39: Landmines To Avoid When Purchasing a Dental Practice (And More!)

Hey, dental associates and new practice owners. Welcome to the Associates on Fire podcast. Powered by Practice cfo. This is the podcast that teaches you what you never learned in dental school, the financial side of dentistry. We cover topics from planning for ownership, buying a practice, to student loans, taxes, and all things financial for the hungry to learn. Dental Associate. So let's light it up.

Welcome, everybody. A new episode of the Associates on Fire podcast. I'm always excited to do these podcasts. It's a. It's a part of my day when I sort of set down client management and meetings and also meetings internally with my team and, and all of that stuff that goes with being a business ownership, just to talk with experts in the industry or existing practice owners about what's going on in their life, what they're seeing in the industry, and. And today we've got a really great guest, somebody I've known for, for a little while. This is Joanne Tanner. Joanne, welcome to the program.

Well, thank you for having me, Wes.

Let me give everyone a little intro into who Joanne Tanner is. Can I do that?

I've known you for some time, Joanne, and.

We'Ve worked together on buyer services, helping buyers navigate those complex waters of buying a dental practice and making that huge decision in their life. And so you are a practice management consultant. You are, I would say, boutique. Is this a fair way to describe you? You're boutique in that you're very involved on a very personal level, and you're not really with. With a company that's got 15 consultants. It's you, it's your brand, it's your knowledge, it's your experience, and you go in personally and you help doctors to do that. Very personal, very boutique. You started off in the Navy, actually, as a dental technician and hygienist for five years. And that's where all of this originated from. This sort of knowledge and expertise was there. And then when you left the Navy, I believe when you left, you went and got an mba, a Master's of Business administration, Is that correct?

That's correct. My emphasis is on strategic planning.

Great. And so you, you joined your life experience in dental with the business education of an MBA. And now for how long, 20 years, you've been merging those two to try to help practice?

Longer than that, Wes. I've mixed my passion for dentistry, and as you mentioned, I personally help our clients either making the right decision when they buy a practice or growing their existing practice. Oh, and I even produced a dentist. Yes. My son, Alan Tanner, is a dentist.

That I did not know very Interesting piece of information there, Joanne. So your life, safe to say, has been surrounded around dentistry and the operations and business of dentistry for a long time.

Exactly.

Well, I know my clients have had great things to say. You know, when we are representing a buyer in a practice, as their quote, unquote CPA, we most CPAs will, they're primarily charged to do one thing in that buyer process. So we're going to really kick off this podcast now talking about the buying process of a dental practice. And I want to make this as informative as we can to these doctors who come out of school. Not a whole lot of business education yet. They're just about to make a huge business decision. I want to try to give them as much helpful, practical information as we can here. When I'm representing a buyer, the buyer usually will have a cpa. They will have an attorney. Often. Sometimes I don't see all the time, but often they will have a Joanne Tanner. They'll have a practice management consultant, and then they have the banker. Because in almost every case, they need lending in order to acquire that practice. Most CPAs, their role is limited to doing the due diligence. And the due diligence is we need to lift up the hood of this, of the financial statements of this practice and verify that it's actually collecting what it states it's collecting, that its labor costs are what they state, that their facility costs are what they claim, and all of those expenses because it's asserting a certain amount of profit. And you are requiring that profit in order to pay your debt, in order to pay your taxes, in order to live on, and ideally in order to fund your future. And so we need to make sure that the profit that it's claiming that you're paying money for is accurate. And that's called financial due diligence. And what we do at practice, cfo, is we go beyond that and we say, let's actually do a full cash flow analysis. What are you going to take home after overhead, debt and taxes? That, to me, is the first question. Is that going to cover everything for you after overhead, debt and taxes? And does it make sense if it does? Great. Now let's go ahead and do the due diligence. And oftentimes we'll do that initial analysis for even for free, just to kick the tires around to see if they want to drop money into a full team and actually move forward with it. So what you do, what I've called your work is I call it clinical due diligence. Now, that's A total Wes made up word. But I see you going in and you're lifting up the hood of the practice management software numbers, which I really don't do that looking at patients, new patients, what treatment is remaining, how effective have they been? Perhaps in case acceptance, have they, as they say, taken the meat off all the bone in the past year or two and you're going to step in and it's going to be dry with no, with no work to do, how effective is the team? That kind of stuff. I want to give you the mic for a minute, Joanne, to tell us what specifically you're doing to help these doctors inside the practice with those numbers. And also if you could address what are some of the landmines that without that can potentially explode and create for a very nasty situation with a new practice owner.

