Know Your Value: Navigating Practice Transitions (E.154)


“Know the terrain before you navigate it. Information is power.” – Matt Zolfo

BRIEF OVERVIEW OF THE EPISODE

Selling a dental practice is no longer as simple as getting an offer and handing over the keys. The market is shifting, private equity is holding longer, and consolidation is changing how buyers view value. Victoria and Matt discuss the current state of dental transitions, the three to five year peak window for selling, and why understanding your practice’s true worth is essential whether you plan to sell, partner, or prepare for the future.

WHAT THIS EPISODE REVEALS

  • The reality of today’s dental practice market and the rise of consolidation
  • Why timing and structure matter more than chasing the highest multiple
  • How private equity and DSOs are changing the game for sellers
  • The costly mistake of selling without proper representation
  • Why every dentist needs a current prospectus, even if you are years from selling

WHAT YOU’LL LEARN

  • How to determine if your practice is truly sellable
  • The critical steps to maximize practice value before selling
  • Why exit planning is business planning
  • How to avoid post-sale remorse with data-driven decisions

IF THIS SOUNDS FAMILIAR

  • You have received unsolicited offers or letters from DSOs
  • You are considering selling but unsure if the timing is right
  • You want to work less, earn more, or plan your exit strategically
  • You are concerned about the long-term value of your life’s work

NEXT STEPS

  1. Get a prospectus for your practice to know its real market value
  2. Evaluate where your practice fits in today’s consolidation landscape
  3. Develop an exit or growth strategy with expert guidance

Explore the Clinical Calibration Institute and discover the systems that move your practice from chaos to clarity.

 

 

TRANSCRIPT

[00:00:00] Victoria Peterson: Welcome to another edition of the Investment Grade Practice podcast. Joining me today is my very good friend, Matt Zao from Professional Transition Services, and Matt, you and I have had the pleasure of working together. Over the last two years, very closely helping a group of doctors make some choices about their future. It’s been a joy and a pleasure to like really get to know you and Kyle Francis, and your whole team at PTS and kind of look at the underpinnings and the advisory that, uh, professional Transition Services offers because to say that you’re a broker would be a misnomer. You know, people kind of put transitions into one bucket. So we’re here today to explore what does transitions look like today, who should be on your advisory team, and what’s kind of happening in the market. So, welcome, Matt. So glad to have you here.

[00:00:58] Matt Zolfo: I’m glad to be here, Victoria. Appreciate your time.

[00:01:01] Victoria Peterson: All right, so let’s kick it off here, uh, you know, our investment grade practice, uh, listeners are pretty savvy. They’re keeping up with the markets, but as a recap, we all know, you know, Heartland Pierce, the veil in the nineties, and the, the consolidation game began, um, it rocked on pretty steady, you know, not, didn’t even notice it for a long time, but in the pandemic things shifted. Things heated up, uh, more players came in, and so let’s start with that. Like take us back to maybe 2021, what might have been happening over the last three or four years and where you see the market today, uh, and what if a doctor is contemplating selling, where’s the mindset of the market today?

[00:01:46] Matt Zolfo: Yeah, for sure. So, um, I think I’ve got a unique perspective on this ’cause I started, uh, with PTS right through the pandemic candidly, uh, uh, April, April, may of 2020. So, um, post pandemic, there was a lot of fear, there was a lot of concern. There was a lot of unknown, right. Right, um, on what was out there and, you know, probably 2019 and 2020, um, there was a lot of activity, uh, and candidly, you know, 2021, 2022, 2023 had been the same, uh, year over year. You know, we kept doing more and more transactions for about the last three years, three, four years. We’ve been steady state doing 70 to a hundred deals a year, comprised of well over, call it 150 locations each year, um, we do a lot with multi-doctor and multi-location stuff. So ultimately we saw an increase in, uh, if you wanna call it multiples, right? Uh, it’s not all about your multiple, but rather your structure, but increase in valuations, uh, through 21, 22 and 23, uh, in 24 interest rates went up. So we saw a plateau in those valuations, um, some groups just quit buying, and focused on same store sales and optimizing the practices they had, um, and others continued to add, you know, add practices. Candidly, money doesn’t do any good sitting in the bank. You gotta put it to work, right? So, uh, those that were already capitalized or call it, had a tranche of funds. Still, you know, did acquisitions now, rather than having, um, 60 interested parties distilled down to 12 buyer interviews, distilled down to 10 Lois, and, you know, having to shuffle between five options. We had maybe, um, two-thirds of that. So we still got plenty of deals done, but ultimately, um, you know, uh, the, the activity broadly, uh, was at a plateau. Fast forward to this year, 2025, and you know, post-election, post-interest rates, things picked right back up. So, um, it’s been fun.

