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Dentists, Puns, and Money is a podcast focused on two things: The financial topics relevant to dentists leaving clinical practice and the stories and lessons of dentists who have already done so.
1. The stories of dentists who have transitioned from full-time clinical dentistry.
2. The financial topics that are relevant for dentists making that transition.
If you’re a dentist thinking about your exit from clinical, and you’d like to learn from the experiences of other dentists who have made that transition, be sure to subscribe to your favorite podcast app.
Host Shawn Terrell also dives deep into the many financial components of exiting dentistry, including tax reduction strategies and how to live off your assets.
And, we try to keep it light by mixing in a bad joke… or two.
Please note: Dentists, Puns, and Money was previously known as The Practice Growth Podcast until March 2022.
Welcome to Dentists, Puns, and Money. I am your host Shawn Terrell, and my guest in this episode is Dr. Brady Frank. Dr. Brady is a third generation dentist turned entrepreneur, author and speaker a wrist injury as a d3 caused Dr. Brady to find an alternate path from clinical dentistry, and he quickly learned how to buy and scale multiple practices as an older dentist. He later co founded freedom dental partners, and he currently leads the seminar called become the DSO. In our conversation, we dive deep on the key differences between corporate DSOs versus autonomous DSOs SPOILER ALERT Dr. Brady believes in the latter model we also discussed how owner dentists can build and exit paths earlier in their clinical career by partnering with an autonomous DSO. As a reminder, our company dentist Exit Planning helps dentists leading clinical with the financial pieces of that transition. In other words, how to build your financial treatment plan for your life after dentistry. If you're interested in guidance on things like your taxes and your investments as you exit clinical schedule an initial consultation with us on our website, which is dentist exit.com website again, dentist exit.com. And with that introduction, I hope you enjoy my conversation with Dr. Brady Frank. All right, Dr. Brady Frank, welcome to dentists tons in money. I'm excited to hear more about your story. Thank you for joining us. I'm so excited to be here and this is great as your podcast for a while now and just really excited to be here. Awesome. My favorite place to start and if you've heard my podcast a few times, you'll notice I always like to start with a bit of background on the interview guests each episode so the audience has some context. Could you share a little bit more about journey in dentistry to this point and sort of how you ended at your current point of your career.
Third generation dentists as a junior dental school had a wrist injury was ongoing carpal bones were sliding in and out of place with my right hand and right hand, went to the wrist surgeon I said hey, I'm gonna need my right hand. He said, Well, you may want to pick a different career. And I have a bunch of dental school debt. And he said we simply looked at your carpal bones, dude. Well, at that point time I realized okay, I gotta figure out how to make money in dentistry. Not actually doing dentistry checked out a few books at the Mark had dental school library on dental transitions ended up putting offers on a few practices as a junior finalize Purchase and Sale contracts two of them as a senior and closed down those the first year to dental practices a building ended up buying seven more in the next five years employing 20 Different associates a bunch of mistakes and eventually selling those practices to those associates. And really that's what got me going into kind of multi Doctor model buying and selling dental practice the business of dentistry if you will. That's quite a story. Did you spend any time at all in the chair? Were you able to practice clinically for any period of time or was it mostly into ownership right away with the yesterday MD behind your your name? What ended up happening is I did go through something called prolotherapy through about 20 sessions where they do about 120 injections in the wrist. It goes into your ligaments and it purposely creates inflammation, tightening up your ligaments through scar tissue that tighten up the ligaments. I still have some wrist issues but not much. I was able to practice all the way until I retired after I'd done enough of the business of dentistry and a couple a couple of groups retired at age 36. Back to work again building more groups and doing dentistry because I was like, hey, what's my purpose and I love dentistry. So fortunately it never prevented me from doing dentistry but on laser I placed over 10,000 implants in my career building implant training company that was sold to private equity really ended up getting deep in the business side and the clinical side as well. I'm training for the world that caused me to get deep into ownership of dental practices where I am not a clinical producer, you sent me into teaching for many I bought a seminar, a system called phasing out seminars for dentists in 2006 seminars around the country from 2006 to 2008. Every month teaching us how to exit and exit Well, and that's when I did a work with a group of 28 financial planners to help them