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In this episode of "Drilling It Down," Wes and Jonathan discuss the decline in dental practice ownership among younger doctors, dropping from 33% in 2020 to about 20% now, largely due to the appeal of Dental Service Organizations (DSOs). They explore the recent 30% increase in in-house inquiries for practice acquisitions, signaling a renewed interest in ownership. The conversation dives into the financial fears tied to student debt, the drawbacks of the “delayed sale” approach, and the continued viability of selling a practice. They encourage listeners to consider their options in the evolving dental marketplace.
Want to submit a question that will be answered on the next episode? Submit it here or email us at newsletter@mcgillhillgroup.com.
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Listen to our sister show, Next Gen DDS! An all-in-one resource for dental students, residents, and early career doctors, discussing both clinical and business aspects of dentistry, hosted by Wes Lyon and Dr. Scott Menaker.
More dentists than ever are seeking out independent, objective, financial advice. In a world recently flooded with private equity money, lower dental insurance reimbursements, and questionable tax advice, it can be tough to see through the fog and answer the most important question, how can a dentist make more money? Join your host Wes Lyon as he helps you see clearly through the fog of dental office financials, allowing you to concentrate on delivering quality dental care.
Wes prides himself in offering independent, uncensored, objective advice to help dentists increase practice profitability, make better practice management decisions, and improve their personal financial planning. Whether you’re a recent graduate, new owner, in the stride of your career, or considering a transition into retirement, the Drilling It Down Podcast will help you make more money, pay less tax, and reach financial independence earlier.
About Us
McGill and Lyon Dental Advisors is an independently owned one-stop financial services resource for the dental profession, based on their "every step of the way" team approach. Their team offers financial consulting services and continuing education seminars exclusively for dentists nationwide. Throughout the years more than 30,000 doctors nationwide have trusted McGill and Lyon Dental Advisors for objective advice to reach their financial goals.
Aside from their consulting, transition, and continuing education services, the group also publishes The McGill & Lyon Dental Advisory, a dental business newsletter that offers valuable insights for all dentists. The McGill & Lyon Dental Advisory provides strategies and advice to help minimize federal and state income taxes, maximize practice profits, reduce overhead expenses, and create and protect your wealth. Membership includes monthly issues, searchable archives, special reports and bulletins, Q&As, financial calculators, forms, guides, letters, and more! Visit mcgilladvisory.com to subscribe!
Wes and his guests are experienced dental advisors specializing in tax planning, business planning, financial planning, wealth management, and practice transitions, who take pride in providing independent advice that puts the independent dentists’ best interests first.
Host Biography
Wes Lyon:
Wes helps dentists and specialists across the country achieve financial independence by improving practice profitability, slashing income taxes, managing dental insurance exposure, and making better personal financial decisions. Wes serves as President & CEO of Lyon Publishing Inc., President & CEO of McGill and Lyon Dental Advisors, and Managing Partner of Lyon Wealth Advisors Group, LLC. He is a highly sought after speaker making regular appearances at industry events, study clubs, podcasts, and McGill and Lyon seminars. Wes is also published in other editorials periodically and writes a Financial Management column for the Academy of General Dentistry. Before entering the dental consulting world, Wes worked in institutional investment management. Prior to that, Wes was a financial advisor specializing in helping small business owners with their personal finances.
McGill and Lyon Dental Advisors is a consulting firm providing dentists and specialists independent, objective financial advice as it relates to tax planning, business planning, and financial planning. McGill and Lyon Dental Advisors was founded in 1983 by Dr. Charles Blair and John K. McGill. Since then, the company has helped over 1,000 dentists reach their financial goals while paying the least amount of taxes required through their tax, business, and financial planning service.
Wesley Lyon:
Welcome back to another episode of drilling it down
Wesley Lyon:
this is your host west lion co-hosting again jonathan
Wesley Lyon:
martin jonathan welcome back to the show how you doing
Wesley Lyon:
man oh pretty good pretty good i'm excited today uh this is one of my favorite
Wesley Lyon:
topics uh we're going to talk about the uh rise of buyers into the marketplace
Wesley Lyon:
we talked about dsos last time and you know what kind of the dsos they're They're
Wesley Lyon:
still buying, not to a large degree though,
Wesley Lyon:
but somebody's got to fill that void.
Wesley Lyon:
So tell me a little bit about what you're seeing on the private practice market.
Jonathan Martin:
Yeah, I mean, historically, and when I say historically, let's say recent history,
Jonathan Martin:
you know, last five years or
Jonathan Martin:
so, you know, we've seen a pretty dramatic decline in practice ownership.
Jonathan Martin:
In fact, if you track it back further than that, and you know,
Jonathan Martin:
the ADA publishes statistics on this annually. I mean, there's been a dramatic
Jonathan Martin:
decrease in the overall percentage of doctors that own their own practice or
Jonathan Martin:
a piece of their own practice.
Jonathan Martin:
And that decline has been a lot more precipitous amongst younger doctors.
Jonathan Martin:
Now, you know, and I don't remember the stats off the top of my head,
Jonathan Martin:
but like in 2020, you know, about a third of all practicing docs with five years
Jonathan Martin:
of experience owned their own practice.
Jonathan Martin:
And now it's down like 20 percent.
Jonathan Martin:
You know, it's more like, you know, 10, 12 percent of overall doctors.
Jonathan Martin:
So, again, a pretty, pretty significant decline in a short period of time.
Jonathan Martin:
And then, you know, alternatively, you've seen this dramatic increase in the
Jonathan Martin:
statistics of doctors upon graduation going to work for DSOs.
Jonathan Martin:
And, you know, that increase has been a lot more, a lot steeper in younger docs.
Jonathan Martin:
You know, docs with five years or less of experience, like one out of every
Jonathan Martin:
three of them are going to work for a DSO.
Jonathan Martin:
And so you can't help but, you know, relate those two trends.
