Blueprint for a Successful Practice Sale—featuring Dr. Kevin Kenny

Welcome, everybody, to another episode of the Dental Practice Sale podcast. I've got an honored guest, somebody here who I have known over the years here in San Diego and been a part of a really cool study club that he has that was called the Patriot Study Club and also known as the Kevin Kenney Study Club. And that is Dr. Kevin Kenney, retired dentist and just a man full of so much information. We had you on a podcast previously, Dr. Kenny. Remember that?

Oh, yeah. I just want to mention that you said I was full of information. I've also been told I've been full of something else at times. So we just got to throw that in there as a disclaimer.

Well, I like to, I like to say I think there's going to be a lot of substance in the podcast today. The first podcast got a lot of listens and it was on some of the big mistakes that dentists make as a practice owner. Yeah. So some really, I thought, practical tips for practice owners. And that was on our Dental Boardroom podcast. And many of my listeners know I run two podcasts. One is called the Dental Boardroom, which really is for ongoing practice owners. I think this one's going to be so valuable, I'll probably post it on both. But I also have related to a technology company on the side called Practice Orbit, which is centralizing dental practice sales, sort of like a redfin for dental practice sales, so that buyers and sellers can find each other and navigate the sell a lot less expensively and also a lot more smoothly. And so today, what I want to do with you, Dr. Kenny, is I want you to relate your story about your sale selling, this thing that you worked so hard for so long to build and have a great dental practice in the community, a great dental team, give a great experience to your patients. And then what was that like going into exiting? What was something so valuable and so important to you over the years for so many dentists who go to sell their practice after they've been owning it for 20, 30 years plus, that's, that's not just a financial decision. It's also a psychological transition that is challenging to pivot out of working in your practice into retirement or wherever that next step is. So welcome to the podcast. Can you just kick off by giving us your background, going back to dental school and your early days, and maybe fast track that, but give us a little context for who you are.

Sure. Great. First of all, congratulations to everybody who's listening to this future buyers and sellers. It's an exciting chapter for both and thanks for having me. All right, who is Dr. Kevin Kenny with this accent? I'm from the suburbs of New York City out of Long island, but Southern educated. I was down at James Madison University and then the Medical College of Virginia, which is now known as Virginia Commonwealth University. I'm happy they changed their name and abbreviated it. I was coming out of dental school a little on the young side, so I had a military obligation. I came out to San Diego, did residency training as an officer in the Navy. I owed them four years. And then after that, I associated for a couple years, and then it was time to dive into private practice. I did stay affiliated with the Navy, so I retired from them as a captain.

And.

And then I'm on staff at the Department of Family Medicine at the University of California, San Diego, where I have a adjunct professor title, which means you get to teach, but you don't get paid. And private practice in San Diego, we were very, very fortunate. I had a large practice. We did extremely well, but it was time to pass the baton, and it was time to move on in life. And so we'll talk a little bit about the excitement of getting a practice, and also we'll talk about the excitement of exiting and pros and cons, both. Now, I'm not an expert in this. I'm not a practice salesperson or whatever, but as we were transitioning out and aging out, you're hitting in your mid-60s. All my friends that were in the study club with me and peers, guys they played golf with, we all seemed to be exiting at the same time. And we all went through this together. A lot of questions, a lot of mistakes were made, and a lot of smart things were done also. And we all learned from each other. And thus, let's do a podcast, and let's really get down to business and talk about this.

So some of the. Some of the specific timeline details, how long ago did you sell your practice?

Okay, I'm 69 now. I sold it seven years ago, but we actually started selling it a lot earlier than that. In my late 50s, I knew that the game was going to end, and we came up with an exit strategy. And then that's. This is where the real meat of the podcast gets going. But we'll go like, well, what motivated me to sell it reached a point where the practice was very busy, had the associate dentist in there every day of the week and the hygiene and a visiting periodontist, and the practice was large. And all through my 50s, I'll call it, it was a mega practice. And we were doing extremely well. And I just flat out loved going to work. I couldn't wait to get back in there Monday morning. And I had friends working with me. I had a great staff, great team, and it was just flat out fun. The patients have with me for years and every day was a holiday and I really enjoyed private practice. But you're aging out and it's time to go. And then you have to be honest with yourself. The law of diminishing returns was kicking in. I was no longer willing to put in the effort to keep the production up. I was coming very complacent with the dentistry that I was doing. And I lacked the motivation. I wasn't interested in scanning, I wasn't interested in doing Endo. I wasn't interested in placing implants, I wasn't interested in doing Invisalign. And it really got to the point, like, what am I interested in? All I was doing was drinking coffee and talking about the Padres or whatever. So I was becoming like the cruise director. And I had the younger doctors were the ones that were motivated to be doing and keeping up with things. And I said, kev, it's time to go. But I just want to say there's a lot of things we say, it's time to go, but are you ready to go? Are you financially ready to go? Are you psychologically ready to go? And that's going to lead into Wes's next. Next question on when are you ready?

Yeah, I mean, let's talk about that in two parts, actually. There's the financial element and then there's a psychological element. Let's actually talk about that psychological element first, since you were. You're touching on that when you're a dentist or as a practice owner. And I can say this myself because I own a practice cfo, of course, which is a practice. It's a. It's a CP in wealth management practice. It gives me an incredible amount of purpose. And every day and some days, yeah, it feels a little bit stressful managing people and managing cash flow, managing taxes, managing all of those demands of being a business owner. Which is why I think business owners should be paid quite well if they can do it successfully because they bear a lot more risk and a lot more, I would say, stress than a non business owner. Now, that's not always the case, but that's generally the case, in my opinion. But it gives you so much reason to get up every single morning. How did you handle that? Can I say, loss of daily purpose when you sold your practice and how did you stage yourself psychologically to accept that?

Well, bam. I'll tell you, it was a shock. The financial and the psychological, they're really tied together. First of all, you have to have a number. You're sitting around and you're in your car by yourself or whatever, your man cave, or you're at the golf course hitting balls while you're alone, and you say, hey, you know, this isn't going to last forever. And how am I doing financially? Then there are people that are dependent on you, whether you've got kids that got to go through college, you're helping out family members, your wife, your lifestyle. And the quick answer is, there's a number. There's a number that you have to have, and you got to figure out what that number is, and it's dead serious. You need to know the number. Now, how do you come up with the number? You got to look at your lifestyle, you got to look at your financial obligations, and you hear different formulas. A number that you subtract 4% every year to live off of. You got to look at your different income streams and be very honest. Some guys had a lot of income streams from rental properties, stock market, you just name it. And other guys were just very honestly dependent on the sale of the practice. And you have to know what that number is. And if you don't have the number, you're in a psychological problem right there. You need the number. And then if you think you're going to live off of 4%, no, try 6 to 8%. Because all of a sudden your wife wants to go on a Viking cruise and you have a lot more time to go down in more expensive golf courses. It costs more to be retired than it does when you're going working every day and you're bringing a sandwich with your gram and a quick launch or running through Starbucks. You're not spending any money. When you're not working, you're spending more money. So start thinking that the number you need is going to be a little bit larger than what it is. Geez. And then you got family obligations. You got to look at that. But, okay, here's the number. And then did you get the number, yes or no? If you got the number, congratulations, you can retire. If you didn't get the number, then you better dig in and start kicking that final mile of the marathon. You need to crank it up. You need to get the number. And it's a shame when I run into these dentists that are semi retired and they're broke and I'm like, hey, you want psychological problems? You've got one now. Being broke is boring and psychologically taxing.

And you have every day, all day.

To think about that, to contemplate it. And honestly, what happens is, guys line up, taking a deep breath and say, well, I got to go back to work. It's not the end of the world.

