Episode 94 – Requested Replay: Live Life On Your Terms
“I wish I knew then what I know now, because maybe things would have been different.” – Dr. Bruce B. Baird
Do you want to live life on your terms?
Of course, you do! But in order to do that, you need to know what opportunities are available to you and your dental practice.
The reality is, that the opportunities for dental business owners today far outweigh the opportunities of yesterday. There is a huge market shift available now, but in order to take advantage of it you need to know two things: what your endgame is, and what these opportunities are.
If you’ve ever wanted to fast forward and learn what your 60-year-old self would tell your present self, then you will want to listen in to today’s episode. My co-founder at PDA, America’s Most Productive Dentist, Dr. Bruce B. Baird, joins me for a discussion on:
- The power of knowing your endgame
- Why private equity investors want to be in dentistry and what that means for you
- Make sure you know the landscape today, and what opportunities are available to help you make choices that allow you to live life on your terms
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Welcome back to Investment Grade Practice, there are days that you wake up and just know is going to be a fabulous day and today is one of those I have my partner in crime, Dr. Bruce B. Baird is on the line with me talking about the new landscape for buildingInvestment Grade Practices. How’re you doing, Bruce?
Dr. Bruce Baird
I’m doing great, Victoria, how are you?
I’m doing great. Just to give our listeners a picture you are on your way to Iceland.
Dr. Bruce Baird
I am on my way to Iceland. I’m sitting in a Lufthansa lounge in Newark, New Jersey and we’re leaving in about an hour to head to Iceland for about eight days. So looking forward to that, it’s been on my bucket list.
I love it. You know, anytime people say, “This sounds too good to be true, this IGP model is where you get to live the life you want to know and build an asset,” and I always look to you. We’ve been partners for 18 years and I want to say that it was 15 years ago, you started working two days a week, your production works, your take-home pay has been great.
Dr. Bruce Baird
You’ve lived life on your terms. No question, no question. I just wish I would have known what I know today because it would have been different. I mean, it would have been better 10 times better but I mean, it can be done in any environment what I love is what we’re able to do now with capital events and to be able to take some of your wealth off the table and invested in whatever it is you decide to invest in, pay off a debt, to do the things you want to do and to me, that gives you freedom and my way of looking at the past has been I’m going to work really hard and make a lot of money that’s going to create freedom. I don’t discount the fact that we’re going to have to work hard and we’re going to do great things but the opportunities today far outweigh the opportunities of yesterday.
Well, let’s talk about that I love this perspective of, you know, what would my 60-year-old self tell my 40-year-old self to do. So there’s some wisdom here but there’s also a huge market shift that wasn’t even available or conceived 20 years ago, that doctors in their 40s can take advantage of. So why don’t we talk about that a little bit on what you said? How do I take equity off the table without losing the thing that I love about being an entrepreneur?
Dr. Bruce Baird
Yeah, there’s, today the opportunities because of the values of dental practices which have continued to rise over the last really 12 years. It changes the entire environment. I’ve been telling people from the front of the room and I feel personally obligated to reach out to all these dogs because we’ve had 1000s of docs come through PDA and I feel personally obligated because I would tell them why on earth would you sell to a DSO when you’re 40 years old. In there, I know guys that have sold that 35, 44 or 48, whatever I, and the truth is I just didn’t have all the information, which is one of those things where you can make decisions but when you don’t have all the info, well, it’s it may not be true and the way I look at it today is if I could take a capital event, meaning at 40 years old, get 9x 8x 9x 10x of my practice EBITA and reinvest a certain percentage of that 30% or 40% back into a new code that’s going to continue to grow. The cool part of that is it allows me to let’s just use a mixed sample of a million dollars in EBITA and you know, that’s a kick in practice, that’s a four or $5 million practice. So you can extrapolate. If you’re half that, or if you’re whatever, but extrapolate those odds, you’re gonna sit here and work for 40 years, you’re gonna sell the practice for 500,000 800,000, a million dollars, that’s going to be the game because things are changing, they’re changing rapidly, but what if you could have a million and even put 7 million in your pocket, roll 3 million forward into a new CO or into stock, a part of a new CO, all of a sudden, this second bite of the apple becomes 15 million more now you’ve created 22 million in value and you’ve taken it off the table but you get to still keep practicing dentistry the way you’ve always done it. It’s just you have no debt. You, you do whatever you want, work as many days as you want and you’re creating that using leverage and that’s a whole different animal than what I was taught what I learned and, if I knew then what I know now Well, the truth is it wasn’t available but it is available now.