Jonathan Martin:
Obviously, younger doctors are working for DSOs more. And as a function of that,
Jonathan Martin:
they're buying less practices.
Jonathan Martin:
And we've seen that, you know, that decline in practice ownership really continue
Jonathan Martin:
year over year. All of a sudden, though, in 2023, when you look at the year-over-year
Jonathan Martin:
declines, it almost flattened out in 2023.
Jonathan Martin:
We didn't see the big steep drop that we'd seen year-over-year-over-year prior
Jonathan Martin:
to that. And what we're seeing in 2024...
Jonathan Martin:
At least in-house for us, is we've seen a very sharp increase in the number
Jonathan Martin:
of buyers who are inquiring about practices.
Jonathan Martin:
You know, we keep a buyer database, just folks who say, hey,
Jonathan Martin:
you know, we're looking for a practice in XYZ geographic locations with such
Jonathan Martin:
and such characteristics.
Jonathan Martin:
Will you just add us to your database should an opportunity like that come along?
Jonathan Martin:
And our database base has blown up this year.
Jonathan Martin:
I mean, we've seen a 30% increase just since January, which,
Jonathan Martin:
you know, compared to prior years, that's, there's something to that.
Jonathan Martin:
So, you know, on top of that, we're seeing practices selling a lot quicker.
Jonathan Martin:
You know, at the same time, we were seeing this decline that I mentioned,
Jonathan Martin:
you know, practice sales, they were taking longer.
Jonathan Martin:
And, you know, brokers aren't going to tell you this in general,
Jonathan Martin:
because the way they get you is, you know, hey, I can sell this practice is quicker than anybody.
Jonathan Martin:
I've got, you know, built-in buyers, blah, blah, blah, blah,
Jonathan Martin:
blah, anything to get you to sign. Or when they contact you.
Wesley Lyon:
Hey, I have five buyers that would love to buy your practice, but sign here.
Jonathan Martin:
Yeah, yeah, you got to love that one. Because once you sign,
Jonathan Martin:
you know, that's where they have you.
Jonathan Martin:
But, you know, we've seen over, again, that same period of time,
Jonathan Martin:
practice has taken a little longer, a little longer, a little longer to sell
Jonathan Martin:
because just, again, fewer buyers out there.
Jonathan Martin:
And so far, 2024, that trend has gone in the other direction.
Jonathan Martin:
So, you know, what we're seeing in the numbers is, you know,
Jonathan Martin:
this trend is reversing, and only time will tell, you know, how much that will bear out.
Jonathan Martin:
But it also makes sense when you talk to young doctors who've kind of,
Jonathan Martin:
you know, done their indentured servitude with a with a DSO,
Jonathan Martin:
you know, they've gone, they've signed the contract.
Jonathan Martin:
And we talked about this last week, but, you know, a lot of them getting pretty
Jonathan Martin:
hefty signing bonuses and realizing, hey, if I break this contract,
Jonathan Martin:
if I leave prematurely, I'm going to have to pay back a proportional share.
Jonathan Martin:
So they're doing their full service.
Wesley Lyon:
That's an odd one though, the signing bonuses. You're telling me the private
Wesley Lyon:
doctors aren't throwing $100,000 signing bonuses out there?
Jonathan Martin:
Well, yeah, that's kind of the doubt. That's, you know, it makes sense when
Jonathan Martin:
you see one of out of every three docs going to work for you.
Wesley Lyon:
No, I just want to poke that. We're going to come back to that in a little bit
Wesley Lyon:
and we talk about the money and how this is shaken out and why,
Wesley Lyon:
but part of it has to do with the money on the young doctors.
Wesley Lyon:
Yeah. But yeah, now they're, I think we're heading is, you know,
Wesley Lyon:
their indentured servitude is up. They no longer owe the $100,000 back, right? That's right.
Jonathan Martin:
And they realize they don't want to practice this way anymore,
Jonathan Martin:
you know? And so, a lot of the best candidates that we're seeing coming to the
Jonathan Martin:
market are doctors who've worked
Jonathan Martin:
for two, three, four, five years at a DSO and realize, hey, you know,
Jonathan Martin:
I get it now. You know, I want to own my own practice.
Wesley Lyon:
Yeah, I had a funny one where we were transitioning a practice to a dentist
Wesley Lyon:
kid. And we weren't really having the kid pay.
Wesley Lyon:
So, kid's in a really, really great spot. And, you know, the kid just was not
Wesley Lyon:
getting the fact that he was getting all this stuff handed to him.
Wesley Lyon:
You know, he's like, dude, he wasn't mad, but he maybe wasn't as thankful.
Jonathan Martin:
Didn't see the value.
Wesley Lyon:
Maybe. And then after a year or two of, you know, his buddies' promises on what
Wesley Lyon:
they would get and his realization of what he has versus what they got promised and don't have,
Wesley Lyon:
his tune flipped very quickly into, oh my gosh, I've got the best setup of everybody.
Wesley Lyon:
And now his buddies are trying to, you know, I think this might be some of it
Wesley Lyon:
too, is not everybody goes to work for DSOs, although I do think probably half,
Wesley Lyon:
I don't know, a lot of them do, I would say, out of dental school. Like, it's a lot.
Wesley Lyon:
It's not some two out of the class went. A lot of them go.
Wesley Lyon:
But now, all of a sudden, they're all still friends. And, you know,
Wesley Lyon:
five years in, you know, whatever percentage of them that went and bought practices
Wesley Lyon:
have experience X, and the other ones are all complaining.
Wesley Lyon:
And there's probably something in there that like, wait, you mean you bought one and it worked out?
Jonathan Martin:
You know, and there is a, I get, you know, a stigma when it comes to the risk
Jonathan Martin:
associated with buying, because it's not like it was 20 years ago.
Jonathan Martin:
I mean, the amount of student loan debt these kids are coming out with is staggering.
Jonathan Martin:
And so when you add to that, okay, now I'm going to have to borrow hundreds
Jonathan Martin:
of thousands, if not in excess of a million dollars to buy a practice,
Jonathan Martin:
you know, I get why that can be scary.
