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This podcast covers from START to FINISH How to Acquire a Dental Practice. Michael Dinsio, founder of Next Level Consultants has literally seen hundreds of deals as a banker in the industry & he has personally consulted hundreds of dentists as a Buyers Representative. Michael talks with GUEST SPEAKERS about Due Diligence, Legal, Demographics, and more... He invites experts to the show to help you avoid those headaches and heartbreaks. So start at the TOP w/ Episode 01 and work your way through the transition process. We break it down step by step in a true #UNSCRIPTED and genuine way.
00:00
Oh yeah! Here we go! Practice acquisition! There are pitfalls throughout the entire process.
00:25
Hey, hey, guys. Welcome again for being part of the program. This episode was.
00:31
A dear friend of mine, we get into a lot of really good stuff where we're discussing kind of like how to narrow down a buyer and if the buyer's the right fit for a seller. Like the top questions practice brokers ask to narrow down the fit. I think that's really important because when you're approaching a practice broker, you want to be careful about what you say and how you say it because they are thinking pre-qualify this conversation
01:01
to potentially fit you to whatever practices that they have listings. We talk also about like the difference between a fine, a well-oiled machine practice versus.
01:13
the fixer upper practice and the differences there and the strategies there. Big picture, what I took away from this episode is how this particular broker really thinks about how the buyer is going to be successful post transaction. If you're working with a practice broker that isn't asking you as many questions as this guy talks about, then you're going to know quickly if you're being sold a practice or if this practice broker is working with you.
01:42
to be successful in the transaction. And that's the key folks. Brokers want you as the buyer to be successful. And what's great about this episode is this particular guy really does care about that. And he's going to ask you a lot of questions. And if you don't have the answers to some of these questions, you got to get super clear about that before you approach the practice brokers. Because if you're unclear, then
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they're going to be unclear. And I think that's the message. Let's get into it.
02:18
Acquisition Uncensored, the truth when buying and selling a dental practice. And now your host, Michael Dinsio. All right, all right, everybody. Thanks again for participating, being part of the program Acquisition Uncensored. We are in the middle of Shark Week and we are working our way from coast to coast interviewing
02:45
the top practice brokers in the marketplace. And today I have a special, special guest that participated in the program Startup Uncensored. And it is Joseph Rossi with JRA, the owner and founder of the company. How's it going, Joe? Nice to meet you, man. Hey, Mike, pleasure to be back. Thanks for having me for another season here. Are you kidding me? I mean, I had so many people.
03:12
uh, come up to me about the startup uncensored program. Like who are those two yahoos? Those big personality Italian guys just so passionate about what they did. And I was like, Oh my gosh, those, those guys are amazing. And I had a lot of comments. Have you missed that folks? Definitely check it out and watch that episode on startup uncensored, but we had to have you guys back because a huge part of your business, um, in a lot of ways, almost half.
03:42
is represented on the acquisition side and this is acquisition uncensored. And we're again, interviewing top brokers across the country. So Joe, again, thanks for being a part of this, man. Tell us a little bit about JRA. I could say high level 10 practice brokers in the market that specialize in real estate and practice sales, Chicago, Indianapolis and Florida. But you guys really, what's the story? How did you guys get into this?
04:12
Yeah, Mike, so we've been doing dental real estate for about 12 years. And as the firm grew, there was a need from the doctors to get into transitions. Everybody wants to buy a practice. We had doctors who wanted to sell a practice. So we've been full throttle on practice transitions for probably a little over three years now. And it's been a real
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natural type of progression because all of our startup clientele of course are interested in acquiring a practice. Who wouldn't be interested in buying a good practice? Yeah, no, I mean, we were talking about this offline how startup and acquisition really, there's so much crossover. Like I know you, we were talking about this, like so many people start down the startup path and then all of a sudden,
05:11
They're like, oh my God, I found this practice. You got to look at this or vice versa. I've been looking for a year. can't find a practice. Screw this. I just want to get into business. I'm going to do a startup. And so to be an expert on both sides, and we both can say we're experts on both startup and acquisition, we have a loaded gun. Well, there's a lot of consultants, a lot of people out there that can't help you with both. That makes you special over at JRA.
05:39
Yeah, it makes you just understand the options to practice ownership. So, so much more than if a doctor is working with somebody who specializes in one or the other and you're really not doing yourself justice if you're not looking at all opportunities that are available to you and then truly understanding them and kind of matching your
06:08
your profile, your philosophy, your practice goals. There's just certain things that are very hard to attain if you wanna do a startup or if you wanna do an acquisition. And then once you kind of align that philosophy, then it's a lot easier for us to present opportunities for you. And a lot of people really don't actually know what is right for them until you really get into the guts.
