts. right now and again like this is the one time like I will shamelessly say you know for all those people that aren't in dentistry right like inflation does nothing good for the dentist right like it's staff wages it's the amount you're paying for your lease if you're buying your building real estate stuff and if you're taking any level of insurance right reimbursement rates sure as heck aren't going up anytime soon. So you're getting pressure at the top, you're getting pressure on your expenses. And this is just one of those times where if you're not structured properly, if all these things, right? Like how many times have you done a transition, Mike, where you've done an analysis for somebody? We know how the hygienist market looks, how many times that, how many times like within the week of the transition, the hygienist knocks on the door and comes in and says, Hey, by the way, Sally down the street was, you know, we're at half the hour and she was telling me what she was, what do you think about a raise here? Right? Like, so these are all these things that you try. Almost a hundred percent of the time, almost a hundred percent of the time, the team asks for a raise. In fact, a deal last week, Buyer transitions, goes in, meets the team for the very first time. She brings her cupcakes. This particular client is as sweet as pie. You would love her. Everybody on the show would love her. How could you hate her? She's fun. She's sweet. She's disarming. It's a perfect buyer. There's some buyers that are just jerks. They come in. They're aggressive. No, she's about as easy as possible. Front office gal looks at me. dirty look. I'm there to support her. I'm not even talking. I'm, I'm, you know, some consultants come in, guns a blazing. I'm just sitting there supporting just in case she gets a curve ball. I wanted to be there for her just in case she gets a curve ball, nothing, no curve balls that day. But literally the next day, the front office gals asks for a seven dollar raise, seven dollars, which took, took the tape, taking that front office manager from like whatever, thirty one, thirty three to forty dollars an hour. And like what? So to your point, Luke, transitions almost one hundred percent of the time have that kind of bump, especially in hygiene and front office. Definitely. Yeah. And, you know, kind of tie this all back together. Right. We're talking about dollar amounts. Yeah. I think really what you're saying, Mike, is access to dollars. Right. Access to cash. That's right. Because you got to buy the business first. And that money's gone. It goes into the seller's pocket, their retirement. But then the cash left over. At some point, just like buying a house, right? The bank's got to throttle how much it lends somewhere. But where it can influence is, again, for the longest time, right? if you were like with our parents buying houses, right? Like the third year mortgage was invented specifically for the same purpose, right? Like the house was the collateral, but when I can take and do a thirty year loan versus a fifteen or even a ten back then, right? Like that's a whole game changer in access to capital, which we were talking about before. So again, you know, if you've got a practice that you're looking to buy, it's doing a million dollars. it's going to be really tough to get like one point two or one point three million dollars to borrow at a decent interest rate against a million dollar asset. But then when you look at interest only payments, you look at extending something out to fifteen years, even if you don't keep the loan for fifteen years, this affords you this access to capital. That's right. That, you know, you can pay Sally that extra money and, you know, now you're taking it out of your advertising budget. You're not taking it out of your home equity loan, right? Exactly. Those are strategies that, like you were saying, probably in my book, right? Number one, if not number one point five, right? In terms of most important things you got to look at, because it goes again, it goes back to that old adage, right? Like a banker is a person that will give you his umbrella when it's sunny out, but once it starts raining, you'll take it away. You need cash after that transition. You go back to get a hundred grand. I don't care what interest rate you negotiated on your purchase loan. Now you're going to be borrowing that working capital loan at what? Fifteen, twenty percent. That's right. And so, again, like that's one of those things where I hate to say it's like those hidden costs of lending, but it's like if you need to upgrade equipment. Yeah. Will they give you a loan based on your credit score? Most likely. But is it going to be a five-year, seven-year loan that's got a thousand, two thousand dollar payment that effectively is going to wash out your interest only period, you'd rather have it in the fifteen year loan, right? So so so that why you would need extra cash before we get to our question that was just posted on Facebook. Why would we need cash, extra cash? It would be. Working capital to pay your bills after you close. That's a big one. We talked about marketing. Marketing is almost a necessity