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VIDEO - DUwHF #720 - Legacy Practice Transitions
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AUDIO - DUwHF #720 - Legacy Practice Transitions
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Ronald I. Prokes, DDS
Dr. Ron Prokes practiced general dentistry on a full time basis for approximately 18 years in and near Kalamazoo, Michigan and has assisted over one thousand dentists in the transition of dental practices over the past 25 years or so. He is co-owner of Legacy Practice Transitions, a company which assists dentists in determining their needs in order understand opportunities sought or offered, and then locates the complimentary party, a process referred to as “Objective Based Transitions”.
Blake Ring
Blake is a graduate of Indiana University Bloomington and brings 15 years of dental experience in the areas of consulting, dental equipment, supply, and technology distribution. He has received numerous awards and accomplishments, which testify to his knowledge and expertise in helping doctors acquire and grow practices. He has assisted hundreds of doctors of all specialties in various parts of the country. Because of his vast network of professional resources and satisfied clients, Blake has strategic partnerships that will assist him in completing a successful practice transition for you. His undeniable work ethic and creative problem solving skills result in a win/win for both buyers and sellers. Blake has a sincere passion to offer the highest level of integrity in the industry, and this has made him a perfect fit for Legacy Practice Transitions. Blake is an active member of the National Association of Practice Brokers and Practice Valuation Study Group. He takes great pride in the consultative philosophy in which buyers and sellers connect through objective-based needs. Blake looks forward to the opportunity to help his clients achieve goals that they thought were unattainable.
Dr. Marty Carrow
Dr. Marty Carrow joined Legacy Practice Transitions after operating a multi doctor dental practice for 35 years. With the experience of completing five transitions in his dental career, he joined Legacy Practice Transitions in July of 2015. His goal is to provide guidance to both the buyer and seller in accomplishing a successful transition.
www.legacypracticetransitions.com
Howard Farran: It is just a huge honor today to be podcast interviewing Dr. Ronald Prokes and Blake Ring in Indianapolis, Indiana. You are actually in the city of Avon. And then you got your other buddy, Dr. Marty Carrow, who's a dentist and he's in Alton, Illinois. Which is across the river in St. Louis. And you guys are talking about a great subject of mine, and that's practice transitions. You guys are with www.legacypracticetransitions.com. So I'll start with, introduce Ron on the left. Practiced general dentistry on a full-time basis for 18 years in or near Kalamazoo Michigan. Isn't that where Upjohn pharmacy used to be?
Dr. Prokes: That's exactly right.
Howard Farran: And has assisted over one thousand dentists in the transition of dental practices over the past 25 years. I mean that's amazing. A thousand practice transitions. He is co-owner of legacy practice transitions. A company which assist dentists in determining their needs in order to understand opportunities sought or offered, and then locate the complementary party. A process referred to as objective-based transition. And he's sitting next to Blake Ring. Who's the other co-owner. Blake is a graduate of Indiana University Bloomington. Which really doesn't mean anything because he's a Hoosier. And brings 15 years of dental experience in the areas of consulting, dental equipment, supply, and technology distribution.
He has received numerous awards and accomplishments, which testifies to his knowledge and expertise in helping doctors acquire and grow practices. He has assisted hundreds of doctors of all specialties in various parts of the country. Because of his vast network of professional resources and satisfied clients, Blake has strategic partnerships that will assist him in completing a successful practice transition for you. His undeniable work ethic and creative problem-solving skills result in a win-win for both buyers and sellers. Blake has a sincere passion to offer the highest level of integrity in the industry. And this has made him a perfect fit for Legacy Practice Transitions.
Blake is an active member of the national Association of practice brokers and practice evaluation Citigroup. He takes great pride in the consultative philosophy in which buyers and sellers connect through objective-based needs. Blake looks forward to the opportunity to help his clients achieve goals that they thought were unobtainable. And then on the far right is Dr. Marty Carrow, who joined legacy practice transitions after operating a multi-doctor dental practice for 35 years. With the experience of completing five transitions in his dental career, he joined Legacy Practice Transitions in July 2015. His goal is to provide guidance about the buyer and seller. In accomplishing a successful transition. And he has the unbelievable distinction of graduating from SIU. Southern Indiana University. Southern Illinois University. Class of 1980. With Rick Workman the founder of heartland dental, who we've podcast on earlier show and now owns about what 1500 offices?
