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Eric Leaver: How To Best Position Your Practice Or Group For Acquisition · Dental Mentors

• Dental Mentors: The difference between the entrepreneur and the private equity folks is very similar to the difference between a head coach of a football team and the people in the owner's box. They think in terms of numbers and we think in terms of mud, blood, guts and people. I know that's a huge generalization. I say that with a little bit of a tongue-in-cheek, but it will impact how you communicate. So when we start building our companies, we're actually building it so that people who stare at spreadsheets all day long can see what we're doing and how we're doing it. Because what I've found over and over and over in the founder entrepreneur journey is you may be doing the right things and it ⁓ you may be having great results in your business. But you're not measuring it and you're not reporting it because you don't need to. You live it all day long. Then you go to sell your company and and you start getting asked a thousand questions. And you're like, I should know that answer. But we haven't been tracking it in a way that we can communicate it. So I'm not getting the credit for the success I have been doing because I haven't been tracking trends and haven't been looking at KPIs. We haven't been categorizing how we do things and we don't communicate in a way that matters. to PE. So what we want to do today is talk a little bit more about that. Welcome to another episode of Dental Mentors. Today, I'm your host, Matt Ornstein, and I'm here with ⁓ a very good friend of mine, Eric Lever, who is gonna just drop some incredible knowledge on everybody today. I want to let everybody know ⁓ that I had to write some stuff down so I don't forget anything. So when I introduce Eric here and g give his bio. I'm going to be reading from a sheet of paper and I wrote down all the questions and topics. So if you see me looking down, ⁓ that's what I'm doing because I I didn't want to miss anything. ⁓ Eric has been very kind and generous to give us some time today. It's actually a Sunday. I'm here in Florida and he's out in Colorado. So ⁓ Eric, before I read your bio, I just wanted to say hello and ⁓ thank you for being on dental mentors. Yeah, thanks for having me, Matt. You and our good friends and anything you want that'll help you and help the dental industry app. Makes me happy to be a part of it. So thank you. Yeah, my pleasure. Thank you. ⁓ so you know, as everybody knows, dental mentors is focused on ⁓ people in the dental industry and dentists and our focus is building wealth and dentistry. So that's, you know, nothing clinical. It's all about building wealth and dentistry and creating the maximum enterprise value for your business ⁓ when you sell it. So I'm gonna just take a minute, everybody, and just ⁓ tell you about Eric Lever. Eric's a healthcare and technology entrepreneur, private equity operating CEO, board advisor, and trusted mentor to CEOs and founders. During his career, he successfully led several high growth national healthcare ventures ranging from providers and payers to technology and investments. In that journey, Eric also participated in more than 100 MA and finance transactions, representing over $5 billion in combined value. Eric brings the rare perspective of someone who understands the founder's journey, how investors evaluate and value companies, and how things change after institutional investment comes in. He knows what founders and entrepreneurs must do to build the kind of company that investors will pay a premium for. Eric's entrepreneurial journey began with Zipfiz, a company he founded and scaled from a concept to $30 million in annual revenue in only three years. Two decades later, The company continues to flourish, a testament to building for durability, not just growth. In the last four years alone, partnering with private equity investors, Eric has acquired and led 19 companies with combined asset value exceeding $1.5 billion. In the process, he and his teams evaluated more than 300 acquisition opportunities and collaborated with hundreds of founders, investors, and investment bankers. bringing disciplined investment judgment together with hands-on operational execution. Eric is also well known in the dental industry. As the founding CEO of Practice Tech, he led the acquisition of multiple software and service vendors servicing dentistry. And he remains a behind-the-scenes voice in the ongoing conversation shaping the future of dentistry and the DSO landscape. In addition to advising private equity firms on investments and value creation, Eric i Eric focuses much of his energy on helping CEOs navigate AI adoption. He is the co founder and managing editor of the CEO Forum for AI, a peer to peer learning network centered on one defining question. What does every CEO need to know about AI adoption in twenty twenty six? So welcome to this. I'm exhausted listening to it, Matt. Well, I just wanted I wanted everybody to to know your background and and and area of expertise because it's it's important to know, you know, that the someone that's giving advice and knowledge is is qualified to do so. So I you know, the topic of this this podcast is what does private equity value most or how to build my company now to maximize value at exit. And that's what we're gonna be talking about. ⁓ we've got a bunch of ⁓ topics to cover. We're gonna have a a lot of fun. The first top topic is exit multiples and wealth creation. So my question to you, Eric, is this most of our listeners want to build great companies that positively impact their communities and that they can be proud of. They want to build legacies. And in the process, they also want to build financially valuable companies that lead to personal wealth creation. They want to build valuable companies that leave a positive legacy. And create multi-generational personal wealth. That wealth creation is usually determined by the value of the company itself at exit. So ultimately, they want to build a company that is perceived by investors as more valuable than similar companies that are also available. Can you talk about exit multiples and how they impact this goal? Thank you, Matt. Yeah. ⁓ you know, you you begin with the end in mind. And your listeners are trying to build wealth through the the dental industry, that wealth is always going to be maximized at the end when you exit, when you sell, when you bring in investors. And so, like every good business venture, think of the end in mind and work backwards. And as you're building your dental clinic or your dental technology clinic, build it so that when that time comes, you look better than everybody else in your category so that you get a higher multiple. So the multiple on the multiple is a is a factor of