226: How to Build a High-Value Dental Practice Buyers Want

You want to build a really good business that other people want to buy because you never know what the future holds and you may not be able to sell it.

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 Solutions Secrets podcast for dental organizations. Now let's get started. Hello, everyone, and welcome to another episode of DEO Growth Secrets. I'm your fearless host, Emmett Scott, and today I'm just excited to have Eric Scalzo and David Marks, both attorneys with Holland and Knight. And you know, you think attorneys, but these are attorneys helping with acquisitions on the M and A side, helping private equity firms find good opportunities, helping dentists find good opportun by doing the work that goes behind the scenes to make sure everybody's getting a fair deal. So I'm excited to have both of them on because you guys have an inside look into what's really happening in the industry. And it's not a place that, you know, as dentists or even operators, we really get to be in those rooms and hear what's happening. So I'm excited to and appreciate both of you all being on today to kind of give us a feel. And I just want to jump right into it. Either one of you can start maybe introduce yourself as you answer some of these. But I'm curious what you're seeing. What's trending right now in the industry, what's maybe a little different than it was two years ago, et cetera.

David, why don't you start?

Sure. So my name is David Marks, and thank you for the kind introduction. Um, you know, I think. Let me directly answer the question. I think what we're seeing is one of the most important time periods in the next evolution of DSOs, and it goes beyond just DSOs. I think this part is really critical to understand. What we're seeing is a lot of experimentation going on right now in dental because it is one of the most developed, sophisticated, experienced areas of creativity when it comes to deal structures, equity structures, compensation structures, all up and down the chain from a debt side all the way to equity. And a lot of really smart people, and maybe some dumb people are spending a lot of time in the area realizing that this is a crucible of opportunity where they can take lessons learned all the way back from the 90s when a lot of these were public companies, but really to the current time period to address what is, I would argue, is the one of the most important driving forces in health care services right now. And that is the background of the the money and it specifically LPs who are looking for to both deploy billions of dollars of what we call dry powder. And so they're hungry for investment opportunities and specifically in health care services. And on the other hand, there's a lot of these older platforms that have yet to trade hands again. And so they're also for a return of capital. And you'll sometimes see this in the media talked about as liquidity crisis or liquidity challenges within private equity world. That background is creating a lot of interesting opportunities because the fundraising that's happening for these private equity funds is affecting the deal terms that everyone from private credit down to your traditional buyout firms want and how they evaluate DSO opportunities if they're going to provide money. And in turn that affects all the way down the chain to the smallest startups. We're seeing all kinds of really interesting developments. VC technology enabled firms, all kinds of people coming to the table and realizing dental is one of the most exciting areas to really be able to try out and experiment with new creative structures.

You know, David, a couple things you hit on there I think are important for our listeners. Sometimes it's like, why do I care what's going on with some big firm or you know, big dso, I'm a single practice, et cetera. But the domino effect that that has on them someday selling their practice and what that's worth and the structure is real. I always say YouTube doesn't get a billion dollars unless there's a Google, right? And so if there are competing interests really trying to maximize the value of the dental practices, everybody wins off of that. Even if you never decided to sell to a dso, it just sets a new benchmark. And so any of these that aren't happening can also have a downstream effect on a dental practice. I'm curious if we just said, all right, there's a few things, you know, you mentioned the 90s, we could even take it to early 2000s, et cetera. And some of the, whether it's lesson learned or things that have changed that are forcing some of the, of the more thinking thoughtfulness around some of these deal structures. I mean, the obvious one as a layperson is we know interest rates have gone up from being almost 0 to 3% to being higher than that. And so if people borrow money more expensively, that's going to change what they can and can't do. We know labor costs have gone up dramatically, which for any dental practice that's taking PPO insurance, which is the majority, has squeezed margins and forced dental groups to get more creative using technology and kind of get their margins back. Are there other things you can say that have happened that are affecting how deal structures are being made right now?