Dr. Prokes: Not quite that many but he's getting close.
Blake Ring: He's close.
Howard Farran: He's close? Well let's start off with Rick workmen as a segue. You know when us older guys got out of school Ron, and Marty, when we got out you guys so Orthodontic Centers of America rise all the way to the New York Stock Exchange. The only one that made it a billion-dollar evaluation, and the whole thing imploded. There were a dozen on NASDAQ they all imploded. They all disappear, now they're back. And now they're about 12% of all the dentist are working for the big-box and I mean big-box like 50 locations or more, that's what I call corporate dentistry. Not you know you have three offices or whatever.
But they think that since they gone from 0 to 12% their thinking linear that they're going to go from 12 to 24 and 24 to 48 been they're going to take over the market. But the bottom line is, when you look in the private sector of individual dentist hiring associate, the same as in the corporate sector nobody can keep their associates. I mean some of these big chains, their average doctors will stay there for a year. So I've seen zero evidence in the last 30 years of my life as a dentist that people go to a years of school to be a dentist, to be your employee.
I just don't see any evidence of that. And we're podcasting today and of course all guys like us, like books and we go to conventions. So this is heavily weighted towards millennial's, a lot of these people right now that you're talking to are in an hour commute to go work aspirin or Hartline or Pacific. And they want to buy a practice but in their walnut brain, they don't even want to talk to you because they think you're not going to talk to me I got $350,000 in student loans you probably won't even take my phone call. Is that true or false?
Dr. Prokes: It's both. First of all the young dentist, typically today what they're looking for upon graduating from dental school are two things. They're looking for income or they're looking for experience. They're coming out of schools average $250,000 or so in debt, so initially there unable to call I'd dental practice they don't think they can buy a dental practice, and actually correct because the banks are looking for to show that they are able to produce the type of numbers that the practice they want to buy is currently doing. So what happens typically is the young doctor will go into a corporate dental setting, they're given a guaranteed salary. They have minimal requirements in terms of management of the practice on a day-to-day basis, and they get some pretty good continued education. So there needs of obtaining an income, and obtaining experience are met. After a couple years, 12 to 24 months typically we find that coming into our market and looking to acquire a typical traditional practice.
Howard Farran: After how long?
Dr. Prokes: Typically about 12 to 24 months in the corporate world. So our typical buyer is about 2 to 3 years out of school. Some of them have done a GPI, then they brought a corporate dentistry, a typical buyer about 2 to 3 years out of their dental school graduation.
Howard Farran: And some of those big chains, some of the biggest ones out there, their average dentist only stays about a year.
Dr. Prokes: Yes, that is correct.
Howard Farran: So how [crosstalk 00:06:25]
Dr. Prokes: They have a hard time retaining the young dentist, and of course now what corporate industry is doing the majority time now they're requiring selling doctors to stay a minimum of 2 to 3 years in order for the seller to get the value of the practice, and then there's so many and then there's so many DSMO's out there and then the small entrepreneurial dentist out there competing for the Associates, that the Associates currently have been a good environment as far as compensation.
Howard Farran: So you call them DSMO's?
Dr. Prokes: Uh-huh. [crosstalk 00:06:55] Dental Service Management organization.
Howard Farran: So, These are called DSMO's, Dental Service Management organizations. Do you agree that it's 12% of the dentists work for DSMO?
Dr. Prokes: I would say at a minimum that is correct we have seen a little higher estimates actually in the libertines and we have heard comments that by the year 2020 some year between 26 to 35% of dental practices will be corporate owned.
Howard Farran: Corporate owned by DSMO?
Dr. Prokes: Yes, that is correct.
Howard Farran: And right now so, I hear 12% you hear lower teen actually Henry Schein, Stan Bergman said 12% of the dentist work for DSMO but they do 19% of the dentistry.
Dr. Prokes: I'm not sure what percent of the dentistry but I've had 12, 13, 14% currently so that's pretty close.
