Dentistry Uncensored with Howard Farran
Dentistry Uncensored with Howard Farran
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1105 Buying and Selling Your Practice with Corey Young, DDS, MBA, CVA and Rod Johnston, MBA, CMA: Dentistry Uncensored with Howard Farran

1105 Buying and Selling Your Practice with Corey Young, DDS, MBA, CVA and Rod Johnston, MBA, CMA: Dentistry Uncensored with Howard Farran

10/24/2018 4:28:34 PM   |   Comments: 0   |   Views: 318
Corey Young joined Omni Practice Group in 2016 after a twenty year career as a general dentist and practice owner. In addition to his dental background, Corey has a Master’s in Business Administration, is a Certified Valuation Analyst, and is an Accredited Business Intermediary. Transitions in dentistry can be a complex process and Corey enjoys using his advanced training and personal experience to help his fellow colleagues navigate these sometimes turbulent waters.

Rod started Omni Practice Group in 2004 after a career in finance and accounting at AT&T Wireless. His background gave him the experience in a variety of areas including accounting, legal, negotiations, and real estate which translates perfectly into the broker world. Rod has also worked in consulting dental practices on how to grow your practice. Rod has written numerous articles that have been published in Huffington Post, Dental Economics, several state and local associations and hopefully soon, Dentaltown. Rod enjoys seeing a seller fulfill their dream of retiring and transferring their legacy to a young buyer who matches their philosophy and management style.


AUDIO-DUwHF #1105 Corey Young and Rod Johnston 
 
VIDEO-DUwHF #11105 Corey Young and Rod Johnston

Howard: It's just a huge honor for me today to be podcast interviewing two legends in dentistry on the left we got Corey Young DDS, MBA, CBA and on the right we have Rod Johnston MBA, CMA. Man three bald beauties on a podcast this might be too much for you to take on a table you see this on YouTube you're probably immediately think you're on pornhub but yeah. Corey Young joined Omni Practice Group in 2016 after a 20-year career as a general dentist and practice owner, in addition to his dental background Cory has a Masters in Business Administration is a certified valuation analyst and is an accredited business intermediary transitions and dentistry can be a complex process and Corey enjoys using his advanced training and bristle it's pranks to help his fellow colleagues navigate these sometimes turbulent waters. I just ran into when I was lecturing at the of the Ohio Dental Association meeting in Columbus was it?

Corey: It was in Columbus

Howard: Yeah and I harassed him in person until he relented and agreed to come on the show. Om right we have Rod Johnston MBA, CMA in Seattle Washington. Rod started Omni Practice Group in 2004 after a career in finance accounting at AT&T; Wireless. His background gave him the experience and a variety of areas including accounting, legal, negotiations, real estate, which translates perfectly into the broker world, Rod has also worked in consulting dental practices on how to grow their practice rod has written numerous articles that have been published in The Huffington Post, Dental Economics and several state and local associations and hopefully soon dentaltown. Rod enjoys seeing a seller fulfill their dream of retiring and transferring their legacy to a young buyer Hugh matches their philosophy amantha style. So the reason I was so excited to get you on the show my rant is this here's my take is they in dental school the very sophisticated DSO's who have you know one or two layers of management are perfect at going into 56 dental schools offering free pizza to have these brilliant amazing speakers scare the living shit out of all the students that it's all going towards Walgreens and CVS and you know the answer to all the problems has come work for me at a DSO. So then I'm sitting at her saying well that's just great they hire all these kids and they live happily ever after and all I see is they all quit their job within a year and by the time they're five years out of school they've had five, six, seven, different associative jobs and then they finally do after five years what I did in a hundred and thirty three days which is just open your own damn dental office. I walked out of school may 11 87 had it opened September 21 I just celebrated my 31 year anniversary. So you have to debunk all the baloney that they're telling their telling them you can't get along if you have 400,000 in student loans and you don't have the experience to open up a dental office you don't know what you're doing you don't know what you do I guarantee you the DSOs don't know what they're doing. I mean not one of them can be publicly traded you're up there in Seattle I mean I'm pretty sure Amazon's publicly traded Boeing's publicly traded Starbucks a publicly traded why because they have the profitable growth business model. These DSOs they couldn't go public if you put a gun to their head. So I want you to start with people that listen to podcasts or usually not three old ballparks like us usually they're still in school they still have hair remaining. I want you to start with just debunking all the stuff the DSOs is telling them at their free pizza lunch in dental school.

Rod: Okay well I'll start well I think there's you know the DSOs have some good things about them and then you know you can use them for your experience as far as getting your clinical skills I typically hear that it takes about three years for a young doctor to have the same hand speed as a selling doctor who's been out of school for you know 20 years or so. So you can use them for to get that experience you know. As far owning a practice statistics are that practice ownership you make about 20% more than an associate dentist so lots of good reasons to own a practice. You also get to set your own philosophy your own procedures that you want to do you hire your own staff you can work your own hours you get to control the practice as much as you possibly can instead of working for someone else that says ok you need to work from you know noon till 7 o'clock at night and here's your staff and you know half of them don't know Dental Assisting at all those types of things and three weeks later you get a new dental assistant if you've never seen before and you have to retrain them all over again. The same with the front desk and hygienists I was as well as you could decide when you want to take a vacation not have the the DSO tell you want to when you want to take a vacation. You can set your own philosophy in the practice as far as what you want to do and what you want to keep in house and what you want to refer out, those types of things, so theres many reasons to own your own instead of working at a DSO.