for a brand new owner because you're going to lose some patients. You just will. You can't keep them all. So you got to grow a little bit. You just said equipment. That's a very common reason. A lot of you guys are coming right out of school and needing a cone beam to do the things that you do. People say to me all the time, that's a standard care these days is cone beams. I believe it. Many people don't even have a panel there. They're taking FMXs and PAs and all that good stuff and just doing implants off that. That's old school. I know. But if you need a cone beam, you're going to need more capital equipment. And then Luke said also like raises, like people come at you with raises. You might need a little extra cash to rebound that those collections. So. uh that's why amount matters amount matters if we were on the startup side of this ep this pod our podcast that would be a whole nother conversation because construction costs are just bunkers right now and so I won't I won't take us down that path um go ahead luke yeah yeah let me jump in with two things too one of the things that I personally am a big fan of for the right owner and the right, you know, the right clinician, I'm seeing more modified startups, jumpstarts, whatever you want to call it. Right now. How do you describe that? Describe that. Cause I don't think. You look at a practice and again, a good opportunity to be something that a, you would do a startup here, right? Like, you know, down the street, there's a Safeway in a strip mall. Dental practice and then right next to it is a vacant space, right? You and I both know that breathe on a mirror and there's a number of banks out there will give you seven hundred, eight hundred thousand dollars to put something in that vacant space that's adjacent to this dental practice. Right. Got it. Dental practice, you know, sad story. Dennis lost his wife, kind of took his foot off the gas a little bit. He's got six operatories with some really nice equipment still in there. Practice has gone from a million dollars down to four fifty. You know, he just kind of wants to be done with the thing. Yeah. Just offloading a practice that he's not working or she's not. You know, get me out of this thing. Let me let me kind of sunset and focus on my new priorities. Yeah. You and I know that can be challenging to finance, right? Yeah. You know, in this particular instance, I almost felt, you know, similar to like what we were talking about before. We were willing to give this guy six hundred thousand dollars for this jumpstart, even though we didn't need it. Right. And so from that access to the capital standpoint in that eighteen month interest only period, I was letting the guy know, OK, listen, here's your two fifty purchase price. Here's your working capital. I want to build some money in there for you because I can. You're not going to pay interest on it unless you are accessing it. But if a chair fails, if you need to add equipment, if you need to do some unforeseen stuff within that first eighteen months, you can sleep well at night knowing We're holding onto that capital for you. You don't have to get re-approved for it. It's sort of like a fixed rate line of credit, right? So as those things pop up, if you're in a position to do that with your lender- Access to cash. Access to cash. And there's literally no consequence to it. Why wouldn't- Why not? Yeah. And I think that's a beautiful way of describing- The scenario of ownership and the woes of ownership is like if someone is giving you access, take it because you just don't know how well or how bad it's going to go. And I hate to say that it that way. There's too many podcasts out there that said, oh, actually, that tees up us, tees us up for the question that came in on Facebook. But like there's too many podcasts and too many books and too many Dentaltown podcasts. Bloggers saying that that you guys are invincible. The facts are that you're not invincible. And there's a big difference between very successful dentists, business owners and average just barely making it and paying their loans. So I'm just going to go on record and say right now that every lender in the world will say lowest default rates in the world. And it's teeing us up for the question that came in. It is. It's true. You guys don't default, but that does not mean you're successful. You're barely making it home, but you're paying the bank. You're paying your payroll. You're paying all your crap. You're paying the bills, but you don't have any money. And so like, I think there's like this false, like, Oh, ownership's so easy. And that's not true. That's not true. You got to run your business. You got to own your business. You got to have resources like next level or the pulse program that Luke has because business is not easy. So actually that's a nice segue to the question that just came in on Facebook. I'll push it up on the screen for you YouTubers. It says, why are dentists so easy to lend to compared to other professionals and individuals? And it's so true. Great question. Like it is so easy. You have a DDS or a DMD behind your name. Luke, how, how, I mean, Huntington lends to other professionals. I