The DSO Wave: Transformative Trends in Dentistry with Brian Colao, Director of Dykema’s Dental Service Organizations Group

[00:00:00] Welcome to Think Oral. Where we connect and connect between oral and physical health. I'm your host Dr. Jonathan Lavee. And I'm your host, Maria Philipova. Let's get at it.

[00:00:22] Welcome to another episode of Think Oral Health, the podcast where we connect the unconnected, the themes across different specialties and silos in health care. And we celebrate examples of interconnected equitable care.

[00:00:39] And so with today's podcast, I'm really excited because we have a leader who is putting this in practice, leading large organizations and allowing us to truly see an ecosystem view of where the industry is going and how some of the most forward-looking and successful organizations in oral health are connecting silos and bridging gaps with patients in mind.

[00:01:03] With that in mind, I will, as usual, introduce my partner and partner in crime for this podcast that co-host, Dr. Jonathan Lavee. Jonathan, who do we have here today?

[00:01:16] Thank you, Maria. I'm so excited to introduce Brian Collejo. He is the Director of Documents Dental Service Organization group. He's really leading the industry in this new trend of the Dental Service organizations.

[00:01:30] He's there at the very inception. He has started this Dachima conference that anybody who's thinking contemplating or growing a DSO needs to be there.

[00:01:40] He is one of the great thought leaders in the DSO. So excited to have you here, Brian. Thank you for joining us at the Think Oral Health Podcast.

[00:01:49] Jonathan, really good to see you and Maria here today and spend a little time talking about my favorite subject, DSOs, I imagine.

[00:01:58] So great. So great. Well, Brian, let me love a little bit of a softball at you for a second and answer the first question, which really is, what are the trends that are driving this DSO industry with this incredible hockey stick growth that we're experiencing

[00:02:18] for the last five years? What's going on? Yeah, great question. What's going on is a great evolution in dentistry. And the evolution is from solo practices and dentist-owned solo practices and dentist-owned group practices to a DSO model.

[00:02:35] And dentistry, as you know, Jonathan, you've been around a long time. It's virtually recession proof or recession resistant. It was pandemic proof.

[00:03:03] The best performing sectors of the entire marketplace in the United States and investors have had a lot of interest in this space. And around 10 years ago, this great consolidation started.

[00:03:16] And we're about 30% consolidated right now. A lot of runway left, but the principal reason. So what is happening is there's a great evolution and consolidation of dentistry.

[00:03:26] Why is that happening? Because dentistry is virtually recession and pandemic proof. And the DSO model is the way in which non dentists can participate in the profits of the dental industry.

[00:03:38] Yes, absolutely. Thanks for laying that out for us. But as we think about a convergence of trends. So we have the business people only dental practices. Amazing.

[00:03:48] What are the other trends that we're seeing in the dental industry that is also a driving force behind this accelerated growth?

[00:03:57] Well, what you're seeing is technology. What you're seeing is the intersection between one business people, the business of dentistry and the practice of dentistry.

[00:04:07] You're seeing that intersection, first of all, where the whole object of the DSO model is you went to dental school to learn how to be a circle world class clinician.

[00:04:18] But when I sometimes instruct dental schools, I'm teaching a couple of courses for a couple of dental schools called the business of dentistry. And when I address the students, I say, how many courses have you had on HR, nothing.

[00:04:30] So how many courses have you had on how to negotiate supplies and equipment with Patterson or Henry shine nothing. How many courses have you taken on legal and accounting in your dental practice? Nothing.

[00:04:42] How many have you taken on how to hire and fire employees? You know, nothing. So you have the whole idea behind the model is the dentist can focus 100% on dentistry and trained business people that are actually trained in the various

[00:04:58] programs you can focus on insurance, reimbursement, billing, collecting, accounting, legal, HR, everything that you have to do in a dental practice that can be handled by the business professionals, the non clinical stuff, and the clinical

[00:05:12] stuff can be handled by the clinicians. And what you end up happening is the clinicians become a better clinicians, because all they have to focus on is being a clinician, none of the business stuff.

[00:05:23] So the fact is that you have to focus on, you have to focus on what you have on your own life. And you have to focus on the business of the practice runs much more smoothly and efficiently and streamlined because you have trained business professionals doing it.