Howard: Yeah I was watching a football game with a dentist the other day and it seemed like every time he had a big procedure he got a new dental assistant he didn't know anything. That's what walked him to the edge, I couldn't imagine doing that. I called my new dental assistant yoni who's been with me 12 years and then the other new one Christene I mean they just read your mind yeah that'd have to be so frustrating. Okay so then they're gonna say yeah but dude I got these private dental schools in Arizona Midwest earns 100 grand a year in Glendale Arizona and AT Still is 100 grand a year, their like dude I'm walking out of school with 400,000 with that is anybody gonna finance me with 400,000 in debt?

Corey: Yeah I'll take this one, they will you know what they have to look at is the bankers look at this as a cash flow situation and they look at when you take on these hundreds of thousand dollars loans as an investment into your loan. At the end of the day long is the bank (Inaudible 6:42-6:47) covering your payments on your student loan in addition to making the payments on the practice and having A good money that's a misconception that you have to pay that down.

Rod: I'll chime in the the banks also look as having a dental you know the dental degree as a as a positive they don't look at it as a negative and so it's it's almost like you purchased a four hundred thousand dollar asset that you can use to generate an income. So the banks look you guys I wouldn't say a positive but it's not necessarily a negative so it's a way for for you to make a living and to make a good living, so there are you know banks are still financing you know we've seen doctors with debt as much as a million dollars get financed.

Howard: Now is that because a million dollars because two kids in dental school got married or was that one solo guy, are you talking about that orthodontist in Las Vegas?

Rod: This was guy from Seattle actually he was he tried to be an orthodontist. So he lived in Manhattan lived in a super expensive you know penthouse and went to dental school and they kept throwing loans at him so he kept taking them and then he thought he wanted to be orthodontist so he went to the orthodontic school for I think a couple of quarters and decided you want to do that so he dropped out. Meantime he accumulated a million dollars in debt and decided to go buy a practice and he got financed.

Howard: You know it's funny because in all the talk about student loan debt. What's the total student loans in the USA up to now do you know what I know it passed a trillion is passed one point five and and they'll never do anything structure about the only reason that's trillion dollars that we'll have if I issued every freshman in high school a credit card with three hundred thousand dollars student loans they all run out buy a Ferrari and what the government did is with this too loans and then make it so you can't bankrupt and then give it an ample cash they borrowed a trillion dollars and then if you try to solve the problem by saying student loans should be able to declare bankruptcy on like any other debt you oh my god once they started defaulting the prices of these universities would plummet but there but yeah you offer a kid a hundred grand a year and a lot of are gonna take him because they don't realize how toxic it can be. So another thing about you know and that's given the game you know they the dental schools are nobody's the only skin the dental school has they can raise your tuition and the student loans of rates are loaning so there's no the dental schools don't have any economic incentive to lower their prices but if you start having those loans tied back to the universities and people started defaulting they would seriously have to fix in that structure but back to skin in the game these associates don't have any skin in the game and runes are morels. I mean every dental practice management lecture I talked to will tell me that the owner of the practice is sitting up there taking notes while the associates are on there on their iPhone surfing Facebook and snapchat when the owner is taking all these advanced courses and how to do molar endo or place an implant and they so the associate just don't care I'll just send it to an endodontist and you know so they don't have skin and skin the game helps a lot. I want to ask you another thing about buying a practice what why should I buy a practice as opposed to start my own what are the pros and cons of de novo versus purchase.

Corey: Cash flow you know if you buy an existing practice you're buying a cash flow. You know say you're buying a practice that's a million dollars doing a million dollars a year as long as you handle that transition well and you can handle the speed you'll have about a million dollars a year of cash flow coming in. If you start your own you're starting with zero now that doesn't mean you can't build it up but you literally you're starting with zero and a bunch of debt. That's the simplified answer.

Howard: So really what you're saying is denovo is risk because you're starting at zero no if you're gonna build a million-dollar practice but when you purchase something you're eliminating risk a lot of that money is eliminate risk. I mean you don't have I mean do you have to buy demographics if you're buying a practice I mean if you already have a practice doing a million dollars a year do you still need demographics?

Corey: Situationally I think at times you could but for a lot a lot of them you definitely are taking out the risk if you don't as you said and if you can handle what this practice is doing clinically and it's doing a million dollars and as long as you can transition it there's no reason to think you wouldn't be doing the same million dollars.

Howard: and what is the default rate on in the US dental office industry?

Rod: Point zero one two five percent or thereabout so it's the number that we keep getting quoted from various banks.

Howard: Point zero one two five?

Rod: Yep

Howard: So you said point zero one two five percent?