how much money you're going to walk away from. I give you an example. If you have a clinic that's doing a half a million dollars in annual IBITA and IBITA valuations for dental clinics right now, they vary dramatically. They can be as low as three I've seen them as high as 12 or 13. That's a huge difference. Huge difference. The same a half million dollars of IBITA. If I get, obviously, if I get a 3x on my multiple, I'm walking away with a ⁓ 1.5. But you think about it, every single, every single digit on the multiple is another year of your life, if you think about that. So if I can sell my If I just sell my half a million in Yebida for a 10X, I am saving myself years and years of work, and I'm creating huge wealth for other people, my family, my friends, my loved ones, charity, whatever it is. But it's the exit multiple that's going to determine whether all of your work for all these years is actually going to really pay off or just sort of pay off. So we focus on that. And what we want to do today, I think, man, in this conversation is say, how do we do that? Right? So what I what I that's what I do for a living. you working with private equity, I buy companies and then operate them. So it takes dozens, if not hundreds, of companies to look at. You evaluate them on s lots of criteria, which we'll talk about today. And if you get good marks on those criteria, you're gonna get a heck of a lot more money for your practice or your DSO or whatever it is than if you don't. So let's focus on that today. Okay, thank you. Words of wisdom. ⁓ the next topic I want to cover is just for people that that don't have a lot of knowledge about this is what is private equity and why does it matter? So my question for you today is for some of the people who are new to the investment world, ⁓ can you give us a Sesame Street version of private equity? What is it? How does it operate? And why does it matter in the wealth creation process that we're talking about today? Thank you. Well, ⁓ first of all, if you think about private equ private equity's impact on dentistry and why it's important that we understand what private equity is or isn't there Private equity right now in America, there's about 5,000 private equity companies. They control about $5 trillion of assets and about 15,000 companies, which is and it's growing faster than any other investment vehicle. That's number one. Number two, look at dentistry and private equity. Private equity right now owns about 130 DSOs. And is the singular most impactful ⁓ element to all of the DSO industry. There'd be no DSO industry. So as we're we're talking today about reverse engineering, building our clinic and our company up so that we maximize our personal wealth, we really should be building it. Thinking, what does private equity want? Because they are so impactful. So what is private equity? Private equity, they're they're basically simple middlemen between huge pools of funds and and the investment. So limited partners are these big institutional investors. There's sovereign wealth funds that are controlling the wealth of countries, literally. There's pension funds, there's ⁓ whatever it is. They have pools of money. Private equity are typically New York Wall Street folks that say, if you give us some of that money, we'll put it in a fund and we'll invest it in a way that you'll make more money with us than you wake make it with anybody else. And that's the whole game. They take money, they get fees for handling the money, they find investments to invest, they they invest those funds. And then, and here comes the real rub that we can talk about today is And then there's going to be this ongoing partnership between the private equity investor and the actual seller or owner of or the seller or operator of that business. And that's private equity in in a nutshell. But for us again, if we think about what private equity, how they think and what they do, we're gonna build a company that will be more valuable. Thank you. You know, ⁓ I've been in real estate for pretty much my whole professional career and Kinda I I kinda like the analogy and tell me if I'm on point here, but if you're if you're a builder and you're building a a house without a buyer in hand, it's called a a spec build, speculation build, and you're gonna build a multi-million dollar house, you know, three million, five million, ten million, as as a builder, you better be certain that you're you know your ⁓ your buyers, who your buyers are, what they want, what style they like, what amenities they like, what square footage they like. You don't build the house the way you personally think it should be built. You build the house if you want to do it intentionally and make a lot of money. You build the house with what the buyers want. E even if that conflicts what with what you think you want, since you're not the buyer. So I like what you said. Like you gotta start with the end point in mind and reverse engineer that. So You if you're if you're a a a dentist and you're building a a single practice or a multi practice group or a dental tech company or s any dental related company, and tell me if I'm thinking about this correctly, you really need to take the time and say what is the buyer gonna want and pay the most money for? What type of company? And then make sure you build your company to meet the buyer's ⁓ ideal scenario. Is that is that on point? It's a perfect analogy. It's an absolutely perfect analogy. If you go, I think everybody likes 5,000 square foot garages and you forget to invest money into the bathroom, and you say, Yeah, but I'm gonna find someone who loves five thousand square foot garages. You've just wasted a whole lot of money. You've been doing it in real estate. It's exactly right. Really good real estate investors and builders know their customer and they build for their customer. And that's exactly what we're talking. Right. And so if you're a dentist and you have a dental practice or you're building a multi practice group, th this is something that a dentist has to keep in mind. Your real customer, if you're looking to exit, is the buyer of your company. It is. Not your patients. Now, obviously you don't have a business if you don't have patience. And if you're an owner operator, you're thinking my customer is my dental patients that need, you know, hygiene and whatever treatment they need. But if you're trying to build a dental practice to sell, your real customer is the company or private equity firm or DSO that's gonna buy your dental practice. Is that what you're saying? And it's a it's a a dual path. Of course, the way you build a great company is to provide phenomenal products and services to the customer, and that's your patient. Right. So that's a that's minimum viable product. Like treat your patients as like kings and queens and Family and