[00:05:38] So that's the first intersection and why we have DFOs is between business and clinical. The second intersection right now is between technology and there's all amazing technologies out there for things like artificial intelligence for diagnostics, artificial intelligence for patient

[00:05:50] management with artificial intelligence you've got innovative patient finance plans, membership plans and all of this technology out there is further growing further streamlining the practice of dentistry right now.

[00:06:04] I mean, I love that you touched on some of my favorite topic sound technology and being able to use technology to provide higher standard of care and run more efficient businesses, right.

[00:06:20] I'm excited Maria on Friday. Okay, the big joke you'll laugh, because I know we have a lot of fun on this show, even I have to go to the dentist. That's the big joke that I'm going on Friday. But when you guys go to the dentist, I don't think you bring all the friends that I'm going to the dentist with I'm going on

[00:06:36] we're going to release this, I think on various social media, my dentist visit is this Friday, and I'm going to the dentist with the Pearl artificial intelligence team and they're going to run the Pearl diagnostic AI on top of my x-rays and I think the glow science teeth whitening

[00:06:53] team is going to be there. So we're going to have a whole group of people at my visit to the dentist. I got a hand to Hippo release once I show up, I got a hand over the Hippo release, my dentist is going to be there. We're going to test out the Pearl artificial intelligence in real time on my x-rays. Keep your fingers crossed. I don't want

[00:07:10] to have at ease. I don't want problems, but I'm going on Friday and we're actually going to do a live interactive visits with some of this technology. Fantastic. So only between you and a couple hundred thousand of your best friends. We'll learn much more about you and your oral health and we'll get to know you a little bit better, I guess.

[00:07:30] I think that's right. Dr. Loman, my personal dentist is going to be there. Yeah, I guess after I hand her that Hippo release, she's going to spill the bean and we're going to talk about everything. Yeah.

[00:07:40] I love that you're going there because what you're describing is a prime example of an activated, empowered patient. You're the one who as a patient is going to the dentist, of course, us on this call are in a privileged position to know about all these technologies and know what questions to ask.

[00:07:58] who to bring to the dentist. But it is talk a little bit about how doable is it for a patient to walk into the dental office and say, Hey, Doc, how about AI? Hey, Doc, how about my sleep health? Or is my oral health connected to anything else that's going on with me? So how reasonable is it to expect that the patients who are not the Brian and Dr. Levine and Maria could do what you're doing and have that relationship with their dentist?

[00:08:28] They can obviously we are myself and you and Jonathan are in a position to hear about this stuff in real

[00:08:35] times. But I do think maybe we're not 100% there today, like at this moment. But yes, I think we're very

[00:08:45] quickly with the use of social media and education. All anybody has to do is Google any of the three

[00:08:50] of us. And at least with me, hundreds of videos come up and educational things. And certainly within

[00:08:56] the power of the patients to start utilizing social media to at least educate themselves and learn

[00:09:01] about some of the things. And then they can come into the office and say, Hey, I can't afford this,

[00:09:06] but you have the patient finance platform where I just I credit works. I just go on there and to

[00:09:11] the last four digits of my driver's license and I get approved right there in the practice. And

[00:09:16] I can pay you right there. And we can proceed. Can I have oral artificial intelligence overlaid

[00:09:22] over my x-ray and tell me if there's anything maybe doc no offense, you're like 60 years old,

[00:09:27] your eyes are getting old, but I trust Pearl more than I trust you. It may catch them. You can't catch

[00:09:33] me. A patient might say that was given their doctor a hard time. Now Dr. Lohman, of course,

[00:09:38] is awesome. I think her eyes are perfect, but still this stuff catches things that maybe the

[00:09:44] naked eye can't catch. And I think patient in the other thing that's going on, Maria,

[00:09:48] it's direct consumer advertising. A lot of these options are advertising direct to consumer.

