THE MILLIONAIRE DENTIST™

Emotional Well-Being During Practice Transitions

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EPISODE 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, welcome. This is Casey Hiers back at it again at The Millionaire Dentist podcast. Co-host Jarrod Bridgeman is joining me.

Jarrod Bridgeman:
Hey, good morning.

Casey Hiers:
Howdy, howdy. So, let's talk about practice transitions. Buying a practice, selling a practice, those are two times in your career that there's a lot of questions and a lot of anxiety. Let's look at it from the younger dentist. Let's pretend Jared, you graduated dental school and you were an associate for a couple of years and you get that itch to be an owner. A lot of times, you're not even sure why. You just think it's the-

Jarrod Bridgeman:
That's the next step because everybody else has said that.

Casey Hiers:
Right. It's the next logical step. What should you look for? What are some of the variables out there? Let's dive into this topic a little bit.

Jarrod Bridgeman:
If you're at the position and you've already been an associate at a different practice, you probably come to realize you need to find, if you want to do that route, find an older dentist that fits with your needs in your wants. You don't want to settle and just be like, "Oh, well this is the best option I have." It's again, we always talk about the numbers and timing and make sure things are right. And if you are jumping the gun and just get into a practice and just don't like it, but you're still there and you may just be miserable for years to come.

Casey Hiers:
We have a client and she joined us a couple of years ago on our podcast, but when she graduated from dental school, she actively went out and knocked on doors to older practice owners and wanted to just have a cup of coffee with them. And that was part of her go-getter attitude to potentially buy a practice that makes sense. Most of our listeners out here that are practice owners can relate to this. They knew they wanted to be a practice owner and they wanted buy, but they didn't really know what they were looking for, what the right criteria were. Do you want to get into what some of those are for our younger listeners, as you're potentially wanting or thinking that you want to be a practice owner and buy? What are some of those curveballs that may be that you need to be aware of?

Jarrod Bridgeman:
One of the things I would consider is if you can get a look at their financial numbers for the practice side is how much are they bringing in?

Casey Hiers:
In any practice sale, that's going to happen-

Jarrod Bridgeman:
Yeah.

Casey Hiers:
... but the sooner the better-

Jarrod Bridgeman:
Yes.

Casey Hiers:
... because a lot of times you can waste time on let's meet for breakfast, let's meet for coffee, some of the playing footsie, and ultimately the numbers have to bear it out.

Jarrod Bridgeman:
Yeah. There was a situation I was in a couple of years ago where I was in talks of helping someone take over a business, and I went and met with the previous owners and they just kept saying, "Oh, things are good. Things are good." I was like, "Cool. What are the numbers? What does it tell me?'

Casey Hiers:
What does good mean to you?

Jarrod Bridgeman:
Yes. And apparently, if it was going really great you'd probably still be there. Yeah. Anyways, I digress. I digest.

Casey Hiers:
No, no. I think that's a good point. Here's one of the things I would say. As the younger dentist, know what you want. There are very different practices out there. A fee for service practice, some that take a few insurances, a lot of practices take almost all of the insurances. You need to know what you're looking for because that's going to really dictate the next five, 10 to 30-

Jarrod Bridgeman:
Plus years.

Casey Hiers:
... years of his career. And so, I say that because too many folks buy the practice that they like the location, they like the previous owner, they seem nice, and they realized the business model, isn't what they want.

Jarrod Bridgeman:
And then you're stuck for years trying to either fix it-

Casey Hiers:
... unwind, yeah.

Jarrod Bridgeman:
... on your own, usually, or you just tread water and like, "Well, I'm here and this is what I got to do."

Casey Hiers:
Yep. That's probably one of the big ones is know what kind of practice you want.

Jarrod Bridgeman:
So, you still love the job you're doing, but you're behind the scenes. You're not just happy.

Casey Hiers:
I've had too many conversations with practice owners who they're just burned out because of the insurance game. And I talked to one recently that said, "I'm going to sell this practice to my associate and go start another one across town. Number one, in an area I like better; and number two, the practice that I want, that's fee for service and I can do dentistry the way I want to do." And so as a younger practice owner, know what you want to do, the type of practice, type of business model, type of dentistry before jumping into being an associate buying a practice, because the younger dentist is looking for leadership. A lot of times the older dentist is looking for someone that just buy the practice, and there's not maybe the leadership there. They both assume the other one knows what they're doing.

