Episode 37 – Requested Replay: What Makes a Valuable Dental Practice with Vincent Cardillo

“The value of your practice goes beyond you…you’re creating something that will be valuable in the future.”  

Your focus as an independent dental practice owner is creating value in your practice; you should be building a practice that other people want to buy. But do you know what actually makes your practice attractive to a potential buyer?

Vincent Cardillo, the founder of Maeva Dental Advisors, joins Victoria Peterson today to share his expertise on what constitutes value in a dental practice. Listen in for insights on how to make smarter, more-informed decisions as Vincent shares his philosophy on what makes an Investment Grade Practice, including:

• What attributes of practice make it attractive to a smart buyer?
• What you can do today to increase your value tomorrow.
• How to avoid the biggest mistakes dental practice owners make when creating a long-term financial asset.

ABOUT VINCENT CARDILLO

EPISODE TRANSCRIPT

VICTORIA: Welcome to Investment Grade Practices podcast. Today I am talking with my very good friend Vincent Cardillo. Vinny, welcome to Investment Grade Practices.

VINCENT: Vicki, thank you. So excited to be here and to see you and to chat with you. It’s always a pleasure. 

VICTORIA: Vinnie, you are the founder of the Maeva Dentist Advisors and what I know is that you work with the mavericks in our industry, the men and women who are absolutely committed to building companies of integrity and value and I love that your name Maeva sort of incorporates that maverick energy.

VINCENT: Yeah, that’s great. That’s what the team came up with and the mavericks that we work with so many folks that their energy is around growing multiple locations, however, keeping it committed to their core values. So it’s folks that are always stretching their boundaries and, and our job is to work with them to manage the stretching of the boundary.

VICTORIA: I love that and on Investment Grade Practices, those are the things that we focus on: what do I do today, so that I love the business that I’m working in, whether I’m working directly in it as an owner-operator or a manager. You and I have been on both sides of those equations. So I love the company I’m in today, and I’m building value for tomorrow. 

One of the reasons I wanted to pick your brain is that you are an advisor to DSOs, large and small. I’ve known you for decades. I know you started out building one of the first DSOs and leveraging that way back. When was that 1995?

VINCENT: Long time ago.

VICTORIA: The students in dental school today, were born when you formed your first DSO.

VINCENT: Yeah, that’s right. That’s kind of scary. It is.

VICTORIA: I think it also speaks to the depth of your knowledge. That’s probably why you sit on the board of advisors for so many private equity firms that are searching for companies of value within dentistry and that is what I want to pick your brain about today. So this is like an insider’s look. Very cool.

VINCENT: Excited can’t wait for the questions.

VICTORIA: What do you look for when you’re purchasing a practice?

VINCENT: So that’s a very interesting question. Because it depends. If the goal with the practice that we’re purchasing or acquiring in our business model is to partner with them, and they’re going to be with us for the long haul, then we’re looking at perio, right? That’s number one, what are their perio numbers like? Because if their perio numbers are, you know, within range of the 30 to 50% of the procedures that hygiene is doing, we understand that they get that concept. However, if we walk into a practice, and they’re at seven or 8%, and they’re going to be our partners, it’s going to be a tough journey to get them to commit over and over this whole new philosophy of believing in perio. So, that’s a really important one. 

The second is, you know, what, what are they referring out? And what are they keeping in-house? And how excited are they about doing different types of procedures, be it implants, it be sedation dentistry and, you know, looking around at their reviews, how are they perceived by their patients, their patients like them, and the number of patients that they’ve seen in the last 12 to 18 months, and understanding the attrition rate. So that’s what we look at with doctors we’re going to be partnering with. 

Now if there’s an acquisition with a dentist retiring that’s different. We know that we’re going to have to, you know, recruit and bring in another partner, dentist, or another associate dentist, we’re looking for opportunities. So we’re looking for a low perio. Because we know there are opportunities to increase, right? We’re looking for everything to be referred out, because we know we’re going to try and bring things in-house. So those practices have value to a smart operator if you would but so, but there are two dichotomies there, right. are we keeping this person are they gone? Are they retired?

VICTORIA: You know what’s great about this, because I know my listeners are in mid-career and late career. So within your mid-career, and you want to join a group or build a group, start living up to benchmarks and exceeding them. If you feel like you’re late in your career, and you’re feeling like, Oh my God, I’ve got to really fix up my practice and put a little lipstick on it before I sell it. That may not be the smartest strategy. 

