Elementary to Existential: Navigating the Evolving Dental Landscape

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 that we do speak with an honest tongue and may not be safe for work.

Jarrod Bridgeman:
Hello and welcome to the Millionaire Dentist. My name is Jarrod Bridgeman, and I'm your host today. Casey Hires, who is normally along with me, is not in today. He is traveling to Denver, Colorado, this week to go to the pediatric conference there, and we're having a really cool social on Wednesday night, probably after you hear this. So if you wanted to go and you didn't sign up, well, it's too late now. But instead, I brought a really special guest today. He is our COO of Four Quadrants Advisory, Brogan Baxter. Brogan, how are you today?

Brogan Baxter:
Jarrod, I'm awesome. Thanks for having me on today. And when did we start shooting a podcast?

Jarrod Bridgeman:
It's been a little while since I've been able to get you back on here. As a firm and as a company, we've just been, I think, kicking ass for a while now, but it's really ramped up, and so you've been such a busy little beaver that it's been hard to kind of pry you away. But one of the big things I wanted to bring you on about is last year was our 20th anniversary as both a company and for you as a member of the company. So now we're at 21 years. So I kind of wanted to touch upon how the dental world, in terms of finance, tax, all that kind of stuff, has maybe changed, has stayed the same over the last 20 years. So let's just kick it off with when you first started here, and this was 21 years ago now, by the way, how does it make you feel to know that you've been at this company longer than some of our interns have been alive?

Brogan Baxter:
Just hit me. So that's interesting. When you start doing these legacy podcasts like this, it makes me feel like I'm a grandpa.

Jarrod Bridgeman:
Yeah.

Brogan Baxter:
So listen to the old man talk. I have way less hair now than I did 21 years ago.

Jarrod Bridgeman:
I was so used to most of my career being one of the younger guys in the company, and that's not the case anymore.

Brogan Baxter:
No, we're elder statesmen.

Jarrod Bridgeman:
That sucks. So let's say, let's go back in time 20, 21 years ago, and you were starting to work with dental practice owners out in the world. What were some of the most pressing, let's say, financial or maybe operational challenges that you typically saw them facing?

Brogan Baxter:
So thinking back over my time, when I first got into this, it was kind of more bread and butter. I don't want to say less sophisticated, but let's just say more elementary-type issues. So we're talking about profitability, we're talking about transitions, talking about savings for retirement. It was kind of the big bucket thing. The market had not matured. Corporate dentistry was just starting to maybe be a little thing, but I mean, in its infancy, nothing like what it's grown to now. So you're dealing with those kinds of items back then, things were still simple, relatively simple. You didn't have some of these more complex issues that you have today.

Jarrod Bridgeman:
This was what, 2004?

Brogan Baxter:
Yeah.

Jarrod Bridgeman:
Yeah. I mean, that makes sense too. And as a firm, obviously, we weren't at the breadth as we are now with the size and everything.

Brogan Baxter:
Sure.

Jarrod Bridgeman:
Were there any kinds of things, let's say again 20 years ago, looking at technology, maybe a lack thereof, or insurance models, or anything that impacted the practice's financial health?

Brogan Baxter:
Hearkening back to that first answer, if there really was more simplicity in the model, there were a lot more single-owner docs. Patients were much more lenient, and there was less competition. They didn't have some of these expensive pieces of technology, so your costs were down. So most people were making pretty good money. They had a pretty loyal patient base, and things seemed kind of easy. And now, even taking it back to the generation before that generation, it was even simpler still. It's just, I think over the years, and this can even go back 40 years, it's just becoming more complex with more and more technology, more and more expectations.

Jarrod Bridgeman:
And it's similar to all medical fields, I'd say. As we learn more as a society in terms of what the docs are learning in school, what they're learning, and in practice, I feel like we've gained a lot of knowledge. And so technology has risen to meet that kind of stuff, especially with implants and things where people are like 3D printing teeth and stuff now, which-

Brogan Baxter:
It sounds like something from Star Wars back in the day. 3D printing? That sounds amazing.

Jarrod Bridgeman:
Well, and a long time ago, it was wooden teeth and horse teeth, but now we've got 3D printers. And then in terms of the simplicity of it too, I wonder how much of it has changed just due to the internet and how many patients try to self-diagnose and think they know more than they do.