Jonathan Martin:
And what makes it worse, honestly, is, you know, the information that's out there about,
Jonathan Martin:
and it's mainly coming from, you know, the DSOs themselves, is that you can't
Jonathan Martin:
afford to buy your own practice.
Jonathan Martin:
And, you know, we've talked endlessly, you and I, about that not being the case.
Jonathan Martin:
But, you know, our bullhorn is not as big as these DSOs who are at every single
Jonathan Martin:
seminar, every single trade show talking about how, hey, you got too much student
Jonathan Martin:
loan debt, you can't get a loan.
Wesley Lyon:
Which is insane because, you know, every time I talk, my title of my presentation
Wesley Lyon:
to them is why you can't afford to not buy a practice.
Wesley Lyon:
And then I say, hey, did you notice how many banks are in the exhibit hall?
Wesley Lyon:
And you're like, well, yeah, about every other exhibitor here is a bank, aren't they?
Wesley Lyon:
All the sponsors are banks. And do any of you have any idea why?
Wesley Lyon:
And it's like, well, they're all lined up here hoping to give you a loan.
Wesley Lyon:
Like every single one of them. What would the best outcome be here?
Wesley Lyon:
I got to make a practice acquisition loan. Sure, $200,000 loan for somebody
Wesley Lyon:
to outfit their practice is great.
Wesley Lyon:
But that's not what they're at this booth for.
Wesley Lyon:
They're there to talk to this young doctor who's going to take a million dollar
Wesley Lyon:
loan and they're going to be happy to do it.
Jonathan Martin:
And get this, you know, this is to me the most telling thing.
Jonathan Martin:
So not only will they give you a loan to do it, but they'll give you 100% of
Jonathan Martin:
the funds necessary to buy that practice.
Jonathan Martin:
And the doctor that they'll give it to will have little to no experience actually
Jonathan Martin:
working as a dentist, zero experience running a business and negative net worth.
Jonathan Martin:
And they'll still give you a hundred percent of the funds necessary to buy a
Jonathan Martin:
practice. And the only reason they're doing that is because you're not likely to fail.
Wesley Lyon:
And they give you working capital.
Jonathan Martin:
Yeah.
Wesley Lyon:
So they almost give you like 110% of what's necessary to acquire the practice.
Wesley Lyon:
They'll sit there and say, Hey, the practice is going to cost a million dollars.
Wesley Lyon:
You're going to need working capital. So we're going to give you a loan for
Wesley Lyon:
1.1 million. We're going to send you $100,000. Yeah.
Jonathan Martin:
Banks are in the business of making money. If they thought that you were a risky
Jonathan Martin:
investment, they wouldn't be giving people with no ownership experience all this money. No.
Wesley Lyon:
The reason the interest rates are so low is the bank's borrowing the money from
Wesley Lyon:
one place and they're lending it somewhere else.
Wesley Lyon:
And when they kind of pull these loans together, they have to figure out what
Wesley Lyon:
the interest rate on that risk class is going to be.
Wesley Lyon:
Because, hey, if 5% of these loans are going to default, I'm going to have to
Wesley Lyon:
charge this group of borrowers is a pretty high interest rate.
Wesley Lyon:
Yet when they go into dentistry, I mean,
Wesley Lyon:
Have you ever seen a business loan get a lower rate than dentists?
Jonathan Martin:
No, not comparable to what everything else is lending for at the same time.
Jonathan Martin:
And speaking of that default rate, you know what the default rate is on loans to dentists?
Wesley Lyon:
I think it's less than one.
Jonathan Martin:
Yeah, it's like half of 1%. It's crazy low. That's why there's so many banks
Jonathan Martin:
that are willing to throw money at dentists.
Wesley Lyon:
Let's define a default too. In some of those situations, you know,
Wesley Lyon:
somebody probably came in, bought it, cleared it, you know, we might've just
Wesley Lyon:
had a lazy dentist in there and all of a sudden, hey, we still got our money back.
Wesley Lyon:
We just had to give it try number two on this practice with a new doctor.
Wesley Lyon:
I mean, you can get a dental practice loan for a lower rate than you get a mortgage.
Wesley Lyon:
That speaks a lot to the confidence they have that a dentist is going to pay back this loan.
Wesley Lyon:
Apparently, if you just go off the interest rates, which I'm not a banker to
Wesley Lyon:
tell you, but the interest rates would tell you that if you can get a 15-year
Wesley Lyon:
practice loan for a lower rate than you can get a 15-year mortgage,
Wesley Lyon:
they think more highly of people that are going to reap Repay their dental practice
Wesley Lyon:
loan, then they're going to repay their mortgage.
Wesley Lyon:
Now, I don't recommend necessarily paying your loan over 15 years.
Jonathan Martin:
No, no, no, but point taken.
Wesley Lyon:
The point is there are banks out there that will give you a 15-year loan at
Wesley Lyon:
a lower rate than a 15-year mortgage.
Jonathan Martin:
And so I get the fear, the hesitation, the concern over the risk and taking
Jonathan Martin:
out that amount of money.
Jonathan Martin:
But when you think about it from the perspective of these billion-dollar institutions
Jonathan Martin:
are not worried about it. Maybe your worry is a little overblown.
Jonathan Martin:
And so, you know, that's the thing is, like you said, I mean,
Jonathan Martin:
young doctors, the ownership model is not for everybody.
Jonathan Martin:
Just because you went to dental school doesn't mean that you're,
Jonathan Martin:
you know, engineered to want to own and operate a business and to do it well.
Jonathan Martin:
But, you know, there's a reason that the industry historically has the vast
Jonathan Martin:
majority of dentists owning their own practices because, you know,
Jonathan Martin:
the benefits outweigh the risks.
Wesley Lyon:
Well, the other part, too, is some of the stuff when you buy a business is a
Wesley Lyon:
pain, like getting the accounting to work, getting some of the payroll systems.