[00:03:45] Victoria Peterson: So even in the current, um, trade, war, tariff, the whole world blowing up, uh, things are still on the rise. Lots of interest in this sector.

[00:03:56] Matt Zolfo: Yeah, no doubt. I mean, there’s, there’s, it’s no surprise if you just Google, you know, private equity holds, you’ll get 80 articles between North America and Europe, that this is probably one of the longest hold periods for, um, um, sophisticated capital, call it a family fund and institutional fund, or a private equity fund, um, because they’re seeking a, you know, an outcome, a target for the return on invested capital. Well, you know, that asset doesn’t, it become more valuable unless it grows. So what we did see in 2024, late 2024 and 2025, is rather than recapitalizing the business and had an exit, a lot of folks went and got more capital, um, and by more, I mean trillions more to the tune of two to three, um, in mul, in healthcare specifically to continue to grow and add partners. So, you know, that trickles all down to, to our world where deals are still getting done, but, um, but ultimately, you know, nobody’s got a crystal ball, uh, and in, you know, the next year or two, I think we’ll see some folks realize those games.

[00:04:57] Victoria Peterson: So let’s, let’s zoom in on that piece just a little bit, um, because doctors who are selling into a private equity market and there’s lots of different ways of selling your practice, we’re just specifically talking about that private equity market. You know, there can, there’s a lot of fear, there’s a lot of misinformation, there’s a lot of just, um, educating that needs to be done because you hear a lot of, “Get all your cash up front ’cause they’re never gonna recap and, you know, this is all hypothetical and this and that.” So what I heard you say was, um, you’ll get 80 articles on let’s hold, uh, let’s, let’s do well long-term plays and things like that. 

[00:05:38] Matt Zolfo:  So this is one of the longer periods of holds for private equity. So most, you’ve got small cap funds, mid cap funds, and large cap funds with different investment. This healthcare is a component of that. Dental is historically a hedge to the downside, and by that I mean dentistry’s a very recession proof business if you’ll a very stable business. So they can take on more risk if they have a dental platform within that, and most folks are looking for something like a three to five year timeline, and for that a three to five times return on invested capital. So call it a 400% return on your dollar. You invest a dollar, you get four back in year three, four or five. Well, with rates going up, right? And the pandemic being, um, a Black Swan event that’s turned into right. A five or six-year hold, or in some cases a six or seven year hold. Now that’s not the case for every group, right? Um, there are about 35 to 45 comps of groups through this, I’ll call it peak timeline, uh, have either had doctors monetize equity, um, or had doctors exit in some fashion, um, but you know, it’s been a longer time period because of those macroeconomic and global factors. The important thing is, if you were, it’s not gonna stay there forever. Right? 

[00:06:54] Victoria Peterson: That was gonna be my question.

 If I were, if I were looking to sell my practice, let’s say over the next 12 months, you know, this is an area that is often overlooked. It’s like understanding, uh, it’s called the recapitalization, the recap, the, you know, when can I take more chips off the table? Whatever you gonna, so, as a seller, I, I need, I need to understand their investment thesis. That’s right, and say it’s three to five years, you know, do you recommend like, dive into that deeper? What gives you the confidence that you could do that in three to five years? Or should they expect more than five to six years or eight years? How does that, 

