Dr. Brandon Ryff grew up in Tempe Arizona, and attended the University of Arizona, where he graduated with dual degrees in Physiology from the College of Medicine, and Molecular & Cellular Biology from the College of Science. Upon graduation, Dr. Ryff then attended the University of Michigan, School of Dentistry. After Dental School, Dr. Ryff became an associate in a small group of privately owned dental practices in Arizona. Subsequently, this group was approached and acquired by a national DSO backed by private equity investors. This transition was a complex process that Dr Ryff found very interesting. Watching his father-in-law successfully serve as the President & CEO of a multibillion-dollar international corporation only further fueled Dr. Ryff’s interest in business and executive leadership. Accordingly, Dr Ryff then completed a 2-year business program, earning a Professional Graduate Certificate in Strategic Management from Harvard University Extension School.
Alongside completing his business program and practicing dentistry, Dr. Ryff was also appointed Vice President of Business Development within the private equity DSO group that had acquired the practice Dr. worked at. Dr. Ryff was involved in multiple acquisitions made by the DSO from 2013-2015, during which time the company ranked # 14 for the Inc 500’s fastest growing companies in America.
A drastic shift in executive leadership and corporate strategy at the DSO prompted a strategic transition for Dr Ryff himself. In August 2016, Dr Ryff left the corporate practice environment and acquired a private practice in Paradise Valley Arizona. During the first year, Dr Ryff applied knowledge he had gained from his tenure in business development and business school to create a unique team environment. After hearing through social media of a themed ‘team-unity lunch’, held in good fun to help mend wounds of the 2016 post-election divide, the Washington Post featured an article about the unique atmosphere and team at Dr. Ryff’s practice.
Among many factors, the leadership and management lessons Dr. Ryff acquired through his work and educational experiences contributed to a 33% growth in his new practice during the first year. Behind the scenes, Dr. Ryff negotiated improved terms with suppliers, vendors and labs with whom he had previously established positive relationships. On the front line, Dr. Ryff focused on leadership and worked to build a culture of positivity and appreciation. With the simple mission of providing clinical excellence and uncompromising service, Dr. Ryff rallied an exceptional team of focused, motivated, and accomplished professionals to take the practice to the next level. To reward their hard work and dedication, Dr Ryff also implemented a unique bonus program, which resulted in pay increases of 24%, on average, for each employee. The combined result of applied strategic management principles, his consistent focus on positive leadership, and implementing a generous employee bonus program was a 75% increase in profit dollars for his first year as owner, 2017.
The journey for Dr Ryff and his team was not without some turbulence however. Months after becoming the new owner, Dr Ryff learned that his landlord had suddenly passed away, leaving the entire property to charity. A big commercial real estate developer made intentions made clear that the plan was to demolish and redevelop the property. Accordingly, Dr Ryff found a new location to continue the 60-year legacy of the practice. With the unwavering support of his loyal team and their active participation in all levels of the process, Dr Ryff and team built a brand new state-of-the-art facility, which will serve to take the practice well into the next generation.
VIDEO - DUwHF #969 - Brandon Ryff
AUDIO - DUwHF #969 - Brandon Ryff
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Howard: It's just a huge honor for me today to be podcast interviewing Brandon Ryff. Thank you so much for coming by.
Brandon: Thanks for having me.
Howard: So, I'm down here in South Phoenix. He's up there and in Scottsdale. So, Brendan Riff grew up in Tempe, Arizona, which is about ten minutes from here, and attended the University of Arizona. That's kind of weird that you’re in Tempe and went to U of A. That's what we call out here… all the kids around Tempe, they want to get away from their parents, they go to U of A and all the kids in Tucson who want to get away from their parents, they go to ASU. I noticed my, three of my four kids went to NAU, to have a ski pass for college.
Then he attended the University of Arizona where he graduated with dual degrees in physiology from the college of medicine and molecular and cellular biology from the College of science.
Upon graduation, Dr. Ryff then attended the University of Michigan School of Dentistry. After Dental School, Dr. Ryff became an associate of a small group of privately own dental practices in Arizona. Subsequently, this group was approached and acquired by a national DSO, backed by private equity investors. This transition was a complex process that Dr. Ryff found very interesting.
Watching his father in law successfully serve as the president and CEO of a multi-billion-dollar International Corporation only further fueled Dr. Ryff’s interest in business and executive leadership. Accordingly, Dr. Ryff then completed a two-year business program, earning a professional graduate certificate in Strategic Management from Harvard University Extension School.
Alongside completing his business program and practicing dentistry, Dr. Ryff was also appointed vice president of business development within the private equity DSO group that had acquired the practice he worked at. Dr. Ryff was involved in multiple acquisitions made by the DSO from 2013 to 2015, during which time the company ranked number fourteen for the INC five hundred’s fastest growing companies in America. Are you allowed to say the name of it?
Brandon: Yeah, it was a Dynamic Dental Partners.
Howard: Dynamic Dental Partners. A drastic shift in executive leadership and corporate strategy at the DSO prompted a strategic transition for Dr. Ryff himself. In August 2016, Dr. Ryff left the corporate private environment and acquired a private practice in Paradise Valley, Arizona.
During the first year, Dr. Ryff applied knowledge he had gained from his tenure in Business Development and business goal to create a unique team environment. After hearing through social media of a themed team unity lunch held in good fund to help mend wounds of the 2016 post-election divide, The Washington Post featured an article about the unique atmosphere in the team of Dr. Ryff’s practice. Among many factors, the leadership management lessons Dr. Ryff acquired through his work and educational experiences contributed to a 33% growth in his new practice during the first year.
Behind the scenes Dr. Ryff negotiated, improved terms with suppliers, vendors, and labs with whom he had previously established positive relationships. On the front line, Dr. Ryff Group focused on leadership and worked to build a culture of positivity and appreciation.
With a simple mission of providing clinical excellence and uncompromising service, Dr. Ryff rallied an exceptional team of focused, motivated, and accomplished professionals to take the practice to the next level. To reward their hard work and dedication, Dr. Ryff also implemented a unique bonus program which resulted in pay increases of 24% on average for each employee. The combined result of applied strategic management principles, his consistent focus on positive leadership and implementing a generous employee bonus program was a 75% increase in profit dollars for his first year as an owner in 2017.
The journey for Dr. Ryff and his team was not without some turbulence though. Months after becoming the new owner, Dr. Ryff learned that his landlord had suddenly passed away, leaving the entire property to charity. A big commercial real estate developer made clear that the plan was to demolish and redevelop the property. Accordingly Dr. Ryff found a new location to continue this sixty-year legacy of the practice. With the unwavering support of his loyal team and their active participation in all levels of the process. Dr. Ryff and team built a brand new state-of-the-art facility which will serve to take the practice well into the next generation.
Do you remember an endodontist out there in Paradise Valley named Joe Dovekin [ph. 00:04:12]
Howard: That was my roommate at Creighton, and a hell of a guy. And he left the planet earth way too early. He got the same thing as Sam Walton got, of Walmart. But, my gosh, what an outstanding journey. So first, I want to go to the beginning. I'm old enough to be your dad. You’re thirty-two, I'm fifty-five, that means I get ahead you at age twenty-three. When I was your age, orthodontic centers of America on the New York Stock Exchange, billion-dollar evaluation, a dozen on Nasdaq. They all imploded, they're all gone. Then you didn't hear about them for a decade. Now they're all back. But the red flag to me is that none of them could go public. I mean, imagine this; imagine they go on Shark Tank, and I go to Cuban and Mr. Wonderful. I like Mr. Wonderful the most, the bald, beautiful one, do you know which one that is?
