43: Finding the Right Dental Practice with Chris Marshall

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Welcome, everybody, to another episode of the Dental Boardroom podcast and also the Dental Practice Sale podcast. This is going on both of my shows because this one relates to a dental transition. And our guest today, we actually have two guests. I have one of my colleagues here at Practice cfo. He's one of our lead CFO advisors. And. And he's helped a number of dentists, many dentists buy into a dental practice. That is Randy Lundy. Randy, welcome to the. To the show.

Great. Thanks for having me.

And then we have a. I'll say, a strategic partner, somebody we work with closely on a number of buyer representation deals, and that is Chris Marshall with a company called Practice Own. Welcome to the podcast, Chris.

All right, what we're going to talk about today really is for any dentist looking to buy a dental practice, I think this will be especially useful for your traditional younger doctor out of dental school a few years and wanting to own a dental practice. I would also say it's valuable for a doctor buying a second or third practice since we oftentimes don't perfect it with just one iteration of going through that process. So let's talk about this. Kris, you're an interesting service provider in this space because you have a background as a dentist. You bought a practice, you sold a practice, and now you spend 100% of your professional life helping doctors do that process of buying into a dental practice. Kick us off with a little bit of a biography of your background and how you got into helping doctors buy a dental practice.

Absolutely. So, like you said, I am a dentist. I've owned a practice, did reasonably well there, and was able to sell the practice for a decent amount. And so I learned a lot of the process of what it's like to both buy and sell a practice, both fairly recently. As a result, I had some friends reach out to me and ask me if I could help them do what I did. And I did. I helped them out and I really enjoyed it. And they referred me to a few of their friends and it started becoming a lot of work to help all these people buy dental practices. And so I decided, hey, I better turn this into a business. And so now I help dentists buy dental practices full time. I have a YouTube channel. I try to release videos at least twice a month on there. People usually find me through YouTube. I do some other social media stuff as well. I have an email list with a lot of helpful information that I send out. And, you know, my information is on my website. They reach out to me and I help dentists all the way through the process of evaluating practices up until closing. For me, the biggest thing to look at when you're looking at a practice is making sure you're buying the right practice. The way that I like to look at it is the best possible scenario as a dentist is to be the owner of a practice. The medium case scenario is to be an associate, and the worst case scenario is to be the owner of a practice. And the difference is if you own the right practice, it's an incredible opportunity. But if you are the owner of the wrong practice, it's significantly worse than being at an associate job because now you're stuck with this business that's under producing. So if you're wanting to get into ownership, the biggest question you need to ask is, is this the right practice that's going to get me to where I want to be? Because if you buy the wrong practice, you might as well just stay at your associate job because there, if you're only making $150,000 a year, you can just leave and go find another associate job. But if you're at a practice that you own and you're, you know, not making what you want to make, it's a lot more difficult to grow that practice than you might think. And so if you go in and buy a practice that's successful from the beginning, you go in, there's plenty of patience, there's plenty of opportunity, well, then your life is easy because you just have to produce and just keep going. You don't have to worry about growing the office because you bought the right one in the first place.

Here's an analogy I have for this that just came to mind is when a doctor buys a dental practice, it comes with a certain amount of hardware, like a computer. And the hardware is very difficult to change out. It is almost what it is. And then there's the software of the practice, which is what is the doctor going to be able to do inside of the culture. Treatment planning, communication, marketing, that kind of thing. And a practice that has a really strong hardware with a good processor, great memory, you know, everything that makes the computer a great computer to use. It's very difficult to change that when you step into ownership. And, and I have a lot of doctors come to me.

They bought a practice or a lot of them did a startup and they spent a lot of money to build it out. So it looks great, got new equipment, nice and shiny, nice sign on the door that looks great. But they're not growing their practice at all. And they come and they just are so tired of trying to get this thing to a profitable place. They're losing money. They would have made more money working at In N Out Burger and then they just want to sell it, but now they have a million dollar loan on it and it's only collecting five or six hundred thousand. And after debt, it's losing money. And they just want to figure out how to get out of this situation. And that can happen when doctors get the wrong practice. So your third option there, it's really hard. It's like getting out of a marriage. It's really hard because now you've got a bank loan and it's from a bank who's got a lot of deep pockets and resources and they're not going to make that easy for you. And selling it when it's declining or just not doing very well or not profitable becomes very difficult. And most brokers don't even want to take.

A languishing practice because they are hard to sell. And the doctor's just thinking, how do I get out of this? On the other hand, they buy a practice with great hardware, good team, good processes, good brand with a good transition strategy. And they're making really good money in the first year because of that right choice. Are you looking to buy or sell a dental practice? If you're a seller, how do you find a strong list of potential buyers? There's no MLS or Zillow for dental practice sales. In such a fragmented market, many dentists selling their practice feel discouraged. That's why I built practiceOrbit.com practice orbit is modernizing how dental practices are bought and sold. It's a platform technology. Y' all know them. Zillow, Airbnb, Uber, and OpenTable, just to name a few. These technologies do two things. First, they help match buyers and sellers by centralizing the marketplace. Second, once the match between buyer and seller is made, these technologies help them navigate the sale to a successful close. Here are a few of the features inside a Practice Orbit users can determine a reasonable sale price for practice in just minutes. All they need is the most recent business tax return. Practice owners can use the directory to find important service providers like practice brokers, attorneys, accountants and bankers. Practice owners and their brokers can invite those service providers into the platform. So all parties are coordinating the sale together. Practice owners will have a beautiful digital listing of their practice, like a home on Redfin. And importantly, the listing will be anonymous. And personal information like your address, name and pictures are only released after an NDA is signed and approved by you or your broker, practice buyers can create saved searches to be auto notified when new listings come on the platform that fit their desired specialty and location. And hey, dental practice brokers, you can list all your practices on the site for free. By doing so, you'll get access to Practice Orbit's large pool of buyers, all of whom have created profiles and saved searches to be auto notified when new listings come for sale. You can use the platform to introduce your listings to a targeted set of buyers. Additionally and optionally, you can use the platform tools such as a built in NDA, a customizable LOI and a workflow tool to navigate the sale from LOI to closing. In fact, you can manage all your listings on the system from listing the practice to NDA to LOI and finally to closing the deal. Create your free account today at www.practiceorbit.com.

Now when I look at buying a dental practice, I kind of look at the operational side and the clinical side and then there's the financial side and there is a relationship between those two. Randy, why don't you tell me as a financial advisor, a CPA who helps doctors buy practices, you're not really looking at the clinical as much. You don't have that background. Neither do I as a dentist. Chris, I want you to comment on this here in just a little bit. What are you looking at though Randy, from the financial aspects to determine whether or not it's a good practice to buy?