Wesley Lyon:
Once you get through the first like six months, most of those systems you get on autopilot.
Wesley Lyon:
So then you sit there and you're like, well, what are my biggest complaints
Wesley Lyon:
about being a business owner?
Wesley Lyon:
Well, one is getting new patients and that can't really be outsourced.
Wesley Lyon:
And that's something you have to tackle head on.
Wesley Lyon:
You have to learn how to talk to patients well.
Wesley Lyon:
You know, you have to learn how to build the trust, get them to say yes,
Wesley Lyon:
get referrals and grow organically.
Wesley Lyon:
And that one, you know what, you're going to have to do it.
Wesley Lyon:
The other one, though, that most people say, hey, what's your biggest pain point
Wesley Lyon:
for an experienced dentist or experienced practice owner? It's very easy. It's the staff.
Wesley Lyon:
But guess what? Whether or not you work for someone else or you work for yourself,
Wesley Lyon:
guess what your biggest pain point's going to be? The assistant called out,
Wesley Lyon:
the hygienist called out.
Wesley Lyon:
Now, it doesn't hit your pocket when it's, you know, not your practice,
Wesley Lyon:
but it still hits your stress level the same.
Wesley Lyon:
So, you know, there's two ways of looking at it. One is, okay, it's not my problem.
Wesley Lyon:
The other is, hey, it is my problem. At least this way I can fix it and get my people in place.
Jonathan Martin:
Right, right.
Wesley Lyon:
So, it's something everyone needs to do. And some of it, too,
Wesley Lyon:
they get to the age where, you know, hey, when you're living a bachelor life
Wesley Lyon:
and you're making $150,000 a year for a DSO, it's like, I'm rich.
Wesley Lyon:
Then you get married. Then you have a kid. And you find out that I ain't rich anymore.
Jonathan Martin:
Well, and then when you look at just regardless of what you're comfortable producing,
Jonathan Martin:
because, I mean, we've worked with so many dentists.
Jonathan Martin:
We've seen docs that, you know, they can't work out of more than one chair.
Jonathan Martin:
And if they're producing $400,000 a year, hey, they don't see how they can produce a penny more.
Jonathan Martin:
And then on the other side of the spectrum, we see docs doing,
Jonathan Martin:
you know, $1.5 million of production on their own, working out of four operatories.
Jonathan Martin:
And they're just, you know, they enjoy that level of production.
Jonathan Martin:
And in every iteration in between, you know, not every doctor is going to,
Jonathan Martin:
you know, produce the same amount. out.
Jonathan Martin:
But if you're producing it as an associate, on average, you're getting paid
Jonathan Martin:
30, 35 percent of what you're generating.
Jonathan Martin:
As an owner, you know, obviously it depends on the specialty,
Jonathan Martin:
but let's just use general dentists, for example.
Jonathan Martin:
You know, on average, your overheads, 57, 58 percent, okay?
Jonathan Martin:
So, you're making 42 percent of every dollar that not only you generate,
Jonathan Martin:
but what those hygienists generate.
Jonathan Martin:
And so, you can be doing the exact same amount of clinical production,
Jonathan Martin:
but you're making taking dramatically more owning your own practice.
Jonathan Martin:
And what that means is, hey.
Jonathan Martin:
I could potentially actually even work less to make the same amount of money.
Jonathan Martin:
So, you know, that's where I say the benefits of ownership aren't always quantifiable.
Jonathan Martin:
It's not always about the dollars and cents.
Jonathan Martin:
It's about being your own boss. It's about controlling your own schedule.
Jonathan Martin:
It's about, you know, controlling your own procedure mix, not having somebody over your shoulder.
Wesley Lyon:
I love how you mentioned that one, being your own boss. Funniest one. It was a guy selling.
Wesley Lyon:
But a guy was about to sign here in Charlotte to sell to a DSO.
Wesley Lyon:
So, and the other guy sitting on the side of the table said,
Wesley Lyon:
you know, hey, one of the best parts is here is, you know, we give you this flexibility.
Wesley Lyon:
You want a day off. You just tell us you want the day off.
Wesley Lyon:
And he looked back and goes, I don't ask people for day off because it's over.
Wesley Lyon:
Like, what do you mean that's flexibility? Like, I want a day off.
Wesley Lyon:
I tell the staff we ain't coming in next Wednesday.
Wesley Lyon:
Like, you know, there is a lot there. You know, you get to just take a week off.
Wesley Lyon:
You don't want to work that Thursday night. Yeah, you got to produce,
Wesley Lyon:
but a lot of the doctors can get it to the point where, hey,
Wesley Lyon:
we're producing, we can afford to do that.
Wesley Lyon:
I've even seen some, we do this a lot with retiring doctors or,
Wesley Lyon:
you know, once they get their financial goals, we bring them down to three days a week instead of four.
Wesley Lyon:
And we say, hey, bonus the staff, you know, make sure they're getting paid for
Wesley Lyon:
four as long as production stays the same and,
Wesley Lyon:
Guess what happens to production every time we do that?
Jonathan Martin:
I was going to say, my guess is it stays about the same. It goes up. Wow.
Wesley Lyon:
It goes up. So you can really learn how to make the office run and be your office.
Wesley Lyon:
And that's good and bad, but there's a ton of good there for the buyers.
Wesley Lyon:
And I think they're just naturally realizing that.
Wesley Lyon:
Before it was like, hey, they had mentors, people to tell them you should expect it to buy a practice.
Wesley Lyon:
Now they hear from the DSOs more than they hear from the private doctors.
Wesley Lyon:
And they, you know, everyone wants to listen to the message that's easiest.
Wesley Lyon:
Oh, I'll go work for the DSO. I'll make just as much money.
Wesley Lyon:
So they go do it and then it doesn't happen. And then all of a sudden,
Wesley Lyon:
you know, it's, I said, you can lead them to the water. You can't make them drink.