But I do want to pause you on this and park up on this conversation a little bit, because there's the magic number. And it's like, what is the pilot cash? That's the question I've often gotten, as if I'm a certified financial planner. And they will ask, and a lot of clients will ask, wes, what is the pile of cash? Or what is the magic number that I need in order to invest? And if your lifestyle is simple enough where you say, I've got a 4.1K, I can pull out 4% on that. I'm going to get Social Security at age 67 or whatever that is. I've done my budget. I need $7,000 a month to spend. My home mortgage is paid off. If it's very straightforward like that, one could almost just do this in their own Excel file or on some free online programs. But when you have more going on, maybe you do have kids in college, maybe you're wanting to buy a second home somewhere in retirement, maybe you're wanting to travel a little bit more. And if you have a bigger practice, especially what. What are you going to take home after the taxes, any remaining debt you have on the practice when you sell, and any selling and broker expenses, what's left? And that's. That's a number that a lot of people don't, don't know or don't have going into the cell of their practice. And yet their business is one of the largest variables of that pile of cash that they'll have to take care of them. Did you engage a financial planner or did you just sort of work through this on your own through a mental exercise?

No, actually, there's like an unofficial board of directors, or we'll call it advisory team, that every dentist, whether you are just getting out of school or you've been at this game for 40 years, everybody needs board of directors or advisory team. And who's on this advisory team? Number one is your financial planner. Whether you're working with an Edward Jones or an LPL guy, an independent guy, Morgan Stanley, just fill in the blank. But you need a financial advice. You need a CPA who was on your team, and you need a banker And I'll go over and extrapolate on each one of those why and how they use them. First of all, don't view them adversarial. They are there to help you. They advise you to protect you against yourself. What do you mean, to protect against myself? Because you make big financial mistakes and blunders, because you're out of your league. This is why these guys go to school, get advanced degrees, and they have experience at this. And now let's talk about the bank. We'll go right into the banker. Why the banker? First of all, let's just say, okay, today's the day I got to look at selling my practice. I got to get ready to sell this practice. Surprise. It may take you as long as two years to sell the practice.

What?

Two years? No kidding. Get ready, because it doesn't sell right away. The associate that you have in the back of his mind, he's going to open up down the street. He just hasn't told you yet. Has that happened to me? Oh, yeah. You just might think that this is going to happen overnight. You're going to get ghosted thinking about selling a difficulty house. Not everybody is ready to buy a dental practice overnight. And you have to be ready, ready, ready to go. It could go less than two years. It could go in a matter of months. However, plan on two years. If you think you're going to go out at 65, you need to start meeting with the bankers, the accountants, the lawyers, at 63. Now, what the banker is going to do is. This is very interesting. Well, how much is my business worth? And then be honest with yourself. Blah, blah. I run into these dentists. Give me a break here. What is this business actually worth? Now, what I did as at 60, I said, okay, what is this practice worth? I really was oblivious. I had no idea. So I went to the big accounting firm that handles lots of dentists. And I went to this gentleman and said, could you come in and evaluate my practice? And now for 3500 bucks, he came in and they looked at all my computer reports, and then they gave me a number. Now, without telling him, I went to his competition, which was run by a former dental supply person who was really high up in one of the big companies. And he retired from that and opened up a practice, sales. So they came in, and for $600, they looked at everything that was in my cabinets, in my equipment, and then they gave me an evaluation on what my practice was. So I had two evaluations. So now I go to meet with CITIBANK So I meet with Citibank, not in my office. I meet with them at a coffee shop up the street because I didn't want my employees knowing that I looking to sell the practice. So then I'm up at the coffee shop and here's what they had to say. Well, we're a bank where legally we cannot evaluate your practice. However, we will lend at 85% of last year's collections or an aggregate of the last three years. And I said, well, don't you want to see my beautiful, really groovy hipster dental office? And they said, no, we're only interested in the cash flow. And if you did these numbers with crappy old dental equipment, even better. And I kind of liked my office. It was mine, you know, it was my baby. I said, well, that's the end of that conversation. They have no interest at all in seeing the interior of the practice. They want to know what the cash flow is. Now I meet with the representative from bank of America, and I was thinking, well, okay, same thing, another coffee shop. And he says, well, Dr. Kenny, give me all the reports and your practice is good, your books are clean and all that. We're going to land at 85% of last year's collections. And then do you want to see the dental office? Sure, I'll walk through it. And he's yawning as he's looking at dental chairs. They want to know what the cash flow is. So what the bank is really telling you is what they are going to lend the young doctor on your practice. And it's going to be based on your cash flow, not on your CT or groovy equipment you have. They want to know what the cash flow is. It's a numbers game. Now. Let's do the cpa.

Can I, can I talk on that? Oh, yeah, let's go to the cpa. This is a really, I think, poignant point when it comes to selling your practice and the valuation. Banks will lend. They, if this is very summarized, but they'll have two types of loans. They'll have loans that are collateralized by an asset, like a piece of real estate property. And they may do an 80% loan to value on that. And then there is lending that is based off of the cash flow. And they don't do hybrids. There's no, there's no asset slash cash flow loan, meaning that we'll do cash flow. But if you have a really nice brand new CT and new ADA dental chairs and you have a new scanner or cone beam or CAD Cam, they don't really care about that. Now you as a seller do. Because you're thinking, over the past five years, I've dropped 250,000 into maybe a renovation and new dental chairs. That's got to be worth something. Well, in reality, it is. Because if I'm buying your practice, I don't now need to go drop that much money because it's already staged from an equipment standpoint for me to step right in and go, I don't have to fix the pump the next day after. After you're gone. But the banks don't look at it that way. And at the end of the day, the value of the practice is going to be what the buy can get, because most buyers do not have cash out of pocket. The only time I see this different is if it's an institutional sell. Because if it's an institutional sell to the DSOs, and this is happening, as you know, today, those are different pockets, and some are deeper and some will do. They'll structure things very differently. Now, that's going to be for a whole nother podcast on the difference between the private and the DSO sell. And maybe, maybe we can talk about that a little bit if you have any thoughts on that. But the key point here is I like that you are getting banks, multiple banks, to look at the cash flow, because that's going to speak reason to what you could sell this for. Because what's a broker going to want to tell you? I mean, no offense, I would do this, too, if I were a broker. I'm going to tell you something really high. Why? So you sign the dotted line and now you're exclusively, I own the ability to sell your practice. Even if you found your own buyer, I'm still getting paid my commission. Doesn't matter that you found the buyer because you signed the dotted line. That's an exclusive listing. Or it doesn't matter what the CPA or the buyer even thinks at the end of the day, what the bank is willing to lend, that's going to drive that. So thank you for bringing that point up.

Now, we're going to get into some actual stories, but the names are changed to protect the innocent. None of my friends that hear this are going, hey, what are you talking about me for? Okay, a buddy of mine just reached a point where he was ready to retire, and he says, you know, I'm ready to go. And then a friend of mine from the Navy, from back east, was living in Maryland, and he just got tired of living in this little Tiny town where he was the only dentist. So he was living like a rock star. But he just couldn't take it any longer and he wanted to move back to California and he offered me a million dollars to be my partner. And I turned him down because I already had an associate in there that I was very loyal to. And then I just told this story at the golf course and a buddy of mine says he's got a million dollars.

Yeah.