Howard Farran: And this is 2017 so you think in three years from 2020 is can ago from 12 to 26 you think it's going to double and three years?
Dr. Prokes: Well it's not what I think that's what I've heard from some of the experts.
Howard Farran: I mean gosh darn Apple, and Microsoft, and Intel couldn't double and three years.
Dr. Prokes: Well again nobody knows for sure and that's the direction it seems to be hadn't and like I said a couple highly respective sources have used those numbers.
Howard Farran: And how many DSMO's do you think there are?
Dr. Prokes: I know there's somewhere in the range of 50 or more.
Howard Farran: 50 or more? Okay, so my question to you on those DSMO's. Are they still doing mostly purchased transitions from selling dentist or are they starting to get Denovo arena where they open their own stores from scratch?
Dr. Prokes: They're doing both. They will do acquisitions if it makes sense. Most of them have certain miles they want a certain number of laboratories a minimum income and guarantee that the sellers will stay for a period of 2 to 3 years but we are seeing more and more Denovo's as well. Especially Harlin, they're growing into that more and more Denovo model themselves.
Howard Farran: And I want to talk about why that, but for an older dentist listening and by older I mean anyone older than me. I'm still young at 54, so to anyone older than me. How big of practice operatory numbers do they need to make their models work? What do they usually like to see?
Dr. Prokes: Each one has a little bit different number, but generally the minimum number of any of the major DSMO's is about $700,000 in income, to around 1 million 1,000,001.
Howard Farran: And then ops and square feet?
Dr. Prokes: Square feet, I'm not so sure about square feet, but ops is generally five or more.
Howard Farran: Five or more?
Dr. Prokes: Yes.
Howard Farran: So that's the equivalent of a three bedroom two bath house I made that's the average practice isn't it?
Dr. Prokes: Right.
Howard Farran: And I've been hearing from a lot of them in corporate, that the reason they like to go into Denovo, is one of the biggest problems they have going into an office is the overhead and it's because the labor is so high, because this doctors be giving their staff a dollar raise every time the earth goes around the sun. And they need that total labor compensation at the Max to be 28% or less, and were talking about FICA matching, health insurance, bonuses, whatever a cost to keep those people in your office. And they're just routinely going into offices where that's 31, 33, 35. And it so demoralizing to do what they have to do, which is say, you work for $25 an hour, and starting Monday you're going to work for $20 an hour, take it or leave it. And a lot of them will just say that when they go in there and that labor cost is high, they'd rather just start from scratch and do it to know about is that what you're hearing or is that not what you're hearing?
Dr. Prokes: No, I think that is correct. I think that's one reason they're doing more Denovo's, and I think the second reason is, one of them a reasons that's a lot of dentist had gone to the management companies to begin with, is that they were burnout of the management practices. So what the management companies offered for a period of time was to allow a dentist to reduce or eliminate his or her manager responsibilities, to get the equity out of the dental practice and to maintain clinical income.
What we're doing now in our business, we're educating more and more dentist, if that is what they're looking for. They can go through a process called a presale, or a incremental sale and the traditional environment, and they can have the same rewards. They can get the equity out of their practice from a non-interest-bearing asset to a interest-bearing asset. They can minimize or eliminate their managerial responsibilities. And they can maintain their clinical income. And they also have security from the ability to practice in the event of death or disability. So some of the needs that many of the doctors initially were having met by the DMSO's are now being met by companies such as ours and we are able to educate the sellers that there is an alternative. So I think that some of the DSMO's in the future will not have as many practices to buy. As they had in the past.
Howard Farran: How many have you sold to corporate because the dentist had to cash out his ex-wife?
Blake Ring: We try not to get involved with those.
Howard Farran: Yeah because it makes sense, because someone will come in and say well docs practice worth $1 million so you got to pay your ex half 1 million, and they're like no, no. How about I will give them the practice in you give me half a million? One of the best ways to do that is just to sell the damn practice to a DSMO, get the money, split the money, and then he continues on working. I want to ask another question, the people listening are by themselves commuting and I know a lot of them are thinking if they're older, how old is the average dentist selling? You said the people buying work, they come to you 2 to 3 years out of school, how old is the doc when they're selling it?