friends, right? That's minimum viable product. What we're talking about today is now how do you structure your company and what do you think about in terms of operations and what are you looking at and what are you not looking at? How do you verbalize all of that? And what words do you start using so that you start to be able to talk to those eventual buyers as well? Okay. Perfect. All right, the next topic is founder builders versus institutional investors. We know they think differently, they speak differently. So my question to you is ⁓ from my experience, it seems like the founders and entrepreneurs who build businesses think very differently than the investors who buy businesses. Can you talk about those differences and why they matter so much? Absolutely. ⁓ so I've been building healthcare and technology businesses for about thirty years now. And as your bio said, you know, I've I've been a startup founder. I've led early stage companies. I've built companies for sale, done a lot of this. And one of the first things I really and and and kind of fun. My my wife has her PhD in the psychology of successful entrepreneurs. What do they how do they think differently? How do they approach their relationships differently in order to be successful? And that success for her doctoral dissertation was was measured by one thing. Did they sell their company for millions of dollars? Right? That was like, okay, let's have a really nice objective thing. and so as we as you you march through this founder journey, and your your listeners are entrepreneurs, they're founders, you think completely different than ultimately the Wall Street person who's going to write that check. So let's talk about how that's different. Because it allows you to start thinking a little bit differently and more importantly, communicating differently. So entrepreneurs are by by almost by definition independent. They don't like to have people telling them what to do. They want to determine their own life. And every single day it's how do when you're an entrepreneur, every single day you're trying to dig like, how do I deal with the fires that I have to deal with today? How do I make payroll? What about my hiring? You're you're You're dealing with hundreds and hundreds of details on a daily basis. Right? ⁓ yeah. And you see it fleshed out in people and schedules and the janitor service. I mean, you're you're in doing everything. And and it's hard work and you're thinking about the operations of your business every single minute. I'll stop and say the person or committee and people that you are going to sell your business to and then work with thereafter, there's a really good chance that they have never run a business like you have, that they've never taken the risk, that they've never had the fear of failure, that they've never had to worry about whether or not I'm going to make payroll this month. And yet they're really, really good at a few things. And we need to honor and respect what they've done. If you're working in a private equity company, the chances are you had a very similar education experience and a very similar ⁓ career experience. You're probably really, really good at math. You probably were involved in your math club in high school. You probably majored in finance, economics, something that's money and math, and then you go to graduate school, and that is reaffirm to you. And basically then you go work for a private equity company. You're taught how to look at numbers in the right way. Most people who work for private equity are looking at their spreadsheets all day long. They're looking at KPIs. They're looking at the numbers. They're looking at the numbers and they're looking at the numbers. It's just a different way to look at at your career. I make the analogy like something of the sort. That just because you are smart enough with math and statistics to win your office football pool, it doesn't necessarily qualify you to run an N to be a head coach of the NFL. Because being a head coach of a football team is is recruiting and training and practices and and strategies. It's a it's mud and blood and guts and dirt. And it's people and sweat. The people up in the owner's box, they watch a football game completely different than the head coach down on the field. And I would say the difference between the entrepreneur and and the private equity folks is very similar to the difference between a head coach of a football team and the people in the owner's box. They think in terms of numbers, and we think in terms of mud, blood, guts, and people. I know that's a huge generalization. I say that with a little bit of a tongue-in-cheek, but it will impact how you communicate. So when we start building our companies, we're actually building it so that people who stare at spreadsheets all day long can see what we're doing and how we're doing it. Because what I've found over and over and over in the founder entrepreneur journey is you may be doing the right things. And you may be having great results in your business, but you're not measuring it and you're not reporting it because you don't need to. You live it all day long. Then you go to sell your company and and you start getting asked a thousand questions. And you're like, I should know that answer. But we haven't been tracking it in a way that we can communicate it. So I'm not getting the credit for the success I have been doing because I haven't been tracking trends and haven't been looking at KPIs. We haven't been categorizing how we do things and we don't communicate in a way that matters to PE. So what we want to do today is talk a little bit more about that. So ⁓ anyway, I'll stop there. Okay. I really appreciate that. I like the football analogy because ⁓ no team would hire a guy who you know he he won he was on a team that won the Super Bowl, but if the team that's hiring considering hig hiring that athlete doesn't have any access to that player's statistics. How many catches did he make? How many how many touchdowns? How many interceptions? How fast does he run? You know, does he have any injuries, right? So you can't you can't just hire an athlete based off okay. We're we're on the same page. That's a ⁓ perfect ⁓ that's perfect advancement of that analogy. It's the statistic. ⁓ thank you. So I had a part two to this question. For ⁓ for the people that are listening that are are starting a business or growing or are growing and building a business, ⁓ what can they do to be better prepared to communicate with the investment community? Well, I I I hinted at it, but I'll elaborate a little bit. Make sure you're re you're monitoring, measuring the things that matter. So we'll talk today about what matters, but it's about creating systems and reporting processes and data collection and data analysis in a way that automatically can be tapped into