THE MILLIONAIRE DENTIST PODCAST

EPISODE 120: The Devil's in the Details

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EPISODE 120: The Devil's in the Details

Looking to buy another practice or even your first practice? What an exciting time! Casey and Jarrod discuss some core things you need to think about when acquiring a practice.

 

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EPISODE 120 TRANSCRIPTION

Announcer:
Hello everyone. Welcome to the Millionaire Dentist Podcast, brought to you by Four Quadrants Advisory. On this podcast, we break down the world of dentistry finances and business practices to help you become the millionaire dentist you deserve to be. Please be advised, we do speak with an honest tongue and may not be safe for work.

Casey Hiers:
Hello and welcome. This is Casey Hiers back at the Millionaire Dentist Podcast in-studio with co-host Jarrod Bridgeman.

Jarrod Bridgeman:
Hey, good afternoon.

Casey Hiers:
How are you?

Jarrod Bridgeman:
I'm great. How are you?

Casey Hiers:
Looking forward to Memorial Day weekend?

Jarrod Bridgeman:
I am. I'm really looking forward to that extra day off. It's exciting.

Casey Hiers:
Good weather's finally here. Friends, family, barbecues.

Jarrod Bridgeman:
Yep, going to a pool party.

Casey Hiers:
Nice.

Jarrod Bridgeman:
It'll be nice. I haven't been able to get into the pool yet, even though we've had a handful of days where it would have been nice to...

Casey Hiers:
You've been working on those abs, doing those sit-ups.

Jarrod Bridgeman:
I have, yeah. I've been watching people work on... No, that comes off creepy. But yes, I would love to have some abs. Maybe I'll stick a six-pack of bread or buns, whatever.

Casey Hiers:
I just pull on one of those shirts. They got like the...

Jarrod Bridgeman:
Built-in. That explains why your skin looks green.

Casey Hiers:
Incredible Hulk. What do you want to talk about today?

Jarrod Bridgeman:
I wanted to touch upon something along the lines of if you're looking to buy another practice or even buy your first practice, it sure looks nice and neat and shiny on the outside. But sometimes when you start digging around in there, it may not be so nice and clean.

Casey Hiers:
The devil's in the details.

Jarrod Bridgeman:
Yes, yes. They say the road to hell is paved with idle hands.

Casey Hiers:
I'm not touching that one. Well, when I think of devil's in the details, let's break it down like this. I think I know where we want to go for our listeners with dental practices. When you go to buy a house, you get excited.

Jarrod Bridgeman:
It's a really exciting time.

Casey Hiers:
You see this house. You love it. You're emotionally charged up. You're excited.

Jarrod Bridgeman:
You're walking through and you're imagining, okay, I can put the couch here. This painting can go over here. My kids will love this bedroom.

Casey Hiers:
This owner of this awesome house wants to sell. I want to buy. Tons of excitement. Then typically you do an inspection. Right now, unfortunately, with the market, people are offering tens of thousands over asking, sight unseen, no inspection.

Jarrod Bridgeman:
Places are selling in hours.

Casey Hiers:
That's crazy, but that aside. Typically, people will then get a home inspection done.

Jarrod Bridgeman:
Correct.

Casey Hiers:
So what happens when they hear things like, well, there's a crack in the foundation. It's the battle between the emotional high and the details.

Jarrod Bridgeman:
That's right. Because then it gets to, is it worth buying now? Am I going to ask them to fix it? What's the cost going to be over time? If it's a foundation issue, is it going to sink into the earth? I don't know.

Casey Hiers:
Yeah, and maybe it's not that dramatic. Maybe there's four things, but significant.

Jarrod Bridgeman:
Is there a way you connect that to practices?

Casey Hiers:
Yeah, let's pivot this.

Jarrod Bridgeman:
Pivot.

Casey Hiers:
Nice Friends reference. Sometimes an opportunity comes to purchase your first practice. Maybe for some of our listeners, they have an opportunity to purchase an additional practice, a second, a third or a fourth. A dentist or specialist wants to sell. You're looking to buy. That's exciting. That's where the emotion kicks in. This is...

Jarrod Bridgeman:
It's excitement. There's the opportunity for more money.

Casey Hiers:
It's meant to be.

Jarrod Bridgeman:
But guess what? There might be some issues that are hidden, hidden in the foundation.

Casey Hiers:
Well, yeah. So once you identify, you might want to buy a practice or another practice. So now what? Emotions are high.