[00:07:31] Matt Zolfo: That’s a, that’s a great question. So what my advice there would be a, get an advisor first and foremost, right? And b, we should never partner with an investor or, you know, even another doctor call it a 50 50 partnership with someone you don’t like and you don’t trust, right? So getting to know the group, the culture of that, ensuring that they’re clinically agnostic. Aren’t going to change. The name on the door, aren’t going to come in and can the team and aren’t going to, you know, dictate clinical practices. That, that’s kind of thing one, understanding the metrics of the financials, um, is important as well. Normally that’s done in diligence, right? We tell clients diligence is not just, uh, the. The buyer doing diligence on the seller, but us doing diligence on the buyer as well. Right, uh, you know, the other big thing too is the advantage of using, you know, a merger and acquisition firm like PTS, is that we’ve got market comps we play every day of the week and kind of the one to $15 million sandbox, and then about two, three times a quarter we’ll do a prospectus for a platform and take two or three of those to market to private equity every year. So we know what. Groups are gonna recapitalize that, and we’ve been at this for 15 years. Kyle, God bless him, our founder and president and I went to Baylor together. We’ve known each other since we were 19 and we’ll be 43 this summer, um, but we’ve got 20 years of learning learnings and not just, you know, doctor to doctor transitions, but doctor to group partnerships, and then group to private equity, uh, either seed round of capital, um, in an LBO buyout or recap. So, you know, we, we’re, it’s not that we just have our ear to the street, it’s that, you know, we’re doing these types of transactions, so we really have a, a window into, you know, what that outcome can look like and what groups are growing. I mean, there’s, there’s,

[00:09:13] Victoria Peterson: Let me ask you this question, um, on the, on this thing about trends, you know, what’s happening in the trends and, and then we’ll get more specific, but there was a time where. Like my phone was ringing off the hook at Productive Dentist Academy. All of our clients were like, “Oh my God, I got this letter in the mail. What do I do?” And I, I just remember a few years back, you know, to call it twenty twenty one, twenty twenty two. There was like this frenzy, and my first piece of advice is if, if somebody sent you a, a, if you got something in the mail and said, “Hey, I’ve been, I drove by and I really love your house, I’d like to buy it. For X number of dollars,” would you just say short and handle the keys? You know? Uh, so there was, there was this frenzy where doctors were like, yeah, they su such and such a company reached out. They offered me this, it sounded good, and they sold, and that was really all the diligence. They didn’t hire representative. They were told like, “Yep, we’ll do it all for you,” and doctors being doctors, they’re like, “I saved the money,” but they probably lost some things and di and diligence on the back end. Do you see that type of heavy prospecting from DSOs still going on today where we’re getting letters in the mail and doctors are, are just jumping and, and, and working to, to get a deal done?

[00:10:32] Matt Zolfo: Yeah, for sure. I mean, I hate to say it, but you know, there’s really only two or three companies in the country that do the type of transaction to the acumen, uh, that we do, and I, you know, we’re probably getting to one to two out of 10. So, you know, 70, 80% of the market is still probably partnering with a group direct. Now here’s the thing, that’s still a good investment, right? And, and all this is about where a. What someone’s timeline is, B, what they want their lifestyle to be, uh, including stress and or time off, right? And then c you know, what does this asset, this, this goose laying golden eggs annually, if you will, of cashflow? What, where does that live best at, where I’m at now, or does it live and grow faster in a, in a different environment? So that’s still the case in a group partnership. 10 practices are worth more than one. A hundred practices are worth more than 10, um, it’s called equity arbitrage, um, but to your point, any doctor that feels as though they’re getting the same, um, outcome without representation is, is lying to themselves. That is a falsehood. About once a week, we’ll get a call from somebody that says, “Hey, you know, I talked to a couple groups. I don’t know what I’m looking at. Can you help me?” And we say, “Absolutely. You know, let’s do a prospectus,” and then, you know, if we think we can better the outcome, then we, we will take ’em to market and represent ’em. If we, if we can’t, then we won’t. Right, and it’s rare, but let’s call it, you know, maybe it’s a six-location and a great market, and the guy’s got two partners and seven associates, and somebody just made ’em a stupid offer, right? That’s off market or that’s, you know, really, really good. We’ll, tell ’em, listen, you know, you, you’re, you’re probably, you know. This is probably a great option and we can exclude them if you want, but we should, we think you should be really educated on what’s out there. So you’re making the best decision when the time’s, right. If that’s now great. If it’s later, you know, even better keep growing. So we wanna be correct in, in, in those instances, and, you know, um, we also want to cover our fee, right? I mean, you know, there’s, there’s a variety of different ways, um, to represent a client in m and a, and you know, we do that from the deal side. We’re not lawyers, we’re not CPAs. We’re not financial planners, and we’re certainly not consultants. You know, we’ve looked at buying firms like that over the course of time. We’ve looked at charging for consulting. We’ve looked at charging a retainer. We, and, you know, that’s just not us. We we’re, we’re doing 45 to 55 prospectuses a month, so we know what valuations are. 87% of those turn into a listing agreement and nine outta 10 close. So you know, if I round high and say a hundred. Well, on those a hundred transactions, we’ll have six letters of six to nine letters of intent. That’s 600 to 900 LOIs a year. Right. So we’ll, we’ll know either where multiples are at, uh, and or what that region of the country, um, is going to trade at per se. So, um, you know, not