Yeah, Chris can attest to this too. We've worked on a few view doctors together and, and the, the number of patients and the collections driven by those patients is the starting point. Making sure that we've got a patient value that makes sense for the practice that you know, especially in cases where perhaps the prior dentist has been doing a lot of procedures, comprehensive dentistry and kind of tapped out all that, all that potential dentistry. We may not see a great patient value correlation.

Moving forward for the doctor. And so that's where, I'm sorry, I'm stealing maybe a little of your thunder Chris, because you've taught me that. But then from that collections number then we start working out the percentage of the overhead cost. So what is the labor, marketing, administrative supplies and labs going to be be taking from that collections number to get to a bottom what we call ebitda, an operating income that can then go to pay the doc, the taxes and the bank what's left after that that then can be taken home. So we're flushing out from that collections number what's the final take home that the doctor could plan on and then kind of create a path over the next few years.

Yeah, and usually I'll tell a, a doctor buying a practice who's asking about our services. I'll say the very first thing we want to do is just understand if you replicated the production of the seller, what are you going to take home after overhead? And overhead, of course, are your key expenses like labor, supplies, lab facility, marketing, administrative expenses, that's your overhead. What are you going to take home after overhead, after debt and after taxes? And does it make sense? How does that stack up against an associateship where you don't have to deal at all with business ownership and the what feels like infinite number of non clinical responsibilities that come with owning a business? And once we sort of answer that question just on paper, numerically, does it make sense? Then that's typically when I like to put in the offer letter and move into due diligence, which is kind of part two of what we do. That's looking under the hood and getting bank statements and tax returns and payroll reports and lease agreements to validate that the numbers on the financial statements are in fact reliable. And then the third part is, okay, we're stepping into ownership in three weeks, a month. How are we doing with credentialing? Do we have our bank accounts in place? Is payroll getting set up? Is our accounting in place? Are all of that so that on day one, the doctor isn't stressing about the mechanics behind the scene and can really focus on their team and their patients and collections? Let's pivot now over to you, Chris. Let's talk about the operational side. What are you doing to help doctors determine if this is the right practice or a good practice as opposed to a landmine unexpecting, an unexpected landmine after close?

Sure, sure. So I agree with everything you guys are saying. The only big issue is when you're looking at financial documents, you are looking at what the seller did, usually the year before or within the last 12 months or last 24 months, however the documents are set up. But the thing is, the buyer who's coming in is not necessarily going to be producing exactly the same as the seller. And there are a couple scenarios that I have seen in which an accountant has told a dentist that this is an amazing practice to buy because collections were super high, expenses were low, and profit was great. But the issue is when this buyer comes in, if the buyer's not able to do the exact same things that the seller was doing at that office, they're not going to be able to maintain that level of production. And it's not as simple as looking at, well, did the seller do implants? Did the seller do endo? Because that's one of the things I hear a lot is, well, the seller wasn't doing specialty procedures. It should be easy for me to replicate. Well, most dentists don't make money from specialty procedures. I mean, some do, but like even the dentists who say, well, I do all these implants, usually their implant revenue is like 5% of their revenue. Even the ones that do a lot of implants, you know, it's more, they just, they like to talk. Dentists make their money from crowns. Usually that's like oftentimes 50% of the revenue is from crowns, you know. And at least if you were to look at the procedures that in terms of profit, crowns are significantly more profitable than a lot of other procedures that dentists do. Oftentimes cleanings and exams are almost done at cost just in order to get a patient through the door so that you can treatment plan on them. Fillings somewhat profitable, but you know, not nearly as much as crowns. So the biggest thing I see is dentists will overproduce on crowns. And that's, that's a huge problem.

Some dentists, the sellers over producing on crowns. Yeah, yeah.

And I've seen some practices. So here's an example of two different practices. Let's say you have one practice where there are about a thousand active patients at the practice and the seller is doing about a thousand crowns per year. So on average, we're talking about one crown per patient. Now the, that practice is going to be extremely profitable on paper. You show that to a bank and the bank is going to say, wow, this practice did 1.6 million in revenue last year. Expenses were 800. This is extremely profitable practice. But you got to understand there's a couple issues with that. The seller was doing so many crowns at this practice that you as a buyer, when you go in, you're going to see Mrs. Jones, and Mrs. Jones is going to have new, brand new zirconia crowns on all of her posterior teeth, new veneers on her anteriors. She just had Invisalign done and just had her edentulous place her site replaced with an implant and an implant restoration. And you as the buyer are not going to have that much work to do at this office. On the other hand, I'll see a practice with 2000 activations, twice as many activations, but the seller only did 200 crowns. Last year. So 1/5 the amount of crowns, but double the amount of patients. So if you buy a practice like that, you're going to go in and you're going to have so much opportunity to treatment plan so much work on these patients, because. So I was just at an office last week and I was going through the, the system, looking at X rays and looking at charts. I pulled up some of the X rays on a patient where the dentist treatment planned a single crown. And I looked at all the other teeth on this patient and there were like another five or six teeth on that patient that I would have treatment planned crowns on and another three or four that I would have treatment planned fillings on. And this dentist, he was, he was ready to retire, he was tired, he didn't want to do that work. So he was just doing the obvious things. The things that patient came in complaining about this tooth hurting. So that's the one he's doing the crown on. When if he was treatment planning comprehensively, he would have done five or six crowns on that patient. And that's not being unethical, that is being ethical. These sellers, sometimes they, they just get tired and they don't want to work anymore. And so if you can find a practice like that, you can come in and sometimes double revenue your first year. That's actually what I was able to do with the practice that I bought and why I was able to sell it for significantly more than I paid for it. Because I found a practice where the seller was under producing and I was able to greatly increase production. So the issue is you bring this, you bring the practice with 2000 active patients, but only 200 crowns done last year. You show it to a bank, the bank's gonna say, oh, this practice only did 700,000 in revenue. Why don't we buy that practice? That was 1.6 million in revenue. And so if you're just looking at the collections from the seller, you're missing out on the opportunity to grow that practice. And now there's two ways to grow a practice. Number one, you can get more patients, but that's really hard. It's hard to get new patients. It costs money. You have to spend money on marketing. It takes time. The other way is you find a practice that's under producing and you just go in and you treatment plan comprehensively. And that's the way that you can double the size of a practice in a year is by finding a practice where the amount of production per patient is extremely low. You come in and I'm not saying over treatment plan. I'm saying just be comprehensive. Do what you are supposed to be doing as a dentist. Like your goal is to help these patients by giving them the best possible care available. And if someone has decay in their mouth, as a dentist, it's your job to tell them about it and tell them the best possible treatments. You have to fix that. And if you can find a practice where the seller wasn't doing that the seller was, it is stressful. I'm not going to lie. If you are a new dentist going into a practice or where the seller for the last 10 years has been telling patients that there was nothing wrong and you go in and treatment plan, five crowns. Is it scary? Yeah, it's scary. It's uncomfortable because a lot of patients are not gonna agree. They're gonna say, well doctor, Dr. Ronald told me I didn't have any cavities six months ago and you're telling me I have five. Are you just trying to take money from me? And it's not an easy conversation to have, but you're doing the right thing by telling people what they actually need done and it's going to be profitable for you. So it works out in the patient's best interest and in your best interest. You just have to be willing to find that right practice and you have to be willing to have the guts to treatment plan even though it's uncomfortable.

