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Inside the DSO Razzle-Dazzle: What They Don’t Want You to Ask · The Millionaire Dentist™

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Hello, everyone, Welcome to the Millionaire Dentist Podcast, brought to you by
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Four Quadrants Advisory. On this podcast, we break down the world of dentistry,
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finances and business practices to help you become the millionaire dentist you deserve to
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be. Please be advised we do speak with an honest tongue and may not
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be safe for work. Hello and welcome. This is Casey Hires back at
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the Millionaire Dentist Podcast in studio with co host Jay Rod. Hey, Casey
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h Chad's here where us. He helps us in a variety of ways here
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at the firm, but one of the things he's been doing is representing us
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at some educational opportunities at different dental shows, recently at an Orthodonic orthodontia show
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and also at a regional show. But there's a variety of things for us
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and got some insights that we thought would be pertinent to talk about today.
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Chad, let me ask you, when you were at the Orthodontia meeting,
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what's really stuck out to you as something that you weren't expect you to be
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there? What was something that kind of got your your blood boiling. A
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lot of the largest flashiest booths at the expo. I've realized I've been these
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orthodonic service organizations zsos DSOs. Obviously a lot of money being thrown around.
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It's very uh they were they there basically just you know, doing a little
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razzle dazzle, trying to get people to lots of razzle dazzle, lots of
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free drinks, lots of flashing lights and uh so, from what I understand,
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you came back and told me a little bit of a story from that
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from that show you are booth. Was you're right next to a DSO,
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weren't you? Kind of yes, it was a legal firm that does a
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lot of the brokering for the deals for DSOs, and had a very interesting
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chat with an attorney. We got into a chat at the expo about DSOs
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and the advantages and he asked what we know about DSOs, and admittedly I
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know a decent amount, but was really interested to hear his perspective on it.
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And he was explaining to me all the benefits of DSOs, the upfront
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cash payouts, being able to not have to worry about the business side of
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the practice, and the HR and all the purchasing and everything that goes into
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the non clinical aspects of running a practice and then being able to count on
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a reliable salary for the next three to five years or however that partnership is
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stipulated and made a lot of interesting points. And so after this you were
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a dead set you were going to sell out to a DSO. Yeah,
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I was actually considering enrolling in dental school, going through the whole process,
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and then working for a DSO right of Wales. So it sounds like he
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was pretty proud of himself as he was presenting to you. It sounds like
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he was doing a practice run for what he tells a lot of the orthananis
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out there. Yeah, it sounded like the greatest thing since sliced bread.
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There was no way you couldn't become rich and everyone should do it well.
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And as we get into this, listen, this is not a direct indictment
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on DSOs. It's indirect. It's not direct. Right, we call ourselves
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the DSO kryptonite, And what that means is for some people, in some
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situations, selling out to corporate dentistry or a dental service organization perhaps makes sense
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for them in their unique personal and practice situation. What makes us the kryptonite
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though, so when this gets brought up in education events around the country,
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ultimately you always have or most often have the option to sell out to corporate
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dentistry or a dso that is a fairly common option. Us being that kryptonite
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means will get a practice owner who collects million dollars, two million dollars one
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point five million dollars in dentistry, and we can get their practices using systems
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and processes and our whole comprehensive team mastering everything incomes doubling on track for eight,
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ten, fifteen, eighteen million dollars. We can get them insulated into
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a place in their practice that it is a absolute cash cow. They are
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their own boss. They haven't had to sell out. They're still making a
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lot of money. They're doing it their way. They don't have to sell
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out nor be scared if one moves in across the street. That's right.
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And so you're insulated because your financials show massive success, and you can sell
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to a young dentist anytime you want, because the young dnist is going to
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look at your financials and oh my gosh, you have a beautiful practice.
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You're close to a fee for service practice, you're making seven hundred thousand dollars.