[00:13:25] Victoria Peterson: Always about the multiple, right there. That’s right. There can be. It’s the way the deal is structured.

[00:13:31] Matt Zolfo: That’s right. Where the equity lives, how that’s cut up, what the covenants are in terms of work back, you know, whether or not that group is being accretive. I mean, if you think about it from, you know, just, you know, the stock standpoint, standpoint, E either a share price or a partnership. If the partnership’s not growing, it’s not becoming more valuable. Right, and while this market, dental market is, is growing, you know, you have to be accretive either in, you know. Seeing more patients or doing more procedures or being acquisitive with acquiring, you know, additional practices, um, and there are some, I was, I would say most are still growing, but there are some that are not, and, um, in that environment, you know, that equity can get, shall we say, stuck right, and not grow or take a longer time to grow. So we’re really good at not just getting the highest offer, but making sure that the doctor is picking the, uh, group that’s correct for them. I’ll go back to a client of mine, uh, Beaverton, Oregon I had two years ago. His daughter was supposed to join the practice. She was at OHSU, about to graduate, fell in love her fourth year, and then moved to North Carolina with an oral surgery resident and he had already added ops and all this other stuff. Well, he had talked to, uh, two or three groups direct and really didn’t know what he was looking at. So fast forward, we ran process, um, you know, had something like 32, 35 inquiries. Did eight to 10 buyer interviews. Ironically, he ended up settling on his original offer was about 3.2. We took that to 5.8, um, believe it or not, and ultimately ended up picking the same group that he liked from the get-go, uh, but with our representation, and we made the caveat that they had an associate within the next first six months of partnership. We said, you know, he’s working five days a week. We were counting on the daughter and of course they were thrilled to go do that, um, so, you know, that’s just one example of an instance where, well,

[00:15:18] Victoria Peterson: Well, it sounds like that just prevents a better, prevents a whole lot of seller remorse, right? Like you turned over every stone and you don’t come back later and go, ah, man, I wish I hadn’t sold for 3.2 ’cause my buddy down the street got X for his, like the, the process itself creates certainty, and that’s one of the things like with the doctors we work with and and have tracked, it’s like 78% of ’em can have some sort of post-sale remorse if they didn’t know. What the market truly was, did they get the fair value and what am I gonna do with my time after I sell? You know? 

[00:15:57] Matt Zolfo: Yeah, no doubt. Well, and, and as we say to everybody, like [00:16:00] whether it’s us or any other advisor, if they, if they can’t more than cover their fee either in negotiations or an acumen, then don’t do a deal like someone. That’s got a million-plus practice or multiple practices, probably has a pretty sweet asset that’s been enough, hundreds of thousands of dollars in cash flow. So just wait, doing nothing is an option. You know, that, that’s one of the things that, you know, we tell folks we, we want to be, uh, in the driver’s seat and in a position when the time is right and not before, um, you know, where now that that timeline in terms of dentistry is getting a little shorter.

[00:16:35] Victoria Peterson: I was gonna say, let’s go into that ’cause that sounds like great sage advice, but you also had to color it in the context of the times.

[00:16:43] Matt Zolfo: Yeah.

[00:16:44] Victoria Peterson: So, pandemic was a little different. Where are we gonna be? Um, I, I know you said you don’t have a crystal ball, but I know you got one in your back pocket

[00:16:52] Matt Zolfo: A little, maybe

[00:16:52] Victoria Peterson: Where would we be if you had to predict.

[00:16:54] Matt Zolfo: Yeah, data validates instinct, as I’ve always said, um, back when I was starting practice,

[00:16:58] Victoria Peterson: Where we go in the next couple of years, like, can I just hold and wait?