[00:09:53] So you might come in there and say, Hey, I want one of those clear aligners. I don't want to spend

[00:09:58] $7,000 for worth of Donics. Can you get me a clear aligner? Can I do something like that? Or

[00:10:03] do you offer anchor dentures or can I get an implant? I've been looking at those commercials

[00:10:08] and you can start the dialogue with your dentist. And I think a more informed patient is going to be

[00:10:15] a patient that's better treated, that receives better treatment, because they're, you know,

[00:10:20] you've always said this, Maria, or we've talked about this, you know your body better than anybody

[00:10:25] else. You may have very skilled professionals that are treating you, but you know your body,

[00:10:30] and you know your preferences. What you may not be is a health care expert. But as you become

[00:10:34] more educated, you can ask more informed questions that's overall going to lead to better treatments.

[00:10:40] Love it. And you've heard of your folks tuning on Friday to hear the questions that Brian is asking

[00:10:47] Dr. Looman from his own dental visit. So I'm sure our listeners will be tuning in and googling you

[00:10:55] and rewatching the episodes. Yeah, it's going to be a spectacle. Friday is the actual appointment,

[00:11:01] and we got camera crews. It's going to be a spectacle. I'm not sure if they're streaming it live,

[00:11:06] but it will be released sometime in the next whenever they hear this the next couple weeks,

[00:11:10] if you Google it, it'll be all over social media, so you'll get to see it.

[00:11:14] The truth of the matter is by people like Brian doing that public awareness information,

[00:11:22] it really does amplify the consumer knowledge, because we know that in health care, it's about

[00:11:28] 17 years it takes to adopt new technologies and dentistry is even longer when we think about when

[00:11:34] scanners came out and how long it's taken for scanners to really be a mainstay of the

[00:11:39] dental practice and the digital workflow. We know that Brian's point that the consumer is going to

[00:11:45] push the professional to get their act together with technology. But Brian, would you comment on

[00:11:54] because of the DSO trends and business people helping to amplify these dental practices because

[00:12:00] of all the different hats the individual dentists would have to wear and now you got a whole team

[00:12:05] approach, how is that impacting integration of new technologies in the dental practice?

[00:12:10] Yeah, it's impacting it in a major way. What you're seeing is a lot of the business folks,

[00:12:17] and it's interesting. I'll tell you, it's really, really interesting what's happening right now.

[00:12:22] You'll see the business folks who attend all of the meetings that I attend to on the business of

[00:12:27] dentistry, they'll learn about these technologies and then they'll say, "Oh my god, I've looked at

[00:12:33] some of these trends. If I adopt something like a patient prism and it listened to my phone calls

[00:12:38] through the AI, I can get more patients to come back and schedule appointments. That could increase

[00:12:44] the revenue of my practice. I don't want to misstate it on the show, but by X percent, they

[00:12:48] have statistics. Wow, I'm sold. Or if I put Pearl AI on these X-rays, we're going to get to do more

[00:12:54] cases in an ethical appropriate way just because we didn't catch them before and now we're catching

[00:12:58] them. That's going to increase our revenue by X, Y, and Z. Hey, guess what everybody? We're doing

[00:13:04] this and they come back all excited. Then some of the dentists are like, "Huh, you're doing what?

[00:13:09] No, not in my practice. No, I don't know about that." Or they'll say, "Okay, we'll let you do it,"

[00:13:14] and then they won't utilize it. There's two big obstacles. You didn't ask me this question,

[00:13:19] but I'd love to talk about this for a second. There's two big obstacles to the

[00:13:23] implementation of all these technologies. I think they are gauge changing. I think they are outstanding.

[00:13:28] The two biggest obstacles to these are number one, just using it. You can pay the subscription,

[00:13:35] but you can convince the dentists to actually use it. Some of the old-timer dentists don't want

[00:13:40] to do it. The young folks, as you might imagine, with any technology, the 30-year-old dentist is

[00:13:46] more open to it. Not always. Sometimes the old-timers will love it, but in some cases, the stereotype holds.

[00:13:52] The young people embrace it. The older dentists less enthusiastic about it. Number one,

[00:13:57] getting people to use it. Then number two, integration. Imagine this. I always use this when I'm

[00:14:04] lecturing. Imagine if everybody's got a smart TV and has all this streaming stuff. We all do it.

[00:14:09] Imagine if I said to you, "Hey, Jonathan, Maria, if you want to use Netflix, you got to get one TV."

