81: Acquisition Tips with Ken Kaufman and CFO Tom Nelson of Atlas Dentistry

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When I was working as an associate right out of school, I never imagined I could own these many practices with this amount of support.

So thank you.

You have helped build my marketing mind

to a whole new level.

You have this natural talent, this unique ability. Happy day to you and welcome to another episode of DSO Secrets. I am Ken Kaufman, your host today, filling in for the illustrious Emmett Scott. I'm excited to introduce today's guest, Tom Nelson, who is the CFO of Atlas Dentistry located in Olympia, Washington. They're supporting 10 plus dental practices in the Washington state. Tom and I recently reconnected having served missions together actually during the same time in the mid-1990s. And we were actually shocked to learn that we were both CFOs of DSOs in this very, very narrow industry and niche and then even, you know, within the same discipline, having come up through the finance ranks. So Tom, thank you for joining me today.

Yeah, thanks Ken. This is fun.

So I want to take a minute and really help our listeners get to know a little bit about you and kind of what the situation is that you're in there at Atlas Dentistry. But if you could start maybe give the listeners a little bit of information about your educational background and then your work background that's kind of led you up to the point where you're now at Atlas Dentistry.

Sure. I had a business undergraduate and I also completed an mba and during that time I worked in commercial banking. So my background is lending to mid size and large businesses including dental offices. I never lent to a dental group because it really hadn't existed that I knew of. But I did commercial lending for almost 15 years and then joined my brother in law, Adam Kramer, who's a dentist. And he saw a vision of growing his practice to 1 and 2 and you know, possibly 25. And so that was in 2012. And we've added measurably a couple of practices every year since 2012. And now we're at 11 practices doing about 23 million in revenue. And we've all done that through acquisitions of existing practices. But we've also combined some practices. We bought two and combined those together, we bought three and combined those together. We Bought another three and combined those together. So our revenue growth has been pretty steady, even though the number of practices has changed. My background, Ken, really is finance and analyzing the cash flow and strength and leverage of companies coming from that banking background.

Great. And then tell me, so how long have you been with Atlas Dentistry then?

It's been eight years.

Outstanding. A good run. And there's still plenty of Runway, I'm sure.

Yeah, there's lots of deals to be done, lots of work to be done. You know, this really started in 2011 for us when Delta Dental changed their whole fee structure and kind of sent shockwaves through the, at least the Washington state area. And dentists were wondering, how are we going to deal with this new type of landscape where we can't always expect a steady increase in reimbursement fees. So that was kind of the impetus behind thinking maybe we need to get some economies of scale and look at getting some new techniques as to how to maximize dentistry.

Great, that's, that's a great background and a setting for us to understand. So I'm going to go through. It'll be a little bit rapid fire, but it's just some basic questions, some stats so people can kind of understand where Atlas is at today.

So total number of locations, we have 11. We also had a sleep apnea treatment company that we sold. So that was three of an offshoot that we dabbled in for a few years and we decided, let's go back

to dentistry, so stick to the core.

Great.

And those 11 locations, all in the state of Washington?

Yeah, they're all in the Puget Sound Seattle area. Some of them are in urban areas. Like we have two in downtown Seattle.

Okay.

We have several in rural areas. Like rural areas, communities with less than 10,000 people. They're all general practice locations.

Okay, great. And it sounds like your growth strategy has been acquisition and some combinations. Were there any de novos in there or has it mostly just been the combinations and acquisitions?

It's all been combinations and acquisitions. We've thought about de novos, but at this point that hasn't been our strength. And so we've, we've looked at mostly retiring doctors take over their practices.

Great. And how many full time doctors do you have then in total?

17, I believe.

Very good. So right now, as the CFO of this organization, and you know, you're still in that, you know, obviously growing phase, getting to 11 practices is really hard and difficult. And I'm sure you guys, you know, you can attest to some of the war stories which Departments now at the DSO are reporting into the cfo. What all do you have responsibility for?

So I have responsibility for finance and hr. We've taken our billing group and actually put them under a different executive manager. And he also handles marketing and technology.

Very nice.