And he's looking to buy a practice and relocate to Southern California. Guy said, let me meet him. Boom, they did the sale. So now they did it on a cheap. They did a cut and paste job with some legal papers they got from old friends. They actually took a scissors, cut it out, and we're in agreement, we're going to sell it for a million dollars. And the practice was going for 100%. The practice was producing a million dollars and my buddy was going to give him a million dollars for it. So now my friend gives the million dollars and he's very happy to get a practice in Southern California. My other friend was very happy to get the million dollars and he was clapping, he was so happy until, until he found out what his tax ramifications were. Million dollars. He got 600. The government took 40% of that right away. He did no planning, no tax planning. And he just couldn't believe it. He got whacked. And then I hired him to work with me as an associate because his personal cash flow was not there and he needed to go back to work. So, hey, work in my office. Experienced guy. But the bottom line is you've got to do some advance planning. Now this is for the seller, Dent. Now you got to see the banks and then the banks will tell you what they're going to lend on your practice. And then you need to see the cpa. You go to the cpa, say, listen, I'm going to get. We'll do simple math. A million dollars dropped in my hand. What am I going to do with this million dollars? It's not tax evasion, it's tax avoidance. And the accountant will sit down and says, well, have you fully funded your pension plan for the last year, for the last two years, or you plan on selling two years? You could do the following with the defined benefit plan, profit sharing. And you'll have to make up some decisions because you're going to be able to cut in your employees and your employees are going to benefit. What you could do with the pension plan or you could just choose to pay a ton of Taxes. I had some great advice from the CPAs before I sold the practice and I had to pay taxes, but I minimized the taxes to the maximum, maximized what we did for the pension plan. We did everything we could in tax avoidance and I was very, very happy. The accountant was talking to my financial advisor, which knew all about the dental abilities of what pension plans we could fund. And I had the bank talking to the accountant, talking to the financial advisor. They did the math test and then they just told me what the numbers were going to be. And I was very happy. So this was my board of directors, my advisors was the CPA and the banks and my financial advisor. And then the final person that you're going to have to get advice to. This leads into something else is the lawyer.

Let me. Actually, before we jump into the lawyer, I want to elaborate a few thoughts on the tax sale. As a dental cpa, I just want to enumerate a few strategies to mitigate the taxes, if we can. I think that might be a relevant topic here. When you sell your practice, it's what's called an asset sale. And an asset sale means that you're essentially opening up the garage door of your practice and you're selling your dental chairs and you're selling your X ray machine and your lasers. You're selling everything. That's an asset sale, as opposed to a stock sale, which if most dentists are set up as an S corporation, and S corporations have stock just like you'd buy stock in Apple and maybe there's a thousand shares. Theoretically, you could sell me your stock and then I take over your corporation. I can rename it, but I take over your corporation. But then I'm assuming any debt that you have, I'm assuming any potential liabilities that you might have. Everything inside of it stays intact. And I now assume that, which is different than an asset sale because I have my own new corporation and I just move your stuff, your equipment over to mine. Now, your stuff might be worth 150,000 if you were to sell it on ebay. Your dental chairs, your equipment, all that stuff, 150,000. But if your practice sells for a million bucks, well, what's the other 850,000? It's what's called an intangible asset known as goodwill. And this is important from a tax standpoint because goodwill is taxed lower than equipment. And the reason why is goodwill. This intangible asset is taxed at long term capital gains rates federally, let's say that you're in the 35 to 37% tax bracket federally. Right now the top bracket is 37%. The long term capital gain rate for most dentists selling is going to be 20%. So there's 17% there that you can save on anything allocated to goodwill as opposed to equipment. The reason why equipment sellers don't like taking some of that million dollar sale price and allocating it to the asset equipment is because dentists have depreciated their assets, their, their equipment, which means that they already got a full deduction for having bought those dental chairs or whatever the equipment is. And if you got the full deduction, you have zero basis in it. And when you sell that equipment, you have to recapture all of the deduction you got from depreciating that asset at ordinary rates. So to keep it simple, in a million dollar sale, $800,000, let's say goodwill, 200,000 equ. 200,000 is going to be taxed at your ordinary tax rates, which let's say is 37% fed. And if you're in a state like California, that's another 10% or so. So that's 47% you're paying on the equipment on the $200,000 and that's more money than you're going to pay on the goodwill, which is only going to be roughly. Most states don't differentiate between long term capital gains and ordinary rates. And so California is going to be probably another 10% or so on top of your federal 37. So that's 47%. So bottom line, there's about a 17% spread that you're going to save on all of the sale allocated to goodwill. So sellers want to allocate more to goodwill, but buyers want the opposite. They want more allocated to equipment because they get to deduct the equipment over five years as opposed to deducting goodwill over 15 years. It's a little bit of a tug of war. Now a couple other strategies for a few clients who are highly cash flowing and they have a really big sell. We will use or set up a defined benefit plan and we will take a good chunk of the sale proceeds and move it into the defined benefit plan. In one case, a doctor sold for $2 million. We dumped about $700,000 into the defined benefit plan and so $700,000 wasn't taxed in that year. Now it's going to defer and eventually when it comes out, it's like a 401. Eventually when it comes out it'll be taxable, but you get to avoid taxes. In that year and defer it. And that's a lot of the name of the game with taxes is simply how far down the road can you defer your taxes. The other thing is you are taxed when you receive the cash. So some doctors have held some of the loan as if they were a bank. So let's say it's a million dollar sale. Bank of America comes in and lends $800,000. You are a second lender for $200,000 and if you receive that over time, you're taxed only when you receive it. And that's another way to defer taxes. Now you've got to deal with the trade off of the fact that you're not getting the cash right then on the sale and you're relying on the buyer to continue to produce well in order to make sure that you get paid. Because if they don't, bank of America is going to get paid before you do. As the seller. You're second in line there. Let me just turn that off real quick. And then if you're mid year or Q3, Q4, you might as well wait until January 1st because then you get to defer an extra year the sale. And lastly, about seven, eight years ago when the Trump tax code came into play, it eliminated the ability for a lot of dentists in high tax states like California to be able to deduct their California or their state tax against their federal tax, which historically you could do that on schedule A. So if I paid paid $100,000 in California taxes, that was a write off for my federal taxes and would save me $37,000. Well when the Trump tax code came into place, they eliminated that and I no longer get a deduction for my state income tax payment. But California came in and said, hey, we're going to let you, if you're a business owner, pay your state tax through your business and you're going to get to write that off just like it's a supply cost to Henry Schein. And that was a big benefit. Now when you sell your practice, what we used to do is we would say let's take that 800,000 allocated to goodwill and let's make as much of that as personal goodwill as possible as opposed to corporate goodwill. We're going to claim that a lot of this intangible asset is from you, Dr. Kevin Kenny. It's your personal brand brand, it's not your corporate brand. By doing that you would save a 1.5% tax at in this case it's California from the franchise tax. And so you know that's going to save you 12,000 bucks right there. So by doing that, everything changed though with this pass through entity tax. In California it's called AB150 tax where you can pay your state tax through your corporation because now you want to pay tax, pay all of the state taxes related to the cell through your corporation and get a very large therefore federal tax deduction because you paid your state taxes related to the cell through your corporation. So we want to allocate all of it to corporate goodwill and no longer personal goodwill. If you have a dental cpa, they're probably going to be able to nail all of this. If they don't, maybe have them listen to the this podcast. I think it will help in the dental practice sale. So some of that was a bit technical, but it's very relevant in order to save taxes on the sale. Okay, let's go into the attorney now.

Just want to say everything that Wes just said over the last three and a half minutes is why you need to go in two years before you're going to sell the practice. Because some of these tax avoidance techniques takes time to set up and like oh, I think I need a defined benefit plan. You can't do that. If you're going to sell your practice two months from now to the kid that's been working for you five years, you have to start actively meeting with people, meeting with your advisory team two years before you're going to sell the practice. If you want to sell at 64 on your 62nd birthday, you're making the phone calls, you're going into the cpa, you're going to the bank, you're going to the lawyer, you're going to financial guy, you can't wait to the last minute or else you are going to pay.