Howard: And I said, Brandon Ryff, Mr. Wonderful, I want a million dollars. And he said, “What are you going to do with it? I said, “I’m going to buy a dental office.” “And then what are you going to do?” “I’m going to come back next week and ask for another million and buy another dental office.” “Then what are you going to do?” “I’m just going to come back every week, and after fifty weeks I’ll build myself to 50 million. Well Mr. Wonderful would say, “Well, how am I going to get my money back? Now you have 50 million of debt.” I just see him rolling up existing practices and their sales and debt grows at the same, and if any of them could do an IPO, they would. But it seems like they’re just flipping them from private equity that specializes in five to 10 million, and then they flip that to some private equity, does 50 million, 100 million. Why can’t these guys go public and do you think it’s a good business, the current business models they do?
Brandon: I think that the current business model has its place in the market. You can't fool the statistics, which are that the DSO model is growing at a rate that's roughly double what the private practice model is growing. Fortunately for us, that rate itself is also double what GP is projected to increase over the next five years.
Howard: Say that again. So, DSO are growing twice the rate of?
Brandon: So DSO’s, so it'd be twelve, about 12% GDP’s, 3% and then the private practitioner about 6%. It's a positive outlook for us. Now, those are all projections. And how do you exactly define growth? Because a lot of these private companies keep their balance sheets, under wraps. So, I think that there's a lot of transferring of these assets, as you mentioned, from one private equity firm to another.
And I think that, I've always thought it was a kind of a bubble waiting to burst because the whole premise of the DSO was; you can centralize your non-clinical operations and you have marketing and you have HR and you have accounting, all centralized and you are able to have one central hub serve various practices across the country in many cases and only have to pay for a one accountant. They have more than one account, but the point is that you don't have to have all of those positions at each location. There were a lot of predictions that this would result in increased efficiencies, reduced expense, but I don't think that that's actually what ends up happening, based on what I've seen and how that type of model actually functions. What my experience was--before I say that, I want to make a distinction between the large DSO groups and, let's say, a small group of five to ten offices. It’s all focused in let's say Phoenix area versus a large DSO that is across the country. The problem is that there's always, due to the culture, there’s always a lot of turnover in these positions and it's almost like they can't get any traction because they're always starting out from square one again when someone else comes in. I don't think these jobs can be centralized to the point where I'm a dentist in their own offices are getting the same level of attention, if they had their own accountants. I've got my own bookkeeper, he comes in every other Monday and he makes my life very, very easy. He pays all the bills, takes care of things, does the W2, 10-99 stuff, all things that I don't want to do. But he actually gets it done. DSO’s; part of their value proposition to other dental practices that are thinking of being acquired by DSO, or be managed by DSO, it's always, “Let us take care of the business stuff and all the headaches and hassles of running the business, and you can spend more time with your patients.” And it's a great thought. I don't see that in the case of the large nationwide DSO model that, that actually happened, that that actually filled. A lot of my time was spent undoing problems, solving problems that were created by the large bloated management structure of the DSO. And it kept me away from my patients and it was frustrating and it came close to burning me out honestly as a dentist. That was once it became national and large and not run by a dentist, that's when I started to see that the efficiencies aren't really there.
What that ties into, in answer to your question; these lack of efficiencies and the lack of the theory becoming a reality, is that these dental practices aren't all that profitable. And I can't give specific details, but I have seen the numbers, at least with the group that I was at and how the numbers were impacted a going from a state-run DSO to then becoming acquired and being run by a nationwide DSO. They became less profitable. And so, it's tough. It's tough with that model to do well long-term. Eventually, the investors get tired of not winning and they have to answer to their investors and luckily they've got diversified portfolios to make up for the losses, but a lot of these DSO’s came in and overpaid for a lot of the practices they acquired and then were not ready from an operational standpoint to run the practices to the level that they were being run prior to any of those acquisitions.
And they miss the key component, which is that you're not buying a practice; it's the doctor. So, I think there were a lot of cases, and they're getting smarter now, but there were a lot of cases where they would acquire a practice and the Doc was ready to just cut and run, and they take the money leave and then so the would the patients, and so would the investment. It's the value proposition from the DSO to everyone else is, we’re going to make this run smoothly. You're going to do great, and we're going to make more money because of that. And I don't think it's what actually happens.
Howard: Man, you are wise beyond your years. You sound like you're sixty-two.
Howard: No, I'm serious, I mean, I just want to review some of the deals, huge, largest red flag, none of them are profitable. If they were profitable, they would go public. They cannot go public. Number two, there were only about three major banks funding these guys, and East West Bank pulled out of it. Do you remember that? And why did they pull out of it?
Brandon: They pulled out of it because the offices weren’t able to make good on their payments.
Howard: Their losses. The banks are losing money. Number two; you said something very profound; The large DSO’s have two layers of management. What you said was so genius where, when I go into small markets and on North or South Dakota or in Arizona or say you’re in a town of half a million, and you have one office. Well, if you go from one office in the south and then go to one north and one east and one west, now you have all these scales of efficiencies for marketing and advertising and all that stuff. And those guys really do, do well. But when you wrap up all these different states with another layer of management, a headquarters, who wants fourteen, fifteen, 16% off the top, there's nothing those guys do to justify their wages. So, one layer of management, I see as being profitable, but affording a second layer, crazy. It doesn't work.
And then another thing you said is, there's two ways we're going to get profitable. One is; we're just going to get more efficient. We're going to save money on supplies and lab and all that. But let's say you get your overhead to a dollar a day or a dollar a year. Well, if you do a dollar in sales, your overhead's a 100%. But if you get to $2 in sales, now you're at-- it's 50%. You could only save so much money. You really start making profitability when keep increasing production. But they don't really get increase in production because of their employee turnover. And it's not just DSO’s it's associates in private practice and its associates in the most coveted fortune five hundred companies. I read a big deal on employee turnover with thing. Facebook, Apple, Amazon, Netflix, Google and Microsoft have millennials last between one and two years.
Apple was actually the lowest at about a year. Then Facebook was the best. They're giving them money, stock options, Foos tables, fun places to work. And these millennials don't stay, so I hope you listen to this because about 25% of our podcasters send me an e-mail: email@example.com. And tell me how old you are, where you're from, all that kind of stuff. A quarter of them are millennials. 95% are under thirty, I get like one old guy a week that says he’s older. But, they're all told, these DSO’s all go in there and say, “Private practice is dying. We're going to take over within 10 years, half the dentists will be working for us. You can't compete with us,” all this doom and gloom, “So you better join us now.
But if that was true, all these DSO’d have been out for decades. But nobody stays, so you can fantasize that, “I'm just gonna get out, I'm just going to get a job and live happily ever after, but it doesn't happen. You're going to have to—my advice, I skipped all the steps. I graduated May 11, drove to Phoenix. It took, from Kansas City of Phoenix, it took almost two days, and I had my office open September 21st. People say, “Were you ready?” Well no, I’m not ready, but it's like swimming lessons.
I threw four boys one at a time into the deep end of a swimming pool. And guess what? They're all alive. They all learned how to swim. They, you know, just better now than ever. Or do you recommend that they go to a DSO for a couple of years?
Brandon: I think again it depends on if it's a national one, which I do not recommend. If it's a local group where you've got five, ten offices and one owner, I think that, for me, it was a great opportunity to learn the business, pickup on additional procedures that I wasn't comfortable with. And they gave me a job when no one else would. Offered me training, and, I learned.