Rod: Yeah

Howard: So I mean and in every case of those bankruptcies that I know was their license taken away and eighty percent of the time it was alcohol or vodka or vicodin and then every once in a while you know someone puts a hidden camera in the bathroom or something completely insane and what I don't understand about the substance abuse thing is you know you can treat that too. I mean you know United States was the country that want to throw everybody in jail and it was Portugal who said look the United States has been doubling down on prisons and police for thirty years and their drug rate keeps going higher and higher and higher so Portugal is one instead of well America is the poster child to whatever the hell they're doing is has to be completely wrong, so they went after the the health model and said it's a disease. So let's take the same money we spend on prisons and police and try to find out why this guy is living on a railroad track eating opioids or sniffing meth under a bridge then turns out you know he didn't know what to do he doesn't have a job he doesn't have training. So they took that money and said let's rescue these people and and they legalized all the drugs and who has the lowest substance abuse rate in all of Europe its Portugal where it's all legal and when the police find you with a needle in your arm under a bridge they call a doctor not a police officer. So if you're listening to this and you don't know why but when you wake up in the morning you drink vodka, smoke pot or eat vicodin well come on you're a doctor figure that shit out there you know stuff like that they fix it all day long and your dental society's when I got out of school 30 years ago thing you heard anything like that they threw you under a bridge. Now almost every Dental Society has a program. So it seems to me that you know you can if you can treat substance abuse there's no default rate in dentistry and then if you listen to your elders and I have no skin in this game you might be less these guys saying well they're not going to recommend denovo because their dental practice brokers okay well I don't sell dental practices for a living and well I used to that's a whole other story back in the day but the bottom line is dentists lawyers physicians don't take orders the military doesn't want them Walmart doesn't want them and dentists lawyers and physicians want to do everything their own way. So when you go become an associate you're gonna be you're too intelligent to be happy because you just don't agree with everything that's being done and the only way a dentist a lawyer a physician is gonna be happy is when they're the drummer and they call the shots and that's our happiness and you not only do they make twenty percent more money I don't even think the twenty percent more money would factor into that much happiness because it seems like the more and more and more money I make the less crap I make now at night look at all that stuff like I wouldn't want a boat because I don't want to take care of a damn boat but when you're in high school you think oh my god by the biggest boat on Saguaro Lake I'd be the happiest guy yeah until I had to live with the boat for the rest your life. So it just comes down to peace I think it's absolutely peaceful to walk into your dental office and know I own this whole damn thing yeah totalitarian dictatorship now I don't give any employee money if I don't want to play with in the playground and if I don't like them if they just rub me wrong and I just like this isn't fun well I'd rather get a new hygienist then work with a hygienist that wasn't fun. I mean I think the most fun thing about me driving to work is I can't wait to see 50 different people I just love them and I got so many they've been there 10 20 30 years so I'm you know own your own you just bottom line and then furthermore I get statistics go back to your last go to your dental school every dental student Society you have a list of all the graduates and where they are now and just look at them why did they change dental office job, well it's all a this why why do you guys think associate turnover so high and first of all do you agree with that I mean or maybe you don't agree with it?

Rod: No it is high that's when we talked to a lot of the small groups and even at the DSO's and that's the biggest challenge and opening up a second third fourth location with doctors is finding an associate that's gonna stick around for awhile and that's that's worth their salt. A lot of associates, you know they either don't on't agree with the philosophy of the doctor sometimes they're put under constraints and you need to produce $5,000 a day or you're out of here and you know that philosophy probably doesn't jive with a lot of associates or 1 they're probably pretty green getting out of school and just getting their hands beat up alone they can't produce $5,000 a day or $3,000 a day. So I think that's that's probably one reason. You know another reason that the doctor may just be giving him some of the the hygiene checks and and some of the easy stuff to do when the low income producing procedures so that associate gets tired of that and so they go look for something else and so they find something else and probably the third reason is that so she gets tired that and they go either do a start-up practice or they or they go buy a practice somewhere so those are some of the reasons I think there's a high turnover.

Howard: So I've practiced 31 years and the number one feedback I hear from a patient coming from a DSO is yeah I really liked it but then I went back and my doctor wasn't there and then I started and then I saw this lady twice I really liked her then I went back and she wasn't there and then I was saying on an earlier flight I guess about a month ago that I had dinner one night and this this lady's daughter was completely in tears because she was eight months pregnant and then she just found out her ob/gyn at the HMO Hospital is gone and I've never had a baby before but I guess if it's your first child and this doctors been walking you through eight months it was just devastating to her that she was gonna have to meet a stranger on the big day. So the employee turnover and I don't want throw DSO's under a bridge, the employee turnover in private practice is the same as in DSO's.

Corey: Yeah

Howard: It's a doctor thing I mean in fact who are the doctors who stay ten years with you how would you describe the doctor?

Corey: Associate the whole time yeah not super motivated a lot of the time they're pretty they're they they have a whole lot of life going on and tends to be or where some of them are just they're scared of everything unless they perceived there to be zero risk involved with moving out of having a job they're terrified.

Howard: Yeah I would say what I've seen is there's only two types they either fear everything and they went into the university the DSO is the military and they just have this this blanket fear of risk on you so that's one and but more success I have had if I looked at everyone that stay with me ten years or more they all came from they have their own practice they so they live the dream they had it all I mean they were up in snowy Buffalo they were up in some cold deal the last kid went to college and all mom wants is to get the hell out of that wasn't a sunny Arizona and the dad says you know and I'd like to do or in my life just come here and do dentistry and so you know been there done that you know it just wasn't for me you know I get that. So on these do so equity you'll what fear is so bizarre like I was just lecturing in Wichita a while back and I know there's you know hundreds and hundreds and hundreds of dentists there and maybe I don't know 400 in the city and one little DSO came up and open one little office oh my god it was like a herd of sheep and a wolf just walked in and they all decide and a lot of these a lot of these kids are saying well I want to go back home but they just opened a big DSO there and I don't really know if I can you know I know I'm getting afraid because I'm little ol 25 year old Sally and can I really compete against one of them big bad boy dsos in the same small town what would you tell her?

Rod: I always tell doctors don't be afraid of DSO's and we do these startups and occasionally we'll find a great great locate DSO right across the street and it's like don't be afraid of them is the public and patients don't want to see a different doctor every time they go to a dentist or let alone the vet or whoever it may be they want to see someone who's constantly that knows them and they've built a trust relationship over the years. You know a lot a lot of these sellers when they sell a practice they're crying at the closing table because they're gonna miss their patients and their staff so they've built a bond with those patients. So I tell them don't be afraid of a DSO of competing against them at all for that reason and also a lot of times the DSOs or hiring green doctors who don't know what they're doing and maybe their clinical skills are not the best in the world I said you know you're gonna get some of their patients down the road so don't you know don't be afraid of them, love them will open up a new practice and they'll do great so there's no reason to be scared of these DSO's.