We're pretty lean on the, on the administrative side. We only have four of us in the executive team. One who is a hygienist one day a week, and then she serves as our chief operating officer, mostly linking in with our front desk and the real clinical side of things. We have our CEO, Adam Kramer, who's an active dentist as well, who coordinates all the mentoring and training of dentists and just other CEO roles. And then we have a. What we call a Chief Strategic officer who handles just a lot of personnel and growth opportunities. And he wears a lot of different hats. I handle the hr, so we have an HR director who reports to me and then a accounts payable person and those. And we centralize all the bill pay. So everything goes through me. I handle all the banking, all the insurance. I also wear the hat as the building maintenance guy. You know, at first I was doing everything, marketing and everything, but some of those big building maintenance questions fall on me, like tenant improvements or if we're going to have some major equipment purchases. Those go through me as well.

Very nice. Okay, good. So you have kind of a facilities layer there as well.

Yeah, you know, we'll get to the point where we'll add a facilities person. We'll have more accounting people. You know, we'll get to that. Those levels. At this stage, we're all wearing a few different hats.

Yeah, well, and that's, that's the state that everybody's in as they're, you know, in these initial years of growth where you just, you're waiting to make that next hire until you see that revenue go up or you have that next acquisition come in and it's going well and, and your P and L needs to be able to justify you making those higher. So. Fully understood. All right. So are you guys currently cash basis or accrual basis for accounting?

So we're cash basis. And I think it would be a big adjustment to go to accrual basis. I've talked to our accountants. We've prepared for it every year in case we really need to go to that level. From an accounting perspective, it's pretty easy to be on a cash basis, and our bank has allowed us to do that. So our financial statements, we're at the reviewed level with our financials. Okay.

That was Going to be a question I was going to ask. That's good to know.

But the bank has allowed us to do cash basis reviewed statement, which is a little odd, I think, for the accountants to do that. But the, you know, the bank's the primary user on those account, on those accounting statements, so they understand how we've done it. We are in the fortunate position of not really needing to make too many decisions. This is up until Covid, of course, we didn't have to make too many decisions on which bills to pay. You know, bill would come in, we just pay it. So we didn't really have to manage our accounts payable in the sense that most traditional companies do, where they're logging them in and then they're deciding how fast to pay or how slow to pay. So from that perspective, doing an accrual based accounting would just add more work on our part, you know, to report that in our system probably add an extra layer of inputting the data at this point, you know, but we know that accrual basis is probably going to be a truer measure of really who we are. You can get some lumpiness, I guess I would call it in the cash flow when you, you know, a couple of times we've had credentialing go wrong and we couldn't collect for a month or two for a doctor. And then all of a sudden a wave of cash comes in. And so it makes it look kind of funny on the P and L that, well, wait a minute, you lost money for two months and then all of a sudden you had a great month? Well, you have to kind of go back and explain those things.

Yeah, that's an interesting testimonial around at least where some of the flaws are in cash basis. But again, to the degree you don't need it. And as an executive team, you guys feel like you've got a handle on things that might not need to be, you know, urgent to get there. But at some point, you know, think about yourself at 20 locations or 30 locations or 40 locations. At some point, do you feel like you guys will need to make that change?

Yeah, absolutely. And you know, even now I have to do modifications to the financial statements internally as well, because sometimes if you do it based on cash, you don't want to get a false sense that you've collected too much or not enough. So you have to, you know, I use the production side to show a P and L based on production and then there's the cash flow side. So, you know, when you're Talking to the doctor team doctor owners, I always have to put a lot of little asterisks there to say, well, here's what we really did, especially in the startup phase when cash might not be coming in as quickly. You know, this is what we really did in terms of production and all the metrics that you do, all the, you know, how much were your supplies as a percentage of revenue? Well, if revenue is collections, that might be different than actually production. And when it comes to budgeting, you know, it really should be accrual.

So that's right.

I guess I know that it's coming and it's just one of those big projects that will, it'll happen in one of these days and we'll get there. It'll be a truer sense of how we are.

