Dentistry Uncensored with Howard Farran

How to perform dentistry faster, easier, higher in quality and lower in cost. Subscribe to the podcast: https://podcasts.apple.com/us/podcast/dentistry-uncensored-with-howard-farran/id916907356

Blog By:
howard

Listen on iTunes



Watch Video here

Mark Eric Bailey is a graduate of Dickinson College in Carlisle, PA. He has been actively engaged in real estate brokerage / development / investment as well as the creation of several businesses over his career. He has arranged business financing for 36 years and has served health professionals exclusively as Capital4HealthCare, LLC since the early 1990s. In 2005, he founded Dentcetera-Advisors, LLC to provide dentists acquiring practices with buyer’s representation services nationwide. Dr. Chaffin joined Mark in each of these endeavors and in 2009 they founded Dental Recovery Solutions 360, LLC together.

Mr. Bailey’s endeavors have followed the business trends in dentistry. First, he focused on carefully crafting financing for dentists to excel in practice with Capital4HealthCare, LLC. Its not the rate, term or amount of a loan but the combination thereof which creates the best financing solutions. 

During the growth years of dentistry pre-2008, it became apparent that practice buyers were not being represented well during a practice purchase. Thus Dentcetera-Advisors, LLC was born to provide buyer representation. 

And when the economy collapsed in late 2008 it became apparent that Dental Recovery Solutions 360, LLC was required to serve dentists, lenders, landlords, BK trustees, etc to save dental practices, professional careers and prevent patient abandonment issues. DRS-360 is the only firm in America focused exclusively in dentistry for these services.

Mr. Bailey is a widower and blessed father of a teenage daughter and 3 awesome cats. He resides in Lancaster, Pennsylvania; enjoys fine cars, reading and the beach.

Dr. James R. Chaffin is a 2004 graduate of Loma Linda University School of Dentistry and a 2008 graduate of LVI. He has owned & operated Cosmetic & Restorative Dentistry practices in Peoria, Phoenix, Scottsdale, San Tan Valley, Queen Creek and presently in Glendale, AZ as CR SMILES where he is building a new office. 

Dr. Chaffin is a talented clinician specializing in implant dentistry, oral sedation, TMD – both cosmetic & restorative dentistry. He is an accomplished entrepreneur / business person / advisor and the CEO of Dental Recovery Solutions 360, LLC - a firm founded in 2009 and devoted to saving dental practices nationwide and CEO of Dentcetera-Advisors, LLC, a national practice transitions advisory firm founded in 2005 and based in Metro Phoenix. He is a visionary entrepreneur as to concepts and opportunities.

Dr. Chaffin is happily married and resides in Cave Creek, AZ with his wife, 2 young sons and 2 doggies. He enjoys body building, high performance cars, movies and golf. 

Capital4HealthCareLLC.com 

Dentcetera-Advisors.com 

DentalRecoverySolutions360.com

Howard: It is just a huge honor for me today to be podcast interviewing Mark Eric Bailey and Dr. James R. Chaffin. I'll start with Mark, who's on the left. Mark Bailey is a graduate of Dickinson College in Carlisle, Pennsylvania. He has been actively engaged in a real estate brokerage/development/investment, as well as the creation of several businesses over his career. He has arranged business financing for thirty-six years and has served health professionals exclusively at Capital4HealthCare, LLC since the early 1990s. In 2005 he founded Dentcetera-Advisors, LLC to provide dentists acquiring practices with buyer representation services nationwide. Dr. Chaffin joined Mark in each of these endeavors. In 2009 they founded Dental Recovery Solutions 360 together. Mr. Bailey's endeavors have followed the business trends in dentistry. First, he focused on carefully crafting financing for dentists to excel in practice with Capital4HealthCare. It's not the rate, term or amount of a the loan, but the combination thereof which creates the best financing solutions. 

During the growth years of dentistry pre-2008, it became apparent that practice buyers were not being represented well during a practice purchase, thus Dentcetera-Advisors was born to provide buyer representation. And when the economy collapsed in late 2008, it became apparent that Dental Recovery Solutions 360 was required to serve dentists, lenders, landlords, bankruptcy trustees, etc. to save dental practices, professional careers and prevent abandonment issues. DRS-360 is the only firm in America that focused exclusively in dentistry for these services. Mr. Bailey is a widower and blessed father of a teenage daughter and three awesome cats. He resides in Lancaster, Pennsylvania, enjoys fine cars, reading and the beach. And on the right is Dr. James R. Chaffin, a 2004 graduate of Loma Linda University's School of Dentistry and a 2008 graduate of LVI. He has owned and operated cosmetic and restorative dental practices right here in my backyard in Peoria, Phoenix, Scottsdale, San Tan Valley, Queen Creek and presently in Glendale as CR Smiles, where he is building a new office. 

Dr. Chaffin is a talented clinician, specializing in implant dentistry, oral sedation, TMD - both cosmetic and restorative dentistry. He's an accomplished entrepreneur/ businessperson/ adviser and the CEO of Dental Recovery Solutions 360 - a firm founded in 2009 and devoted to saving dental practices nationwide - and CEO of Dentcetera-Advisors - a national practice advisory firm founded in 2005 and based right here in Phoenix. He is a visionary entrepreneur as to concepts and opportunities. Dr. Chaffin is happily married and resides in Cave Creek, Arizona - where my sister, Shelley, lives. Shout out to Shelley - with his wife, two young sons and two doggies. He enjoys bodybuilding, high performance cars, movies and golf. Man, thanks so much, guys, for coming on the show. How are you guys doing?

Mark: Awesome. How are you, Howard?

James: I'm very good.

Howard: I'm doing very good. But, you know, Mark, even though you're out there in Pennsylvania, you've spent a lot of time in Phoenix, Arizona, and, James, so have you. And that 2008 crash, I mean, Warren Buffett always says, during a recession, when the tide goes back out to the sea, you get to see who's swimming without any pants on, and, man, that was brutal. What did you guys learn from that 2008 because, James, the last I heard is that right here in the Valley ... what was it ... how many practices did you hear went under in 2008?

James: About a hundred and fifty.

Howard: About a hundred and fifty.

James: About a hundred and fifty in that one year, yeah.

Howard: Was that one year 2008 or 2009?

James: I think it was crossing from the end of 2008 straight into 2009.

Howard: Yeah, and when you see a hundred and fifty, I mean, I had dentists in my front room crying, and, man, it was sad. I mean, it was [00:04:07] [sounds like: crud], [0.4] and in your bio, one of your deals is to prevent abandonment issues. That was a big problem right here in my backyard too, because dentists who went bankrupt and you had ... and, you know, there were, like, orthodontists with several hundred patients in the middle of treatment, and, thank g*d, some local orthos ... one local orthodontist was so damn smart. He was a brand-new start-up and he just said, "I'll finish all your cases. No money." And it built so much goodwill, he had instant word of mouth referral, he had instant goodwill with all the referring dentists, everybody. I mean, when I heard that, I got verklempt. I mean, I thought he was the sweetest guy in the world. Of course, he's Canadian, and they're all sweet up there. But, you know, so, what lessons did you guys learn from 2008, and how does that 2008 losing  a hundred and fifty practices right here in our backyard, what does that make you more passionate about today?

Mark: Go ahead, James.

James: I'm passionate about people that get into a rough situation, just making sure that they have other opportunities that never knew about. You know, I mean, time and time and time, client after client that is upside down and their practice is unsecured lenders up through the eyeballs, secured lenders up through the eyeballs, take high risk debts out, behind in taxes, and they don't have a clue how to get out of the situation in the right manner. I mean, they're just sitting there in a pool and they can't swim, and that's where we come in. You know, that's what I'm passionate about, because I think we do a lot of good service on saving dental practices.

Howard: So, you graduated from Loma Linda in 2004?

James: Yes.

Howard: And this is 2017. It's a tougher market in 2017 coming out of school than 2004. I mean, I don't know what your student loan debt was, but mine in 1987 was eighty-seven grand, but I see these ... we've got two dental schools in our backyard here. We got one in Mesa - A.T. Still - and we got one in Glendale, where you practice - Midwestern. Midwestern is graduating a hundred and fifty a year; A.T. Still, I think, is seventy-five or eighty, and, man, they're coming out three fifty, some of them are $500,000 in debt, then they go buy a practice for seven fifty, and you're talking to a baby and they're a million Dollars in debt, and they don't even know what they're doing.