Howard: You know some of my best friends are dentists on the same street or down the street, Tom Mattern we had dinner two nights ago I mean I would from a purely a business perspective I'd give anything to fake a replace with some DSO Brad Sandberg down the street one of the best dentist in America I would from purely an economic point of view I would love it if I switched him out with a DSO. I mean I tell these kids I would rather be in a town that had 4 DSOs in a town where you had Brad Sandberg and Louis and Tom and Sharon Mattern.  I mean those people have skin in the game and they own their own thing and they're good people and they're honest and if something goes wrong they'll fix it no questions asked that's how you should fear not some mismanage thing but I do want to tell you one thing I don't like about the trends I don't want to talk about the trends in the transition in the industry, we were talking earlier about skin in the game when you're an employee you have no skin on the game already do back in the day the seller would carry the paper so he would never sell to someone who wasn't gonna be successful I mean if he had the wrong attitude if he knew you were gonna rub everyone the wrong way if he knew you were a narcissistic nutjob he wouldn't let you buy his practice because he didn't want you to take over his patience and he didn't want you to default on the debt so they would carry the paper and then when you got in trouble you had some old dentist that would come down there and help you out, he can call an old patient that's upset. Now it's his faceless institution where the seller finances a through some Bank a thousand miles away from home, is it a good thing that the seller has no skin in the game once they cash out is that really a good incentive for the art industry do you think the seller should have to carry half and abate carries the other half do you think that would, I guess with a default rate of point zero one two five no one cares but what do you think about the transition from owner finance to stranger bank finance?

Corey: I see your point with that Howard, It definitely would put more of an emphasis on the seller, the hard part is you know as a reality especially if the DSO is coming on board it's hard to go back to that because the DSOs you know they'll have 20% holdbacks a lot of times but they're willing to write such a big check it's gonna be hard to convince the sellers to go back to carrying half of that debt themselves for no other reason. The banks also the reality of as a banks are just that they love to lend this money out again because of the huge people the low default rate.

Howard: and it's a huge loan.

Corey: I was going to go back to that.

Howard: I mean what does the average practice loan you guys deal with, you're in Seattle Ohio what does the do things mostly works at Ohio or national or what is your territory?

Rod: We're up and down the west coast and Corey  covers the Midwest so we have quite a bit of the United States coverage.

Howard: and what is your website?

Rod: www.Omni/pg.com

Howard: and what does the PG stand for?

Rod: Practice Group

Howard: and Omni stand for.. Omni directional radar

Rod: Yep exactly

Howard: and where do you get the name Omni?

Rod: Originally when I first started the company we were doing all different things in the dental world we were doing consulting we were doing accounting we do the acquisitions we were doing real estate so a whole bunch of different things so you know omni means all.

Howard: Yeah omni means all of all thing and all ways or places. The website is www.omni/pg.com and what are my homies going to find at omni/pg.com?

Rod: Well that's where we have our listings throughout all the different states that were in, in addition we have videos and some educational things so that's one of the things that we try to do especially we hold buyers seminars and sellers seminars we try to educate people on you know if you're five years out from selling your practice we talk about what you should and shouldn't be doing before you sell and buyers we started buyer seminars as fires were so green and the letter of intent they'd say okay now what now what do I do and so we started doing seminars to train them on you know psychic this is the season of steps you take to buy practice. So those different videos out there on that and selling as well as I think we got a few real estates seminars doing start-up practices.

Howard: Now do you ever sell practices to do so or do you ever buy them for dsos or any of those guys your clients and if so what are they looking for?

Rod: You know they call us they call us all the time asking about our practices because they're typically looking for practice doing over a million dollars they want like Corey said the seller to carry back 20% they wanted to stay on for two years and you know then they have to reach certain goals in order to get that last 20% but I can, we haven't sold any of the major dsos we've sold quite a bit to some of the small groups who own two to ten practices but none of the major DSOs like the Heartlands and those types we've never really sold a practice to those guys.

Howard: and plus Heartland, those guys have a pretty big internal team.

Rod: Well I should say in a lot of ways their competition to us because they're doing marketing to sellers and and things like that and I'm not you know trying not to bash the DSOs and say they're the worst thing in the world or there are good places good things about DSOs but I just wanted to.

Howard: I podcast the CEOs of so many major DSO is a Rick Workman Steve Thorne I mean I love the guys and I just businesses competition I mean you could not be I mean last night the Patriots barely beat my undefeated Kansas City Chiefs I went to University of Missouri dental school and that wouldn't have been a great game if there wasn't great competition and so I just see I don't see any of this person so when I go back to the kid he's been out of school a couple years she's getting his speed he wants to have his own place what should he be looking for in a practice, what would it would've his hometown has three practices for sale besides price what should I should be looking at?

Corey: You know largely you got to look at the type of procedures that have been done in that practice can you clinically right now and then do most though now doesn't have to be an absolute match but realize what you're buying you need to be able to do or you have to deal with it. Let's say that practice you're looking at buying does 20% of its revenue from implants and you currently don't do implants at all you know that's 20% that you either got to figure out how to do really quick or you're just gonna walk away from. So that to me is a big fit I think it's also that personality wise I think sometimes gets lost on this there's a temperament issue some dentists are very laid-back some are very draconian and I don't mean that as a judgmental thing but when the staff and the patients are used to one personality type it can be a bit drastic if the exact opposite personality type comes in and takes over.