Dr. Prokes: Well traditionally the selling doctors been in his or her 60's, but what we try to do is we try to reach the marketplace where the doctors are 45 to 55-year-old range. Because somewhere in that 45 to 50, typically the doctors kind of climbed a mountain and Slate a dragon and are on a plateau now they don't want to work in harder, they do want to work longer, quality of life is starting to get more important to them now than an extra 15 or $20,000. So our marketplace, I mean we sold practices as old as an 86-year-old dentist, but our marketplace is trying to hit that 45 to 55-year-old Dr. show him or her how they can double the value of their practice if they do a stage incremental sale rather than wait until their 65, and doing a walk away. So the average is probably still in the 60 something range, I think the ADA said the dentist are now working longer currently than they have did in the practice but I think the ADA said that somewhere around age 66 or 67.
Howard Farran: 66 to 67. So you're saying I only got 12 to 13 years left in me?
Dr. Prokes: If you're lucky.
Howard Farran: And then I'll run out of gas? Another thing doctors, at thing with older guys I want you to talk about preparing to sell. A lot of doctors think I should get all new chairs or should update my pay what makes obviously when you put your house on the market, the real estate agent comes in their first they do a check, they say okay you got some of these repairs that need to be fixed. But a lot of times a walk in your house and say, you would make a lot of return on investment if you put it new carpet, or painted the house, or did these things. How do you spruce up a dental office to make it a hotter selling asset?
Dr. Prokes: As far sprucing up we always like to put a little bit of lipstick on the pig there if possible to make it look more attractive, but the main thing we tell doctors if they're going to be able to spend money to make the life more efficient, their practice more efficient, easier for them to practice, more effective for the patients and the staff. Bingo had spend the money but unlike a house if you put money into a kitchen or remodeling a bathroom you get that money back at least one or two times fall. But in a dental practice, the money you put in the practice will make it so easier, and well make it so quicker. It probably isn't going to get you the full return back on whatever money you put in there. So other than just some cosmetic improvements in the practice, we always leave it up to the doctor for him or her to make that determination of whether or not the improvements in terms of equipment, will be as good for them to feel comfortable with the dollar we turn.
Howard Farran: When you look at the S&P 500 it's just always filled with murders and accusations and it might 30 years whenever I me a dentist is doing 23 $4 million usually they were in a small town maybe there was 10 or 20 dentist and a small town. And whenever the old guy was going to retire and put his practice up for sale, they didn't want some young energetic whippersnapper to come in a great get out for 40 years. They would buy that practice and roll the patients into their practice. And I know guys who have bought every retiring dentist in their town, maybe one guy every 3 to 5 years. For the last 25 years and they got these three $4 million offices why do you think the S&P 500 does so much M and A activity and the [inaudible 00:16:38] Industry of dentistry does not.
Dr. Prokes: I think dentist are not aware of the tremendous potential for return of mergers we and our business do a lot of mergers. Have dentist the bye-bye three, four, five practices from us. Any time what comes up in their neighborhood. So we always been very prominent in the area for practice mergers. Most dentist just are not aware of the benefits of a merger. When you do a practice merger, first of all you only have your production related expenses that are going to go up you have your fixed expenses the matter what you're doing.
So your production expenses are the only expenses that you have. And for every dollar that you add to the practice through a merger, you are going to make personally somewhere between 15 to up to 60% in some cases without ever touching a hand key. You're also using other people's money. You're going to the bank to borrow the money. So if you have $500,000 to invest that you want to invest in the stock market or real estate it's your money. If you buy a dental practice for $500,000 you go to the bank about the bank and using somebody else's money. And the other thing is in addition of a financial windfall as far as practice mergers do, You're also new defensive strategy in the center preventing may be a younger more of aggressive dentist from coming to the community to compete with you.
Howard Farran: Okay I just got one problem with everything you just said Ron. You are not aware of your experience you spoke way over the head of all those millennial's. Can you try to go back and repeat what you just said in a slower way, I mean that was like PhD economics.