And you know, something I think is neglected all too often is how does the doctor communicate those five new crowns that are needed for that patient? How do they say this, how do they present this? And there's, you know, there's the digital technology to present it and sort of point at some X rays and whatnot. But by far the more influential tool is to know how to communicate that to a doctor. And this is something I've always encouraged my clients to do and very few dentists do. This is they're intentional about role playing scenarios, being maybe coached or reading books on how to present exceptionally well in a way that increases the odds or the probability of the client or in this case the patient accepting that. One of the things I'll mention on this concept of comprehensive dentistry is so many practices nowadays are PPOs, PPO driven practices, as you know. And I'll be curious what your thought is on this. But if, if you're, especially if you're in a PPO style practice where you're getting $700 for a crown instead of $1,300 for a crown with the same cost structure underneath to deliver that crown, the profit margins are significantly better on fee for service. But it's also a model that is harder for a lot of young dentists to create the kind of brand that people are willing to pay out of pocket for. And so in a PPO model, I I really believe that to make that profitable, the more that you can bunch treatments into fewer visits, the more you're going to be able to be profitable. Because there's a certain cost that comes with every visit. Employee costs, facility costs, supply costs. There's a lot of indirect costs with every visit. If you can do more dentistry in fewer visits, that's how you can still compete really effectively. In a PPO model.

Why don't you tell us your view on Should a doctor, a young buying doctor, try to find a fee for service? Does it matter? Do you prefer one over the other? The nice thing of a PPO practice is the PPO is essentially doing the marketing for you, so you're probably going to have more people in the chair. But a fee for service is one crown. Fee for service is like four PPO crowns. In terms of profitability, what's your advice there for buying doctors?

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Yeah, so.

First off, would I rather be working at an office that was predominantly PPO or fee for service Absolutely. I would choose fee for service because you're getting paid more for the procedures you're doing and you're not limited by the insurance companies. But the issue is when you buy a practice, it's not necessarily as simple as the patients just staying on. When you take over, if you buy an office that is predominantly fee for service, meaning that, that the patients are being billed out of network, instead of being billed in network, patients are deliberately going to see a dentist and paying sometimes two to three times what they could be paying if they went across the street to see someone else because they want to go see that dentist. Maybe that's been the family dentist for years, and that dentist used to be in network, but they, they went out of network and this patient wanted to keep seeing the same dentist. They, maybe this dentist is able to do some type of special procedures that most dentists aren't able to do. The dentist is doing something or has relationships with patients that those patients are choosing to pay significantly more for that treatment. So when you as a buyer come in and take over a fee for service practice, you have a lot of patients that now have the choice they could see you and pay three times as much, or go across the street and be in network with someone else. And so then you as a buyer have to decide, are you going to go in network, even though that means the patients that stay, you're going to be making significantly less per procedure. And so that is why it's really difficult to buy a fee for service office. If you buy a PPO office, generally the patients are going to pay the same amount no matter what office they go to, because the, the insurance companies set the fees, the fee schedule, and so they don't have a financial incentive to leave the office when you take over. But if you buy a fee for service office, they have a huge financial incentive to leave or you're going to have to lower your fees. Now, does that mean you should never buy a fee for service office? No, because what I do is I calculate if you're going to go in network once you take over the office, does this office still make sense? And the answer is sometimes yes and sometimes no. And so it's going to depend on the office. It's going to depend upon the number of active patients, it's going to depend upon what your estimated revenue is going to be once you take into account the lowered fee schedules being in network versus out of network. And so it's really case by case scenario. But if you're looking for a more Straightforward acquisition, a predominantly PPO based office is going to provide you with the lowest patient attrition while still providing you with a decent revenue per patient. If you go to an HMO practice or a Medicaid practice, yeah, you might have low patient attrition, but the reimbursement rates are significantly lower than PPO plans usually. So PPO plans are usually the middle ground where it makes the most sense. Fee for service, a lot more risk on that attrition. And if you go with HMO or Medicaid, the reimbursement rates are too low for it to make sense.

Yeah.

Speaking of, of risks, buying a practice and assessing all those different components in a, in a cohesive view of whether I should buy or whether I should pass, what, are there other risk points that you see for a buyer stepping into a new practice that you'd want to vet out?

Yeah, definitely. So I have a whole list of different risk assessment things I do when I look at a practice. I'll just go through some of the main ones. Right now, staff is a big one. So the more staff a practice has, especially hygienists, the better. And the reason why hygienists are so important is because patients usually come back to see either the dentist or the hygienist. When you buy an office, usually the seller is going to retire. Sometimes the seller stays on for a while, but generally the seller is going to retire. And so patients are going to continue to come back and see the hygienist that they've been seeing for the last 10 years. And so that dramatically decreases your risk. Whereas if you take over an office. Oh, go ahead.

Sorry, I was just. That also come back, comes back to that case acceptance piece, I think a little bit the, the team, you know, are they reinforcing the buyer's credibility as they're talking about those extra five crowns that you were describing? Or is, is there a little bit of a friction point there? That's always an interesting point. Sorry, I didn't mean to cut you off though.

Yeah, yeah, definitely. But yeah, so the more, the more staff there are then the lower the risk. Because even if a few of the staff members leave, you still have some of the original staff there. Whereas I've seen some people look at offices where the office manager was the seller's wife. That's pretty common. That, that can be, that can be an issue. Sometimes the dentist is doing his or her own hygiene, which is a huge risk because now you have to hire a new hygienist. Day One and you're hiring a new office manager day one. So many risks there. So staff is a big one. Other red flags we already talked about over or under treatment planning. So, you know, that's something I definitely want to look at is was the seller over or under treatment planning? That changes your risk level. The rent for the building and the situation with the lease make a big difference in the risk level too. If you have a relatively low rent, then you can keep your practice smaller and still have a decent profit. Whereas if your rent is really high, then you are going to have to have a higher revenue in order to have a higher profit. So it gives you less wiggle room in terms of if you have a down year, if your rent is higher, because rent doesn't change generally. Whereas you know, a lot of the other expenses, like how much you're spending on lab bills, supplies, that's going to change if you have a down year and have fewer patients. But rent, your practice loan, those two things are not going to change. Staff is kind of in the middle. Usually that's a dentist's biggest expense is their payroll. And if you have to let some employees go, you can lower that number a little bit, but generally you don't want to. So when I look at a practice, I usually think of payroll as a fairly fixed number, at least up front. Just because it's hard to let staff go, it's definitely hard to go in and say, hey, you were making $30 per hour and I'm going to lower you to 20. It usually doesn't work. So I think of that number as fairly fixed.