And on that defined benefit strategy, I just got to emphasize that's a very nuanced specific strategy and it really only works if you're going to associate back for a period of time as an independent contractor and therefore your entity, your corporation stays in place and a DB plans defined benefit plans allow you to front load three years of contributions. So if you're going to associate back or have your corporation open for another three years, you can take three years of contributions front loaded in the year of sale. And that's how when normally you can only fund 2 or 300,000. That's how you can fund 6, 7, 800,000 in the year of sale. But that has to be set up well beforehand and Strategized. Otherwise the IRS is going to look at it as a tax shelter. And that's tax evasion, using your terminology, which is very spot on there. So you got to plan carefully around. Some of those are easy. How you allocate more to goodwill or delaying to January 1st or carrying back some loan. Those are fairly straightforward. But the more complicated ones, you need to plan ahead of time.

Wes, let's talk a little bit about a broker sale and broker sale, non broker sale. And then what I did, and I'm going to say very positive things both ways. I want to sell my practice to two young guys. They were eager beavers or they were great guys and all this other stuff.

Stuff.

But the psychological aspect of it, when we got down into the room with the lawyers, and I'm just going to be very honest, I couldn't do the deal. I wasn't ready to walk. And then the young dentist, they didn't have their act together. They couldn't write a check for anything. They were too busy having a great time, traveling around and partying on the weekends. And then they couldn't write a check for a nominal fee. And I was like, what is wrong with you guys? You've been out of school for five years and you can't write a check? Check for $75,000 for two guys? What are you doing? They didn't have their act together as young dentists. And then I wasn't psychologically ready to sell the practice to these fellas. They weren't ready yet. And then my lawyers advised me not to do the deal. Now I was out of my mind. I was so upset because they were going to pay top dollar. I was going to walk away with a ton of dough. And it blew up in my face. And then some mistakes were made. And then God intervened. One of my former dental assistants who went to ucsf, she went to dental school on the west coast. She got into dental school. She was a very, very smart young lady. She had a gap year. She did college in three years, so she had a gap year. She worked for me as a dental assistant for a year. Right after this sale fell through, she calls me up, wants to meet with me, flies down for one day. We meet in a coffee shop. She says, I'd like to buy your dental practice. Can you wait 18 months as I'm going to do a GPR? I sat there and said, 18 months, blah, blah, blah, blah. Yeah, I could wait 18 months. I sold it to my former dental assistant.

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 technique 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. 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 orbits 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.

Wow. So this was a non brokered sale because you knew her directly and you had a team around you and we had a team.

Now I just want to get back to the brokers and say positive things about the brokers. So now now we met. Now I went through this whole debacle with lawyers and my legal fees were over 20 grand and I was out of my mind. I actually had to leave San Diego because I was so flipped Out. And then I said, come back. I said, now I got to work again. Now, those two years, additional years that I worked were two of the best years I had in private practice. The practice was. It was a printing press. It was cranking out a ton of money. Yes, I sold the practice for less money to the dentist that I knew. However, the money, the two years that I continued working, I banked it. So I won. And I had a great time, I had a great staff, and it was just two more years of fun and games. Now, the brokers, most of my friends use the brokers. And here's the deal with the brokers. This is off. Okay, here's the deal with the brokers. You're going to meet with the brokers. They want you to sign paper. Don't sign anything. Shake hands and don't bring a pen. Don't sign anything. Interview several brokers first, because once you sign on a dotted line, they own you. You decide to sell it to your cousin, your sister's kid, forget it. You're going to have to pay the broker fee if you're thinking about finding a buyer on your own. Don't sign with a broker. A broker is nothing but a matchmaker. That's it. After they do the matchmaking, then you need a banker, you need a lawyer, you need an account, you need a financial advisor. Like, what did the broker do? They just get you a date. You're on a bachelorette, they just get you a date. Then it's up to you to close the deal and you're back with the bank or all that. Now, good thing about a broker, great thing about a broker, you have a number. You know what that number is in your mind? You and your wife have sat down and says, well, if we sold the practice for this, we'll be happy. So don't get overly greedy here. Let's be realistic. I talk to these guys, it's worth. No, it's not. It's worth 85% of last year's collection. I don't care what it. Like Wes said, new cone beam, doesn't matter. The banks are only going to lend on the cash flow. But here's where the broker comes in. The broker is going to try to find out what your number is, and then they're going to add 10% to that. And then they're going to sell it for 10% more than what your number is. The broker gets their commission. You got your number. The young doctor gets a practice, and everybody is happy. And some of my friends, they had practices in, let's just call it less than desirable neighborhoods in San Diego. Places where you might not want to live, but maybe your practice is there. And they were harder to sell. And they went to the brokers, and the brokers were able to find buyers that were very, very happy to practice there. And the brokers got the 10% above the number. Everybody was happy. The broker came through for the selling doctor, and the broker came through for the young doctor that's been looking and looking and looking for an opportunity. And they saw this opportunity and thought it was great. So there is a place for the broker, and you win with the broker. If you know your number, you've got to know this number. Don't even call anybody. If you don't know the number yet, sit down and figure it out because you're wasting everybody's time. Know what that number is, honestly, and then the broker will get 10% above that number. Everybody wins. Selling a practice. You could sell it on your own. Just do the math. It's 85% of last year's collections, and that's what the bank is going to lend. You spoke with the financial advisor, your cpa. You spoke with the board of directors. Everybody's advising you. So just run a little ad in the Dental Society newspaper that your practice is for sale. And guess what? The young doctors are reading this. You could sell it. I've known several people just ran little ads. And guess what? A very qualified buyer came and you're ready to go. Put the word out early on with the Patterson rep, Henry Schein rep. And they look at you, they see the gray hair, no hair. Even your own patients know, say, hey, Dr. Kenny, how long are you going to hang in here? You're turning into like a Joe Biden of dentistry. It's like, how much longer you plan on doing this? They already know before you know, you're hanging in there. So, you know, put the word out with people that may be able to do an introduction. If you get an introduction and you could sell it on your own, great. If you use a broker and the broke is going to get you above your number, they're going to get 10% above the number that you can live with, then the broker is great. I just got to talk about a corporate sale. Really good friend of mine was going to sell his practice. He had an associate in there, and his associate's been in there for years. Associate. He had cold feet. He was a little hesitant about. That's why he was an associate for more than five years. Pull the trigger. Make up your mind. Do it. And then he's going to give a very fair offer to the Associate. At 85% of last year's collections, Corporate came in and paid him a million dollars over his asking price. He sold it to corporate. My friends that have sold to corporate, and then they have this, you got to work for corporate for five years. I'm just going to end synopsis. They're all unhappy. I never met a happy guy yet that sold to corporate. Then they end up suing each other. And corporate comes in and guess what? You are the lowest employee in the office now. You are lower than dirt. You are no longer the king of your own kingdom. You are answering to the manager, the high school grad that they hired to manage that dental office you answered to hard now. And they want to know why you did a three surface restoration on number 29 when you could have done a crown. Are you ready to be working for somebody else? The beauty of having your own practice is you got to work for yourself. And then that's another thing. When you sell your practice, get ready. I thought I was going to hang in there for a couple years and mentor the young doctor. And we get along fine. And I knew her and all that stuff.

Stuff.