because I really think a business needs to have a third party and understand finances. Exit 2008 stopped doing that because the subprime recession caused all dentists to say retire the stock market's dropped 38% or whatever. So then I went back into transition through a book called transition time. And I've always enjoyed that process. I'm a dentist moving on to the next phase through an exit or a transition or a sale to a corporate DSO or autonomous DSO and so I've really loved all those environments with a strong from me realizing hey, I'm not gonna be patient forever, to be short. And understand your audience. They're facing this reality of 55 years old. I'm 60 I'm 80 I'm not gonna be a clinician forever. I want the lifestyle like like, backwards, my neck hurt. I'm burned out whatever that may be. So we've ran parallel paths, but just with a little different focus. Interesting. So you mentioned really briefly in scaling initially ran a school several practices and then selling them off. You made several mistakes along the way. I know you mentioned your your legacy as well. So you had some experience, I would guess about the business of dentistry going into it or maybe not to lead in that direction. How was your I guess expertise with the business side of dentistry early in your career and what did you learn in scaling that many practices that early on? My dad he had his masters in healthcare administration and went around to different hospitals that were failing and consulting fixing them up my grandpa when I asked him if I should go into dentistry, he said no, he would have chosen some business route. And when I went to shadow him, I watched him pack a large amalgam for the fourth time but it fallen out and I don't know if I want to go into dentistry. I did end up going into dentistry, but I didn't have any formal healthcare training or business training, per se. And so I ended up getting formal business training later and real estate training and a lot of other training. But that was after I realized more than 20 years ago that I knew nothing about any of this stuff. After making mistakes being embezzled from someone on staff tried to sue for wrongful termination at that time. Having dentists who had sold to me break out of the non compete associates that kind of never tend to work really hard. They've got guaranteed minimums, all sorts of things that that you can get into if you don't understand the business of dentistry, I think happen to me and can happen to me for reasons so that I can get really educated and understand it to the point where I can help those transitioning or exiting, whenever that may be the next phase so that I can other student mistakes I've made over 22 years and over the experience of owning dozens of practices, so that you don't have to make those mistakes because there are no do overs but the good exit. That's very true and something that I preached a lot is usually a one shot to get it right so you better have your your ducks in a row before you pull the trigger. You mentioned it really briefly early on in the conversation but what are you up to now and kind of how are you involved with with helping dentists exit clinical practice as it stands today and 2023? So I went from being a group practice owner adding partners having associates to helping other dentists around the country, position and or expand and have multiple locations and helping DSOs and the attorney groups that serve them. And at some time I found that oh boy, there's two distinct groups of DSOs. There are what I call corporate DSOs buy your practice, slap their brand on it manage your staff the way they want to manage, you wear the scrubs with the Apple or whatever you put on the golden handcuffs. That's corporate do so but the other DSO less known and way more advantageous to the dentist is called an autonomous DSO and autonomous DSO gives full freedom independence and autonomy to the dentist. That'd be a chasm between those two types of DSOs. The way it's structured, there's this big line here called the corporate healthcare line above it as a DSO. That's all the non clinical stuff below it is the PC or the clinician. That line is basically connecting the teeth or the barrier between the agreements of the DSO and the agreements of the PC agreements, the connection and all basically say the same thing the dentist gets to make all the decisions with the practice, they own 100% of the practice, but they're gonna take a benefit from the big finances and private equity. And so saying it this way a well structured exit within autonomous DSL to keep your brand no slap a brand on your front or let you keep your exact staff you have almost 100% staff retention. As opposed only 37% of staff retention to the corporate DSO takeover. So you got to keep your staffing all your systems that you do the way you do for your same vendors, your same lab, all that stuff, really autonomous and that allows you to transition out to a junior doctor that was in your shoes. So I say this. It gives you all the best of the billions that are pouring into dentistry from private equity all the best of them. The great cash coming into your bank account for a great retirement coupled with a warm and cozy transition. And that's what an autonomous DSL gives you a corporate DSL, he's got a lot less half. Frankly, it's the opposite of a warm and cozy transition.