Howard: Great point also to that point if you buy a practice from someone who loves selling yeah this guy there's all these big cases but he loves selling and he's got the personality for sales he's the sales person and then you have the personality. I myself i don't like sale, I mean if you're a 1, 2 molar a year dentist and you got to practice that'll do a million dollars when one doesn't one tooth at a time and one does it on 20% of the patients at a five ten thousand our case at a time that's a you know red flag so yeah so if he's doing all of his implants and pulling his wisdom teeth and doing molar endo and you can't do any of those three things you know that that's the wrong practice but i want you to flip that around and find a practice where you can do everything he's doing he's not like big cases you you're green sales if he's doing just insurance PPO dentistry one to 30 times that's you whatever but let's say it's an old man like any three of us who, Corey do you just love pedo i mean when people ask me what I think about this new silver diamond fluoride I say why I feel sorry for everything about pediatric dentistry but so but if you like kids and you see this practice is doing a million dollars a year and he refers out almost pedo and you love kids or a dentist that didn't do his molar endo right now and you know I'm old I mean I want you to find the dentist word you can do everything he does and then you could get a free dental office you could absolutely get a dental office for free if you could go in and add a service to that dental office that generates enough revenue to make your payment and and a lot of these dentists that are older they love to talk about their cases and all this things like that but man somebody I believe so much opportunity on the table. The biggest one I ever saw in my life and this is just unbelievable it was in Palm Springs and I was a friend of me and Mike Detola's and me and the door about six hours apart in Palm Springs about splits difference this guy found this old forty buddy practice it wasn't doing much it was real low dollars and he was only attractive because his mindset was I should I want to buy a less expensive office so it was like half the price all the offices of the time going for like back in the day and you know they're all going for six seven hundred this one was gone for like three hundred the man patched everything with amalgam for forty years and had this old office with three rundown chairs with two hygienist and every day at least four of is adjusting mo dbl amalgams would crumble apart and they would come in and do a thousand dollar crown yeah he just sat there doing four five crowns a day day he was open I mean and the guy didn't do his molar endo he didn't place implants and a new sleeve happy Invisalign he didn't do anything he just found a guy who patched everything with amalgam for forty years. So the big question when I was a little kid in her church was Dan and Beverly Carney they were the founders of Pizza Hut and Dan was the I mean it's pretty cool in your small town and the most famous guy in your town Dan Carney the founder of Pizza Hut the most down-to-earth and we still is and but I mean me and my friend Jim Bell sometimes we had a business idea we drive over to Pizza headquarters and you could literally walk in there ask the secretary can I talk to Dan and she just laughs sure and he'd treat us like we were serious you know like we actually had a brain and we asked him this specific question before then should I own the land and building for my dental office and so I'm gonna be there for 40 years or should I write because it seems like it's pretty stupid 30 run away he goes how a pizza we make all the money on Pizza Hut when the real estate business I only buy the land and building when I'm in some area where that's what I have to do but if given the choice I just want to put all my money in the business my business grows fast, real estate is like it's just like a bond fund or an index fund it's just this steady slow appreciation but your business is something you can double and you can triple and you can expand you guys don't put any your money in real estate but the kid asks you, should I own the real estate or should I rent for 40 years?

Rod: It depends on a couple of things well one do you want to own multiple practices because if you're gonna buy real estate you're gonna use up your capital so you won't be able to get loan so you know that's that one of the things the other thing is in the current market what's the interest rate so low your your monthly rent payment may be $5,000 a month but your monthly mortgage payment may be $4,000 a month so in that case why wouldn't you purchase your building instead of paying rent and you know the building you build would build equity and they'll put that money away towards retirement so it's in the current economy in most places it makes more sense to buy your building today now 10 years from now that may flip the interest rates may be back up to 7, 8% and the the rent may be 4,000 and the mortgage may be 8,000 so in that those scenarios it makes more sense to probably rent then own.

Howard: It's funny how emotional businesses because you know like the the feds you know movie interest rates known it's you know it's gone from two to three and it's like having a meltdown in the bond market and the equities market and everybody's freaked out. Dude I graduated high school in nineteen eighty you know what it was in nineteen eighty twenty one percent when I have a middle school of 87 and I bought my first house a year later I thought I was a genius because my mortgage was a twelve percent and the guys selling it to me his old mortgage was fourteen percent and he was trying to get me to acquire his loan so I didn't have to go through all the loan deal acquire fourteen percent when I can get twelve and now everybody's like oh my god if the Feds keeps this up and all the feds doing these normalizing interest rates and I need to be a five percent and I swear he got a hit with from 3% to 5% today that market would lose 20 percent value because people are just that I mean and and I don't want to give you one thing on interest rates if you study the history of finance going all the way back to the beginning of time you always want to hold the same hand as the superpower. If the superpower is holding all their money in gold and silver that's your best bet right now your superpower is 19 trillion dollars in debt so their only incentive is to make that useless they they want inflation and the Fed says they want inflation be 2%. They would like to pay off that dollar of debt where they'd like to pay down and win it with an inflationary dollar and so interest rates I think it's very abusive that grandma grandpa save their money their whole life and put a thousand dollars in the bank and then the bank pays them 1% interest the only reason they're getting paid 1% interest is because the government has 19 trillion debt back in the day banks you put in a dollar they give you a nickel for interest they loan it out for a dime and they make the nickel spread but dude they are out of control completely insane deficits you know interest rates are so low. It's basically free money in fact if you go back after 2008 you actually have negative interest rates. I mean that it takes an hour to explain one negative interest rates are but I mean but the only the only thing I found in the last 31 years when dentists got in trouble with dentists when they didn't have fixed all the sudden the interest rates would change significantly and they had debt that was floating 200 basis points over Treasuries or some something published in The Wall Street Journal and if you're gonna go in debt you need to lock down that interest rates your loans do you guys lock down interest rates are they floating?

Rod: Most of them are fixed these days.

Howard: but when you say most of what percent are not fixed

Rod: I would say it's probably 90% are fixed and 10% are variable these days.