James: Yeah, what is the interest rate anyway, now when they're coming out of school? I met some young graduate that was interviewing with me, they had $3,000 a month student debt, you know, payments, you know, and that's, like, I don't know what his interest rate was but I'm like, how the heck do you afford that when you take a look at coming out of school, limited production ability, and comes into a practice. You know, he's probably only going to make about eight to ten grand a month from his own skill level, then you have [00:06:57] [sounds like: to top in] [0.1] his payments, you know, and then if he wants to go out and buy a practice, if he doesn't choose the right practice, I mean, it's just that this is a lot of debt and it's terrible to see these young graduates ... I mean, when I got out of school, you know, I refinanced my student debt at, like, a one point two five interest rate, I mean, not a big deal, but I see these kids. Do you know what it is now?

Howard: Well, I mean, they've got all kinds of different loans.

Mark: Yeah.

Howard: I mean, when they're $350,000 in debt, you know, they owe money to three or four different plans.

James: Yeah.

Howard: And anywhere from good to miserable interest rates.

James: Yeah. So, I mean, we see that time and time again from a personal perspective and then you top on a business perspective. We have clients that, you know, financed super scratches and start-ups and spent $800,000 on a brand new office to open their doors and they don't have enough working capital to be successful. They don't have the business background to be successful.

Howard: But does that $800,000 [00:07:55] [UNCLEAR] [0.1] include the land and building, or is that a rental?

James: No, we're usually talking about a rental. I mean, the last scratch practice that we did was in ... actually one of them was in Phoenix here. The gentleman spent about $700,000 on equipment, TIs - the Taj Mahal, you know - and he didn't have any patients, and I'm like, oh, you know, there are smarter ways to do that, and there are smarter ways not to. We have clients that have bought practices that didn't cash flow, like, you know, their representation showed them. They couldn't support the debt service, and then they start, you know, getting into problems. We have doctors that don't know how to manage their business from a ratio point of view on their PNLs, that start making bad decision, you know, after bad decision, and then they get themselves in this train wreck of unsecured and secured debt and they don't know what to do.

Howard: Well, that's the one thing I try to preach on every episode, is that, you know, when we got out of school, you could make so many bad mistakes coming out of school and still make it. You could go to bad demographic area, too many dentists, you could do so many things wrong thirty years ago and still kick butt. Today with that kind of debt, you better not make many more mistakes after that. You better, you know, when you walk out of dental school, I hope your first three to five decisions are an A, and if you walk out of school with that much debt and you start making some C, D and F decisions, you know, I mean.

James: Exactly, well, we've had cases ... you know, I like to talk about my local cases, but every decision, you know, can create a problem. So, you know, I had a doctor that had a wonderful practice and then he bought a second practice that almost took him down. One little domino effect and the whole thing is gone. So, you're right, I mean, every decision is exactly what you need ...

Howard: Well, you know, the truth is, you know, they see a dentist named Rick Workman out in the middle of little Effingham, Illinois, just opened his eight hundredth office and they see Steven Thorne, whose dad is a dentist - he's not a dentist - and he owns, like, three hundred and fifty, so, they just see this massive evidence that this can be done. They just don't realize the skill involved, you know, I mean.

Mark: Absolutely.

Howard: Yeah.

Mark: In that case James was referring to, the individual had a certain type of practice and a certain demographic. The second one was entirely different, and it was on a side street with no visibility. He went in and financed it, and, my g*d, after the second year, I said he had to put money in every month to keep it alive, and fortunately we were able to come into the situation, restructure his financing, and with the assistance of a realtor, get rid of the building in the second location, and suddenly, not only did he repay that debt in a very short period of time, he doesn't have to worry about a second location at all.

Howard: Right. I always say when you got one location, your problems are a barking Doberman in one corner and a barking Rottweiler in another one, and then when you open up a second office, those turn into Godzilla and King Kong.

Mark: Absolutely.

Howard: And I see one of the most surefire ways to go bankrupt is expanding from the second to the third location. I see more bankruptcies on that move because they just realized that they don't have any systems, they don't have a management team, they didn't have a concept, you know, so.

James: You know, that particular case that he's talking about, we actually got the case. It was about three weeks before foreclosure of the building, and they were taking everything from him, and this doctor got some words of wisdom from another company that doesn't deal with dentistry and they told him, "Just stop paying your bills in that location." I don't know what their plan or strategy was, but we got it and we had to save this guy within a period of three weeks, got to come up with a solution to be able to get him on the right track. So, you know, that's where doctors [00:12:02] [UNCLEAR]. [0.2] But, a little history with Mark here. Actually, he was my mentor and guider when I first graduated in 2004. He financed, got the healthcare finance for my first practice and, you know, that's when we met, and we had a good relationship for the last, you know, fifteen years, something like that. I mean, it's been a wonderful experience. But, you know, he taught me a lot when I bought my first practice, and I asked him, I'd say, "Hey, will you mentor me when it comes to cash flow and business?" So, I actually worked for Mark for a long period of time, learning and growing and watching him give advice to doctors, also telling doctors, "No!" What bank tells somebody, "No"? And he's telling doctors, "Do not buy this. This is not what you think it is", and ultimately giving [00:12:55] [UNCLEAR] [0.4] advice, and that's a little of the history when it comes to Mark.

Howard: Mark, what did you learn from the 2008 meltdown? The reason I keep asking is, you know, I'm fifty-five and it just seems like every ten years another economic correction takes place, and the last one was 2008. Now it's 2017. It's November. I mean, we're almost going into ten years since the last one, and I'm already starting to smell trouble. One of the things I've noticed, I mean, besides, you know, the stock market's appreciated way too much, the investment decisions are made by humans and they're irrational, so, their investment bets are irrational, and that's why there's always going to be a cycle. Maybe when they invent the singularity and artificial intelligence, maybe humans won't make some many irrational decisions. But, I started seeing the first things to go, you know, humans are never going to walk away from their car payment, their cell phone payment, and their house, but they start giving up things like, "I'm not going to go out and eat lunch out anymore. I'm going to take a lunch. And I'm not going to go get mani-pedis at the spa." And right here in Phoenix, the biggest, sweetest day spa for all the rich women is Dolce and they just closed their doors. And one of the greatest lunch restaurants is Z Tejas, and they just closed down three locations, and in 2008 my buddy, the Applebee's right across the street, right up the street from me, went under. And my buddy, [00:14:28] [sounds like: Tom Adarin], [0.3] got a smokin' hot deal on the bankrupt, but when I start seeing people not spending on wants - you know, they're going to cling to their needs - but when they stop spending on their wants, I start smelling market tops.

Mark: Well, that's what many people say. If you follow Howard Dent, for example, and he's an economist who functions based on demographics. He has researched the world demographics for the last six hundred years and the trends always follow suit. So, whether it's Europe, whether it's here, whether it's Asia, the same trends are always following. So, he too says that in a very short period of time there is going to be an adjustment made in the stock market. We'll have to see how that goes, but I ... you know, it can only grow so high for so long before an adjustment will occur. You know, when we started with Capital4HealthCare years ago, many of those people that came to me and they were healthcare professionals, were looking to buy real estate. They were, like, maybe buying a second home or an investment property, and I would ask, "What do you do?" "Well, I'm a dentist, a doctor, I'm a veterinarian", and they would complain about, you know, back in the '80s, late '80s, you had the first adjustment with healthcare insurance and they were just growing acclimated to that, and they said, "Well, we can't get financing to support what we were doing." And back then it was entirely different. I mean, today we have so many great practice solutions groups, from B of A, Wells Fargo, all the big guys and SBA lenders and everything, but back then it was [00:15:55] [sounds like: rogue] [0.3] community bank financing and they didn't understand a healthcare practice. So, when people would go and they would try to get a loan, you know, it was ... they never were provided with sufficient working capital, so, if it was a start-up, by the time you reached the point that maybe you were close to profitability, you were out of working capital, and you couldn't apply yourself to any of your loan payments. So, you know, you see that trend, and we see now, of course, funding has changed dramatically again with all the different online services and so many different merchant cash advance companies where people say, "Oh, my g*d, this is fabulous! Howard, I went online, I filled out a five minute application and a day later they sent me fifty grand!" Yes, but, the monthly payments are not monthly payments, they're daily debits from your bank account. So, you better stay on that treadmill and do a lot of dentistry, because every day they're going to debit your account for 500, 800, 2000, whatever the case might be. And that's what James and I see so much of is, it's not that people have grown their practice to a point and go to the local bank for a line of credit or go to a working capital lender for a working capital line. They can't get that anymore, because they're in such dire straits with their own practice finances and their personal finances that they figure, "Ah, I heard on the radio on [00:17:18] [sounds like: Sirius] [0.2] this morning, I can get this program, you know, and it'll take a day to get me approved and funded." So, many people are going that route and suddenly they call us and say, "I can't make ends meet."