So, Wes, we truly get behind the numbers. You make sure it makes sense, the financial due diligence on paper. But what procedures did the seller do to produce those numbers? I used the analogy about playing cards. If you're getting to 21, are you getting to your 21 with two cards or with 10? In dentistry, when buying a dental practice, we want to know how many active patients. Now, I realize that doesn't change the value, but I want to know if there are 500 or 1500 active patients. We help the buyer look at the treatment philosophy because that can be a potential landmine. If the seller are doing things or diagnosing things that the buyer doesn't necessarily believe in, are there procedures that the seller is referring out that maybe the new doctor can add if it's implants, any Perio or Invisalign, for example. So in addition to getting behind the numbers, we want to take a look at the mix of procedures. One of the potential landmines that come into play has been Delta for the last 10 or 12 years. Now every dentist, when they buy a practice or open a second location, if they want to be a Delta provider, they they will become a Delta PPO provider and the buyer isn't necessarily aware of that. And we use an app west that integrates seamlessly with Dentrix, Eaglesoft and open dental. It does not give us patient names. So the brokers and attorneys give us thumbs up on utilizing our app and it automatically tells us the active patients each month. Production collections for the past two years. Even before COVID I wanted to see trends, especially now. I want to know, are they back to the pre Covid numbers? So not only are we trying to figure out what are they getting, I help Our clients find out what can we do to make it even better. For example, one of the first things that we'll run is the pending treatment plan report. I call that my inventory. But from that pending treatment plan report, we can visualize and take a look at what types of treatments is the doctor presenting. Sometimes there are duplicates. It says bridge versus implant. But it gives me an idea. Are they only diagnosing fillings and they're not doing any crowns or they're doing a lot of crowns. It gives us so much information on the philosophy. So the major landmine again is the Delta. So we have this app that will tell us not only the active patients, how many of those patients have Delta then? And I know you've seen it and you love it, our spreadsheet that we produce on how much the cash flow will be reduced if they move forward, becoming a Delta provider. Because the best thing, Wes, would be for our established doctors, those that are wanting to sell in two to maybe five years, taking that transition out of network. But we'll talk a little bit more about the established doctors later.

Yep.

So the other thing are the accounts.

Yeah. It's almost like if you can get out of network, then the whole Delta Premier issue becomes a non issue. But there's also. You can't go in and on day one do that. There's already enough jolting going on with that transition so you can phase into that over time. I want to just dive a little bit more into the Delta before we go on to another landmine. And it's, it's just, it's just a comment. The comment that financially going from in Network Premier reimbursement rate to a PPO rate, give me, give me an average drop there for a standard crown.

30 for the crown, depending upon how the premier fee schedule, some doctors haven't increased it in years, but it's about 30 to 40% reduction in the crown fee.

And the fillings, the restorations are 50 to 60% less.

Wow. So the question.

Question for you is procedure code report.

Question for you is then let's throw an example here. If a crown is a doctor's fee schedule for a Crown might be 1400. Is that reasonable? A standard crown, 1400 UCR fee. Okay, so if we take off 12 to 4. Okay, let's do 1300 then. 1300. If we take off 30%. So I'm going to multiply that by 30. We're down to 900 and 10. Is that the Delta PPO reimbursement level?

Oh, it's less than that. It's anywhere from 750 to 850. And how the doctor may be able to make up for that is the buildup. Sometimes the seller is not charging out a buildup because we were trained 25, 30 years ago that the buildup was part of the procedure. So maybe there are codes and that we can legally and ethically charge to make up for that hit because it is a big, big haircut when accepting the Delta.

Yep. If a doctor were able to actually charge that 1300. And let's say that their overhead expenses to service that, you have your front office scheduling, you have your assistant setting things up, you have your rent cost that you have to allocate to that you have supply costs to that lab costs. When you allocate all these costs, let's say that that cost ends up being all in around 60%. And so you have a profit of 40% on that $1,300. Well, $1,300 times 40% is $520. Park that number in your head for a second. I'm trying to quantify this economically for a listener. If you got $520, that's your profit after your overhead, great, you're going to go pay 150, 200 bucks in taxes on it. Or so you're left with somewhere around $300. You might go put 50 bucks of that in your 401k, take the rest out, you know, pay your living expenses, et cetera. Now, let's say you get that haircut and we're down to what, 750 bucks reimbursement for Delta PPO. Okay, so 750.

