201: Secrets to Successful Dental Practice Transitions

If you have a general practice, improving your hygiene base is really attractive to a lot of groups. If you're a specialist, you want to diversify your referral base.

Hi, I'm Emmett Scott and just like you, I've had my ups and downs in the dental industry, but times are changing. The DEO has built a map of how to succeed in one of the most challenging industries to navigate. On this show, we talk to dental industry leaders, solve problems and get you the answers you need to face these challenging times and thrive. Welcome to DEO's Growth Secrets podcast for dental organizations. Now let's get started.

Well, hello everybody and welcome to another episode of DEO Growth Secrets podcast. I am Jacob Poole, the CEO of the deo, the dentist entrepreneur organization and your guest host today, filling in for the illustrious Emmett Scott. My guest today is David Haynes, the vice president of National Practice Sales for Menlo Dental Transition. David, how you doing today?

Doing great. Thanks for having me.

Awesome. You know, I'd love to go just a little bit about what you're all about. Your background. Grew up in Georgia, accounting, kind of finance, which, you know, inside the dental, inside the DEO. We've actually been diving really deep into DEO members P. Ls and, and I gotta tell you, it's not always pretty. And so I personally welcoming any type of finance background, anyone with, you know, that kind of accounting expertise inside of the dental industry is, I think highly needed. So, so that's your background, your kind of finance business

from Georgia and I should say like accounting for me. Somebody told me, you know, there's a smart guy that I knew, he said, hey, accounting is a tough degree. You should, you should study that. And so that's why I did it candidly. You know, I did one internship at a tax shop. I did taxes for, you know, for my internship. And it was tough. Like I knew that that wasn't necessarily my profession. So I've, I found a way to kind of pivot and do, do something that, where I can use those skills and education. It's been great.

Awesome. So it's, it's highly important and you know, a lot of other industries I think may be a little bit ahead of dental as far as the, the acumen and the, the amount that we're putting into the finances of P and L. Because it's healthcare, right? We want to focus on patient first, we want to focus on health outcomes, but also as a business. So I love that. And you're with Menlo Dental Transitions, so you all help folks transition, right? You help folks exit. You kind of guide them through that process, maybe a little bit about what you all do at Menlo.

Yeah. So we started as a commercial real estate firm, began doing transitions about 10 years ago. And I, I focus specifically on our segment that's doing 2 million plus in revenue. So we have large, complex situations with either multiple locations, associates, you know, sometimes they own the real estate. So that's, you know, if it's, if it's got a lot of moving parts, that's the stuff I get involved in. But as a firm, we help, you know, we have resources to help anybody. So there's, there's seven of us on my, on my team that, that are doing all size of all sizes of transactions. And so we've seen, we've. We've probably seen it all, I think it's safe to say, and, and then we have really nice support as it pertains to commercial real estate. There's a whole separate team for commercial real estate and property management and startups. If you want to start a practice, we've got somebody, we've got some folks that help with that too. So.

Amazing. So today we're here to talk about transitions, the marketplace, exits, mergers and acquisitions, that whole world. You know, since I got started in 2016, inside of dental, we've been really at this, this point between large DSOs that were growing fast, and then your dentist entrepreneur, your dentist leader who is kind of buying the second, a third, a tenth, maybe even a 20th, 30th location. And that is the area of transaction, right? That is where doctors are exiting. That is where you guys live. And so I'm curious, kind of, what's the market like right now? What, you know, it was, it was hot in 2017. 2018 was 19. We had Covid. What's it like now?