for reports. All right. Think about here's the strangest thing I found. When I when I was early on working with private equity. I thought they wanted to hear my stories. And I quickly learned that honestly, Eric, the stories don't matter. We don't care about the stories. We don't care about the narratives. We don't care about where all of that. We just wanted to see, can you fill out the dog on form and I need this report done? So once again, continue to run your company with people in mind first, second, and third. But make sure that you are you are observing and reporting things that will matter to that future, that future owner. Okay? And we'll we'll get into those details. I'll j I'll jump into ⁓ the big theme now and I'm jumping ahead a little bit here, Matt, but here's what private equity really matters to them. It's really simple. Growth and efficiency. Everything I'm gonna sh we're we're gonna talk about, you know. ⁓ other frameworks. But if you really think about all that thinking about all the time is growth and efficiency. And growth and efficiency are ⁓ are really easy to measure, particularly growth, but there's different ways to do it. But if growth and efficiency is really all that matters to private equity, they'd actually have a a a measuring rule. But here, everybody write this down. And here's what it is. It's a mathematical equation that if you think every month at the end of the month, how did we do on our rule of 40 or 50 or 60 or 20, whatever it is? So here's the rule of someone ought to come up with a really good name for this equation. It's a very simple thing. How do I measure my growth? Is I take my year over year revenue, right, as a percentage. So How did your how did your top line revenue grow from we'll we'll use a calendar year end from 1231 24 to 1231 25? What was your growth, your annual growth? If I did $110,000 this year and $100,000 last year, I had a 10% growth rate. All right. There's your number. Write it down. 10. Well, let's do it easier because it should be. I made 120,000, made a hundred and twenty thousand this year, I made a hundred thousand last year. So I had a twenty percent growth rate. Stop, write it down, twenty. Then you look at your IBITA margins, and your IBITA margins will be all over the board. But let's say your IBITA margin was I made a hundred thousand dollars on a million dollars of revenue. I therefore have a ten percent Ibita margin. You take that first growth number. And you take your margin number, add them together, and if they're at 40 and above, private equity pretty much says, healthy company, this is good. And all the gold stars and the happy things start happening. If you're under the rule of 40, just you need to have a story. The more you're over the rule of 40, the better you look. Now. This can be manipulated a little bit, and it's not always a perfect gauge of the health of your company, but it is the most simple gauge of the health of your company. So if you want to have like the big simple thermometer that you put in your mouth on how what is private equity, look at me, how am I doing in the rule of 40? Now there are exceptions because what happens if I'm growing at 40% and I don't have any evidence? Maybe that's good because I want to keep growing and that's my priority, right? But ultimately, the closer those two are next to each other. So if you want a rule of 50 and you got 25, 25, you're money. You're a golden company. You're going to get the premium exit value. So if you only remember one thing from the from today's podcast, is start thinking about that rule. And that everything else we'll talk about for the rest of today will basically flesh out how you're doing that and how you're categorizing it. Does that make sense, ⁓ Matt? Tot ⁓ absolutely. And ⁓ I was just gonna add what you said is really, really important because you could have two you know ⁓ dental practice groups. I'm gonna I'm gonna c I I define a D SO as two or more dental practices. Now there's no clear definition of it, but L let's just say you have a ⁓ dental group. They'll call it a DSO. Making this up, you've got five practices in your group. You got two two DSOs and they both have an EBITDA of a million dollars. But pract practice group number one has has had no organic growth for the last five years and their EBITD been at a million dollars for the last five years. Then you take company number two that has a million dollars of EBITDA, but they've been ⁓ growing organically. at ten percent a year and ⁓ their eBid number has been growing at you know twenty thirty percent a year, company number two is gonna likely get a a higher exit multiple because he's showing growth. Right. Yeah. Yeah. ⁓ so if you're if you're growing more than twenty percent a year in your top line revenue, you're you look healthy. You're you're okay. But back to your point, very, very important. If if it is gonna be imbalance, I'd much rather have a higher growth rate than it than a margin. Because you can always play with margins, but growing it takes a lot more work. So if you're growing more, we're doing fine. I agree. All right, next topic is the five pillars of value creation. So and I and I've heard you mention the five pillars of value creation. I saw you laugh a little bit, but can can you tell our listeners more about that, please? Yeah. ⁓ it's ⁓ it is it's not a universal use of a phrase or or categories, but it's something I put together over the years, which makes life simple. I when I was in graduate school, I taught preschool as a as a as a ⁓ a side job. I I and I learned really quickly to make things simple. So I'm I my five pillars is how do you make this whole thing growth and and ⁓ efficiency simple? So the five pillars in my mind, and here they are, is there's there is market share, there's market expansion, there's wallet share, there's operational efficiencies, and then there's AI and technology. One, two, three, four, five. I used to only have four, which was market share, market expansion, wallet share, and operational efficiencies. But in the last year, particularly, if you're not focusing a lot of your thought and energy around technology and particularly AI, ⁓ you're missing the boat. Because here it is, folks. Right now, because of AI valuations, if your company has a strong AI component of its delivery of service, your multiple can almost double. Give you no. Probably not going to happen in the dental industry, but I could tell you right now, in valuations from private equity, if you are an AI first company and you have a million dollars of revenue, you're going to get twice the value at least for your company than if it wasn't. So that's how much private equity is starting to value. companies that are looking at AI, but we'll get to that in a minute. So those are my five. And we can walk it, we can walk through a little