Absolutely. I think the other thing, in addition to those really impactful facets of deals, is the overarching landscape and what we're calling the kind of baby HSRs or state review and approval laws which are rolling out across the country. And our colleague John Saran in our Chicago office has been tracking this and we have on our website, it's called the HK Navigator, a visual map of the United States. And all the, all the states that are exploring have proposed or have passed legislation relating to transaction reporting and, and even some consent laws where transactions in the healthcare space need to be put in front of regulators to, to either.

This is a place where regulators have concerns around the consolidation and different healthcare. It's not just a dental thing.

Correct.

Understand and see what's going on.

And in some cases dental's actually carved out and, or left out and in some cases it's explicitly carved in and it's, it's an evolving arena and I think there's some folks out there kind of running around screaming, you know, the sky is falling and this is, this is a problem and this is an issue and etc. Etc. But as David said, the DSO space is one of the most mature physician practice management spaces out there because of the history of the evolution of the industry. And also the, the players, DEO and ADSO and others who have really kind of linked arms together and said here's how we achieve regulatory compliance which is good for everybody and can still make money. And this is, I think, just another opportunity to show as an industry that compliance is, is forefront in our mind. And so knowing that transactions may need to be reported or consent needs to be given in advance of a transaction is really important to make sure that we're all complying with it. And again, I don't see it as, as problematic as opposed to just one more thing that we need to comply with. And it's now the, the lay of the land. And again, the lay of the land is changing on a weekly, daily basis. And so check that Navigator website often.

Yeah. Is that a, is that a website that someone could go to. To kind of understand their state and.

Absolutely.

And we can.

We can provide a link for you guys for the show notes or where else you.

You put them. But I think that. I think it's really interesting because I think, you know, a practicing dentist somewhere never imagined that, you know, someday they'd go to sell their practice and, like, it might have to be approved. And so that might be something that they want to get involved with one way or the other. But, yeah, that's how big and maturing this industry is and healthcare generally is. Right. I'm curious, if you think about, if we go really deep quickly here on deal structure, what are you noticing as evolving as, you know, private equity firms are maturing and understanding the nuances? You know, I think there's a lot of concern by dentists in the past, especially that private equity firms were coming in, buying up dental practices and kind of controlling the marketplace. Being an insider, if you will, I've helped a lot of our members understand it's not true. What's more true is you have dentist entrepreneurs looking for funding, looking to have impact in their dentist communities and grow. And they need private equity because the banks run out or they want to take some money off the table. And so dentists have always really been in control of this marketplace. And I think to the extreme that at some times, the private equity firms have gotten really hurt by not understanding how much in control dentists are on this. And so I think they've had to mature and say, oh, wait, compliance really matters. We need to look at that. In a way, maybe we didn't look at that before, you know, the terms of the agreement and the dentist just walking away or the dentist not being happy. You know, I think dentists are so concerned that the private equity firm will control them, et cetera, which, you know, legitimate things. They need to make sure they're. They watch for. But frankly, the private equity firms are concerned that all the dentists stop working, stop producing, you know, and. And the owner just walks away and says, thanks for the money. Good luck on running this thing. Yeah. So I'm curious how that's playing out on a real detailed basis in some of these contracts and deals.

Yeah. So we as a firm, so we're partners at Holland and Knight, and we head up the healthcare, the private equity healthcare practice with some others here. And we joined Holland and I, David and I, and 250 of our closest friends when Waller merged with Holland and Knight a little over two years ago. And so those of you in the DSO space or the dental space for a little while may know the name Waller. We've been in the DSO game for 30 plus years and our now retired former partner Don Moody was really a thought leader in that. I hired Don when I was in house counsel with a DSO down in Miami to do some work for us and then he returned the favor and I moved to Nashville a decade ago and have continued in the space. But drawing on those 30 years of experience and the evolution of, of the DSO industry, you know, kind of living through the dentists that walk away, the dentists that get hit by the proverbial bus, right? We're all mortal and, and, and dentists have, have passed away and we've had to deal with kind of the transition of, of clinical care and the transition of the practice and the transition of the business deal that was struck. And we've had instances where, you know, other law firms will sue to what we say, what we call blow up the dso, right? Take the friendly practice owners and turn them unfriendly. And so we have evolved the documents in a way to make sure that we've got, you know, carrots and sticks and that the documents stand up against each other to achieve the business deal. But at the end of the day, you know, you have in 45 states the requirement that the practice be owned by a licensed dentist and the prohibition on the corporate practice of dentistry. And in those states you will always have that kind of push and pull of the investors and their desired outcome from an economic standpoint and the clinicians and their desired and frankly, rightful retention of clinical control of the practice. And even in the states where direct ownership is permitted, obviously the clinical decisions have to be made by the licensed dentists. But I think we've seen the industry really kind of come to an alignment on that front. A realization that great clinical outcomes as dictated by and supported by the practitioners lead to great business outcomes. And so we're seeing a shift too and it's been, you know, a decade in the making where there's been some real leaders that started this really, really early. But a shift from we are an accumulator of practices and our value is strictly in getting more practices and kind of duct taping them together to we are an enabler of great clinicians. We take the back office work, we take the stuff they don't want to worry about. We bring the expertise from other industries, right, other multi site retail style industries. And we've seen some great success with some executives that have been brought in from the hotel Industry and from the, you know, kind of the, the restaurant industry. Because those concepts of multi site organizational, how do you run a business like that? Those, those concepts are really transferable to the DSO space to provide high level of customer service.