And I can't believe I'm saying this on this podcast, about two days after I sold the practice, I felt that stiletto heel on my rear end. When are you going to get out the door? This is my practice. And guess what? It was. I sold it. And when I was working back as an independent contractor, I was no longer getting the hygiene and the period. Honest. The associate dentist. I was the associate dentist. And I would come home and my wife would say, is that all you made today? Is that it? You were in there all day. You don't own the practice anymore. And then I don't want you talking to my employees. And the employees, they're torn between who's my boss, the guy who was my boss for 25 years, or the person who's writing my paychecks now. They're loyal to the person who signs the paychecks. So surprise, surprise, for all the older dentists, when you sell the practice, you must just be ready to walk out the door. Now, if you're thinking, well, I really like to stay for two more years, then do like I did when I stayed for two more years. Don't sell the practice. Don't sell that practice until you are ready to walk out the door or unless you just want to be unhappy and Miserable working for somebody else, taking orders. Just don't do it. If you want to stay a couple more years, you're really enjoying yourself. You're not sure what you want to do. Keep it for two more years and so you sell it for less. So what, you have those two more years of cash flow and you still win, you're happy. I just want to touch, really, I'm going to go back a little bit, the psychological aspect.

I have a, I have a few thoughts on. It's so much good content there, Dr. Kenny. I just want to reflect some of my thoughts on it. When it comes to the 85%, the way that banks are doing this is they say we will lend up to, and that's a keyword, we will lend up to 85. And some banks now are doing 90% of annual cash flows. And I, in some case, I think I've even heard a little bit higher than that. But then it goes through underwriting and they determine how much they'll actually sell it for. And how much they'll actually sell it for is a function of the cash flow. So a practice that's doing a million dollars and has a $200,000 net cash flow is going to sell less than a million dollar practice that has a $500,000 net cash flow. Because they're looking, they're trying to determine this, this number, how much cash flow is left, left after the overhead to pay for everything in the doctor's life, their debt, their personal living. They call it your global debt coverage expense ratio. And they want it to be higher than 1.25. And then if it is, they'll lend. It's actually this very simple mathematical deduction that they do. That's my first comment there. Practice Orbit, the technology that I've developed. If you have your tax return, your 1120s, if you're sole proprietor, it's going to be your schedule C. If you're a partnership, it's going to be your 1065. If you have your tax return, there's eight boxes that you fill out inside of this free account. And it will calculate with a lot of accuracy what a value is of your dental practice based on your collections, yes, but also your overhead and therefore your cash flow. And it will tell you sort of a low, medium and high range. And then if you put in how much debt you still have on the practice and what an estimated brokerage fee will be, it will calculate the take home after your debt, your taxes, your selling expenses and any broker fee. And then you can Give that to a financial planner. You can print it out, Give it to a financial planner and it's probably going to be within, I would say, 20 to 25% accuracy, and it's totally free. So that's a tool almost like a Zestimate on Zillow is for your house. It's that for a dental practice. And if you have your tax return within two minutes, you can have that number. The next comment is, is using a broker or not using a broker? The way that I've handled it with Practice Orbit is Practice orbit has a 2% option and then they have roughly a 5 to 6% option. If you have your buyer and you feel confident about the buyer and you have, I will, I will say a dental specific team, So a dental specific accountant, a dental specific attorney, and they can have other types of clients. But if they know, they have to know the nuances of dental, then I think you can move that through a sale. We'll call it FSBO for sale by owner without, without a broker. And I do think that's very possible. It's a complicated sell, and that's why you need people to understand it. The challenge you have when you don't use a broker is that there's nobody every day waking up thinking, I only get paid if this gets through the finish line. I mean, the seller, that's true, but the seller doesn't understand all of the complications of the sell. The broker has this huge gravitational pull to get everybody moving with some momentum toward a finish line because that's when they get paid. That's one of the. Is one of the biggest values, I would say, of a broker is they work hard to get the job done. But they do cost, of course they do cost. And the banks have to factor in the brokerage. The banks are factoring in the cash flow to the buyer. But at the end of the day, the banks are going to lend a certain amount. And if a broker can do their job by, by maximizing what that bank is willing to lend, by trying to create clarity for the bank on cash flow, because the more clarity a bank has, the more likely they're willing to lend on that, that practice. So I stay agnostic on that. A lot of practices sell without a broker and they do just fine. I think they need a good team and somebody to help move that forward. If you don't have a good team or you feel like it's too complicated and you don't have a buyer, then a broker is going to be a good option for you lastly, when it comes to the corporate sale, you're right. I've heard so many of these stories of dentists selling and then suddenly they're an employee and it takes all of the juice, it takes all the fun out of being a practice owner. But what's happening right now is these DSOs are coming in. And I try to stay agnostic on this because we have had a number of clients sell to DSOs. Practice CFO, my CPA and wealth management firm tends to work with larger dental practices. We're a cfo, not a bookkeeper model. And so they love to pitch my clients. So we've evaluated hundreds of these pitches. What I notice it generally comes down to whether or not it's economic advantageous is they will offer a lot more, sometimes 50%. I've seen probably 250% to 100% more. But you have to look at the way that you receive that extra money. And they have what are called holdbacks and they have what are called earnouts and they have what are called equity swaps. And what I have found is when you take all the cash flow over the three to five years that they require you to stay on. And first of all, if you're not ready to stay on, you don't even want to consider no DSO is going to buy you if you're not willing to stay on for three. Now it's usually five years at all. So that's number one. But assuming you are, if you take all the cash that they pay you on the sell and as an associate on a DSO sale, and then you take the cash you would get in a private sale and you say I'm going to work back a little bit too because you have to compare apples to apples and you present valued it back to today. Generally the cases you're better off not selling to a dso in spite of of the big eye popping number they present to you on day one, where the only time I see it really works is when they have that equity rollover. So let's say they offer you 3 million and a million is an equity rollover. That means you give up a million dollars of the equity value of your practice for a million dollars of equity in that dso. And this is very, very common in most DSO sales. If that million dollars turns into nothing, you're better off selling the practice private. If that million dollars turns into $5 million, well maybe you'll deal with the pain and suffering of being, you know, an employee of this crappy entity in order to get this extra 4 million, $5 million. And I've. I've had a couple cases where I've seen that essentially happen. And I've seen cases where it turned into zero. And that's where the risk is, and that's where you have to assess. Is this larger entity run by a great management team? Do they have a good mission statement? Are they well run? Are they well funded? That kind of thing? And that gets more complicated. And there are brokers that specifically do DSO sales, like McLaren and Associates. I think they're a great one that does DSO sales that can evaluate that for you. But it's not as shiny as sometimes you think when it's presented to you with the DSO letter of intent pitch that you may get. So just be properly represented when you are considering that option. All right, Dr. Kenny, that's my tangent back to you.