bit of what those mean. ⁓ let me start with let me start with market share. Okay. Most people think market share is growth. And market share is how many customers in my market are using my product. You say is that the same thing as sales? Yes, but it's not just sales. It's sales, it's retention. We're thinking about how many customers in my market, not how much money they're spending. Market share is how many customers. So if I live in a town of five hundred people, let's say, and all of them are potential dental customers, and nobody comes from anywhere outside of my little town to come here, then my potential market. Is 500 people and my market share is how many of those 500 people are actually coming to my dental clinic versus somebody else? And so if I've got 200 of the 500, that's phenomenal. But when you're doing your activities, you're saying, how do we get the most amount of people, customers in the available market to use at least one thing that we do? Okay. That's market. So that's market share. We're trying to grab as many customers in whatever our market is. So we do marketing, we do sales, we do referrals, we do all those things. But when you're back to private equity, when you can start to talk about this is what we're doing for to increase our market share and our wallet share and our market expansion, now you're talking their business. And then they think My goodness gracious, that's the kind of business partner I want in my dental my dentist partner, because now they're talking the verbiage I talk about because that's what private talk about. What's your market share? Does that make sense? Does it bring any questions up for you, Matt? ⁓ because sometimes we all talk in our little world of language and realize it doesn't always communicate outside of our little world. Does that make sense to you? I know you do for you, but yeah, it does. And I think you communicated that closely to me. ⁓ yeah, so you want to move on to market expansion? So let's talk about market market expansion. Sometimes it's called TAM or TAM expansion. TAM is total ⁓ addressable or available market. But let's just say our market. So an when private equity looks at your company. They're gonna say Have these people built a foundation that we can build upon and build something bigger than this in two to five years. So one of the ways you grow is you grow by being in better sales, better marketing, and we approach our our little town of 500 people. Or I have an idea, why don't we expand our market? Maybe we can. Open up an office in the town next door, right? That's market expansion where we open up a part-time office over there. Or we start doing other services in our market, right? But we're expanding our market. So you can do it by saying we're only doing general dentistry or we're doing we're doing general dentistry and specialty dentistry, we're expanding our market. Or here's the big example: maybe I only want To have a clinic in my town of 500 people, or why can't I service all of Los Angeles? How would you service all of Los Angeles? You get on the radio and you get on television, you open up multiple clinics, right? Whatever it is, you start doing things to expand the size of your market, which ultimately leads, therefore, to more revenue. So when you talk to private equity or investors and you're building your company, you're saying, how can Do we A, do we want to build our market? And if so, what are the smart ways to do it? Very simple. It's either going to grow in scope of location or in scope of services provided. Okay. And so that's all you got to think about. But when you're making decisions, you're making you probably already instinctually are doing this or thinking about it. But now you start going, ⁓ we're working on TAM expansion or market expansion. See how it just just a little twist on the verbiage and the and the language, and you start going, ⁓ now I can talk about that. So I'll stop there because it's probably a little confusing. But does it make does it make sense to you, Matt? Yeah, absolutely. And ⁓ You know, one thing I've seen in dentistry, which has ⁓ been shocking to me, is that ⁓ so many dental practices and the ⁓ dentist owners in those dental practices refer out hundreds of thousands of dollars per year to to other specialists. And, you know, I'm just saying like I I've talked to plenty of dentists that they say, well, we don't do orthodontics or clear liners. We just refer it out. Or, you know, we don't do endodonics. We don't do any period. We don't do veneers. And they end up referring out, I mean, hundreds of thousands A million dollars a year. And really all it would take would either to be hire an associate doctor that knows how to do those treatments or go get trained to do it yourself. Yep. So that that would be expansion of services. And as you and as you look at expansion, vigor is not always better. Because again, you're looking at profitability too, right? Growth and efficiency. So ⁓ you know, you If you grow your market too big too fast without the the efficiency, your your profits are going to collapse and you may overweight your entire organization. And that's why market expansion can be a huge boost to your value, or it can kill you. So thoughtful business owners who we're talking to is like, okay, is it time now? Maybe it isn't time now to go to the next or time now to do this. But I can tell you your private equity investors are going to want to know that you have a plan in place to that you have tested to grow from small to medium. And then after the acquisition, that same test of methodology is going to take you from medium to large. And that's what they're looking for. You went from small to medium. We're going to invest in you, give you a premium price for your clinics, because You've shown us that you know how to do growth and you can get to large. And this is one of the big ways to do that. All right. Thank you. That was great. ⁓ can you let's talk about wallet share. So can you explain to the listeners what is what is wallet share? And ⁓ isn't that the same thing as market share? I know it's not, but well, I know you know this, but ⁓ wallet share is probably the most confusing concept for most folks when you again, this is phraseology, but wallet share says I can grow my revenue without adding a single customer. I just need to make sure they spend more of their dollars with me instead of somebody else. So, what I have found is maybe the most effective brainstorming and teamwork and collaboration in a company is to think more about wallet share than you do about market share. Because everyone's already thinking about market share is. get more customers. Wallet share is the secrets is let's let's get a few more dollars out of the same customers. How do you do that? Well, you know who's done a really good job of this? And