It may just be to say, look, I have got a lot of gold here. I’m not very good at perio. Yeah, I refer out endo Oral Surgery, sleep apnea, extractions, crown, and bridge prosthodontics. You know, like all of that and I’ve got a really loyal patient, there are practices where the patients are super loyal to the retiring dentist, and the location is branded as a dental facility. So you’ve got that mental repetition and pattern in the community.

VINCENT: Right, right. So, what you’re saying is correct. It’s important to understand who you are. So when you are having a conversation with someone, you can represent it appropriately because someone may want to take advantage of the knowledge base of your own practice.

VICTORIA: And, you know, you helped me a lot in neighborhood smiles when I had that group.

VINCENT: I did?

VICTORIA: Yeah. It was more than just having fun and buying you dinner. You helped me a lot but you’re right, I had three practices 15 minutes apart. One was high-end comprehensive dentistry into TMJ therapy, functional sleep apnea, all of that Botox, you know, oral systemic. The other one was a kind of bread-and-butter community, which had been fee-for-service and we actually brought in more PPO, because the younger doctor needed that to build up their service mix.

So that was good and then the one in the middle was known for emergency dentistry and we barely had to advertise because people knew it was a dental building. When you came in from the parking lot, ours was the only door It was the first door in the door and all the other dental practices were down a long hallway. So all three of them only 15 minutes apart had a different marketing strategy, because of what worked and fit in their value equation. Is that what I’m hearing you say?

VINCENT: Yes, yes. So look, it’s okay, being as close as you want to each other, we use the home practices right next door with different names. 

VICTORIA: Oh, I love that. I love that. All right. Now my next question was split into two parts. Because again, you’re all about driving to value. So for anyone listening to the podcast today, what can they do today to increase the value of their company, maybe back to them as an ROI as an owner? And then the second part of that question is what can I be doing today to increase my value tomorrow? 

VINCENT: So it’s, it’s good to understand what first and foremost is the focus on your core values, right? Just focus on who you are, and who you want to be, because then your team will, will emulate that, which is important, right? So you’ve got the value of the practice is beyond you, you’re creating something beyond you. So to create real value and an exit. 

What we see is some doctors believe that if I create a $3 million practice with just me and three hygienists, you know, that’s great, it’s good while you’re working it because you’re making a lot of money, but when you go to exit a practice, a buyer will dislike that. The individual dentist can’t afford it and the groups are afraid of it, because you are a risk to them, because you’re such a high producer. Right? If you get too good, you need to understand on the exit, that that’s going to be a negative to you. 

And they’re going to say look your risk to me because you produce 2.5 million a year. I know we have 400 doctors in our average doctor produces 800. So I’m gonna have a problem on my hands when you leave. So that’s, it’s something to be aware of. 

So that would lead to bringing in an associate, where you could spread that risk out, and you’re not perceived as a risk. It’s having a paring of policy and following it and making sure your team follows it. It’s not referring as much out and you can, you can recruit someone that wants to do all the things that you don’t want to do.

You know, we see practices and doctors that hire producers that are doing implants that are doing sedation dentistry. If those are areas that you’re not interested in, there’s someone that’s out there who wants to do it, and bringing that in and now have a $4 million practice where you’re doing two, and they’re doing two, you’ve now increased the value, even though it doesn’t make sense, because you’re producing less. 

But to the buyer, if you’re a big practice, your only buyer is going to be a group and these are the things that a group looks at and how they look at it. 

VICTORIA: Wow, it’s amazing. You and I will have many, many interviews because I know how deep you can go on this topic. You’re scratching the surface, and there’s so much gold. 

And thank you for staying tight to the topic. Because each episode I want, I want the listener to be able to walk out and go, okay, that one was about building value and so far, I’m taking notes, I’m taking so many notes. 

Number one, I love it when you said to focus on your core values, who you are, and who you want to be, your team will emulate that and know that the value of the practice is beyond you. That sounds so common sense and yet it’s not. Right. So build your productivity, yes, and build it beyond you. Because that adds more value. Did I get that right?