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In general dentistry, you're saving two hundred thousand. I mean, just
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on and on, and so that's why we're the kryptonite. So when we
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hear this pitch from the DSOs, we know who they are targeting sometimes,
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which is that practice owner who has tried to do it themselves. There may
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be in their late fifties or sixties or god forbid, seventies, and their
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options are limited, and so that can potentially be the route they take.
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But you hearing their pitch, if you will, was fascinating because once you
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started to ask some questions, some of which you kind of knew the answer,
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others in which you genuinely wanted to learn. Let's get into that a
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little bit. Yeah, I asked several questions of a pretty inquisitive guy,
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and his attorney was sharp. He had great answers to most of my questions.
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When finally I got to the point where I just came out and point
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blank asked him, So, if you are a successful practice owner running a
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profitable practice, and you don't want to immediately retire, what is the advantage
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of selling to a DSO versus working with a company such as ours that will
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still allow you to retain full ownership and make your own decisions in the practice.
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And after that it was complete silence. Crickets. Huh wasn't a good
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answer, And I didn't think what I was asking was that poignant. But
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to me, that really signified that there wasn't a good answer. Did his
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tone or body language change, yeah, shoulders slumped, slight frown and you
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can see the wheels turning. But it just wasn't a good comeback to that
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question. So, I mean, unless you want to get out of dentistry
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permanently or you just can't handle being a practice owner, he didn't make very
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many good points as to why you should sell to a Dso what were some
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of the basic questions you asked him? We asked a lot of questions such
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as, you know, what are the benefits, what's the what's the benefit?
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And for him it was love that one. Yeah, yeah, yeah,
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you yeah, you just rattled those right. Yeah. Sure, when
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you get that big, big check, right when you sell the practice to
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him, But then you're also locked into a contract for several years, working
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for a salary or a percent of production. But He really really highlighted the
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fact that you're gonna get you know, several million dollars check up front.
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We're gonna buy your practice for one hundred percent of revenue, which is what
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you normally get seller privately, you know, seventy five or eighty percent.
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That was a big point. And then you get stock. There's stock,
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and when we recapitalized and selled a private equity groups, you're gonna get a
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hand in all those profits and and those shares. But you don't really you
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didn't say how many shares you own. He didn't really get into how many
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shares are outstanding. But that kind of cocktail party talk really tickles the fancy
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of the practice owner who was under safe for retirement. So then they hear
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that and they're like, oh man, they get they get lost in the
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bright lights of EBB and then stocks and because they'm undersaved, no start imagining
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that big old check like publishers clearinghouse type thing right now, grass, But
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then you know, as you as you've pointed out, you know privately uh
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off off offline, Um, you get that big check, but you don't
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actually get all that money, right, what happens of that there's taxes,
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talk about taxes check. I mean, but it's true, like it's easy
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to just say off a million dollars once you pay your taxes, and once
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you knock out your sharehol or loan that your CPA didn't tell you about,
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God forbid, you still have any debt when you do this. But I
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mean that million dollars turns into four hundred real quick. And if you've got
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some significant debt, it's even less. I mean, what we find is
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typically one to four years worth of cash flow and retirement. Is what that's
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worth to you. That doesn't get it done, doesn't get it done at
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all. And I know you had after having a conversation it kind of pique
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your interest to do even more of a deeper dive. What are the some
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of the things after fascinating that didn't have an answer to, Well, what
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if you have a successful practice, do you even get into with him the
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control that the seller gives up or kind of get into some of the strings
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attached. Yeah, yeah, so and getting into you know, losing control.
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You flip that as well. You don't have to worry about any of
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the business or non clinical aspects of your practice. We do all of your
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practasing. We provide you with software, we provide you with associate dentist and
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recruiting services. Is whether you want him or not exactly do you have no
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aut time or authority to choose which software you want to use or which technology
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you want to implement within your practice. So it was spun is not having
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to worry about all that stuff. But he never really honed in to the
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point that once you sell to a dso, you are relinquishing all control of
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every major financial decision to your practice. I've shared this before, but recently
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talking to a crowd and getting into that conversation of which what's easier selling to
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corporate dentistry or selling your own practice, And we're touching on a lot of
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the pros and cons of it. But a practice owner raised his hand and
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said, I can share with you a personal experience. I just sold to
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corporate dentistry. My gut told me not to do it, but for a
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variety of reasons, I did it. And I was supposed to stay.