Yeah, that's a great perspective and I appreciate the position you're in now and then obviously the lift that it's going to be in order to get to that next step. So I want to go through software quickly. And again, all of this is meant so that the listeners here on DSO Secrets, they can get to know you and the organization and what type of software you guys use in those things. And then if there's. It makes sense to network or reach out or connect at the end, we'll give everybody your contact information and as well, you're going to be out on the DSO Secrets group as well. So first up, practice management software, Dentrix. Okay.

Accounting software, QuickBooks Enterprise. Right.

And when we talked before, you are using the consolidation function of that, but it's a little bit clunky for you as I, as I understand. And it's. That's been the report I've gotten for most.

Yeah, we went with the enterprise because it helps us do our payroll. So we use QuickBooks for payroll as well.

Okay.

The. The consolidated function is pretty nice. It is a real time sucker though, if to aggregate all of your entities, it literally takes maybe a half a day to run some of, to run all of those reports together because you're just so. You have to do other things while you let QuickBooks spin. It just reminds me of computers back in the 80s and 90s. It takes a long time. Now, I should say that each one of our practices is owned in a separate legal entity. So we have a separate QuickBooks file for every entity. And at some point in time I'd really like to move to a higher level of accounting software that I don't have to log into a new accounting or new file every time I Want to get to a new practice. So. But QuickBooks is, you know, it's a very inexpensive option and you know, it's just the power of inertia. Now that we know it so well, it's a chore to maybe switch over to something else.

Yeah, that's right. That makes sense. You know, the interesting thing about that software, first of all, it really is a best practice if you have different legal entities, to have each one set up separately. I know some will create one entity or you know, within QuickBooks, create one entity and then do classes by in each location or each entity be named by that. But the challenge is your balance sheet doesn't break up by class and it can mess up some of the other financial reporting. So anyways, for those that are thinking about it, and one of the biggest complaints is, you know, like you guys have 11 entities. So that means that whoever's paying your bills or going in and putting entries in, they're logging out of one, going into the next one, logging out of the, you know, logging out and then logging into the next and so on and so forth. So yeah, the next tier system. And as soon as you guys are ready, there's certainly good options there.

Yeah.

How about AP automation? Are you just entering and using QuickBooks or are you using any other automation tool around AP?

No, just using QuickBooks and logging them in as we pay them. So we don't even log them in as a payable, we just pay the bill straight out of QuickBooks. Got it. Print checks from the office or you know, pay with a credit card and whatnot.

And then you're doing for Payroll. You mentioned QuickBooks. Do you have any separate outside like HRIS system where you keep track of employees and information about them, or is that all in QuickBooks?

We've got it all in QuickBooks for right now.

Okay, great. And then you may not have this, but do you have any type of a learning management system where you're deploying training to employees or you know, things around onboarding or, or anything like that?

No, we haven't gotten to that point.

Okay, how about your forecasting and planning? Do you use some type of off the shelf software or do you use the almighty Excel?

We use Google Sheets actually, and that is something that we really ramped up a couple of years ago and we're pretty proud of what we've done. We just created it all in house, but we have a master Google Sheet and then we have separate tabs for each location and then we have a management company as well, and so that management company receives management fees, so that the whole Google sheet is all tied together. And we forecast down to the day of how each doctor is doing, how each hygienist is doing, and then that breaks out into. So we ask the doctors to give us their schedule for the next year, at least as good as they can give it to us. Then we might trim a couple little things and then we forecast out the whole next year of every single expense. And we have those 11 companies. But we've standardized the P and L and the balance sheet and assigned key numbers to each category so that they're similar across the different practices. And that way we just replicate those tabs on the budget and say, you know, building maintenance and repairs, okay, that's number 5,400. That's going to be the same across everybody. And so that, so when it comes to our forecasting for expenses, we've got it down pretty well. And what's amazing is that on the aggregate, like if you take all 11 companies, our forecast is usually very, very close. What's funny is that each out of each of the 11, we'll have one that does better and like by far. And then one that does a lot worse than we thought. And maybe that looking back, you think, oh, that's right. They, you know, a doctor had to leave for some reason and we had to get a new doctor or just for whatever reason. On the aggregate, we're really good at projecting, but on the specific practices, sometimes it's not always perfect.