assume. Is it easy or hard to lend a dentist and why? That's a very loaded question. It sure is. What do you want to take? Well, I mean, I mean, I mean, the first thing that I'll point to is in our. Fifteen years career, roughly fifteen years between both of us. How many banks? Can you name that tried to be in the dental lending game and had to get out? because they didn't know what they were looking at. Lots. And there's actually a lot of banks that are in. No, you're right. They're like, oh my gosh, that's really key. You're right. There's a lot of banks that jumped in and jumped out, but there's also some banks that jumped in and it's a mediocre product. It's both. Yeah. Or it starts really good, and then once they start seeing some activity in their portfolio, they're like, wait a minute, this isn't as good as what it used to be, right? That's interesting. Yeah, it's really interesting for you to say that. Especially like, I mean, this is not the purpose of this podcast, but you look at the banks that wanted a piece of the multi-practice space, you see interest rates increase, and you get all these mid-level and emerging DSOs that are completely... pivoting and trying to divest practices and assets. That's true. DSOs are kind of starting to fall apart a little bit, teeny bit. It's definitely kind of a Darwinian event, right? Where the good ones that had the capital, liquidity, they're going, the ones that were relying on leverage. got caught with their pants down, no dry powder. And, you know, there's a lot, a lot of scramble right now in that space. So I want to go on record. DSOs are fine. It's just as a whole, it's definitely tapered flat. They were growing like crazy and now it's flat all of a sudden. So anyways, back to the, I think this is one of those pieces where it is a little bit of a misnomer, right? I talked about it earlier, low default rate, The reason that I think that dentistry is attractive is because the margins. It's one of the few industries where if you're running a textbook where your overhead is sixty, sixty five percent, you compare that to a restaurant. Yeah. If they're running at a five, ten percent margin. profit margin profit that's a good restaurant so that does not allow for a lot of room for error right and if it's true time this whole thing the reason private equity and um pension funds and all these things were interested in dsos was specifically because of that right like you have this industry where I can invest in an asset that's going to throw me off twenty percent twenty five percent annually, don't find a stock that's going to pay that in a dividend or don't find anything else that's going to give you that kind of return. But what's interesting about that, though, Luke, is that the profits have gone down over the last five years. And I think that's why you're probably seeing some of the flat line and DSOs. We talked about it with the inflation is that inflation is It's when people think inflation, they're thinking of like the product, like this cup of coffee or gas. I think what Luke's really alluding to is is like people. And that's your biggest expense is people. Hygienist front office. We touched on it today. And that, that is, uh, that is really rising. And, and, and I'm seeing a direct correlation. Of course you are to wages and to profit and the higher the wages go, the lower the profit goes. Usually when Luke and I see a business thrown off, not as much cash as it should, you go right to wages and usually you see it right there. And anyways, uh, Just DSOs are struggling with it too. And if a big, big, big headquarters is looking for that ten to twenty percent profit and the hygienist just stole it from them, they're going to want out because they're not getting the same the same gains. But I think we could both say, though, I mean, you guys are in it still. You're still lending. You still believe in dentistry. It's pretty fail safe. I mean, that's why you're lending to dentists fairly easy. Is that right? Is that right? And when you look at the numbers, ownership statistically is, you know, unless you have a spouse that's making seven figures, right? Like ownership of a dental practice vis-a-vis being an associate, there is a very select number of folks that can make more money as an associate than they can as an owner. And Even during that transition period, right? If you're struggling, a lot of practices, if it's collecting a million bucks, still should be in some ways spitting out, you know, three hundred to four hundred thousand dollars a year before you start paying your loans. Right. So if anything, you know, that's when, you know, your role becomes important. All right. How do I successfully transition this and how do I put a plan in place where I actually can grow this thing? Yeah. And I will say that a good buyer rep isn't just going to give you the information about how much the value is, what the pitfalls are, what challenges you're going to have. That's very important. But then the question is, what's the plan? Like a lot of people talk about the what's wrong, but they don't know how to fix it. It's the how part that I feel like Next Level has a good product and an