Wesley Lyon:
All of a sudden they think back to that professor. Oh yeah, this is what,
Wesley Lyon:
you know, he meant or she meant when said, I'm going to need to buy my own practice.
Wesley Lyon:
And now they're flooding the market.
Jonathan Martin:
They have the bigger bullhorn, but now I think there's been enough time for,
Jonathan Martin:
you know, those stories of situations where doctors didn't like working for
Jonathan Martin:
the DSO, where things didn't go well.
Jonathan Martin:
You know, I mean, this has been going on for 15 years, but really the intense,
Jonathan Martin:
you know, rise in the, you know, level of consolidation started in, I'd say, 2017, 2018.
Jonathan Martin:
So, you know, we're six, seven years into really DSOs occupying a significant
Jonathan Martin:
portion of the overall industry, and you're starting to hear that other side of it more.
Jonathan Martin:
And I think that's what we're seeing in 2024. I think the, you know,
Jonathan Martin:
the winds are shifting and doctors are kind of coming back to the market.
Jonathan Martin:
Only time will tell, but there's definitely no way to misinterpret what we're
Jonathan Martin:
seeing in 2024, which is more buyers and shorter time on the market for doctors who are selling.
Wesley Lyon:
Yeah, and this one might be just something biased because of who we are,
Wesley Lyon:
but I've noticed we've got more doctors getting back involved with dental schools
Wesley Lyon:
that are actively reaching out to us going, hey, we need help.
Wesley Lyon:
You know, we've got a dental school, we've got, you know, 150 kids in here,
Wesley Lyon:
and they're being told to go to DSOs, and we're trying to actively fix that.
Wesley Lyon:
So I think you're getting it on both ends, too.
Wesley Lyon:
A lot of people are going back into the dental schools, and they're passionate
Wesley Lyon:
about it. I mean, Scott Medeker is helping us.
Wesley Lyon:
He's passionate about it. I want to help these kids. It's not a,
Wesley Lyon:
you know, to them, it's not a money thing.
Wesley Lyon:
It's, hey, this was amazing to me for 30 years, and now I'm on the back end.
Wesley Lyon:
And, you know, retirement ain't as easy as people think. So now you're sitting on the couch bored.
Wesley Lyon:
What can I do that's really going to make me happy? And I'm like,
Wesley Lyon:
yeah, I'm going to go wrangle these kids up and get them to buy practices.
Jonathan Martin:
Yeah. And they had such â doctors like Scott had such a successful career and
Jonathan Martin:
ownership did so much for them.
Jonathan Martin:
It's good to see them wanting to share that because that's the thing is there's
Jonathan Martin:
really outside of those doctors who are out there talking and preaching about
Jonathan Martin:
the tenants and the benefits of private practice ownership.
Jonathan Martin:
There's nobody out there talking about it other than, you know, you and me.
Wesley Lyon:
Hey, we're backed in our corner here, you know. We need like a political super
Wesley Lyon:
PAC so we can compete with the DSOs.
Jonathan Martin:
Yeah, they have pretty deep coffers. I don't think we're competing with that.
Wesley Lyon:
No, no, we don't charge those type of fees around here.
Wesley Lyon:
So, unfortunately, we won't be buying our way into any of those huge things,
Wesley Lyon:
but still get the word out the best we can.
Wesley Lyon:
And I think naturally people are starting to look for how that goes.
Wesley Lyon:
But I do want to kind of twist that.
Wesley Lyon:
And the reason I wanted to do this follow-up episode here is we've talked about this a lot.
Wesley Lyon:
I was talking to Matt on our team here, and there's more buyers in the market.
Wesley Lyon:
And as you mentioned, we've seen that because the days to sale,
Wesley Lyon:
meaning how long it takes a dental practice to sit on the market,
Wesley Lyon:
has gone down dramatically this year.
Wesley Lyon:
And obviously, it's got to have something to do with all these buyers listening in.
Wesley Lyon:
But I also want to talk to you about, hey, what are these benefits of selling
Wesley Lyon:
your practice privately?
Wesley Lyon:
But most importantly, we talked
Wesley Lyon:
to days on the market. We're not really talking about a partnership.
Wesley Lyon:
We're not talking about, hey, guess what? I knew Junior coming back into town.
Wesley Lyon:
So just naturally, we need to do the deal. I mean, these are practices being listed for sale.
Wesley Lyon:
Obviously, they don't say Dr. Jonathan Martin's practice, but say practice in
Wesley Lyon:
Charlotte area for sale.
Wesley Lyon:
And it's funny throughout the years as you gain wisdom, I think I was more inclined
Wesley Lyon:
to be willing to kind of not talk a doctor out of trying to find their own buyer career and.
Wesley Lyon:
I've seen so many of them go wrong. I think it's a really, really good sign
Wesley Lyon:
that the practices aren't sitting there. But I also want to talk about,
Wesley Lyon:
hey, what are the benefits?
Wesley Lyon:
If you're a senior doctor and you want to retire, what are the benefits of just
Wesley Lyon:
straight up selling it in a brokerage capacity versus bringing in an associate or trying to find it?
Wesley Lyon:
Because I'll just give you this example. We could probably apply to at least 100 doctors.
Wesley Lyon:
Brings in associate. associate we're going to sell the practice
Wesley Lyon:
in two years to said associate and I'm going to walk out the
Wesley Lyon:
back door so said associate comes in you
Wesley Lyon:
pay said associate 150,000 a year because they
Wesley Lyon:
have to live your practice doesn't really have enough to justify them at least
Wesley Lyon:
the first year so the second year maybe you break even on it and then come time
Wesley Lyon:
to sign the paperwork what does said associate do runs off on you yeah and now
Wesley Lyon:
you've hired staff you've paid this you've sunk a lot of
Wesley Lyon:
money into said associate and they're just running out the back door on you.
Wesley Lyon:
And it doesn't happen all the time. I don't want to necessarily scare people too much.