[00:17:02] Matt Zolfo: So if I may be so, um, candid, there’s about 194,000 NPI numbers in the country for dentists, uh, uh, to my knowledge, about 40, 45,000 of those are specialists. A portion of those are deceased. So there’s about, call it a hundred, a hundred, 10,000 practicing general dentist in the United States. Don’t quote me on this, it’s back of the napkin stuff we’ve been kind of researching and I’ve been looking at forever. That said, with all the comps and data that we buy and that we know of and that we mine, um, and press releases and stuff like that, as of the beginning of 2025, we were something like 38% consolidated, uh, in the dental world. That said, if you go Google, Harvard Business Review equity arbitrage consolidation in healthcare, what’s happening now happened in, uh, hospital 40 years ago, pharmacy 30 years ago, dermatology 10 years ago, vet five years ago, and the valuations on this timeline trending towards something like six, 60% are on a bell curve. Hmm. So, you know, when I started in oh four at Henry Sine Dental in Dallas, Texas start dental practices, you could buy practice for 67% of collections and we will end up there again candidly in probably three or three to five years, but the other healthcare verticals through consolidation had been through four or five turns of liquidity, and by that I mean recaps, and once you get to something like 50 to 55% consolidation, multiples start coming down because investors don’t have to pay that. Right, um, and groups don’t have to pay that. Right. On top of that, there’s probably dentists that, you know, a doctor went to dental school with that they wouldn’t let touch their mouth with an explorer, much less a handpiece. That guy’s probably not gonna pass a chart audit, you know, getting into the clinical acumen of a, of a good group, right? Um, so in summary, you know, we think that we’ve got something like three to five years left with one or two more turns of liquidity. Now, that’s not to say, you know, this is all big doom and gloom. It’s, it’s not. A dentist is always going to be able to hang a single and see patients. They’re gonna do it on their own like they’re doing now, or like they did 50 years ago, right? They’re not gonna get the culture and the acumen and the buying power and the PPO relationships that you would in the event you plugged into, you know, a strategic partner, but you can own your own business, um, you know, on top of that, you know, there are doctors at Heartland that have equity, that have 2,800 locations between Canada and North America, but that’s not growing at four times return on invested capital year over year. It’s growing at about 30 to 40% to, to my knowledge, you know, that was 50 or 60% a year or two ago. So those that there, there is value in having equity, equity at a later stage, it’s not just, it’s just not going to grow as fast. So those are, I’m a bit in the weeds here but those are some of the things that, you know, we talk with folks about based on where they’re at and their growth life cycle of the business, whether or not they wanna play golf an extra day, a week or not.  Whether or not they wanna spend another day at home with their kids, you know, during the week, you know, if you’re a mom and your kids are now teenagers, you’re doing a lot of unpaid uber duties. I’m a dad and I’m doing the same. So, you know what, whatever stage of life folks are at and what, you know, what they want that outcome to be, you know, we want to be correct and want to be, help, help them be in the driver’s seat of what that looks like, um, when the time’s, right. So, you know. We’re, I hope I’m wrong. I hope it’s 10 years. My 15-year-old and 13-year-old, you know, are in private school and still need to finish through college. So, you know, I, I got 20, 30 more years to work here, um, but, uh, but yeah, that, based on what we know, that’s about where we’re at.

[00:20:38] Victoria Peterson: Okay, so let’s say that, uh, there’s this. Three to five-year window at p at peak multiples. So what I heard is, yeah, you’re, you’re, you can, you’ll have sellable practice, you know, is it going to be a peak multiple? And that’s where we do a lot of work because honestly, uh, when doctors come to us, uh, they’re, they’re not sellable even if they wanted to sell, and that’s the first thing that we do at PDA is say, “Are you bank ready and are you sellable?” Because in between there, uh, if you’re those things, then you’ve got choice. Like I could choose to expand, I could choose to bring on an associate because things are going well, or I could choose to, it’s cash flowing really well and I could choose to do other things with it, but, um, choice is what we’re really all about is like helping you get to financial freedom, working within your practice, even though you don’t have to work anymore. So we will help you get cash flowing and investing, and, and we’ve got lots of different partners for that. So you’re working by choice, and so now some doctors are, are thinking about their choice of what do I do if I’m ready to start really slowing down in the next three to five years? And sometimes what we see are triggers like, it did grow and now it’s, I got HR and people and things and it’s hard, or the marketing in my area got more competitive ’cause more doctors moved in and I’m not just getting new patients like this on the automatic anymore, and that’s a little harder. So there’s a lot of really good reasons to partner with someone who has recruiting and marketing and things like that, all the back office stuff in place, but if, if we were to look in the next. You know, two to five years. What’s, and we’ll even say 10 years. ’cause at PDA we say exit planning is business planning. Yeah. So if you had the one, two, or three for a doctor listening to this podcast today going, uh, this all sounds really good, but what would be my first step to even know?