06:37
into the guts of it. And you know, that's, that's probably an episode in itself. That topic is like, which one's best for you. And I know at next level, I did this webinar, it's still a record holder on most attended webinar and the webinars by or built, which one's right for you. And we, and I went through the pros and cons and, but that's telling that so many doctors were interested in that topic.
07:05
versus just doing a topic for startup or just doing a topic for acquisition because there's a lot of noise there. Yeah. Yeah. And one of the things we incorporated from, I think it was that podcast that you did, it's something like, are you an entrepreneur or do you like things a certain way? You made the sentence and we use it all the time right here, but I thought it was like the most encompassing line.
07:34
you could have, if you answer that question, you could figure out if you're a start or buy candidate. Well, I'll be sending you trademark infringement rights and licenses on that later, but let's get into the acquisition. We literally, we could talk about that topic all day. Shifting focuses now on acquisition and really staying in that lane. And let's get into the question. So
08:01
I ask, I'm asking all the practice brokers, what's the most important thing a buyer has coming to you when looking to buy a practice? Like you're the rep of the seller. Yes. And, you want things from the buyer before you can take them seriously. Let's get into it because we remember we just went through banking and vision and how to find a practice. Now you're calling the broker.
08:29
Remember folks, you're calling the broker and you're gonna start having this dialogue. The broker wants to hear some things out of your mouth before they take you super seriously. So let's get into that. What do you wanna hear? Yeah, I'm really looking to match, really understand what a buyer is looking for and what a buyer's true and end goal is.
08:59
if that end goal matches well with what I know about our seller. And once we kind of get a number of questions answered, we'll know if it's worth pursuing. But it's all about the buyer's goals and what the buyer is looking to accomplish, what they're looking to find. And do you see this
09:27
transaction coming to fruition at some point. And that's really what I like. That'll, you know, we may represent the seller, but I have to really understand what the buyer's needs are in order to make a successful transaction. You have to understand both parties goals. I folks, it's so refreshing to talk to practice brokers that talk like this. And maybe you,
09:57
all don't understand what I mean by that. And if you do good, that means you're working with some great people in your market. But I'm saying that because it's it noticed that it was really focused about the buyer, not the seller, that what he how he just answered. mean, listen, he's representing the seller. But to make a successful transition, you do have to understand the buyer side. And that's what I heard you say. Right, Yeah. And at the end of the day, as a
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broker, our end goal is to get a successful transaction. And again, the buyer and seller are equally involved. The big difference is in our markets, there is a lack of inventory product and it's all about availability for the buyer. There's only so many good practices available.
10:56
Like the price that a seller is going to net is not going to vary too much between the buyers that are aligned with that seller's vision and the buyer's vision. So it's about making the making the right fit so we don't have problems in due diligence or start negotiating on something where the true intentions of both parties really aren't there. You can't force it.
11:26
And again, there's a lack of inventory of good practices. So if you're a practice buyer and you find the right opportunity, you got to jump on it. Well, let's actually get to that, like what you're seeing in a moment. But let me keep at it here.
11:49
What are, do you get calls all the time or sometimes about buyers knowing exactly what they want? Or do you get calls all the time where they don't really know what they want and they're just kind of fishing? I think a lot of buyers just get naturally frustrated with the process of buying a practice because the practice, you're not going to find this hidden gen that
12:19
checks off every box and is the perfect practice. That is very rarely out there. So the process of pursuing practices is frustrating for practice buyers. So you have to narrow it down. And like the ways that we'll narrow down what to look for is one, the biggest one is
12:48
the number of collections, the geographic area, the type of procedures that are being done, the type of insurances or fee-for-service combination that that buyer is looking for. But just from those four factors, if those don't align with what a buyer is looking for, there's not...
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much to choose from, from within the inventory, but just those factors, four factors alone could eliminate a good portion of our inventory. And then there's the whole consideration of, know, do you want to add value to a practice or do you want to buy this fine oil machine? And the fine oil machine is gonna, well, you could say it's gonna cost you more, which is fine, but more it's, you're gonna more,
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have to take out larger debt to get that fine oiled machine. And there's going to be competition in getting that fine oiled machine. All right. All right. So big picture. OK, so wait, you just covered some really great ground here. That was so good. All right. So let me jump. We can get to the fine oiled machine versus the fixer upper. I think that's that's a great place to go where we're headed. But before we get there.