So the market right now is. It's. We're busy and there's, There's a lot of things taking place. We're seeing consolidation, at least at that DSO level. You know, it's really picked up its pace in the last few years. There's, you know, it's hard to say exactly what inning we're in. Right. I. Nobody can really say that. A lot of the studies and information out there is like a couple years old, and it's moving so fast that it's hard to exactly pinpoint where we're at. But there's so many groups that have gotten big and we're seeing them drop off or slow down or maybe just not be as aggressive with their Offers, you know, if somebody has 700 or 1,000 practices, you know, within the, within the DSO space specifically, some of those folks are actually slowing down and we're having to look at a lot of other options for sellers, whether it be smaller groups, but then outside of that, the owner user space is still super vibrant. Like we have this last, in the last two, three weeks I've taken a group to market and we've picked up offers. I mean within two or three weeks we've put four practices under contract that are all pediatric related. And so within that owner user space there's lots of activity. Startups are, if I were to generalize startups, it's a little bit difficult. There's still activity, but lease rates are so high, build out costs are still high. So Covid kind of put a wrinkle in a lot of things. But overall the market is still generally vibrant. Right. There's, there's plenty of buyers, there's liquidity. There's liquidity all up and down the stream. Right. So if you're, if you're jumpstart all the way up to large dso, there's still plenty of liquidity out there, which is for me the biggest thing that gives me some comfort in the industry. But, but there's no doubt that the consolidation is. We're at a more mature phase than we were a few years ago.

Yeah, that's showing up in so many ways. Really. You know, obviously the, I think the, maybe you're saying this as well, the maturity of just business as much as I'm saying, you know, there's a lot of room for improvement on the P Ls and the finances and the way we're looking at the way practices operate and how they're valued by the, by the actual dentist then dental leader, dental entrepreneur. There's also been a lot of maturity. I mean if you look at where it was like five or six years ago, I mean people didn't, we were teaching people what EBITDA was. And so are you seeing a little bit more of a mature buyer? And I mean the, the purchasers are probably always been mature, but the sellers seem to be getting a little more mature. These are really your clients? Potentially.

Yeah. Yeah. So I pretty much exclusively represent sellers in the process. And by the way I should maybe preface this entire conversation is that I'm not necessarily pro DSO in every situation or circumstance. Right. Like if somebody, if you were to ask me, should somebody sell to a dso? My answer is probably not. Like if I had to give one answer I should say probably not just because it's such a narrow segment. Like, for you to be a perfect fit for a dso, you have to be doing a lot of things right. So you have to understand your accounting. You have to probably know what your EBITDA is like. People don't just. To your question, people don't just look into this, you know, to having a practice that's big enough. And, and we've worked. We've seen a lot of your clients throughout the years. DEO clients do really well because they're educated on it, but we see all. All folks in between. I'm working with several different specialty groups right now to help them with some succession planning. And there's basically, there's a whole bunch of people that are. That don't really have a great plan in place on how to exit. You know, how do you succession plan somebody that has 25% ownership in a specialty practice? And there's a lot of. There's still a lot of education to do, but I think by and large the resources that are available today, most of your individual practice owners are more educated than they were. And that's thanks to things like this, podcasts and all. I mean, there's all kinds of the buzz. I actually think that the buzz around DSOs has caused more people to be educated. Now they have a bigger. They have a carrot to kind of, you know, work towards. Right. And so it's caused people to do things that they may not have done previously without some of those options on the table. So I think it's fascinating, but there's certainly a lot more educated sellers out there than there were five, five, ten years ago.

Yeah, it's. It's probably just. It's natural progression. Right. Also, competition is forcing people to get. And I also am a little bit of an echo chamber because we do teach a lot of dentists and their leaders about this. And so it feels like they're maturing as well. But there's got to be folks out there too, who a lot of this is. Is new to us still. Yeah. And so when, you know, you all represent sellers only or mostly or how does it work with it like that? Because I know a lot of other brokers or some other brokers or some other exit specialists or folks who work in emergency acquisitions. They're on both sides. Right. So they might represent the big DSOs and sometimes and then equally. But it sounds like you work mostly with the sellers.