Those are 1980 fees, by the way.

Yeah. And your cost structure, does it change at all? No, no, there's nothing in your cost structure that changed. All of your expenses are exactly the same. So if your expenses before were sick were 60%, that's $780. I'm calculating a loss there. Now, maybe, maybe I'm accentuating these numbers a little bit because a lot of the costs in a dental practice are. Are fixed costs. So maybe the, the actual costs going into that are 40%. But either way, my main point is that you're going from $520 of profit to probably less than 150 bucks to 100 bucks. So your profit is dropping by somewhere around probably 70%, 80%. So if you are doing fee for service crowns, one fee for service treatment, one fee for service crown, a full UCR payment to you is worth probably four to five times an in network PPO that's feeding you 6, 700 bucks on that crown. So when you say, I'm really scared that I'm going to lose clients, just know patience, just know you've got to lose.

You got to lose four. If you one patient will allow you to lose three to four other patients and still take home the same amount. Talk about a work life balance getting back into adjustment for the same profit. If you can keep even 50% of your patients on a fee for service schedule that were all on the PPO before that, you're making a lot more money and you're taking home less. And I only spend a little bit of time on this because I'm trying to accentuate the economics of it to say just how much the PPOs are harmful. I know they get you, I know they get patients in the chair and that's really valuable. And when you start up or you initiate a practice, hey, $50 of profit is better than no dollars of profit. I get that. But when you get to that point of capacity and you're like, I don't have a whole lot of slack and I've got people waiting to get into my dental chair for hygiene appointments and other appointments, that is your time to start taking a real hard look whether it's worthwhile to stay in these PPOs or start going out of it. Okay, so I'm done talking about that. Anything you want to add to that, Joanne?

Yes.

Delta sent out a letter just a week ago to all the doctors. Many are having a huge fee reduction come January. So we're helping many doctors establish practices, making the decision to transition out of it. And by the way, Wes, tell your clients, do not send out a letter to your patients. It's at least a six month process of informing the patient, knee to knee, eye to eye, that we're having a change in relationship. The minute you send out a letter, the patient interprets that letter that, oh, I can't go there anymore, that you don't take my insurance. We work closely with the team on their verbal skills because when the patient calls and asks, do you take Delta? If we say no, they're going to hang up the phone. So, Wes, it's all about relationship. Because if the patient perceives it's just another dental office, then they will go to somebody that takes my insurance. But if they know and trust and can feel that the doctors and the team care about them, most likely they'll stay. So when we're talking about the doctors that are buying a practice we recommend that they stay with the programs if possible for at least two to three years. So you've established that relationship, then you can do.

That's great. Now here in California, let's talk about that letter really quick because I actually just saw that I mentioned this morning, it just came out a week or so ago and it landed on my, my email box this morning and I haven't fully read it or interpreted it. But for those California listeners and I suspect that other states that are in Delta Premier have already or will be seeing this soon. Tell me what's in that change for California dentists starting January 23rd.

The good news is some of our PPO providers did get an increase because they need to level out the playing field. It's not fair that the doctors that have bought a practice before 2010 or whatever the year was, they're still being honored the premier. So the biggest news was the premier doctors saw a reduction, some not much because their fees weren't that high. The specialists received a huge decrease. Delta by the way, was going to make this change in early 2020 right before COVID and then they delayed it. So it's about an 8 to 10% revenue reduction. And like you're saying with the profits low already in dentistry, how do we make up for that? Wes, it needs to be about efficiency and I'm not talking cutting corners. We need to reduce the last minute no shows. We need to make sure everyone's pre appointed for their next appointment and we need to help the patient find ways that they can fit the dentistry into their budget maybe with CareCredit or some sort of payment plan.

Great. Which specialists do you know are being affected by this and are there any special remaining specialists that are still, I'll say on the old schedule or immune from these changes?