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I can't remember if it was three years or five years, but that's associated
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with how much you get. Long story short, he said he couldn't last
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six months he couldn't handle it, and he was done. He lost a
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lot of money, and he regretted doing it, but his personality, he
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could not watch his baby get wrecked in the manner in which they were maybe
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changing it right, they were changing it in the manner in which he did
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not like it. He didn't feel like it was in the best interest of
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his staff, of his patience, of himself. He was just a number,
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and he screams from a mountaintop to anybody who will listen, don't do
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it, or at least try to find another option. Obviously on this podcast,
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the other option is have an external team that masters this stuff. So
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you can collect a million, you can make four hundred, you can save
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one hundred, you can be on track for twelve million, and you don't
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have to worry about the business and financial side of this. In the beginning,
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to us, that's just that's a ship shot. But for the purpose
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of that conversation, it's it's incredible the things that were left out. It
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was just it's an autopilot and you get a bunch of money. What are
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some other things you saw that you know you might corporate corporate seller beware,
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I mean in talking about the expo itself. I mean, the biggest,
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flashiest, best looking boosts were these DSOs or osos, and me being the
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Devil's advocate, getting into thinking, I mean, where's all this cash coming
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from? Why are they spending so much on these shows to attract young dentists
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or young orthodonist And it really got me to thinking just our economic climate that
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we're currently in. I mean, the past several years, the government has
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been printing money, the stimulus checks from COVID, all of that. There's
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a lot more money looking for good investments, and there are good investments to
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be found. And when thinking about it, I mean, a great investment
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is a profitable dental practice. But when they have derived their marketing pitch these
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dentists, it's all about that catch. It's the upfront payment. But what
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we all forget is it's not a cash that's valuable now, it's owning a
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productive business, which is the valuable asset. They're willing to pay so much
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for it, and by selling that, you lose that and they're going to
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capitalize on your fears. You know, the economy is going to be taking
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a turn. Practices are going to go down in valuation, But if that
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is the case, then why are they so desperate to buy? Why are
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they trying so hard to buy as money practices as they possibly can. Well,
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it's sad because there's so many practices that underachieve for decades and when they
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do that, you know they can swoop in and they know they can make
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them more profitable. But practice owners not going to get that profit. Jared,
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where's your where's your head in? Where's your head at? With all
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this DSO corporate dentistry talk sucks so profound? Thank you. You know,
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we've done several podcasts and I've even we've even done some with our CEO and
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president and founder Jason Smith about you know, you don't need to sell to
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a DSO, you need to work on yourself and work on your own practice.
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And it makes sense that Chad, when you were talking to the advocates,
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they were only selling you on the benefits of it. And of course,
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yeah, they're not going to want to mention any of the negatives because
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that's you know, that makes them a terrible salesperson. But I like your
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point about if if you know they're they're they're trying to spend as like we're
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doing you a favor, Let me take your practice off your hands. It's
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not doing that well, You're not doing that great. We can do better,
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And I feel like most people know that's not true, and they don't
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like people messing with their babies. So, yeah, what did you when
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you were doing your research? Did you come up with anything or were you
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able to find anything that you know, here's a reason or here's a couple
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of reasons as to why you shouldn't sell your practice to Dso I found many
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reasons. I didn't find any on the actual DSOs websites themselves there or no
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cons on those those websites. Yeah, I found a handful. And what
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you mentioned earlier too, just about I forget exactly what you said. It
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was a perfect segue into what it all comes down to, and it's greed.
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They don't want to help you as the practice owner or the dentist.