Yeah, I only represent a seller. So if there's occasionally a situation where we'll be hired to do an appraisal, and maybe it's in a partnership scenario and we'll get asked some questions and in those engagements, we'll just answer them on a neutral basis. Right? We just, we just kind of answer in a, you know, in a most neutral way possible. But 99% of the work that I do is all sell side work. So I'm only interested in working with sellers. And my, you know, my favorite work, you know, I don't, my favorite work is to work with folks and putting a plan in place. Right. It's not, you know, people, people are sometimes guarded when they go talk to a broker initially. Like, I've experienced that. And it's like, hey, we're not here to sell your practice tomorrow. Like, you know, we've got enough things going on. I don't need to sell your practice to pay my bills tomorrow. Like, that's not. But, you know, the objective is to help them, educate them, and put them on a path towards whatever. I mean, everybody has their reasons to sell and exit, and everybody has different timing considerations. So my objective is to sit down with them and let's put a plan in place. Like, hey, if the practice needs to grow, if you're not meeting your objectives now and we're not ready to exit now, that's fine. Let's put a plan in place to make adjustments that need to be made to the practice to make it marketable, whether that be to an individual or to a dso. And the goal is just develop a relationship, get to know each other and put a plan in place. I mean, so many situations, I get thrown into more situations than I would like where we're forced to take action. You know, we're hired because somebody's either sick or injured or maybe they kind of extended the career a little too long and, and, and the practices, you know, we're in a, we're in a tight spot from a sales standpoint where we're forced to take action. And those aren't fun. And so I think it's a lot more fun to plan, help somebody achieve that goal and then help them exit. It's, it's, that's the space where I like to be.

Yeah, I mean, I would love to talk about actually the importance of a plan. I had a friend who sold his business earlier this year and it was, he was under the gun and he had to sell for 40% less than what he originally was quoted the year before because he had to sell it within like six months. And so I Mean, you know, it sounds obvious, but if you're under time pressure, it just reduces your options. And so. So David, what you're saying is it obviously behooves you to kind of go in and create a plan. Even if that plan is a three year plan or a five year plan, it doesn't mean you're selling your locations tomorrow. But talking to somebody like you or an expert who's done the planning, you can at least start setting out these milestones and getting ahead of it.

Yeah, and there's so much that goes into it too, from associates, associate contracts, leases. I mean, I've got a, I was working on a situation this morning where we have a lease provision that, that's potentially kind of a wrinkle in our deal. This lease was signed, you know, 10 years ago. Right, right. And so there's just so many things that we can do with time to help improve your chances to maximize the exit. It's not that, you know, one lease provision necessarily takes your practice to zero, but it might take, it might take a little bite off or might make it less competitive. But my whole objective is in a perfect world, it's never perfect like this. But in a perfect world, we do some planning, we set the practice up to be successful according to the owner's goals. Right. It's not my goals, it's whatever the owners, whatever their goals are. Right. And so set them up, execute on that plan and help them and just enjoy life. It's not, you know, there's so many little areas where we can make a difference, you know, whether it be in a work back time frame and whatnot. It's. There's just a lot of things that, there's so many factors to these sales. It's not just price, you know, and it's not just, you know, there's just, there's a lot of elements that we can tweak if we have time.

Yeah. And so many of the things that come up during a sale, especially last minute, are totally preventable. Right. They're totally. With some preparation. Like the lease, for example, that's one where you get to the nth hour and like all the lawyers are reading all the final documents, you're like, oh wait, what about this one second thing? But you know, working, working with somebody where you all are going through a methodical way, you're ironing all that out ahead of time and so you're reducing the surprises. It just kind of, it's always kind of interesting to me how much like pre thinking, pre planning Kind of mitigate so much of the stress at the end.

Yeah, and it's not that I'm a genius, it's just what I deal with every day, you know, I mean, doc, dentists are doing different things that I couldn't do and they have skills in different areas. So it's not that I'm smart, you're not. It's just we have experience seeing a variety of issues and you know, once you've seen something 50, 100 times, it's like it starts to become ingrained in you and, and, and there's just so many little pitfalls in the process. So yeah, that's the goal is make it smooth. You know, let's, let's, let's, let's help them out as much as we can. There's a few doctors that I talk to once in a while that they say, well, what do I need a middleman for? It's like, well that's, it's all we deal with, you know. And I'll give you one example. So this. We worked with a seller recently who was approached by a group. They gave him a number, it sounded great and we got involved and were able to find essentially a different offer. We were able to pivot to a different group. Not only did we increase his valuation, but we shortened his work back time frame, we improved his lease, we improved his ability to sell that building that he owns as well. He's with a group that's got a better history in terms of recapitalization than he was initially. There's like six or seven different things that we were able to touch and cumulatively it's just such a massive impact. And so yeah, our goal is to take the experience that we've, you know, we've, we've had some bruises along the way is, and our goal is to try and help our clients prevent, you know, prevent some of those mistakes.