Howard: Yeah I would not get  a variable interest rate, I think that's a very risky situation. Also is the one loan bundles real estate and business?

Rod: Typically they're broken up into two separate loans one for the practice one for the building you know and a thing on real estate is you want to control where your practice is going to be we've run across several situations especially in this past two years where the landlord has a tear down clause in the building and this guy's 65 years old and he called me up to sell his practice and we discovered that there's a teardown we went to to extend the lease and he said no I'm not planning on renewing the lease in two years I'm planning on tearing the building down so you don't want that to happen to you especially when you're 65 got ready retire now his practice went from a value of about $800,000 down to we're not sure we're gonna be able to sell it because there's no not gonna be a place to practice. So you want to be able to control your physical plant throughout your career.

Howard: and that is another huge problem that dentists and physicians they think well since they live their whole life being the smartest person in the room that when they go sign a lease they don't even look at that they're there a dentist I went to the Ohio State University why the hell would I have to have somebody break my lease and and you look at these lawyers on dental town and these guys are showing their leases all day long it's like well who did you have read that over. I mean that's malpractice you could go back and sue that attorney oh I didn't use an attorney so you applied algebra and trig and the krebs cycle to a real estate attorney and you didn't know what a teardown clause. I mean it's just I'm my favorite yoga place with under because they didn't understand the leases is they leak on the roof and it's a portable yoga studio they don't make any money and according their ladies gets to have to fix the whole damn thing they don't the yoga studio everything so the only thing they could do is go bankrupt.

Rod: Yep

Howard: and of course when you ask a yoga instructor well who is your who's your real estate attorney I would go back and get in his face with this least a sign I signed it as Starbucks what really. So in yoga I don't remember any yoga class going over terms and conditions in real estate. Yeah so guys I mean it's same thing going to the board they they go I don't need a lawyer I'm going to the board, I did everything right it's still a legal transaction by a board from the state government and there's attorneys who walk every single case through their four decades and you don't know anything you're going in there all emotional and also one less thing on the estate board thing is all my friends I mean you just refund the money and you say well it's not fair well do you want to happen you want to sleep with a knot in your stomach for a week and then cancel all your patients on Tuesday to go down and listen to a bunch of state board people because you didn't give Wanda back her $1,000 for her denture really that's the best you traitor time and resource and so leave your ego you know I think the people who do the most successful like me are just humble they just know what they know they know what they don't know they they use attorneys they're the first people to raise their hand and say I want help and the dad when you were little who would never have slowed down and asked for directions and had to find it himself and was always 45 minutes late because he was a stubborn mule those are the dentists and getting all the trouble you know. I want to go back to trends in transition so sometimes in my thirty years they say it's a bite market sometimes it's a seller's market sometimes you want to be the kid that's looking to buy a practice sometimes you want to be the doctor selling practice what is it today is it the buyers market or a seller's market who's got the upper hand the old man selling a practice as a young kid buying one?

Corey: Definitely a seller's market right now, you know there's a supply and demand problem there are a lot of for whatever reason there seems to be a hold up of a lot of guys setting on their practices and hanging onto it a little bit longer. We get contacts all I'm looking.

Howard: So continue it's a seller's market because a lot of dentists who maybe 10 20 years ago would have sold earlier hung onto their practice longer is how you counted to?

Corey: Yeah there's a lot of people hanging on I'm not even a hundred percent sure why that is going on.

Howard: Well they opened up six more dental schools in the last ten years so that's a lot of people in the supply chain I mean if you expand your graduation class you can't really do anything to the selling grandpa class.

Corey: Yeah

Rod: Well you also have a big push there there's there's almost in some cases more buyers because you have the DSOs and the small groups trying to buy up practices as well so in addition to the individual solo guys buying practices you have these guys who and everywhere I turn to there's a new course and a new seminar on how to start your own DSO and how to own multiple practices and those types of things so there's a big push from all the consultants there's like you need to be a small DSO in order to fight all the insurance companies and to get better reimbursements from the insurance companies and those types of things so they're really pushing these doctors to own multiple practices so there's a bigger buyer pool then maybe in prior years. You know interest rates are also low that helps the buyer market so they're you know the value of a practice is all around on cash flow and that's what the banks look at so if interest rates are low the payments are lower so their cash flow will be better with interest rates being lower and also the economy is doing well in most places. So more patients are doing dentistry so that helps practices do better makes their values go up so the sellers at a point where they want to sell their practices right now and plus when the economy is doing well their 401ks are performing better and their investments are performing better so they can retire and sell their practices.

Howard: Rural or urban? Some people tell me that in the big urban centers practices you put up for sale there so liquid a lot of these practices several offers the first month but then some people say there's rural nightmares or there's practices have been listed for years with no interest because their in a small town so is there any difference in to environment and we're all in your guys experience?

Corey: Definitely I think the rural is it depends on how horrible if you have a rural practice that's a reasonable commute to a major metropolitan area those are fairly easy to sell if you have a true rural practice which is like two to three hours from anywhere those are a challenge and a lot of that just comes down to in my opinion now you have lottie's done sports broken or play area but they both the dental schools are in a bigger yeah they moved there when they're young they meet somebody they love they might have had thoughts of going back when they were 19 but by the time they're 26 they love this area they're in they don't want to leave their wife is from there they just don't want to go back. So the pool of people open when the rural areas gets much smaller than the people that are willing to stay in the urban areas.