And can I insert a quick comment here? And then I want you to continue on the risks here. Dental practices are.

They'Re heavy with fixed costs. And fixed costs, as the name would imply, are costs that really don't change month to month. Generally, regardless of your collections, collections could swing up and down, but these costs typically stay the same. And you're listing off some of these, rent being an obvious one. Labor is generally pretty consistent from month to month, regardless of collections, because you're not really firing somebody or every week telling them to come in less or come in more based on demand. They're just coming in on the same fixed schedule. And most of the administrative costs are fixed. So the true variable costs, the ones that actually correlate to collections, are labs and supplies. And this creates a high, higher risk, higher reward business model in that up to your fixed cost structure, your overhead is literally 100%, you don't have any profit, and if your fixed costs are 75% of your total costs, you have to make at least a certain amount in collections every month just to cover your fixed costs. If your fixed costs were only 10% of your revenue, typically it's very easy to cover your fixed cost. In this case with dentists, it's not. You have higher debt because equipment costs money, build outs cost money, acquisition cost money. That's a very high fixed number as well. Now the opportunity is once you hit your fixed cost structure, let's say you're on day 18 of the month and you've had enough income, this is sort of a theoretical conversation, but enough income to cover all of your fixed costs. Every dollar above that, about 80% or so, is going straight to the doctor's pocket because at that point it's only labs and supplies for the most part. There's a few other, like merchant services costs and a few other things that are variable. But for the most part, 80% of every dollar after you pierce the fixed cost line goes straight to you. And so if the Doctor's average collecting 80,000 and you have $130,000 a month, you're just stashing 30, $40,000 in your bank account just from that one month alone. But the inverse is true as well. If you only collect 50,000, your bank account balance is going to drop significantly in that one month. And I want doctors to understand that nature of fixed versus variable costs when they calculate what do they need to be collecting to be profitable in this thing. All right, I'll hand the baton back to you, Chris.

And I would recommend even looking at it on a day to day basis. If you can calculate what your general expenses are on a day, you can get a break even number. And I like to have in the practice management software a total of what your production, adjusted production is after taking an insurance write offs for the day. And you can see, I mean if your expenses are 4,000 and you're doing 3,000 that day, you're losing a thousand dollars that day. And so that's one of the reasons I love same day treatment is because you already have your staff there, you're already paying for electricity, all these things are already being paid for. The more work you can add on that day, that's only going to increase your daily production number. And same day treatment is incredible because not only are you increasing production that day, but patients are less likely to not show up because they're already there. Anytime a patient leaves, chances are you know, they, they may or may not come back. Hopefully they are, but you never know if, if you can just get it done while they're there, you know they're going to do it. And also you're not taking a spot up on your schedule next week. By scheduling someone next week, you're leaving that spot available for someone else.

Yeah. You know, on a daily basis I have a calculator I occasionally will pull out of my, my back pocket and it's, it's an Excel spreadsheet that looks like a calendar. And it will. We, we with all of our clients, we calculate what is their goals based break even, which is the collections they need to cover their overhead, debt, taxes, personal living expense, expenses today and set aside future savings to be able to become financially free at some target date in their life. And we call that your goals based break even. And then what this calculator does is it says, here's your days open for the month. And you literally go every day and you say we're open, it's a holiday, you know, whatever. And it will calculate how many days are open in the month and then it will say how much do you need to collect on average per day? And then every day the office manager or the doctor goes in and puts their collections for that day and then it recalculates for the rest of the month how much they need to collect in order to meet that break even. And it gives kind of a daily view and sometimes it's a daily reminder, a daily view that kind of motivates us to be productive for that day. So I love that daily view of things.

All right, so we're talking about risks. The biggest risk that I would say most dentists need to worry about is not that they're going to go out of business. Very few dentists go out of business. It's very uncommon. It happens occasionally, especially if you do a startup. I'd say from what I've seen, a lot of the dentists who go out of business, it's because they did a startup. The biggest risk when you buy a practice is if you buy the wrong practice. Like you were saying, with high might have higher fixed expenses and potentially a lower number of active patients. You can get into a situation where you're not making very much, you're making enough to pay your bills, you're making enough to make sure your creditors aren't going to be coming after you, but you're not making very much to set aside for yourself. I've seen some owners who, they were making 2 to 300,000 as an associate, they buy a practice and now they're only making 150, which is unfortunate because you could have just stayed at your associate job and done better. And an associate job, if you're not doing well, you just leave and find another job. If you buy a practice, you can't. So biggest risk is, is just being in that middle ground where you're not very successful, but you can't get out. You're trapped there. And I, I kind of humorously call it the, the death spiral that some dentists will get into where if you buy the wrong practice, you're not, you're not going to have enough patience. If you don't have enough patience, you can't treatment plan enough to make a. Enough money. And then if you don't have enough money coming in, you don't have any money to spend on marketing, so you can't get new patients. And it's this cycle where you don't have enough patients, so you can't treatment plan enough, you're not treatment planning enough, so your revenue's not high enough, your revenue's not high enough, so you don't have enough money to devote towards marketing to get new patients. And you can get into that cycle if you're not careful. And that is the biggest risk, I would say, if you're acquiring a practice or doing a startup, both can have that risk.

Yeah.

The biggest difference there, you know, from the seller might be operating the practice in a position that's profitable for them, scaled to what they want to, you know, like work, life, balance, perhaps, maybe they're scaling back. But the biggest difference for the buyer stepping into that practice day one, is that now they've got a practice loan that they've got to cover out of cash. And that's cash that the pro, the seller may have had going to their pocket previously because they were free and clear. But the buyer now has to cover that and still have enough to pay themselves.

So that. And sometimes the seller owns the building too, and they might be paying themselves rent under market value. And then you come in and your rent is doubled and you have the practice loan.

Yep. And that's why, Randy, as you know, every time we do our analysis, we try to. It's called normalization. You're trying to adjust the P and L income and expenses for what it will be after closing. Because I always tell buyers, you're not buying the cash flow pre close, you're buying the cash flow post close. That's what you get. And that doesn't always mimic the pre close. One of the issues in the past, I'm curious Chris, if you see this still is Delta Premiere and Delta Premier. Most buyers, if a seller is still in network Delta Premier, they're not taking PPO. They get paid 12, 1300 a crown from Delta Premier as opposed to the 750 or so on a PPO. That's a huge write down for the buyer who will not get in most cases Delta Premier. There's certain specialists I believe that can still do Delta Premier. But do you see this issue at all as you help buyers?

