David Rinkes visits with Linda to discuss the current financial climate for the dental market; practice start ups, acquisitions and selling your practice.
Linda provides dental professionals actionable marketing knowledge they can use to grow their dental practice.
Linda Mettler: Welcome to the matalin Marketing Podcast where we will talk about marketing strategies and tactics to grow your practice. I am your host, Linda Mettler and I have worked with dental
practices for several years now, and I want to share my knowledge and experience with you so that you can gain valuable and actionable steps on how to grow your practice. We will talk about the latest
and greatest and marketing features some guest speakers so that you can hear firsthand what is and is not working and help you unravel the complexities of the digital marketing world. I work really
closely with my clients. So we will also delve into some other issues that affect your practice from time to time, such as staffing problems, COVID protocols and similar issues. Good morning and thank
you for tuning into the Mettler marketing podcast again. Today we are so lucky we get to talk with David rimkus. David has been involved actively in healthcare lending since 2000. He has closed
hundreds of loans helping dentists acquire and startup practices, restructure debt. With office expansion, real estate acquisition, build outs and equipment purchases, he's done it all. David likes to
evaluate the needs of healthcare professionals to design custom solutions to help achieve their financial objectives. He has worked with dentists throughout the country and currently focuses on
Arizona David, thank you so much for joining us this morning. I appreciate you spending some time with us. Oh,
Linda, thanks for having me. And Glad to be here. Great. So David, tell me a little bit about the current financial climate for the dental industry, and how it has changed since COVID.
David Rinkes: Good question. Um, you know, I'll say this, historically, dental practices have done well, through challenges like COVID, recessions, and so forth, the Great Recession may be a little
bit of a different story. But I think the current financial climate is really good things have returned to normal. You know, lending is where it used to be prior to the lockdown last March. And I
think it, you know, took a couple months to get to that point. Because banks, you know, on the lending side, we weren't sure what was going to happen with those practices being locked down for, you
know, from mid March to through the end of May. And in some parts of the country, you know, the lockdown went into July. So, you know, we're patients going to return we're collections going to go back
up, or people going to do the procedures with confidence. And I think that has returned greatly. And I'll use the example of my, my personal dentist office, they are hiring a second associate, and
they are seeing 80 new patients per month. which as you know, is I mean that that is that's stellar that Yeah, 80 new patients a month is stellar. That's what it is. And so they're doing very well in
the majority of dentist, I've spoken to dentists, practice brokers, anybody within the industry, I've the mudgett strong majority is it has returned, patients have returned, numbers are up. You know,
it's very, very small minority that is having a problem. And, and that's the smaller practice, which historically, the smaller practices have just not performed real well. Anyhow. So I think, you
know, overall, though, I, I don't know that things have changed during the change during COVID. But on the backside, the flip side here now that we're approaching the end of the pandemic, hopefully,
you know, I think things are more normal and back to the way they've always been.
Linda Mettler: I have to agree with you. I think most of my my clients, I would say all of my clients are at least 85% if not 100% back to normal. point. So, so it's good to hear that, you know,
things in your industry, from your perspective are, are back to normal and lending practices or are back to normal as well. Do you think are there any changes in the in the financial climate post
COVID that, in effect, the dental industry, either negatively or positive that you think are here to stay like anything that people need to incorporate in their in their business practice? Post COVID?
Or is everything pretty much normal the way it was?
David Rinkes: I see things more normalized. I don't think there's anything any finance, financial changes that were made? Post COVID, other than the the probably the second half of 2020. You know,
lenders were all cautious just okay, are things going to return like I mentioned. Right. And the fact that they have returned I I'm in touch with? I have lender colleagues that, you know, we're always
in touch with each other. And we're not seeing any thing different within our lending guidelines at our banks to prohibit lending money to somebody other than what is the normal policies? So I think I
think, you know, that that locked down was pretty scary. Sure, but I think we're seeing that the values of practices are remaining the same, and in some cases, might be going a bit higher in some
areas.
Linda Mettler: Really, that's, that's interesting. Well, I know a lot of a lot of dentists will be really happy to hear that the values are remaining the same or going higher. Everybody really happy
to hear that. So
David Rinkes: yeah, I think one change to though it within the practice is probably more on the staff side. Yeah, cuz you know, a lot of staff. When lockdown came, they were able to get unemployment
and of course, or the unemployment at the time, the government was paying a premium, which is higher than their income, and so they didn't return. So you probably see some new faces in a practice. Oh,
yeah.