Let's talk really quick about attorney. Okay. For years I had. For 30 years I had a business attorney. He was a great guy. And just all the business problems went through the attorney. When it was time to sell the dental practice, the first time we went to sell it, I used my business attorney. The legal fees were over $20,000 and the sale did not take place. The second time, when I had the buyer and we both sitting down and not adversarial by any means, we agreed on a price. I said, let's go to a different attorney. Let's go to a dental attorney, someone who just really handles dental and medical and chiropractic and veterinary optometry selling medical businesses. And they acted as an intermediary for us. So earlier, Wes was talking about goodwill and sale of equipment. This is where the professionals come in. They know the formulas. And you just kind of sit there and say, this is Greek to me, advise me. But. But the attorney acted as an intermediary. I did not get everything. However, I got enough. And the young lady buying my practice, she did not get everything, but she got enough. And we both looked at each other and we were both happy. And then it was a very smooth transaction and it was very economical for both of us. We didn't run up unnecessary legal fees. Now, here's the worst case scenario with the attorneys, the younger doctors that were originally going to look at my practice, they had an attorney, a so called dental attorney. And then I had my attorney and what the opposing attorney's negotiating method was to delay, delay, delay, delay, delay, delay, delay. And then her idea was that these old guys, they're just greedy and we could squeeze every nickel and dime out of him. And then at the last minute, right before the loan is going to disappear, there's actually a term that's called the drop dead date. The loan is not good forever. The bank says, we're going to lend this amount of money until May 30, and if the deal is not done by May 30, drop dead, it's over. So the opposing attorney pushed this all the way up to the deadline, and her deal was, he'll sign. Because these guys are old and they want the money. Surprise, surprise. Don't go into any negotiation if you cannot walk away. And I walked away. They were shocked. But he was supposed to sign and give us this great deal. No, I walked away on advice of attorney. But be ready to walk away. Don't go into any negotiation. You cannot walk away. Don't back yourself into a corner because the other attorney is going to squeeze you. This is just like hard lessons to be learned. And this was a total negotiating ploy. And I didn't understand it until it was over. Like, why can't we get this deal done dragging on? Because the opposing attorney wants to win and she wants to win by squeezing you. And this was their thing. He's going to sign before that loan. Nope. I walked away. And it turned out to be a great thing. And unfortunately, the two young fellows that were going to buy the practice, they were in a state of shock because they wanted to buy this practice and it blew up in their face. And they're like, now what do we do? And unfortunately for them, I had them working as associates. I fired them the next day. They were like, well, what do you think was going to happen? I was like, donald Trump, you're fired. You can't stay here and work anymore. You didn't buy the practice. And we're all replaceable. They were replaced in two minutes. But, yeah, the legal attorney, the dental accountant over, just a regular guy. That's one step above H and R block. People that deal with this all the time, they're just better professionals advising you on this deal.

I want to hit on this. The psychological aspect of selling the practice.

Let me make a quick statement on the attorney. I have a lot of. Obviously, as a dental cpa, I have a lot of experience working with attorneys, since we've represented a lot of buyers and sellers over the years. And pretty much every deal has a dental attorney. And the dental attorneys are. They are so indispensable in the process because there's a lot of language inside the purchase and sale agreement that's your contract with the buyer that you have to be held to once you sign that bottom line. And good attorneys, they don't necessarily have to. A good attorney, even if they're not dental specific, will learn those terms and they will advise you. Well, I like attorneys who have done a number of dental deals because there are sort of standard ways of handling certain things like retreatments, for example, after the sale. And where I find an attorney is really valuable is when they, is when they help you see the context or the force through the trees on a given term. There are some terms that are worth walking away from, walking away from the deal over. And there are other terms that probably aren't worth walking away from the deal for. And a good attorney is going to help crystallize that for you. And I have seen some dental attorneys that just, they almost feel like their job is to compete so aggressively for their client that their success is only represented when they do stir up, up trouble. And sometimes that's not seeing the forest through the tree. And I've seen attorneys break deals that should not have been broken. And at the end of the day, if it's a practice doing 1.3 million and let's say you overpay by 50,000 as a buyer, but it's where you want it to be, it's the type of practice you like all that stuff, it shouldn't break the deal. It's pennies in the long run. So a good attorney, and I think a good CPA around the numbers as well can help clarify what's worth going to battle over and walking away and what isn't. Now, if you walk away generally, not always, but generally. And we'll do this at practice, CFO is, we'll apply half of the fee that you pay us. We'll sort of give a discount on the next time around. So you're not paying the same amount with every new deal that you, that you enter into. And attorneys will do that. I do find attorneys generally charge somewhere around 7 to 12,000 and they usually will have an hourly rate and a fixed rate. I generally say go with the fixed rate. That way you don't have to worry about picking up the phone. And attorneys are very much worth their earn. Okay, let's go ahead and pivot.

I agree with everything Wes just said. The money spent with the attorneys, that was the exact numbers and it's money well spent. And if you're getting into a million dollar sale and you're worrying about $50,000, it's nickel and dime and the big picture of things, you're going to have to give a little. It's not about winning, it's about making a difference deal. At the end of the day, you want to make a deal. You don't want to win, you don't want to beat the other person and you don't want to lose and be beaten by their opposing attorney. You want to sell a practice where you could shake hands with the young doctor and wish him the best of luck. And surprise, surprise, you might be there for a while. There's a little bit of give back. Oh, something. We don't want to leave this out with the banks. Surprise, surprise from the banks. The banks are going to lend the money. And I heard this a million times now and then right before you think you're going to do the deal, everybody's real happy. The bank comes back, says, Dr. Kenny, you're going to have to have some skin in the game. And the banks want skin in the game. You're going to have to carry back paper. I don't want to carry paper back. You're going to have to carry back a nominal fee, a very small fee. Mine was 75,000 on a more than a million dollar sale. It was nominal fee. You're going to have skin in the game. And then everybody that I knew was selling a practice. The bank, well, they said, I have to have skin in the game. You're going to have to have some skin in the game. It's not the end of the world.

World.

You lend the money, the lawyer sets it up. You lend the money to the young doctor at the exact same rate that the bank is doing it. They just want to make sure the bank is covering themselves, that you're not cheating this young doctor. You now have skin in the game. Okay? For the young doctors out there, things to beware, okay? The banks look at programs and they crunch numbers. I was a big numbers guy. I ran all the programs. Programs. They run programs way beyond I ever thought. They find everything. And now if you're selling your practice, you better start cleaning up your books. Now, I know a couple of guys, they want to sell their practices. And here's what Citibank told them your practice is worth. You ready? This number zero. Your practice is worthless because your books are so cooked. This is so crooked, it's beyond belief. You got all the shenanigans going on. Paying your home electric bill, buying your groceries from Costco, buying gold and saying it's your lab expense. Guess what? Busted. You're caught. Your Practice is worth zero because you've been skimming and scamming for years. Now you're sitting at the other end. You're listening to this. Oh, I'm a skim and scam guy. Clean it up before you sell it. Quit shenanigans, whatever that shenanigans is, your three year old is making $40,000 a year salary. Give me a break. Break here. The bank is going to catch all this stuff. They're going to evaluate your practice at zero. And guess what? Now you got to clean it up. It may take a couple of years to have two good legitimate, fair and honest tax returns. Don't be that guy. Guess what? You're going to get caught in the end. Clean it up for the young doctor. Be fair. Just be a good person. Let's see, I got some notes down.

Here also on that. So in when, when you sell your practice, the banks and the buyer are trying to determine what is the cash that I'm going to get out of this thing If I buy and I maintain the production, what am I going to get after? Labor, lab supplies, facility, marketing, admin. And when you're running so many, the seller's running so many personal things through the practice, it's really hard to define that number. And if it's not clear, everyone gets scared, everyone gets cold feet and no one wants to move forward. So. So these add backs as a seller, this is what a good broker can do. This is what a good CPA can do. Is you clearly you create your accounting reports every month in a way that says these are my true business expenses. And then these ones down here below the line are some of these sort of slush or safe. Just don't even run them through. But if you're running some of them through for tax deduction purposes, at least call them out clearly have a different card, they get a different credit card for those expenses. Make sure there's a different set of accounts on your chart of accounts in your QuickBooks file and that your CPA knows about this. The more that you can make it easy for the buyer and the bank to understand what is the true business cash flow, the better. So what I always do is get your P Ls for the last 3 years, go through it, sift out all the garbage. Garbage. And also what are true business expenses? But they were one time, let's say you did a, a remodel and you dropped $40,000 on it and your accountant put that through the P and L should have gone through the balance sheet but they put it through the P and L. You want to add that back and say wait, that's not a true ongoing business expense. So these sort of one time things, sift them out, your profit goes up and you present that clearly to the bank and the buyer. And that makes everybody's job easier. And if their job is easier, the price is going to be higher.