[00:14:15] If you want to use Disney Plus for the kids, that's you got to buy a second TV. If you want to use

[00:14:20] Hulu, you got to buy a third TV. If you want to use Prime Video, you got to buy four. You'd be like,

[00:14:25] "What are you, stupid bro?" I'm like, "Quit, I'm not going to put four TVs in my living room.

[00:14:29] What kind of dumb thing is this?" As you might imagine, any smart TV you buy, whether it's Samsung

[00:14:36] or Sony or I don't know all the brands, you go through all the brands, you can get all of these

[00:14:41] streaming sites you can get on one TV. The TV people figured this out. We haven't figured this

[00:14:47] out in dentistry yet. Sometimes, if you've got a certain PMS system, it might work with Pearl,

[00:14:53] but it might not work with a different AI company, or it might not have the patient finance embedded

[00:14:59] in it, or it might not have patient prism, patient retention embedded in it, or we can run down a

[00:15:04] whole bunch of the RCM functions. What you may have to do is you've got to close that window,

[00:15:10] open up another window, go do it. This is the biggest critique I hear from whether it's

[00:15:15] solo practices, group practices, or DSOs. They're like, "You guys got to figure this out." The people

[00:15:20] that run the PMS systems, the biggest ones, you got to figure this out. We can't buy a separate TV

[00:15:26] because we want to use Amazon versus Hulu versus Prime Video. We're not going to have

[00:15:31] three TVs in our office. You need to get all this stuff integrated. The two biggest obstacles are

[00:15:37] once just convincing people to learn about, be trained on, and use the technology, and second,

[00:15:43] to get it integrated. Those are the biggest obstacles of why the technology, it's moving fast,

[00:15:49] but why it hasn't just exploded and been everywhere is because of those two big obstacles.

[00:15:54] That's exactly right. Bright has a clinician. I've been

[00:15:56] Maxing for north of 30 years, I believe that the hygiene room is the center of innovation of a dental practice. And it's really because of the who. It's that hygienist that we like to call the rock star of the dental practice. The great communicators they spend an hour with the patient. It's where you put all of the digital the scanning the salamary diagnostics the airway the CBCT. But to your point. It has to connect to those practice management software systems and a lot of them are resistant.

[00:16:24] The API connectivity to a lot of these innovative software companies that are coming out closing

[00:16:31] the gap on what needs to happen in data collection and also data expression to the patient. We all

[00:16:38] know that the visual to the patient is so important. So if we have a source of an internal camera,

[00:16:45] the source of a cone beam CBCT that all has to converge on one TV and integrate to that

[00:16:52] software. When that starts to happen, you can actually build that. But it's a little bit difficult.

[00:16:57] We have that in our practice. But once you can build that, you start standardizing your systems

[00:17:02] in your processes in that dental practice. And I'm going to go back to the DSOs because the DSOs

[00:17:08] have this opportunity as business people that have resources and capital for training and

[00:17:13] education that the the elevation of the industry can happen when the DSOs of the proper leadership

[00:17:21] and vision and execution on that vision when they have the learning power. I mean, if you're

[00:17:27] a solo practice, right? And you go to XYZ. We know who they are, but I try not to call

[00:17:32] people out on the show. But you go to XYZ that's got, you know, their PMS system, you're a solo

[00:17:38] office and you're like, I want this integrated. It's inconvenient. They're like, yeah, that's

[00:17:42] nice, whatever. If you're a DSO and you're like, I have 100 offices and if you want my

[00:17:47] 800 offices, you better get this stuff integrated. You start to see, oh, wow, all right, maybe

[00:17:52] we were on to something, we better take care of this. So the DSOs are pushing this when

[00:17:57] their own way. And I think that has enough leverage and bargaining power that the PMS

[00:18:03] sponsors of that technology are really starting to take notice. I've talked to them. I visited

[00:18:08] really with all the three CEOs of the three biggest PMS systems. And I said, guys, you

[00:18:13] got to do it. I'm watching this. You're announcing we have a partnership with ABC, but what if

[00:18:18] one of your practices doesn't want to do business with that AI company, they want to do business

[00:18:23] with another, it would be like, I have a partnership with Netflix. What if I want to watch Disney

[00:18:28] plus? You can't force me to watch Netflix. You have to have it all available. And I think

[00:18:33] they're getting the message. We're probably several months away from truly seeing the

[00:18:37] integration that needs to happen. But I think they're getting the message.