Yeah, I mean, why middleman? I think, you know, in small, in like smaller transactions, maybe you can kind of cut that out. Depends how much time you have. When you start talking about, I'm talking small transactions, like non business transactions. Right. Like know, $10,000, something like that. When you start spending, you know, talking about millions of dollars and having an expert where you can. First of all, you've done this many times, brokers have done this many times. Right. This is, there's very tight processes around this. There's like, don't forget this, there's a check into this, like here's a pitfall here. And you start talking about that, that one wrong move. I mean, you're, you're talking millions, you know, like, if you don't understand a provision here or the way a contract, you know, when you sign it goes here, it's millions of dollars. So, yeah, I think I would imagine more sophisticated your, your sellers get. They probably, maybe even understand the value of having experts, like an expert team to help 100%.

And, you know, most, most groups, it's. What's interesting to me is that most groups are. There's kind of this weird relationship, right. Where if a buyer and a seller meet, they have opposite interests at first, and if it's going to be a partnership in the future, it's like their opposite interests initially, but then those interests are aligned. Post close, post closing. And so it's just really weird relationship. Or sometimes people will get comfortable working with, directly with, with a buyer. And, you know, I think one of the lessons I've learned is just not to get too cozy with, with a buyer. Our whole objective is to create a competitive environment, you know, so we want to make buyers kind of fight for a practice. So we want to put that plan in place. But then once we go to market, we want it to be presented as in the best light possible, and we want buyers to fight for it. You know, the worst situation that I can be put in is having one, one practice and one buyer. Like, if I don't have multiple buyers or options in front of us, I lose a lot of leverage. And so the goal is to, you know, create some leverage. And, you know, a lot of these groups that are out there, they want you to roll equity into their organization, but they don't really let you get a look under the hood prior to closing. That's kind of weird. And so, you know, some of our objectives are to, to help at least help our customers understand what they're getting into. Right. Maybe we don't have 100% clarity, maybe we don't have full financial transparency in the partnering organization or the buyer, but we can at least look to some of our experience and compare offers once we've created that competitive environment. That's something that's just kind of an interesting facet of the, of this process.

Yeah. So some of the ways you're kind of making this transition go better for anyone who's listening, who's interested in, in making go better. So the tips, right. It sounds like one is obviously as many buyers as you can. Right. And that means not getting too close to certain buyers. The emotion starts getting in like, oh, we're, you know, we're kind of buddies and whatnot. But man, when it comes to an exit, it's, you know, it's, it is, it is partnership. Right. And you do want to work with people that you can work with long term, but it's also business. Right. You want to make sure you're getting the full value out of your business. Yeah. So that's one and then the other one you're helping out. And it's a tip is dig as much as you possibly can if you're going to have equity into that next that, that buyer. Dig, dig, dig, dig to understand what's that equity, what are you getting, what are you buying? Right. I mean, this is something you guys help with a lot. Yeah.

And it's tricky. There's a lot of organizations, these are private companies, they don't really want to share their secrets with everybody. And so getting, sometimes getting that information out, even in a, with a new partner, that's a great practice. It's surprisingly difficult to get that information out of them sometimes. So, you know, part of that due diligence process is getting to know the ops team, getting to know other partners that have already done, you know, kind of been before you. You know, all those things are important. Like due diligence is a, is that's our time to really uncover as much as we possibly can and make sure we understand the organization and kind of what we're getting into. Nothing's going to be perfect, right. These, there's going to be drawbacks to every different structure. There's Holdco models, there's JV models. There's, you know, some people are debt funded, some people are private equity funded. There's, there's all different scenarios out there and not one of them, all of them have some drawbacks to it. But at least we want to, at least we want our clients to understand the full scope of what they're getting into and where the risks are.