Howard: So, who's your typical client? Who's listening to you right now on an hour commute to work and who's your ideal client? I mean, is it the ... talk to that dentist right now.

Mark: Right. Well, for me, in Capital4HealthCare, my preference was always the young dentist, the dentist coming out of school who has not made any mistakes yet.

Howard: Hey, hey, hey, hey! A young dentist is fifty-five. Fifty-five is a young dentist!

Mark: Howard, don't forget, in the late 1980s and 1990s and most of the, you know, last ten years, there was no book called 'The Business of Dentistry' by Dr. Howard Farran. So, they didn't have that guide. They graduated, they weren't taught about business in dental school, and suddenly they were trying to determine, do I go to work for someone who may not have the skills that I do or may not have the current skills that I do, or do I start a practice or buy an existing practice? Many of the people that I financed over the years buy an existing practice. I genuinely feel that if we do our job right and we do the due diligence with them and negotiate the best deals with them, that the financing is going to enable them, when they buy an existing practice, to survive and do well. Start-up, I always say is like taking a piece of pie, a big, whole pie and saying, okay, we're going to take a little bit from each practice in that market share in order to create our market share. It may work, it may not work, and as you know, as we talked about in '08 and '09, so many practices failed that were start-ups. Acquisitions did as well, but I think there are more start-ups that fell than anything else.

Howard: What I noticed in the backyard was there were two ... there were three variables that I saw. It was the young kid who came out of school and did a scratch start-up from scratch.

Mark: Right, absolutely.

Howard: And they thought they were going to do a big direct mail campaign and get a Facebook page and they'd have patients and the patients didn't materialize. The second group - and a lot of these were my friends - they were older guys like me, but they focused in on just cosmetics and they couldn't extract a tooth, they couldn't do a molar root canal, they can't make a partial or a denture, and they had lost their skill set down to bleaching, bonding and veneers, and they were all up in north Scottsdale and all they had been doing for years was people would come in, they'd give them twenty five to fifty grand, they'd take everything out of their teeth and replace it with porcelain and Empress and glass, and those patients just disappeared.

Mark: Absolutely.

Howard: And then the third variable was demographics. It didn't hurt anybody in Maricopa and Eloy and out there in the suburbs and the rural - it was that North Scottsdale cluster where everybody went chasing all the rich people and rich people ... the difference between rich people and poor people is a poor man and their money always part, and rich people don't part with their money. That's why they're rich! And they start cutting back on Dolce salons and getting veneers and all that kind of stuff when there's bad times. Like, right now in Phoenix, that's another variable that scared me. Where I live, you know, there's been about thirteen to fifteen homes on the market in over the million Dollar home market. Now there's thirty-eight and none of them are selling. I mean, so, right now homes in the Valley between, you know, over a million Dollars is pretty much illiquid, which again reinforces the smart ... you know, there's thirty-eight homes for sale, because a lot of smart, rich people are thinking, "You know what? I don't want to have a million bucks tied up in a house. I want to go liquid", you know, so, anyway, you were talking about ... by the way, I just re-tweeted - my homies follow me on Twitter. Thanks for following me. I just re-tweeted your tweets, so they can find you @C4H under ... is that 'underscore 360'?

Mark: Yes, sir.

Howard: C4H underscore 360. So, and that's where you're talking about Capital4HealthCare? Is that what you're most passionate about now, or ...?

Mark: Well, today, you know, it's the combination really of all three of those entities, but most of our time is spent with those people, you know, that have made mistakes or found themselves in a bind. We recently took over the management of six dental practices in Ohio where the individual had just ... the last thing he did was merchant cash advances and they killed him. And, you know, stabilizing those practices, growing them to the next level and then releasing them back into the market with a doctor that - whether it's a DSO or a doctor - that would come in and buy each of those practices to operate. It's difficult. We've seen so many different things on a daily basis. James will call me. We have, since we started our relationship back in 2004, we have a standing call every day, except for weekends. But every day we speak between ten fifteen and eleven fifteen, and throughout the day James will call and say, "Well, hey, we had another call and this guy needs this, or this lady need that. What are we going to do?" He has all these different systems and techniques and concepts down pat for saving people.

James: You know, we see all sorts of different clients, Howard. I mean, I see acquisitions. I have a new client from New Jersey that, good practice, $900,000 gross, his rent's proportional. Some of the stuff is pretty proportional from his staff salaries and, you know, from his business model. He started just basically not doing taxes correctly and over ten years accumulated a million Dollars in taxes, started taking high risk loans. Boom, boom, boom, and his practice is about to be seized. So, we're involved. We're going to save the practice, get it out of harm's way, and restructure this gentleman so he can move on with his life. But the practice we're going to be able to save, so that it doesn't get shut down. I have clients that ... I have one here, it's a local guy, and we have practices all over the country. I have one here on Via Linda and Shea in Scottsdale, a million two, he just crossed in the million two in December - and this was a last year deal - he walked away from his practice. Just shut the door. I got called actually on that case by a landlord group called Whitestone REIT, which is a big company. They called us in, they said, "We have a problem. The guy abandoned his patients." Our company went in, we restarted the practice, got the team back - the original team - negotiated all the landlords and the leases and all the UCCs were able to come to terms and we put it back on the market, and we released that practice to another doctor, and it's continuing, you know. So, these are the kind of cases, whether it's ... we do scratches where they've overbuilt, to even regular acquisitions, and those high-risk loans that Mark's talking about is definitely a common denominator that we see quite often. So, you know, what our job is to do is to give another alternative to the dentist that's stuck by himself as the sole practitioner, has all these things coming at him, doesn't know what to do and he's drowning, and we kind of save them and that's our strategy, that's our plan, and we've been doing it often. Well, we're pretty busy, unfortunately, but I think we do a good service by protecting doctors and giving them another alternative, as well as their teams. You know, the teams get to go on, you know, because what I always like to say to my doctors are, when the doctors hire us, is, "You've got a good practice, but it's not good for you right now. It's going to be good for another owner, but you just, you know, your time is done." So, we always structure an exit plan that includes, you know, rebuys, restructures, debt clearances, you know, and we work with their attorneys as well to give them a plan structured from A to Z, start to finish, so, you know.

Howard: For the kids that are in dental school, they don't ... I doubt they understand the severity of patient abandonment. I mean, State Boards, there's a couple things they really don't like and, besides substance abuse, it's patient abandonment. Did that dentist, did he lose his license for that or did he get in trouble with the Board?

James: Well, we caught it right in the nick of time [00:25:59] [sounds like: for four weeks], [0.4] so what my job on that particular case is, I went in as the dentist and I grabbed those patient charts, contacted them all, got it restarted so there wouldn't be, so we prevented in that case.

Howard: But explain to the kids what patient abandonment is and why is that so bad.

James: With this gentleman, he's in the middle of crown and bridge and extractions and, you know, he's running a, you know, basically an 80 to $100,000 a month practice, you know, in production collections. Lots of patients running through there, and when he shut its doors and didn't tell anybody where he's going and what do, didn't even refer it out to another dentist, you know, these patients are our calling, they have, you know, insurance checks coming in, they have maybe treatment they're right in the midst, and you're basically abandoning a ton of regular clients that, you know, are normal people. You know, imagine if you spent, you know, $4,000 getting ready for a case, and you spent all your money, and the doctor's getting a denture and you're about to have implants, and you're getting that immediate dentures started and ready, and then you walk in and no-one's around, or you've spent your last dime of your entire life, you know, in some cases, 'cause people are on budgets, and this doctor just beelines it. That's heartbreaking.

Howard: Yeah, and it's so tough, because I know the psyches from the ones that I've gone through it with, you know, and they're really depressed, they're in a bad frame of mind. I mean, they're just really depressed, and they just can't take it anymore, and, you know, you've got to careful because, you know, dentists, I mean, since I've been here for thirty years, every year in the Valley one, two or three dentists kills himself.

James: Yes.