Howard: And you just said something profound; they offered you a job when no one else would, and I find it very jaded when all these older dentists are on Dentaltown whining about DSO’s, and it's like, dude, your office is closed Friday, Saturday, Sunday. You're not offering employment. They get me, you don't even know how many times you had an incoming call from Thursday at five to Monday at eight. And if you just had them sitting in there with an assistant. I mean, say you paid them a $400 minimum day or a $500 in a day, one broken tooth and a crown. There's a thousand. One toothache, root canal, crown; there's $2000. The convenience, whatever.
Brandon: Yeah. With that being said—
Howard: And thank you to the DSO for supporting jobs, because when I got out of school, the only ones that providing my roommates who weren't ready to dive in the deep end was the army, navy, air force, and marines. And nobody bad-mouthed that. Nobody said, “They’re”—so why are they bad-mouthing DSO’s when our colleagues need employment?
Brandon: I think that it all comes down to one key element, and that's people. When I was employed by a small group in Arizona, they treated me well. Honestly, they did treat me well. It was when it became national and when dentists weren't involved in running it anymore that it was clear what the objective was, and the objective was; make money above anything else. The problem with the model that the National DSO’s try to operate is that they assume all of these practices are the same. You can cookie cutter them, you can treat them all the same. You can manage them all the same. They all have the same needs. They all respond to management in the same way. And it misses the fact that management's not always the best solution. A lot of times it's leadership, and one of the key components of leadership is, being ethical, being consistent, being fair, helping people, having a noble cause. And when you're missing a check marks in all those boxes, it becomes problematic.
Howard: And all those things you said are unmeasurable foo-fa, right? When you take ethics; when I was your age, if you got caught drinking beer and whiskey, the cops just laughed. But your caught with marijuana, you were in jail. Now marijuana is legal. Gay marriage; when I was little, people would walk out of--I mean, I remember several times leaving Catholic Church and kids joking that they went to parks the night before and beat up fags. And then ethics and dentistry; you have even it's more art than science.
Like, you have dentists who their whole passion and mission is removing everybody's toxic Mercury Amalgam and replace them with the composites. Or, I would say that and say, well, the Amalgam will last 38 years, this inner plastic lasts six years, and they're saying, the mercury is toxic. Well, it's bond insoluble to silver zinc, copper, tin. You swallow an Amalgam, you poop it out twenty-four hours later. But they eat shrimp and lobster that's filled with ethyl and methyl mercury. And then where you went to U of A was where I was edu-ma-cated and brought to life on mercury toxicity. I went down there, this guy published, I went down there and talk to him. This is like thirty years ago, and he was an old dude, but he was taking, fetal premature babies, abortions, what have you. And he was looking at mercury toxicity. And he said it's all seafood. And there was a ton research that made it all the way to the CDC and they got all the way to where they wanted to put a warning label on seafood for pregnant women. But our politicians stopped that.
The ethics of, “I'm going to remove your toxic Amalgams,” when I'm eating seafood, lobster, and shrimp. And the other is the successful dentist, some of these kids get out of school, they build million-dollar practices. They got passionate about one thing like implants or sleep apnea or cosmetic dentistry or Invisalign. So, these DSO’s that think they're going to stamp out a million model T Fords and every one of them is going to be black, my God, it’s just crazy. And that's where a lot of dental divorces come in because you and I are friends in school we’re buddies. We get married and we have a dental office and I want to go off into sleep apnea and TMJ and you're like, “Dude, bring it home. Let's, let's go this direction.”
So yeah that dentist though, if you want a cookie cutter and build a large military, what does the military want? They want young boys under twenty-five. They don't want a bunch of boys over fifty. And I'm herding dentists, physicians and lawyers like herding cats. They all got a mind of their own. And the ones that are going to go out there and take several hundred hours of CE and master like implants or sleep apnea or Ortho or TMJ or whatever, they're not going to work for corporate. So, people are just going in there doing time for a year or two and then getting out. Would you agree?
Brandon: I would agree. And there's nothing wrong with that.
Howard: Right, right.
Brandon: People need to put themselves in the best situation for themselves.
Howard: Look at the cars and housing though. I mean the biggest expense you’ll ever pay in your life is taxes, but the second biggest expense you’ll ever pay is your house, third your car. And look at housing, you can go a trailer, a one-bedroom, two-bedroom, all the way to fifteen bedrooms. Look at cars; you can take the bus, you can get a used car, you can take Chevy all the way to a Lamborghini. And that’s the way dentistry will be; there will be many, many markets and neither of them are right or wrong, they’re just markets serving people.
Brandon: Yeah. I think if DSOs want to get serious about actually managing effectively, they need to get down in the trenches and understand the actual needs of their practices because I think, at least for me, the perception was always; why are we watering the garden while the house is on fire? They would be focused on some project that didn't help our day to day operation, and if you want to gain credibility with the people that you're supporting, it's in the word DSO; Dental Support Organization than the people need to feel supported and that means that their problems are solved, or their jobs are made easier. That's what people want; is they want a smooth operation. They want their day to go well without surprises, without problems that they can't solve or that make them have a bad day.
Howard: One of the neat things that you did though, that none of my [inaudible – 00:24:33] chance is, you worked for a DSO, and are involved in multiple acquisitions made from 2013 to 2015, which I'm sure made you buying a practice a very knowledgeable person. What do you think all these kids, what could you share with them that they're never going to have the experience of being on a dental office acquisition DSO team for two years before they go buy their first practice? Or, maybe buy their only practice.
Brandon: Yeah. I would say that you got to look at what you're really buying outside of just the number. On some profit loss statement, that means nothing. You need to look at the objective facts. Of course, you've got to know what money is there, but you also, more importantly I'd argue, you need to look at what made those numbers happen? One of the key indicators in my view to whether you're looking at a good dental practice with a good dentist, it's not the online reviews because you can, in my view, you can manipulate those and kind of pay your way. It's, is there team happy? Is Their team motivated? Are they focused? Are they gathered around and supporting a central mission? Do they have enthusiasm when they come to work? How long has their hygienist been there?
Howard: None of these are on a balance sheet number.
Howard: But the accountants painstakingly, “How much is that cabinet worth? And what’s it depreciates?” Or, “When did you get this equipment?” And, “What’s the replacement—” It’s like, the equipment, okay this office has two hygienists and they’ve both been there twelve years, and this office has two hygienists, and one’s been there two years and one’s been there six months. And, they’ve had a different one, and those aren’t even on the balance sheets, are they?
Brandon: No, but again, it goes back to the cookie cutter argument where these guys think that just because one year did 2 million, that the next year it's going to do 2 million, and they don't look at all of the factors that contributed to that happening the year that it happened. If you lose key players, you are not going to do the same thing that you did the year prior.
Howard: And who are key players?
Brandon: There are a lot of them; every single member of the team in my view as a key player. The patient is a key player. When you're looking at evaluating a business, you need to understand the patient base that is attached to the practice as well as the systems that are in place. The, culture of the practice…it's a lot more than what a corporate is focused so much on running. Reports, they would rather run reports and look at profit loss statements and it's numbers, numbers, numbers, numbers, numbers.
I would rather, and what would recommend to anyone listening and thinking about buying a practice would be; ask questions to the people that are involved in making everything happen. Ask them if they're happy to ask them if they need anything, ask them if there's anything you can do to help them. When they see that your priority is to help them succeed and to support them and give them the tools that they need to be successful, it's invaluable. You can't get better than that, but the numbers, they're, they're focused on the results. The numbers tell you what's already happened. It's too late by that point.
Howard: It's so obvious to dental students when they're looking at the Phoenix Suns and the Phoenix Suns has five players. It was so obvious to me, a dozen years ago, when they let Charles Barkley go; like what? Isn't he liked the whole team? And you said, “Everybody's the whole team.” I mean, Charles Barkley throws the ball to you and you don't catch it and goes out of bounds. I mean, everybody is critical. The dentist on, they take HR the least serious and it's the most important.