Right? You're told to fall in line with the way we do and take your practice and, you know, let it come. The kind of corporate red tape laden thing that can be common. So usually I get two calls a week, saving people, our corporate DSOs and about 15 calls or emails a week saying how do I get into an autonomous DSL interesting and I have not heard that distinction that often spoken about within dentistry in the time that I've been involved in. And so that's something that I think will be educational for a lot of people just a little bit finer point on the autonomous DSL. How does how does that pay structure work? There's a dentist pay a flat fee to the autonomous DSL or is it a percentage of production or collections that just to be autonomous DSL is in the business of making money as well. How does that relationship work financially? Here's how it works. And here's how private equity even allows dentists to have that infinity. They studied the two of them for 22 years and in the late 90s. There were eight DSOs only three of them survived and they were all autonomous DSLs the other five that were corporate bankrupt, was three autonomous DSO out of those three that were less, okay. Two of them things are modeled from autonomous to corporate over the years. Those DSOs went down in fact one of them released over 500 employees last year. They were going down by just getting more autonomous to one of the major autonomous DSOs the dentists owns 100% of the practice. Usually the way it starts is they get a valuation of the practice to get 70% in cash. Now they own they roll over tax free tax for 30% interest up here, which ends up being interested in a bunch of different Okay, so now they bifurcated their one asset into several, a couple different assets, the practice assets, they own part of the DSO moving forward easily receive 20 To 30 to 35% of their own collections, dividends on the stock and Holdco plus some of the models involve a JV model wherein they receive a part of the ongoing EBIT as well. So four major components cash upfront Holdco stock dividends based on a percentage of EBIT da and then dividends from that stock. And then of course, the goal with every private equity company is that they would buy a DSR platform, hold it for two to five years, recap it with another larger DSO or equity platform and then they recap again until they've reached these very, very, very large P E groups like KKR or BlackRock, once you've hit that level, right? Doc value does not have much room to grow because there are mega mega mega private equity companies with trillions. It's only the billions. So when you think about this, and when you think about what autonomous CSR to choose, you must find one that has the early stages of growth in that first three years ago, we joined them later when there are big names like most students get letters from the CSR letters. And if you join them, then anything less than the meat on the bone. If you put them in their early stage, whether they've already been proven first, but they're still early, then it's a very, very good value to have that Holdco shares at that time. And so under the timeline correctly, it's two to five years from the time the dentist gets the cash up front and buys into the DSO until the practice fully becomes bought out by the autonomous DSL and the dentists, dentists 100%. Exit free and clear usually within a fixed time period and understand correctly. Questions, Awesome questions. So contracts here's here's an ESOP that's gonna buy their practice, right it's gonna acquire them or more athletes and nobody's gonna partner with them because they do still have 100% of their PC. What happens is versus the offer. After some due diligence and calculating the bid or EBIT da versus the offer, then your letter of intent, that's usually about a 90 day period right in there before closing and if it is going to close and both parties say, Hey, this is great. The attorneys gonna fund paper.
Let's say their valuation is $5 million. They're gonna get 70% of that. Or a little over $3 million in cash upfront. The other 1.7 million, let's call it four 30% is now held in stock and let's say got it at three, three bucks a share, right? private equity company that owns the DSL platform is going to want to get to at least a 3x. So that's three bucks a share. Once it hits about $9 a share. That's when they're going to sell the majority interest in the DSL to another private equity company. Their investors are happy they're happy. A new private equity company now, which has to be a bigger private equity company not only funds the deal, but it's going to take hundreds of millions or a couple billions in the new acquisitions, let's say five, six or seven times multiple because they already know that the platform value is at 12 to 14 times more. So every practice they buy doubles their share price, which is great for the dentist who already sold into that level because their share prices doubling as well. So the cool part about keeping some on the table is all that growth is tax deferred. And unless the private equity company made a mistake in their purchase, right, these are very smart financial people who've done this before unless they made a big mistake, your stocks gonna grow. But even that being said, I still recommend taking the majority of impact following a sound financial plan because no matter how sure a stock that is, and it's still stock, it's not real cash. And you can it might be 73 you might do it 20 slip, some 9010 Split 90% Cash 10% stock but they do want you to have some stock, as as crucial. They call it aligned if you don't have any stock, you don't really care about that the so much anymore financially, so they want you and the doctors to be aligned. And that's actually a protective mechanism for your stock as well because all these dentists have taken up part of their career part of the practice enrolled in pre tax into the DSO who's gonna drop out who's gonna violate their contracts, who's going to not refer other dentists into that do so it's kind of an ecosystem with an autonomous so my last last point here is the corporate finish on the corporate DSL requires law back to keep the dentist school the handcuffs on so they motivate your clinical economists because there was motivated through getting benefits incentivizing. So instead of a weapon, a clawback, which is calling back money they paid you are interested. Instead they incentivize users shared ownership and alignment and they don't have any clutter. That's the last major difference. Okay. That's all that's really interesting stuff, just to make sure I understood correctly. So the final exit of the 30% is contingent on a buyout from a third party private equity group most of the time or was it contingent on a specific stock price relative to when the dentist buys in? Most of the time it is contingent on that new private equity company, they call it a recapitalisation force. So when that recapitalisation occurs, you can sell all of your stock, some of your stock or none of your stock, right? And some deals actually do kind of a sub DSO