[00:22:44] Matt Zolfo: Yeah, no. Doing something. I mean, you’re, I mean, there’s, there’s two things that come to mind. One is know the terrain before you navigate it, right, and information is power. There’s never been, other than today, more information available both publicly and privately, uh, in the financial markets in a transaction, um, values and things of that nature. So, have a prospectus done, whether it’s us or somebody else, you know, have somebody look under the hood, I mean. You’ve looked at thousands of p and ls, we’ve done, um, thousands and thousands, and by that I mean somewhere between four and 5,000 prospectuses over the course of time. So we can tell you, you know, a um, average supply percentage for a practice in the million to million five range, or the 3 million to 4.5 million range, or for an implant heavy practice, or for a practice that only does clear aligners and doesn’t do any, um, straight wire ortho, um, or for an oral surgeon that is, you know, hawking teeth only wisdom teeth or, or oral surgeon that works for the pro on. It’s like all that data can, you know, tell folks where they fall in the realm of normalcy across the country, um, and then two, you know, just having, having, having a prospectus or evaluation on file is great for a trust or for a will or, you know, just to kind of know what, what the business is worth. It’s, it’s one’s life work, right? It’s their arguably the most valuable asset, exclusive of some, you know, family fund or family trust they have coming down the road, and it certainly, you know, um, has a lot of people tied to it, team members and, and patients within the community. That’s so, you know, you, you, you can’t advise on what we, we can’t advise on what we don’t know, which is why we, you know, we, we wanna be correct. So we, our prospectuses are, are basically free, but once you have that information, whether you, you know, what I would say is anybody that’s basically, you know, believe it or not, our average client last year, average at PTS was 42 years old. The year prior was 38. So most of the folks that we work with that are entering into, plugging into a strategic partner or a financial partner or looking at a transition of some sort that are still in growth mode, right? They’ve got 5, 10, 15 years to work, um, are, you know, late thirties, early forties that said, you know, if you’re 25 and don’t own anything yet, there’s nothing to value, and on the same token, if you’re, you know, 45, 50, even 55, and think you wanna work 1, 2, 5, 10 years. You should probably know what that practice is worth if an individual buys it today and what that practice could be worth three to five to 10 years down the road in the event that equity lives in a new environment, um, and we’ve got folks that we update prospectuses for quarterly. It’s rare, but it does happen, folks that we update prospectuses for every 12, 18 months, uh, and we do that because, you know, I mean, if you think, uh, we, we are sell side representation only, so you know, if, if a doctor can get a business to a 5 million evaluation versus a 3 million evaluation, we’re gonna have to tell ’em to wait. Right? You should hang tight. Keep doing what you’re doing, you know, I