[00:18:41] Yeah, I think so. I think so. Let's go somewhere else. Let's talk about the future. Let's talk

[00:18:46] about the future, the DSOs. And when you see this trend going and cast out the next three

[00:18:51] to five years, you alluded to it in the beginning, as we just look at the rapid growth all the

[00:18:57] way up to almost 28 to 30% of the overall industry or DSOs. What's the future look like?

[00:19:03] Well, this is the end. I always say, please don't shoot the messenger. If you're a solo

[00:19:07] practice listening to this and you don't like it, I'm sorry, I'm just delivering the message.

[00:19:13] Is the market consolidations 28 30%? Like you said, I believe in 10 years. It's going

[00:19:18] to be 75 or 80%. So the next three to five years, maybe we're halfway. This little recession

[00:19:24] we're in now has slowed things down a little bit. The M and A activity is not what it was

[00:19:29] in 2018, 19, 20 and 21 ended up being record years. Yeah, 2020. As soon as we open back

[00:19:35] up, it ended up being a record year, but this year, we're down a little bit because the

[00:19:40] interest rates, the interest rates are at a level not seen in 30 years. So that's slowing

[00:19:45] down the buying power of certain some of the DSOs. So there are still transactions happening,

[00:19:50] but it's down considerably. And it may for every time I think it's going to get better.

[00:19:55] We now got two wars instead of one war. It looks like we got two wars going on and other

[00:20:00] things. It may remain with us for most of 2024. But I think in three to five years, we're

[00:20:07] probably going to be north of 50% consolidation. And then in 10 years, we're probably going

[00:20:12] to be close to 75, 80%. What I say is if you're 65 70, you can retire however you want to

[00:20:19] retire now. But if you're in your 20s, 30s, 40s or 50s, you have to understand what's

[00:20:25] going on with DSOs and have a game plan. The good news is we've got 10 years. You're

[00:20:30] under no pressure to act this second, but you need to come up with a plan for the next

[00:20:36] 10 years. If you're 20, 30, 40 or 50, something years old because this DSO consolidation is

[00:20:42] here to stay and it is the future. It is here to stay and it is the future.

[00:20:47] So Brian, as you think about the growth in the industry of the DSOs, what do you think

[00:20:52] is going to happen over time? All things being equal with valuations of these dental practice,

[00:20:58] is it going to be a decrease in supply-graded demand to drive the pricing or do you see

[00:21:04] something else? How do you think about it? You know, that's a really good question. Let

[00:21:09] me answer it this way. Obviously, from 2015 to 2000 and I would say 21, first part of 22,

[00:21:19] the prices were just going up and up and up because the market was exploding. We saw

[00:21:24] record returns. Now, we're in these recessionary conditions. There's less transactions going

[00:21:30] on. The multiples of EBITDA, and if you don't know when you're listening to this, that's

[00:21:34] how we calculate your EBITDA and we pay a multiple of EBITDA for your office. That's

[00:21:39] the measuring stick of the value of the organization. EBITDA's earnings, a poor interest

[00:21:43] act is depreciation, amortization. It's the gold standard for that. But anyway, it's

[00:21:48] down now. This year, it's down. I think when the interest rates come down, I do think the

[00:21:54] prices are going to go back up, but I think they're going to fall short of the record

[00:21:59] that we get. I feel like some of those records in the near future, we're not going to hit

[00:22:04] those again, but the prices are going to go back up. Now, the point you made that nobody

[00:22:10] quite knows the answer to is what's going to happen in seven or eight years when the

[00:22:14] supply starts to shrink, but there's still a lot of demand that may very well. If you

[00:22:21] just applied basic economics, law of supply and demand, that may drive the prices back

[00:22:26] up at that point in time. But right now, with the market consolidation being 28 to 30%,

[00:22:32] there's plenty of inventory. I would not say there's a limited supply out there at all.

[00:22:36] So we're not seeing that come into play yet, but five, six, seven years, the supply issue

[00:22:42] may come into play where there's a more limited supply and that drives up the prices.