Dr. Prokes: Sure, well in any dental practice with two categories of income. We have our fixed expenses. This will be things such as rents, insurance, utilities, our attorney bills, art pay bills, whether it's 100 or 500 those expenses stay the same. The second category of expenses we have are what we refer to as our production rate expenses.
Howard Farran: Okay but a lot of people call those variable expenses.
Dr. Prokes: Variable expenses or production same thing, but basically what it is, is that things such as laboratory, clinical supplies, office supplies, they will be a percentage of our income. So our laboratory bill might be typically 10% of our income. So if we do $100,000 is 10%. If we do a million dollars it's still 10%. Same thing with supplies. So that might be 6 to 8% of whatever a dollar amount were doing. When we add money to a practice through a merger. Our fixed expenses stay the same. But it is only our production rate expenses. So if you add your production rate expenses, if you use your laboratories about 10%. If you use your clinical supplies around 8%. If you use your office supplies around two or 3%. So that's about 20% right there.
If you buy a practice and merge it with another you don't have to have two full-time staff. You might have one, one and a half staff there. So your staff expenses for a merger are not going to be 28%, there going to be probably around 15% for the merger. That takes you up to about 35%. And then if you buy a practice your debts usually averages around 10%. That's about 45%. And they you have to pay, if you're not going to be the dentistry yourself you're going to have to pay dentist to do it. So you might pay a dentist 30% of collections, so that takes you up to about 75%. So for every dollar that you add to the practice merger, you might be making as the owner or the buyer of the second practice, 25%, without ever touching a handpiece because of the production related expenses.
Howard Farran: And then economics in three words of supply and demand, you're getting rid of another supplier in your town and when you flip out 65-year-old tired dog, you just said earlier probably peaked around 45 or 50. And your place that old dog that's about to be taking to the vet and be put down with some young 25-year-old whippersnapper, who's probably got 1200 mg of testosterone [inaudible 00:20:50] all-natural, you don't want that. So it's an extremely amazing defensive play, especially in the rural.
Dr. Prokes: The older dentist that's 65-year-old dentist that were buying a practice and merging into hours they generally lost their enthusiasm and their ad so it's generally a lot of work waiting to be done in those acquired practices. We have one dentist that we worked with for 20 years and Dan Atlas he buys a practice from us about every 2 to 3 years. And he will not buy a practice from a young dentist. He will only by a practice from somebody in their 60's. Because he wants them worn out, he wants a lot of for him to do.
Howard Farran: You know I've seen some of the biggest gold mines. I call it the hidden Valley in the rough. I know a guy who went out to Palm Springs when I graduated and 87 and it was some 70-year-old man retiring, and all he did was patch everything with amalgams. That guy bought this little bitty practice and four times a day one of his existing patients walked in and a big old chunk fell out and he just repaired it for a crown. I mean he was doing foregrounds a day from his patients that he had been patching for 40 years.
Dr. Prokes: Well those other practices to buy because a lot of the young young dentist unfortunately that don't recognize they're looking at stuff that looking at equipment they just been to one of the major dental meetings they see the brand-new equipment and technology and that's what they're looking for. What a young dentist is really buying is an opportunity, is an opportunity to meet those patients. So the old 70-year-old he probably had 12, 1300 patients a went to the chair every year so. And the opportunity to meet them. We kind of these the young doctor. If you don't hurt them much more than the old guy if you don't charge them much more than the old guy and you got somewhat of a personality, you're going to keep 85 to 90% of those and you're probably going to do a whole lot more those per patient record per year than the old guy was doing the last 15 or 20 years.
Howard Farran: You can't even make up this next-door. So when my grandma Mary died, my mom's mom grandma married from Kansas she died at the funeral they were trying to fix me up with this guy who was going to be who was a dentist and wanted to sell his practice one day and whatever. And he was telling me how there was no Harry Donald's disease and Parsons Kansas and he thinks it's because they had hard water. And I saw a lot of other young dentist go in there and buy a practice, at first it was just because they didn't know how to tell of these patients that they had gum disease. And a lot of time modern severe did them disease. And I said no, no, no you got to see this as an opportunity.