Jarrod Bridgeman:
It's all communication, as you said with that one client we have. If you're out there grabbing a cup of coffee or with another dentist, you may want to interview them as much as they're interviewing you. Talk to them and find out what their game plan is. Are they wanting to leave in five years, want to leave in 10 years, whatever the case may be, because sometimes when you have an end in mind like I'm out in five years, they may start acting retired while they're currently working. They're checked out.

Casey Hiers:
It's good to have that. Is there some rapport? Is there some likeability factor with each other? And that is important, that meet and greet. Maybe spouses and having a dinner. But to your point, look at the numbers.

Casey Hiers:
Here's four things at minimum, and we've talked about these, I think before, but as the younger dentist, these are the questions, as Jared alluded to, ask the current owner, these questions. And if you're on the other end of the spectrum, if you're on the you want to sell your practice and bring on an associate for that goal, make sure you're doing these things. This is going to be symbiotic and help both of you, but know the numbers. Know if you can afford it. So, as the younger dentist ask, get into the numbers. This is my range. Is your current overhead... And if the older dentists, looks at you with confusion, deer in headlights when you bring up overhead, as many don't actually know their overhead, that could be an issue.

Jarrod Bridgeman:
I agree. Once you get to the point where you are actively going to buy, it's really important to build that team. You need that dental-specific team. You don't want cousin Roger, who he's a great guy and he's a home inspector or something, but his advice you can it or leave it, but you need somebody that actually knows what they're talking.

Casey Hiers:
Oh, I see. A business owner who may be in a completely different industry-

Jarrod Bridgeman:
Yeah.

Casey Hiers:
... and you're getting advice from. When you said team, this is funny, I instantly thought of the staff of the practice owner. When I present CE I'll see your team and I always have to qualify, in the reverse, your accountant, financial planner, business advisor, and investment person, but you hit on something. What's the staff look like? Not in a shallow way, what do they look like? But are they full of energy? There's a lot of situations where the younger dentist comes in and there's a power struggle. And if it's a seasoned team and staff, they will almost take ownership of that patient relationship a little bit.

Jarrod Bridgeman:
Because at some level, a hygienists that's been there 20, 30 years and all of a sudden here's some hotshot dentist coming in, sometimes the hand of the rooster, or whatever they call it, things can push back. So, it's really important to talk about that as well.

Casey Hiers:
Yep. I'm understanding what that looks like. There's a whole bunch of things you need to do, but let's say you buy-in. There needs to be a real clear understanding of roles. You can't have the tail wagging the dog. We talk about that a lot, but you're right. Beyond that coffee, dinner, likeability situation, what are the numbers? What's the overhead? What's the income? How's the profit and loss statement look? How's the balance sheet look? Can you afford to bring on an associate? And here's a newsflash guys. If the older dentist you're speaking with, if their collections are below one, three, it's not going to work.

Jarrod Bridgeman:
Wow. Yeah.

Casey Hiers:
I could talk an hour about why it's not going to work, but here's the cliff notes version. If somebody is collecting eight, 900 and trying to bring on an associate and you're that associate, unless they're going to work maybe one day a week, you really need to understand what that looks like.

Jarrod Bridgeman:
Because then would you say it's because the older dentist, it costs more? They're losing money just by having you there?

Casey Hiers:
Potentially. And we've talked about this on the other end of the gamut. You're paying a $1.10 for every dollar of dentistry. Eventually, those numbers aren't going to work out. So to your point, don't wait until the end of the transaction after a verbal agreement and then get access to the financials. You want to do that as soon as possible. And to the older dentists, those are the conversations we have. Hey, I've got eight years left while overhead and income, and retirement are big focuses, I want my practice to be attractive. How you do that is to lower your overhead. Show somebody low overhead, high income, and not producing $3 million of dentistry, but you can do this producing one, four.