Linda Mettler: Yeah, staffing is the number one challenge all my clients have. Right? Yeah. Yeah. Yeah. news content has been since the pandemic and continues to be the number one challenges. Okay.
Okay. Yeah. So I think some people left the industry as well. I think some staff, some, you know, hygienists, assistants maybe just decided, you know, this is kind of a scary thing and didn't want to
risk it happening again and left the industry. I'm not sure, but staffing is definitely a challenge. What other challenges do you see in the dental industry? From a from a financial perspective? You
know, from your perspective, do you see any other big challenges for dental offices? Maybe somebody new coming out of school, or somebody wanting to transition out? So you know, retire kind of the
last five years of their career? Do you see any big financial challenges for them?
David Rinkes: Um, I think financial challenges now going, what I'm seeing right now, you know, our student loans is a big challenge, right? Because the increase and as an example, so when I got into
this financing 20 years ago, for dentists, the average student loan was probably about $150,000. And today, today, it is it is just escalating quickly, it's, it's probably 400. In a lot of cases. A
lot of dental call it a lot of dental schools are $100,000 a year. And so, you know, that's quite a bit of money. I think that's increased actually over the last couple of years. It's gone from that
300 to 400 level. And then you'll have the other bigger challenges when you have a husband and wife, dentist. And now all of a sudden you have seven $800,000 in student loan debt. And so I think that
that's always going to be a challenge. for the foreseeable future. I don't know what the solution is to the student loans. But when you have that type of debt, then it comes down to what kind of
practice can you buy that cash flows enough to provide payment to the debt service of the business? And then the student loan debt? And then of course, you know, people want to buy a nice house, you
know, and nice cars. So, you know, those that's a challenge. Err. I think you know, what I've see here in Arizona as another challenge is the corporate dentistry coming, getting bigger and bigger and
now It's been coming on for probably the last 10 years maybe. And it's very true here in Arizona, because in Arizona, you don't need to be a dentist to own a practice. So a lot of the good practices
have been purchased by the corporate dental groups. And so that's taken some of those practices off the market, I mentioned, I can see an increase in pricing in practices. And part of that has to do
with that corporate side, because they pay a premium to buy that practice. So I believe that's driving the standard price up in the market. So I think those are some challenges, I think, the other
challenge, because of that corporate side is going to be the smaller practice, the smaller practitioner that, you know, maybe only has three or four chairs. And when that corporate office dentist
moves in, their economy of scale is so much better, because they're there, they're buying cheaper, they're, you know, they're, they're doing more procedures, probably, whereas that smaller dentists
may not be able to compete with that. So that would be my concern is for the smaller dentist in the future, what's going to happen to them. And, you know, when dentists come out of school, they, you
know, the standard is they go by a practice, right. And I think, you know, the other side of that corporate piece is that there is a benefit for those dentists coming out of school because they can go
get a job in that environment and the corporate environment and develop their hand speed and, and learn how to run a practice and see how it's right and
Linda Mettler: right, and I'm sure that's attractive for them. Especially if they are coming out of school with so much more debt. Yes, used to. So a lot, I've seen a lot of younger dentists come out.
And instead of trying to go buy a practice or become an associate, you know, in a smaller practice, they do go to work for the corporate office, because they can have that guaranteed paycheck, and
they've got that larger loan to pay off. And like you say, they can get a little more experience. So I am seeing that trend as well to where the the younger dentist coming out of school is going to
work for a corporate office, at least for a few years. Sure, going out on their own. So yeah,
David Rinkes: I've talked to a few. And you know, their concern is certainly that amount of debt that they have, especially when you consider you think about it, you know, a dentists coming out of
schools 2830 years old, right, and they come out of school, let's just say it's $400,000 in student loan debt. Right. And they want to buy a house. Right. And so I every chat, I mean, residential
prices on houses are going through the roof. Crazy. Yeah. Right. So you know, there's another half million, you buy a car, you have a family, you have kids, you know, all of a sudden, you're 32 years
old, and you're, you know, a couple million dollars in debt. So yeah, it's a scary, scary thing.