Yeah. So what, what are some of the things somebody can do now to start maximizing or setting themselves, themselves up to maximize a future exit? We talked about a plan, talked about giving time so you're not under the gun and you can do the proper due diligence. What are some other things that somebody was like, I'm thinking about exam maybe. What's the time frame next? Two to five years, two to seven years. Like what's the sweet spot?

Yeah, so I'd say first thing, it just depends on what their goals are. But assuming they've got a nice practice, and they want to make some marginal improvements. If I was to give them just a short list, you know, we're going to make some small changes, right? If there's keyman branding, right, we can get rid of some key man branding. That's a really small change, but we don't need it to be. We don't need to say Dr. Smith on there. We can, we can, you know, we can get generic. We can. You want to have enough ops, right? So if you're trying to. If you're trying to target a DSO sale, we don't have enough operatories to be attractive to a dso. If you've got four operatories, most cases you're just not attractive to a dco, even if your other financial metrics are good. So that's kind of a big change, you know, so we need more time to correct that change. If you're going to relocate space or build or add, you know, that's something that takes a lot more time. If you have a general practice, improving your hygiene base is really attractive to a lot of groups. If you're a specialist, you want to diversify your referral base. You know, a lot of specialists that we see, they have a pretty big concentration with a couple of referrals. And it's like those things, you know, it's hard to start to write that ship. But if you, if you have a few years, you can make some changes. You can trim the payor, mix negotiate with insurance companies. Consider cutting back on some of those discretionary expenses. So many people will buy stuff, they'll go to Costco and they'll put it in supplies. You know, it's like, we can cut that out. We can try and make the case to, you know, adjust those expenses out. But if there's, if there's a whole bunch of adjustments, it's. It can be hard to do. It's harder to make that case. So those are just a few things that kind of goes back to the planning. It's, what do you really want? You know, if you want to bang on the cash register, we can make big changes. But for most people, it's making small adjustments.

Yeah, actually, I think, I think those are amazing. And what else? I mean, let's say you got a P and L. Where, where you're looking at P and Ls and looking at where opportunities are in P. Ls, where do you see the biggest opportunity? How would you go through in P and L?

Oh, man. So it really. It really just depends on what the objective is. But let's suppose for a second we're working with a practice that's doing two and a half billion revenue. So at two and a half million in revenue, that customer could, that client for me, could go either way. They could go private sale, they could go DSO sale. And it really depends on their objectives. But as we're looking at a P and L, we common size everything and try and boil it down to where, where do we have some. What's fat here compared to the peers? Right. So we just do some quick comparative analysis. What is the rent as a relation relationship to revenue? What are supplies, staffing costs?

Do you have some numbers there that you like to lean back on? Or how do you think about that? Like, what do you like to see those numbers be?

So if you boil it down on an owner user transaction, if we have owner discretionary income, and this is on a smaller practice, it seems like this number 30% comes up a lot. So if you're 30% of your collections as far as your net, then you've got, then you've got a nice practice that's pretty much average. As the practice grows, these numbers get skewed dramatically. So there's a huge difference between somebody that is doing, let's say a million and a half revenue and three and a half million in revenue. Because the person is doing three and a half million revenue is going to have much lower rent as a percentage of revenue than the person doing a million and a half.

Right. Overhead. Overhead kind of decreases as a percentage of revenue as you're just adding more patients onto the top. And it just, it's all, it's all essentially, you know, it's all kind of gross. Gross profit at that.

That's right. It's almost like it's. There's not really one number, like I can't really give a number to say, hey, this is, this is a good, you know, target number. Because everybody's so different and each market is different. You know, if you're in the Bay Area versus, you know, Texas, you know, your rent structure is going to look a lot different. Your staffing costs are going to look a lot different. And so what we'll do, though, we have enough comps. We do appraisals all across the country, all over the place. So if somebody's, you know, for a partnership or getting divorced or whatever else we do, we have an appraisal team that's certified that does this work. And so I have access to all the data so I can look at a practice that's about your size in your submarket with a similar fee structure. I mean, it's going to be different between a fee for service office and an access office or an Arizona, it's access or say Medicaid office. So we're going to look at that and say, hey, your number is good here, or it's not. I tend to find that folks that are retiring that have been comfortable for a long time, they tend to be kind of fat on some expenses, mostly staffing costs. Right. And so, yeah, you know, there's just a lot of things that we can tweak if we know, if we can look under the hood and say, hey, this is, you know, you're looking good here. But this concept of meeting your fixed costs is very powerful. You know, as the practice gets bigger, the bigger the practice is, the more it makes sense for a DSO sale. You know, I mentioned that statement at the beginning that not every practice is, is the best DSO candidate. And that's true. But the bigger it is, the higher the, you know, you've cleared that fixed cost hurdle and your margins just go through the roof at a certain point.