Brogan Baxter:
Patients they've grown more sophisticated, just like the business models have grown more sophisticated over the years. Patients are now more educated. There was a lot more trust previously. There's a lot less trust now. And post-COVID put that on a totally different plateau. So yeah, you talk about that simplicity and the easy way of being able to do things. That's something that really was ending around 20 years ago, I felt like. So I've seen that change pretty dramatically in the last couple of decades.

Jarrod Bridgeman:
I feel, though, in general, as a pop culture world, we've treated dentists nicer. Growing up in the eighties and nineties, we had movies like The Dentist, a horror movie. We had Steve Martin in Little Shop of Horrors.

Brogan Baxter:
Absolutely.

Jarrod Bridgeman:
So I feel like at least we're a little nicer on the appearance of those. Let's go ahead and fast-forward to today. Some of the challenges you've mentioned, have any of those changed? Has some of it stayed the same? Let's go from there.

Brogan Baxter:
So something I feel like's evolved, I'm going to leave a spot later to talk about corporate dentistry in more detail, but let's just call it, there's a hell of a lot more competition out there, whether that's competition with other dentists, whether it is some corporate outfits, whether it's some fly-by-night wanting to do their own corporate gig. There's a hell of a lot more competition. The internet helps that too, because it makes it easily accessible for people to locate competition. I think there's a lot of pressure with dentists feeling like they've got to keep up with tech because if not, then they get left behind. Their patients don't feel like they're with it. To an extent, that is a thing, and there are efficiencies that can be gained from some of that. But with that comes increased costs.
And with the increased costs, if you've got any insurance plans, those reimbursements have been dropping, so you're getting pinched a lot more. Your profitability is really getting pinched, and it creates a lot of additional pressure on the business owner and the practice owner. And so the business model has become a lot more sophisticated and complicated.

Jarrod Bridgeman:
We kind of talked about what's persisted and what stayed the same. And you've mentioned overall in terms of advertising, it's easier for people to find more practices out there. Back in the day, families had the same family general doctor for 40 years until they retired, and they just came in next; they took over. A little bit less like that, I think these days. Is there any other big... I know what you're going to answer, but what's been one of the bigger obstacles, challenges that sole proprietor dental practices have faced?

Brogan Baxter:
Okay, so I'll insert the conversation about DSOs here. Those have really exploded, and it was kind of fueled by the profitability that was in dentistry, catching some of the early stages of cheap money. Cheap money allows, and when I say cheap money, listening folks, when I say that, I'm talking about low interest rates because with low interest rates, DSOs can make substantially more profit, and there's a way smaller of a bar to get a better return on investment. So what happened was is there was this kind of proliferation where all these DSOs were out there trying to compete. It was like a nuclear arms race, trying to acquire as many practices as possible. And so they're bidding it up to very high prices with really half-assed business model approaches. Some of them are okay, a lot of them aren't, but the pendulum's starting to swing back a little bit. But the DSO thing really has resulted in quite a bit of consolidation within the market. And so now you almost have these two different pools of dental practices. There are the big corporate ones. Now, whether they just put big corporate dental on the sign or whether they still try to make it seem like it's the owner doc and just put it-

Jarrod Bridgeman:
Yeah. Smith Family Dentistry.

Brogan Baxter:
They're the puppeteer pulling the strings. Right? So you have that aspect of it. But then you still have the, I don't want to call mam and pops, but the single owners that they own a practice or two, they're still doing it the old-fashioned way. And those people who are doing it the old-fashioned way are trying to compete with some of these bigger DSOs, and it can absolutely be done. It's very difficult, especially when you're trying to run a practice, be a parent, be a spouse, be an employer, and be a practitioner. There are all these different things that fall on the plate now of an owner that didn't use to be there.

Jarrod Bridgeman:
Right. And you brought up because 20, 30, 40 years ago, it might have been easier to just let your front office lady run with some of that stuff, too.

Brogan Baxter:
Yeah. Everything is trust-based. It's a lot easier now. Now things have just become, for lack of a better term, a little more commercialized.

Jarrod Bridgeman:
I think I've seen a bit of a trend you had mentioned, it's kind of starting to swing back, the pendulum is younger docs who may have spent a year or two or maybe a couple years grinding away at a DSO, realizing, "This is not for me, this is not what I wanted." And have started to open their own practices.

Brogan Baxter:
The DSOs throw a lot of money at the dental schools. They throw a lot of money at the state associations and the national associations to get a voice.

Jarrod Bridgeman:
Basically lobbying.

Brogan Baxter:
That's essentially exactly what it is. They're lobbying for that, but because of the need for money, those institutions are happy to hold their hand out and take some of those funds.