I love that. So for listeners who are kind of catching up to this conversation, it is it’s kind of a mind meld and a mind trap to say, Well, how do I? How do I take equity off the how do I get $7 million from my million dollar practice today, you know, all of these things that you talked about? So let’s break it down a little bit. practices are being sold, bought, and sold based on profitability. So wherever you are in your journey, start becoming more profitable. We actually have a calculator on our website now and I’ll share the link in the show notes. I think Productive Dentist Academy might be the only consulting firm out there that has dissected the private equity playbook and can with pretty, pretty smooth accuracy. look into the crystal ball and say this is what my practice could sell for today. This is what it could look like in five years, whether I sold to a solo practitioner, a private group, or a DSO and it’s really powerful when you understand what your endgame is and Stephen Covey says that right, start with the end in mind, and then back it up. I think the challenge for most doctors is we’ve never had an end game, you know, the end game was to work till you’re 65 put some money in a 401K, and hope you have enough to last until you’re 90 but the end game can shift because the economy went crazy, because interest rates are going up because the stock market is volatile. What is a private equity investor? Bruce, can you talk to our audience about that and why do private equity investors want to be in dentistry?
Dr. Bruce Baird
Well, private equity is one of those things I’ve just learned some, you know, in the last six months, I’ve learned more about private equity investment banking, then than ever. I’ve learned more and and the truth is I’m telling a little story is that if you had $100 million sitting in your bank 100 million and what do you do with that money? Well, guess what, people who have that kind of money, they actually put that money up with private equity companies and they sign contracts with these private equity companies that guarantee them a 12% return, or a 10 or a 14, whatever it happens to be, it’s a guaranteed return for a fixed amount of time, might only be five years might be seven. So the private equity says this is a closed Fund is a five year fund or seven, and we’re gonna pay you five times 12 $60 million for your 100 million and at the end of that five years, we are going to give you your 100 million back and you will have already received well mainly your during that time. So what’s the game for private equity, they have to increase profitability. They have to find other private equity guys that will buy them because they have flows and bonds and so it’s almost a game that’s played among private equities, the same private equity groups sell to other private equity groups and then the next time they sell to each other, and so this is closed funds. That is an enormous amount of money, institutional money, retirement funds, you know, all these sorts of things where there’s so much money they need returns. Dentistry is the best return right now, in all of the health care and, in fact, forever Probably the biggest across the board in any distance and so they are paying a premium, much more of a premium and they were 12 years, much more than a premium that were even five years ago.
Today, you’re starting to hear which something’s really important. You’re starting to hear things like 7x multiples and 8x, went back 12 years ago was 5x or 6x. Well, how does that work? Well, it all depends on your EBITA. We’ve evaluated 10 offers for one single 10 Different DSOs came in and offered offered a payout to these to this practice 10 Different and the EBITA. It was different on all 10. So people get confused, thinking EBIT is a fixed number, it should be, but DSOs don’t think it should be because they can adjust your EBITA and say, “Oh, no, we don’t figure that and usually, you’re going oh, okay, because you don’t know any better and so all of a sudden, you’re even it goes from 400 to 300 but they still aren’t at the same amount, which says 2.4, or whatever and all of a sudden you’re sitting here, and it’s an 8x, not a 5x or a 6x and it’s literally baked into the way they do business and so when you hear about 8x 7x, six, I don’t believe that. I mean, we’ve got to be able to one of the things we’re doing at productive dentist Academy, we’re figuring out what is your truth. What can we take? Well, I’m not gonna say take bank, but what can we hang our hat on, and say, This is yours, and now we’re going to increase that. So one thing I love about investment group practice, they’re going to continue to increase your EBITA and we’re figuring that every single month, so that, you know, you know that you’re increasing your profitability, your profits of your practice and that’s the perfect opportunity because you actually know, and I have to say, I sold 12 years ago to Heartland I didn’t even know what made it, it was so sad. They gave me an offer, it was a lot of money, but anything would have been a lot of money to make 12 years ago and so today, we’re going to standardize that with our clients and people we work with. I love that.
I’m so happy that I can catch you on your way to Iceland. You are an icon in dentistry, for several reasons. One, you never stop learning, you are voracious, and you’re still taking clinical classes after you hung up the handpiece, you know, you’re actively engaging in developing new businesses and working with me and the team on developing deeper, richer content for PDA. It’s always evolving, and it’s always great to catch up with you.
Dr. Bruce Baird
Oh my gosh, yeah, it’s so much fun. I mean, it. I mean, dentistry is a passion of mine, obviously, been doing it for 42 years and I don’t want to just, you know, putting up the handpieces one thing which I did two and a half years ago, but the new printing technology, the new things that are out there that can increase profitability, decrease the ability to be able to take care of patients and a much higher level. Gosh, I love that. I want to keep doing it. You know, I’m not sure physically I can. I can do it but I can sure help Dennis do it.
I love it. Well, congratulations on your new book “Legendary Leader” quite a thrill to see your big mug on Time Square.
Dr. Bruce Baird
That was amazing. I had a lot of people calling me out of the clear blue Sam, what is going on? So it was great. I love it.
Thank you so much. We’ll also put in our show notes how you can order Bruce’s new book “Legendary Leadership”. So if you’re looking to take your leadership game to the next level and not skin, your knees, and bumps and bruises along the way I highly, highly recommend this book. Bruce, my friend. It was great to be with you today.
Dr. Bruce Baird
Oh my gosh. Great to talk to you.
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