[00:22:47] Fantastic. Love that, Brian. Let's just switch gears a little bit and let's talk about the

[00:22:53] dentist entrepreneur that does not want to join a DSL, but says, you know what? I think

[00:23:01] I can do this with my team. What would you advise to that dentist and how can they take

[00:23:07] that posturing to be able to be competitive to this growing trend of the DSOs?

[00:23:12] Yeah, this is what I would say. You are going to sell and I say this every day. You

[00:23:17] control the timing. It's a wonderful place to be. You've got 10 year or more window.

[00:23:22] You control the timing. You've got plenty of time. You can have a lot of fun in 10 years.

[00:23:27] A lot of stuff you can do. So you're under no pressure to do it, but here's what I would

[00:23:32] just say. You will sell some days. If for nothing else, the return will be so attractive.

[00:23:37] You have no choice to do it. So when you build your organization on your own, you should

[00:23:42] do it like a DSO does it and you don't know we help people. There's others out there that

[00:23:48] can guide you, but make sure you're building your organization with the right structure,

[00:23:53] the right agreements and

[00:23:55] My thing is as it would be as if you were doing a DSO, that way when time comes ultimately to do a transaction, it's gonna be like we say plug and play, very little obstacles, very smooth. If you decide, no, I'm gonna do it my way. Like, I don't care what everybody else is doing. I'm gonna grow this my way. Well, yeah, this is a free country. You certainly can do that. But when the time comes to do some type of equity deal with somebody, it's gonna be a lot more clunky, a lot more difficult, a lot more fun.

[00:24:24] More time consuming and costly. It happens a lot where someone will approach me and God bless them. They did, I admire what they did. Maybe they started with one office and they've got 15 now and they somehow clogged their way to 15 offices. But I look at it and the structure is really difficult and inefficient, and sometimes we got, I'll say it on your show. Sometimes we got to charge people 50, 75, 100 grand to convert it to something that's is gonna sell on the marketplace.

[00:24:53] So if possible, you want to avoid that and you want it from the very beginning, even if you're doing it on your own, make sure you structure it in a way that will be attractive to a future buyer someday, 'cause I really believe all but a handful of people ultimately are going to buy.

[00:25:10] They may hold it for five, 10, 12, 13 years or something, but ultimately they're gonna sell because that's just a trend to the marketplace.

[00:25:18] And the returns that the DSOs are paying are way higher than they ever were in dentist to dentist transactions.

[00:25:25] That's right. And so Brian, how does the dentist get those capabilities surrounding them? From a standpoint of taking that organized approach to their practice, learning all of the necessary functional roles of human resource, finance accounting, operations, marketing, sales, digital marketing, blah, blah, blah, and on and on.

[00:25:47] All of these hats that the dentist leader has to wear to be successful, how do they navigate around that challenge to upgrade their own capabilities and skills?

[00:25:58] How does that go?

[00:25:59] Yeah, there are a couple things. You can certainly educate yourself, but that's a lot of work.

[00:26:03] You can also outsource a lot of these things. There's really, really competent billing and collecting and HR companies and other technology companies out there that will do these things for you so that you can, in effect,

[00:26:16] outsource the services and gain the same economies of scale that you might have if you were a DSO by outsourcing some of this stuff.

[00:26:25] There's a couple call center companies that are just outstanding where you're not going to stand.

[00:26:30] If you've got Bible offices today, you're not going to stand up your own call center. That's absurd.

[00:26:35] You would never invest in that overhead, but if you outsource to a call center, you get the power of a call center.

[00:26:40] You get the power of a billing or collecting or revenue cycle management company or something.

[00:26:45] There are a lot of companies that will outsource that sort of stuff, and it's terrific.

[00:26:50] It's really a terrific way to even the playing field until such time as you're comfortable exploring some type of DSO deal.

[00:26:59] Right.

[00:27:00] Amazing.

[00:27:01] The future really is for the dentist who doesn't want to join the DSO yet, grow your company, grow your skills and capabilities, get the experts surrounding you outsource and look at that as a thing.

[00:27:13] Yeah, one thing I would say, you want to go this alone? Let me just give you the best piece of advice I can.

[00:27:19] Growth is measured by EBITDA, not the number of offices.

[00:27:23] Anything you do, whether it's a de novo or an acquisition or you're adding new chairs to your existing office, same store growth is key right now in this marketplace because you can't do as much M&A activity.