[00:25:41] Victoria Peterson: I think this is why we love working with you so much, uh, and, and the whole team at PTS, Kim and Stanton and, and Brent and Kyle, I’ve gotten to know so many of you is that there is this space between your p and l and balance sheet that your CPA looks at and between a traditional practice management, uh, ’cause PDA, we do practice management, but it’s not, it is not what doctors really think about with practice management, uh, I mean, we, we do all of those things. We’ll help you calm down your team. We’ll teach phone skills. We’ll, do you know, those kinds of systems work? But more importantly we go, where are you at? Where are you at? And so that moving from three to 5 million in value, that doesn’t happen because the calendar turned over and you just worked it for another couple of years, is because you found, I call ’em the IKEA shortcuts. So, uh, working with someone like you, like pen on the wall. Yeah. That’s what this could, this is, and, and we also work with a lot of financial planners, right? So we’re not the financial planner. So to meet my end goal for financial wealth and security, my goals, I need to be at 7 million. I’m currently have 2 million. My practice could be worth 3 million. Now I’ve got a couple of years. You could work with someone like PDA or someone else to say, “How do I grow the value?” Yep. Because we want you to work smarter. We actually slow down practices. We don’t cram a bunch more patients in there. We optimize a patient that you have, get your service makes right, and all of that because you, you went really fast, but there was this huge point that you went in there. What flavor of practice do you have right now? And I can think of three offices that we’re working with where the owner doctor built a beautiful practice and it followed his clinical journey, and now it’s highly surgical and it’s critiqued and there’s like two to 3000 patients sitting over here that if they have a toothache, they’ll call you, but we didn’t expand hygiene. We didn’t bring in a bread-and-butter dentist. Yeah, and we didn’t monetize that part of the practice, and so when you go to sell, they’re gonna go, “Well, if you leave and there’s no surgery, what is the value?” So it, it is not always about the profits and the ebitda, it’s structure. So those no doubt, those are for me, what you’re saying is there’s. Compelling reasons to get that prospectus now. So you could have people like you and me and the financial planners and everybody look at it and craft a strategy that’s bigger than what traditional practice management does, which is like, well, “Hey, you did 1,000,005 this year. What’s your goal next year?” So that’s, that’s coaching.

[00:28:31] Matt Zolfo: Yeah.

[00:28:31] Victoria Peterson: What’s your goal? I mean

[00:28:33] Matt Zolfo: That that last scenario, what you’re talking about is optimizing the practice, right? Yes. In theory, whether it’s any asset, a home, a car, a business, you would, in theory wanna sell at an optimum value, right? In the case of what we do in m and a, you’d wanna partner plug in to an ecosystem of health at optimum value, where you’ve maximized what you can do with your own training, pun intended through all the blood, sweat, and tears of owning it also, pun intended. So that said, if you, you know, and this whole concept of, I hate to keep talking about multiples, but the whole concept of a multiple of EBITDA is years of earnings. So waiting one year, if you were gonna get, let’s say, end up getting, you know, two to three to four times ebitda, 10 years from now. Well, that’s fine. Well if you’re gonna hang onto it for 15, well then you got at 18 times per se. Right? Right. So there’s, there’s no harm in, in waiting on the same token, you know, for that doctor that is doing all in fours or hybrids or Uber surgical and, you know the associate’s doing some of the bread and butter stuff, but that’s not maybe optimized, whether from a treatment planning standpoint or a clinical standpoint, or you needed to add an associate sooner rather than later, you never got around to it. Well, at that stage, that’s a really good cashflow vehicle for the owner, but you also have to find someone’s two hands to backfill that, whether that’s at 72 or at 57 or at 80 years old.

[00:29:54] Victoria Peterson: Or two. Yeah.

[00:29:55] Matt Zolfo: And you know, at, at that stage, throwing the keys in the mailbox, you know, it, it, it might have to be the scenario if it’s a rural practice, right? 

[00:30:04] Victoria Peterson: So, and there’s no, there’s no shame in that. There’s no problem in that as long as you cash flowed and you were very prudent and a good. So, let’s end on this ’cause I, I, you and I. We have talked for hours over lunch and over dinner. So let’s bring this to a good conclusion because I thought you, you also brought up a really great point there. So even though we’re talking about to the sellers about what’s happening, it’s really, um, prudent to understand the buyer scenario because going into a buyer’s market with established, uh. Whether it’s a private group, an emerging DSO, an established DSO, or private equity, those sorts of environments, I heard you say, let’s optimize it, then leverage it because they’ll be able to take it to the next level where you probably couldn’t take it by yourself.

[00:30:56] Matt Zolfo: Yep. Yeah, and then there’s.

[00:30:59] Victoria Peterson: I just wanna ask you this question. Is there this other scenario of I’m gonna max it out and then I’m gonna go find an associate that will partner and buy in and another partner to buy in? I don’t see that working out as well. I see like if you’re gonna do a partnership over time, you start when the practice is smaller. Yeah, do an equity grow and together do a little more equity because it’s hard to sell in one chunk to a private person a, a three to $7 million asset. Private. Yeah, private dentist. Do you see the same thing?