Howard: So, a lot of these patient abandonment, you know, the Board's got to realize, well, that's a hell of a lot better than Doc going home and killing himself. But, you got to get clear, and the one thing I've noticed that's so demographically different in dentistry, just like TMJ migraines, is that you talk to practice management consultants and with Millennials, they say that two thirds to 80 percent of clients are females. That's why dentists think females have more headaches and migraines than men, when they epidemiologists say it's not true. It's because women go get help. They raise their hand. And so many men, you know, they just don't get help, and I've said to so many dentists, "Why haven't you had a consultant? Why don't you get help? Why don't you have ...?" But they're a man! I mean, I can remember when I was little boy, me and my five sisters, Dad drove us all the way from Wichita, Kansas, to Disneyland, and he got so damn lost in L.A., but he wouldn't ask for help. It was the only time I ever saw my mom have a meltdown, you know, just, you know, "If you don't pull over at that filling station right now ...", you know, she almost was going to kill him! But men just don't get help until, you know, it's ... they just walk out of their office and lock their doors. And I used to think so many dentists who practice ten, twenty, thirty, forty years, and if they just would have had one consultant ever, or one every five or ten years, their life would've been so much easier, they would have made so much more money, you know. Talk to that dentist out there who needs help. It's probably going to be a man. The women are already calling. Talk to that man. He might think it's a hopeless situation, because he's always going to think, well, you don't understand, my situation is different. You know, what ... who's your perfect client? Who's listening to you right now and ...?

James: The perfect client for us, I mean, I like to catch things before they go into the courts. I mean, we've worked both sides of the fence. You know, I've worked with trustees, our companies work for attorneys that represent trustees. I've been in ... our company has been involved with fraudulent mergers that brokers have done, brokers, we work for brokers too. They usually call us and say, "We have an upside-down practice. This guy wants to sell but the value, what he owes is not worth it. We don't know what to do", so those guys usually just walk away, you know. The brokers now are starting to realize that we're here, we can negotiate things out in the best interests of the doctor. There's two sides to what we do. The first side is the business side, but it's also the personal side. So, you know, usually our clients of both debts; they have the secure debts, but a lot of these loans have their personal attached to them. So, they have homes. You know, I'm dealing with a client out in South Carolina that's got a practice that we're going to be releasing. He's going in to [00:30:34] [sounds like: BK], [0.1] but we want to protect his house, you know, that's his life, he's seventy years old, you know. So, what we like to do is strategize the release of the practice from a business point, but everything we're releasing will roll back into the personal side. So, we actually strategize both levels, you know, I mean, especially with these upside-down practices. You know, they have ... they bought a practice two years ago for eight hundred grand. They're in a declining revenue trend and now it's only worth four hundred grand. Well, they're upside down for four hundred grand, just like a home. Well, what do you do? And then they're like, "Well, I can't grow back up. I have all this debt", and they tend to just dig themselves deeper. So, we, you know, one thing we do ... we had a call a couple of months back, where the doctor was, "Oh, my g*d, I'm getting my unsecured" - and for the doctors, when I say 'unsecured' it means, like, your lab bills and, you know, these guys are not secured on your practice, so, your labs, your supply companies - this guy was basically behind on those bills and he was about to borrow a ton of money from a high risk lender. Well, thank g*d, he called us, because we were able to restructure all those unsecured bills in a payment, you know, that was based on his cash flow, that would work. We actually restructured it 50 percent of what he owed. So, we actually did a reduction on that and that was all this guy's problem. You know, we get clients to where they are a little bit more, where we can one step above, where we look at it and we're like, you know, we have some problems here, but if we restructure some things, maybe we can re-finance the thing and put you on a better path, a plan of attack, you know, a better future. Then the next escalation above that is the guys that are ... they owe their unsecured labs and supplies and all the people on your PnL, two, three hundred grand in debt, then they owe B of A or Wells Fargo, whatever, you know, they're upside down in their practice two, three hundred grand, and, you know, the debt starts compounding, so, you know, in those kind of cases, we like to catch it before it goes into the court system, because at that point we can save the practice, we can take the practice, protect the practice, and give it a pathway that is acceptable to all lenders, to where the practice can be released, and then we can deal with the client with the aftermath.

Howard: Well, if someone wants to talk to you about their current nightmare, what is the best way to contact you?

James: E-mail Mark. You can email us at DRS-360; DRS - D-R-S - dash 360 dot com.

Howard: What's the e-mail?

James: My email is jamesdds1.

Mark: Or you can leave it care of mark - M-A-R-K - @DRS-360.com, James has a cool e-mail address. It's jamesdds1@DRS-360.com. We also have a toll free line and we are available 24/7 in order to speak to people and understand what they have going on in their lives and how we can help them. And that's 844 377 3601.

Howard: Really? 844 is toll free?

Mark: Yes, it is.

Howard: I never even knew that. 8443, yeah, I don't have any toll free numbers. I get dentists that text me, or they email me: howard@dentaltown.com, and say, "I need to ask you a question. Do you have a toll free number?" I'm just like, "Really? Really? You want me to pay for the phone call and then answer your question?" I mean, it's like, g*d. I just reply back.

Mark: We have so many people that somehow, some way, they find out our cellphones and that's fine, and they'll call us or text us on the cellphone and that's how the conversation begins.

Howard: Another question that young dentists are hearing on Dentaltown is, they go to buy a practice and some of the big national firms say, "No, you don't each side have a broker. You want dual representation. If each side has a broker, they're going to go back and forth, and back and forth, and back and forth, and you're never getting anything done. So, you want to find a broker that's going to represent the buyer and the seller. So, we'll just get her done." Is that good advice? Is dual representation, one broker for both sides, do you think that's a good deal, or do you think that's not a good idea?

Mark: I don't like it personally. When I was an active realtor, I happened to be in Hawaii in 1993 when the National Association of Realtors rewrote the Code of Ethics in order to provide for, not just a seller's agent, but a buyer's agent, dual agency or a facilitator. And you can just imagine, g*d forbid you're in a car accident and you're the plaintiff and the defendant, you both fire the same lawyer. No matter how good that lawyer is, and no matter how hard that lawyer that tries to be 100 percent unbiased towards you or towards the other party, at some point it's just not going to work out. And that's the reason in the real estate industry, where they created buyer's agents to represent buyers and seller's agents to represent sellers. Of course, you know, when you represent a seller, when you're supposed to be loyal and obedient to that client. And, you know, if they tell you something in confidence, you're not supposed to share it with the other party. Now, obviously, you have to be fair. You always have to be good and fair to both parties, but you still represent that one party. So, when Dentcetera was created, when James purchased his first practice, he was represented by a dual agent, and there were a couple things that happened almost immediately. One day I couldn't reach him on his cell phone and he was already doing his transition pre-closing at the practice. So, I called the practice and the phone number rang and the voicemail picked up and it said, "Come, visit us at our new location at blankety blank", and I'm thinking, "Oh, my g*d, there's all the goodwill going right out the door." So, we corrected that. And then, two or three weeks later, he closed. The seller almost immediately started doing direct mails to not only the existing patient base in the practice James purchased, but for the entire ZIP code there, and then the next step was that James had a scenario where people would come in and they would say, "You know, I want to finish the case I started to do last year", and they would call for a pre-cert and the insurance company would say, "Oh, we paid that case in full last year", and maybe two or four crowns have been completed. We brought in a forensic accounting firm and they ultimately agreed to a $200,000 adjustment and the dentist that was involved there from the seller side lost his license for a couple of years. But, when I looked at that and I said, "Oh, my g*d, from a lender's perspective there is no-one there that really looked into all these details, and obviously, what the norm was at that time - we're going back to 2004, you know - buyers and sellers used the same practice broker and there was nothing ever thought of about it. So, Dentcetera was created from the perspective of representing buyers, not in doing any start-ups, that's not my forte. It was always from a matter of an acquisition. If you're private practice, I want to know everything about that practice. James joined in right away and he brought, of course, so much knowledge in the way [00:38:08] [sounds like: from school], [0.5] just having a great business mind as to what we needed to look at clinically, you know. Was the practice doing a lot of perio? Was the practice doing a lot of hygiene? What were the flaws and how can we make those flaws opportunities? We never, ever look at an acquisition and say to you, "Hey, Howard, if you buy this practice you should be able to do boop, boop, boop, boop, boop." We don't, you know, work on transactions projection-based. You have to look at an acquisition and say, this practice works for me, right now. And I can pay my professional expenses as well as my personal expenses and have a good life. If anything magically improves above and beyond that, well, that's great, but if you know you're solid at that very beginning, with what you're looking at, that's the best way. So, that was really Dentcetera, you know, trying to take that buyer and protect the buyer. Now, of course, Dentcetera has grown, and I know you know Christine Forakis Cracchiolo, she's a partner in Dentcetera, she joined us in 2009. She's our chief counsel and she's involved in every transaction from beginning to end.