Brandon: Right. If you ask questions, people will tell you if you're willing to listen. I love various quotes and I'm not very good at citing them, but I'm one of them that I try hard to keep in mind is, “You have two ears and one mouth for a reason. You're supposed to listen twice as much as you talk.” And I really try to, employ that in my office.
Howard: And so another thing I'm pursuing, a lot of them think there’s a rule of thumb that they sell for one years’ gross. I know that practices are more liquid in the urban big cities then they are in rural. My thirty years I've watched Dennison Towns of 5 thousand put their office up for sale, but after two or three years and a heart attack later just close the doors. This is a liquid asset. Did you find yourself in a bidding war, were there several offers on this practice? Was it competitive or not really?
Brandon: That was then, and now it’s not this way.
Howard: What year was that
Brandon: When we were doing all that? ‘13, ‘14, 2015. Back then the competitive advantage that we had, would be we didn't have to go through a qualification period with a bank and take a month to fund. We could push a button and boom, done. We had a process, we had a pipeline, acquisition pipeline that we would work on every day. We would do our due diligence, but we could act quickly, a lot quicker than anyone else could. And it's not that they had more money, because their objective was to try to build value right out the gate by paying as little as possible for the practice. They would try to build in a value with the dentist that was selling by setting up an arrangement where the purchase price actually could increase, based on their performance over the first, second or third year. That would tie the dentist to the practice for a couple of years and help with the transition. And it would give them an opportunity earn out additional money. And that's not something that banks do for just a regular guy.
Howard: I'm already turning into one of those grouchy old farts where it's always better back in the old day. But back in the old day, the owner would always carry the note for the young dentists. So, you know, you buy, live scene out here in Phoenix for thirty years. One of the biggest mistakes I've seen is some dentist is doing 800 hundred thousand a year and a really nice practice, maybe a million dollars a year. But he places all his own implants as all of his wisdom teeth removal, does all of his molar endo, and the kid that buys it doesn't have any of those skills and wants to be a cosmetic dentist. They go buy a million-dollar practice in two years, the first year the revenue goes from like a million a year to like a four-hundred year. So, he didn't have the skills. And then number two, a lot of dentists, there was hidden problems with the office that weren't really disclosed.
I've seen it in small towns where through his own patients knew that the big factory was gonna go to Mexico, you know what I mean? So, they sell to some young kid, some other bank finances and another state and then he's not even there eighteen, twenty-four months and the town of five thousand, one factory that employs five hundred and it shut down. But when the owner carried, then I thought I had an upset patient. I could call them and say, you know, you're a patient you've had for twenty years? He's really mad at me. Well, let me talk to him, you know what I mean? And that guy would be out, when he's going to church and buying groceries and all that talking about, “Oh my God, I'm so glad I saw that guy. He's just got out of school. He knows all the latest stuff. He's the best guy you can find.” So, the owner carry I really like. And then that's pretty much gone.
But I think you can still find it, because I'll tell you why I think you can find it; one thing you recognize when you're fifty-five is that you start recognizing patterns, you don't understand right or wrong or what caused it or you don't always know, but like, when I graduated from high school, the market crashes, 21% interest rate, double digit inflation and Paul Volcker came in from the Fed. I got out May 11, ‘87, September, ‘87 black Monday. Then I lived through the March 2000 Internet bubble crash. And I just ten years ago was that 2008 meltdown ice melt meltdown, again, because I see this pattern every decade and I see it all over the place right now.
So, if a dentist has a bunch of money in his stocks, he's thinking, “My God, that could really go down,” and then bonds, what are bonds these days? Two, 3%? And then you said, “Hey Doc, you sell me this $750 thousand-dollar office, and you carry it for seven years at 10 %.” That old man is going to be thinking, 10%, I can’t get 10% out of bond, and my stock portfolio, I just don’t want to lose ten, 20%. I think right now a lot of young kids could go, and especially in rural where there’s ill-liquid. Not to mention the supply and demand ratios. I was in Irvine, California yesterday lecturing, and Ryan was there, we had three different dentists who really want to practice Durmine, and they can’t find—Irvine, the city of Irvine has a dentist for every five hundred people. And it's like, dude, why don’t you live in Irvine, because if you commuted an hour out down a two-lane highway, you could find an area that has a dentist for every two or three thousand people. Were you afraid of going in Paradise Valley?
Brandon: No, I wasn't afraid, I was excited. A little nervous. And that's natural. But, one thing that made me feel good, and this is what I hope a young dentist and dental students will hear, is that I'm going through the process to get a loan from the bank, there's, a certain level of security there. This is my opinion on it; banks are actually pretty good at evaluating risk. And one huge red flag is if the bank will not give you a 100% financing. Now this is right now, the market's changed and all that. But if they won't give you a 100%, that means that in their view it's not worth that. And if they were to assign a debt service to something that isn't justified by what they see in the asset, then it's risk. It's risk and it's risk that they're not willing to take.
And you might take that as a warning that maybe you ought not to do it. What people do and what I've seen, and you brought it up is the owner carry back is the owner will say, “Okay, the bank is only going to give seven hundred, but the price is a million. I want a million of all carry back the $300 thousand dollar loan.” I'm not saying it's wrong, but, dentists that are wondering, “Gosh, is this a good deal? Is this going to make sense? Am I making a big mistake? Is this too risky? Is this going to fail?” I think you can rest assured that the banks do a better job than the private equity folks.
Howard: Because they’re not Emotional.
Brandon: Yeah. And they're going to go in there and they're going to actually look to evaluate risk that's going to be tied to whether or not someone actually going to pay. The private equity DSO guys, when we go in and we would buy these offices, this was a conversation I had with the business development team and we actually got into a pretty heated discussion about it. I see business development as being; yes, of course we're doing acquisitions. That's the external part of it. I grow on the inside as well. So, I had a fundamental objection to going around and buying up all these offices and then just taking off, just let them do whatever they're going to do. I felt that we have a responsibility to monitor and evaluate the practices that we acquired and to make sure that these practices were succeeding and that our acquisition was adding to the bottom line. If it was losing money, how is that helpful to go and buy all of these assets that are losing money?
Howard: Because when they're out buying the assets, that's exciting. They're doing deals, they’re closing deals and going home and popping champagne, and they're doing deals. That's the emotional side of that game. But that's a big insight stock tip when you're looking at his company stock and they say, “Well, the sales grew 25%.” Yeah, that's because they opened up twenty-five new restaurants, but then you need to go back and look at same store growth. And then same store growth is going down four, five, six, 7%. So, they're buying this restaurant or opening up for a dollar, and a year later it's only ninety-five cents, you know, it's going down. Being a, a student as you were, what a practice manager software did you go with?
Howard: You went with Dentrix?
Brandon: Yeah, I really don’t care so much for Dentrix and I know a lot of people don’t, but it’s what was there. It’s what the team knows how to use, and it does get the job done. It’s got some bugs, but that was the software that I was comfortable with, so I was fine with it.
Howard: A lot of these kids think that consumers are very impressed with high ticket items. Like, I come in, I don't know if you're any good, but if you mill your crowns, you must be better. If you have a 3D $100 thousand dollar CBCT, you must be better. If you have $100 thousand dollar millennial laser, you must be better. In your DSO market did you see a correlation between buying these high dollar tickets and increased productivity and net income and profit or not a correlation?