Yeah. So two thoughts on that. First off, I have had three or four clients just this year that have been able to sign up with Premier so it's not impossible. And they've all been in different states now. Delta Dentists.

Yeah, interesting.

Yeah. Delta Dental is interesting because it's not just a single company, it's multiple companies. It's kind of like a franchise. There's some that do multiple states, there's some that just do single states.

So each Delta Dental is going to treat this a little bit differently. I wish there was, I wish it was as easy as just saying they will or will not approve you for a Delta Premier. But some I've seen denied and some I've seen approved. I'm not sure exactly what goes into that. I think it has to do with the area you're in. If Delta Dental sees that there is a greater need for providers in that area, they're a little more aggressive in what they will give new providers. So it's going to depend on your location and probably the mood of whoever you're on the phone talking to at the time. Yeah.

If you're, if you're assessing that for, let's say there's a seller that's done Delta Premier and we're, we're not sure whether the buyer is going to qualify and get that status, what would you, what would you use as kind of a discount to say, hey, worst case scenario, buyer, you're going to at least get PPO rates. This is what you can probably count on.

And how many patients, what portion of the collections were from Delta Premier. I find this to be a really difficult number to decipher out of the practice management software.

So the reason why I don't really worry too much about that is because I'm looking at things a little differently than looking at revenue and then subtracting things. I usually start from the ground and then go up rather than starting from the top and go down. So I look at the Seller and I look at the practice, I look at the number of patients that are at that practice, and then I estimate what the buyer's revenue is going to be based upon the number of patients, the potential of that practice, and then this, the actual buyer, how aggressive the buyer is going to be in treatment planning. And so that's what I usually use for my initial estimate of what the buyer's revenue is going to be once they take over the office. And that's my number is sometimes very similar to the sellers, but sometimes it's dramatically different. I've had some practices where the seller, you know, had 6, $700,000 in revenue, and I'm projecting that the buyer is going to have 1.2, 1.34 million potentially. So double or more. Those kind of practices are less common. I mean, they're out there. I've. I've helped probably five or six dentists this year buy practices like that where I think it's a double type opportunity. I'd say that's about the top 20% of practices that I help people buy are that great. But there's some where revenue is projected to go up by a few hundred thousand, which is not nothing, especially if you're able to keep expenses the same. But with that being said, I, I'll see a lot of practices where my projected number is significantly lower than what the seller's revenue was. And I say a lot about four out of five practices that I initially help buyers look at fall into that category. And so initially I see the practice and I say, hey, you're going to be making less than the seller made here, most likely. I recommend you keep looking. And so usually it takes at least five practices before we find one that I recommend moving forward. Forward on.

Okay, so how do dentists find that pool of potential practices to buy?

Yeah, so the number one way is reaching out to practice brokers. And brokers are somewhat like realtors when you buy a house, but there's some key distinctions that you have to keep in mind. So a realtor, when you are trying to buy a house, they are going to show you every single house that's on the market. Because there is an agreement between realtors that if there's a seller's representative and a buyer's representative, they split the commission. Usually in real estate, it's about 3% goes to each party. And so a Realtor is happy to show you any house on the market that's listed through the MLS because they are going to get their commission for dental practices. There's no such agreement. When a seller hires a broker, that broker is only going to get a commission on the practice that they personally have listed for sale. And they sometimes get as much as 10% on a practice, which is a lot. I mean, if a Practice sells for $2 million, it's $200,000 in one sale. Now if this broker is working for a company, usually they're splitting that with the company. So they might only be keeping half of that and half might be going to the company, which is why it's extremely competitive to become a practice broker because there are a lot of dental practice brokers out there. My aunt was getting her hair done and was sitting next to someone the other day and introduced herself and he said, oh yeah, I'm a dental practice broker. Just at some random hair place. There's a lot of dental practice brokers because it's so profitable, you only have to sell one practice per year as a dental practice broker to be doing very well. And so it's competitive.

And last, but you have to reach.

Out to every single practice broker because they're not going to tell you about practices. Other brokers have listed for sale are practice brokers.

Is there any sort of credentialing that they have to go through to be qualified on this? So their assessments of the practice may not really. They probably aren't adequate to rely on.

Some are absolutely horrible, some are great. There are some practice brokers that do very comprehensive reports and do valuations and are extremely useful and they make my job easy. There are some that are just, they just, they straight up will lie. I've seen some just straight up lying about practices and you don't know who you're going to get because there are, I mean, there's more than a thousand practice brokers in the US probably, probably a few thousand. And some of them are great, some are terrible and some, some are inexperienced, some are very experienced. You just don't know when you reach out. And if you are not adequately evaluating the information yourself, then I would absolutely not trust what a practice broker says because they will just straight up tell you whatever you want to hear because they want you to buy that practice so that they can get their 10% commission on $1.5 million.

Yeah, I have a, a lot of thoughts on this subject.

Because I've been involved in hundreds of practice sales and just worked with a lot of brokers and over the past four years as sort of a moonlighted project, I have practice orbit practiceOrbit.com here's my plug for it. PracticeOrbit.com is essentially trying to create a central marketplace for all those brokers and for self service or FSBO for sale by owner options as well. I have had mixed feelings about brokers. I think as in every career, including my own, you've got a pendulum or you've got a range of really good and really bad. And a really good broker I think earns their fee pretty well in that they will move mountain and earth to get that thing closed. And attorneys, I love them, they're so busy. Accountants, I love them, they're so busy and creating organization in the chaos of a dental transition. I find brokers. A good broker who understands dental really well and knows has, I would say, enough soft skills to manage the psychological side of a sale, which is pretty intense at times. That's where a broker can do really well. And sometimes they make an introduction, sit back and then collect their hundred thousand dollars. And I don't feel that they're really playing their role. And the interesting I've always thing I've always found is it's the same license to sell houses as it is to sell businesses as it is to sell dental practices. And yet it is such a dramatically different sort of skill set and analytical process to sell a business than it is a house. But it's the same license. At least here in California it is. So with Practice Orbit, it's creating sort of an MLS or like a Redfin, except it goes beyond being a listing site. The deal actually processes inside of the platform with digital NDAs and LOIs, a transaction management room. The banker comes in, you could come in, Chris, the accountant and the attorney come in. And they all operate off of a common workflow and timeline to get it to close a lot smoother. Sort of like Redfin meets Airbnb in a way. So I put a lot of time and money in that. And it's launching actually right now and doing demos with brokers to use as a deal management platform for all of their listings. I think there's a market demand for it. Is the industry ready to adopt a marketplace technology in dental practice sales? Jury's out. I feel pretty confident it will, but. But we will see. Let me ask you this, Chris. Pivoting a little bit. Dental practice ownership is a lot more involved than being an associate because you have all the business side of dentistry. Why should a dentist consider even becoming a business owner today, especially in a landscape that is so competitive with corporate dentistry?