You bought this little practice, that was just doing 750. But if he was doing. Oh it would it been 1 million and you just need to embrace at the times of change. And you just got to explain it better, and be all proactive. But you just found a real hidden value. I want to go back to m and a activity. If you're on shark tank the first question they're going to ask you is on your company what is the acquisition cost of a new patient? So when you go to the dentist and you say what is the acquisition cost of a new patient how much do you spend to get a new person and the deal they might say well I spent 3 to 5% on marketing.
This isn't what I'm asking how much are you spending per head. So then on that m and a activity if I bought the old man's practice across the street and I don't want all the equipment I'm just going to move and the patients and the charts. What do you think the average price per patient is going to be on M and A activity and what does that compare to on marketing because some of these guys know that they might spent hundred $50 per patient on a Google ad one 800 dentist charge you a flat fee of $100 for a new patient what are you paying per head on M and A activity?
Dr. Prokes: Well I will give you an answer rather than specific number I will give you a percentage. There's three ways really to go a practice, and one is just through time and inflation. That's obviously going to grow very, very slow it's going to be 2 to 3% a year probably. The second way is if you do practice management. If you talk to most of the practice management experts in the field they will probably tell you that if they go in and they go practice by somewhere between 15 to 20% per year, most of their dental clients will be pretty happy and will have seen a significant growth.
And that the third way to do it of course is with the practice, which is the quickest. We can double a practice and 12 months time through a practice merger. So in terms of cost it's going to be based on how many patient records you have. So if you buy a practice for $500,000 and there's 2000 patient records and that practice then that will give you the annual return of whatever it is the cost to buy their patients. But certainly in terms of return on investment remember that there isn't anything better, or the growth of a practice than a practice merger.
Howard Farran: And what you're doing what people are buying, what would you say is the average liquidity practice on the market? Would you say at 750? If you looked at standardization 12 -1 the distribution, what is the average practice? What is the price is a $750,000? Is it more close to 650? [crosstalk 00:25:53]
Dr. Prokes: There's a little variability again different geographic areas obviously but if you take it on a national basis and certainly in the Midwest the average practice today is doing somewhere between 60 and $70,000 on a monthly basis. But I would take you out to 720 to 800 there.
Howard Farran: So they're doing 60 to 70,000 a month how much would that be a year?
Dr. Prokes: 720 to 800 something.
Howard Farran: 720 to 800? And what is the practice selling for?
Dr. Prokes: It depends again on a lot of different factors. But in general the range of a practice that is primarily fee for service and or PPO's somewhere between 65 to 80% of a three-year weighted average.
Howard Farran: Now are you, are you still saying that practices are more liquid in the urban centers and become very illiquid in the rural areas? How far away you have to get from a major city before you got a practice that's an illiquid asset and it's going to be really hard to sell?
Blake Ring: Well Howard I think when you say urban sometimes even some of the inner-city practices are a little more challenging depending on the demographics of the patients. But suburban practices obviously are very desirable, the most affluent educated areas are most desirable. What we have seen since it's a sellers market as we seen some of the rural practices actually become a little bit easier. So we try to educate some of the buyers do you want geographic? Is that the most important thing or do you care about the opportunity, and are some great opportunities in rural areas.
Howard Farran: So why is it a sellers market right now explain to my homies what that means? It's better to be a seller than a buyer but why, why is it better to be a solid than a buyer?
Blake Ring: Right now there's just not a lot of sellers, especially quality practices so we got this kind of bubble we talk about and corporate dentistry babe in their one to three years what we get a good practice in a desirable area we may have 10 people to call. So selling a practice is not that challenging as far as you know having a good practice. But right now there's just not a lot of, there's not a lot of sellers right now.
Howard Farran: How many practices, how long have you been in this business Blake?
Blake Ring: I've been a dentistry for 15, I've been doing this for a little over four years.
Howard Farran: In the last four years how many practices have you seen in really small rural areas where there's just no buyers? And it's been up for cell for two, three, four years and it's not going to sell? Do you have a list of those?