Brandon: Well, I didn't see a correlation because I didn't see that capital expenditures was part of the plan. One of the things the DSO’s say about themselves is, “Yeah, we'll take care of the management, you spend time with patients,” but they say, “We leveraged our strength in numbers to reduce costs and we pass that onto the patient.” No, it gets passed on to the investors, and I didn't see that any of that was taken and diverted to buying these expensive high dollar items like the Cerec and Cone Beam and all that stuff. So, I didn't see a correlation. Now in my own practice, we already had that stuff, so I don't have anything to compare it to, but I know if it’s in the bio that one year we had it and we had a certain revenue level and then the next year we still had it, but it jumped 33%. We didn't buy any big-ticket items. We didn't start using these any more than we were using them before. It's, focusing on the human part of it. You can't buy yourself out of this. You can't, you have to get in there and do your hard work the good old-fashioned way; treat people well, provide a quality.
Howard: And where can they learn this, or where did you learn it?
Brandon: I learned a lot from trial and error and failing over and over and over. Prior to buying my practice, I learned what didn't work to motivate my team. I learned what didn't work to get patients to want to come back to the practice. And I watched the failures around me and took note and tried to implement it in my day to day, without actually having made those mistakes. And then formally it was to a point where I felt I needed additional training and that's why I went and did the business school for a couple of years.
Howard: Harvard Business Extension? What is that?
Brandon: Harvard Business Extension School.
Howard: Harvard Extension School.
Brandon: It’s their school of continuing education and it is something that you can do online, live web cast. You appear telephonically, and some people are in the same state as you. There are some people that were on the other side of the country, but it was a hybrid program where—
Howard: You do it from home?
Brandon: Yeah. So, I would leave work a little early and I'd go and it's about two hours, a couple of days a week and there's a professor and there a lecturer and you can push a button and raise your hand and you can--
Howard: So you did all this from your home on your own computer with a Webcam?
Brandon: Webcam. And then the other part of it was you did have to go and appear in person.
Howard: In Cambridge Massachusetts?
Brandon: Yeah, so you have to do that. I went down there I think three different times.
Howard: It's a two-year program?
Howard: And what was the degree called?
Brandon: It's a certificate program. So, it's strategic management.
Howard: And do you recommend it?
Brandon: Highly recommend it.
Howard: What did it cost?
Brandon: It wasn't bad. I think it was about fifteen thousand total, the whole thing.
Howard: For two years. If you study my career, my inflection point was when I did my two-year MBA night school. It was Monday and Wednesday nights from six to ten and we did a lot of telephonic stuff with sometimes the instructor would be at U of A in Tucson. It was pretty neat, they had a big screen, and I felt like I was just in the class. And sure enough, I raised my hand, I’m looking at her on a screen and she’d say, “Yeah,” but it’s a total game-changer.
Brandon: Oh yeah. It's one of the best things I've ever done. The best decisions I've ever made.
Howard: I'll give you another analogy; it's like if you're dental assistant’s working for ten years, you're thinking, “Well, she knows how to do a root canal filling here.” She's been assisting you for ten years. Well, it’s just really different going to dental school, and a lot people, dentists, they think, “I’m a dentist, I do root canals, I get marketing and advertising and I get all this stuff.” I don’t know. There’s nothing like the formal, and I tell dentists all the time, “You’re getting your butt kicked in business, go back to school.” And I, I actually loved it. I was so sad when the ASU deal was over because every Monday and Wednesday night it was two classes a trimester, so six to eight would be one class, and eight to ten would be another class. And every trimester you got two new classes, and it was six trimesters over two years, with the same two-hundred people. And the evening program isn’t a bunch of kids, God, there was the famous Sheriff Joe, there was a company that worked for him. Eddie Bach’s grocery store, there’s a couple that worked for him. Every company you could think of in Arizona, Intel, Motorola, Microsoft; all these companies.
And hanging out with those guys, talking shop, you start realizing there wasn’t a lot of difference between dentistry and donuts and groceries, and even a government operation like Sheriff Joe, you’re still managing people and time and processes and budgets. Maybe you get your money from customers, but it was like a two-year deal.
And when it was over it was sad. It was sad. I just thought to myself, “What are you going to do Monday night?” I had to go back to Monday night football. And for the first year, I just watched Monday night football and I thought, “I’d rather be sitting in that classroom, with those people.” It was really cool. You just go do. And they’ve got a Saturday program too. You just, every Saturday, eight to five for two years.
Brandon: Yeah, I really recommend doing that. I think if you go in there and try to get something out of it, and understand the differences between management and leadership, understand that management is, here’s another quote; “Management is getting people to do things right, leadership is getting people to do the right things.” And, you understand that there’s a people process behind a number process. Most of that program was about leadership. They had some core management courses, and you know the strategy and numbers and all that, but that’s not the major factor in whether or not you’re going to be successful in business. It’s about whether you can get people motivated to support your cost, and the program was case-based, so they would show you different scenarios, things that happen, and where different leaders failed, and what they did to turn things around, but the whole idea that you can just analyze your way out of these problems, looking at spreadsheets, it just doesn’t make much sense, and it’s not what I found in my practice.
And management, what’s the goal? You’re going to get someone to comply with the policy. When you lead people and you get them excited, they’re going to do more than comply; they’re going to embrace it, they’re going to support it, and you’re going to be much more successful in doing that.
Howard: I think management is more like sticks; like, “If you’re late, I’m going to write you up, and if you’re late three times, I’m going to fire you. And if you do good, I’ll give you an extra carrot. I’ll give you a bonus, a nickel.” And I think true leadership is when you can make people want to do the right thing.
And, there’s so many different views and theories on leadership. One trick I have on leadership is, because you might have a different personality, for instance, remember that Indiana Hoosier’s coach who threw a chair at a boy and they got rid of one of the greatest basketball coaches of all time? First of all, you don’t know what leadership style that guy needed, all of his boys, you didn’t hang out with those boys. Maybe for some boys, that works really good, and maybe some boys it works really bad. I always go to people and say, “Who worked for you, what’s your management about? What leader touched you?” And usually they’ll go back and say, “You know what?” I’ve had a girl say to me, “It was my volleyball coach in high school.” Or, “It was this teacher.” It was this lady that ran the choir at church, or somebody. I’ll say, okay, that’s what touched you, so that probably has a lot to do with you. Be that person.
I love the leaders from the grave. I mean, look at, we never talk about religion and sex, politics, look at Jesus of Nazareth; he died two thousand years ago, how many people are still, “What would Jesus do?” Gandhi, Martin Luther, for me, my dad. My dad’s been gone since 1999, and he’s still affecting how I think and he’s still a leader. So, when you can lead from the grave, man, that’s inspiring, when you can lead from the grave.
And these dentists, I’ve seen it so many times, they walk in, first thing they do is they walk up to the schedule and go, “Why is my afternoon all open?” It’s like, “Well good morning, doctor!” You just walked in and took a crap right on your receptionist’s front desk. And now, she’s going to be answering the phone and greeting patients all day.
The dentists don’t want to learn that; they say it to my face, they say, “Well that’s the soft and fuzzy stuff, I want to learn bone grafting. If I could learn how to place implants and bone graft to a high predictability, my office will double in sales.” It’s like, dude, someday a robot will make this stuff. The Chinese already have the first robot successfully place an implant. You’re working with your monkey hands, is going to be replaced like Uber did to a taxi driver; it’s the leadership stuff that’s not going to go away.
Brandon: There’s something I want to share, one exercise that was done in one of the courses when I was on campus. Everyone in the class had a couple of sticky notes on their desk, teacher didn’t say anything while they were there. The instructions were, “Write down one trait on each of your post-it notes that you feel would define the ideal boss or person that you have to work with.” And we all did it, and then she said, “Okay, on that wall I want you guys to put hard skills like smart; highly trained, highly accomplished, lots of experience, all that goes over there. And then, over here, all the soft skills, read it and see what ones you have. It’s; kind generous, friendly, trustworthy, all of those things.”