Yeah. So on average now there's a lot of A lot of different variables that go into this, but on average, if a dentist goes from being an associate to being an owner, they can either see the same number of patients and double their income, or they can see half as many patients and have the same income that they have when they were an associate. And I really see both as viable options. Some buyers come to me and they say, hey Kris, I just want to make more money. And I say, okay, well then just see the same number of patients or see more patients and double the amount that you're keeping per patient. Or some people come to me and say, hey, I'm at this point, this job and I'm working five days a week, I'm exhausted, but I don't want my income to go down. And so, same advice, buy a practice, but just buy one a little bit smaller. You could work two and a half days a week as a dentist and make 2 to $300,000 a year fairly easily. There's not that many jobs where you can do that. Like, that's, that's great. Or if you want to work all five days, you could be making a million dollars a year as a dentist or more if you have associates working for, for you. And so there's just so much opportunity that you are passing up when you're working as an associate. The advantage of being an associate is the flexibility as an associate. As long as you're not signing some sort of long contract. Now I've seen some associates for whatever reason sign contracts for like a year or two that they can't get out of, which I think is crazy. Don't do that. I wouldn't give assign anything that's more than a 60 day notice. It's if you're going to take a job because the reason you're working as an associate is for the flexibility. That's why you're doing it. If you don't know you want to live in a certain town, you, you don't. Maybe if you're not married yet and you're worried that once you get married you're going to have to move, stay at your associate job. But if you are at a place in your life where you want to be there at least reasonably long term. I tell dentist, if they're going to buy a practice, plan on being there at least five years, ideally more, but you know, at least five years. If you're in that situation, well then it, it just makes so much financial sense to be an owner. And I hear a lot of people talk about how, oh, I'M worried it's going to be a lot more work being an owner than an associate. I just want to go in and see patients and get out. I don't know who you're talking to because, like, I have a ton of friends who are dentists. And the ones that are owners, they're the ones at 1:30pm on a Wednesday that are golfing. The ones that are associates are the ones that are at Aspen until 6pm in the evening. And they don't even have time to go to the gym before they go home and eat supper and go to bed and wake up to be back at the office at 7am the next day. On average, owners have a lot more freedom and a lot more control over their schedule. They usually are at the office a lot less than associates are and they're usually making significantly more money. It's just a matter of you have to make that commitment to buy a practice and be willing to put your name on it and say that you're going to be there long term. That's you're trading off your commitment and your flexibility for.

More control over your schedule, a better lifestyle and a higher income. So you just have to decide, are you at a point where you're able to make the commitment to being at this office for the next few years? If so, then it's time to be an owner.

Yeah. And from an economic standpoint, as the way Randy and I look at it, there's the production that you do as the doctor, and then there's the profit of the business and the owner gets to keep that profit. And that's a big distinction there. And to the extent that they run a really strong practice, to that same extent, is the profit gonna be a lot higher and they get to reap the rewards of that sort of business savvy and skillset that they've developed as a really effective leader and operator of their business. The other thing too is.

Just their ability to curate their professional life. So specifically is something you can't do as an associate. As an associate, you're essentially.

Following somebody else's framework around your profession. You have some flexibility in there to negotiate as an employee, but as an owner, you have full discretion on managing that. And I love that freedom and ability to custom build your daily life professionally and just have. I mean, I would say my happiest dentists are the ones who are running a good practice. Not the wrong practice, but the right practice, and they are running it well. Now, how does a dentist know that they are ready to Be an owner.

Generally the banks to get a loan are going to want you to work for at least six months to a year after you graduate from school. So I have seen some dentists buy practices straight out of school, but it's usually if they have extra financial help from a family member or someone to potentially co sign the loan or do something to help them. Generally though, the banks like to see six months to a year. You also usually have to have a little bit of money saved up before you buy a practice. The average is about 10% of the price for the practice. Is what the banks want to see that you have saved up. If you're buying a practice but not buying the building, you usually do not have to have a down payment. If you're buying the building in addition to the practice, you usually have to have 15 to 20% saved up as a down payment. So let's say you're going to buy a million dollar practice and you're going to lease the building. You're not going to buy the building immediately. Then you need to have at least six months to a year of experience. And, and you have to have $100,000 saved up. And so that's kind of the average size of practice that I recommend is about a million. And so I would recommend trying to have about $100,000 saved up before you decide you want to buy a practice. Now rent. I've seen some dentists do it with a lot less, but it can be more difficult. Sometimes you have to get a gift from a family member if that's an opportunity. Sometimes the seller will have to do partial seller financing. There's a few different options if, if you are not able to save up that much. But my true advice is if you don't have a hundred thousand dollars saved up and you're a dentist, just go get a better job and don't buy a new car this year and then you'll have the money saved up in a few months. Like it's not that hard as a dentist to save money if you're smart with your spending and you have a good job.

Yeah, you know we have a free financial education platform for dentists. It's called associatesonfire.com and in there one of my first videos is, I call it the overall timeline in the life of a dentist coming out of dental school.

When to buy a house versus a practice. When to.

Structure their student loans into one of the pay options or the repay options. When to set up a 401k and it's there's a. There is a sequence of events that does reduce a lot of friction and creates flexibility for a doctor. But one of my key themes in the Associates on Fire program is keep living like a dental student. It creates so many more options for you. And if you're trying to find the best practice, the right practice, and not end up in the wrong practice, you need to create options. And to create options you need to have multiple practices that you are considering so that you have a choice and you're not just taking what's handed to you. And if you have more liquidity, meaning more cash in the bank, that's going to make you look better to more sellers and more banks. And it's going to give you a leg up from many of the other associates who came out of school and immediately released that pent up consumerism, I call it. And they buy the car and they, you know, they get in too big of a house, the rent is too high and everything's too high. And now they just have $15,000 in their checking account and they don't have, they don't look good to a seller and to a bank. And therefore their options are limited, which means they might get into a practice that isn't the ideal practice. And, and then it perpetuates an even bigger problem. So that, and you mentioned student loans.

For student loans, I do not recommend you pay your student loans off early. That's one of the biggest mistakes I see dentists make. I've had a lot of dentists that come to me. They're ready to buy a practice in every way except they decided they were going to put all their extra money into paying their student loans off early. And so they don't have that hundred thousand saved up. They don't have that safety net because they just paid off student loans early. There's no reason why, why pay off your student loans when you're making $200,000 as an associate, when in a few years you might be making 500 as an owner? It's going to be so much easier to pay those off and you'll have that liquidity saved up to where you're able to buy the practice. So I would agree with income based repayment your first year because your income in dental school is probably zero. So your first year is probably going to be zero in payments and then go from there. Just pay the minimum you can until you're an owner. And then I would aggressively pay them off once your income is high enough to where it's not burdensome to put 100 to $200,000 towards your student loans for a few years until you get them paid off.

