Episode 97 – Seller Readiness

“Ninety-five percent of dentists cannot retire and maintain their standard of living, which is sad. It’s not fair.”  ~ Dr. Victoria Peterson

Join Investment Grade Practices Podcast host Dr. Victoria Peterson and Dr. Bruce B. Baird (host of The Productive Dentist Podcast) in this raw and candid discussion about seller readiness in the dental profession. The landscape of dentistry is always evolving amidst morphing economic conditions and shifting industry dynamics, which is why it is so important for dentists to prepare themselves for the financial challenges and opportunities that lie ahead. 

Dr. Peterson and Dr. Baird emphasize the importance of proactive planning and strategic decision making to ensure that dentists can retire comfortably and maintain their standard of living. Your hosts provide valuable insights into the timeline and considerations for selling a dental practice, how soon you should begin the conversation about selling, and offer practical tips for maximizing practice value and profitability.

Finally, your hosts introduce a new program that is designed to help dentists navigate the complexities of seller readiness, and enhance the value of your practice. In this ever-changing economic climate, this is one episode you do not want to skip.

As you immerse yourself in this episode, consider these key reflections:

• How can you begin strategizing for the sale of your practice now to ensure a smooth transition and maximize its value in the future?
• What steps can you take today to lay the groundwork for seller readiness?
• What strategies can you implement to enhance revenue, reduce expenses, and improve the financial health of your practice?
• What reliable sources of information can you consult to educate yourself about the process of selling your practice and avoid falling prey to industry hype or misleading advice?

EPISODE TRANSCRIPT

Regan 0:00
Hi, Doctor. Regan Robertson, CCO of Productive Dentist Academy here and I have a question for you. Are you finding it hard to get your team aligned to your vision, but you know, you deserve growth just like everybody else? That’s why we’ve created the PDA productivity workshop. For nearly 20 years, PDA workshops have helped dentists just like you align their teams, get control of scheduling, and create productive practices that they love walking into every day. Just imagine how you will feel when you know your schedule is productive. Your systems are humming, and your team is aligned to your vision. It’s simple, but it’s not necessarily easy. We can help, visit productivedentist.com/workshop that’s productivedentist.com/workshop to secure your seats now.

Victoria Peterson 0:45
This is a conversation you should start having eight to 10 years before you actually sell.

Narrator 0:54
Welcome to Investment Grade Practices podcast where we believe private practice dentists deserve to get the lifestyle today while building an asset for tomorrow. Join your host, Victoria Peterson, to design the practice of your dreams and secure your financial independence. Let’s get started.

Victoria Peterson 1:18
Hey, Bruce, it’s great to see you again.

Dr. Bruce Baird 1:20
Good to see you too, Victoria.

Victoria Peterson 1:23
Hey, we just spent two weeks together, which is a treat for us. Me living in Hawaii, you in Texas, anytime we can get together. It’s it’s just fantastic. Thanks for joining me here today, I thought we would take a moment and let our PDA alumni and podcast listeners in on some of the great stuff we’ve been talking about over the last couple of weeks.

Dr. Bruce Baird 1:46
Yeah, it’s been a I mean, it’s been a whirlwind. You know, I have to say, I’ve learned an enormous amount over the last month, you know, in dealing with a lot of things, you know, from private equity to Seller Readiness to sales to I mean, across the board, things are changing in the dental industry and and I really want everybody to know what’s going on, it’s important for you to understand,

Victoria Peterson 2:15
I love it. So why don’t we dive into that. And I love what you said things have changed, things have changed since pre-COVID But they’ve also changed even in the last year of what’s happening with interest rates going up and things like that. So I guess we’ll dub this little episode seller readiness, are you prepared for the financial cliff? And I don’t mean, guys, I don’t mean like the whole world is going to stop but one of the things you and I talked about passionately, Bruce, is that 95% of dentists cannot retire and maintain their standard of living, which is sad. It’s not fair, you give everything to your dental practice and to get to the end of a 10, even 10 or 15 or 20 years of doing something and it all comes down to one number one pass or fail. And then you got to figure out can I retire or not retire? It just seems like there ought to be a better way.