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narrowing it down. want to talk a little bit more about that. So when buyers call you, and it's kind of funny because I'm leading the witness because I know what these calls sound like. This is for you guys, audience. This is not for me. This is for you. All right. So is it fair to say that if you don't really know what you're looking for, it can be a frustrating call for the practice broker? Yeah.
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All the practice buyers are kind of looking for the same thing. I want a cash flowing practice in a very good location with this type of provider base. Okay, that's what everybody wants. Everybody wants the best parts of a practice. But the question is more of what are you willing to sacrifice to get
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into practice ownership because you're probably not going to get everything that you want. So what parts of an imperfect practice are you willing to live with? love that. so geography, size, type of procedure, fee for service versus PPO or a mix up. Let's get into that. Okay. So geography oftentimes is kind of a deal killer for people I've found.
15:44
I mean, I'm not saying it's the right, I'm just saying that's an easy one to qualify. The most common answer I get is I'd be willing to drive an hour a day for the perfect practice. Which is actually a long time, but you're in Chicago. Yeah, so that might be 50. Yeah, so, okay, so drive time, lifestyle, all that for sure.
16:13
To me, of those four, types of procedures should be number one on the list, right? Because I always say, folks, you've heard this, you your advisors, me as a buyer's rep, your CPAs, your attorneys, your whatever, we can, bankers, we can mitigate a lot of the business risk by checking off the boxes and making sure that everything's checking out. What we cannot mitigate for you
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is if you can take the torch and run with it. And the only way to do that truly is to dig into the procedure, the procedures, right? Yeah, and that's the biggest value add or value loss depending upon your skill set. And then everybody wants a practice with a stellar hygiene department where you can add to it. But if there's sophisticated procedures in a practice that you can't do, that's an instant
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value and loss. And that's something that's got to come up right away and be explained to all of the parties right away. typically that issue comes out once we have the first meeting with the doctors, because they're all very proud of their skill set. You'll see them start talking to each other about, do do X, Y and Z? And who do you use for this and that? And that's a huge component that
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should be addressed even sooner than it normally is. But on a practice perspective, you were provided what procedures are being done. Really pay attention to that. Yeah, really pay attention to that. Yeah. mean, okay, that that's perfect. You know, this concept of trying to find a unicorn is a common theme with Shark Week, by the way, all the all the practice records are saying the same thing that
18:11
You all are looking for a unicorn. And I like this approach of like, what are you willing to sacrifice? And maybe it's your real estate background, Joe, but like when you're showing people real estate, you kind of have to get a little creative with every situation that you look at to make it work with the doctor situation. So I like that, that thinking of kind of reverse engineering, reverse engineering it, but size is another interesting thing, Joe. How do you,
18:40
Yeah. You know, the banks really care about size because also because of size matters. Size matters. It's all right. Hey, this is uncensored, Joe. That that those kind of comments you get bonus points on this show. So so size does matter. However, size can also too big could hurt. And definitely. And and
19:09
The reality is, if you can't keep up with the production, that is again, the greatest risk of an acquisition is that the practice starts taking a downward spiral because you can't keep up with the production. So how do you, a broker, make sure that that success is there? Yeah. So whatever you're producing on your W2 as an associate has to be somewhat in line with what you're acquiring or
19:38
You need a plan to staff it with other associate doctors. But maintaining the income stream of the productivity of the practice you're buying is of the utmost importance. You have a historical track record on what you're producing as an associate. And if you're taking, I don't know, over a 20 % difference,
20:07
Either way, if there's not enough productivity, that's also an issue too. But the productivity has to match you historically, or you need a plan to compensate one way or another to maintain that productivity. A lender will bring that up right away, but it should come up even naturally as you're looking through practice perspectives and talking to buyer and seller.
20:37
meant for our listeners to be more prepared about the process. And I hope that our listeners have picked that up because there are actually ways to mitigate that, ways that I've mitigated that as an ex-banker, just because your production reports don't show the number that we need them to. There's a lot of ways that you can show a banker or show a seller or practice broker that you can handle it, looking at specific days.
21:06
and showing those days, maybe looking at your fee schedule. Because fee schedules, if you're in an area that's got really low fees, that's gonna hurt your production. I've had doctors that produced way higher, but their fee schedules were way better. And I've had bigger producers when their fee schedules are lower. So anyways, all right, let's switch. Let's switch. find well-oiled machine.
21:36
versus fixer upper. why, everybody wants the well oiled machine, but they're gonna sell quick and they're gonna have a line of buyers out the door and it's gonna go for top dollar. What, tell me about the fringe, the fringe deal. So this is, this would be like maybe, maybe 600 or less.