Nice. And then are you able to download out of Google Sheets and then upload those budgets into QuickBooks? Do you go that far or do you just keep everything in the Google Sheets for reporting and everything we do

put all that information into QuickBooks. Yeah. And that way we can run budget versus actual reports because that's pretty helpful. We do those every month just to see where we're at. And then we then right now we can't consolidate those in QuickBooks that I know of, those budget versus actual, because they only have. That's one of the limitations of QuickBooks is they only have a canned number of maybe six or seven consolidated reports, like a P and L, a balance sheet, cash flow, a couple others that we don't use. So then we have to take the budget versus actual and then put them back into a master spreadsheet to be able to show it on the aggregate. So it's, it's. I love spreadsheets, but it's a whole lot of work that probably I could Save a lot of time and energy and, and you know that. I think the rule of thumb is if the data is out there, you should be able to just push a button, you know, and, and it should be able to create the reports that you want if you're using them over and over again. That's what I want to get to.

Yeah, that's definitely the next level or next tier system for sure, but it's certainly possible. How about team communication and chat? Do you have, what do you guys use for that?

We use Google Groups, I think, and we have multiple levels of that. You know, all the office managers, all the leadership team, executive team, different groups

within sort of a Google chat or Google hangout structure.

Yeah, yeah. You know, the office managers love it. They'll write each other and say, hey, look what I found in Dentrix. This is this neat feature that nobody else knew about. Or, you know, one of the things that it, that it changed. One of the big reasons why we used it was for hiring. We hire mostly at the local practice level. And so when somebody would be leaving the organization, it was hard to get that information to the HR director. And so with this Google Groups, it's just made it really easy to say, okay, so, and so is leaving, and here's her last date and that sort of thing. Great.

How about credit card expense reimbursement? Do you have software that you're using for that kind of stuff to capture those transactions and people upload receipts? Or is it all done manually at this point?

It's, it's all done manually using a Google, a master Google sheet that our AP person has created. And people, then people log in, fill it out. We've looked at some software systems and just haven't been able to justify the cost because we only have maybe 10 people that are getting reimbursements. So if we had more people traveling, I think it would make more sense, but haven't done anything with that. You know, there's, there's some pretty neat systems out there where you can scan all your receipts and upload them to a system and pay people back.

What does your monthly or your quarterly financial statement package look like? Do you include some type of written MD or are you just doing a verbal discussion? Once you run all that information and get it prepared, so what does your package look like and how do you guys discuss and review?

You're talking about internally?

Yeah, internally.

Internal. Internal. It's a P and L and it's a balance sheet and a cash flow statement. And I create my own Cash flow statement, because this is directed at doctors. So they don't want to see a lot of accounting jargon. They just want to know, okay, where did the money go? What is that stuff called?

So in your cash from operations section, they don't want to see net income, add back depreciation, add back amortization, add, and then add your changes in AR and your changes in liabilities and all that stuff. They just.

I've completely simplified it. It's the top. It says net income, sources of cash, and uses of cash. It's those three things because that's where we, you know, where did the money go? Where did it come from? It's. It's much easier to boil it down that way. And so I prepared those three, and that's on a quarterly basis. Now with COVID I've been doing monthly financials. I think it's been pretty important because the difference between accrual and cash, or what I would say our collections versus production has been really challenging to figure out. Okay, what do we really have and what will we have in the future? I know you've dived into that in previous podcasts about modeling your cash flow and your burn rate. And so we've really spent a lot of time in the last four months looking at detailed cash flow and financials. But before that, it was quarterly financials with a couple paragraphs of discussion. And then on a monthly basis, I create the budgets versus actual reports. And then on a monthly basis, I have this global report. I just call it where we are now. You can see I've dumbed it down for everybody's usage. Where are we now? And it's got some graphs of production, it's got graphs of collections, all the little stuff that we track. But it's mostly just a barometer of how are we doing compared to last year. How are we doing compared to budget? And then I break it out by office.

Great. So you can see by office the details, as well as, at a consolidated level, budget versus actual, as well as the actual performance against the same month or the same measured period in the prior year.

Yeah. And that. That tells us, okay, how are we doing compared to. In it. Yeah, compared to how we. How did we do last year?