model where you want out of stock, they will guarantee that they'll buy from you after a period of years at a certain multiple, major autonomous DSOs buys, you're gonna 7.5 And after surgery, so you're not subject to timing of the market and the private equity company and instant events because they think they're gonna trade in the 1207 and a half, right? Give me some some guarantee on so they're saying I will sell it at 7.5. We'll buy from them after they've given us a number of years, and we think we'd get a 12x when we reach out. Okay, now what's really important I think a logical question that most people would have would be if I don't want to, you know, if I was gonna take my money to go do something else or be done. I just want to try it to do that. It's not going to be to use your words clawed back in some fashion. Yeah, totally. So there's Phil's major nuances between the corporate and autonomous club and a couple big differentiators that I wanted to give you a chance to speak to on the autonomous DSO one is clinical autonomy, right? And you spoke that the dentist in this model still has that. And then the other inspector, one of the good things seemingly about corporate DSOs, or any DSO is the ability to do some things with the economies of scale, right supplies or equipment that can be purchased, you know, with a bit more leverage given that the group involved versus a single doc that's out there. Could you speak to those two things and how those fit in with with your model of autonomous DSL? That's a great question. So I've spoken about how your doc increases. So your practice is worth maybe four to seven times multiple here, but when you have stock in the mothership that's worth anywhere from 10 to 16 times multiple. So it's not just the arbitrage between the multiple values, but it's also the ability to grow even organically. That's the parent company through five major things. Number one, they supply the same stuff they're better than the silverback get. Number two, lab number three HR HR getting better deals on medical insurance, oftentimes through a PEO. Number four big insurance reimbursement rates on PPO is a lot higher fees can be negotiated at that level and in fact, one of the major DSOs they're paying in $1,450 a crown in the DSO, other dentists $720 half the amount right and then number five really has to do with the managerial scale. So you pay a full time office manager and XYZ you pay them really well and like when you grow your practice, even in autonomous here so instead of hiring a bunch more staff and actually have a lot of those functions done by the mothership, and that's because we see overhead from staff down a little bit and everybody wins a little more.
So one of my big points to a lot of smaller solo dentists is that the sale value of your practice if you go private, the private going to carry the day necessarily, they probably won't care today as it relates to living the next 20 or 30 years of your life and retirement and cash that is required to do that play. They're saving and building other assets alongside of their practice. But that's a different podcast for a different day. But what I hear you saying is some of the value that can be extracted and leveraged out of this model. It would seem that a dentist can think about an exit from clinical at an earlier age if that's something that they would like to consider. In fact, doing it earlier age. You look at a spreadsheet and it actually compounds the retirement savings many many, many fold. Here's how it works. Say a dentist has a $2 million grant with 500,000 of EBIT da say in our network, they were going to get a seven times multiple. That's 3.5 million, which means they get 2.5 million let's call it in cash, the rule of 72 states that 72 divided by your ROI is the number of years it takes your money to double, let's say a 2.5 million. Let's say you're at 7.2% ROI. That means that your money is going to double in 10 years now. That puts you at $5 million, which is your two five people or five you pulled out all along the way you're still making 30 to 35% of your clinical productivity and you own stock in that company. And let's just say that company to the average autonomous DSO at least that we work with over three years, their stock increases by a minimum of 200%. Let's say the remaining balance is called 1.5 million increases by 200%. Over five years. Now you're looking at pulling that you know you're looking at let's just call it safely three to $5 million in stock that that happens the recap so now you've got 5 million cash at some point 2% interest compounding at the 10 year mark three to 5 million more cash plus your clinical and now that you've learned something gotten out of your box made an exit when I found is everyone who has made some type of exit life redefines themselves. If you don't take that step to redefine yourself, then you end up being exactly like the ADEA statistics, which is at the age 59 and a half only 6% can retire with the same financial lifestyle. So there's financial reasons or there's going on your box reasons or learning reasons or social development reasons. And so when I look back, I'm like the only times I've really grown or when I get out of the box, do something new do something different. But in this case, least financially The sooner you make make a transition, the better financially especially because we are in a DSL bubble right now. values will come down as more conglomeration occurs. Physicians who didn't take advantage during the bubble. They didn't realize that practices were worth nothing once they conglomerated to just seven Pokemons in the medical market. So yeah, there's a lot of neat things to run through considerations financially for the transition, if you hit on it there but for a dentist that's thinking about their transition out of clinical that sort of needs a lil bit of a nudge, I guess, what advice would you have? This is the nudge that I would give them. You already think you might want to do a transition meaning youth had a little sense of burnout a few years ago, meaning your back and not feeling the greatest. You just got a report from the doctor and he said that better down now or, Hey, my retirement account does not look like it does. Like it should have I thought it was gonna be what, sometimes more if you've had a little inkling like that. What that means is literally you sell your practice and walk away to get 3% of last year's revenue, typical broker sale, a million dollar practice can get 700 grand, less the broker fee. If you're using a broker, less taxes, you're not gonna be left with hardly anything. That's if you walk away. The second format is a DSL a corporate deal. So we'll look at the corporate DSL you don't get stuck in the company. There's a lower price all that stuff. Let's just assume nobody wants to go that route. The only other real options in autonomous DSL, and you get the highest valuations are willing to stay aboard for a few years. It's three to five years, five years and you get the highest value because private equity companies don't have a dental license.