Jarrod Bridgeman:
And for the students who are just graduating, it's almost a guaranteed job. You're walking out with all that debt.

Brogan Baxter:
Yep. It's a safety net. There's a lot of pressure. Increased costs of going to school are resulting in four, five, $600,000 worth of student loan debt. They don't want to go out and be paid for straight production. They want a safety net. You've got to know how to compete against the DSOs when you're trying to recruit these people. I mean, they're getting phone calls when they're three years away from graduating, and these people are relentless; these recruiters are trying to get these people there. And they make all the promises, and a lot of people take them up on it now. They get out there, and they find out it's not all lollipops and gumdrops.

Jarrod Bridgeman:
No.

Brogan Baxter:
There are expectations. For lack of better terms, they cut their teeth out there doing things that they're kind of uncomfortable with doing, because they're not getting the education that they used to get. So then what happens is after they kind of figure out how to do some of these procedures and they kind of wise up to how things operate, they go, "I don't want to do this anymore, but I need some help to transition from corporate to either something less corporate or owning my own practice because I feel like I can do this myself." And they can make way more money that way.

Jarrod Bridgeman:
For sure.

Brogan Baxter:
Nobody tells people that, but they absolutely can.

Jarrod Bridgeman:
I mean, even a mediocre-minded dentist in terms of business and finance can still make okay money.

Brogan Baxter:
Absolutely.

Jarrod Bridgeman:
Compared to a DSO.

Brogan Baxter:
Yeah, absolutely.

Jarrod Bridgeman:
And then once they're doing well, and we come in, and we kick ass and make them lots of money.

Brogan Baxter:
Hell yeah.

Jarrod Bridgeman:
Brogan, in today's environment, what would you say the top two, maybe three, financial challenges you see practice owners facing today?

Brogan Baxter:
I'm going to talk about three things. The biggest one that I hear now, and there's going to be a lot of dentists that are driving home or hanging out listening to this awesome podcast by the way, that say that this is the biggest issue, and this is all post-COVID. It's staffing. It's finding help. Nobody wants to work after COVID. The ones that do want to work, they want to be able to call the shots on what they make. And dentists know that it's costing them money by being short-staffed. So again, you have this wage float where people's incomes just keep getting higher and higher and higher, and everybody's jumping for the highest dollar. And that's where we're tying it back into the DSOs, because they can offer some of these ridiculous amounts of money. It's hard to compete with that if you're not running a good dental practice. So staffing is a major, major issue in dental, and this is something that's really happened in the last couple of years.

Jarrod Bridgeman:
You say it really hit home around COVID time?

Brogan Baxter:
Yeah, yeah. COVID was a real big wake-up call, and I mean, it's not even bound to just dentistry. There was a massive transformation with people leaving positions, going to other positions, lowering of expectations and requirements for people coming into roles, because people were just sitting out of the job market. So I mean, you've got places that used to require graduate degrees or college degrees, now settling with high school degrees are fine. And that's tough. And that's something without COVID, I don't think would have happened.

Jarrod Bridgeman:
Maybe not as fast. I do feel the lateral moves that some people do from company to company to kind of get an extra dollar, an extra dollar here and there. It's a generational thing, too.

Brogan Baxter:
It is a fickle job market with fickle candidates out there that are happy to stab you in the back for a dollar an hour. And that's really unfortunate as a business owner. So that one mixed in with the DSOs because ultimately these corporate outfits are the ones that are kind of helping to float these up, as far as the cost to them, it's not that much money, but it's your biggest overhead in an entrepreneurial dental practice. So that's really tough.

Jarrod Bridgeman:
And you said too with the DSO, maybe that two dollars extra an hour, that's not a big deal to them, but to the hygienist out there or to the front office, that's massive.

Brogan Baxter:
Yeah. Yeah, it's crazy. There are also not enough hygienists out there right now. I hear that from clients all over the country. I mean, we have clients in over 40 states now, and that is a universal opinion out there. Somebody's going to make a lot of money going and opening a hygiene school out there.

Jarrod Bridgeman:
Should we open one?

Brogan Baxter:
We should do that. Four Quadrant Staffing.

Jarrod Bridgeman:
That's right.

Brogan Baxter:
No, and then you layer on top of these other issues with staffing, and then some of the increased competition from the DSOs, and that's competition with staffing as well as patients. You layer on top of that the declining reimbursement rates of shitty insurance plans out there, and you get this major squeeze that hurts almost exclusively the owner of the dental practice.