Wesley Lyon:
When you've got the right person and it's going to work, it's definitely the right thing to do.
Wesley Lyon:
But more and more when doctors approach me, hey, I'm going to do the old school
Wesley Lyon:
way. I'm going to find an associate.
Wesley Lyon:
I'm going to bring him in here and ask him why. Well, I don't want to pay the brokerage fees.
Wesley Lyon:
So I go, well, we're going to pay the doctor $150,000 to avoid the $80,000 brokerage
Wesley Lyon:
fee. Is that what I'm hearing you say?
Wesley Lyon:
Most of them at that point, they're kind of like...
Jonathan Martin:
Doesn't make a whole lot of sense.
Wesley Lyon:
Yeah, you're right. This doesn't make a whole lot of sense. But from your end,
Wesley Lyon:
at least, I want to talk to you about a little bit, hey, would these benefits,
Wesley Lyon:
have you seen any of them really get screwed up?
Wesley Lyon:
Because to me, I think I've seen a really, really bad one that I think you guys
Wesley Lyon:
probably worked on as well.
Wesley Lyon:
However, in relation to how bad this was for the doctor's life,
Wesley Lyon:
And, you know, we had to get an attorney involved for a couple of weeks and,
Wesley Lyon:
you know, shut down a situation.
Wesley Lyon:
But otherwise, he still had his money.
Wesley Lyon:
He was still retired and he just doesn't get along with the new doctor.
Wesley Lyon:
And that's about the worst I've seen. You got anything worse than that?
Jonathan Martin:
Yeah. So I guess just to back up a second in general, obviously,
Jonathan Martin:
and you'll hear me say this anytime we're talking transitions.
Jonathan Martin:
I mean, there's pros and cons, there's inherent risks to the different ways of transitioning.
Jonathan Martin:
And, you know, what we're talking about right now is, okay, if I would just,
Jonathan Martin:
if I'm going to take the approach of selling the whole thing at once,
Jonathan Martin:
you know, not doing a partnership,
Jonathan Martin:
not affiliating with the DSO, but if I'm selling the whole thing at once,
Jonathan Martin:
do I wait until I'm ready, put it on the market, sell it, walk away,
Jonathan Martin:
or do I do what we call a delayed sale, which is I go find an associate,
Jonathan Martin:
plug them in, let them work for a while, and then sell them the practice.
Jonathan Martin:
And, you know, both of those arrangements can work,
Jonathan Martin:
but the risks of the delayed sale, of bringing the associate in are,
Jonathan Martin:
you're essentially bringing somebody in, letting them test drive the car,
Jonathan Martin:
And giving them time to decide for one reason or another that they don't want the car, you know.
Jonathan Martin:
You know, maybe they don't like the patient base. Maybe their spouse decides,
Jonathan Martin:
you know what, we've been here for a year and we just don't want to live here.
Jonathan Martin:
We're going to move somewhere else.
Wesley Lyon:
Not only that, but not only are you letting them test drive it,
Wesley Lyon:
but you're actually paying them.
Jonathan Martin:
That's right.
Wesley Lyon:
To test drive it.
Jonathan Martin:
That's right.
Wesley Lyon:
This isn't like a lease for 12 months and give it back to me.
Wesley Lyon:
This is a, I'm going to write you a check, make sure you're comfortable while you test drive my car.
Jonathan Martin:
Yep. And you've, by definition in that scenario, you're not out there looking
Jonathan Martin:
at other options, right? You've put all your eggs in one basket.
Jonathan Martin:
And in the scenario that you outlined, if that doctor gets in a year or two
Jonathan Martin:
years or three years or whatever the agreement was,
Jonathan Martin:
and they just decide, eh, you know what, I'm going back to specialty school,
Jonathan Martin:
or we're going to move somewhere else, or we just want to be associates forever and never own.
Jonathan Martin:
There's an infinite number of things that can happen. They don't buy the practice.
Jonathan Martin:
You're back at square one at the date state that you thought you were going to be out.
Jonathan Martin:
And then on top of that, you've got an associate in there who's been doing probably
Jonathan Martin:
a significant amount of the production.
Jonathan Martin:
And you got to hope you're in a state that, you know, allows for covenants not
Jonathan Martin:
to compete to be enforceable.
Jonathan Martin:
It can, it can impede your ability to, from a timeframe standpoint,
Jonathan Martin:
and just actually from a functional standpoint, transition out of your practice.
Jonathan Martin:
You know, having an associate that decides to back out can very much deviate
Jonathan Martin:
you from your desired time frame and impede your ability to sell at all,
Jonathan Martin:
again, if they're doing a significant amount of the production.
Jonathan Martin:
So, you know, that is just one of the big inherent risks of that approach.
Jonathan Martin:
And that's why, from my standpoint, there's only a few scenarios where I really
Jonathan Martin:
recommend even doing that.
Jonathan Martin:
You know, to me, it's a lot less risky, as you pointed out, that if you just
Jonathan Martin:
find the buyer and sell it to them, well, hey, if any of those things happen
Jonathan Martin:
after they've bought the practice, you're no longer at risk.
Jonathan Martin:
You got paid, cash is in the bank, and, you know, what they decide ultimately
Jonathan Martin:
to do can't hurt you financially.
Wesley Lyon:
I was kind of like back to the car example too. I think the biggest benefit
Wesley Lyon:
is, okay, you're at the car dealer and you're the one selling it.
Wesley Lyon:
And you're selling a Suburban. One person comes in, they want to test drive
Wesley Lyon:
it for 12 months and maybe they'll buy it afterwards.
Wesley Lyon:
Somebody else comes in and says, hey, you got a black Suburban. I need a black Suburban.
Wesley Lyon:
Let's talk about the price and I'm going to drive out of here with the thing.
Wesley Lyon:
It's like, you know 100% what the intentions of that person are.
Wesley Lyon:
Because everyone's going to look out for themselves. So maybe your intention
Wesley Lyon:
is to sell it to them in two years.