Jarrod Bridgeman:
And I was also thinking about we've touched upon this kind of stuff with previous podcasts as well, but you should probably look into the rental, the the lease agreement, and I would talk to the actual landlord. Don't go off of what the owner thinks he has. And who knows, they may have had a contract where every year gets raised a percentage, but maybe you can talk to that landlord and work out a better deal, too.

Casey Hiers:
It's funny, you said that. Sometimes there is lease language in contracts that is prohibitive of bringing on an associate and transferring things. Yes. Make sure you understand the lease. A lot of times it's best to structure it buying the practice in tiers, production time served, have some different buy-ins on a time schedule; but then maybe buy the actual land or the building maybe maybe five years later. So there's some income for the older dentists as he's winding down, but it gives the younger dentist a little bit of a break from just hemorrhaging money buying the practice and the land. But you hit it, know what's in that lease, both front end, and back end practice owner. If you're the younger or the older, the lease. I have seen some horrible verbiage in leases that can potentially prohibit a proper sell-

Jarrod Bridgeman:
Oh, yeah.

Casey Hiers:
... of a practice or even put in this lease that if it happens under certain circumstances the landlord could get it cut.

Jarrod Bridgeman:
Oh, yeah, that's-

Casey Hiers:
That's not common, but it's happened. And so that's a very good point. What are we looking for?

Jarrod Bridgeman:
And to be honest, whenever I read a contract, I don't get most of it, personally.

Casey Hiers:
By read the contract we mean find an attorney to-

Jarrod Bridgeman:
Yes.

Casey Hiers:
... read the contract.

Jarrod Bridgeman:
Yes.

Casey Hiers:
Obviously, a firm like ours, we're doing all of those technical things for the dentist. If you're the younger dentist looking for this, you're going to want a financial firm, an accountant, a CPA, an attorney. You need your external team looking at these things because the devil's in the details. And to your point, I've read a lease in a lease course that I've sat in and it sounded fine. And then they start pulling out different verbiage and they say, "This paragraph means this."

Jarrod Bridgeman:
This, yeah.

Casey Hiers:
And it's always restrictive. It's always going to be pro-landlord. And so, I don't want to go too far down that rabbit hole, but that is absolutely something to consider. It's okay, well, I want to buy your practice and know how long you want them to stay and know what that exit plan looks like. And if you'd like to buy the building and all of that, what's that timing look like and what's in that lease? Good call.

Jarrod Bridgeman:
Thank you. Thanks. I often pride myself on my points here. I actually was thinking about something and that is we often talk about associates, the buying, the selling, the transitions, and all that. Would it be a bad thing that if you're in maybe a smaller area where there's not a lot of options to buy, why wouldn't you maybe want to just start your own?

Casey Hiers:
Ooh. This is interesting. Okay. I'll just share things that I hear from practice owners and from our chief operations officer Brogan Baxter. He's seen a lot of this and shares a lot of this. There are instances where the attractive part of town to live in is supersaturated. To your point, find maybe a rural place, maybe where maybe you're not the only game in town, but you're not one of 30 games in town. And potentially that's not bad, when you start your own practice can start it the way you want to. Now, again, that goes back to knowing the business model that you want.

Casey Hiers:
If you're a doctor of dental surgery and you're going to put on your big girl and big boy pants and buy a practice, you need to have those thoughts of what kind of practice do I want? And if you start your own, there's pros and cons to that; and then again, the insurance game and what that looks like. And so that's, for some people, that is a nice fit. A, a lot of those rural practices are some of the most successful. You don't necessarily have to live up two blocks down from your practice, but those are good.

Casey Hiers:
And to your point, maybe there's not one to buy. Just hanging up a sign and advertising there's risk in everything. If you buy a practice, you might not like the staff. You might not like the building, the location. You might not like the lease. You may not like the business model with the insurance. You start your own, well, you're going to be doing some heavy marketing, but you're going to be able to dictate a lot of those terms. It's knowing what you want.

Jarrod Bridgeman:
And bringing in the staff that you want-

Casey Hiers:
Absolutely.

Jarrod Bridgeman:
... as well.