Blake Ring: Yet there's definitely a list of those I mean there's just some, what we go into a situation like that how would we probably would do a nonexclusive agreement to, we would try to get in front of his many people but usually when you get to really small areas if somebody didn't grow up in that area, they didn't have a significant other from the area, they don't really have a lot a desire to go in the middle of nowhere. So they are challenging.
Howard Farran: Are you listing all these practices on the classified ads on dental town?
Blake Ring: We are.
Howard Farran: Yeah, the next update of the app, so there's a quarter million dentist on dental town but 50,000 have downloaded the app but the app that hasn't had the classifieds on it, but the next update will have the classifieds on there so I think it will, even more explode the activity. Again for the last 30 years, I've seen so many people they go out in those rural areas, and they do for tens. And then Thursday night they jump in their airplane, Porsche, Mercedes-Benz, had into the nicest most rock and hot city, condo in the city. They hang out there Friday, Saturday and Sunday. And then their classmates are practicing in that city. And they're not making ends meet. I can give you a dozen names right now they do that.
Blake Ring: So accurate.
Dr. Prokes: We see that all the time I think part of the reason is that money of the young dentist are making their decisions based on emotion rather than logic. So often times will talk to a dentist and that very situation you just mentioned will say what would you rather do, would you rather live in a large metropolitan area and be competing with hundreds of other dentist and making 85 or hundred thousand dollars a year? I would you rather be an hour and a half away and making 34 $500,000 a year driving an hour and have every weekend. But again it's an emotional decision. So what you try to educate people have to come to a logical business conclusion make and 8590% of your decision based on business principles. Last 10 or 15% may be what your hearts tell you as far as word of the year what to do.
Howard Farran: And what's funny, is the dentist practicing within an hour of the ocean from San Diego to San Francisco. They go to the ocean about once a year because they are stressed out of their mind, they are broke, they have no money. But the people the practice and our inland and or Bakersfield or whatever they do the for tens and then fly into LA for the weekend. They have a million-dollar condo on the beach. So the guy working by the beach, never goes to the beach. And the guy an hour or two inland has a second house on the beach.
Dr. Prokes: I think a lot of that is human nature there.
Howard Farran: Yeah and with my boys you know I came from Kansas to Phoenix, and it was so frustrating raising for boys and the city because they had motorcycles, go carts, and guns, so the cops were always having to come to my house and tell me that they can't do that, they can't write on the street. And I'm like really? I would much rather raise for boys out somewhere where they can shoot a 22 and ride a motorcycle and a go kart. But anyway, a lot of times and our generation people did four years in the Navy so they were out sailing around in the ocean for four years why can't you go work in a town of 2002 hours a way to make 300, 400, 500,000 a year for four years and then sell it to some other young hungry kid, and then come into the city? So you're still take pro-rural nonurban?
Dr. Prokes: Well we again have worked in both environments. I fortunately of see more people willing to go to a rural environment certainly a urban suburban environment is much more marketable.
Howard Farran: So what do you want to talk about next do you want to talk about the buyer or the seller?
Dr. Prokes: What would you rather hear about? We can talk to you about either one.
Howard Farran: Well you're talking to both you're probably talking to a hell of a lot more buyers and sellers just by the age. I want to start doing this. If I'm working at Aspen right now, or Harlan, or Pacific or whatever, I think the lawyers do it better by the associate works for them for two, or three, or four, or five years and are doing really good to make them partner. And it's that emotional, well I'll be partner. Or like a teacher, I will put up with all these students because I'll be tenured. But when their associates at corporate don't know at the end of time though still be an employee it pops their bubble.
I think the corporate dental office business model has not been discovered yet, but I think it's going to come from Price Waterhouse, or law firms, or Boston consulting. And those deals where you make partner. But right now she's working, or maybe she's working at an associate in the private sector but she doesn't want to be the employee any longer. At what point should she go to legacypracticetransitions.com and what would be, spell out her first couple moves where should she start, you started a podcast, for she needs and come and experience. So she's been doing that for a year. What would be her next move? And what would she find if you want to legacypracticetransitions.com what would you find on this website?