Right. I mean.

Exactly, exactly. And, and a focus, yeah, and, and, and a focus on the customers. And the customers is really two customers if you think about it. The customers are the patients of the dental practices. And obviously you need more patients showing up so that dentists can spin the drill and, and, and treat more folks. But the dentists are also customers of the dso. Right. And, and if you have, if you, even if you've structured the most kind of tightly wound Gordian knot contract saying the DSO and the, and the practice entity are tied forever, which you know, you can debate whether or not that's even permitted, but let's pretend that it is and let's pretend that it's tied super tightly. To your point. If the dentist doesn't want to show up anymore, the dentist doesn't have to show up anymore. And so it's evolved to how do we create a place where we can support each dentist to make sure that they, that they thrive in their chosen profession so that everybody is a winner at the end of the day? Patients and dentists and investors.

Yeah, it's interesting. One shift I've seen, I'm curious your all's take on this is let's say early on you might have a private equity friend that says hey, you're a dentist. Have you thought about getting with some buddies and let's you know, you know, put some practices together and grow this and we could get some arbitrage on multiple, et cetera. And a dentist goes, oh that's a cool idea, et cetera. Now you have dentists saying what if we got together and you know, we could just kind of combine together and maybe we could get a higher multiple together. And you have the private equity firm say no, you know, like no, that actually doesn't work. We actually need things standardized. We need clinical standard of care, we need a clinical leader. You know, we can't just have a hodgepodge of leadership here. And so that's some of the maturing that I'm seeing just overall in the industry is they actually know what brings good clinical care, good standardization, everybody being on different practice management software, super painful. And how is the clinician going to lead if that's true? And how are they going to get the right data reports and, and all of those things? Am I reading that right? Are you seeing that shift as well?

Oh, 100%. I mean it's. And by the way, this is not just a small shift, this is a huge shift. I mean this is, if you look back at the, at the late 90s and the ones that failed, and if we're being honest, even some of the ones that started to struggle with the interest rate increases, the reason is they were cobbling these practices together without real integration, without real effort to create value and provide value outside of trying to get a arbitrage on a multiple with the interest rate changes. That math doesn't math anymore. And the only thing that counts is real genuine good business where people wake up in the morning, they want to go to work, they're excited to go to work, and the patients they see, they come back and they tell their spouse, hey, I actually like to go into the dentist. I mean, it's the kind of mentality that is an extraordinary differentiator. We're seeing it in terms of valuations by private equity. And the good thing is that while not all private equity shops are equal, I think even at the fundraising side right now, it's not an easy fundraising environment for private equity shops. The ones that are really powerfully able to differentiate. Specifically they hire experts to serve all of their portfolio companies. Around payer reimbursement, around AI, around technology enabled services, around practice management, software integration. Right. There's a real understanding that it's no longer just about how good you are manipulating the Excel spreadsheet, it's how good are you at helping people really manifest the best version of themselves when it comes to both the giving and then actually experiencing care. That is a huge and powerful differentiator to the point of like multiple turns of ebitda.