I talked to a pediatric dentist that was received a letter, 10% fee reduction. I heard from an endodontist that they're going to be going out of network because they also received significant. So it's a big decision. How can I afford to stay in network and still stay in business? But again it's a, it's about the relationship and communicating that change to your patient. So it's a big problem. Again, we can help the doctors figure out how much Delta is in, in the practice.

In, in some ways it's like gosh, if every dentist in the comp in in the country could somehow get on a zoom call together and say we are going to take a stand, we are all going to go out in that whatever you Know, it's just that because dentists still, even though there's been a large rise in group, large group dentistry and DSOs, DPOs, all that, all that trend, even still, most dental practices are still operating at a private level and don't have that strength of community to be able to fight back a little bit on this. And so these insurance companies feel like they can, they can do this. And I mean, Delta is huge and it's in a lot of employer plants. They just have a lot of leverage to work with. And I, I like to say don't let that own you. You need you, you can own this. It's maybe not easy. And I would never try to go out of network or fee for service without a coach, ever. I would never do that. Because you're right, it could end up, it could end up destroying your patient count, your new patient flow, if it's not communicated. Gosh, communication is absolutely vital when it comes to doing a transition like this. But I'm seeing on a fairly regular basis among our clients, a lot of them going out of network and doing so successfully by far. I can't think of actually one that has failed where I would say that failed. I can't think of one where they're making less money afterward than before. But in every one of those cases, they had somebody helping them through it. Somebody like you, who knows that space and can walk them through it.

Because it starts with the experience. And so when the doctors and the team have that first meeting, because the team needs to understand our why, why are we doing this? It's not about money, because we do not want to reduce the quality of care that we're providing our patients. And if Delta expects us to take lower fees or whatever PPO it is, how can we continue that path? So everyone needs to get behind it and be clear on why we're doing this.

Great. And we had a podcast specifically on going fee for service. There was a large demand for that, that podcast. I think it's a hot topic because dentists are feeling that pressure on already compressed margins, profit margins, and now, and now this, you know, so I, my heart goes out. I really sympathize with the dentist. At the same time, I'm such an optimist and I have a lot of clients who make a lot of money as a standard private practice, single location, traditional nut and bolt dentistry practice. Their branding is phenomenal. They're good communication people. They're good at leadership and delegation. It's a lot of that stuff that you, I mean, really, you don't learn in clinical training, but that in some ways, in many ways defines the success, at least economic, financially. And I also, I think from a professional experience that defines a lot of that, that, that success. Now, in my opinion, you've got to have that clinical down. And most, I feel like, of our clients are very great clinicians, but a lot of doctors aren't taking that next step. And the strange thing that I'm finding, Joanne, is that a lot of young dentists are what I call empire builders. They want to build an empire, they want to build many locations, and they want to have a team and they want to. They're already talking about getting out of clinical dentistry, and they haven't even really stepped foot into a dental practice yet. And I don't mean to belittle that mindset. I love the ambition about it, but. But I've also seen it lead a lot of people into a area of significant financial strain because they take on too much, too little. They don't necessarily have the training to be business people. And I'm not saying they can't become business people, but I am saying there's a sequence of events to that process. And the first thing that we have to do is to learn how to run a good dental practice first. It's like the guys who started McDonald's. I mean, they were flipping burgers themselves for a number of years. They, it was little by little that they created their pattern, their system, and then they leveraged it to replicate it and step outside of the clinical work of flipping burgers. There's just that process that is very, very difficult to, to get around.

So, Wesley, appreciate this story, because when I guest lecture at the dental schools, my opening line to the students, because we need to give them some business management. I told the students, your professors don't want you to hear what I'm about to tell you. And I look over my shoulders. Someday, doctors, the dentistry is going to become the easier part of your day. It's not going to be about margins. Oh, wait, it's a profitability margin you haven't learned about just yet.

Right.

So I knew you would appreciate that because it's so true that they do need to understand the business aspects. And then the clinical dentistry does become easier. Right now, the HR is extremely difficult. Wages are going up due to inflation. It's so hard to find a hygienist. So working on that team culture, so we retain team members a long time is also important.

So agreed on that. Now, when you're working with a buyer, do you come up with a written report that you then sit down and use as sort of your X ray to then guide them on some of the important areas to be aware of as they're stepping into ownership? Is that how it works with your clients?

It's a very detailed report. The first part, as you mentioned earlier, is the delta fee reduction and so we put together Excel spreadsheet. We also make a list of recommendations and how they can make the Are.