Jarrod Bridgeman:
What has been one of the worst cases you've seen in terms of insurance reimbursements? Like a percentage-wise maybe?

Brogan Baxter:
Oh God, 50%.

Jarrod Bridgeman:
Wow. Okay.

Brogan Baxter:
So dental listeners out there, imagine going and working your butt off, coming home, being beat tired and knowing you took a 50% pay cut today to work that hard.

Jarrod Bridgeman:
And a lot of these owners out there, and maybe even associates, the only thing they know to do is maybe, "I guess I'll just do more, produce more." Like, "Let's create more patients in there."

Brogan Baxter:
That's all they've been taught. That's what they've been taught by a lot of practice management folks out there. That's what they've been taught in dental school. The way out of it is more. Folks, I've got news for you. The way out of it is not more, the way out of it is better. And I understand you might not know better, but you've got to surround yourself with a team that can help you find better. It's not about more because ultimately that will come back and bite you in the ass. You're going to have to hire the associate sooner. You're going to feel it in your back and your neck sooner. You're going to have to retire sooner. It just squeezes you more. It might make you feel a little better now because you feel like you're producing your way out of it, but the problem is you're still not getting better. You need to get focused on better, not necessarily more.

Jarrod Bridgeman:
Well, and you're also missing out on potentially quality time with your spouse, with your children. You might miss events or school events.

Brogan Baxter:
What's that worth? What's that worth long term? I mean, you don't get to spend the time with your kids. What does that do to your marriage? With all these different issues, I mean, as morbid as it sounds, that is one of the reasons dentists have one of the highest suicide rates in the entire country, and that's just terrible. It doesn't have to be that way.

Jarrod Bridgeman:
That non-stop working and grinding away, and just not seeing your debt drop, not saving as much as you thought you should, and all that can really weigh down on a person.

Brogan Baxter:
Think about it, the system's kind of broken, really. If you think about it, these dentists go to school to be dentists. I get it, I understand it. But they ultimately become business owners. So they're having to rely on their dental school education regarding business, which was negligible or nil.

Jarrod Bridgeman:
Maybe like six weeks.

Brogan Baxter:
So now you're looking back to your sophomore intro to economics class to try to run a million-dollar company or a multi-million-dollar company. And then on top of that, they don't have the personality type to be able to want to manage an office full of what's generally a gossipy type, clickish group. These are conflict-avoidant dentists. So they're already behind the eight-ball there. What do they get for all of this? They get a shitload of debt. They come out of dental school with a bunch of debt. They have to go, oh, acquire a practice if you want to make money, so now you're in more debt. You got maybe reinvest in that. Oh, you want a house? Oh, we're going to have to buy one of those, too. Maybe a car? Get married? Gosh. So there's an incredible amount of financial pressure that's out there for dentists, and part of it's the system, and I understand why the system's set up the way it is, which only I think leads to why our offering and our services to dentists out there can be absolutely life-changing. Because if you get financial freedom, if you feel like you can breathe because you actually have some money in the bank at work, you actually have money at home, we actually save money for retirement. That releases an incredible amount of pressure from the dentist. And I mean what that's worth long-term is almost immeasurable.

Jarrod Bridgeman:
At one of our recent events, one of our clients came and joined in on the bourbon tasting, and then he stood up and spoke for a few minutes to the crowd of people who just kind of seen us online and wanted to see what we're all about. And as he was telling his story, there were tears coming out because of the happiness and the release of the stress and all that stuff. It's crazy.

Brogan Baxter:
The emotional toll, and again, we're dealing with personality types that don't like to share this, so they keep it pent-up inside. It makes it very difficult, and it can absolutely be emotional. I've sat in numerous meetings where people have cried tears of joy and sadness, and I see it daily. And I know the struggles that these dentists go through out there. That's what 21 years of objectivity gives me.

Jarrod Bridgeman:
Right. Well, I know as someone who came from outside of this field entirely and came in, I think a layperson initially is like, "Their business is making a million dollars. What are they so stressed about?"

Brogan Baxter:
"Oh, I paid this much for a crown. Geez, they got to be rolling in it."

Jarrod Bridgeman:
Right.

Brogan Baxter:
There's another story behind the curtain.