Dr. Bruce Baird 3:11
Yeah and the pressures of inflation. I mean, we’re seeing that with wages, we’re seeing that with equipment, we’re seeing that across the board and which starts to eat into profitability, which causes stress, which you know, and we, you know, just in the last two weeks, we’ve talked to probably 25 different offices and everybody’s feeling that that that pinch, and we’re talking to doctors who have committed to moving forward with not selling their practice, but partnering their practice into a, into a practice group, which is one topic, but what’s really important is for people to understand is when do you need to be ready to sell? I mean, when do you wait in this environment? Do you wait till you’re 65 and hang the shingle up like my grandfather did back 60 years, 70 years ago? I don’t know but things are changing and with interest rates going up the DSO model has changed quite a bit. You’ll hear a lot of marketing online from brokers saying, “Oh, it’s still great,” And you know, because they still want to buy you but when, when do you need to be ready to sell and I think something’s very interesting. When I started Compassionate Finance years ago, people asked me the question, what’s your exit strategy? And I said, I want to build a great company that takes great care of people, takes great care of the patients, takes great care of our doctors and the exit strategy will show up it will appear and it did and my philosophy was that you know, I want to build a great company. Well, many of you have built great companies, and you’re feeling this pinch from inflation and you’re not really sure what to do maybe the stresses of day-to-day management of the business, which, you know, those are all things that that we can help with. But when’s the time to start thinking about these things is today, you know, but one reason in particular is, we’re in a period that’s gonna go on for maybe another seven or eight years, this consolidation of dentistry, if you ever if you decided, “Hey, Bruce, I just want to work, I just want to do my thing. I just want to, and then when I’m ready to retire and put enough money away, and I’ll be fine.” That’s great and that’s a whole different animal. But that’s, you’re in the 5%. What about all of you that maybe haven’t done that or don’t know what the future holds? And we’ve learned a lot about that just in the last couple of weeks.

Victoria Peterson 5:47
Yeah, I would say, you know, across the board, a lot of doctors that we work with that are thinking about selling and by the time thinking about selling, this is a conversation, you should start having eight to 10 years, before you actually sell if you want to build an investment grade practice, if you want to maximize your leverage in the transaction. So no doubt I would have would have been learned this week that the average age of the selling doctor is now 40.

Dr. Bruce Baird 6:08
Like 40, 41, yeah,

Victoria Peterson 6:10
Really 41? I was thinking 40 to 46 but wow, there’s a lot this is not, this is not Grandpa Lampa’s retirement plan.

Dr. Bruce Baird 6:31
No, it’s not and, you know, stinks. Again, things are changing, consolidation is going to continue to happen and you know, most you guys know, I sold a hard one and, you know, I wasn’t really part of anything. I mean, I was in it, I was being paid to continue to work but I just didn’t feel like I was necessarily part of a of a group or part of a, I didn’t feel like I was a partner, even though they call them partners. I think there’s there’s other ways of going about doing things and being ready to sell, here’s what’s maximum is maximally important because if you’re not, then you’re going to get somebody to tell you something, you’re going to believe it, and then you’re going to walk down that path and you’re going to find out maybe it wasn’t a rosy path as you thought it was going to be.

Victoria Peterson 7:21
I love that. So from the seller readiness perspective, we wanted to just take a moment, if you’re a PDA alumni, you’ve probably heard us talk about this for a while but there’s a couple of things that can really help you combat, the higher interest rates, the effect of presidential elections, the corporate consolidation, all of that macroeconomics. It has some impact on your practice, but it’s really the microeconomics of what you’re doing today that will make a difference. So we have actually created an entirely brand new program, we have a workshop that comes along with it and I very short six-month Advisory Program and if you are experiencing this, if you have kind of peaked and plateaued in your practice and the if you’ve had your practice valued, let’s say, and the number doesn’t quite hit what you need for financial freedom. Well, did you know that if you raised your collections by 10%, and you cut your expenses by 10%, so in this case, a $1.2 million practice, you’re you’re just trying to find $12,000 1000 bucks a month if you could, if we can help you find 1000 bucks a month, and we can help you grow with 1000 bucks a month, did you know that your take home pay would increase by 40%. So there’s little small things that you can be doing today to get your practice ready so that when you do get devaluation, you’re going to be happy with that number. So growing $50 an hour means $76,000 in revenue, 100 bucks an hour and most of you have done this, maybe you’ve plateaued or they had a lot of team turnover, that’s what we heard from our doctors is like, “Yeah, yeah, I used to produce more but then, you know, COVID and the team and we had some turnover.” So 2023 I think was probably one of the hardest. I’m still including it in pandemic years, because we had you know, 20 was a 2020 pandemic 2021 was something of a recovery 2022 was still a boom recovery year but 2023, all bets were off like people there. They’re still migrating around the country, but most of the geographic migration has slowed down. The job markets were stabilizing and your practice became your practice. Question. So now is a time to think what what am I going to do for the next day? So think about becoming seller readiness ready as my next decade? What do I do now to take advantage of the trends that are happening? How do I improve my profit margin, because that’s the name of the game and how do I take better care of my patients along the way? Those are the doctors I’m seeing that are getting the best multiple for their practice and they’re there because the multiple is right, the money is right, they have an easier time focusing on what does life look like after the transaction?