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Practice Even better. But we also put together a SWOT analysis. The strengths, weaknesses, where are any opportunities and any threats in owning the practice. So that creates an action plan list for them to be able to use throughout the next year. And then we put together a custom program because unlike some of the other coaches, I don't make them sign a long term contract. It's month to month. And I will tell you, I still have a few clients that I started coaching in the 90s. They're ready to sell now too. So month to month because sometimes they're fine, but other times they might need three to six months or longer with some coaching.

Great. And so I assume a natural MO for you is that you'll help somebody buy the practice. Yeah. And then you'll stay around and help them through that transition as you do that. One of the landmines I've seen is the staff are very unsettled oftentimes going through that. Is my pay going to change? Are my benefits going to change? Are my hours going to change? Am I going to lose my job? What does my future look like? That's a difficult one. And oftentimes they don't know about the change until just a couple days. I've even seen. They don't know about the change until the sell already occurred and they feel like their trust was betrayed. How do you, how do you help that HR soft side in a way of the transition?

I tell the doctor who's buying the practice that they do not need to change. They will not, should not make any changes on the pay or the benefits, grandfathering or honoring whatever benefits they have. And then you may be making changes for future people if needed. Another change that I recommend that they do not make is implementing a perio program right away. Yes, the patients need it, but the hygienist is going to be offended because that's what he or she has been doing all this time. And then if we lose the hygienist, there goes a lot of the goodwill down the street. So that can be very challenging for the new doctor. And you're right, the team is nervous. They're also resentful of the seller because they didn't tell them sooner. But everyone has sworn to secrecy, so you can't tell them until the very end.

What's the messaging like of that buyer? They step in, it's day one, maybe they're in their first huddle. The doctor is standing in front of their team and there's all these sort of nerves going on underneath. How does the doctor balance this desire to introduce new blood, new thoughts, new leadership, new innovation, while at the same time helping everybody feel that it, that that stability still exists? That's a delicate one.

Very delicate. The first thing is to get to know your team first. Don't talk about changes right away. Remember, this is their house that they've been at for 5, 10, 15 plus years maybe. So you are not going to go in and suggest any changes. So you listen, you learn and make friends with your team. Then slowly, when you get to know, for example, there was a client recently, the office didn't have a computer, you don't see that very often. But if the client goes in right away and starts systematizing things, maybe the staff won't like that change right away. So once you find out where the team is, maybe they'd be excited about digitizing X rays or implementing new ideas. So we just tell them to be patient, listen to the team and get to know them. That's the first step. It's about relationship.

It's not unlike, in a way, if you read a book on communication or have a therapist who talks to you about communication in your relationships, maybe your marriage with your kids, whatever. You always learn that the first thing that you do, the very first thing that you have to do, is you have to.

Hear and acknowledge. Just hear and be excessively generous in saying, I hear you and I acknowledge you. Not just saying I hear you, but actually using words that say, I'm giving you a forum and a mic, a space for you to tell me how things are working for you and how this practice has been run and maybe what's going well and maybe what's struggling. The first thing I want to do before I come in and even say anything is admit that I'm new here and I'm new here and I, and I got a lot of ideas. I'm really excited about what we can do. I'm really excited about new things being introduced that we can be bringing here. But I want you to know, first thing more than anything is that I hear you and that I understand you. So, so let, let's talk. We can talk to me individually, we can talk in groups. However they want to go about creating that safe space for, for the team to start talking and sharing and putting things out on the table, to point out and say, this is something that I think requires attention. Dr. And then when people feel that they are heard, then it just opens up much more the willingness for everybody to, to, to also reciprocate that hearing and to be flexible over time. That's just my thought. I've never actually done that in a practice because I'm not a dentist, but, but, but that's just something I think could be very, very relevant.

You're absolutely right. The doctor needs to go in there and listen to everyone and, and then when they have that one on one meeting with the team members, getting to know them, and then gradually start saying, tell me about this place. What are we doing well, what are we known for what's going well? And have accolades about that. And then they start making a list of what are some of the things that you feel you'd like to improve. Because if it's on their list as well as your list, everyone wins and it goes a lot easier.