it's a parallel industry to dentistry, is the chiropractic community. What and the chiropractic community, which had a lot of experience in with, is they pretty much have figured out that if all I'm going to do is Is alignments. I'm gonna have a very limited income stream. But if you go to most chiropractors' offices today, they were thinking about wallet share, wallet share. How much more money are my customers spending on something that I could provide for them and so they can get it all from me? So you go in for an alignment with your chiropractor, they also have you on a wellness program, right? Where you're paying a, you know, a ⁓ fee for wellness. You're buying your vitamins and supplements from them and a bunch of other things, right? I have a customer. Are they spending or would they spend more money with me if I offered something else to them that they need? Your example, Matt, was the perfect one. I have a general dentistry business. Why don't I find a way to add other services to that, including endodonics or other specialty foods? Dentistry, et cetera, et cetera, et cetera. So private equity loves to deal with ⁓ companies and loves to invest in companies where the owners understand this concept. Here's another way, for example, here's another way to get wallet share. Wallet share just saying I get instead of only $50 per per customer per year, and you make it up the numbers. Now I'm getting $75 per customer computer. How do I do that? ⁓ another part of wallet share is your pricing. Now I know in dentistry we have huge constraints on our pricing elastic elasticity, but increasing the price of your product and service is another way to increase your wallet share. Because instead of spending fifty sty0 today, you improve you. impro increased your price to fifty two dollars, now you're getting fifty-two. So wallet share is more services and higher prices. And that that growth lever is far more powerful than most business owners understand. I I agree completely. That was very, very sage advice. Thank you so much. All right. ⁓ let's move on to The next topic, operational efficiency. Yeah. you mentioned operational efficiency, but not EBITDA. What what's the difference and how do they relate? ⁓ EBITDA will positively improve when you improve your operational efficiency. It's just cause and effect. And ⁓ most people say, How do I how do I improve my EBITDA? I would say focus on processes. And I would say right now. That we have never in my lifetime had a better opportunity to improve processes than we do now with AI tools. And I'm not saying all processes are AI. Be very, very clear. But right, I I believe the most successful companies in 2026 and hereafter will be those that are run by individuals that are trying to constantly think. How do we make this simpler? Like simpler. And every time you simplify something, you have lowered your costs because you've you've simplified it, you can get more done in a shorter period of time. So the one thing like you think about dentistry. Everybody kind of has the same experience, right? And we could walk it through what it is. But dentistry is in many ways. still being done today like it's been done forever. And I think the DSOs that are going to move from where we are today riding the tide to those that are going to really differentiate themselves are the are going to be the ones that have people in leadership who stop and say, throw away all the processes we've ever thought about. And they're asking their teams every day, every week, every month, whatever it is, Can we make this just a little easier, a little more simple? Can we skip one step, right? ⁓ and you think about that, how that impacts the patient experience, how that impacts your hiring, how that impacts your employees' experience. Is there any process that our employees have to go through that if we just thought about it smarter and simpler, they wouldn't have to do one one little step? And it's a mindset that I think is going to actually define the really successful companies of the future because then you can take AI and overlay that on top of that. But that's a whole other conversation. But the the the best entrepreneurs today are those that are thinking about simplifying processes differently than anybody else has in their industry. And it's gonna be one of those things. Matt, you you've got a DSO. If you come up with that one step that eliminates a whole line of costs or labor or whatever it is, it gives you such a competitive advantage. And I think most entrepreneurs these days are not thinking about simplicity and process simplicity enough. And I can tell you now that when private equity looks at your company and sees, wow, it's a smooth operation. It just runs smooth. And and your costs go down and your labor goes down. And like, how are you doing that? It doesn't happen by us all doing happy hands and saying everybody work better. It happens from disciplined approaches to processes and systems. Anyway, does that make sense? Yeah, it does. And you know, ⁓ I want to just quickly touch on two topics, but one of the ⁓ great phrases I've ever heard is, you know, the six most dangerous words. for ⁓ for a business. We've always done it that way. Yes. And, you know, ⁓ I I read Elon Musk's book. ⁓ I think the guy's probably the smartest human on the planet right now, but Elon was talking about in the Tesla factory and the rocket factory at SpaceX. Elon would go through and the engineers were in a separate building or separate offices from the people on the production line. So Elon would go and go like what is that part? And the production manager say, Well, that's this part. And Elon said, Well, why is it there? And the production manager would say, Well, the engineers, you know, put it on the plans. And then Elon would go to the engineers and s sometimes say, What why is this? on the plans and the engineers would say, Well, someone from production told us they wanted it. And then he'd get ⁓ all together and say, like, do we even need this part? No. Why is it there? Because he said we should have it. She said we should have it. But ultimately didn't even need it. So, you know, Elon brought the the engineers are on the ⁓ manufacturing floor now. So if ⁓ anybody on the production line has any questions or things like that, the engineers are communicating directly with the ⁓ manufacturing line, which which is really cool. One of the smartest guys that I've talked to in dentistry, he did something brilliant. He actually hired and I never heard anybody else who's done it. He hired an industrial engineer to spend two weeks at his dental offices, in the offices, and document the f the patient flow, the whole thing A to Z from an industrial engineer's vantage point. And then they revamped the processes for, you know, scheduling, greeting, getting them through the dental