Yeah, that's awesome. I mean it's a maturing that is a win, win. You know, at our last event someone asked me about, you know, is it about profits or culture? And I'm like, that world of them being separate is gone.

Yeah, totally agree.

Profits allow you to drive culture, by the way, like how do you pay for someone's lunch and do the fun things, etc. And have the team meetings when you don't have any money? And, and how do you drive good profits when you have terrible culture and the turnover rate and people can go work anywhere now and all of those things. So they are hand in hand, it sounds like at the highest levels of even transactions and money and so forth, that that's recognized as well. So that's great for everyone to just mature into better businesses that aligns with our DEO coaching. So that's why I think it's important.

So I'll tell you, Elby. Oh, go ahead, Eric.

I want to push back on one thing you said there, Emmett, because I think it's really easy to, and I know you're not advocating this, but I do want to draw the distinction. I think it's really easy to say culture is lunches, culture is events.

Totally.

I think it goes much further than that. Right. Culture is building a sustainable business that does it, that doesn't rely on the arbitrage. Culture is, I think, creating an environment where compliance is king. Right. Both from clinical compliance to corporate practice compliance to up at the board level, you know, antitrust compliance and the issues when, when you go to sell, what's going to be looked at there? And I, I think, and again, I know you weren't, you weren't saying lunches are our culture. That's not what the D E O preaches. But I do think that the private equity folks, the investors can sniff out a. Oh, we've got a great culture. We do, you know, we do Friday lunches and we do a team meeting every quarter in the Bahamas or whatever, or every year, whatever to the feeling of a culture of excellence. And I, and I think that that's really important because you're going to get the extra turn if you have a culture of excellence, you're going to get a, you know, we're probably going to cut those lunches because they don't actually do anything response if, if that's your culture.

So yeah, it's a great call out, I think, I think that's right. I think owners showing up stressed, owners showing up, having to focus on short term items. Right. Is a result of not having profit and so having that profitability. But you're right, the underlying component is do people know how to behave at a level of excellence and it's rewarded. Behaving that way. It's great. Call out, David.

I'll give you a specific reason why I think we're seeing it in a more systematic way. You know, if you look back 10 years ago, every single deal, all the way from the smallest deals to the biggest deals, they were more or less structured the same way in terms of you have a buyer and you have a seller and the seller's going to make some representations and warranties and sellers expected to stand behind those where if they say, hey, I've got this number of dollars of revenue, it turns out they didn't they're going to have to pay up for that. And if it turns out that they represented that they were doing things in a compliant way and they weren't, well, guess what, they'll have to pay up for that. That's still true. But a big change that's happened and you can actually track it, we have the data for it is the introduction of representation of warranty insurance into the healthcare market. The healthcare market was the last market where it became a thing. And the reason was because insurance carriers were unwilling to provide coverage really around things like HIPAA and then especially billing and coding and healthcare compliance. And what's really interesting about that market is what you have are these third party insurers who are saying, we will ensure the seller's representations and warranties, the accuracy of their statements about their compliance and their financials. And if you think about it, what happens is when you're going in the process, you're doing a deal or staying up late nights chugging Red Bull and you come into an issue where buyer and seller just have to decide are they willing to do the deal on these terms or not. In the old days, buyer could just say, you know what, I'm just going to be okay with it and let it go. Now buyer doesn't get to make that decision really. The insurance carrier does due diligence on how high quality the buyer's due diligence was in the process. So the buyer can't just use any law firm and they can't just use any quality of earnings firm and they can't use any billing and coding firm. They have to use high reputable folks because there's going to be a separate law firm representing the insurance carrier and doing checks on all of it. And what we've actually seen is an evolution in the types of claims that are being brought afterwards and a lot more real effort being put into due diligence up front. So it is kind of forced structurally an outcome that is yielding just better transactions. It's kind of harder for the sellers who would just kind of run and gun and say, you know what, we'll deal with compliance later. You can't. And so what it really does is once you get, because that insurance is now available, you can do $30 million deal or less sometimes and still get really good coverage. And because that has an incredibly good outcome for the seller, right? Instead of tying up 10, 15%, 25% of their cash proceeds in an escrow for like two years, they can get pretty much all their cash at closing in Those deals, but it really yields a better outcome.