[00:27:36] You have to grow your EBITDA. If you're not growing your EBITDA, you should not be doing it.

[00:27:41] The higher the EBITDA you have, the higher the value your organization will ultimately have.

[00:27:46] That is the best advice I could give somebody that's going it alone right now.

[00:27:50] And I respect that, by the way. You got a nice runway. You got 10 or more years.

[00:27:54] If you want to keep going it alone, I respect that, but you got to do it the right way.

[00:27:59] There you go. Bam.

[00:28:00] That is the greatest advice and that is wisdom.

[00:28:03] Grow your EBITDA, not the number of practices which might just give you a lot of confusion.

[00:28:09] Focus on profitability. Would you say, Brian, focus on your team?

[00:28:13] Do we have a quick example? I know we might be.

[00:28:15] Absolutely.

[00:28:16] Absolutely.

[00:28:17] Here's the example.

[00:28:18] First question I'll get. What is EBITDA on? Why do they use that?

[00:28:22] Great question. Here is why. And I'll tell you, you go to a dental conference and you're at the bar.

[00:28:27] And one person, if you're me, you're at the bar, I am sorry to say.

[00:28:31] There's one person that's saying, I got a $2 million practice.

[00:28:35] And then this other dentist feels a little guilty. It's like, well, my practice is only $1 million.

[00:28:40] And maybe he's over here towering a little bit because you got the $2 million.

[00:28:44] Well, then we start asking questions. And what we find out is the $2 million guy after payment of expenses.

[00:28:51] You know, his EBITDA is $200,000. Okay. And the $1 million guy after payment of expenses, his EBITDA is $400,000.

[00:29:01] Because it takes the $2 million guy, $1.8 million run his practice, and it takes the $1 million guy, $600,000 to run his practice.

[00:29:08] What have we learned is that the $1 million guy should be buying drinks because his practice is twice as valuable as the $2 million practice because his EBITDA is $400,000.

[00:29:18] And the $2 million guy's EBITDA is $200,000. So that's why we use EBITDA.

[00:29:24] And what will happen in a sale, the $1 million guy's office will go for a much higher price than the $2 million guy's practice.

[00:29:32] So this is why we calculate EBITDA. One, why EBITDA is the standard.

[00:29:36] And two, why anybody thinking that's listening to this about expanding through de novo's acquisitions, more chairs, whatever you're going to do, you got to grow your EBITDA, you're not increasing the value of the organization.

[00:29:48] And that's your charity or something. I don't see the utility in growing, but lowering your EBITDA. I know that doesn't make sense to me.

[00:29:57] There it is. It goes back to dentist understanding the business of dentistry, why it's so important for people like yourself to talk about this, to educate the dentist.

[00:30:07] So they're focused on the right things, which is the highest level of patient care, but also to build sustainable, profitable business over time.

[00:30:15] With that focus, I think you're getting both sides of that coin of excellence and everybody wins.

[00:30:22] Brian, thank you so much for coming on the show with Maria and myself. It's great insights and amazing trend that's happening in dentistry.

[00:30:30] You are at the tip of the spear of this trend. And thank you so much for really explaining it to our listeners.

[00:30:37] I love being here. This was absolutely terrific. Hopefully, we'll do it again sometime before we leave. We're having our big DSO conference again, July 10th through the 12th in Denver.

[00:30:48] I know you've come. Maria's been there before. I would just say if you're interested in learning more about DSOs, the evolutionary evolution of dentistry value of your office, please come to our event July 10th to the 12th Denver.

[00:31:01] You can find information at dikomadso.com on that.

[00:31:07] dikomadso.com for its leading conference with the DSOs. It's a must if you're contemplating it. Brian, thank you so much for being here, and hopefully, I'm going to see you real soon.

[00:31:16] Yeah, I'm looking forward to it.

[00:31:18] All righty. Take good care. Thanks so much.

[00:31:21] Thanks for listening to the Think Oral Podcast.

[00:31:28] For the show notes and resources from today's podcast, visit us at www.outcomesrocket.health/thinkall.

[00:31:38] Or start a conversation with us on social media.

[00:31:41] Until then, keep smiling.

[00:31:43] And connecting care.

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