office, payment, reappointment, and out the door. Without decreasing the patient experience in any way. And the offices that he implemented that in, they doubled their production and doubled more than doubled their EBITDA just from streamlining operational efficiencies. Nothing else. I'll bet you they doubled their employee satisfaction too. I didn't ask them all, but I you're right. I'll bet you they do, because guess what? When you start doing that and your employees see that you respect them enough that you don't want to waste their time. Doing something that they didn't need to do. So they can spend time doing what they really should be doing. But it's it's financially smart. For the customer, it's smart and for your and for your employees, it's smart. Yeah. All right. So this is our last topic. It's ⁓ AI and technology. I have two questions related to that. So I'll start with question number one. ⁓ you're the co founder of the CEO Forum for AI. ⁓ I know you think and talk a lot about AI, you already have, but how does AI impact the other four pillars? Thank you. Yeah, I I mentioned at the top of the hour that ⁓ I added AI and AI as a fifth pillar to the to the value creation pillars. And and the reason is obviously I live and breathe AI. I ⁓ I actually took a sabbatical ⁓ this last year. And I've spent most of the last eight months. Most of what I do has been studying AI and studying AI ⁓ as it relates to the CEO and founder's role. I would say the following, and we could talk forever about it, but A, we talked earlier that if if you are embracing AI rationally and we in your practice and business, by definition, you will get a higher multiple. So we'll stop right there and say, if so you can do that. Like do that smart. Because over the next two years, dentistry, every industry is gonna, every investor is gonna say, How are you embracing AI? So the answer is figure it out. We can't put our heads in the sand, it's not going away. It's gonna be here and it's gonna make it can make your listeners multi-million dollar, multi-millionaires, if they just Do that. Now, what doing that is is very complex, and this isn't the time to talk about it. But if here's what AI can do for your dental client. The magic of AI is that it can help you predict ⁓ care that is going to be needed. So there's predictive AI that says looking at all this data, here's what you you can know. There's generative ID I generative AI or Gen AI that is helps you to create email marketing campaigns, marketing, et cetera, et cetera. But the magic of A right now that everyone should be thinking about is that we can automate things with very complex interfaces. AI can automate that in a way that maybe you do one thing, your AI agent is actually automating things like Here comes folks, billing, RCM, payables, marketing. There's there's a million things that AI can do really well for you that you don't have to be doing and your folks don't have to be doing. And then your folks, your team, whatever, checks the work. So think of AI as an efficiency ⁓ tool. But then you think about some of the ⁓ players and vendors that are also in dentistry. You know, look what O'Fear and Mackenzie and And Erica are doing over on Pearl and all the others that are making the experience of ⁓ they're using AI to make the experience in the chair for that patient very different, right? Or look what patient prism is doing where that AI is now analyzing the calls you're having, the receptionist response. And it's and AI can do so many things. So as an entrepreneur, If AI is not AI and technology is not something that you are putting as a integrated whole of your entire business, you're putting you're probably leaving millions of dollars on the table when you exit down the road. Yeah, and that that was that answered part two, and that's how does AI impact valuations? And and you just answered that. ⁓ in my opinion, if you own a single practice or multiple practices and you are not embracing AI at this point and you don't embrace it vigorously, you're gonna leave millions of dollars on the table that that you should be able to ⁓ to get upon sale. So I I I one I'd like to just touch on that one I have two things on that. So when I was talking to Pat Bauer, ⁓ CEO of Heartland you know, w one of Pat's favorite things to say is data fixes everything. And when I was chatting with him about this, Pat told me that Heartland actually has hired data scientists, you know, people with PhDs in in data and the science of data. ⁓ but for for I'm sure those those type of specialists are, you know, very expensive. But for a dentist who has one practice or, you know, maybe 10 or 20 practices, ⁓ Or or even like a DSO with fifty or a hundred practices, you know, most people in the dental industry, you know, ⁓ I'm fifty-seven. Most of the people that are, you know, in executive positions, from what I've seen, the majority of them are, you know, fifty to seventy years old. And we didn't really grow up with technology and don't really understand. I mean, we hear what's going on with AI, but we don't really understand AI enough for you know, people like us to make a decision on what should we do with AI? We're we're l relying on the vendors to tell us what they can do and what we should do. Would you recommend if a if a dentist or a DSO group can aff can afford to hire an employee, you know, to run the AI part of the company, would you recommend that? And like what would that what would that person's position be? What is that person called? Well, ⁓ it it depends how bit I would say that if you own if you are under two to three million dollars of revenue, no. ⁓ but you don't need to. Here's here's the wonder. You don't have to be an AI whiz, nor do you have to have AI whizes on your team in order to take advantage of AI. If you're one, two, five clinics, pick a couple of vendors and start there, right? And and think about pick. An AI vendor, just to start, one or two, that is doing something that will positively impact your patient experience. Focus on the patient experience. So, and you don't need to hire a full-time person. I would say, yes, if you're one of the top 20 or 30 DSOs, you're probably bringing on an AI expert and Probably not a data scientist unless you're really big, because data scientists are tremendously expensive right now. ⁓ but you don't have to be. I think right now, find just if you're an entrepreneur up to a mid-size DSO, just pick your vendors very carefully. Because you're already going to have somebody in-house who's handling technology. If you're one of the top DSOs and you're that big, Every company that big in America right now is fighting over the same data scientist. You can call it whatever you want to, but they're basically data scientists. They're reporting people, but you don't have to, you don't need a data scientist. You