21:36
versus fixer upper. why, everybody wants the well oiled machine, but they're gonna sell quick and they're gonna have a line of buyers out the door and it's gonna go for top dollar. What, tell me about the fringe, the fringe deal. So this is, this would be like maybe, maybe 600 or less.
22:04
maybe 500 or less. Yeah, like even 500 or less is where you'll get really a nice value add component. But even the practices at 600, if they're profitable and depending upon the infrastructure of the building, those will go quick too. It's all about how you like, do you want to do the sweat equity? Like I love a practice that's if it's 400,000, but in a good location, the value.
22:34
that you could add to it is a lot higher than buying that well-oiled machine. Because again, to buy the well-oiled machine, you're gonna have to take out a lot of debt. And the sweat equity component will give you a value proposition after 18 months or a year. That's why we kind of love the startup. Some startups do really well after 12 months, 18 months.
23:02
I mean, you could create a ton of value that may or may not be created in a practice acquisition. There's ways to create, even buying the fine oil machine, there's ways to create value through sweat equity, but you have to have a specific plan for it. if the million five practice isn't referring out, or is referring out all of their endo and you know there's X amount of endo,
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cases, there's instant value. So I don't want to say like value add could happen at any price point. It's all about what the purchasing doctor's plan is. Yeah, I always used to say this when I was in banking. There's four scenarios when walking into, everybody thinks that the bankers have two scenarios, a decline or an approval, two scenarios, right?
24:01
But really there's four scenarios that the outcomes are a decline or approval, but the four scenarios are really good cash flowing practice, really strong buyer scenario one. That's an easy approval. Or how about really strong practice, really weak buyer? I don't know. Then there's a scenario where it's really weak practice, really strong buyer.
24:28
could be also fringe deal, but probably yes. And then there's weak, weak. That's an easy, that's a no, right? And so, folks, hope you have picked up that like, sure, there's the process of this deal, but if anything, the more prepared you are walking into talking to a practice broker or a banker is gonna help you out. But even more so, Joe's talked a lot about like having a transition plan for success.
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and knowing how you're gonna grow your value add, whether it's a smaller practice or a bigger practice. Yeah, we told her, if you don't have a value add plan, what's the point of buying a practice? Yeah. There's nothing wrong with maintaining, but you got the mindset of I'm gonna add value. That's the good buyer. That's the good operator.
25:27
And that's the guy who's just easier to work with in general. But regardless of the practice that you find, what is your value add plan? And if it's just to hold on and to maintain, maybe you should be an associate then. Yeah, yeah. What's the No, there isn't. We actually talked about that in the last episode. what's the saying go? If you're not growing, you're?
25:54
Dying, mean, maintaining is fine, but the well-oiled machine, you'd be fine maintaining that probably. It's making a ton of money, you're gonna pay off your loan. I would never say ownership is easy straight, but- That's fine there. The problem with that, Mike, is there's gonna be the guy who knows how to add value to that. And if you're a practice buyer competing with-
26:20
the guy buying the well oil machine that knows how to add value for it, he's gonna outbid you. And you're not gonna get the practice. Oh, okay. Now we're getting into some strategy on how to win the deal. It's worth more to them because they know there is this value add component. So a doctor who has this maintained type of philosophy, oh, how did I lose this practice? This other guy paid $300,000 more because they saw the value.
26:49
So your value add philosophy translates into your acquiring of the practice. And that's a big factor. Okay. You've got my brain firing right now because as a buyer's rep, you know, I help doctors value the dental offices. help them analyze it, find some red flags, if any, do the chart out of all that good stuff. Right. And so, and so
27:18
I always come up with that professional opinion of value, right? But it's the doctor's decision on what they wanna offer. And if we come up with that game plan of how to grow it, you're absolutely right. It's an opportunity cost of not moving forward on a particular opportunity. That doesn't necessarily mean that the practice is worth more. No, the practice is worth what it is.
27:47
JRA is gonna appraise it, I'm gonna appraise it. The number is gonna be pretty similar, but the buyer that wins it is also looking at the opportunity cost. That's what I heard from you. Right, all practice valuations aren't the same for every buyer. There is no set number on a practice. If somebody knows how to add value, regardless of what it's appraised at, that buyer is gonna pay more for it and it's worth
28:16
more to that buyer. Maybe that buyer doesn't have your traditional lending institution and they can pay cash for it. But the valuation of a practice is in the eye of the purchaser. And they're not only competing against what their bank says, what their accountant says, or what the market says, they're competing against the person who knows how to add value to it.