[00:31:32] Matt Zolfo: No, we definitely do, and candidly, you know, that landscape changed a ton. I, I did my first new office at the age of 21 in 2004, if you can believe it. Yeah, um, that gals and her husband are good friends of mine and now are partnered in a group, and that group is recapping round two here, this, um, summer, but, um, to your point. Over the course of time, goals change and needs change, and life happens and this, that and the other. So in the event, wherever that person would like to be on the journey of the lifecycle of their career, um, again, knowledge is power and data validates instincts. So knowing what that’s worth and kind of, you know, which route to go, whether to do another location or at an associate, those things are fairly easily, um. The lens with which the market will, will view the value of that business. We’re very good at, uh, don’t do it with your CPA, it will be incorrect. Don’t do it with your financial planner. It will be incorrect at the risk of sounding, um, arrogant. It’s factual. Unless they’re doing 75 to a hundred transactions a year with individuals and large specialty transactions and strategic partnerships, they just won’t know, you know, what, what the, the comps are in that environment, um, but you know, to your point, if even if it is selling to another individual, those things take time, um, based on the profile, the practice, whether it’s urban or rural, whether the doctor wants to work another year or three, um, whether it’s heavy, you know, super GP or refer orthodontist, right? Is kind of the spectrum of the doctor that refers out everything versus the one that doesn’t let anything leave the door, you know? And, and on a real, I’ll end with this. Like on a, on a very broad level, most, most doctors graduating dental school now don’t wanna own anything. They wanna show up. They have, they’ve had Netflix for 10 years, they lease a car if they own one, they Uber or Lyft everywhere, and they rent, they don’t own home. Like, I don’t mean to, you know, doom and gloom, millennials or, uh, millennials. 

[00:33:32] Victoria Peterson: Well, there’s also

 half a million dollars in student debt.

[00:33:34] Matt Zolfo: The pool of people looking to own is, is smaller on top of that, um, when I started in this business, the average dentist had about 225,000 in dental school debt or, or school debt undergrad, and now, I mean, I’m not lying that number’s north of $700,000 in debt. So you know that, you know,

[00:33:53] Victoria Peterson: That’s, it’s escalating it seems like every six months. I was still at 500,000, but.

[00:33:58] Matt Zolfo: Yeah, so the, the, the, it’s more likely if a practice is doing over a million, certainly more than 2 million, that an individual can’t afford to pay what the practice is worth, and knowing kind of where folks fall on that spectrum is important. I think that’s kind of your, your core audience. The average dental practice as a closing note does 798,000 in collections as of 2023 average, which means half are doing below, that half are doing above that. So this, this echelon of, you know, your core client, our core client are the folks we’re kind of, you know, speaking to, uh, but, you know, know your value basically, regardless of what you know, whether that’s a year out or 20.

[00:34:38] Victoria Peterson: Yeah, I love it. I love it so much. I, I think it’s like having an annual physical, right? Knowing your blood pressure, knowing your cholesterol. Knowing your book value, knowing areas that you could optimize, it’s, it’s just being a smart, savvy owner. Matt has always so great to spend time with you. If people wanna get in touch, and I heard you mention several times, uh, we do complimentary prospectuses for doctors. There’s no obligation. They just wanna figure out what it’s like or have a conversation with you, how do they reach out and, and connect?

[00:35:09] Matt Zolfo: Yeah, so email is matt@professionaltransitionsingular.com, uh, or LinkedIn, Matt Zolfo. There. There’s, I’d say there’s only one of me, but I have a cousin named Matt Zolfo. It’ll be clear on LinkedIn who’s who, uh, but it’s Z-O-L-F-O on LinkedIn. DM and I’ll, I’ll, uh, I’ll reach out, but yeah, we, we do, we do a lot of those. We, we, at PTS, uh, we believe that trust is earned and value is garnished through really hard work. So we’re not shy about rolling up our sleeves to get a prospectus spit out, uh, it’s a good thing to have, again, just on file and to know kind of where the market’s at.

[00:35:42] Victoria Peterson: I love it, and we’ll put all of that in the show notes too. Again, thank you so much for the work that you and your team does. At PTS, uh, our industry is better for it and our doctors are more educated because of it. So thank you so much.

[00:35:56] Matt Zolfo: Likewise. Thanks for your time, Victoria.

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