need a manager, someone who knows the tools and understands the basics and knows how to coordinate it all. And that it to hire somebody who can coordinate all that with you. Is not an expensive proposition. You're probably paying about a hundred and fifty thousand a year, which is no, it's not cheap. But if you have a DSO that's big enough to handle that, you're gonna absolutely want one or two of those in there. Okay, would that fall under like chief technology officer or chief marketing officer? Well, if you don't have it, no, you don't put it in marketing. First of all, AI is your job as the CEO. Remember that over and over again. ⁓ dentist, whoever it is, if you own the business, you you cannot delegate AI. Okay? Just you cannot. It is not something that you give to a technology person to say go AI AI f it. Because AI implementation is actually a collaborative team effort, and that's a long other conversation we can have for hours. But AI is not something you hand off to a technologist to go do because that doing It's going to impact the processes that everybody in your office is going to be using. And so they need to be a part of it. And they need to be on board on why we chose these AI tools instead of those AI tools. And you it's important to bring your team in and let them feel like this isn't a threat to them, that they are part of the decision, that they love to see, you know, Pearl or love to see patient prism or they love to see a scribing thing. Make sure that you involve everybody, your company. In the process, you don't completely delegate it to a technician, but yes, you need someone on your in your company who understands enough about technology to manage the tools. And that is a chief technology officer, chief information officer, vice president of IT. You can call it whatever you want. Yeah. I you know, as an owner of a DSO, I think embracing AI as quickly as possible is absolutely critical. to success, especially if you're building a group to sell. You know, ⁓ the the two biggest issues in in dentistry right now are ⁓ is wage inflation. I mean it's it's crazy. And then also there's there's almost like ⁓ the insurance companies and payors are not keeping pace with real inflation at all. So your cost of labor is going up way faster than what you're able to charge for services that you bill through insurance companies. So the only way to really stay ahead of the game financially in if you own a ⁓ you know, a dental practice or group is to start using AI and really maximize operational efficiencies. Now, again, the the listeners in our group, you have to be a dentist or an owner, you know, to be part of dental mentors. So, you know, the employees aren't listening to this, but The reality is over the next coming years, AI is going to eliminate a lot of un unnecessary or redundant positions that are currently being filled by human beings. And what's interesting is, you know, let's say let's say you you have a dental practice group that's tr gonna trade at a seven times EBITDA, and you're able to ⁓ eliminate a hundred thousand dollars worth of human payroll. Not only are you making an extra hundred grand a year right in your pocket, but when you sell your DSO at a seven time multiple, you just put an extra seven hundred thousand dollars in your pocket when you sell. Now, I mean, I I'm not a huge fan you know, looking down the road that so many jobs are going to be eliminated and permanently. That's that actually kind of upsets me, like just from a human standpoint. But it's a reality that you have to accept. You have to accept. And if you're not If you're a dentist and you're not getting on board with AI and not understanding it or a CEO of a DSO and you're not paying attention and not embracing AI, you're really gonna ⁓ create some unnecessary hardships financially and operationally going forward. Do do you agree with that? ⁓ one hundred percent. And you have yeah, I I study, read, think, talk ⁓ about AI all day, every day. And you just hit it. ⁓ but I would say the following. AI, every technology advancement in the last 200 years, jobs were lost and new jobs were created. Period. Find me one that doesn't, because it's been this ongoing conversation. So what's going to happen with AI is that there will be a stratification of the labor force. Some people will embrace it and just become More productive. AI just makes you more productive. What AI is going to do for you and your dental practice is that when your dental practice is growing, you don't have to hire more people as you're growing. It's not, hey, let's get rid of all of our staff. It's when we're growing, we don't that staff is more productive. So we don't have to add another this and another of this. Of course, caregivers, you know, the clinicians, you might have to do that. But every everybody else. So AI is. Yes, gonna challenge jobs, but it's gonna create new jobs and it's gonna make people who are doing their job happier with their job because they actually feel like they're working on the things that matter and they don't have to do these mundane trivial things that a robot can do. Yeah. Right. Yeah. All right. Well, we are right now ⁓ approaching the one hour mark. So I wanna say ⁓ on behalf of dental mentors. Thank you very, very much to my good friend Eric Lever. I mean, you just you dropped a a ton of incredible knowledge ⁓ and insight to all of our listeners. I really, really appreciate you. And I want to say thanks for coming on. ⁓ Eric has also generously ⁓ offered to come to some of our live events. So some of your listeners will be able to meet him in person and ask him questions and And really do a a deeper dive on these type of topics. So Eric, thank you so much for being here. I really appreciate you. Thank you, man. Everybody who's watching, hope you learned a lot. And we'll see you next time on Dental Mentors. Thank you. Bye bye. Thanks. If you enjoyed today's video, we'd love to invite you to join the Dental Mentors Facebook group. The group is completely free, but it is private at invite only. The group is for practice owners, dentists, specialists, and dental CEOs. If that's you, we'd love to see you inside. As part of Dental Mentors, you're going have direct access to the brightest minds in dentistry and the brightest mentors and some of the greatest CEOs that have ever worked in the dental space. You're going to learn all the best practices that you're going to need to optimize the profitability of your practices, to properly scale your practices, and to achieve a high value exit. You're also going to learn the closely guarded secrets that the rich and wealthy use for asset protection. And the access to private investments and investment strategies that will allow you and your family to create generational wealth. 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