That's amazing. Yeah, that's amazing. So the insurance carrier being in the deal now, number one, I think represents a level of quality that we're maturing into, that they feel like they can actually insure it. So, you know, pat us on the back, we're getting better as an industry. Number two, to your point, it makes the deal so much easier. If there is an issue, you do have a third party who is financing those issues because it was so painful, right? Where private equity firms like, hey, your numbers didn't play out, right? Now they're going to, who's their partner, who's their dentist and saying, we're going to extract all these dollars from you. And so now you have this other piece. It's nice that there's a third party in the room that just has to take care of that. But in exchange for that, that third party is going to be like, all right, we're going to vet this opportunity, which has a virtue cycle, doesn't it? It just continues to bring things up to a higher and higher level. And at the end of the day, it means as an industry, we actually have to run things off of almost a standard code of ethics, if you will.

There's an expectation you're rising floor. And even if you're not doing an insured deal, if the buyer who's buying a practice down the road, if they want to be able to exit and get the really attractive benefits of an insured deal, they know that between that first deal and when they exit, they have to implement really rigorous structures and protocols. I mean, it's, it's really not that different than any other set of financial controls. If you're going from a cash pay, you know, we maybe sometimes put everything into the system and maybe sometimes we don't. We don't have great tracking on credit balances and prepaids and you know, that app that happens with a lot of, you know, the startup practices. But at some point, if you want to really take advantage, you gotta clean that up. Because the expectation is now there.

There's been a movement in the industry for a long time time, which is multiples have held, but the requirements have increased.

Right.

So what I could get for 10 times in the past might have been a throw together versus now. It has to be like a legit business. And I think this just speaks to that as well. Is, is it an insurable business? Right. Do those kind of things now are driving a turn or multiple, et cetera, because it Reduces risk along the board.

Anything you want to add in an insurable business? I mean I said before, right. Building a sustainable business, I think they're kind of it's interchangeable, right? If it is insurable, it is sustainable. If you've built in the right systems and the right checks and the right policies and the right focus and culture, I think you are both insurable and sustainable.

As you look at the evolution, if you were talking to a bunch of dentist owners like you are on this podcast, what advice could you give them? They don't do these transactions every day. Okay. So for every one of them, except for maybe our larger groups and DEO who you know, have done this a couple times, but the majority, they're going to start flat footed and they're going to go get advice frankly from their brother in law who's an attorney and from other friends. What are some things with you all like this is your day job, this is the only thing you do all day long. What are some things you see that you know, the best dentist owners are doing in the transaction process, right. That just make it better for them ultimately? And on the reverse side, what are kind of like not best practices, you know, where you see like they think that that's going to help them win or get a better deal, but it actually just kind of ruins things and might even move their number downward. So if you guys don't mind sharing a little bit of inside ball, I think that would be really helpful. Kind of best customer activities versus worst customer activities that create the best outcomes for them. And I think you've given number one, which is build a real business, build a great business, focus on that more than anything. I think that's foundationally number one. Is there a number two, three or

four if, if you know you are going to sell or think you are going to sell or want to just build a really good business that you might have to hold forever and that's okay, you should be looking at the measurement stick for that transaction, right? Or, or the measurement stick for success. And so if we're talking about how do you get to a sustainable business, which is also the same thing as an insurable business, what would you need to do to make it an insurable transaction? And, and we every day will, not every day but all the time will help our clients in anticipation of a sale. We'll do a pre sale diligence run through because we, we play on both sides. We buy, we sell, we help people grow, we help them sell and we help private equity Guys invest and make sure that their investment is secured. And so the earlier that you will, you can do a kind of pre sale diligence. Even if you don't have a plan of sailing, the earlier you know, the six buckets that you are missing parts of and the earlier you can address it, prioritize and then address them. Right. If you don't have a good compliance program that meets the seven elements, first of all, that may be problematic depending on the amount of government money you accept. But it's also not best practices. If you didn't even know you needed to have a compliance program that meets the seven elements, fine. But the only way you're going to figure that out is if we do a kind of pre sale, you know, reverse diligence and make sure that you've got what you need. So I think that the folks that do it right figure out the goal post, prioritize and work towards those that goal post again, even if they never want to sell, that builds a sustainable business. And then the ones that screw it up, if you will, or the thing that we see maybe that you think adds value but doesn't. I'm going to put it that way because I don't think it's a screw up. Thinking you need to be a DSO just because you're in the deo, thinking you need to be a DSO just because like that's what your neighbor's doing, right? I can't tell you how many calls I've had with people and I say, okay, you want to be a dso, we can do that and we can take your money and happy to do it, but why? And they say, well, because I get a higher multiple. No you don't. Oh, because I, I'm part of the DEO I need. No you don't.