Howard: [inaudible – 00:50:47]
Brandon: There was a massive herd on this side of us, there were thirty of us in the course, and we’re all over here trying to put our sticky note on the wall, and there were a couple of guys over there put; smart, IQ, all that stuff, and there was just a handful, and then this whole wall was full, it really, really made the point and I’ll never forget the importance of the soft skill. When people meet you, and they’re evaluating you for the first time, they ask themselves two questions; “Can I trust this person? Can I respect this person?” It’s like the saying goes, “People don’t care how much you know until they know about you care.”
Howard: Were you in scouts?
Brandon: When I was a little kid, yeah.
Howard: Ryan, find me the scouts, what was it, scouts honor?
It was trustworthy, loyal, helpful, friendly, courteous, kind, thrifty, brave, clean and reverent. Isn’t that funny, I haven’t said that in a [inaudible – 00:51:47] but that’s the real stuff, isn’t it?
Brandon: That’s what gets people excited to follow you.
Howard: I get it all the time where a hygienist will say, or post on Dentaltown or IGtown, they’ll say, “You know, he’s really, really picky on an open margin if he didn’t do it, and he’d say, ‘This crown needs to be replaced.’” But then on the recall, this one’s far more open. “Oh, that’s fine, we’ll just watch it.” And then, now the staff doesn’t believe in the treatment. I also think it’s another red flag when everybody works in an office and nobody goes to that dentist.
Brandon: That’s a huge red flag. You bring up a good point.
Howard: You agree, that’s a huge red flag.
Brandon: It’s a huge red flag, just like the point of not having a long-term hygienist, because hygienists don’t stick around and put up with that open margin nonsense. So, to be an effective leader, you have to be authentic. You have to have consistency with your words and your actions; doing what you say, saying what you do, and being consistent and ethical every day. Not just sometimes, what’s the definition of integrity? It’s doing the right thing when no one is watching, so in a situation where you make a mistake, one of the most humbling things that actually is empowering, it builds your power; it doesn’t degrade it, is to admit when you’re wrong. Admit mistakes, just make it right and learn from it. And if you can do that in front of your team and own a mistake, and I’ve done it several times. It’s a level of humility that people just can’t resist admiring, and it takes time. You can’t just do it once and then you win the whole team. When they say, you buy a practice, don’t change anything for a year, I agree with that to some extent, but it’s not because, “You don’t know what you’re changing, so you need to have a year.” Its; you need a year to get people to actually trust you, it takes time.
Howard: I know my homies, I know how they think. They think, “I don’t care if none of the staff stay, and I don’t care if the patients don’t come back, I’m going to get an A in marketing and advertising and SEO and website and Google ad words and Facebook ads and I’m going to tweet and Twitter my way to success by just getting a bunch of new patients every month.
Brandon: What I would say to that is, I don’t advertise.
Howard: You don’t advertise?
Brandon: I don’t market, I’ve got a website, that’s it.
Howard: And what is your website? Ryan, show it to me?
Howard: Scottsdalesmile—so you only have a website?
Brandon: I have a website.
Howard: Why do you not advertise?
Brandon: I don’t advertise because our patients do it for us. The majority of our new patients are from internal word of mouth referrals and that is to me a classic sign that you’re doing something right.
Howard: How many dentists—are you the owner, are you the partner?
Brandon: I’m owner.
Howard: But you have associates, right?
Brandon: Yep. I’ve got two associates, both of whom were prior owners of the practice and just worked back.
Howard: Jonathan Coombs?
Brandon: Jonathan Coombs and Don Chiappetti.
Howard: And is Don Chiappetti, is he Italian or Syrian?
Brandon: I don’t know, that’s a good question.
Howard: So you agree then, what I see is I see the cottage industries where nobody has more than 1% of the market by definition, cottage industry. There’s 125 thousand dental offices and the biggest chain, Harlan owns eight hundred, so they’d have to grow another 50% to have 1% of the dental offices. Those small cottage, they always want new patients, but to get to a billion-dollar company, the fortune five-hundred, they all have loyalty programs. They’re all like, “Who hasn’t flown Southwest or seen a Chase credit card?” They try to keep customers for life, and the dentists, even in their vocabulary will say, “We have a really great new patient experience.” What about the existing patient experience, why would there be a difference between new and existing?
It’s kind of that amateur cottage industry that thinks a new patient experience, when the onus should all be on loyalty.
Brandon: I think a high new patient count is a sign of weakness, it means that you’re dependent on that, and the marketing budget to make that happen in order to get the revenue levels that you’re experiencing.
Howard: So what percent of revenue are you spending on marketing?
Brandon: I thought you might ask, so I brought my---marketing, .63%.
Howard: Nice, and what do you think the average DSO is?
Brandon: Maybe four? Three or four. It depends, some of them market a lot heavier than others, but again, this is the point I want to make to everyone watching or listening that is thinking about how they are going to compete with the DSO; don’t. Let them flood everyone’s mailboxes with all these flyers that give away dentistry. Don’t participate; there’s one thing I learned in the program, that there’s a red ocean strategy and blue ocean strategy. The red ocean, it’s red for a reason. Red; blood. It’s cutthroat and you get in that ocean and you fight it out with everyone, or, you can go into the blue ocean which is uncontested market, you’re not fighting over these people that I would argue you may not want in your practice anyways; they’re not loyal, they’re Groupon shoppers, they jump around from place to place, and it’s on us as a profession to resist the temptation to try to compete with that part of the market.
We need to be very careful because if we do that, we diminish the value of what we provide as dentists, and that’s what happened to the physicians, and that’s why the consolidation of the physicians that happened many years ago resulted in the low reimbursement rates for a lot of physicians now. The same could be said for the effects on trust; if you have people coming into these corporations that may not be the most ethical, or they may not be honest and fair, the perception in the public is that that is tied to the dentist; they don’t care, they look at dentist. So, we need to be careful as a profession to be preserve the trust, and people trust dentists, they do, and we want to keep that way.
The value and the services that we provide, when you do free exams, free x-ray, free this, free that, and all that stuff, you’re focusing on price instead of value; there’s a very big difference between price and value. DSO’s, in my view, focus on price, it’s a number. It’s not in context of any of the other factors surrounding the experience, and value is, “Okay, it costs what it costs, but you get a personalized experience, you don’t have a revolving door of dentists and team members. We have A players, not B and C players in the practice.”
We use the top materials, we use the best labs, and we have the time to sit down and talk with the patients about their personal life, and we don’t have to run and do three hygiene checks and do a filling in-between coming back and taking an impression for a crown. That’s the life that I lived for five years, working corporate and having to jump around. I almost burned myself out and did a number on my back. Dentists need to watch out for that too; it’s not sustainable
to work under those kinds of conditions.
Howard: We passed our hour, we’re in overtime. I want to go back; you dropped the term, “red ocean, blue ocean.” Will you go back and explain, because that might have flown over someone’s head, what’s the difference between a red ocean and a blue ocean strategy?
Brandon: Red ocean; think of, there’s something called Porter’s five forces, and it describes how in business, you have different levels of duress, coming from different directions. One is, a new entrant to the market, someone is—
Howard: This is Porter’s five forces?
Brandon: Porter’s five forces.
Howard: Number one is a new entrant?
Brandon: New entrant coming in and trying to get some of the market share. And then you’ve got your customers that put pressure on you for low cost or increased value. You’ve got your suppliers that can put pressure on you, which is an interesting situation because of the class-action with some of the supply companies.