And I've read that it takes approximately seven times for a leader to echo a, a new, a new leadership style or message or their theme, whatever it is, before people in the, in that business finally say, okay, he or she is serious about this. It's actually, we're actually transitioning into this new platform of the way we operate because so many leaders, and I'm guilty of this at times come in just guns a blazing with ideas just left and right. And then a lot of them aren't followed through. They're not followed through well. There's not a great execution plan or they never hear about it again. And you just lose a lot of credibility as an owner and a leader of a company when you, when you take that approach. So I, A lot of my listeners, mm. A lot of my leadership, I mean, a lot of my listeners know that, that we use a, A, a system called the Entrepreneurial Operating System, also known as Traction. And it's a whole, it's like a, it's like a software in a way. It's not literally a technology, but it's a, it's a platform of tools and processes. There actually is a software called Traction tools that we use that helps us run our meetings. These meetings, they're called L10 meetings. They're very effective. There's timers, there's specific agendas. You, you identify what is a rock, which is kind of this big process thing that you want to change in your practice versus just issues which are things you're working on right now, this week that you can check up. And it just creates a common flow. I love that. And I think that there's different leadership styles and I'm sure that as you go in you have sort of a.

An approach, a program of some way to create that system of operations and leadership, whatever that system is. It takes like seven times of people hearing it before they're really mentally starting to get on board with it. Have you found doctors struggling to implement a new leadership style in a practice as they come into ownership?

Oh, absolutely. In fact, I love the EOS operating system because it takes time to get that traction. You mentioned developing a leadership style, the style that does not work. I came from military and it might seem like it's going to go a lot faster if I say you will do it my way. But that does not work in dental teams. So we can all understand where are we going and why and where are we now? And let's together create a path to get to be where we're going. And as you mentioned, creating those rocks, those special moments in our life and the special moments in the practice. So definitely creating that traction.

Any other landmines?

Oh yeah, we could. I love it. There's a whole actually library about seven or eight books from the Traction series by the owner, who is Gino Wickman. He started it, but he states specifically that his leadership program, and I think this is probably the case for.

Any platform based leadership program that isn't just about a communication skill. It's a platform of meetings, how you run those meetings, creating what's called an accountability chart, identifying who does what. Like there's a lot to this that it takes 18 to 24 months to really get that cog spinning. And it's kind of a step back in a way initially because you're putting in non productive time into this platform. But we're about halfway through and I'm seeing the effects of it and I love it. And it's big, a big commitment and it's also been hard to get everybody on board. But it's a beautiful thing as it actually happens.

Got to get the right people in the right seats.

Yep.

Sounds like the other landmines.

Yes.

I want to talk about the landmines for a moment because although the doctor may not be buying the accounts receivables, you're buying a system where Dr. Seller was able to allow three to six months or however much to pay off. However, if they are going to buy the accounts receivables. Did you know, Wes, that if the practice has Dentrix or Eaglesoft and many of the other softwares, if we do not close out the month end and many practices still don't, the AR does not age. Open dental is okay. But many of the softwares. So when you and I look at that aging report, we. Oh great. Only 5% over 90, maybe not. So we can look at the software to determine and show the doctor because that could be a huge problem if they overpay for the accounts receivables thinking that 80% is current. They also need to make sure that the accounts receivable credits any liabilities of patients that may be prepaid or the insurance overpaid, that there's money due back to either the patient or the insurance company. Sometimes it's only a couple thousand, sometimes it's 10, 20,000.

Do you recommend they buy the AR or not?

Depends. It can be helpful for the cash flow. As you know, that first few months, it's a little tight. It takes a while to finish the credentialing. So if it's the right price and you can confirm the accurate value, because if that front office has not been closing out, the AR report will not be accurate. So I like it if they can, and if they can't buy it, it's fine. We have a tracking form that I'd be happy to share with you because when the monies come in on that first or second day, the patient's paying with the credit card that belongs to the new doctor. But our Visa MasterCard machine may not be set up yet. So that goes. It went to the seller's bank, but it actually belonged to the buyer. So tracking the ARs are a very, very important part of it.

I have a podcast that I did a few months back and trying to find that podcast right now that was.