It's so hard, Tom, don't you find? It's so hard, like if you just run a profit and loss for, say, the month of May of 2020, it's so hard to just look at that and get value when you add the context, like you're doing where you show well, what did we budget? What or what did we do last year? May. And you create those comparables. It creates so much more context. And I've just found it creates a lot more richness around. Otherwise, everybody's like, well, what did we do last year? Or, you know, it really helps people understand. Okay, is what I'm looking at good or bad? Should I be happy about this or should I be sad about this? I've had so many times in my career where I've been explaining. And they'll sort of put their hand up and say, okay, hold on. Am I supposed to be happy or sad right now or angry? What emotion should I be feeling? And I find that bringing all that context and helps people understand. And especially CEOs and dentists who maybe they don't have a lot of training in reading financial statements. Now, they're all super smart, but those who have a little bit more training, sometimes they look to us to help them create the right context to evaluate those numbers in.

Yeah, I agree. And I like quarterly reporting simply because one month can be totally off. You know, if somebody takes a week off of vacation, that'll make that month look terrible for some reason. Also, we do payroll every two weeks. So every two or twice a year, you're gonna get two months that have three payroll months. Yep. And that'll add kind of a whole new weird spice. Just makes it look terrible for two months. Can. A little. A short, little side note here. We discovered that in 2020, we would have an extra payroll because we're on cash basis accrual or, sorry, cash basis accounting. Yep. So every year we have 26 payrolls, but in 2020, we're going to have 27 payrolls. Yep. When I discovered that, I thought, okay, no problem. We'll have 27 payrolls in 2020, but we'll probably have 25 in 2021. Well, nope, we're not. We're gonna have this extra payroll, and our payroll is, you know, half a million dollars or however much it is.

Payroll's half of all money coming in goes out in payroll and DSOs, if not more. So it's a big expense, and to have one extra is painful. I'm sorry. Go ahead, Tom.

Yeah, it's just the way that the calendar worked. We paid on January 3rd because that was the first Friday of the year that we would pay. And then our last one is going to be December 20th, something because it'll be before the new year. And, you know, if you think about it, I mean, hopefully our listeners would appreciate this, but there's. If you're paying every two weeks, there's. That's 20, 26 payrolls. But really there's 365 days in a year plus. Plus you throw in a leap day. So every 12 years, you're going to get one of these extra payrolls. And, you know, it just seemed like, okay, if we've got Covid, we might as well throw it in with 2020 now.

There you go. I love it.

I braced the bank. I said, you know, if we were on accrual, this wouldn't even be an issue. But we're on cash basis, so this year is going to look half a million worse. And that's. That's pretty significant. That's not a small amount of money. And you can't just write it off as a one time thing. It's actual cash out the window. So I don't know, maybe I'll go back and say, maybe 2020 is the year we'll convert over to accrual.

Yeah, I was just gonna say you're kind of selling it right now. You may not be realizing it, but yeah, we've been on accrual payroll for years. And it just removes all that noise because it just shows actual. Anyways, I'll get off the soapbox. So I want to jump into

now

because we know that you've grown through these acquisitions and combinations. And I'm certain, I know you're a smart guy and your executive team, everybody's on their A game. But I'm sure there have been some mistakes you guys have made in doing acquisitions. I'm sure there have been some things where you look back and say, whoa, that was brilliant. Didn't know that that was going to be brilliant. But that ended up working out really well. What are kind of some of the key tips and tricks for those emerging DSOs that are looking to try to get a process of acquisitions going? And then what are some of the pitfalls you guys have found in sort of trouble spots in taking that acquisition growth strategy?