So you're paid extra for doing that. So if you've had an inkling or thought of transitioning at some point, my recommendation would be get on it. Today because your practice time only becomes less less time you have on your fuse to stay clinical in dentistry. 20 We've had a great conversation and we've done a bunch different topics. Is there anything that I haven't hit on that you think would be important to convey before we start to wrap things up? Say this equity companies the back DSOs autonomous DSOs is money to them when they buy a bunch of individual deals and put a lot of time and effort into that individual deal. You can get with some type of a group that actually brings Dennis together combines their numbers, almost like a union, if you will, and then goes to market as one force and hire multiple EBITA and way better terms. So if anyone's watching this think about transitioning into a group that allows you to go to market together we have higher multiple higher sale prices, way better terms. Stuff, great advice. The name of the podcast is dentists puns and money. Do you have a dental job that you would like to share?
You pre warn me about this?
Because my grandpa who was a dentist and a lot of money sitting there right? Yeah. When he broke a golf club. He went bought a used to replace it. Okay. This joke is in remembrance of my grandpa loved him. And so here, here here it is. What is the fastest and best way for wire and all this one? Oh, a pain between two dentists.
So anyway, I'm sorry. Me too. We tend to be kind of cheap, right? We tend to try and do things on our own. Even if it negatively impacts us. And so with that being said, Shawn, we do we have freedom dental partners, folks in the Google Suite and our partners we buy up for DSOs. We turn them into great things. Particularly I'd love to look up dental Bar dmtl Bar, NTL bar and freedom dental partners there's a ton of press releases, they we acquired them and converted all the doctors summary doctors were sorted into owners. And I'll tell you what, it went from doing X to Y it's crushing it right now. And so what we basically do is we buy worker DSOs we also clump together as dentists I get way higher valuations and we better terms and we work with different autonomous DSOs in doing so. And we also have our own DSL platform. So that's how we help and happy to help guide anyone in any direction. They're mostly websites again for people to want get in touch. I want to learn more Dr. Brady? Yeah, one of them is become the dso.com that's literally us dentists becoming the DSO and then getting our highest valuations, right, a great freedom dental partner, and so either one of those will get to me, my emails not directly on there, but if you want to email me happy to share anything, maybe a buck or two or whatever. And that's the Brady dt dso.com Awesome. That is Dr. Brady Frank dentists turned founder of become a DSO and freedom dental partners. Dr. Brady, thank you for sharing your expertise and your story and for being a guest on that disciplines and money.
love being here. Thanks for all the great stuff you're doing for dentistry as a whole including this podcast. And so hopefully, we talked about dentists in their journey. Awesome, good stuff. Thanks for listening and following along. Are you a dentist nearing your retirement from clinical or have you already hung up your handpiece? Would you like a treatment plan for the financial components of your exit from clinical? Our company that does exit planning helps dentists like you reduce taxes in retirement and optimize how to best live off your assets, including the ideal time for you to start taking Social Security. If you'd like guidance on those critical pieces, or just a second opinion, schedule an initial consultation with us on our website. Our web address is dentists exit.com, and there's no obligation for your initial consultation at website again, dentists exit.com As a reminder Dentist Exit Planning and Terrell advisors LLC is a registered investment advisor. The information presented should not be interpreted or construed as investment, legal tax financial planning or wealth management advice. It does not substitute for personalized investment or financial planning from dentist Exit Planning or taro advisors LLC. Please consult with your accountant and attorney for tax and legal advice. This podcast conveys the views and opinions of Sean Carroll and his guests and the information herein should not be considered a solicitation to engage in a particular investment tax planning or financial planning strategy. information presented is for educational purposes only and past performance is not indicative of future results.
Keywords: dentists, dso, dentistry, autonomous, practice, dsl, years, clinical, exit, private equity, corporate, stock, transition, brady, dental, group, cash, money, dental practices, buy