Let'S see, everything you need to know when purchasing a dental practice. Now I'm sounding like I know everything there, but one of the things I touch on is the AR and whether or not to buy it, I can be supportive of either way. It is nice to have that cash flow from the AR flowing in. So you don't have that 30, 60, 90 day gap from buying the practice to money really coming in meaningfully, especially if you're, if you're in all these networks. But. And that's why you need working capital on top of the loan price from the bank in order to help you weather that storm. But if you have the ar, it can flow through. The AR is just one area though, of potential conflict or disagreements because you want to pay less than the face value of the ar. And just to clarify, if anybody's listening, they're like, what's ar? Accounts receivable? It's for treatment that was already done but the practice has not collected on it yet. So you're it's future money that you are owed because you already delivered the treatment. That's called accounts receivable. And if you look at accounts receivable report it's divided up into how old, how long ago was that treatment. Within 30 days you have X, 30 to 60 days Y, etc. And the farther out you go, the less likely you are to collect on it. And so there's three reasons why AR you, you pay less than 100% of the value of the AR. Number one is the seller gets money now instead of having to wait. And there's a time value to money. Dollar today is worth more than a dollar tomorrow. So that's number one. Number two is that you're having to pay to collect that money now. So there's, there's an overhead attached to the collection of that dollar. Number three is you're now bearing the risk of loss patients not paying. So those three reasons are why you might end up paying say 90% of the 0 to 30 day bucket and 80% of the 30 to 60 day bucket. And then eventually you get out to 120 plus days and you may not want to buy that at all or maybe pay 5% of that bucket because of it. And so we, if you work with us and maybe, maybe with you to have this Joanne is we, we calculate what we believe would be a fair price for the AR and if the seller would agree to that. I actually like it because I like that cash flow. The only thing is now when the money comes in you have to have an endorsement stamp or some way for the buyer to get those checks deposited in their own account even though they're made out to to the seller.

Some banks will allow you to take care of that. Others you have to check with whatever bank. By the way Wes, we will help your clients complimentary if they're buying a practice to look at the accounts receivable aging and make sure the month end has been closed out because otherwise they will be overpaying tremendously. So be happy to offer.

That's a great point.

Quick and easy screen share and we look to see there and it would save them thousands of dollars or reassure that they're making the right decision.

That's a really great point because if I get an accounts receivable report and I run my numbers but that AR report is inaccurate and those things are at those accounts receivables are actually older than what they're stated then I'M going to create a value or price that is more than one should be paying for that. So that's a great comment.

Because it would be a huge problem and you would feel badly if you were overvaluing the ars. Yeah.

There's so much we could talk about but. But I need to distill it down to one more item before we, we finish up here. Were you going to say something, Joanne?

No. Okay. I mean there's so much we could talk about. We could talk about. You know, some thoughts are.

Do you stick with the existing practice management software? The answer is going to be yes, but a lot of doctors are wanting to start looking at other practice management softwares that are true software companies, not necessarily.

Supplier based technologies. And there's pros and cons to all of those. That's always an interesting question to me is what technology do you merge into these days where data matters, intel matters. What softwares have APIs with your practice management software? Do you want something like a dental intel or, or another software? Things like that really are intriguing to me. Another one though.

Another one is though the, the whole deep so and DPO space. I, I kind of want to maybe just talk about that for a second. What you're seeing and. Or is there something else that would be a big landmine that you would like to focus on as somebody in this space.

Then it was hard to hear you that last question but you're talking about changing softwares again. I tell my clients to go slow on making any changes. We don't want to overwhelm the team. But repeat your last question for me.

Well, it's more me discovering how to use the last five minutes. There's so many good things we could talk about. Maybe we do a part two later but I kind of just want your feedback on the consolidation that's happening in the industry around DSOs and DPOs. Can you hear. Let's talk about that for a second. Let me preface that question is we all know most dentists know what the concept of a DSO is with Western dental or Aspen or if you're on the west coast there's the specific dental services is a really big one incidentally started by a dental CPA named Steve Thorne and those are sort of the big ones but there's a ton of emerging ones and sometimes those emerging ones are granting bilateral ownership where the doctor also owns some of that central organization and they call those dental dental partnership organizations or DPOs.