Okay, now I'm going to hit on two points. I'm going to talk to the selling doctors, then I'm going to talk to the buying doctors. But these are all just very positive things in advance. And now we'll get redundant. Congratulations because this is going to happen. You're going to sell this practice and congratulations young doctor, you're going to buy one and you're going to have a great life. And the doctor is selling congratulations because you have had a great professional career living an upper middle class lifestyle. Lifestyle for many of us. I never thought that dentistry was going to be this good. I just wanted to be a dentist. It far exceeded all my expectations. But for the selling doctor, you have to have a team of advisors way in advance of any sale plan, at least a year in advance, maybe two years. What is your number? What is your financial number? What is your timeline? What, what is your age? What are you going to do with yourself after you sell this practice? You must plan that out. Whether you're going to be in a volunteer group, a rotary group, a golf group, you're going to exercise, play with the grandkids, travel, make a list, make a business plan for retirement or else you're in for a state of shock, you lose your sense of purpose. And for me, like a hyperactive, over caffeinated New York guy, the first two years, money didn't matter. It was rough. I had to reinvent myself. Be aware of your health, be honest. What I'm finding now is now we sit down at the golf course, it's disease du jour, who's breaking down, whether it's just name it. Afib, skin cancer, this guy had a heart attack. I mean we're not going to live forever and I didn't plan on that. But health does come into play. Write down the things you would like to do do before health catches up with you. And on the exit strategy, be honest. Greed versus poor planning. Don't stick around so long because you're greedy and don't stick around so long because of poor planning. And it's very rewarding. The whole career reflecting back was very rewarding. Hey Dr. Kenny, what did you do with yourself. What did you finally do? I got into doing a lot of volunteer work. Work overseas with a group called Global Dental Relief. I've done in 11 overseas mission trips or overseas to Central America. We've gone to Guatemala, Panama, the Dominican Republic, Cambodia, Vietnam, Nepal. I get a bunch of Navy buddies and young doctors and say, come on, you want to go to Nepal? We'll hike in the Himalayas. We did all this stuff after retirement. The first two years, I didn't know what to do. Now we're just planning these great trees trips. Still doing dentistry? I'm volunteering at the university in a teaching capacity. I've got into a lot of philanthropy. These are things that I did to kind of reinvent myself. But just sit down and write it down. If you want to be an A tennis player, you want to get that game down, you want to finally break 80 playing golf, you want to travel and spend a lot of time with your grandkids. Whatever it is, whatever floats your boat. But just start planning for that and congratulations. Planning for your retirement is just like planning with a business plan for your dental practice. Write it down, make a plan. If you have a bucket list or some crazy thing, you know, you wanted to go skydiving, book it and jump out the plane. Whatever you want to do, you want to take up surfing, but hurry up and do it before health catches up to you. For the young doctors, this is really important competency. Okay? You graduated dental school, and now I love running to these new grads. You are not ready for private practice. I am sorry. I would not go to any new grad. Some of these schools are coming out of these prestigious universities. They've never done a root canal.

Really?

You think you're going to be in private practice? You are not competent. Oh, the two crowns that I. You are not competent. You have enough to pass a board exam. And now I'm hearing they're even dumbing down the board exams. At least we could all say, well, we all passed the board exam. We were competent enough to get out of dental school and get a license somewhere. They're dumbing it down to some degree where other states. I heard New York is requiring a GPR now. They're making it more restrictive. Not restrictive, but they're making sure that their doctors are competent. Be honest with yourself. Are you competent? You are not ready for private practice if you are not competent. You are ready for stress beyond belief if you cannot deliver the goods. You show me every single dental practice that's good, and I'll show you A very competent and confident dentist that could present dentist ministry and do it and deliver the goods. If you are not competent yet, get competent. I'm big into gprs, I did the military, that's not for everyone. But a gpr, that's the alternative. Do it just oh, I'm not going to make the money, blah blah. No, you get it back because you are competent and you'll just make sure you are competent. If you're not competent, you are setting yourself up for huge failure. I call this my 2 year MBA after I get out of the navy or you get out of a gpr. You want to work as an associate in a good practice or in a DSO because you need to learn business. You go in there and say, okay, I am not in here to make a ton of money as an associate. I am in here to learn business. How do they run a business? How do they do the insurance? How do they present the case? How do you manage people? Guess what? Really simple. You could go down to the bookstore and it could be a lot less learned from reading some business books. I think I read all of them, but I thought about it and here's three and these are available on Amazon. Every single bookstore in the United States. Go into business section. These three books are there in every store. How to Win Friends and Influence People by Dale Carnegie. You show me a successful guy. Oh yeah, I read that at college. We all read it. Okay. The One Minute Manager by Ken Blanchard. We all read it. How do you manage people? They gave it to us in the Navy and said, read this. It was written really good. A fantastic book that I was given to as a young guy. The Richest man in Babylon by George Claussen. It's 100 years old. This is a book that tells you how to manage your finances. Very fundamental books. These books are all an easy read. They could be one couple of them. You could read it in just a few hours. You're done. But these are the fundamental ones. We have all read these. I'm looking over at Wes, he's nodding his head. He read them. When you get into private practice, practice. Get ready to work. You're going to work. You can do this and you will be rewarded. But it is an adrenaline rush when you have your own practice and you're a young dentist. Get ready to work. You will do fantastic. Do not become complacent at some dead end job. Okay, I'm going to repeat this. Do not become complacent at some dead end job. And I'm going to make Fun of the military and corporations. Corporate. I would see these doctors in the military and they are becoming complacent. And then they become administrative doctors. And then they haven't done a root canal in seven years. And they haven't taken out a tooth in seven years. And now they're in for the long haul. And they are no longer. I mean, they're just. Their clinical skills deteriorate. They got used to whatever little carrot the military was hanging out there. It's four and done. Do your military period. Get out. And then I run into these dentists. They've been working in a DSO for five, six, seven years. Oh, I'm so. I just want to look out for my patients. Baloney. They have an endodontist that's doing the endo. They have an oral surgeon that's doing the extractions. And you're just doing drill and fill. And then they're telling you to go, you should do a crown on that tooth that you know, you could have done a conservative restoration and would last for years. Don't become complacent at these dead end jobs. Quick story. Came out of the Navy. We all got out of the Navy. All my friends. One of my buddies had a great associateship. Fantastic associate. It was paying three times what we were making in the Navy. Then he got me a job down outside of Philadelphia. I went down there. I was making three times what I was making in the Navy. He stayed as an associate for seven years. Years. I opened up my practice three years after I had my own practice. I was making three times what I was making as an associate. I felt like I won the lottery and it never ended. My good friend, he stayed way too long. He became complacent. Eventually he got his own practice. He did really well, but he stayed way too long. There's too many of those stories. If you're working in a DSO right now, if you don't learn it in the first two years, you are not going to learn it. Start planning your exit strategy. Don't become complacent. Don't do that. That is the enemy of all business. If you buy a practice. Don't change anything the first year. Don't change nothing. Don't even change the toilet paper. Don't change anything because the patients are used to doctor Good Guy who is no longer there. And don't start over diagnosing. And don't start making fun of the other dentist. Dentist, you just shoot yourself in the foot. Say things like, Dr. Goodguy was a really good dentist. To be able to have this restoration last so long as it did. But now we're at the point where. And then if the patient is in the practice, you'll get to do the dentistry. Don't chase him out the door by diagnosing to the number eight or everybody needs two fillings and two crowns because you have school loans. That's your problem. You took the law loans out. Treat the people honestly and be fair. Don't start over diagnosing because they're going to diagnose themselves right out the door. To a dentist up the street that's going, I just don't see this. I don't think you need this work honestly. Don't do that. You will shoot yourself in the foot. Be honest and be fair compliment. Don't try to oversell. Just don't do that. When you go to the CDA meeting for us, the California Dental association, the Hinman down in Church, Georgia, the Greater New York at the Javits center right after Thanksgiving. When you go to these conferences, go to these conferences every year. Take one class in crown and bridge, one class in practice management. Most of your revenue is going to be generated by you, by your little eyes and hands in crown and bridge. Keep going. Every year, the materials change, techniques improve. Every year you go, you go to a crown and bridge lecture and then you go to a practice management lecture. Don't skip the practice management lecture because you want to see the latest endo technique that you are never going to do. You go to the practice management lecture to learn how to run a business. And then when you find out is that after you go to these practice management lectures, the different gurus start saying the same thing. And they're saying the same thing. Why? Because it works. These are things that you need to know, but you just keep going. One crown of bridge, one practice management every time. Hire consultants. Don't be cheap. Don't be afraid to hire consultants. I use consultants through my entire career. I would have one consultant for three years. They would come in and then I would go a year without one. Then I'd hire another one. And they'd come in with new ideas. The softwares with updating new technology would come into play. And then I learned this in the Navy, this was a good thing. From the military we would have these inspections, a white glove inspection. And no kidding, the guy came in wearing a white glove. They were looking for the dust. They were going up on your baseboards and that drawer that had the endo files that's been thrown down there. Suddenly that drawer was cleaned out. Those oral surgery instruments that have not been correctly labeled, suddenly it was done because somebody was looking over their shoulder. Now, when the consultants come in and your staff realizes that the consultants come in, the consultants are nice. They don't come in adversarial. But they noticed that in that bottom drawer, those two charts that they have not called Delta Dental on, those two insurance claims that have been paid, those collection phone calls, all that stuff that should be done, it's suddenly done with a new set of eyes is coming in, and any shenanigans that may be going on, the consultants will see it. And then sometimes you need. It's like children. The kid is sucking his thumb all day long, and the parents can't get this kid to suck the thumb. They go to the dentist. Could you do anything? Yes. I sit down and says, you're a big girl now and you're going to go to first grade. Don't suck your thumb anymore. And they go, okay. And they stop. The consultants come in. You tell the consultants, listen, she's always on. If she spends all day long emailing her friends, then the consultant comes in and says, listen, you're on the clock. Quit emailing your friends. They stop. You can tell the consultants what you want them to say, and they say it for you. And if people hear it from a third party, they hear it from Yoda, some higher authority. Authority. They'll listen. So the consultants help you get things done in your office that for some reason, they're just not listening to you. It happens. Hire people that compliment you. I have a friend that's a surgeon up in Orange county, and you look at this guy and you go, this is geek time. Unbelievable. But if I need dental implants, I want him to do it. And here's what he told me. Listen, I can never be a general dentist. I don't have the personality for it, and he doesn't. But I hire very extroverted, outgoing persons, people to offset my personality. Hire people that complement you. If you're a very quiet clinician, then make sure your dental assistant has very good communication skills. So they could present and they could say things that maybe you're just not comfortable with. If you talk a lot like I do, I needed quiet dental assistance because we'd be completely. There was too much talking going on. I never shut up. So you compliment. Get people that can compliment you. And then just. The final thing I'm going to say is, congratulations. Congratulations to the young doctors that are looking to buy a Practice. This career has just been fabulous. I can't believe how well we have done. All my friends, every one of us, we have all done great. And congratulations to the selling doctors.