Wesley Lyon:
Maybe their intention is they just don't have another job offer.
Jonathan Martin:
That's right. That's right. And we've seen that happen. And so going back to
Jonathan Martin:
the few scenarios where I do recommend the delayed sale, really it's due to a lack of other options.
Jonathan Martin:
You know, if you're in an area where there's just not going to be a lot of interest,
Jonathan Martin:
not a lot of candidates, and you have a candidate that comes along and says,
Jonathan Martin:
hey, I want to test drive the car before I buy it.
Jonathan Martin:
You're not really in a position of strength.
Wesley Lyon:
Or sometimes I recommend they go down that road because you know what?
Wesley Lyon:
The right person comes along, but you aren't financially ready or you're not
Wesley Lyon:
emotionally ready to say, hey, let's do a delayed sale.
Wesley Lyon:
I'll sell it to you in two years. And when y'all do that, you freeze the goodwill, right?
Wesley Lyon:
So, hey, if you grow the practice while you're here for these two years,
Wesley Lyon:
I'm not I'm not going to charge you on the growth.
Wesley Lyon:
It's going to work for me. It's going to work for you.
Wesley Lyon:
But I think that's a candidate first, delayed sale, second scenario versus, you know, I think,
Wesley Lyon:
I'm not saying it's the worst idea in the world, but some doctors just go into
Wesley Lyon:
it with the idea of, I'm going to do a delayed sale ahead of time.
Wesley Lyon:
And it's, I mean, we just went through one,
Wesley Lyon:
here with a shared client where, you know, he got a little upset that,
Wesley Lyon:
you know, the guy didn't want to buy it from him ultimately and backed out the deal.
Wesley Lyon:
And, you know, emotionally a little bit, you know, upset. Am I going to be able
Wesley Lyon:
to get out of here? What's going to happen?
Wesley Lyon:
And then, you know, boom, the next buyer comes in and she's just happy to be there.
Jonathan Martin:
And if it's the same doctor I think we're talking about, that actually worked
Jonathan Martin:
out in their favor too, because he didn't have to sell it for the low price
Jonathan Martin:
that they'd agreed to for the doctor who'd been there.
Jonathan Martin:
He got to sell it for current market value with all the growth factored in that
Jonathan Martin:
that associate had brought to the table.
Jonathan Martin:
And he was in a great market where, look, no matter what happened,
Jonathan Martin:
he was going to be able to find a buyer.
Wesley Lyon:
Oh, and she just, you know, she looked at the numbers. They were fair.
Wesley Lyon:
Yes, thank you. I have a bank loan. When can I buy it?
Jonathan Martin:
Exactly. Exactly.
Wesley Lyon:
And that's where it's just, hey, look, somebody on the car lot looking for what
Wesley Lyon:
you're selling is worth a whole lot more than somebody bruising Facebook marketplace at 3 a.m.
Jonathan Martin:
Well, and I think the broader point, if you kind of take a step back from this
Jonathan Martin:
specific scenario we're talking about, the broader point is,
Jonathan Martin:
look, there's a lot of transition options out there.
Jonathan Martin:
And, you know, they all have their pros and cons.
Jonathan Martin:
The biggest mistake I see doctors make is they like to put their head in the
Jonathan Martin:
sand and just, you know, hey, status quo is great.
Jonathan Martin:
I just want to keep doing what I'm doing. And I don't want anything to change.
Jonathan Martin:
And the reality is, hey, change is coming for every single one of us.
Jonathan Martin:
And we have no idea what the timeline is for that change. But we cannot work forever.
Jonathan Martin:
We can't maintain the same practice modality forever.
Jonathan Martin:
At some point, we're going to, you know, come across health issues.
Jonathan Martin:
We're going to want to slow down. We're going to need to transition our practice.
Jonathan Martin:
And, you know, the sun shines brighter on folks who plan.
Jonathan Martin:
And for some folks, a full sale, and I would say for the majority of folks,
Jonathan Martin:
a full sale, putting the practice up on the market, selling it to another doctor
Jonathan Martin:
is the most realistic and the best fit from a transmission standpoint.
Wesley Lyon:
That's what I love. If you're a one doctor practice, you got your six staff
Wesley Lyon:
members, maybe a little bit more if you're a different specialty,
Wesley Lyon:
tea, maybe a little bit less, and you don't have the buyer.
Wesley Lyon:
It's just, hey, you find this, you get to interview them. It's not like a live auction on eBay.
Wesley Lyon:
If somebody comes in, you don't like them, you don't have to sell it to them.
Wesley Lyon:
But you just, one day, they come in, they give you a boatload of money that the bank lends them.
Jonathan Martin:
And you're out the back door.
Wesley Lyon:
You take your money. And hey, if you're going to work back, whatever it is,
Wesley Lyon:
but if there's a a disagreement on the back end, I've never had any of those really go wrong.
Wesley Lyon:
I've had plenty of doctors call me up and just go, hey, you know what?
Wesley Lyon:
Me and him didn't really mesh. I like him.
Wesley Lyon:
But we just didn't really mesh well in there. So, you know, I kind of called
Wesley Lyon:
them and said, hey, you know, do you really need me in there?
Wesley Lyon:
That's the majority of the time. That's the worst thing that happens. Right.
Wesley Lyon:
You just get two people that don't mesh well. And, hey, one of them got a payment.
Wesley Lyon:
One of them didn't. We know who's in charge. And usually the senior doctor,
Wesley Lyon:
you know, neither of them really want to be in the position.
Wesley Lyon:
So, it's always funny how it works out.
Wesley Lyon:
Usually the senior doctor is the one to just call a spade a spade and say,
Wesley Lyon:
hey, you know, I think you're feeling guilty.
Wesley Lyon:
But I don't think me and you are really working well together.
Wesley Lyon:
Other, call me if you need me.
Wesley Lyon:
I'm still here. And it ends in a friendly terms. We don't have to sit there
Wesley Lyon:
and we discovered we don't work well together while you're an associate and
Wesley Lyon:
you're supposed to buy the thing from me in six months.