Casey Hiers:
And the sizing and the pace of it, all of it, because what I see more often than not is rushing into buying a practice that has a ton of insurances and they don't love the staff. And so they love dentistry, but they're what are they fighting? They're fighting the insurance game. They're fighting human resources. They're fighting overhead. They're fighting-

Jarrod Bridgeman:
They're stressed all the time.

Casey Hiers:
That's when it becomes dentistry is not what I thought it was going to be. And so younger dentists, ask yourself these questions. Older dentists are probably chuckling. If I would've heard a little bit of this and actually taken it to heart could have saved myself some time, maybe saved myself some stress and money.

Jarrod Bridgeman:
And the whole idea is, as he said, rushing into things. I know it's hard to take away the emotion and just look at the numbers. That's also a reason why it's important to have that dental CPA and the financial planner and the attorney, because you need someone who's going, to on your benefit, tell you what the best options are. Instead of we like to run with our hearts and I get that, but it's when that's your career and your life out there that you have to be objective.

Casey Hiers:
A lot of times people find that attorney, that CPA, that advisor consultant, who is familiar and by that it's, well, my uncle knows them. My parents know him. My friend from dental school knows them. That familiarity is not necessarily fruitful. What is this is somebody that has familiarity with dentistry.

Jarrod Bridgeman:
Yes. The business itself.

Casey Hiers:
That's going to launch, have so much more results than, oh, I know them. Small world, three degrees of separation. We have a mutual friend. That's cute, but-

Jarrod Bridgeman:
We've talked about that. They may never want to hurt your feelings or something, or they may feel they can get away with fumbling some numbers.

Casey Hiers:
Yeah. Find somebody that knows dentistry, that has experience, that can tell you what you need to hear. Now, we'd be remissed if we didn't bring up the younger generation. Also, they're not running out to buy like maybe they have in the past. That's a broad stroke, but corporate dentistry, the SOs, they're looking for folks. They pay an okay amount and you don't have the business side of dentistry stress-

Jarrod Bridgeman:
... worry about. Yeah.

Casey Hiers:
Now, you're going to be micromanaged. You're probably not going to be doing dentistry the way you want to do it, and you're going to be producing like crazy, but you don't have those headaches. So, that's an interesting route that's becoming more popular. The older practice owners are a little nervous about that. But again, have that leadership where your overhead is sub 60. Your income off a million bucks is $400,000. Make your practice attractive.

Jarrod Bridgeman:
Yes.

Casey Hiers:
Running a gun and then winging it on the business side is not going to do it.

Jarrod Bridgeman:
Nope.

Casey Hiers:
Having a right firm that's going to get you there, that's going to make it more attractive. Then when that young dentist burns out at corporate dentistry, they can buy a practice that's really, really attractive and you'll end up being much better.

Jarrod Bridgeman:
I was at a cookout, Memorial day weekend, and I was talking to a guy I had never met before, a friend of a friend and he was a dentist. And so I talked to him and a couple of years ago, he actually sold his practice to a DSL, but he still works there. And he's like, "Yeah, we take all the insurances and I am grinding every day." And I told him what we do, and he's like, "Dang, I wish I would have heard about you guys sooner."

Casey Hiers:
And the insurance part doesn't affect him as much as the amount of dentistry he is expected to produce, and then is there potentially influence to over-diagnose? That's a whole nother podcast right there, but there's added pressures. And so again, there's pros and cons to all of it. We're not endorsing one way or the other-

Jarrod Bridgeman:
No.

Casey Hiers:
... but the biggest thing is know what you want.

Jarrod Bridgeman:
Yeah, that's what I would push towards.

Casey Hiers:
And so many-

Jarrod Bridgeman:
If you're happy with what you're doing, okay.

Casey Hiers:
But so many don't. They just say, "Oh, Dr. Smith down the road, they seem nice. So, I want to buy their practice." And it's more of a surface decision than a little more in-depth, so that's what we're encouraging today. Any parting shots for the audience, Jared?

Jarrod Bridgeman:
Again, just look at the numbers, interview, take your time. Don't feel the need to rush into it. You'll be happier in the long run. And that's almost the case with just about anything in life, to be honest.

Casey Hiers:
Words of wisdom. Let's leave it there. Thank you, sir.

Jarrod Bridgeman:
Thank you.

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.