Howard: [00:39:13] [INDISTINCT.]. [0.0]

Mark: Christine Forakis, now her name is Christine Cracchiolo.

Howard: [00:39:21] [INDISTINCT.]. [0.0]

Mark: C-R-A-C-C-H-I-O-L-O.

Howard: And she's an attorney here in Phoenix that does practice transitions?

Mark: Yes. Of course, her father was John F. Goodson.

Howard: Have her come by my home, for me and Ryan to do a podcast.

Mark: I'll do that. Absolutely.

Howard: I mean, I generally don't allow lawyers to come into my house, but I'll make an exception. By the way, that website is ... so, was that a play on etcetera? Dentcetera?

Mark: Absolutely. Dental Etcetera. Dentcetera.

Howard: Yeah, I love the name. Dentcetera-Advisors.com, and I just re-tweeted their last tweet, if you're trying to find them. They're @DentceteraAdv. @DentceteraAdv. "Buy, sell, finance, transition, market a dental practice with us, new graduates, associates and long term dental practice owners all flourish with us." When you were talking about that that six offices in Ohio, as an exit strategy, is it pretty easy just to sell those to a DSO? I mean, is that something where a big Heartland would come in and say, "Well, we'll take it over." Or, let's say your practice is going down, are DSOs still doing mostly roll-ups and buying practices, or are they starting to do more de novos, where they just open their own from scratch? Are they a good exit strategy?

Mark: We've seen both scenarios. We've had DSOs that were interested in our practices in Ohio and in other places. But again, they're looking for a practice that doesn't have flaws. Sometimes that practice may have a flaw. Maybe it's above and beyond the financials of the practice, but maybe it needs a new build out or it needs new equipment. Well, you know, that's not something that a DSO typically wants to do. They want to come in, they want to see the financials, they would like the seller to remain long term or short term, and, you know, be able to grow that practice as part of their business model. James works frequently with DSOs. James, would you like to comment?

James: Yeah, they always have their ... each one has their different model of what they look for and when they put it in the category, they're usually, you know, buying for top Dollar. Some get cute and want to offer half with this and we'll give you half upfront and then, you know, what the doctor ... but, you know, generally speaking, for DRS-360 practices that we have, yeah, mostly regular doctors buy our practices. I mean, we have a few that want, but they typically don't want the work, you know. And, quite frankly, as I was saying, a lot of our practices are great practices, I mean, they are absolutely fantastic, they're good for a new person. They're always sold for, you know, a fraction of what a normal practice transition brokerage firm would be because our mission is not selling it for top Dollar. Our mission is saying, "Hey, this is reasonable. The new buyer is going to get into a great situation. It's going to roll perfectly, and life is good." So, most of these situations, actually the structure of the practice is doing well. They may just have mismanaged some of the ratios, like, what we had in one practice, rent was about $2,200. No big deal. Okay. We're like, all right. For a ten op practice, that's good. $95,000 collections, alright. Supply bill very proportionate, it's about 6 percent - rather have it about 5. And then you're looking at it and you go, oh, my g*d, payroll's forty-eight thousand. Well, hey, you know, I mean, that's the way he ran it.

Howard: Does that include the dentists and dental associates, or is this just a single dentist and that's just his staff?

James: That was just staff! And I'm like, oh, man!

Mark: That was his staff, and then we had to add about twenty-four thousand in dental fees for the month. So, I'm sitting there and I'm doing the books, and I'm, like, choking myself because I'm saying, oh, my g*d, this has to be rebuilt. We got to re-do this schedule because it just doesn't work. So, James got involved and he made all the necessary adjustments and now the practice is reaching a point where it is going to be profitable. And that's part of what we do when we recover a practice. We evaluate every aspect of the practice, stabilize the practice, in some cases we replace dentists or staff, and then, of course, grow the practice and, once we're at that growth mode, we'll either retain or flip the practice, and James makes all those adjustments very carefully.

Howard: So, what was his labor percent and what percent do you like labor to be at?

James: Mark?

Howard: I mean, if he was doing forty-eight thousand in payroll ...?

James: Yeah, I like it about ... when I set a low budget of a practice, I like to set it at 30 percent on a low budget. So, you know, if the practice does generally, you know, between eighty to ninety-five consistently, I will always set my payroll at the lowest. Like, looking at a twelve-month spread, I'll say, the lowest amount they've ever done is eighty thousand, I'll set 30 percent budget at that mark, and then, so, every month of the year, we're under 30 percent, and we're good to go. So, when I set ... I like to set a low budget.

Howard: But, what was that guy's labor at?

Mark: Well, out of the $95,000 general monthly income, labor, including docs, was seventy-five thousand.

Howard: Labor, including docs. But, what was labor minus the doctor?

Mark: Labor would be fifty-seven.

Howard: Yeah, you know, the CEOs of DSOs that I've podcast interviewed have told me they're ... what they don't like and they're staying away from is, they'd go in there and there's a bunch of legacy staff that are massively overpaid, labor's 30 to 40 percent, and they're going to have to go in there and buy that and then go fire all these goodwill people that have been there forever and replace them with half the price and, or because if you go in there and adjust down their pay, then their morale is horrible. And, so, you know, they want to buy a practice where the staff and doctors stays, and they just say it's just cheaper to do a de novo and run it at a loss until it breaks even, than it is to go in there with labor at 30 to 40 percent and deal with all those headaches.

James: Yeah, we usually correct a lot of the situations before it's usually sold. It’s like ... but a lot of our clients are doctors that we ... you know, as I was saying, we've worked both sides of the fence. We've worked for courts. We've worked for attorneys representing trustees. I've worked for B of A, Wells Fargo, we're the main referral source. I like working for doctors because, like, for example, we're in Arizona so we'll talk about an Arizona case; I had a doctor in Kingman - Kingman -about a $700,000 practice. The guy was in debt. Good practice. We needed some corrections from a business plan, but his main goal was to protect his team. So, we restructured where we were able to protect his practice. We were able to get the practice into a new owner. The new owner wanted to keep him, so, he was allowed to keep his job, and we protected his team. So, right now, currently, the doctor has all his debts cleared. He's in his original practice that he's been working for ten years, and he now has a partner that's running it and he's making money as a dentist, and we cleared all the rest of the debts. If we didn't catch that, probably eight weeks later, I mean, probably about eight weeks later, people would have been calling, filing judgments, and things would have been chaotic. So, in that situation, a lot of our clients are actually the doctors that want to stay in their existing practice. So, and those kinds of situations we love really good, because it's a nice transition to a new owner from goodwill and that kind of thing. So, those the DSOs do like.

Howard: Well, you know, you and I are in Phoenix, and Kingman is a rural town.

James: Yip.

Howard: Last I heard, 56 percent of Americans are urban, where I think two out of three dentists practice, and the other 44 percent are rural, were the other one out of three. Talk to these young kids, do you think demographics matter?

James: Yes, I do. I mean, you know, I'm a big fan of acquisitions as long as you do it right. You know, not based on projected, and buying it for ... and I see all these brokers that I've had contact with, and, I mean, I know all the brokers in this State and I deal with brokers nationwide. They're always pushing that limit.

Howard: You said, they're always ... the brokers are always pushing what?

James: The limit ...

Howard: Oh.

James: ... you know, on what they can sell at. They're maxing out the cap, if B of A can't, you know, they won't do a loan at ... what is it now, Mark? Is it 1.2 to 1 ratio?

Mark: Well, they use that and, you know, they're looking for the higher ratio possible, but they're typically 1.25 to 1.35.

James: So, you know, they're pushing their ...

Howard: That's the size of their loan?

Mark: No, that would be a debt service coverage. So, for every ... if you had a $100,000, let's say, in debt payments for a year, that would mean that you would have one twenty-five to one thirty-five available as net cash flow to pay your debt. And, obviously, the higher that ratio becomes, sometimes when we represent buyers and look for acquisitions, we won't decline those practices that will operating at a 1.69, 1.79 ratio, because there's less chance for error, and if you make an error, you have so much additional cash flow that you're going to be able to survive it.

James: So, I mean, that's what I always think is important when I talk to young graduates. I mean, my second practice that I purchased, I was sixty days out of school, was a million four, but the debt service coverage was what? Three to one?

Mark: Three to one. It was fabulous.