Yeah. One of the toughest things that we found was combining offices. You know, on paper, from my CFO perspective, the combination was brilliant. This is why we got into the business. Let's get some economies of scale. Let's have one central, you know, have one front office who can do all this. When you combine offices, you're combining personalities. It's like combining households and merging together. Three different dental offices, or even two different dental offices can be a challenge. On the personnel side, you know, there's been ways that they've been doing it and sort of an order of how people have done the operational flow in the office and that it's been more challenging. So we had one where we literally. We combined three different practices. Two had been in the same building, but separate practices on separate ends of the building. They were selling their building and needed to move into a new one. So we remodeled another building down the street that had a dentist in it and combined all three practices. And that was. That was a challenge, you know, just. Just to get all three teams involved. We had. We spent money every quarter to do team building exercises, you know, let's go do an indoor volleyball competition, things like that, to really get them to gel. And, you know, and I'll be honest, we lost a few people along the way. Some that we didn't want to lose, some that we. It quickly was apparent that we needed to trim some of them. So you mold a new team, but that took about a year to even get some stability with the team. When you do acquisitions, it's good in the sense that you've got a patient base right away. And I've found that patients are very loyal to the office. If you keep the same staff and you're in the same location, even if you have a retiring dentist. I think it's been greater than 95% patient retention for us, which I'm still amazed at. And in fact, most of the people who end up leaving were maybe people who have been traveling to see that dentist because they used to live there and they still go back. They've always gone back to see the doctor. It really has been the patient stickiness. They've really stuck with the practice. Now the challenge of acquisitions, I think, is that you're dealing with legacy equipment, legacy systems, and sometimes there's a conversion. We made a decision a while back, we would just have all of our practices on Dentrix software. I mean, at least that's who we're using now. But rather than having multiple software platforms, it's just so much easier if we're all on one. So we can do common training and things like that. Well, if you. If you. To convert an office to a new system, it takes some. Takes some adjusting. Depends on how well the office. Well, it depends on how well people are good at new technology. You know, some people embrace that more than others.

That was one thing that surprised me. When we've been involved with acquisitions and needed to move them to a new software system, I did not think about or did not see the first time we did it, I didn't have visibility to this, but the revenue actually goes down in the practice. I had no idea that a software change would have that dramatic of an impact. But we saw 5, 10% decline in the month where we moved forward with the changeover. And I'm sure we could have done it better and organized it better. And you guys probably have figured some of that out. But I was really surprised. I didn't know that would be so disruptive.

Yeah, and you know, people get used to what they're. What they're used to. And so whatever package they were on, even it was. Even if it's a really inferior practice management software, they were used to doing it the way they were. And so maybe. And so they go to this new software program, they are just not used to just clicking on buttons. They don't know the things that they have to do. And sometimes people think it's a lot more work when really it's less work for them, but it's just a new way of doing it. And so you're right, it does create some bogging down of the systems. And for example, we changed a practice over to Dentrix, but the previous practice didn't have any treatment planning in it at all. There was no. They wrote it all in charts or really the doctor just knew it in his head. And so there was nothing in the system of, you know, this patient needs all this treatment. So the new. So, you know, we. In Dentrix, we asked that everybody put all the treatment in. Well, that meant that they had to add that input in for every patient that came through the door. So we actually hired a couple people to have to input a bunch of data into the computer. Plus some of it just didn't transfer over. That's the downside too, is that not always able to pull over all the demographic data every time based on the limitations of the previous system. So that, you know, that's one thing that we've been cognizant of.

Anything else stick out to you? What do you think has gone well in terms of your acquisition strategy?

You know, we've hit some really good, some real home runs with some of the doctors that we've hired, and then some of them haven't worked out. And that's still a process that we are trying to hone, I guess. I mean, that probably takes a psychology degree more than a doctor degree or a finance degree to really find out who's going to be the best candidate for your organization. And, you know, we've learned that hiring people who have the same goals that we do and a personality that works with ours is probably more important than experience or, you know, their stage in life or any or even their availability of working days and all that sort of stuff. We really want people who are going to be aligned with, you know, our mission statement. But even more than that, it's people who have, like, goals, you know, whatever you're, like, you know, whatever your goals are, if your goal is to have that practice grow, if your goal is to have them take on a leadership role, whatever it is, we, that's what we're trying to, to look for now, that's. That's harder in rural areas. It is. Probably one of the biggest challenges, honestly, is when we put up a, an ad for a doctor in Seattle. I mean, a couple years ago we put up an ad. We had 30 resumes in two days.

Yeah.