Jarrod Bridgeman:
So let me ask you this then. Of course, there's all this excitement builds up and you're walking and you're looking around, but like what should really drive the decisions here?

Casey Hiers:
Ooh, okay. If you're doing a practice inspection almost, what are... to stay with our analogy of real estate.

Jarrod Bridgeman:
Gotcha.

Casey Hiers:
So what are the things to look for? You're excited. Emotions high. They want to sell, you want to buy. Now what?

Jarrod Bridgeman:
Because not everything's going to be a hundred percent perfect at any time.

Casey Hiers:
No.

Jarrod Bridgeman:
But what are some of the...

Casey Hiers:
You want as much information as possible.

Jarrod Bridgeman:
Right, and what are some key, big things to keep an eye on?

Casey Hiers:
I imagine a lot of our listeners know some of these answers or have done it poorly and wish they would've looked at some of these details. We'll just cover a handful of them that you want to get your arms around.

Casey Hiers:
Well, the first one's overhead. Do you want to buy a practice with 70% plus overhead, or would it be better to buy a practice maybe with 50% to 60% overhead, maybe 62. That's a big difference.

Jarrod Bridgeman:
For sure.

Casey Hiers:
Massive.

Jarrod Bridgeman:
Well, because you know, if it's a million dollar collecting practice, a 1% difference in overhead's like 10K.

Casey Hiers:
Sounds right.

Jarrod Bridgeman:
I love that math.

Casey Hiers:
You're a numbers guy. How about insurance or fee for service? That's something a lot of young folks can potentially overlook.

Jarrod Bridgeman:
They're not familiar with the insurance, I wouldn't say robbing you blind, but insurances taking their cut.

Casey Hiers:
Oh my goodness. If you're buying a practice that's PPO driven or just massive except every insurance. What's the adjustment percentage? What's the adjustment rate? That's a detail that's incredibly important.

Casey Hiers:
Location. Is it a good location? How's parking? How's the building? How's the equipment? That's fairly obvious.

Jarrod Bridgeman:
You would think. Sometimes, I know I've seen without naming names, but I've seen a couple of practices in areas where even the building might just look a little older and I'm like, I don't want to go there.

Casey Hiers:
I've had conversations with people after the fact and they realized some of the things we're going to cover weren't as rosy as they thought they were, as they entered upon this.

Casey Hiers:
Practice financials. What is the practice owner, what's their income been over the last five years? I mean, that might be important.

Jarrod Bridgeman:
For sure, because at least you know what you are walking into and if there's ways to improve.

Casey Hiers:
Patients per day, production per day. How many patients are there? There's a lot of trend lines there that can be important. Employee wages, what's that percentage?

Jarrod Bridgeman:
Speaking of employees, not even just percentage, but looking at how many there are, longevity. Are they going to be really loyal to the selling dentist? There's a lot of that that comes into play too.

Casey Hiers:
Are they overstaffed? Are they understaffed? What's the culture of the staff to your point? We've heard some nightmare stories where...

Jarrod Bridgeman:
Is this the one about the fight club in the basement?

Casey Hiers:
I don't think so. But having experienced employees is a good thing.

Jarrod Bridgeman:
Correct.

Casey Hiers:
However, when the new person comes in to purchase, is there a danger that some of the more long term employees are still going to be loyal to the selling practice owner? Are they open to being coachable? That's hard to gauge, but I think that conversation needs to be had, it needs to be looked at, at least.

Jarrod Bridgeman:
Speaking of the selling dentist, you might want to think about, are they sticking around? How long are they sticking around? What's the plan for their, let's say, retirement?

Casey Hiers:
Absolutely. Is it a walkaway? Are they going to stay for six months? Are they going to stay for 12 months? Making sure that's really, really clear. I mean, that's like seven or eight details that unfortunately too many practice owners may look at a couple of them.

Jarrod Bridgeman:
These are very broad stroke topics too.

Casey Hiers:
Oh yeah. Big old buckets that we're really just kind of glossing over. Again, I have these conversations with practice owners where they'll find three or four or five of these that they didn't really think of beforehand and getting out in front of it. Again, the devil's in the details. People want to let the emotion drive a decision. Pull that emotion out, look at all these metrics, all the data points, ask good questions, really have a good feel for it.