Jonathan Martin:
And most practices aren't big enough to facilitate multiple doctors anyway.
Jonathan Martin:
So, it's not anything that you ever have to deal with. But like I said,
Jonathan Martin:
you know, while that's the plan that works for most people most often,
Jonathan Martin:
there's other plans that accomplish different goals.
Jonathan Martin:
And so, you know, the further in advance you plan and really it all starts with kind of your world.
Jonathan Martin:
Just make sure financially you're in the right spot so that when it comes time
Jonathan Martin:
to be thinking about this,
Jonathan Martin:
you can do what you want to do, as opposed to what so many doctors that come
Jonathan Martin:
to us are in position to have to do,
Jonathan Martin:
which is they have to get the maximum amount of money out of their practice
Jonathan Martin:
transition because they can't
Jonathan Martin:
afford not to, because they They didn't plan because they didn't save.
Jonathan Martin:
And, you know, that's one of the big drivers of all these doctors who've sold
Jonathan Martin:
to DSOs is they couldn't afford to walk away from the big check,
Jonathan Martin:
which, you know, it's unfortunate because, and we talked about this on the last episode,
Jonathan Martin:
you know, you really need more than one reason to go that direction.
Jonathan Martin:
You know, it can't just be all about the money or you're looking at not being very happy.
Jonathan Martin:
But, you know, if you do everything right, I still would say,
Jonathan Martin:
you know, for the foreseeable future, the primary way doctors are going to continue
Jonathan Martin:
to transition in and out of practice ownership is a full and immediate sale,
Jonathan Martin:
not preceded by an associateship.
Wesley Lyon:
Yeah, it's an awesome way. For everyone out there listening,
Wesley Lyon:
though, you should consider every single transition option.
Wesley Lyon:
It's just, we wanted to talk about this one today because there's a reality
Wesley Lyon:
when I sit down with most of my clients and we go through all of them,
Wesley Lyon:
but, you know, before I send them over to your way and I go,
Wesley Lyon:
okay, well, what do you think about this?
Wesley Lyon:
What do you think about that? And I just, you know, poke around and ask a couple of questions.
Wesley Lyon:
Well, how much do you want to spend on an associate? Zero.
Jonathan Martin:
Okay, well, let's go. It's not that easy.
Wesley Lyon:
Let's cross that one off. You
Wesley Lyon:
know, hey, you're not big enough for a partnership, so we're out the door.
Wesley Lyon:
Or you are big enough for a partnership, but did you just tell me you want out in two years?
Jonathan Martin:
Exactly.
Wesley Lyon:
Why are we entering into a seven-year deal when you want out in two years?
Wesley Lyon:
Like, that one's off the table.
Wesley Lyon:
Eventually, a lot of times, you just end up narrowing it down to going,
Wesley Lyon:
well, yeah, there's this one option here.
Wesley Lyon:
It's very, very simple, very clean and easy, and I'm guaranteed to get my money.
Wesley Lyon:
And that's where people end up. So we don't necessarily want to push people
Wesley Lyon:
that, hey, you have to do it this way.
Wesley Lyon:
I think a lot of you are just going to realize that this is your simplest way to do it.
Jonathan Martin:
Yeah. Yeah. And the good news being, hey, it's not something that is going to
Jonathan Martin:
continue to atrophy and go away like we were kind of thinking over recent years
Jonathan Martin:
with the, you know, the decrease in practice ownership,
Jonathan Martin:
the longer wait times on the market.
Jonathan Martin:
So things are looking up in that respect, which is good if you're a seller.
Wesley Lyon:
Yeah, it was a phase. DSOs are here to stay. It's not like they're going away,
Wesley Lyon:
but it's not going to continue like it is.
Wesley Lyon:
But all that to say, big takeaways here. Hey, if you're looking at selling,
Wesley Lyon:
we got plenty of buyers in the marketplace.
Wesley Lyon:
Practices aren't taking as long to sell.
Wesley Lyon:
I've even been shocked with someone where they're selling. So they're selling all sorts of places.
Wesley Lyon:
So if you're looking at transitioning, all that stuff, give us a call. Make sure you talk to us.
Wesley Lyon:
Jonathan Wade help you out get you in good shape but you don't need to listen
Wesley Lyon:
hey you don't need to sell your DSO to make sure you get money,
Wesley Lyon:
New doctors, they'll do it, and the banks are lined up. They're still lending.
Wesley Lyon:
I don't think the banks really ever stopped lending.
Jonathan Martin:
They didn't. They didn't. Rates have gone up, of course, but still.
Wesley Lyon:
Hey, they cut back down. I got a text message from one of the bankers, five and a half.
Jonathan Martin:
Whoa, that's a good one.
Wesley Lyon:
I mean, I know we all sat in la-la land when it was, you know,
Wesley Lyon:
I've got some loans out there at 2.7, 2.5 on a practice. is.
Wesley Lyon:
So, okay, if we exclude that short period of time, you could really get sub four.
Wesley Lyon:
Five and a half is a really, really good interest rate. It's a really good rate.
Jonathan Martin:
When I started doing this rates were almost 9%. So, hey, you know,
Jonathan Martin:
it could always be worse. Yeah.
Wesley Lyon:
Come on, I didn't think you were that old.
Jonathan Martin:
I'm not, Wes. I'm not that old.
Wesley Lyon:
You just gave it up there. People are going to look up one more interest rate is 9%.
Jonathan Martin:
People who are watching this can see he's not that old.
Wesley Lyon:
Yeah. I didn't think you were either, but man, 9%. Yeah.
Jonathan Martin:
Yeah. It was 20 years ago. So. Yeah.
Wesley Lyon:
Man. Well, now we appreciate everyone tuning in though. Jonathan,
Wesley Lyon:
thanks for joining us. And remember, there are private buyers for your practice.
Jonathan Martin:
Hey, good to see you.