2019 APAC DENTAL FORUM- Clinic Expansion Models with an Eye for Exit! Part 1

I can confidently make two statements about this group today. First.

Most of you guys have not been able to double the number of your locations within the past 12 months. Not because of lack of money, access to capital.

Not having enough patience.

Or lack of vision or ambition of your management team.

But rather your inability.

To attract and retain dentists.

Second.

All of the groups here are looking for a way to have a quicker market penetration.

Increase valuations so you can exit from your groups partially or completely within the next one to five years.

Would it be nice if you had options available to you where you indeed could double, triple or even quadruple the number of your locations within the next 12 to 18 months.

And.

Be able to attract and retain dentists on a long term basis? Wouldn't that be nice?

By the end of the presentation today, I hope I can re trigger your thinking about growth strategy in 2020.

First of all, good afternoon.

First and foremost, I'd like to thank the organizers of this event.

The manufacturers, well as the open room events, for bringing us together and bringing you.

The leaders, the mover and shakers of our industry.

So over the next couple of days we can all share, learn and collaborate with one another.

In past 30 years I have been a dentist.

An entrepreneur, an angel investor of the very first publicly listed company in the world.

And for the past six years I have focused my consulting practice and growing practices just like yours.

By bringing good systems and processes in place and most importantly, integrating those systems.

So when they're ready to exit, they can have a much higher valuations.

Having this unique background as being a dentist, having a formal education, investment bank.

Have allowed me to work with dental groups across the globe, from small developing countries to fully developed saturated dental markets.

And what I have found.

Is that the best management teams.

Are those who I like to refer to them as.

Strategists.

Situational strategists, meaning that the situation the group is in best determines their growth strategy.

For example, if you are a publicly listed dental company.

And you are under pressure to meet your quarterly goals.

You may choose M and A activity as the primary source of growth.

To meet.

Your shareholders expectations as well as protect your share prices.

If you are a large privately health dental group who may be facing difficulties in attracting and retaining dentists, or if you are in a dentist community.

Where you're being looked at as the corporate entity or I should say enemy, who is there to steal.

The business of this small solo practitioner and shut them down? You may opt for a different growth strategy where is more dentist friendly and less aspirat.

Or you may be a small emerging dental group who needs access to quicker cash financing.

Better brand recognition and perception in the marketplace. Then you may choose a different method of growth.

What is important is that.

No matter which method you use, typically these methods are non transparent to the general public and even some of us are dental professionals. So when I go to those options with you.

Which I will cover seven traditional and non traditional ways of expansion, I will also give you an example of the companies where their primary activity falls within that category so you can research it more or welcome to contact you for more information. Before I do the presentation I need to warn you this is an over simplistic 30,000ft view.

Of the growth strategy. Any strategic formulation for your company will require an in depth analysis of your company's balanced scorecard as well as considering all legal and tax implication. Now when I go through the list, I will go and define the list because some of these methods you're already doing that, some of them may be new to you. At the end after I define the list then I will do a comparative.

Visual of all of the methods based on what I like to call situational lenses that I use in my consulting practice. After I do an assessment of the client before I advise them on the growth strategies.

The first model is the organic model which pretty much everyone here have probably gone for the organic.

It'S using the generated profit of your company to start new practices from scratch. It's a very slow nurturing process because you are focused really on running the business than growing the business.

It's great if you're cash rich, if you have private equity backing, lots of money or if you're cash poor but you have good credit which you can have access to lending.

If you do more than $2 million a year you can go to specialty bank that they or focus on dentistry. Anything less than that, the traditional bank will do it. If you're doing more than $5 million a year.

Then you can look for investors that are willing to take part of the equity and give you the money.

An example of that is clear choice which is a dental implant center in the US.

When they're private needs private equity back, they focus on doing implants, the all on the floor and everything else there.

If you're cash rich you can wait out.

The time that it takes for the practice to become profitable.

And there are definitely cash rich then posted.

Their primary activity is organic growth. They did some M and A's, didn't work out, lots of problems in integration.

They recently sold off about 120 offices in the US and lost a lot of money.

Next is the non organic or the mna. It's acquiring other clinics to show fast revenue growth. Popular among PE backed groups or companies with large cash reserves. Publicly listed companies generally are forced to do a lot of M&As to protect their share prices and many times those don't go very well. The biggest problems are post merger and pre merger integrations.

And they continue to be number one challenge in MA sector.

Some of the big names, Bupa, Dell, everybody is pretty much familiar and QNN from Singapore.

Franchising Franchising became popular in the 90s, then it went away because part of the franchising laws on the basis of the law of franchising is about control.

And.

In countries such as the US and I assume it is the same thing in Singapore and some of the other countries, you cannot tell the dentist what to do. So franchising was not very popular between about 2000 to about 2010. The last several years they have lightened up the franchise's laws and now becoming more and more popular.

The problem with franchising is that you must have a good business development team to go out and sell sell those franchises as well as obviously you have to spend a lot of money on the legal fees and structure there.

Example of that is Concord Dental and Vital Dent. They typically charge anywhere between 40 to $70,000 as an initiation fee with about 3 to 8% negotiable on royalties.

After that is the licensing.

The licensing is similar to franchising but is less regulated.

You need to have a strong good brand and good love documentation. It is very easy to onboard practice owners.

But to sustain them you must be really giving them value. The prime example of that is the Mallow Clinic which they grew substantially and I personally added 17 clinics to their network within 12 months. The problem was that they were not.

Taking care of their licensees the way they should.

And they had some other problems with payments and everything. And Mallow Clinic is really non existent in Lisbon.

Then we have the DSO or Dental Service organizations or you can call it Dental Support organizations. They were introduced in the late 80s as a legal loophole for.

Non dentists to own clinics. And this is one of the reasons right now we are in this once in a lifetime generational opportunity. Because there are so much money out there that are throwing at these DSOs that are not.