Howard: Henry Sign, Otterson, and Benco.
Brandon: And I think Burkhart got let out of it, but yeah.
Howard: You think he got let out of it, or they weren’t involved?
Brandon: They were involved, but they were dismissed from being part of the—
Howard: Why do you think they got dismissed?
Brandon: The rep I know here in town tells me because they weren’t participating in any collusion or price fixing, or any anti-trust type issues.
Howard: Do you think the other two were?
Brandon: It depends on how you define it. I think there’s a lot of funny business that goes on in a lot of industries, and whether this one is substantially different from any of the other stuff that—
Howard: I’ve seen some very cringable stuff. I noticed there was this little bitty guy that sells supplies online, and he took out a booth in Arizona and Texas. So, the big three said, “No, that guy is not coming. If he comes, we’re not showing up.” I said, “Are you kidding me?” And the executive directors so then it’s like, “We don’t play like that.” So, this little guy went and got one little booth, and then these major empty spaces, you went to the convention like, “Why is that all empty?” “That was the big boys.” And that’s bullying, and the attorney general in Texas, the dental, the state dental society turned over to the attorney general in Texas, and then our guy here turned over to the attorney general of Texas and that looks like that—is that a big part of that suit?
Brandon: Yeah, that’s a huge part of it, and it’s price fixing, and it’s keeping prices artificially high because they know that they’re the only—
Howard: And it’s funny, so they were worried about this little guy selling supplies online, I think it was Source One, wasn’t it? Source One right here in Arizona, and who cares about Source One? Jeff Bezos had a booth at the New York, the greater New York Dental Meeting last November. I love the greater New York Dental Meeting, because as we’re talking right now, it’s a Chicago mid-winter meeting. And greater New York always has it after thanksgiving, and there’s Christmas, and the weather is perfect, and it’s the most amazing meeting. I’m getting texts from my team all day long, they’re in Chicago, it’s twelve degrees, I’m freezing, it’s miserable. It’s like, God. Then the same meeting while whine every year why their attendance is falling. And then, when are they going to have the Yankee meeting? Why don’t they just move Yankee, they should just combine Yankee, and Chicago Mid-Winter and just have it at the North Pole every February. So, suppliers, okay? Suppliers and then the last one, so that’s; threats of substitution.
Howard: Substitutes to the marketplace.
Brandon: That’s right. And then the last one is the obvious one, which is direct competition. That is, if I can make any message known today, it’s that we’re not in direct competition with DSO’s, if we choose to exit that red ocean, and go into the blue ocean where you don’t have—so, a classic example—
Howard: What’s the red ocean, there’s blood in the water? Is that why it’s red?
Brandon: Cutthroat, whoever has the most marketing flyers in the mailboxes. Whoever can sell the product for the lowest price possible, it’s competing on that level, and you’re focused on price, you’re not focused on value.
Howard: Like Groupon; it’s a race to the bottom.
Brandon: They can have them. As far as I see it, and that’s what everyone, if they want to exit the red, go into the blue ocean, uncontested market spaces. You’re going after that no one is trying to take away from you. Of course, there are other people in that ocean, so it’s not truly uncontested, but on a relative term, it is. You’re not going to win—
Howard: And that’s why I never rolled out a DSO for the last thirty years, because I could go out there and get an A on demographics, the location, the advertising, the equipment, I could do all that. But I always thought, at the end of the day, the dentist is a product. I know this is an iPhone, I know this is a bottle of water. But when I walk in and meet you and you tell me you have four cavities, you’re no different than my engine light coming on, and I go to the same auto guy since I got my car in 2004 from the same guy when he was single. Then he got married, then he had a kid, now he’s up to like three kids; I believe and trust him when he says, “I’ve got to do this.” Then the scheduled maintenance stuff, he’ll tell me, “Well, I wouldn’t do it. Who does that?”
The product is the dentist, and are you creating an atmosphere of empathy, sympathy, trust? I have to read the, “A scout is trustworthy, loyal, helpful, friendly, courteous, kind, obedient, cheerful, thrifty, brave, clean and reverent.” I think I’ve got all those.
Brandon: That’s impressive, that’s good.
Howard: But that’s what it is, and how are you trustworthy when every time I come in here it’s a different dental assistant, and it’s a different hygienist, and it’s turnover, and there’s all these, I’m getting all these mailing pieces in my mailbox. You’re my dentist, and, yeah.
Brandon: We found in our practice that people are willing to pay a little bit more to not have to deal with all that, and to come in and to have a true dental home, and faces aren’t changing. And we know them by name, they come in and we don’t have to say, “Who are you? Who are you here to see?” We know who they are.
Howard: And you know what? You know what I would pay just for a cardiovascular surgeon, a cardiologist? I mean, you know how sad this is; you see all this research that on five-year, ten-year mortality rate, stents versus non-stents, no difference. Statins versus no statins, so I figure I’m fifty-five, I’m fat, I’m bald, I’ve got four grandkids, I should really go and get this thing checked out, and you know what my friends tell me? “I don’t know who I can send you to because if you walked in there, I guarantee you if ten people went in there, ten would get stents.” I’m like, “Really?” So, you’re in the hood here for 30 years and you don’t know who you could send me to? And they go, “No. I mean, I know if send you to this one place that we all know, shit, they’re going to do a bypass on you!” And I think the market is warming up.
I think the millennials are going to be very different, and the way I see they are going to be so different is in religion. The baby boomers, like the ten commandments, the first three; one God, honor me, this day is holy, the next one is honor parents—it’s kind of a blind obedience. “You’re the doctor,” I mean, I’ve been a dentist for thirty years, all the older people; “Well you know, you’re the doctor, if that’s what you think. You’re the doctor.” Now the millennials are like, “Let me a fifteen-minute Google search on this; and they’re not orthodox religion; they’re spiritual. They’re like, “I know there’s something bigger than me, but I don’t believe you; I think you can eat shellfish.” I’m not going to get all caught up in these rules which my mom and sisters are obsessed with. They read the Bible like a lawyer is reading the constitution, and I think that the millennials are going to be far more loyal to themselves than blind obedient to God and country.
You also see it in the surveys around the world what percent of their children are willing to go to war and die for their country? It’s a chart from 1950 to 2018; it’s just plummeting down. Some of those countries are down to only 11% would die for their country. A lot of them are wise and saying, “You’re the politician, why don’t you go die for the country?” I noticed the guys who start all the wars, none of their kids are in the war. So, I think it’s going to be a very highly more educated market and they’re going to realize you get what you pay for. My iPhone costs more than a Samsung. If you gave me $1000 dollars cash and a free Samsung, I’d give them both back to you; I don’t want it. And I would pay a cardiologist cash, deniro, if he would just sit down and say, “Here’s the pros and cons to everything,” and what he would do. I don’t want him to be the average American Hospital.
When I was in MBA school, there were hospital administrators there saying, “Dude, we lose money on almost everything we do.” But I’ll get a $40 dollar for an exam. But I get $100 thousand dollars for a bypass. I get like $80 thousand dollars for a mastectomy. I get $50 thousand for a hip. I can’t do all these exams and consultations, we have to do big surgeries. And if our hospital does three to four big surgeries a day, bypass, colonoscopy, mastectomy, hips; if we do three or four big ones every single day, we pay our bills. But we take those four things away, we’re losing across the board, and that is just so wrong. The hospital, the way it’s set up, they can’t make a living telling Grandma, “Here’s your pros and cons; let me spend twenty minutes with you.” You know what I mean? They don’t make money doing that. The Medicare, Medicaid insurance system in America
is, they only make money doing acute dentistry.