Yeah, that's a key point of conversation we have with a lot of our, of our doctors. I even say I'd rather see you in a house funding a 400 tax deductible 401k before paying off your student loan. Because your student loans, a unique loan, you're in partnership with the government and the government is literally paying for some of that loan on subsidized interest depending on which program you are in. But the government is helping pay that. It's typically not terribly high. I will say the disadvantage with student loans is most doctors because of their income level don't get a tax deduction on the interest payments of the student loan. But that said, and especially if you're on a pay or repay that limits how much you actually have to pay, that is a huge advantage that dentists should be taking care, should taking advantage of to build cash in the bank. And I say once you buy your practice, you buy your home, you're funding a 401k and an IRA, you're maximizing your tax deductions and you have a lot of surplus and you don't like debt. Okay, let's lift our heads and consider a student loan pay down option and maybe even go and private, go into a private loan at a lower interest rate. But there's pros and cons to all of those things. So. Such a great comment there Kris. Thank you. Thank you. Randy, anything you want to add to that?

I think that the general theme there is cash is king. So keep as much on the side as you can to have available for whatever opportunity is going to come. And that still applies I think in the first couple years of ownership too.

Agreed.

That's why we'll want to look at the bank terms. What's the load that you're going to be carrying and if there's a building purchase in the future, how much cash do we want to build up for that first before we go after principal payments on that loan? Because we can get really aggressive on that. But we just want to time things out and stage them in the right sequence of priority so that you basically are getting ahead, you're getting ahead as quickly as you can to get the best take home net pay at the end of the day.

Less is more. I always tell young doctors, less is more. Less spending that is. And if you can do less spending and, and I love your comment there Randy. Even after buying the practice. So having cash in the bank is helpful to get into a practice. And then when you're in the practice, sometimes that credentialing plugs up the cash flow for a few months and the bank may give you some working capital. But it's really nice and you're going to sleep a lot better at night if you're sitting on extra cash in your personal account. And if you don't have to take as much money out of the practice and to live on it frees up more cash inside of the practice to invest into really good team members, good marketing. Maybe you do need some new equipment, all of that to then scale your, your practice. So again, keep living like you're a dental student before buying and even for a little while after buying a practice. That's my financial planner council coming out there. Okay. Last.

Not forever though.

Not yet. Eventually, yeah, eventually you can live not like a dental student for sure.

But I like how you said it Wes, in the past. I mean when we're thinking about that kind of financial lifespan, we're looking at two people, we're looking at you today and we're looking at you in a few, in five years, 50 years even. And so we're trying to stage these financial decisions to set you up in both scenarios.

The best.

Yep. And Kris, you may not know this, but when we're working with a doctor, we do a budget with them and if they're married, their spouse, so we say what do you need to live on? And then we, and then we set up through payroll a deposit every month of the exact amount they need for their budget. And then we try not to touch the practice checking account. And it creates a constraint because very few people, especially doctors, are going to take the time every day to log into a personal financial planning software and put in their expenses, you know, categorize their expenses and do their accounting on their personal spending. That's just very tedious. But if we do that one time budget, which every client is going to do a one time budget with us and then we'll revisit that every couple years or so, then we know how much has to come out of the practice, which therefore allows us to know how much can stay in, which allows us to plan for reinvestment and growth opportunities inside of the practice and savings into their IRAs and 401s or paying down bad debt or building emergency reserve funds or funding kids education. 529 accounts, whatever their life goals are.

Being on a budget is like the most fundamental aspect of good financial planning is simply living on what you earn. All right, last question here, Kris, and then we'll go ahead and adjourn. How long does it usually take to buy a dental practice and what are the first steps?

It usually takes something like three to six months to find the right practice to buy. I would not buy the first practice you find. Chances are when you first reach out to practice brokers, they're going to show you the practices that they've had on the market and haven't been able to sell to anyone else. The best practices are going to sell usually within one to two weeks at least. There's going to be an LOI submitted on those practices within one to two weeks of when they hit the market. And so if you just on any given day, reach out to a practice broker, and I already told you, some practice brokers might only list one or two practices per year. If you just reach out on any given day, they're probably not going to have a very decent practice for sale. What happens if you reach out to nine or 10 practice brokers? All the ones in your area you can find. At some point you're going to get an email and it's going to be the perfect practice. And then you want to move forward quickly on that. Once you find that perfect practice, then we're looking at somewhere between two to three months for closing. It's going to depend on some of the specifics of the deal. Some sellers want out right away. Occasionally, you'll buy a practice where the seller has passed away and you need to take that over quickly before there's too much patient attrition. Sometimes you'll buy a practice where the seller is in no rush to leave and they want to work another year or more before they leave. And that's when you, you might buy it and you might keep them on as an associate if the practice is able to support it. So every deal is going to be a little bit different. But usually it does take the bank time to approve your loan to go through underwriting. And it usually takes a little while for insurance credentialing to make sure you're in network with the insurance companies. And generally, if you add up all the different tasks, I have a list that I give my clients that's about 80 different steps of things that I want them to do before closing. And even if you just do one thing a day, that's going to take you a little while. Like, there's a lot of stuff that has to happen when you buy dental practice so two to three months for closing and, you know, three to six months to find a practice. So I would say give it. I would start looking for practices a year or so before you're actually ready to be an owner. Hopefully it'll go a little faster than that. But also, I wouldn't want you to be in a situation where you're desperate and you have to just take the first practice you can find. If you want to make sure you have an amazing associate job that you're at before you buy a practice. I wouldn't say, I hate my job, I want out today. Let's go buy a practice. It's usually not a good scenario because then you're desperate to buy the first thing that comes to the market. Whereas if you have an associate job, yeah, you're not making as much as you like. It's not perfect, but you're happy there for the next year. Well, then now you're in a good position to buy a practice because you have some time to actually find the right opportunity. Office.