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They want to profit from you or the patient, right exactly. You don't
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get to pick your supplies exactly, So they are making all their money off
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the labor of all the practicing dentists out there as private equity partners that aren't
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producing. And the thing is, I just thought about this too is you
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know, the patient who may have been coming to see you for the last
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ten, fifteen, twenty years doesn't know all the history going into Now you're
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working for somebody else and your supplies are different, maybe you have some different
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staff going on, and they just see it as, oh, I don't
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like going to doctor Chad's as much anymore. I might go to somewhere else.
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Yep. I was talking to a younger dentist earlier this month than after
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about three years of ownership. They said I was going to give it at
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two more years and then look to sell to dso because I just felt so
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overwhelmed with the business and financial side of it. I felt like I just
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my head was in the sand with cash flow and taxes and it was just
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such an uphill battle. And so it can be overwhelming. I understand why
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people would consider it. It's good to educate yourself. But that's what part
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of today is educating people on the broader picture of the pros and the cons.
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I mean for our clients, I guess the the rub is you have
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to be coachable like the so you don't have control, you have no autonomy.
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You have to do for our clients. You have to be coachable,
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which goes to the point of if you're not gonna take most of our advice
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and you shouldn't pay us. Other than that, there is no rub We're
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the real deal. You can have it all. You can have a killer
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practice that is yours that you enjoy that as Hey, if you want to
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take a day off, take a day off, you don't have to get
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you know, can micro managed by the people that just gave you this big
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check. But no kidding, but yeah, I found it fascinating. No,
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an attorney who does a lot of these deals. You kind of heard
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his best step forward of kind of what the pitch was and just being sort
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of astute, you ask some questions, propose something that he couldn't get out
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of, and it's not like you're some twenty year veteran of studying DSOs.
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I am certainly not. I think it was interesting because I don't think he
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really knew what we four quadrants to. Clearly, I think it was trying
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to, yeah, sell us on something, and when it just came down
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to the point where all the positives that you're pitching, we can do the
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same thing for practice owners without having them except the practice owner gets to enjoy
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the profits of their hard work. It's it's uh, it's incredible. Is
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there a chair you want to put on top of this one? Pal?
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There is? I would like to say if you want to hear more about
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us just going off about DSOs, but really learning about getting some real dental
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financial advice from us. We are going to be in El Sagundo, California
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on May twelve at Top Golf El Segundo. Would be pretty exciting, right,
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I know that place? Have you been there? I used to live
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about two miles from this. Yeah, Hermosa Beach, Manhattan Beach, Santa
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Monica. There's there's a lot of areas that that tie into this new Top
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Golf right by on Spolvada or Pacific Coast Highway. Some call it used to
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be a little executive nine whole course. I used to go play out.
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There's probably some lost golf balls of mine. But it's a beautiful location.
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It actually serves a lot of different areas and regions in that geography. Hopefully
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we get to pull a lot of people in there. These have been really
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really good. The folks that attend, they learn much more than anticipated and
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then they enjoy getting a little bite to eat and going and smashing the golf
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ball. And it's right. We're also going to be in our own backyard
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and June we'll be at Fishers Indianapolis Top Golf as well. I know we
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got some other shows that we're exhibiting at coming up. Guys. Don't forget,
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guys and gals, we are offering a free tax assessment right now.
17:34
If you received a really large bill or maybe a really large refund and maybe
17:41
this isn't even the first year and you're getting fed up with what's going on
17:45
with that, or even if you're not and you want to hope that we
17:48
maybe we can find something your current CPA is not. Go to four Quadrants
17:52
Advisory dot Com slash taxes for that. Fill out the form and one of
17:56
our experts will be in touch with you. Chad, thanks for bringing back
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that vibe valuable information from that that expo in Chicago. As I say,
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Chick fil A, it was my pleasure. Guys. Thank you. That's
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all the time we have today. Thank you to our guests for their insight
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and for sharing some really great information. And thank you to you the listener
18:18
for tuning in The Millionaire Dentist Podcast is brought to you by four Quadrants Advisory
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to see if they might be a good fit for you and your practice.
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Going over to four Quadrants Advisory dot com and see why year after year they
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retain over ninety five percent of their clients. Thank you again for joining us,
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and we'll see you next time.