James: Even though I was a little bit naive, I knew that I'd have to be a real idiot to mess this practice up, because there was a lot of profitability even if I dropped 10, 15 percent, I'm still able to cover my debt service and pay myself and pay my loan back. So, I'm pretty safe. When these guys - and I see a lot of it - they're sold on projections. Maybe the bank just said, "Oh, yeah, we'll accept that", and when they buy it it's so tight right off the bat, where one hiccup, they're not getting paid, you know, and then it just, you know, [00:49:42] [sounds like: crates it]. [-0.0] So, they buy something that's just so tight. So, I've talked to brokers and I'm like, "Hey, why don't you drop the price from here to here. It will sell faster, and it will be a good buy for the buyer. But also, it's a good sale for the, you know, doctor that's selling as well. Or you could just keep it for a year on the market." That's why, like, a lot of DRS-360 practices or even, quite frankly, our normal acquisitions, when we sell a practice for a dentist, we usually don't keep a practice for more than thirty to sixty days. Our clients know this is what the value is, it's easily financeable, we find a buyer that's a good fit and Boom! It's gone. We don't play that pushing that envelope to where we're maxing it out. So, that's not really good for the success or the future of the practice.

Mark: Right. What James is saying is - there's an important part of what James is saying I don't want anyone to be confused by it - that if we represent a seller, obviously, we're looking for the highest and best use and the highest, best return for their practice. But there's a difference between what is that legitimate value for that practice, or some magic number above that, you know. So, it has to work. When we look at everything, not only do we pre-qualify buyers, but we pre-qualify the practice that we're listing for sale, to make sure that it will qualify for financing, for someone who is qualified, that they will be able to obtain the maximum financing as well. So, it's, you know, there's a couple of extra steps we do, of course, in DRS-360. We also do equipment valuations for banks, for lawyers, bankruptcy trustees, and also for clients and dental clients. We also do practice valuations as well. So, we try to, you know, be in every proper place to make sure that we make the right decisions with the client.

Howard: So, that's your third website. It's DRS-360.com. Dental Recovery Solutions 360 is a top dental practice solutions group in the United States. If your dental practice is worth less than overall debt, accounts payable are ninety days plus late, negative cash flow, contact DRS-360. We save dental practices every day nationwide. And that Twitter is @DRS_360. And how come Mark's got his beautiful face on that and not James? Was it a coin toss or was it just deemed that Mark was more handsome than James? How did that play out?

Mark: James has a separate one that's called @DentalRepos.

Howard: My gosh. Yeah, I'm a big Twitter fan, and you know why? Because Twitter and LinkedIn ... you know, LinkedIn got bought by Microsoft ...

James: Right.

Howard: ... and Twitter went public at forty and they're down to twenty, and I'm sure they're headed to ten or five - because if you post a tweet on Twitter or LinkedIn it goes to all your followers.

Mark: Sure.

Howard: You post a post on Facebook, they won't push it out unless you boost the posts and give them money. So, if you're giving your social media platform money, why would you do that if there are social media platforms that don't cost money, which is Twitter and LinkedIn. The other thing about LinkedIn, these dentists, they spend all this time on Facebook, but they always have to give money to boost their post. If they did the same, if they built up their LinkedIn following, number one everybody on LinkedIn has money or dental insurance. They all have jobs. I mean, that's why Microsoft bought it, because they said, my g*d, there's a gazillion people there and they all have college degrees and great jobs. Look at the people following you on Facebook. How many of them are biker chicks, you know, that don't have any money? And so, dentists post all this stuff on Facebook and then spend money. And I'll rest my case on Twitter, that's why Trump is the President, because at night, during the evening news, only a million are watching CNN, only three million are watching Fox, and he had six million Twitter followers that he could tweet from three in the morning to ten at night. He just went direct, man, he literally disintermediated the middleman. And, I mean, and then, also, so, congratulations to you guys for having four Twitter accounts. And I suppose you guys are big on LinkedIn too?

Mark: Yes.

Howard: Yeah. That is amazing. I want to ask you another question. You know, Socrates said we only have two emotions: fear and greed. There's a ton of fear out there with these dentists about these DSOs. What do you think of the health of the DSO market? They claim they have 12 percent of the dentists working for them. And when I say DSO, you know, I'm not talking about a dentist who has two locations or three locations, I'm talking about your thirty-five major players who have 12 percent of the dentists, they claim they do 19 percent of America's dentistry. The red flags are they can't go public, you know, they've got too much debt. They've bought their earnings, so every time they buy a million Dollars practice, they get a million in sales, but they got a million more in debt. So, as they've built these monsters, they've built debt sheets that would just make me cringe. But what do you think of the DSOs? Every time I talk to one of those guys, podcast them, they think, you know, in ten years they'll have a third to half the market, and that they're the greatest thing since sliced bread. How would you grade the health of them, since you deal with dental disasters and dental recoveries? And, plus, Mark and I are old enough to remember - I don't know if ... but, when we got out of school, Orthodontic Centers of America was publicly traded on the New York Stock Exchange, there were a dozen on Nasdaq. Every one of them imploded. Wall Street will never forget it. None of those thirty-five DSOs could go public tomorrow on Nasdaq. I mean, they just ... Snapchat could, and that thing was a joke.

Mark: Right.

Howard: Twitter could go public, and that was a joke, but these guys can't go public. They've got amazing debt. I've already to this rodeo before thirty years ago and watched them all implode. What do you think is the status of DSOs? What does their ...? Talk about what your thoughts are on the DSOs.

James: We've actually had some DSOs contact us to try to refinance different sections of their group, like, we had one DSO that has, like, thirty offices in Houston, you know, and they're just hammered with debt. You know, like, remember that one we evaluated, Mark?

Mark: Yeah. Absolutely.

James: You know, [00:56:26] [INDISTINCT] [0.0] oh, my lord, we're talking about crazy debt, not as profitable as you'd think. I would, you know, as a personal business owner, I would just go out of my mind if I had that much debt. I mean, they buy themselves into the category, you know, and when these young doctors get swooped into, "Hey, I'm going to by myself the same way. I'm paying 80 percent, or whatever the cash flow of practice is. I'm flying it. I'm going to have twelve. And, then I'll do an EBITDA times X", and, you know, I'm about low debt. I'm about keeping your debts low. I'm not about ... you know, seeing some of these guys' portfolios, Howard, is absolutely insane. I'm not frightened by them as a practitioner. I've never been affected by them. I think you can compete with them, you know, as a solo practitioner. You know, a lot of doctors will, you know, get the fee-for-service model. I want to be fee-for-service and they don't market as aggressively, you know. I mean, I spend $12,000 a month in marketing every month, and it yields returns. Consistency breeds volume. That's what Mark has always told me since I was a young chap and it works. And, you know, I don't mind even some other marketing, you know, I have doctors that say, "Well, I don't want to do some of those specials and different things like that." I'm like, you know what? Bring them through the door, and it's your job to create the value and sell dentistry. Provide a high-end fee-for-service feel, but make it affordable, and then, when you're talking about cosmetics and reconstruction and stuff ... Howard, I do a ton of reconstruction and implants and cases that are big, and it's because of the way I market. I compete with the DSOs, but I also market above and beyond in different levels of marketing. So, you know, I have a low-grade marketing that a lot of, you know, tons of mailers and different things go out, but I also have the higher end marketing that I've always had. So, I'm kind of a hybrid type of practice. So, you know, a lot of doctors are a little bit nervous about, well, can I compete? Yeah, you can. You can buy a better ... you know, like, you were saying about those cosmetic dentists that only do veneer, they don't do implants, they don't do grafting, they don't do, you know, general dentistry anymore. Well, expand your basket and, you know, I think you'll be just fine. I don't think, I'm not worried about DSOs. They will probably always be around. Some will implode. Some won't.

Mark: Well, what I see a lot of times is, from a young age my dad used to say to me, Howard, cash flow is everything. Period. So, you know, James will, of course, say to me, "Well, Pops, we do have to have production before you can worry about cash flow." Correct. But, nevertheless, cash flow is everything. Period. So, if they're buying practices at the top of the market, and maybe they're funding 80 percent at first and then 20 percent over the next couple of years, maybe they have the seller staying on for a couple of years, that is part, I guess, of our industry today, or of our profession today in dentistry, is that DSOs - what was a chain and now is DSOs -however, you do see that in the last year more graduates went to work for people or went to work in DSO/chain or sole proprietor practices because they like the convenience of coming in in the morning, they are given their schedule, they leave at four thirty or five o'clock, and they don't have to worry about billing and collections, H.R., financing, marketing, anything. So, I think that that is the trend that we're seeing. But I still think that all, you know, there will always be a market for a good dentist that serves his patients well, markets well, and does the right thing. So, I think that that market will always exist. Will it change over time? Most likely, but it will always exist.