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and is gonna beat them to the punch. couldn't agree with that more. Man, I'm full of sayings today. Full of sayings today. It's worth what someone's willing to pay for it, right? Art, it's a big art on the wall and it's like someone loves that, they're gonna pay whatever the hell they want for it, right? So.
29:09
Yeah. And to a point, and we're talking about the well-oiled machine here. We're not talking about the $300,000 practice. Yeah. Yeah. No, no. Okay. Cool. I love that. I love that piece because I do get the buyers that want it at all costs because they can see the opportunity. Let's talk about the fixer uppers though. Those are challenging because they don't have a ton of cashflow.
29:38
And sometimes you do have to think about the startup and compare. And sure, you can get a great value, but then the question is, is what didn't the seller do? Are you gonna have the same issues? why, I'm almost asking the why behind it not taking off, right? Joe? You're gonna go back to what is my value add? And now at a smaller price point,
30:07
your value add actually becomes a lot easier and it's a little different than the value add on the higher producing practice. know, it's infrastructure making it look good, marketing procedures, getting credentials with the right providers. A lower producing practice is gonna have a lot more glaring issues to fix than the well-oiled machine.
30:36
and it's if you wanna put the time and energy to do that. The issue we run into a lot is, do you wanna put the time and energy into a practice that maybe the location is no good or maybe the construction cost is gonna be exorbitant, then a startup starts looking a lot better. So talk about the dollar amount investment.
31:05
And comparing again, the value add or the opportunity costs, whatever you want to talk about, and then factoring in construction costs and ramp up and just the philosophy. Yeah. And not everybody wants the million and a half dollar practice. You some people want to be close to home to get a nice work life balance. So they don't need or want the well-oiled machine.
31:33
The fixer upper value add practice could make a ton of sense. Yeah. All right. Last question, Joe, you've been awesome. And, uh, we even got a little uncensored, uh, by you again, which is fantastic. You, you lived up to every expectation that I had, uh, a little less mild today. I don't know. Are you having a bad day today? Good day. All right. So here's, here's my question.
32:03
Chicago, we're in Chicago right now, folks. And we're moving from west to east or east to west, however we arrange this Shark Week. What are the biggest issues? We kind of covered this in Shark Week startup uncensored was the real estate challenges of Chicago. But now you're representing Indianapolis as well. So just in general, the markets that you serve in the Midwest, what are some of the hardest, what are some of the things
32:30
that our listeners need to pay attention to in your markets compared to maybe a West Coast versus East Coast? Yeah. And regardless of the geographic, I think it kind of comes down to density. The denser, not more sophisticated, I was about to say that. But the denser the market and the more competitive the market,
33:00
the more important your site selection is. If you're in a small market with very few competitors and not so much density, location really doesn't matter that much. But when you're in a metropolitan area, the location itself is everything. And regardless of the market, you wanna have a brand that looks good
33:28
that people see that is vibrant and that is close to other traffic drivers, like a grocery store, like a Starbucks, like something that has great street visibility where your brand can be presented to the world. It's gonna be the first way your patients judge you is how your office looks and feels and how convenient it is. So regardless of
33:57
really market, kind of go if it's rural, it's different story, but everything else, you need to have certain attributes about your real estate that are very important. And you your leasehold options are going to be abundant, or your purchase options are going to be limited. Yeah, no. And there's that real estate experience, folks, that, you know, you get that crossover and having
34:24
having a JRA in your, on the other side is a huge value add because you get that real estate experience. Dude, thank you so much, man, for being a part of the program. We always have fun with you and we're gonna pump this out, but folks, show notes below to get ahold of these guys and they're just...
34:48
The thing that I took away from this episode is they're buyer focused. They are. I hear it. He's thinking about how you could grow and showing you how this practice fits you. it's, I love that because they are representing the seller. They've got a job to do, but they can also help you be successful. That's what I took away. Yeah, but we also have a practice buyer program where you can independently work with us, whether you're buying a practice.
35:18
with
35:36
No guys, these guys are excellent. I think there could be a lot more of me in the market. There's only one me and these guys are, anything they're doing, they know what they're doing.
35:51
and they're excellent at it. In the show notes, you're going to be able to get a hold of this guy and anybody else on their team. So thanks again so much for being a part of the program. As always, thank you, and we'll see you on the next one, My pleasure. Thanks so much for having us again. OK, talk to you. Tune in next time for another truth-filled episode of Acquisition Uncensored.
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We want to hear from you. Interact with your host Michael Dinsio. Follow us on Facebook and YouTube. Comment and subscribe.