VINCENT: Yeah, exactly. Exactly. No, that’s awesome. Because it’s all about, it’s all about growing people. Right? That’s where the value is, right? If you’re growing better managers and you’re growing better hygienists, you bring an associate and you grow them. Then when a buyer, again, as most of your practice is at that higher end, you’re going to be confronted with these group buyers and they see a lot of practices and if you’re focused, when they visit, they will know.

VICTORIA: Can I have you back and let’s just talk about team culture? In another interview.

VINCENT: Yes, for sure. I’m not sure if I’m that person, but we’ll give it a whirl, and if you don’t like you can erase it.

VICTORIA: I’m gonna lie. I’m gonna love it. This will be fun. All right, my last question for you and this is the most fun question.. But what is the biggest mistake you see dentists managing their business in terms of creating an asset? What are some of the big mistakes that they make?

VINCENT:  I mean, I think the biggest is really understanding their numbers and understanding their KPIs. Right, their key performance indicators and we like to break those KPIs into three buckets, their business KPIs, operational KPIs, and clinical KPIs.

Your Business ones are related to your profit and loss name, right? How much are you spending on supplies? What percent is it? What percent is your team understanding of what EBITA is in tracking that EBITA? Because that’s what people are gonna buy you in the future. So you can create that value every single month as you look at it and manage it. 

Your operational KPIs are more around, you know, your marketing. How many new patients with what’s the cost per patient? What’s production per hour? By provider? What’s your retention rate? Right? Those are your operational ones. 

And then your clinical ones are, you know, what’s, what’s our perio percentage? How are we following our x-ray policy? Right? That would mean that you’d have to go and do chart audits and check that the x-rays were there are a new patient exam policy and that you know what your expectation is of a new patient exam. Again, if you’re there alone, that’s fine but your team needs to know what you expect for an exam what you’re going to be doing and if you get an associate, you’re going to review that with them and you want to do a chart audit that reviews your clinical exam or your associate’s clinical exam, along with any other thing that you believe in. 

That’s part of your core values that say, all right, you know what, for every new patient, we’re taking an x-ray and a pan and we’re charging for it. Alright, great. I mean, we used to do that with 40 offices every single morning. I would get a readout that said, Okay, you had 62 new patient exams this morning, and there were 40 FM x’s in 58. Well, something happened, what happened, and who didn’t follow it, right?

VICTORIA: That’s awesome and this is one of the reasons why I love working with you. At Productive Dentist Academy, we’re primarily in the solo practice space but we grow the doctors to the point that they’re really large and then they got to think about their exit strategy and you’re always one of my go-to people for this topic and it’s just a pleasure to now put this in a podcast format and get some of this out there because it is such strategic thinking. 

And we’re so passionate about these KPIs that you’re talking about breaking it down into business operations and clinical. I don’t know if you know this, but now Patty Sooy and her team have a whole clinical faculty now and they go What is your philosophy of care? Like, what do you believe in? Are we serving the most underserved in the Medicaid realm? Are we serving blue collar working class? PPOC? Are we serving fee-for-service?

What’s the demographic? What’s my philosophy of who I want to treat? What do I believe about technology? What do I you know all of that, but then there’s the standard of care? Or do you just articulate it? That’s my metric. So that’s what I believe but what really showed up? And how is my team and get in? There’s a whole system we thought, yeah, we’ll just do a half-day program on that is probably a four or five-month training with daily.

VINCENT: It’s a constant follow-up, right, and you have, like the KPIs that you want to follow on your clinical and your operational side? Or really, whatever your core values are, you better be, you’ve got to have some metric for each one of those. Yeah. Right. Because how do you know, it’s real, right? And how does your team see that you’re real about those core values? Well, you track them and you show them you reward them and they become believers because you’re a believer

VICTORIA: Vinny, thank you so much for being with me today. You really bring to light the belief that you know, strong businesses, Investment Grade Practices, and focus on building the people, and the profits, but you do it through this framework of purpose and passion. So thank you for being with me.

VINCENT:  Yep, you’re welcome, and thank you so much for having me and always a pleasure to chat with you and see you. 

VICTORIA: I know that my inbox is gonna blow up. How do people get hold of you?

VINCENT: You can get my info. So it’s vin@maevenadvisory.com. You could text me on 134-332-550.

VICTORIA: Vinny, once again, thank you very much for sharing your philosophies on what makes a great Investment Grade Practice.