Right?

Like unless you have a real good reason and it's estate planning purposes, that's a valid reason. It's you want to take, you know, non dentist investors, that's a valid reason. But if you don't have a valid reason, I don't want your money. I want you to grow a great business that you can then sell and as part of that transaction the DSO will likely be formed and established and all that. But you don't need it in advance of that.

That's a good one, Eric, and close to my heart, because I actually have a presentation and training in our resource library that I point a lot of members to when they're like, hey, I'm thinking about doing a DSO that's titled why you shouldn't set up a dso, which seems counterintuitive, but I think they think it'll make them look better for the banks than it won't. It'll make the banks even more confused.

Confused, yeah.

Yeah.

They think that it'll make things simpler for their employee management, which it won't. It'll actually make all the accounting more expensive as they're trying to do allocations,

the benefits more expensive, the insurance more expensive, the everything more complicated. Unless you have a good reason. And then let's do it and figure all that out.

And you hit on the two reasons that I give as the only two reasons. I need a non clinical investment partner in this in some form. I have to give equity to somebody who's not a non clinician. And I've actually already maximized out a profit sharing solution which would solve that too. Or number two, maybe some estate planning concepts that would work. So I like our alignment on that. That's an awesome one. Anything else you want to add as like not great practice?

David, thoughts?

Maybe I'll call it transaction add. It's where you really get distracted easily by different shiny objects. And there's going to be a lot of shiny objects thrown at you in a sale transaction, even before a sale transaction. And we get a lot of phone calls talking about how do I get my associates motivated, how do I get them equity? And the analogy I which irritates. But the analogy that I give is imagine I'm Willy Wonka, I've got a big candy shop, right? I have so many different flavors and things that can make you turn into a giant balloon or, you know, shrink you down to a little gummy bear. But if I give you all of them, you're gonna get sick. My job is to curate for you based on what your vision is, what your purpose is, and stick to that. If you don't know it, stop. Figure it out. If you are unwilling to rely on, tell your team what that is, stop. And get them on board, get them aligned with it. You know, it's always a little bit of a yellow flag for me when some sellers are kind of understandably. But they say, you know what, I can't let anybody else on the team, no one know about a potential sale transaction. It's not because they have a bad business, they might have a great business. It's a little bit of maybe there's a misalignment between what that founder's goals are for the business and what everybody else's goals are in the business. And it's just frankly, if everybody's really aligned on vision, they're going to find a partner who is aligned with that vision. Right. And they're going to execute on it. Every single person is going to wake up every day. I mean, I have to wake up every morning and see Eric's face. And I'm not even married to him. I'm married to my wife, Morgan, who works just a couple doors down the hallway. So it's one of those things that you're going to perform better if you are aligned with the people that you wake up, drink coffee and go and execute on. And if you really believe in it and staying true to those principles, it's really important. And you should have that conversation with counsel, you should have that conversation with your whole team in the sale process. Especially if you get a really good, high quality investment banker. They need to be aligned and understand what is it that you really want to achieve, not just in terms of how much money you want to take out. Right. But what do you actually want to achieve in the next five years, 10 years, 20 years in terms of making a difference for yourself, for your day to day life, for your patients. There's a lot of things that you realize don't matter that can be distractions in the sale process. Little terms around employment agreements and equity terms and you know, various purchase agreements points. And then there's other terms that really should matter a lot.

Right.