Jarrod Bridgeman:
If all these things hit at least an acceptable level for you, then get excited. You know what I mean? We're not saying don't be emotional. Don't have love for what you do, but pay attention to the hard numbers first.

Casey Hiers:
Right.

Jarrod Bridgeman:
So, Casey, let me ask you this. You're always out and about talking to practice owners and practicing dentists. Are there any horror stories you've heard of someone, either (a) buying a practice and finding out there are some really nasty stuff in there, or (b) had to walk away from a purchase.

Casey Hiers:
Insurance and overhead are the two I would say that I've had conversations that sneaks up on people. The overhead was higher than they thought, or it was poised to go higher. One that sticks out. Our clients have thankfully third party oversight with our team, but they'll bring us a lot of opportunities and the emotions hide the excitement side. It's a done deal in their mind.

Casey Hiers:
Well, we'll look at these details and 30 other metrics and criteria, and it's the times when we communicate with them, this would not be a good practice for you for all of these reasons. We have those conversations and they're bummed out.

Jarrod Bridgeman:
What you're saying is, and this is something we've never said on this podcast ever before, is that you need a team.

Casey Hiers:
Well, you need somebody to look at these details, and some people like to look at these kind of things or have a cousin or an uncle or a friend that looks at them, but this is the essence of what a practice owner's life is going to be. Is this practice a good one or a bad one?

Casey Hiers:
Ideally, you find a practice that overhead's 58%. Their fee for service. Great location, great parking. Equipment doesn't have to be top notch, but you certainly don't want to buy something where you're replacing everything.

Jarrod Bridgeman:
Like one of those drills where you have to ride the bike first to kind of, that pull starts the equipment.

Casey Hiers:
There's your sign. Employee wages. I mean, if they're already at a very high benchmark, that can be hard because unfortunately we know that some of the tenured employees, when there's new ownership, it's almost the tail wagging the dog. They overvalue their importance sometimes and will boldly go and almost demand more money. Not all the time, but you have to be open to it, and that's why you really want to understand the employees, their longevity, their compensation. All of the culture, all those details beforehand.

Jarrod Bridgeman:
Well, and you also need that time for the first year or more to really learn and get a feel for that new practice.

Casey Hiers:
There's pros and cons to the senior doctor retiring. If they stick around, that's helpful for a little bit. But ultimately the horror stories are, I've heard the younger dentists say the staff doesn't listen to me. They're still going to him. He doesn't own it anymore. It's very frustrating. I don't know how to handle it.

Casey Hiers:
We've covered a little bit of this in other podcasts, but again, setting expectations and boundaries and what it looks like ahead of time versus just, this is so exciting handshake deal. Let's do it. It's kind of loose. As you know, many older practice owners, they realize they don't have enough to retire after they retire, and so they want to stick around for a little bit longer.

Jarrod Bridgeman:
70, 75.

Casey Hiers:
Those are the nightmares. It's just like anything else. You want to be excited about something. You should be pumped, but boy, you've got to take a deep breath and really look at it. Really look at the details.

Jarrod Bridgeman:
That's right.

Casey Hiers:
Because again, there's a lot of bad practices out there. There's a lot of great practices out there. Sometimes a dentist will look at two practices - one's bad, one's great - and they have a hard time discerning which one? A lot of times, again, it's maybe an emotional pull towards which owner they feel like they're the most similar to. That's important, but the foundation of the practice, that's what you really need to look at.

Jarrod Bridgeman:
Exactly. Well, thanks, Casey. I hope you have a great Memorial Day weekend. If you were listening to us, which you should be and you would be at this point, I don't know why I asked, but here's the deal. Give us a like, and subscribe to us on whatever podcast, streaming you listen to if it's Spotify or Apple podcast. Make sure to subscribe to us. That helps us out quite a bit.

Jarrod Bridgeman:
If you like us, give us a like on Facebook. You can find us pretty much on every social media, except for TikTok, but who knows? Casey's been working on his dance moves.

Casey Hiers:
That's a lie. I'm a fantastic dancer. I don't have to work on anything.

Announcer:
That's all the time we have today. Thank you to our guests for their insight and for sharing some really great information. And thank you to you, the listener for tuning in. The Millionaire Dentist podcast is brought to you by Four Quadrants Advisory. To see if they might be a good fit for you and your practice, go on over to fourquadrantsadvisory.com and see why year after year, they retain over 95% of their clients. Thank you again for joining us and we'll see you next time.