Jarrod Bridgeman:
Beyond the challenges, let's talk about something a little more uplifting. Are there any exciting opportunities or potential trends you see that owners can look forward to or should be-

Brogan Baxter:
Yeah. Yeah. I don't want to make this all Debbie Downer. There are outstanding opportunities there. I think there's going to be a lot of opportunities for dentists with selective acquisitions going forward. I actually just read a report talking about how the DSO money is starting to dry up. Valuations are coming way down. They're being way more selective about whom they acquire. Part of the reason is that we have a lot more expensive money than we had in years past. On top of that, some of these DSOs have already flamed out now. They're not working. It's not as easy as everybody realized.

It's not just about growth, growth, growth. It's about actually running it like a business now. And so the pendulum's starting to fall a little bit back more towards the center there. So I think there will be some strategic opportunities for practices to be able to acquire other practices. That doesn't mean second locations necessarily. It could just be absorbing them into your practice, but you still have to have good advice and a team to be able to do that, and you've got to have the profitability ultimately to be able to do that.

Jarrod Bridgeman:
Brogan, last question for you today that I can think of off the top of my head here that's not pre-written. For a dental practice owner listening right now, what's one crucial piece of financial advice or a tip that you would offer in the next couple of years?

Brogan Baxter:
So this is something I feel like even spans a couple of decades, and it won't change. If you have low overhead, lower overhead. So whatever it is now, take 10% off, 15% off, 20% off. The lower you get your overhead, I mean, while still treating your patients and your staff appropriately. The lower you get your overhead, the more opportunities you'll have. And to expound on that a little bit, if your overhead's lower, you profit that much more on an associate. Go break even on an associate that much more. You have that much more room to be able to hire that additional staffer, so then you're not short-staffed. You have the opportunity to go out and acquire an additional practice. The piece of equipment doesn't hurt as much because your overhead's already low.

Jarrod Bridgeman:
Or increasing your own income, throw money into savings.

Brogan Baxter:
Absolutely. If you don't have that, you have fewer options. And see, what I do here for clients is try to give clients as many options as quickly as possible. Because if you have options, you've got lots of different ways you could potentially go. If you're in such bad shape, and specifically from an overhead income retirement, it all stems ultimately from overhead. But if you limit yourself to those options, there are things on the table you'd love to do. It's not even in the stratosphere of something that can be done right now.

Jarrod Bridgeman:
And that can be really rough. Again, just people feel like they're trying to chip away at this marble rock, and they don't have the right tools, so it never turns into the statue they're trying to make. It's a weird metaphor, but all right, I'll take it.

Brogan Baxter:
Yeah, it's really tough to be able to do that, especially having the objectivity because you're so far in the trees that you don't see the forest, and so that's where that third-party objective way to look at things, or even a dental specific firm, whether that's my firm, some other firm out there, whatever it is, having somebody from the outside look at your stuff-

Jarrod Bridgeman:
Someone whose emotion is removed from the situation as well.

Brogan Baxter:
Right, right. "Why do you do it this way?" I mean, I've literally had clients say, "Because we've always done it that way>

Jarrod Bridgeman:
Yeah.

Brogan Baxter:
"Well, that's okay, but what about this way?" "I didn't even know that was the way." "Okay, well, let's go make some money."

Jarrod Bridgeman:
That's right. They used to bleed people with leeches.

Brogan Baxter:
Well, sure. I saw Rambo.

Jarrod Bridgeman:
That's right. God, I love Rambo. I was a kid, and I had a big wheel, a Rambo big wheel with fake machine guns on it. It's still crazy to me how many toys and cartoons were made from rated R movies back in the day.

Brogan Baxter:
Oh, yeah.

Jarrod Bridgeman:
Robocop was a cartoon, Rambo, all that stuff.

Brogan Baxter:
Oh, yeah. It was awesome.

Jarrod Bridgeman:
The Toxic Avenger. Anyways, Brogan, thank you so much for coming in today.

Brogan Baxter:
Awesome opportunity. Thank you for having me.

Jarrod Bridgeman:
Folks, if you're wanting to learn more about us or just some great tips and great advice, and you have not gone to one of our events, go to FourQuadrantsAdvisory.com/events. We're going to be in Cincinnati, Ohio. We're going to be in Columbus, Ohio. We're going to be in Fort Wayne, Bloomington, and Merrillville, Indiana. We're also going to be in Wichita and Kansas City in Kansas, and we've got a lot more events coming up. We're going to be at, I believe, SmileCon this year as well. So check us out, drop us a line, subscribe, give us a great review, and if you know somebody out there who could really use someone to talk to about this stuff, have them fill out a form, and we'll have one of our reps reach out to you. Thank you so much.

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.