Linda Mettler: Yeah. And if you're, if they're like my son, he's just coming out of law school, and he's so tired of being poor and broke and starving. He just wants a job and to have some money. And
so, so I can see where, you know, that is attractive for some of the younger dentists coming out of school to just go and, you know, work for a corporate practice and make some money. But it is a
little bit sad that some of it seems like it is shrinking for some of these solo practices, making it harder for them. Some of the solo practices to sell to a younger dentist, I'm seeing that the, you
know, the older dentists, the ones that want to retire and sell their practice, they're having to sell to corporate companies, because there are fewer younger dentists, you know, able to buy, or
wanting to buy a practice and take on that much debt. So
David Rinkes: yeah, yeah. I see that and I see, you know, the, the, you know, the average size of a practice anymore is so different as well. It used to be that a million dollar practice was basically
unheard of. And today, that's more than norm. And, you know, I remember the first million dollar loan I did, I think it took like five months to put the loan together. You know it because it was just
such a big deal. Right? That, you know, the bank was a little bit concerned. And so we just had to go through a lot of interviews, a lot of, you know, due diligence in looking at the practice and
making sure that you know, we had the right We're comfortable with a buyer. Whereas today a million dollar deal. Those happen all day long. Right? So yeah, a little different as things are moving
forward.
Linda Mettler: Right? Right. Well, what would be your top piece of advice for, for one of these younger newer dentists coming out of school that, you know, maybe they're going to work for a corporate
office, but maybe they want to have their own practice, you know, in three to five years, financially, what would be your, your piece of advice for them to set themselves up to, you know, be able to
get a loan of that size and acquire a practice?
David Rinkes: Really great question. And something that has been asked by dentist, for years student dentist, and I used to give the same information I've done, you know, speaking of some different
schools, but I think for a new dentist, thing to keep in mind is to kind of what we're just talking about, right is to keep your debt low. So don't go out and buy the, you know, the big, you know, fat
house right away. And maybe put off buying the, you know, the really nice car right away, you know, just kind of enjoy your income for a while, but build your assets up, keep your credit clean. And
when I say credit, clean, your average score or FICO score, if it's over 700, you're attractive to all lenders in the dental industry. And you can check your score online. So that's there's so many
different sites to go to today, to get a free credit report or get your score. So I think that's, that's one thing to be aware of it and what's something that's really important that I don't think
dentists think of and you think about it, when you go to dental school, or you go to college, right? You You typically go away, you know, you leave your hometown. So where do you really want to
practice? Have you looked at the area that you want to go to? And, you know, not everybody goes home? Not everybody goes to? You know, not? There's not always a practice available somewhere. So where
are you going to be comfortable. And as you know, when when you leave and go to college, you know, it's not unusual to end up where you went to school and you move there. So I think that's something
to be to think about. And that's important also for the family. So, you know, if there are spouses involved, kids, that's something you need to think through a little bit in your planning. Another
thing to do is, and I think it's almost standard anymore, is dentist, the new dentists coming out of school, it seems to me that they do more procedures. They're more, you know, it's not just standard
basic dentistry, they're doing implants and, and, and Invisalign, and different procedures that, you know, maybe the selling dentist didn't come out of school doing. And so they retain more for their
practice, which goes to their income. And something that's also very important is develop your team. Who are the advisors that you're going to consult with? You know, that is a great piece of advice.
Great. Thanks. So I mean, think about it, you need, you need a bank, you need someone that's gonna help you market the practice. You know, you need a good CPA, you need a consult, you may need a
consultant, you may not, at least at some point in time, I can see a consultant coming in. And you certainly need an attorney to review contracts and leases, and make sure that, you know, things,
you're not getting stuck with something that you don't want, right, or you're signing something that you don't know what you're signing. And as you know, in our industry, all of these people, there
are people like this, that all specialize in dental. Right, and I think that's a value to to understand the industry. And, you know, if you develop that team, I think you're going to protect yourself
in the long run. Certainly not like buying a house. It's you're developing your business that you're probably going to have for the next 2530 years.
Linda Mettler: Now, I think that's a great, great piece of advice, David, and I agree with you 100% on that, and then especially the part about, you know, there is so much value to developing that
team and having the members of that team understand the healthcare and specifically the dental industry, because there are so many nuances. In so many things, and, you know, dentists, same with
medical practices, you know it, there's just so many nuances to it. And the more your team understands your world, the better they're going to be able to help you and or help the dentist, you know. So
I agree with that. Absolutely. So, absolutely. And I know you're very involved in, in the dental industry in Arizona. So I know you do a lot of work with the Dental Association and a lot of other
vendors and I know you're very well networked. So I know you've got a lot of great, great people to refer out for those dental offices. So David, and your your financial advice sounds like it's great
for everybody, not just for dentists keep your credit, keep your debt low. Don't go out and buy the fancy cars until you can afford it. We everybody needs to hear that right? Pretty, pretty standard,
right? I mean,
David Rinkes: okay, but you know, I do, I, you know, have lots of stories about different younger dentists I've met, and how they came out of school, and they got that job making 150 grand a year, all
of a sudden, after being in school for eight years. And I had this one husband and husband and wife, dental team one time that they met them, and they were looking to buy a practice, right. And so I
went into that little bill, talk about not spending your money and of course, and not buying a big, fancy car and his face just changed. And I said, which by and he said, I got the 740 Beamer. And I
looked, I looked his wife, I said, and what did you get? And she said, I got the C class, I said, Oh, so you took a step back, but you still got a pretty nice car, right guy? Yeah. And they just were
looking at me and I said, Look, you know, it's just something if your income support, integrate, you don't have kids. But that's something you just got to be aware of.