Howard: So if you're a dental school if you've earned it Rod correctly he said in dental school never date a girl from a big city because you might fall in love with her and then you'll be in a highly competitive area because it's my experience and the only girl that's gonna go back to town of 5,000 was born in this town of 5,000. I mean even my son my oldest owns a class example met a girl in Phoenix fell in love this that as soon as they start dropping frogs guess where my daughter-in-law wanted to go back to Beeville Texas town of 5,000 where her mama is and her grandpa is. So I mean I had a patient one time they were retiring she was so sad because they thought they were doing the best thing for their two children by having them travel abroad during their university studies so they put him on this program one wanted to go to London and one want to go to France here there are only two daughters and gifts for their two daughters did while going to college in London and France, met somebody from London in France and now their grandbabies are in London and France. They should write a country music song never let your daughter studying abroad and then I've read this a thousand times of dental school deeds there's only one Dean in the United States who's smart enough to understand this and it was Jack Dillenberg in Arizona. All the rural communities were underserved and Pew.org is the best demographics in America because it's a huge nonprofit whose shows you where there's no dentist the underserved, about 70% of their work is in saving the oceans and the next biggest thing they try to do is study health care and and Jack Dillenberg was one that says well yeah because every dental school accepts you based on your algebra calculus dat scores, so you have all this war of the top well a kid that goes to a high school with 4,000 kids will be significantly more competitive than a kid he goes to high school with 50 kids yeah when you're the smartest math person in a school of 50 kids you think you're real smart when they transfer you to high school with 4,000 you started flying those kids actually smarter than you and Jack with the first one the search saying oh you're applying from an Indian Reservation that doesn't have a dentist. Well yeah you're accepted I don't know I don't care end of story oh you're from a town of 5,000 where do you want to go when you graduate oh okay you're accepted and it's the same thing in you when I visit universities, visiting small businesses in Arizona like I met several several businesses in Arizona near Kingman near Seligman where they I say well what is your biggest limits of growth and they say well you know how hard it is to get a mechanical engineer and Seligman and every time a boy from Seligman applies to ASU his grades aren't good enough to get in. So he doesn't get in and then the kids they accepted if they're all born in Phoenix guess what what's the chance that they're gonna want to graduate their newfound degree and go to slingmin Arizona okay there needs to be some over test because all the universities are all fighting over their rankings. They're more concerned about their rankings that they are about their communities and it's a very perverse incentive.  So you know I could rant on that forever. Do you think in your experience the the urban the rural practices have lower overhead and the doctors make more net income than the urban dentists?

Rod: No I think the rural practices have higher overhead typically than in the urban dentist so or the other the other way around actually so if you're further out you're probably gonna have lower overhead because you're not...

Howard: You said that exactly backwards...

Rod: Yes I did

Howard: So the rural practices have lower overheard and the urbans have higher overhead and lower net income, explain to my homies why that is.

Rod: Well in Seattle for example and you can't even find a hygienist there there's not many of them around there they're getting paid $50 and hour just out of hygiene school so there's big competition in in the downtown or the Seattle area for for hygienists as well as dental assistants as well you have all the Microsoft's and Amazon's even taking this the assistance you can get $35 an hour just being an admin answering the phone at Microsoft where you can be a dental assistant making $20 an hour so there's not as many dental assistants around so if you go into and and rent is incredibly high in the downtown area so it's $40 $35 a square foot where you go to a you know practice further away from downtown areas it's going to be $12 or $15 a square foot and there's not as much competition for staffing. So the hygienists are may only be a few job openings so hygienists are a little easier to find the systems are easier to find those types of things help to keep your overhead down.

Howard: So i'm going to go back to the example I just used, this guy was winning to me he's never going to get a hygienist whos not in the town of 5000, noone is going to commute two hours to work everyday. So I came out this great idea so you know what go to your high school and have an essay contest so why want to be a dental hygienist and then the winner you pay her tuition to go to hygiene school and then she comes home and she's the hygienist that you know she won the prize so you're on the conference calls you back only two people wrote an essay anyone know if I would read over them to help him decide which one won. I said quit being a dumb and send them both what happened their grades weren't high enough to get into hygiene school. I mean like really so a C algebra is really that affects your your dental hygiene skills I mean I've never been in the middle of a root canal and need to know jack about calculus you know. I want to ask you an off topic question you're from Seattle I'm just curious I'm being selfish here why did Bill Ackman just invest nearly a billion bucks in Starbucks? I mean he's a highly activist investor is there something wrong with Starbucks or he wants a couple board seats and it's gonna change directions I mean what's the Starbucks already all that and a bag?

Rod: Yeah there's one on every not only every corner but halfway between the corners as well here in Seattle. So I don't know the answer to that I mean I really don't know. Me I don't like their coffee I go to the non Starbuck locations but I don't know the answer.

Howard: Does it make a lot of news in Seattle since that's where your from?

Rod: Not really haven't really seen that too much.

Howard: He's an interesting character he's hard to say what that guy is thinking up his sleeves.  So yeah back to urban overall my gosh every dentist I see that goes about two hours from wherever and there is an airport there just crush yet they don't have to take anything into the PPOs they charge a thousand worker crown a thousand for the root canal a thousand for dam plant a thousand for event or a thousand or a partial they just they just crush it and then the ones that go downtown Seattle they're on every PPO they're on Delta Dental there's you know everybody's got a website and a Facebook page and I mean it's and so the bottom line if I was dental schools I would accept kids from the rural and when you go in that rural school I mean when you go to when you're that rural country boy and you go into downtown Kansas City at the University of missouri-kansas city don't marry some girl who grew up in eyesight of the chief Stadium no don't marry some girl who likes to go to the plaza and she's you're never gonna drag her back to the country. So just you know if you're in dental school and you know and you can you get student loans and you want to be rich someday it's just as easy to fall in love with the country girl as it is city girl.

Rod: That should be the first question on your date, is where you from.