Yeah. In terms of finding the office. A couple quick comments. I love it when doctors take the initiative and they just go knocking on the streets. Have a letter, they can handwrite a little letter and they can look up the local dentist. If the doctor looks a little older, you know, they could walk in and hand a letter and ask it to be given to the doctor. Talk to your local suppliers who are often very connected with the dentist locally with practices that aren't listed yet. Maybe a doctor's been thinking about it and if they suddenly get a letter from you and you appear to be a really good buyer, you may say, okay, that's it, I'm ready. I'm ready. I'm going to entertain the conversation. And if a seller can think, oh, I could sell it to this potential buyer without paying a 10% broker fee. That is another incentive sometimes to go and reach out personally to doctors or like us, a dental CPA firm. Hey, Wes. Hey, Randy. Do you have anybody in your client list who's looking to sell here in the next year or so? Could you make an introduction? And taking that proactive effort oftentimes, I think is a great way to expand your options, especially options that aren't going to be as competitive because you got it before it went to market. The other thing I'll mention briefly is in practice orbit, buyers can create saved searches off of their dashboard. And the saved searches are where they want to buy a practice and the type of practice and sort of the revenue level and Then they'll be immediately notified as soon as a practice, literally in seconds when the practice goes live on practice orbit. And theoretically, if we've got 100 practice brokers all putting on a listing a month or so, you're going to have a lot of practices coming for sale on the platform and buyers can be automatically notified and immediately put in an NDA through the system and then an loi. So that's another way to find practices. And I lied. I do have one more question if you have time, Chris. Do you recommend doctors generally buy instead of startup and what would be a reason to start up instead of buy?

Yeah, absolutely. So as far as buying versus acquiring a practice, the reason you would generally prefer to buy a practice is the patients. The way that you make money as a dentist is you treatment plan on patients. So the more patients a practice has, the more you're going to be able to treatment plan on those patients. If you do a startup, you're not going to have any patients at first. And so it can take sometimes three to four years to get to a point where you're profitable and sometimes even more before you get to a point where you're doing well as a dentist. I've seen some people buy practices and they're making 6 to $700,000 their first year of ownership. As a startup, you're probably not going to be making any money at all your first year. Also, when you do a startup, you usually have to stay at an associate job for one, two, sometimes three years, working part time while the startup is open part time. And oftentimes you don't have enough money right away to hire a hygienist. So you're doing your own hygiene. So the, the issue is if you do a startup, it's going to take you a lot longer to become profitable and it's going to be a lot more work. The advantage of buying a practice is that you can making a lot more money right away. Now there's the question of growth. I hear a lot of people say, well, with a startup you're not going to have a practice loan, but then you also have to balance in the opportunity cost. How much is your time worth?

Do you really want to take a pay cut of potentially? We just said you could make potentially 5, $600,000 your first year as an owner if you buy a practice and you're going to make zero your first year as a startup. Now, it might not be exactly that far of a difference in, in every case, but let's say there's a two to $300,000 difference for three or four years. That's $800,000 in lost opportunity cost right there from doing a startup versus an acquisition. And that might be enough to cover your practice loan right there depending on how big of a practice you're going to buy. And so it really comes down to that opportunity cost versus versus the risk of doing a startup and potentially, you know, going out of business or not making nearly as much as you were planning on making.

Yep. I, anybody who does a startup, I call them the brave and the bold. I mean it's, it's a harder road. It's, it's very much a harder road. The, I get the appeal. The appeal is I'm going to create a practice, look, feel, culture, hiring everything that has my fingerprints on everything from the ground up. It's, it's uniquely mined and I'm going to love it. And I understand that. And I started up practice CFO as well, so I get a lot of those benefits. But it is absolutely a longer road to profitability with an incredible amount of stress and headache that goes with it. And I'm not trying to discourage doctors from being brave and bold and doing that if it's the right thing. Especially if in the area that they absolutely know they want to need to look live in, they may startup may be one of their only options in some cases. What do you think about these practices? Just this past week I had two owners come to me and they started a second location and they're doing about 500,000 in each location. They got in one practice six ops and another one nine ops. Beautiful build outs. They took out $600,000 to do the build outs in these things. They realize that the second office is 10 times more difficult than running the first office because there's only one of them and two fixed cost structures now. And they're scrambling around town to, you know, to service this or find an associate who's actually going to be reliable and put their love into it. And it's really hard. So they come to me and they say, Wes, I just need to cut my losses. So you got this practice. Beautiful build out, six ops, four $500,000 build out costs. And they're trying to sell this thing for like 350, 400,000 just to cut their losses. Maybe they have 500 patients. What do you think about those as an opportunity? Because there's quite a few of those that come up.

There are? Yep.

And brokers don't like to sell them. They, they're low, the commissions are low, and sometimes they're harder to sell.

So if you are going to do a startup, you've decided you want to do a startup, you understand that you probably have to stay at an associate job part time, but you just really want to do a startup, then oftentimes you can buy one of these existing build outs. And I usually call it an existing build out rather than calling it an existing practice, because a practice is where there's a lot of patience. A build out is where there's equipment. And so you can buy an existing build out and maybe that's less expensive and quicker than doing a startup. If you do a full startup and you are responsible for your own build out, meaning you find a, you find some real estate that is not yet set up to be a dental office and you have to do the construction work to do that build out. That can take more than a year sometimes, and sometimes you're paying rent for five or six months before you're even able to start seeing patients, depending on if you're able to negotiate that in with the landlord. Whereas if, if you at least find an existing build out like you were speaking of, at least you can get started right away, but it still is probably going to take you three to four years to become profitable. And so you, maybe you cut a year off of that timeline, but now you're looking at two to three years to become profitable, which is better than three to four years. But if you just find an existing practice that has 2,000 active patients and you go in and are able to treatment plan $1.3 million in dentistry and have $700,000 of expenses and walk away with 600 for yourself, year one, I'm going to choose that second option any day of the week.

Agreed. All right, this has been a phenomenal podcast, guys. Thanks for joining and doing this. I think we should do more because I actually have a lot of other questions and topics related to the dental transition that we could absolutely do go into. I, I will say, Chris, I want you. My preference would be that you're in every deal that we're involved in because you look at things that we don't look at as the financial people. We see numbers on a paper. You see patients, you see treatment plans, you see what meat is left on the bone versus what has been extracted off the bone from the seller and what opportunity lies. And so I think you're going to catch things that we probably would not catch. And so I love pairing up with you and I know you two are working on a number of practice acquisitions together, so we appreciate the teamwork that you have with us. Any parting words for buyers out there on buying a dental practice?

It's not an overstatement to say that this is buying your first practice is probably the biggest personal and professional decision that you're going to make as a dentist. And so shameless plug for Chris here because what he does is, is quantifies the risk and the opportunity, and I think that's invaluable.

Great.

I agree. I say the same thing. I just say most important decision who you marry. Second most important decision is what practice you buy.

Well. And if you're working, if a buyer is working with us as a pair, we lower our rates quite a bit because, Kris, you do a lot of the work that we do and then you do a lot more. And so we will, of course, do the financial due diligence. That's what CPAs are typically involved to do during the process. And then we help stage them with, with their financial sort of ecosystem when they step into ownership around accounting and payroll and bank accounts and insurance to protect their loan and all of that that we help them set up with with our big massive list. So between your big massive list of tasks and our big massive list of tasks, we've got all of these buyers covered to step into ownership successfully. This has been a great show. Thanks for joining the Dental Boardroom podcast, guys.