Linda Mettler: Yeah. And they just I think you just have to think about the future. And especially if you want to own a practice, or in any kind of business, you've got to think ahead a little bit as
to how to set yourself up financially. It's just like, when you go get a mortgage, you know, you've got to think about how do I set myself up to qualify for this mortgage? It's the same thing for
acquiring a practice, right? You've got to set yourself up financially so that you look good to that lender so that you can get that loan.
David Rinkes: Absolutely. Knowing that that's your business that's going to live for the next 30 years, you're, you know, you're going to work toward that and have that someday. So why go further into
debt to have it today? Well, you know, if you're successful at your business, maybe you just pay cash for that one day, right? For instance,
Linda Mettler: David, I'm gonna set you up with my son. Like I said, he just came out. He can't wait to get a job and spend money. I know, I know, the first thing he's gonna do is go to the car
dealership, I'm like, yeah, I'm gonna get you to intercede to intercept him. Off, he's setting you guys up instantly. No, that's great. So David, I, I'm wondering to a little bit if you can tell me
your perspective a little bit. I work with a lot of clients that are maybe all maybe five to eight years away from wanting to retire to transition out to sell their practice. And a lot of times,
they're not sure what they want to do, do they want to bring in an associate? Do they want to sell to a corporate entity, they all they come to me because they, you know, they've kind of been motoring
along at, you know, the same patient base, same same production levels for five or 10 years. And now they're thinking about, you know, transitioning, you know, a few years down the road, but they know
that they've got to do some marketing, increase that new put that new patient number every month, so I try to help them with that. What did they need to do from your, from a financial perspective, to
get to make that practice look attractive to sell? What's your perspective on that? Like, what's the best way for them to and how do they structure that? I mean, what's good for them? As far as
structuring that sale of that practice?
David Rinkes: I think you answered part of it right there. Linda was really keeping the numbers up. And I think too many dentists that sell, you know, they start checking out and their numbers drop a
little bit. So when their numbers drop, of course, the value drops. Right. And so, you know, that's, it's also a challenge for a bank to make a loan when they see numbers dropping.
Unknown: So it's,
Linda Mettler: so the bank doesn't necessarily want To give the loan to the buyer, if the sellers got three or four years of declining production,
David Rinkes: you're saying there's gonna be a lot of questions. Okay. And it could, it will affect how the loan is structured, for instance. So let's just say that somebody drops for three years in a
row, banks not really sure why that is happening, right. So is it patients are leaving? Is there something wrong with a staff? You know, you know, are they leaving? What what's driving that change? So
the bank, in that situation, may say, Well, we want the seller to hold a note. So let's just say the sales price is 500,000. And, you know, the bank may say, Well, we'll do four, but we want the
seller to hold 100. So interesting, reset. You know, that could happen. And, and then, of course, you know, the seller that could affect the sellers retirement plans by not having that extra 100,000
in the bank. So I think that's one thing we're sellers, you know, they they realize maybe three to five years before that they want when they want to retire, but then it's just they don't look into,
they don't do the research. Right? So what's the actual value of my practice? What can I actually get? What, you know, what, what would that look like? You know, it's just like, the other thing too,
as far as a practice goes, it's, it's, it's like, when you sell your house, right, when you sell your house, you may put a little, put a fresh coat of paint, you know, you clean up, you get rid of the
clutter, you you, you know, clean up the yard, you know, you do all that and make it presentable. So, so you want to be you want to do that I wouldn't suggest going out and investing in, you know,
like new flooring or something like that. Unless, of course, you've got the 1970s, green shag carpet, then he might want to change that. And flooring today is pretty, pretty simple to do. But make the
practice presentable. You know that that's something you know, you also you mentioned, selling to an associate, and or having an associate hiring associate in. And certainly, I think that's probably
the easier way for bank to make a loan is to, you know, sit financing associate because he's when they have an associate in the practice, they they already know, the patient base, they know the staff,
they've already developed those relationships, which are key to the success of that ongoing success and success of that practice. So I think hiring associates not a bad idea at all. Right, I think
that could lead to a quicker sale. And, and also, going back to my point about not letting the numbers drop, if you bring in an associate who was a little bit more gung ho, because they're starting
their career, your numbers might actually go up.