Which was, you know, because everybody wants to live in Seattle and be part of the, you know, the big city and that's, you know, and they see that as a, as a great place to either raise kids or to, you know, have. If they're a younger doctor, that's kind of a hip place to live. If you're asking someone to live in an economically depressed area that has, you know, it's an hour away from Costco and, you know, maybe doesn't have the sports teams for their kids or something like that, or at least that's the perception, then it's a little bit more difficult to find a doctor who will do that. And you've got to. Then you got to find the right fit. And that takes a little bit more of a challenge.

Yeah. And so. And these hires are. So it's when you're acquiring a practice and the existing doctors wanting to transition out into retirement and so you're needing to hire to backfill for them. Is that right?

Yeah. And we've had a lot. We've had a big combination. We've had doctors who have worked for us continue to work for us for a year. Some full time, some part time. Some have retained ownership. Actually, only one has retained partial ownership. The rest have all sold all of their interest in the practice. And then some retired right away. I mean, our first one, he was. He was diagnosed with cancer before he was selling it. And so he never. He passed away just weeks before we actually signed on the practice. It was pretty sad. But, you know, since then we've had all flavors of people working back for us or not. You know, some have had medical issues and all of a sudden they couldn't work again. But yeah, bringing on a new associate or associates has been a large factor in when we could purchase it. You know, especially these rural areas, we can talk to a dentist and say, hey, we want to buy your practice, but we need to go find an associate who will work there before we can even buy it. Interesting. Take the risk of acquiring it and knowing that the doctor is ready to be on his way out.

And are your associates generally coming straight out of school, meaning this is sort of their first role in dentistry, or are you finding more experienced, experienced dentists? What does that combination look like?

About a third of our doctors are straight out of school and the other two thirds have experienced. We haven't had very many with more than 10 years of experience, for example. Very few of them have had a lot of experience. Most of them are a few years experience or straight out of school. And we've had pretty good success with people straight out of school. Honestly, it's been a good, you know, they're in a position where you can help mold their treatment philosophy and help them get up to speed even if they're slower. They're so eager to learn and so eager to do things and, you know, please patients and all that. They're ready to jump.

Yeah. And when you say slower, generally, that's just because they haven't had the repetitions yet. They haven't been chairside full time, seen 15, 20, 30 patients a day on a regular basis. And so it takes a little while to, I think, adapt to that pace. Is that what you.

Exactly. At dental school, you know, they're only seeing a couple patients a day when they're actually practicing that, and all of a sudden they're thrown into seeing multiple patients and some procedures. It takes them a little bit longer and then they also, they don't know, they don't know the higher procedures. So, you know, implants, things like that are, that's a big learning curve for them. So as far as, yeah, when I say the word slow, maybe they're actually slower at doing some procedures. But they, but there's also a ramp up in their daily production average because they haven't been able to do some of those larger procedures. Their production.

Awesome. Well, this, this has been fantastic. We're going to move to our lightning round section now. Tom, this is where I'm just going to rapid fire some questions and just your rapid fire brief responses back. What are you currently working on?

We are, you know, I think Covid gave us a few Months to look, look at our to do list and say, okay, what are the things we haven't done over the last year? So we are currently looking at our vendor relationship for supplies. We've had a long term relationship with one company, but we figured, you know, it's probably time to look at a new one. And so we put a lot of time and energy into looking at some of the big supply vendors out there and seeing really what opportunities we have. So we've done some diving into all sorts of supplies costs. That's probably one of the biggest projects that we're working on. Interesting. The pipeline of acquisitions is still aplenty, but we've got to just sit back and evaluate what we really want to do. Is now the time to buy a lot of practices. And so that's always the ongoing project, but maybe not at the forefront at the moment.

Right. And what are you most proud of, Tom?

I think that we are. I'm proud that we have done this all with debt financing. That's been our philosophy is that we've been moving along with either internal cash or debt financing. And so we've done this in a steady growth mode and constantly learned from what we've done. You know, that's all you can do is just keep moving ahead and try your best.

That's great. And would you attribute that is some of it to. I mean, obviously you've got to have a good bank relationship, but are you finding that the acquisition prices are fitting within what the bank's willing to finance? And then are you able to grow those acquisitions pretty quickly, the earnings so that, you know, you can stay within debt covenants and those kind of things?