And so focusing on what matters is

what I would say it speaks to the culture too, around, you know, if you're doing this transaction, some of the language our coaches will give members is like, how does it benefit them? Because you've probably are thinking about this transaction because you've maximized your ability to have impact, to scale and grow, which is limiting their career growth, et cetera. And so being able to formulate like, okay, yes, there are benefits to me in doing this transaction. There's a lot of benefits to them too. And does that align with your ultimate vision and your culture within the company? If so, they should all be really excited about this happening. Right? But if it's something kind of, I don't know, misaligned with your culture and your vision, then you probably want to call that out sooner than later. I think number two that I heard is get clear on what your why and all of this so that all the little details you don't get too caught up on. Right, exactly. Because if you're really clear on, like here's the outcome that I'm trying to get to these other things maybe just aren't as meaningful or important. So it's awesome. You know, one thing that's really interesting about you, all that I think our listeners should understand is you really have to play in the world of quality because you are on both sides of transactions. You know, you have to look in the face the private equity firm that you helped get a deal to and. And vice versa. And so if your name gets out there of like, they just give us crappy stuff all the time, it really hurts your business. So you guys, like the insurance companies are sitting there going, we really need to have quality on this thing. Right? We need to have quality equity firms that all the dentists aren't going to hate because we're going to get a bad name over that. And we need to have quality dental practices that we're handing to private equity firms to partner with or they're going to think these guys are pushing deals that are, you know, terrible on the back end. So I think there's something really virtuous to that at the end of the day.

Lawyers and virtuous.

I like, I like.

You're welcome. I'm a good marketing guy, aren't I?

There's not too many people have drawn that connection, but it is a real connection. No, I just wanted to say also that, that that question shouldn't come up for the first time as part of your transaction. I think one thing that the deo, like a really just kind of brilliant pivot or really expansion is, is the expansion into the coaching game. And the idea that you should be diving into your why and your what and your how years before you're talking about a transaction. So you're not coming up with an answer. Why is this good for staff? It's part of your plan and your vision from kind of, if not from day one, from day now.

Totally. And what's really great, too, is whether you plan on holding the company forever or you plan on doing a transaction at some point, the path is actually the same. Because who wants to hold a. A crappy company for the rest of their life?

Correct.

And who wants to try to sell a crappy company and get a lower multiple and value for it? So building. I think the theme of this podcast that we take away is there is total alignment now for you personally, for what the industry is looking for, for all the players that are coming together that we're all maturing into the fact of let's just build great companies. What are the principles underlying that do those things? You'll get the highest multiple. Or you might sit back and say, man, now that I built this great, it's running good. I just kind of want his lifestyle right now. It's self managing, et cetera, et cetera. Which really simplifies, I think, some of the complexity of like, should I do this or should I do that? Should I take the short term approach or should it's all now merged into just take a long term great approach to building a business.

So somebody said it, and I forget who, but so I can't attribute to anybody, but they said, you know, you want to build a really good business that other people want to buy because you never know what the future holds and you may not be able to sell it. And I think there's a lot of folks that figured that out over the past two years like they were building something with a goal of selling it in 24. Well, guess what? The market didn't want it in 24. And so if you were building it to kind of max out and peak in 24, now you're holding something that's not optimal and it's probably a drain on your energy and your resources and your life as opposed to building something that somebody else wanted to buy because it's a solid company. Now you're stuck with it and that's not a problem.

Yeah, I love it.

That's true across the board. I mean, you've got entrepreneurs who realize that you have private equity firms that are doing that. That's what I think a lot of the media and the regulators don't realize. But it's a good thing. These continuation vehicles are basically big private equity firms saying, wait a minute, we built a really good asset. Why are we trying to sell it? Let's hold it, right?

We have to sell it because of the terms of our prior fund and when we have to give back capital. But we still want to be part of it. And so we got to close out that fund, we'll do a new fund and carry it on. Market's not realizing the true value of it today because of broader market issues and interest rates. So let's just hold it, continue to build it, continue to grow it.

Yeah, good business is good business, period.