Linda Mettler: That's, that's what I see that that's exactly what I see. because like you said, sometimes that, you know, that dentist that is three to five years from wanting to retire has checked
out to some degree, and you bring in that associate that's younger, that's Gong Hall, you know, they want to jump into marketing, their social media savvy, they, you know, they, they're really ready.
They want more patients, they want that work, they want to develop their skills. So yes, you absolutely do see production increase, or at least I have in the practices that I've worked with.
David Rinkes: Yeah. So I think that's big. You know, it's, but I think overall, you know, if the seller does it, right, they'll protect the value of the business. Right, they'll have more for
retirement and, and and that's somewhere where they probably want to consult with with somebody,
Linda Mettler: do you think it's wise stated to, for them to get a practice evaluation, even five years before they are thinking of selling?
David Rinkes: I don't think five years spending the money on a practice valuation because, you know, go back to the number thing, if, you know, they increase their numbers 20% over that five years for
the check out. That's going to increase that value. I think having the conversation with a bank broker or CPA and saying, Okay, let's understand what the current values in the market are. So I have an
idea when I meet with my wealth, man measure what kind of money I'm going to have, what kind of taxes Am I going to have? And so then they can do some planning. And at least understand. And just a
quick example I've had, I've seen many dentist that will call and say, Well, I think my practice is worth this. And I'm like, well, you're talking 100% of your collections. You know, that's not that's
not what the market is. Right? Because the the market varies wherever you are, whether it's California, Arizona, Colorado, or New York City, right? Those values are going to change. So I think, you
know, depending on how you sell it, whether you hire a broker, whether you hire that associate and sell to them, you need to know what to expect out of it and how to plan for that. But I wouldn't
recommend spending money five years ahead of time, but starting conversations, I think makes sense. Yes,
Linda Mettler: sure. Sure. No, that's that's a great piece of advice. That definitely makes sense. From what I've seen what I've definitely, what other what other tips of the of the trade do you have
for us, David? Or, or insights or piece of advice? Or do you have anything else for us?
David Rinkes: Oh, wow, testing me now. And maybe on the spot there? Maybe I left it all on the table? I'm not sure. It's just
Linda Mettler: gonna wrap up in a few minutes. So I just thought I'd see what else Yeah, what else? What other tips of the trade you had for anybody, for our listeners out there? You know, I
David Rinkes: think it's in summary, it's probably more on either side, buyer or seller, it's a matter of being prepared. And it just like, it isn't anything but in business. You know, you probably as
a buyer, you want to be get the right CPA and help you understand the numbers. Right? Right. One, understand what the financing options are out there, what different banks offer you and understand
what you want in a banking relationship or any relationship. And I think, to me, that the newer dentist I've been talking to, they seem to be much more aware and prepared than they were, say 15 years
ago. And I think that has to do like you mentioned, you know, just internet and things like that, where they can get the get information that maybe 15 years ago you didn't get. Right. Right. So I
think just being aware, is the key. And being prepared.
Linda Mettler: Great. I would I would agree with that. I see so many people come out of school, you know, I see both I see some people come out and they really don't have much business acumen or much
business information. And then I see the the dentists that come out of school, that just have so much information and they aren't being taught in school, they, they have the savvy, to go get that
information on their own, and and find that person that can help them but I do think that's crucial for people, people coming out of school and people that have been, you know, had their own practice
for, you know, 10 years, you've got to treat it as a business and you've got to have those great relationships with your bank is probably number one. And your attorney and your CPA and, you know, you
have to realize it's more than just practicing dentist dentistry, it's running a business. And so having that business acumen is is crucial for them. So great. Well, David, thank you so much for
sharing your insight and your knowledge and everything, your expertise with us today. I really do appreciate it so much. And I will put a link in our show notes for people to contact you if they if
they have any further questions and want to reach out and contact you. So thank you so much for that. And hopefully everybody you know, feel free to contact David or myself and Remember if you want to
have a great day make it a great day. Thanks London.
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