Yeah. And yeah, you asked about reporting. You know, that's one of the other things I throw into our quarterly and reporting is how are we within our debt covenants. And that's something that I fix that I more fixated on than the management team in general. I really want to look at those covenants.

That makes sense. All right, we've got to jump on to the next one here. Favorite sports team?

Byu, Cougar football team. I wish they could do better.

Favorite hobby?

I love cycling and running. That's awesome. Both of those are my favorite hobby these days.

I think you were telling me that you were going to do the loaded job this year, which that's an over 200 mile bike ride in a day and you're climbing over 10,000ft in elevation if not more. Right?

Yeah, it's an epic ride. It's beautiful scenery up there. And I'm also training for a marathon that, you know, has been postponed, so we'll see if loaded jaw happens. Cross your fingers.

Yeah, there you go. Favorite app on your phone.

Oh, I love an app called Picture this. And Picture this, I should say Strava is probably my favorite app, because that's the one that I use all the time for cycling and running.

But, yeah, that tracks all your runs and heart rate and all of those different things. So you can analyze.

Yeah, but picture this is where it takes a picture of a plant, you know, like a flower or some sort of plant outside, and then it identifies it for you, and it has amazing accuracy. And so when I go hiking or just when you're outside, it's. It's. It's a really neat plant identifier.

That's amazing. I didn't know about that one. I need to tell my wife about that one.

That's great. It's like facial recognition for botanists.

There you go. And your favorite spreadsheet function.

I love Goal Seek. I've used Goal seek for forever. You know, Goal seek is where you say to yourself, if I want to. If I want a certain result, like, I want this budget to make a net profit of 100,000, what does. Then how. What would the revenue have to be in order to get a net. A certain result? So the. The goal seek button, you put your mouse on that, and then it'll say, okay, I want X result by changing Y cell. And then you click on the cell for revenue, and it'll sit there, and you actually see the numbers change, like a slot machine. And then. And then all of a sudden, it calculates. Okay, to get a net profit of 100,000, you've got to get revenue of, you know, a million dollars or whatever.

So that's great. I've not ever used that function. Goal Seek. I love it.

Yeah.

All right, Tom, appreciate you being on the show today. Our listeners are going to get a lot of value from this. Do you have any final parting words for. You know, think about the emerging groups. They've got one, two, three, four locations. They're trying to figure out how to get up to where you're at at that 11 number. Any parting advice for them?

Yeah, you know that I would say that the one thing that each CFO or whoever's doing the finance, probably the most important thing you could do is really evaluate each acquisition or each de novo that you do in a detailed pro forma spreadsheet. And, Kenya, I think you've probably covered some of that details. And there's lots to learn on how to look at buying and selling buying practices because you can make the day to day decisions of saving $1,000 here and getting a different vendor for that. But buying a practice and evaluating whether it's going to be worth the ROI in the future is a huge decision to make. And that takes a lot of little decisions to look and see what are my expenses going to be and exactly what is my pro forma? So that, that takes a whole lot of. That's a much bigger discussion for another day, I'm sure. But that's where you make your money, is putting together those assumptions. And only you will know how the assumptions work for your organization. You'll know your expenses, you'll know what to expect. So it's not something that somebody else can tell you, but it's, you know, it's a process of learning and people can do it. Yeah, they'll be good at it.

Great advice. Yeah. So Tom, if somebody wanted to get in touch with you, like if they wanted to learn a little bit more about, you know, goal seek or your proforma mentality and how you come up with those assumptions or, you know, any other way, I know you're going to be joining up in the DSO Secrets group. So by the time this podcast goes live, people can chat with you there. How else can they reach out to you if they want to connect?

My email is tom atlasdentistry.com and that's probably the easiest way to get, get a hold of me and then we can chat over the phone or whatever. Perfect.

Great. Well, Tom, again, thanks for being with us. I think that our listeners are going to get a lot of value out of the things you've talked about today. And I want to offer, I want to thank everybody for joining today's episode. This is a wrap on this episode with Tom Nelson of Atlas Dentistry. He's the CFO where we've covered a lot of details and also some great tips and tricks around how to be successful in an acquisition growth strategy. Thanks again for joining. Happy day.

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