Well, thank you both. This has been awesome. I think, very educational. You've simplified down. I think the core principles that, you know, go into these transactions make them very usable for an operator. Anything kind of in closing that you want to make sure people understand. Of course, I'd love for you, you know, if people want to talk to you ahead of time and say, hey, I do want to understand what the seven components of compliance are and what do I need to do? Because those are great roadmaps to bring to your do coach or for you personally to be like, okay, I've got a checklist now of how to build a great business.

Yeah, I'll say. I think I'd like to leave folks with the following. There are folks that have done exactly what you were trying to do. Maybe not in the exact same way. And I think figuring out through the, through the coaching or through hiring folks as consultants or just learning at conferences, I mean we go to all the conferences. Our firm has been again, been in the DSO space for 30 years and when we joined with Holland and Night, we got a bunch of resources that we didn't have previously. We have a fantastic woman, Sandy Heller, down in our West Palm beach office that used to play for the payers and deny claims and she has switched teams and she is now playing for the good guys and she's gotten some fantastic results for a bunch of her clients and chasing payers down to pay to pay money that they're either, you know, slow walking or, or just denying in, in general. Go with people that have, have been there before and have seen it before. And, and I think in doing so you get just the real value. And also don't be afraid to reach out. David and I, I can't tell you how many hours a day are spent on phone calls that we don't bill for because we, we firmly believe that first of all, it's the right thing to do. Like if you're calling me up to ask some questions about whatever and I've got it, I don't have to research it, you know, it's a half hour phone call that helps you, like that's the right thing to do. Second of all, it's investing in the industry writ large. We want to see success here. We think a rising tide lifts all boats. And third, we want to build relationships and get to know folks and make sure that they're successful. So don't be afraid to reach out to people, have the conversation up front about kind of cost of time and that sort of thing. But if you give me a call and you say, hey listen, I want to talk about a future of sale process and what that can look like, I'd say great, let's chat. And I'm not going to charge you for that but, but I think that's very important information. So I want to leave that with folks is like, go with the people that have done it before and hopefully are a little bit giving of their time and expertise because folks have given it to them.

I'll add to that entrepreneurs are a certain type of breed, and that usually means that they aren't just focused on one thing. They see bigger pictures, they see how things interplay. If you ever read the book Range, it talks about the power of that. There are a lot of entrepreneurs in dental who also are interested in things like medspas and Infusion and pick your sort of trendy topic of the week and we do all those deals. But one of the things I always tell people who are first dipping their toe in healthcare or healthcare services is you've got a much better ecosystem in dental, because I don't know what the DEO equivalent really is and a lot of these other spaces and the ability to really test out a lot of your theses that maybe you can deploy in other kind of specialties with different caveats. You know, you're really going to learn a lot by focusing on dental to start with. And there's just a lot of resources and capabilities you can deploy, including from DEO and the conferences where you can really learn how to do it and then kind of replay it and scale it in other ways and take a lot of lessons learned from other specialty practices, other healthcare ecosystems, everything from technology to products. But there really is a benefit to focusing on an area that's got some maturity and has a lot of resources right there and available to provide that kind of coaching for a thesis that you want to deploy.

Awesome. All right, if somebody wants to reach out, what's the best way for them to get a hold of one or both of you and just say, I'd love to just chat.

LinkedIn and email are great.

Yep, David Marks, the real David Marks, and Eric Scalzo, the Hollow Knight website as well. If you just. If you plug in dso, we'll come up. Our emails and our profiles are there. And yeah, give us a call. Reach out with email. Would love to chat.

Awesome. Thank you both for being on today. For those who, you know, want to dig deeper, feel free to reach out to DEO as well. @deodentalgroup.com we have a event coming up here June 12th through the 14th out in Arizona, and so hopefully see you all there. It's a great place to network with 400 other dental entrepreneurs and really talk through some of these issues. And until next time, keep smiling. Thank you for listening to deo's Growth Secrets podcast for dental organizations. Continue the conversation on our Facebook group and meet other dental leaders. Get questions answered and the strategies you need to succeed. Plus, we have some free resources for you right there on the Facebook page. Remember, you're not alone. Let's do this together. Join DEO's Growth Secrets Group on Facebook. And until next time, keep smiling.