And there's some exploration including on my side, is there a Space to give a private practice owner the access to scale. And there's a lot of benefits in business to having access to scale and having access to regular business advice and business systems and all of that. But I've seen so many of these, which are just big sales pitches, they're done wrong. You've got private equity backing on them and they're wanting a huge return over promising things. A lot of fine print. I'm telling you. Talk about landmines. This is like Landmineania in this space of potentially selling or partnering to a bigger organization. And yet I think that there may be a space for it nonetheless, if it's configured the right way, as long as it doesn't remove the doctor's clinical autonomy, the doctor's ability to run a practice that is beneficial for patients and staff and doctor that is financially rewarding to the doctor. A lot of the jury's out. And what I've seen recently, Joanne, this is the last thing I'll say then I want to turn it over to you is, is I've seen some practice management consultants roll up their clients into a dpo, which totally took me by surprise. I mean, there's a couple big names that have got together with all our clients and said, hey, if we all come together and we form a DPO or dso, whatever, you are all going to walk away with all these millions of dollars. Let's do this. And some names I would have never thought do that are doing that. Totally a shocker to me. What are you seeing? What is your comment slash advice in this space of consolidations and large part and partnerships, the large group partnerships, I'll say.

I was also very surprised when I saw some of the names that are coming together. So my advice is be careful. There are some very good opportunities out there because they have the buying power. So your supply bills may be lower, your lab bills could possibly be lower, but you may also lose some.

Autonomy. You're going to lose some decision making. Wes is like getting married. So when you join a partnership, you need to make sure you know what you're getting and what is the possible exit strategy. Let's end on a positive note. When you're working with a doctor, the financial due diligence, the attorney is certainly doing the legal due diligence. Let's not forget about the management and clinical due diligence. And that's not an hour at the end of the day. It's at least a three hour or more if it's a large practice. So frequently the doctor is going to go on a Saturday or even a Sunday because they want to be fresh when looking at the treatment plans. And I caution them to not start talking and having a conversation with the seller and their spouse because we want to focus on the charts and the treatment plans, the X rays and the schedule. We can make a list of questions for later when you do a lunch or a dinner.

Great. There is then clearly a process that needs to go into buying a dental practice. And.

Thanks for your comments too on just your general take on the large group consolidation. It's definitely a trend. It is a marriage. Huge, huge decision either way, when you're buying into a practice or partnering into a practice, whatever scale that is having a due diligence not only around the numbers but around the clinical side of that practice and having somebody like you to sit down and educate, slash coach.

Them through that, I think is such an invaluable experience. In my perfect world. Every buyer is going to have a Joanne Tanner. They're going to have a good practice management consultant who understands that, who will go into the office and do what the attorney doesn't do, what the banker doesn't do, what the accountant doesn't do, which is go look inside the practice management software itself and dissect those numbers clinically, operationally to tell a story. What is that story? I can tell a story. High level financial results that I can tell that story. But I've also told that story and said this is going to look great. And then the doctor gets in there and what was inside the guts of that clinical data actually told a different story than what the P and L was telling. And there's reasons for that. And I don't have insight to those numbers. So it's a great team to have I think somebody like, like you and a practice cfo, financial advisor together going through that. A lot of dentists will say I'm just, I'm too poor, you know, I'm still living on ramen. I can't, I can't pay for all this team. And my, my, my advice and of course this is self serving because we want you to hire us. But my advice is this is a decision. Get a little bit of extra financing from the bank, plan to use some working capital, maybe even a little bit of your savings because if you get this done right, it is going to create a vehicle of real strong cash, financial support for your own financial independence as you go down your, your career. You want a good team on that. It's like Tom Brady seeks out great coaching he's hard on his coaches if he feels like they're not pushing him, given him what he needs. Great leaders often, almost most of the time are seeking coaching. And that's what I think you could offer dentists who are buying a practice or selling.

We wouldn't think about buying a home without a third party home inspector. And it's not going to be the brother in law of the broker. You want somebody at arm's length that is not related to help them understand and truly get behind the numbers. So be happy to help you and your clients.

Yeah, I always, I always think it's interesting, I always think it's interesting when a, when a buyer has their.

Their cousin who's a general bookkeeper and they're the ones that they hired to do the due diligence of a dental practice and they're doing both the clinical and the financial due diligence and a. They're not going to have any idea what clinical is and on the financial side they're not going to really know what makes for a successful dental practice or not. Anyways, thank you so much for being on the show, Joanne. It was productive. I love what you do and we will keep in touch. There's so many subjects we could possibly dive into in a future program. So thank you for being on the program.

My pleasure.