And is that because DSOs are more interested in the bigger practices that are a little more profitable? And why do you think that is?

So it really goes back to that same concept of understanding your fixed cost structure. So if you've, if you're, if you've got a big practice, your fixed costs haven't changed, you've got, you've got margins, operating margins that are really profitable. And it's harder for an individual to come in and compete for that practice. You know, if somebody's doing $4 million in revenue, it's hard for an individual to convince a bank to lend them 90% of $4 million, you know, or whatever the price ends up being. And so it starts to, the DSO offer at that point starts to make a lot more sense because they have deeper pockets, they can afford that. And you're starting to get a multiple of EBITDA rather than a percentage of revenue. So you've kind of switched, you've switched valuation models almost entirely when you're, when you've got a larger practice.

Yeah, yeah. And so, and then the DSOs can just a little more easily come in and increase new patient flow, decrease costs a little, a little less, and they basically can justify themselves in ROI a little more simply. And so it's a, it's a more clear cut kind of situation for them.

Yeah, it seems like DSOs are mostly interested in, at minimum maintaining Right. It's kind of interesting how they underwrite to maintaining what has been done historically or at least on a trailing 12 months basis. They don't always necessarily have a plan to grow the practice. And I personally believe this is where the rubber will meet the road, like relative. I mean Most of the DSOs that we see out there in the marketplace, they haven't been around for 10 plus years. This is actually still pretty, a pretty new development for a lot of these organizations. So we haven't really seen this cycle fully kind of work itself out in terms of how are they going to operate these practices long term. Can they actually grow a practice? If practice is doing $4 million in revenue, what ideas do they actually have that the owner hasn't thought of to grow that practice? I think time will tell on a lot of those. And succession planning is the other big question mark is do these groups have a really good succession plan in place to replace that founder doctor? A lot of times the secret sauce is with the founder doctor and so we haven't really seen, you know, as those folks retire and move on, how is the, how are these DSOs going to grow and, and succession plan that I think time will tell, but that's certainly a big element. I think most DSOs are mostly interested in maintaining that. Obviously they want to grow, but I think, you know, they're right.

Yeah, they're, they're, they're underwriting to maintain, which is maybe a, you know, hopefully a conservative, you know, scenario in that hopefully.

Right.

I'm sure that's what, I'm sure that's what they're thinking of, they're trying to do. So. Yeah, that's great. So is there a difference between like a DSO multiple, you know, evaluation that you're getting from a DSO versus kind of the doctor owner to doctor owner or this, you know, selling to somebody who's not a dso?

Yeah, there's pretty huge differences there depending on the size of the practice. So I tend to find that if you're in that two main dollar threshold, it really could go either way. Right. And I'm speaking very generally, but you know, depending on your submarket and your margins, you know, if you're north of $2 million in revenue, it starts to make a lot more sense to sell to a dsl.

And what's the difference in multiple? I know it's hard to tell, but everyone's always wondering that. So I have to ask. Yeah, how do you see that?