Howard: Yeah and last question I was to talk about demographics because if you're 25 and you buy a practice and say you're gonna practice six I have four years man communities can change look what happened to Detroit how they would 2.7 million to seven hundred thousand I I would want to know in real estate they say from the time they build a brand new community house to the time it's a crack house and bulldoze mow it down it's about a hundred years it's about a hundred years from this nicest house in the community to we need to tear this thing down.How do these kids first of all the demographics matter and if so how do you experts find demographic information where do you go what do you google what are you looking for?

Rod: Yeah we we actually pay for a service it's called site to do business it's service the CCIM Institute. So we get all kinds of different it's called site to do business and it's part of this CCIM for commercial real estate brokers and it's we pay for that service and has a lot of detailed information including how much dentistry is spent on a certain zip code and those types of things so we get to look at those types of demographics.

Howard: So is it free, do I have to log in, is it a paid account?

Rod: It's a paid subscription

Howard: and so you like that one.

Rod: Yeah gives a lot of detailed information on dentistry and various demographics but I guess one thing it all depends on what you're in dentistry for to you know to make money and I guess the splitted is on that so if you're from a rural area in you know you want to just go back to your hometown and do dentistry that the money's going to follow you so it's a all depends on just where you want to want to practice some but if you're gonna be practicing in more of an urban area you'll want to do demographics you'll want to figure out how many doctors there are how many patients per doctor those types of things, how many homes are owned in a certain area what the average income is and what the spend is for dentistry in that specific area so you want to figure all those things out so we help look at the demographics of certain areas.

Howard: So how much would a kid have to pay on that site to start looking in his area?

Rod: Well they can contact us and we can help them get that information it's about I think we pay about $350 a month for that.

Howard: and how do they contact you?

Rod: They can go on to our site they can shoot us an email info@omni-pg.com

Howard: So info@omni-pg.com and so were there any questions I wasn't smart enough to ask?

Rod: No I think you hit hit most of them I think you know right now it's a like I mentioned that I think when I wrote to you is a perfect storm to be selling practice and it's a great time to be buying practice so it's a good time for both sides some that's both get in and get out of you know and just because you sell your practice doesn't mean you have to stop doing dentistry that's one point we make to a lot of the the sellers as you know if you feel that your equity is high enough and you don't want to wait until your start your practice goes downhill we always suggest that they sell now and then go and work for somebody else or you know...

Corey: or go work for you Howard.

Howard: I would love that, if your a short fat bald guy living in the snow. My mom just called me this morning she got her first snow in Wichita, Kansas can you believe that. Well I mean it's still Sunday I mean I couldn't even wear a shirt in the backyard it's so hot. Hey have you ever had a sell the practice because they had to get a bunch of equity out to pay out for divorce?

Rod: Oh yeah yeah we've had several of those over the years and that's happened there's a you know a lot of reasons that doctors sell their practice and you know more and more over the last probably three years or so doctors are wanting to sell because they're tired of managing staff they're tired of battling insurance companies they're just tired of dealing with health care company or health care investigations and those types of things. So they're not just selling to retire anymore they're selling because they're tired of the business of Dentistry they wanna practice dentistry.

Howard: Here's what all the here's what all the dental consultants will tell you at a bar but they won't tell you on a podcast or a show but a lot of those guys when they're tired of the stress they're tired and they're tired tired tired tired tired, there's something under long in their tool their depression they have depression and doctors are so egomaniac they can't come to terms that well maybe their depression maybe they have a depressive lifestyle maybe they don't exercise maybe they drink too much but you know when you have all these written burnout so much of burnout is because you're not taking care of your tool you're not exercising you're not eating right or you're hanging around with toxic people like maybe your your spouse or something like that but man when all you want to do is run from a job where the average general dentist is making a hundred and seventy thousand a year and the average of specials making three hundred thirty thousand and you're from Seattle I mean do you want to go work in a Starbucks okay they gave you $15 an hour. You know how far it is from $15 an hour to a hundred and seventy seven thousand dollars a year and so many of these so many of these dental consultants say oh my god you know he's driving the Curtis staff crazy he's not happy he's miserable and and and and it's hard to tell a doctor like you need to you need to get a physical need to see a therapist. You know I had a lot of that success with TM I didn't really believe in so much of all the TMJ noise because I was lecturing all around the world and all the rest of world they're epidemiologists are saying that when a human gets really stressed it goes into fight spasms a brain that's a headache but Americans say oh no I'm it's gluten and dark chocolate and red wine no it's stress lower back the whole chiropractic industry irritable bowel syndrome heart issues and grinding your teeth and so many times I would just ask them after I went through the Pankey Institute and you know every all these includes courses got my masters in TMJ. I just say did you do you think there's any chance you might be stressed and I had two referrals one for the boys to John up the street one for the girls this other woman I can't tell you 31 years later how many the biggest love feedback fest I've gotten from patients a man Howard you the best thing ever did to me wasn't fixing my damn shoes when you sent me to Dr. John oh I saw him every Tuesday for a year to get my life back on track and it was the best thing that ever happened to me and he told me you know you gotta fix this or it's gonna ruin everything. So maybe if your dental office is going downhill maybe if you're I mean come on for 177 thousand dollars a year how many Starbucks people would change places with the dentist that they didn't have to go to the dental school to manage the staff and deal with insurance for 177 thousand year. What percent of them would take that?

Rod: 90

Howard: Yeah so you know look at your tool if you're not happy a lot of times a psychologist can tell you ten major reasons why you're not happy beginning with lifestyle diet toxic people in a bad relationship I could go on and on and on but hey you guys are legends thank you so much for taking it out of your life and spending it my homies today I hope you are posts start a thread and drop all those YouTube videos in there thanks for helping my homies make better decisions. 

 

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