Dr. Bruce Baird 10:42
Yeah, no question. I mean, that the thing is, seller readiness means getting ready to sell, whether it’s five years or 25 years, because you’re gonna enjoy the benefits of being ready, because your profits are gonna go up, your take home goes up and you may decide I don’t ever want to sell, again, I keep saying that, but great, because we don’t care one way or the other, we just want you to get to that 5% that are able to retire and enjoy their life and travel and do all the things that they’ve always done and they’re gonna get to do it in the future when they don’t have that revenue coming in and so I think, you know, just to kind of highlight what’s going on in, in the world of dental service organizations and everything else, I mean, this consolidation, again, it’s gonna last about seven, eight years and then it’ll go back to your not so many private equity groups, you’re probably not even selling to DSOs, you’re selling to another dentist and the difference between selling at 65% of your previous years call options or 75 and selling your and selling at six or seven times your EBITA our profit is a very different number. In other words, opportunity is extremely high right now And we want you to understand that but what I also want you to understand is, whether you sell or not is, is not the point, what whether you sell or not doesn’t really matter. If you’re following a growing business model, if you’re growing your business, and you’re doing those things, and then you may find that, “Gosh, you know, I’m at 300,000 and EBITA and if I could grow another 100,000, nipa or 200,000 EBITA, I might get a $3 million check and have more money coming in at the back end of that deal,” and so what you would have sold for, again, a million dollars or 1,000,002, now you’re have opportunities to sell for 5 million and I always say you know, I sold my practicing did very well but it’s, it’s the long-term effect that paid me in with stock values and those types of things. So we just want you to understand that we’ve done a course now that will help you do that. I implore you to go, I think it’s now’s the time, if you haven’t. First of all, most of you have thought of it because you’ve gotten 50 unsolicited offers for your business,

Victoria Peterson 13:11
And are starting to actually call your office and

Dr. Bruce Baird 13:14
Yeah, calling your office. And here’s something extremely important is the game of EBITA is just that it’s a game, the game of multiples is just that it’s a game, we had one doctor that had 10 evaluations done 10. Their EBITA was different in all 10 and their multiple was different in all 10. So what when somebody says, “Well, I got a six and a half, well, I got a six-point by eight and I got a six-point you’re a four-point,” whatever it is, you may get an eight and get totally screwed, because they gave you an eight but they gave me an EBITA of 200,000 when you’re able to really was 450,000 and you would have made a whole lot more money. So don’t listen to the hype. You guys have come to us, you trust us and we are so appreciative of that. We’ve always looked out for our bar Doc’s and I’ll be honest, there needs to be a level playing field and that’s really what PDA has done. We’ve leveled the playing field we tried to we tried to give you all the information to understand what event really is so that you’re making sure we’re counting everything that counts into that. And we’re getting the highest multiples for our group called Lampa Dental Group, which we put together and it’s a it’s a, not a DSO, which, you know, what, how do we describe our group,

Victoria Peterson 14:39
Lampa dental partners, it’s a dental Partner Group. The founders have autonomy on their four walls, like their office manager doesn’t suddenly become their boss. I think that’s where consolidation gets a really bad rap as well. As we just peel back the onion and go deeper and deeper and deeper in our own understanding, we wanted to come to you guys, let you know if you’ve been through the PDA workshop before and you’re looking for that next level, we do have another course it’s called Seller Readiness. You don’t have to go into full coaching to take advantage of that But it’s going to help you get organized. So you know where all your financial documents are, you understand how to read your p&l, as you understand what it could mean in this environment. It also helps you get ready whether you’re selling or you get hit by the Bud Light Truck, you know, where all your contracts are, do you know how to onboard an associate and have a solid agreement would your spouse be taken care of to have life insurance, all the things that can decrease your risk as a solopreneur or partner and maximize your value so Seller Readiness does two things for you it it decreases your risk at by by getting you organized and it increases the value so I love a Christine Yuan is heading this up for us and her her number one thing is “I want to give you peace of mind. I want to help you get organized and give you peace of mind and certainty that you can make great choices.”

Dr. Bruce Baird 16:23
Sure dental dentistry obviously we all know is very stressful. But I can tell you one way to reduce stress is to have predictability and to have the security knowing that all your stuff is spoken for you know where everything is and further you are now have the opportunity to even grow more so when you’re not stressed what happens way grow. So those were all super positives and so I’d love to see you guys in March. If you can’t make March, then September, and yeah, I just feel like this is a must-listen to for the future and I hope you can make it.

Narrator 17:06
Thank you for tuning in to this episode of Investment Grade Practice podcast. If you find value in this episode, help us spread the word by passing it along to a dental friend. Subscribe and give us a Like on iTunes or Spotify. Learn more about building your Investment Grade Practice at productivedentist.com today