Howard: You guys, I really wish you would do dentistry a huge favor. There's a thread that just got started a couple of days ago in Dentaltown, it's called 'so burned out, lost drive and motivation, tired of dentistry'. It's already at sixteen hundred comments with forty thousand four hundred and seventy-four views. And as I read that, you know, it just kind of makes me sad. These guys are pouring their hearts out and, being in the rodeo for thirty years, I know so much of this is because their house is not in order.

Mark: Correct.

Howard: They're upside down in debt. I mean, they're even talking about it, you know, and I wanted to make a light joke on it, and I'm going to post after we get off, I'm going to say, "Well, you know, I'd rather be a dentist than a chef because everything they make just turns to poop", and, you know, try to put something funny. But, I think you guys could get a ton of traction and leads, you know, and can you just go in there and sell Dentcetera, just say, "Hey, we just got done in a podcast with Howard but, you know, how much of this is about debt? How much of this are you upside-down or are you in over your head?" But it's on today's active topics: 'so burned out, lost drive and motivation, tired of dentistry'. I mean, it's just a pile-on.

Mark: Yeah.

Howard: I mean, it's just a pile on. All these guys and gals on there just pouring their hearts out about how, you know, they're just in over their heads, and some of them need help and you guys could do so much. James, you said you spent $12,000 a month on marketing. I think it is so amazing how, you know, the average dental office ... what do you think the average dental office adjusts off of production for PPOs every month? How much money?

James: Oh, jeez, I don't know, about 30 percent.

Howard: Yeah.

James: [01:02:05] [INDISTINCT]. [0.2]

Howard: Yeah, so, they don't blink at signing up for every PPO and having $20, $30,000 a month in adjusted production, but they won't even think about spending a Dollar on advertising to the other half of America who doesn't even have dental insurance.

James: Yeah.

Howard: Why are they so ...? The average PPO price is 42 percent below the doctor's usual and customary fee. Why do they not blink at lowering their price 42 percent signing a PPO, but won't spend, like you do, twelve thousand a month on marketing?

James: I would ask the same question. I'm like, you know, it's the easiest path.

Howard: So, what percent is ideal for marketing? You talked about labor, you want it to be 30 percent of your lowest month's collection. That should be your budget going twelve months forward, so you're always going to be 30 percent max and fall below it all the time. You talked about supplies you like at 5 percent. What do you think advertising expense should be?

James: Well, at minimum at least 5 percent. I like to go on growth. I mean, you know, my practice does about 2.7, 2.8 consistently and it's in growth mode, you know, and ...

Howard: And how many associates do you have?

James: I have two.

Howard: So, three docs basically doing a million each?

James: Yeah.

Howard: And, are those are docs partners or employees?

James: Actually, they both have offers, they could buy in at any time. It's up to them. I run more of a group, you know. I used to own multiple practices, but with DRS-360 and the things that have been done, I actually sold all of them about a year ago. I kept my biggest one that I've had for fourteen years, and my team has been with me for a long time, so, you know, I kind of just have a group model, you know. I don't ... a lot of doctors are like, "What? You don't have ... You have a problem with them buying in?" No, I don't have a problem. My practice is paid for. I don't owe any debt on any of the stuff that I have. It's kind of like, one of my buddies told me that he does the same model. And, yes, I own 100 percent of a $2.8 million operation. Well, we actually ... I don't mind any of them buying in. That's perfectly fine, 'cause I can take my money and I can roll it into something else. But, you know, when you're in growth mode, you know, and you're selling, you're like, "Hey, listen, we get about ninety-five new patients a month, the doctors are loaded. Let's bring in another guy." You know, suddenly maybe my 100 percent, if I sold 50 percent of it, maybe my 50 percent in the year would be worth more than my 100 percent was if I didn't sell it. So, I always like to sell in a certain time, you know. I had a buddy of mine that said the same thing. He owned 100 percent of a million Dollar practice, and his buddies were like, "Why are you selling half of it?" He goes, "Because I'm growing." So, he sold half of it to his partner and two years later he was doing two point six. Well, his 50 percent ownership is now worth more than his 100 percent ownership back in the day, you know. So, I'm about always growing and what I see a lot of the time is, for the practice we deal with, they're not spending any money on marketing. [01:05:21] [INDISTINCT]. [0.1] No internal marketing methods, no relationship building, and they're like there's ... it all comes from everything else, you know.

Howard: Where are you spending your money in marketing? What's working? What's not?

James: You know, I do a lot of mailers. I think with, you know, I put personalized pictures of my team on them. So, when people see it, they actually see my team. I think that's important. I don't do photographs that are professional, that are like posed, you know, like glamour shots. You know, we're pretty chill. We're in the lobby and we're just taking pictures, so they can see the realistic connection of the people that they're going to come to. I do a lot of introductory prices as a 'thank you', to come and try us out. I don't do discount. I also put cases, my own cases on there, before and afters type of thing, that are just crazy. You have other options, you know.

Howard: There's such a bias with Millennials on marketing because, when you listen to people like, say, Scott Galloway at NYU School of Business, when you look at the data driven business minds, research driven, they're always in grad departments. Like my favorite book, 'Good to Great'. What's that guy's name? Jim Collins. I mean, he wrote 'Good to Great', 'Build to Last', 'How the Mighty Fall', but he's a university professor with a grad department and his graduate students and him spend five years a day to write a book, but when you look at marketing, the number one marketing is still direct mail and e-mails.

James: Yup.

Howard: I mean, even if the e-mail blast only has a 3, 4, 5 percent open rate. But when you're a Millennial and you grew up on Facebook, they just keep wanting to do Facebook, and it's like, "Really? You think Grandma, who's going to have her denture replaced with All-on-4 implants, is going to find you on Facebook?".

James: Yup.

Howard: You know who's going to find you on Facebook? A bunch of Millennials who drink fluoridated water and brush their teeth with a fluoridated denture fuzz and had sealants and they don't eat anything! And direct mail, and even with direct mail with a miserable 1 percent return rate, my g*d, if you mail to your whole damn ZIP code, you're blasting, and e-mail blasts, I mean, they got to be collecting all their patients' e-mails and, I mean ...

James: Absolutely, absolutely.

Howard: I have eight thousand emails at my dental office and, my g*d, that's ... so, I know they just want to ... I know they're fixated on the Four Horsemen, you know, Amazon, Facebook, Apple and Google. But I'd take a direct mail and e-mail blast any day over a Facebook boost or a Google AdWord.

James: Oh, absolutely. I think there's two parts to it: taking care of the people you have in your practice to stimulate referrals internally, and then, external, to bring them in. It's a combination of a lot of different marketing methods that we use. But, you know, I see a lot of doctors that are so addicted to marketing external, that they don't actually take care of their home base. So, they're losing fifty out of the door, but then they're bringing in fifty, so the practice is not in growth, you know. So, I like to email stuff. Absolutely.

Howard: I want to ask another question that I see. And, oh, my g*d, we went over, we're way into overtime. Do you guys have to run, or can I ask two more overtime questions?

Mark: You certainly can, Howard.

James: It's okay.

Howard: Okay, you know, every dental consultant I've podcasted doesn't think too much about associates. You know, they say, you know, when they go into a practice, the owner dentist will attempt the molar endo, will attempt removing the wisdom teeth, will attempt all this stuff, and the associates just refer to an endodontist, refer to the oral surgeon for wisdom teeth, refer out the [01:09:13] [INDISTINCT]. [0.0] And, you know, when they go to a seminar, the owner doctor is viciously taking notes while the associate is surfing Facebook and doesn't come back from lunch, and these chains that are building up, these DSOs with a bunch of associate employees, do you think the associate mentality is very different than the owner occupied dental office as far as production?

James: I think so. I think when a person, I mean, just at least from the colleagues that I've met, when they go work for a DSO, the day they walk in is the day they're thinking about what they're going to do after they leave this job. Makes sense, you know. I mean, with my doctors, they're part of my group, and to me, they're my partners. Now, they may not be an owner right off the bat from the physicality of paperwork, but I sure as hell treat them like one. And I don't like that term 'associate', because, you know, I've work jobs in the past from all careers, and I remember clocking in and clocking out, and I hated those jobs. It was always, when is it going to be done? You know, I like to create a sense of ownership for the doctors that work with me. They're my colleagues, and I think it's the leadership of the doctors that have associates, you know, they treat them like associates, you know.