Whatever goals you had in the beginning, you met those goals. You've had a great career and you've had a great family life and you're able to help people out, help your family members. You got your kids through college, mission accomplished. And now it's time to pass the torch and give that young doctor the opportunity to have a great life. And that's all I have. Wes.

Dr. Kenny, it's like a library up there in your head. Thank you for sharing so much information. So I'm going to sort of summarize. What is our our game? What should be your, your strategy or your plan of attack here as you approach the cell of your dental practice? Number one, start early, start a couple years beforehand. Start prepping your financial statements to tell an accurate story of the profitability of your practice. Number two, organize your team and they can help you with that as well. Who's going to be your legal representative? Who's going to be your financial representative? Talk to some banks. A lot of sellers don't talk to the banks, the buyers do. But I think it's a great idea for the sellers to engage some banks and the bankers will love it because then if you've engaged somebody from bank of America or Provide or some other bank, they're going to have a package ready for a buyer that comes in that's all ready to go. Now they have to underwrite the buyer's credibility and all of that, but half the work is already done. And lending can take a while, underwriting can take a while. So you're saving a lot of time in the process for everybody. So organize that team. That's number two. Number three, define your number and your team can, can help you do this. What is the number that A, you need to be able to retire or take that next step and B, what is the number that you believe you can get from your practice after all debt and expenses? And do those alone align? And if they don't align, then what's the game plan? Do we work a little bit longer? Do we plan on associating back somewhere? What's the game plan? So define your number. That's get your financial planning done and in place. And number three, plan your life post sale. What does that look like? And it's very true that you end up spending more money, usually because you have more time to spend after retirement. And so plan that life. What matters to you? How are you going to redefine the purpose? Purpose for getting up every day, Talk with your spouse about it, Prepare that psychological transition plan for your life. Anything you want to add to that summary, Dr. Kenny?

No, I think you hit on all the important points, but it's a great chapter in life for both people. The retirement side is great. There's so many positive things to it. It's healthier. You actually exercise and eat better because you're not running to the office. For the young daughter doctors, it was hard to get out of college. In college, we had to make those grades. It was hard to get into dental school. It was hard to get out of dental school. Then you got to spend some time. Residency, gpr. Finally you're ready. You're like, I'm dying. I can't wait to get my own practice. I've been spending 10 years getting ready for this moment. When you finally get it, it is flat out fun. You will enjoy it. Go in with a good attitude, and you'll. You just will love going to work every day for 30 years. You win.

Great. Dr. Kenny. Hey, how can people learn about your foundation?

Oh, the foundation. Dr. Kevin M. Kenney Foundation. Just Google it. What we're really doing is thanks for the opportunity on this. We do these humanitarian missions overseas. We also support the University of California, San Diego has three free clinics here in San Diego where poor people can, can go and get their teeth fixed for free. It's a learning environment. And then the biggest thing we also have going on is I do this giant, giant toy drive in San Diego to support the young military families. A lot of the military kids, they're 23, 24 years old with two kids. The wife is at home. And the military does not pay a lot of money. And sometimes Christmas is tough to buy a bicycle or whatever. And last year, we were featured on all three local networks. We just raised thousands of dollars and just supplied all the young military families with toys. My toy drive is just fantastic. It's a lot of fun. And then that's how you find out about my foundation. But here's a really great idea. Take a look at my website, then copy it. If you're in Pennsylvania, you could do great things in your own neighborhood, right in your own backyard. Do the toy drive. Figure out where you could volunteer. You still have these skills. Skills go in a couple times a month to help out some people. There's just lots of things you could do with a Rotary Club, with your local church. Just try to figure out how you could still give back because you still have these skills and knowledge. And just because you get in your late 60s, it doesn't mean it's over there. Just a lot of things you could do on your own. So just take a look at my website there and copy it.

Great. Well, hey, I just want to congratulate you and compliment you on what has been a remarkable dental career and just a way of going through that career and benefiting so many other people and finding that it comes back to benefit you. That's the way we all want it to be and to lift up others and have a really successful experience. So just a lot of congratulations on that. So thank you for being on the podcast. Dr. Great.

Thanks for this opportunity.