amazing coaching team. CPAs give you the what's wrong all the time, but they don't know how to fix it. Maybe they do know how to fix it, but they're not going to roll up their sleeves and actually help you fix it. Um, man, lots of selfish plugs today. Thank you, Luke. I feel like you're selling me more than anything else, but, um, Jen, uh, I did want to share this Jen Bennett, uh, throughout a, Hey, Luke and Mike, a really great broker here in the Seattle market. Um, Jen Bennett. Yeah. Great person. She works for Omni Practice Group. She just wanted to say hey to us. It's cute. But, you know, Luke, I've really enjoyed this episode. I knew it was going to go longer than my other episodes because you and I usually dialogue about just all kinds of stuff. It's super fun to have these coffee talks with you. Any... I could go all day with you. We're forty nine minutes in. We got to shut this down at some point. The average commute is twenty five minutes. So we've butchered that. That's why we record it, right? Yeah, that's right. People could just hit go and stop and go drive home to double the commute. What is any last final kind of like comments that you really wanted to share with the dental unscripted? I had a really good conversation yesterday, so I'll trip this in. One topic we didn't talk about today was buy-ins. And one of the things that I really think you're going to start seeing too is more and more of these type of transactions and these opportunities arising. And this is another one where I'd say that you need to make sure you have an presumed comfort of buying in owning forty nine percent and then the whole thing falls apart. Right. Yeah. That's that second tranche never comes in. One again, shameless plugs. One of the things I think right now that is awesome that we've brought to the marketplace is the incremental buy in product. OK. So, you know, at our former employer, right, you do a loan. Eventually, that second opportunity would come. It could be in a year. It could be in two years. Seller could change their mind. For those buyers, and again, you do a great job at this, Mike, putting together a definitive transition roadmap, like I'm going to buy forty nine percent now. I'm going to kind of mentor as an invested partner for a year. After twelve months, I'm going to buy that next tranche, whether it's two percent to get controlling interest or the remaining fifty one percent. Similar like we were talking about with the modified startups. I'm a strong proponent. If you're going to do a buy in, have that eighteen year plan and we can include that in one credit facility. Yes. And we can disperse that over that eighteen month period. And it should be advantageous to both the buyer and the seller. Again, lots of dialog about what capital gains are going to do. So this gives a seller an opportunity to spread Their income over time. If they do it right. Wow. And then the side part is it commits that seller to transitioning. Right. So it kind of alleviates that cold feet moment. Yeah. Because, again, I think you and I both would agree that one of the go back to how easy it is to lend to a dentist. How hard is it to do a partnership dissolution or something like that? They're typically very emotional. They're very expensive when attorneys get involved. So that's one of those other ones I would just chime in that if you're considering doing a buy-in, I don't care if it's your parent you're buying in with. That to me is one of those moments where things can go sideways very quickly. So you want to make sure that you have in writing- Love that. A defined plan in place. I love that, dude. Another structure piece that's so key is like, you did a beautiful job. I'll just simply say that dentistry and financing can be so linear about how we approach deals. And sometimes you just need to get a little bit more creative to make a win-win for both sides. It doesn't always have to be just the way everybody always has done it. And Luke just described a way to make both parties happy. And I think like creativity needs to be part of the conversation in the next decade or two, because like, I don't know. There's multiple ways to peel an onion back. So, all right, guys. Well, Luke, that's an awesome little tip and a cool product. Guys, again, down below is Luke's contact information. He works for Huntington Bank. Again, a fantastic bank. And I really appreciate the time, man, for what we did today and shared and your knowledge. And I know Luke would be open to conversations with anybody and provide his knowledge of plus years of dental acumen. So thanks again for being on the show, brother. I really appreciate it. This was fun, Mike. I appreciate it. Anytime. Yeah, dude, we'll, we'll have to do it again. Um, all right guys, uh, another great episode done and, and, uh, booked for dental acquisition unscripted again, reminder, reminder, reminder, we're switching over to dental unscripted. Um, so if you're on this channel and listening on this channel, we are moving over. So please get over to dental unscripted. And, uh, as always guys, thanks for following and listening. We'll, we'll catch you on another, uh, on another day. Take care guys.