So I'll give you an example. We, we closed on A transaction not too long ago where our, our customer had a little over $3 million in revenue and we ended up with over an over $8 million valuation. Now of course that seller doesn't get all of that valuation up front, but right there alone we've already, we've already cleared the hurdle of an owner user. So most owner users, I think I come from a banking background, so most, most owner users are limited to what their bank can lend. And 95% of the dental banks out there have a limitation. They can't go more than 100% loan dollar amount to revenue of the practice. And so that kind of puts a cap, a ceiling on what an owner user can offer. Very, very rarely do they go over that. And so if you think about the situation I just mentioned, if we have an offer that comes in, let's just say around $3 million, you know, that's it, that's for 100% of the practice versus the DSO in this particular case was able to offer 8.8, over $8 million. And so it's kind of like there's a huge difference once the practice gets to a certain size. But up until that point, it doesn't always make a lot of sense. You know, somebody's doing under $2 million in revenue. It's, it's kind of hard to justify candidly where, when you have the deferred comp, I mean there may, there may be reasons to justify it, but it's, the math is not quite the same.

Last question here. Is there a difference between the DSO where you're getting some of that comp as far as in equity, whereas if you sell it to another Dr. Owner, you're calling Dr. User.

Owner.

User. Yeah, whatever. Yeah, no, it's good. There's lots of ling, lots of good lingo where that bank, you know, financing might be more just straight cash up front or as the, as the seller. Is there a difference between kind of how those deals would be structured?

There's a huge difference in structure. So the reason why I say DSO deals aren't for everybody, like some of those numbers might sound attractive, but candidly it's really rare to find somebody with massive margins like the example I just mentioned. So, you know, there's so much to consider. There's most DSOs want a 5 year work back. So you have to really think, do you want to be married to an organization for five years? I mean that's a huge question mark. And I think DSOs are nice for if somebody wants to take some chips off the table and reduce some risk but not fully exit. They're generally a better option. But an owner user transaction is much more simple. Right? You're selling 100% of the, you're selling 100% of the practice. You may have a short or even long term work back. I've got some sellers where we've sold their practice to an individual and they're still working there years later. And so it's, you know, the owner user transactions are much more simplified. There's a lot less moving parts and there's a lot less risk in terms of that rolled equity. We talk about rolling equity. You know, you're not going to get paid 100 of the DSO valuation upfront and there's almost no situation where they pay 100%. So if you're going to get a nice multiple, you're going to have some deferred compensation. And so understanding that is really important and it really comes down to complexity and what you need, what you need and want out of a practice sale. You know, it may not, it's definitely not for everybody.

Well, I love that earlier we were talking about what is the value? You know, some folks are, what's, what's the value of having somebody in the middle? Well, it's this, right there's, it's so complicated. There's so many ins and outs to this and it really pays to have somebody who's been there and done that and walking them through. So you're out here educating, you're out here helping doctors. If anyone is interested in this path, we would say reach out. Yes. You're doing a appraisals. It sounds like you do appraisals quite often.

Yeah, so we do appraisals and we have a, we have a private client offering, if you will, where if you're, if your practice is doing over $2 million, we will put together a plan for you at no, at no cost. So it's not, it's not a certified appraisal, but it's more of a, hey, let's sit down for an hour and talk about your, let's get to know your practice and let's put together a plan that you can use with us or without us. You know, you can take it and just do your own thing. You don't necessarily, there's no obligation there essentially. So, you know, we have multiple different offerings. The, the goal is to have conversations and help people have a successful exit.

Yeah, I think it's one of the smartest things any business owner can do is really keep it top of mind because it's all aligned to, to really maximize an exit. It's going to force your business to be really good. You want. You're gonna. All those things you talked about about de risking the key man, the, the sign and like hygiene, all of that should be done anyway, right? To create an incredible business. So thinking about an exit, it just forces you to do that. And so I know some people that I've heard of, folks who have gone to market every two years would sell, weren't planning on 100%, but just to get the feedback about how to make their business better. And then boom, once they did exit, they had tweaked all those knobs. So no matter what, it's really smart to talk to somebody like you and be kind of like in relationships. So you're always working towards that. North Star.

Yeah, absolutely.

Awesome. So, David Haynes, Menlo Dental transitions. Reach out to LinkedIn. I don't know, probably the website as well. David. If anyone's looking, LinkedIn or just.

Just email is great too. David menlowtransitions.com we're happy to. Happy to talk anytime.

All right, thanks for all the hard work out there. Just chopping through the wild world of M and A.

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