Howard: Yeah, I only see successful associates when they're working in an office where the owner doctor is full time, Monday through Friday, to five, you know, full time, totally committed. Then the associates get mentored, they get motivated, they excel. But when I see dental offices with nobody in there as the owner, just associates, I'm not impressed by the numbers, the profitability, and I think that's why they can't go public.

James: Absolutely.

Howard: But, gentlemen, thank you for going sixteen minutes over. This was the most fun hour twenty minutes. I'd love to talk to your attorney. What part is she with?

Mark: She owns Forakis Law.

Howard: They always are going to solve their problem by going to Kois, they're going to go to [01:11:19] [sounds like: Spear] [1.1] and go to Scottsdale Center and get a CEREC machine. They're going to go learn LANAP and buy $135,000 laser. They're going to go buy a CB/CT and drop, you know, a bunch of money on implant training. They're always going to solve their upside down in debt dental disaster with spending another one hundred, two hundred, three hundred, four hundred thousand Dollars on all this high-tech equipment. What are your thoughts on that? Is any of that a return on investment? And should any of that be bought when you're upside-down in debt and you're trying to dig yourself out of debt?

James: No.

Mark: No.

James: And we see that quite a bit. I mean, I think, the two cases ... we have two cases running right now were a year ago they just bought a CEREC. Another guy bought a cone beam. The other guy bought a laser. You know, I mean, it is what it is. They thought spending money would get them out. You know, one guy tried to hire a consultant, spent a ton of money on that. You know, in my experience with consultants - there's some good consultants - but I think that, you know, they'll spend money anywhere to try to get them out, and a lot of times a consultant will come in, they'll do, you know, culture improvements, they'll do personality testing, they'll give you some tracking sheets to create the value in the system, but they don't go into the nuts and bolts of the financial problem.

Mark: Well, I think one of the ideas there too, is that when they buy these different things, that's fun, whereas sitting down, truly looking at your finances, evaluating your finances with someone that knows what they're talking about and how it applies to dentistry, most likely is not going to be fun. It's like pain or pleasure. It's going to be painful when you look at that and you see that your budget for employees is way over, or you don't need nineteen employees, you need eight good people doing the job, or, you know, advertising is out of whack, or lab expenses are out of whack, or dental supplies, whatever. That is painful to look at that and have to make changes internally. It's pleasurable when you have somebody that comes in and says, "Hey, you can buy this, and this going to be fabulous for your practice, and look at all, you know, the fine techniques and how well it's made. And we can get you in at nine ninety-nine down, and it's going to cost you this much to eternity." But if they don't use that tool at all, it just becomes added debt.

James: I think it comes back, Howard, to the consultant thing, where the Number One I hear is, "Well, this consultant said I needed to produce more." So, if the ratios are off, they're like, well, we've got to produce more, we've got to produce more. So, they suddenly are like, "Well, I can do the CEREC and that will help my lab bill." Well, not really, unless you really know what the hell you're doing. Or I'm going to do this implant course and I can try do it. They're always thinking about what they've got to do to produce more, instead of coming back and thinking about, I always like to call it, like, you have operations and then you have your financial, and your financial should guide you what changes you need to make from an operational point of view. I've talked to a consultant, she goes, "Well, we've got to have this ratio over here." I'm like, "Okay, that's financial, that's theory. What are you going to do in your practice to make that happen, so you have that financial change?" "Well, I don't know. I mean I'm just telling him what he needs to do." I'm like, "You told him that ratio of staff salaries needs to be 26 percent. Well, what are you going to do to make that happen? You've got to change the schedule, you've got to focus on it, you've got to accept it, you've got to map it out and make the change and then you'll get your goal; not always produce more, produce more." So, usually I think that that mentality of producing more means, okay, I'm going to go buy that extra machine. I'm going to go spend $50,000 and go get implant training. And then it's like they're rolling.

Howard: Yeah, then that's the difference between economic theory and an economic strategy. A theory is you need to raise production, get more new patients; but in reality, a strategy is when you make a yes or no decision. It's like, okay, you're going to bring down your labor. Show me the decision matrix of where all the questions have a yes or a no, you know.

James: Yeah.

Howard: Do I need less people? Yes/No. You know, make decisions. As my dad would say so eloquently, "Sh*t or get off the pot", you know. Last question, last question. I'm being too greedy, keeping you guys on. Do you like any of these dental dashboards?

James: I haven't actually been on a lot of dental dashboards, to be honest.

Howard: There's a lot of companies popping up. A lot of them are in Utah where they plug into your practice management computer system, and pulls out a bunch of numbers to give you, you know, a dashboard of, you know, your production, collection, number of hygiene patients, how many got rescheduled, but that's not a big part of your secret sauce? Is any dental dashboard ...?

James: No, no. I mean, I just kind of go old school. Pull off the things I need, interpret them. I do things a little differently. A lot of doctors budget things and pay bills on a bi-monthly basis. I do a weekly budget and I'm on target every week. All my bills are paid every week. I allocate money every week into that certain cash flow of a monthly allocation. 'Cause practices usually collect about the same every week. And so, what I see a lot of doctors do is, oh, at the end of the month they're like, "Oh, this wasn't great. Well, maybe next month it will be better." And they didn't do any changes to make next month better. If there's a problem in my practice, because I do everything weekly, I will know it now. I won't know it in two weeks when it's too late, or two months, by the time they've grabbed all the information, "Oh, man, I'm not doing very good."

Howard: You know, I asked you a question: do demographics matter? And you geniusly said you just prefer acquisitions. I mean, you don't have to risk anything knowing if a dentist is needed. Supply and demand. If this is going to work. Acquisitions are so much better. Yeah, are you Monday through Friday, eight to five, or are you big into early morning, evenings, weekends? Do hours of operation open matter?

James: You know, to me, in my practice, I've had a practice where we always thought: work smart, not hard. And my second practice I purchased was more prosthodontics and things like that, and, you know, my old mentor used to say, "Hey, if we can do the same amount of money in three days than four, then we're going to do three and everybody gets a day off." Well, you know what? We ended up doing $2 million working three days a week. We were like, "Heck, yeah." You know, to me now in today's era, I mean, I look at what my patient base needs and then I am able to serve the hours they want. I mean, my office is open Monday to Friday and every other Saturday.

Howard: But is your Friday ... what are your hours Monday through Friday?

James: Eight to five.

Howard: Eight to five. And you're open every other Saturday at what hours?

James: Eight to five.

Howard: Eight to five?

James: So, two Saturday we give it for convenience, and then on Thursdays, we will roll into the seven o'clock regions to give little evening hours. But, you know, we've been requested, we've listened to our patients, our patients have guided us. But I'm not into like, I'm doing a scratch practice, so I'm just going to suddenly do these crazy hours to see that that's the magic bullet that's going to work.

Howard: Yeah, the magic bullet, if there is one, is spend less than you earn, and that's not a new patient experience, it's an every patient experience. It's like, focus on customer experience. When you go to work, bring it. I don't care if you're an extrovert. How many of your favorite movie stars aren't really serial axe murder killers? They just play the part in the movie. So, if you're shy and want to hide in your office, well, when you're at work it's time to go Hollywood and, you know, instead of finishing a root canal and running back in your office and posting on Facebook, you should walk the patient out to the front. And I always am walking out of the waiting room, shooting the sh*t with the next one, the last one.

James: Absolutely.

Howard: If I'm ever running late, I go out there and I apologize, and I blame it on the patient, you know, in kidding, joking way. Everyone's laughing. I mean, as opposed to you hiding in your office, so the next patient twenty minutes late is sitting there having a hissy fit and really stressing out your receptionists. Own it! You were late, you go out there, you go out there and tell them you're sorry, but if I had to bet on a dentist coming out of school, I'd want the chairside manner, the making me secrete dopamine, serotonin and oxytocin, not fight or flight adrenaline and norepinephrine. I'd want everybody in the staff ... and, you know, whenever I go to my, you know, physician, you know, it's always some window witch sitting behind a window, handing you a clipboard, not making eye contact.

James: Absolutely.

Howard: But, hey, gentlemen, seriously, we went an hour and a half. You guys are so amazing. Thank you so much for coming on my show today and talking to my homies. I just thoroughly enjoyed podcast interviewing you.

James: Thank you.

Mark: Thank you very much, Howard. It was a pleasure to talk to you.

Howard: All right, I hope you guys have a rockin' hot day.