Like, how many dental offices lose money on cleanings, exams, e-rays and fillings, but they don’t care because if they get a couple of crowns, a couple of molar root canals, and do a partial denture or place an implant, they will make money. Well they should be making money on every action they do; you shouldn’t have to sit there and say, “My hygiene department loses two-hundred a day,” but if, instead they’re doing a MOD direct filling, and do a crown, I’ll make it up. The incentives are horrible.
Brandon: Yeah, the saying this reminds me of is, “Charge what you’re worth, or you’ll be worth what you charge.”
Howard: Text me that Ryan, I want to remember that. Charge what you’re worth, or you’ll be worth what you charge. Because if you only get paid $78 dollars to do a filling, well you’re going to do a $78-dollar filling. But if you do the filling the way you would do it in any of your kids, then you need $178 dollars or $278 dollars to make that worth, then that’s what you’ve got to do.
Brandon: It goes beyond that in the first case. You become associated with doing $78-dollar fillings. Your name and your reputation is not linked to quality and all the other good things that come with it.
Howard: So what’s your goal? You’re just a baby, you’re thirty-two, what is your goal? Where do you see yourself in ten years, twenty years, or when you’re as old as me and a grandpa and have four grandkids?
Brandon: Yeah, ten years I see myself still practicing dentistry. Maybe not owning Scottsdale Smile Center. It’s a lot of work, it’s a lot of fun, it’s very rewarding but the size of the practice makes it so that I’m not as available for my family as I’d like to be, so I’d like to—
Howard: You’re married with kids? I see your wedding ring, you’re married with kids?
Brandon: Yeah, we’ve got a little baby girl, she’s seven months old.
Howard: Oh, wow! I’ve got to tell the truth; you can still put her up for adoption at seven months, but once they get about two years old, then it’s going at the end of the day cost you half a million dollars, so I just want you to know. Right now, you could probably make $45 thousand dollars on the deal, keep her for twelve more months and she’s going to cost you half a million. I’m just teasing. But that’s awesome!
Brandon: Yeah, so I want to be a dentist for many years to come, well beyond the tenures but maybe balance a little bit more with family life, and that’s where I see myself.
Howard: Family first, business second.
Brandon: And that’s how we run it at the office too.
Howard: Yeah, I see that hypocrisy where the dentist, three times a day they come in and, “Your wife is on line two,” and then the assistant gets in trouble because her husband calls, or the school calls, and they say, “No personal phone calls.” I axed that rule right out of the gate; because I hired an old office manager and that was her rule. I said, “Well she’s not going to be able to assist me during a filling if she’s wondering who the hell is calling, or if the school, or is the baby sick,” I mean, I like that show, Pawn Stars, where that bald guy kind of looks like me, and that’s his saying, “Family first, business second.”
Brandon: That’s right, and anything, there’s no reason not to have a policy like that. Anything that you think you’re going to lose by having your hygienist off for a day because her kid is sick, she’s going to appreciate you and your leadership and the gesture so much, you will make that money back ten times over in no time flat.
Howard: I believe, I call it the “longer lease theory,” and you know who taught me that? You’re never going to believe that; it was a federal reserve study, and they did one of the biggest studies on employee turnover in business. Because they own more economists, I mean, I think three thousand PhD economists work for the FED, so they want what’s best for the economy and they ran this deal, and they were comparing how bonuses in sales deals get them focused so much on making the sale, they stop paying attention to all the periphery things. What they saw that actually increased the most profit was the longest leash; so, let’s say that I say, “You have to work for me eight to five, everybody has to work eight to five.” But, if I wanted to drop off my daughter to school, I drop her off at 8:15, I could be there at 8:30. But then, that’s your black and white rule; everybody has to be here at eight.
She always comes to work resentful, and somebody else had to take her whole life, when the other two girls, they don’t even have a kid in school. A quarter of baby boomers didn’t have a kid. I noticed with my office, three out of four have kids, and one out of four have furry friends, dogs and cats, whatever. I’ve had so many people stay with me twenty years or longer, and what they usually point back to, I’ll say, “Well, why?” Because you assume it’s because I’m tall, dark and handsome and all that stuff, and they, “It was the flexibility, it was letting me work from home,” because you know here in Phoenix, some people want to get here at six, because if they had to be here at eight, they’d be an hour in traffic, but if they came at seven, they have fifteen minutes of traffic. Some people have to leave at 3:30 or they’re going to sit in an hour of traffic. So not having these one sized fit all, they used to say with the King, the King’s writ, w-r-i-t, dot the I’s and cross the T. He would see a writ, and if you did this you were killed. All these people were getting killed had nothing to do with the Kings writ. They went back to the Kings writ and say, “You should write it better, you should write it more clearly.” And you don’t want to be the King’s writ, you don’t have an HR policy of dot the I’s and cross the T’s, you want to keep customers for life. You’re not going to do that unless you keep patients for life. And if they don’t walk in there and see someone, and even if you have staff turnover, it’s one thing if you have staff turnover amongst a background of people who have been there fifteen, twenty years, that’s very different than when you walk into a DSO and the whole place is flipped in two years.
Brandon: You’ve got to do things that make their lives easy. As I said earlier, we’ve got a policy where we’ve got unlimited sick days. We call them personal days; unlimited. I think Google does that, but how does a small business, a dental practice, how do we do that? We’ve got a culture where people wouldn’t think of abusing that, and if someone is sick for two weeks, I don’t want them coming to the office, because they’re not going to be productive, they’re going to get other people sick, most importantly, they’re going to get the patients sick, and they don’t want that. So, if someone is sick for two weeks, but they’ve only got a week of sick pay, then what do you do?
Howard: Remember Ryan, when my son was working for a restaurant and we shout out a name, and he says, “I’m really, really sick with the flu,” and he’s a cook, and they’re like, “I don’t care, come in anyway.” Remember that? It’s like, okay, so this is the guy handling all the food and he’s telling you he has the flu, not a cold, but he has the flu, and your first thought is, “I don’t care, come in anyway?” So, he and me don’t eat there anymore. But hey man, we were supposed to do an hour, we did an hour and 21, seriously man, you are wise beyond your years. Which goes to show you, you can get some decent experience; a lot of people go work at DSO’s and say, “It was horrible, it was horrible, after two years I finally got out of there.” I’ll say, you work for this company that owns like a hundred offices, tell me all the management stuff you learned! “I didn’t learn any.” “Oh, so you just had a bad attitude, so these things you didn’t like, you didn’t realize that there’s not many people that could even own a hundred offices, so you can badmouth it all day long, but they’ve got skill sets you don’t have.” I mean, how many dentists in the United States, what percent of dentists in the United States could get to the level of owning a hundred offices?
Brandon: Maybe a quarter of a percent?
Howard: I know! So really, you work for Rick Workman who owns eight hundred and you didn’t learn a thing? You worked for Steven Thorn at Pacific and you didn’t learn a business thing? You worked for Rick Kirshner who owns three hundred and fifty—really? You can just say you didn’t like it because A, B, C. I tell kids, my God, go work for Heartland, steal all their owner’s manuals, the HR’s, all the forms, all the systems, every day you go to lunch, go to lunch with the office manager. And then see if she can eat lunch with the district manager. And after you work there two or three years, you kind of did a residency, you kind of did a dental MBA of a corporation that effectively runs eight hundred offices. Now is it perfect? No, I’m not perfect, you’re not perfect.
But thank you so much.
Brandon: Thank you.
Howard: For coming by and talking to my homies, that was awesome.
Brandon: I appreciate it. Thank you.