Dr. Prokes: What we would do first of all is not so much what she would find on the website, what we want to do is we want to get to know her as a person and find out what her needs are. So we were as kerf three or four questions will say Dr. how much do you need to earn your first year in private practice? And often times the answer is somewhere around 300,000 between $75,000 said Dr. we didn't ask you what you wanted that she would you need it when needed hundred 30 550,000 the second question what ask is Dr. how much in 5 to 7 years when you're established in general practice?
How much would you like to earn at that point will that's when I want to be earning $300,000. They want to be understanding initially, but the economic needs are, and then to see how aggressive there. So they say they only need $110,000 and they only want 104,070 it is not a real aggressive person we don't have to put them in a million-dollar practice of that the first thing is understanding the economic needs. Second thing is to talk to them about emotional needs, emotional things are emotional needs such as control, and business. Are you able to take control? Do you need to take control?
Are you able to share control? Are you willing to wait a few years before you get control of the practice? So third question is your business background, do you have the skill and acumen and what it takes to manage a dental practice question mark or do you need to learn? In the fourth question will ask them is geographically where is it that you would like to be and how flexible you are? What's we hear the answers to both questions, then we begin to understand what their opportunity scepters. Once we understand that type of opportunity that they seek, then our role becomes to find a corresponding opportunity where the sellers needs, the seller's perspective needs are met. Too often what happens is people get together out of convenience are they see something on the Internet that sounds good and may or may not be good but they don't take into consideration the needs of the other part. So our role really is to understand the opportunity sots based upon the buyer's needs, the opportunity offered based upon the sellers needs, and the match those two together.
Howard Farran: Hello are you seeing any difference in those four needs between the half the class that boys and the half the class that girls when you go to that list of economic needs? Emotional needs, business background, geography, flexibility question mark are you seeing any differences between the boys versus the girls?
Blake Ring: Yeah absolutely where definitely think some differences. As you probably know a lot of the female dentist that are coming to their significant others are other professionals, so whether there an engineer, there an attorney, there another dentist, so they're still thinking about having a family they don't have to be the main breadwinner and the family so they're looking for partnerships with maybe they can have somebody else that has a young family. Maybe they can even work less maybe there 2 to 3 days a week so there's definitely a different need for females as opposed to our males and dental.
Howard Farran: And what does the average dentist Mary? Does she even have a job? What percentage of the time that she even have a job?
Blake Ring: I don't have an exact percentage but there's definitely a percentage.
Howard Farran: I mean the dentist and the class, that's the craziest think they never even get. Every woman dentist in that class will marry a man who has a doubt, a good job, a professional. About 30% married a male dentist. And the males will marry the girl with the nicest but at the waffle House. And then she says I'm marry a rich dentist I'll never have to work again and then shall destroy $10,000 a month until he hangs himself on the ceiling fan. And how you marry would've been more important than your profession. I mean I would've rather gotten a job at Taco Bell and married a dentist than go be a dentist and married a girl talk about is a girl at Taco Bell will quit her job and then immediately think she's rich married to a dentist position or a lawyer. And the next thing you know she's buying $5000 Gucci purses and walking at a chain restaurant I mean it's insane. I mean and my making this shift up or not?
Dr. Prokes: I don't think anybody can argue with you on that.
Howard Farran: Oh my God.
Blake Ring: Hey Howard, I think there's a bubble that's going to pop now that the student loan debt is so high, $250-$500,000 is not common to how many people are going to get $500,000 in debt to be a part-time employee at a dental office it just doesn't make a live center were trying to figure out the economics and how long this [crosstalk 00:38:20]
Howard Farran: Well the reason I brought up that question I'm really sensitive to the female male issues because I grew up with five sisters and of course in dentistry most of the employees of healthcare are women but I remember them telling the girls in my class that they were going to stay home and have kids and make babies and probably quit their jobs. And those girls that it, they were offended. But now it's 30 years later, and those girls actually on average had bigger practices than the boys. While getting married, and having big families.
I made some of them are just the monster practices. Stephanie Van diamond, so many of them in fact I did a podcast with three of them. So a lot of this stuff where, like right now were told that millennial's, are lazy and their dumb and their lazy and all that. And they're probably lazy because there really, really smarter. And they're not going to do, they're not just going to be busy. They're not going to move unless it has a purpose or a reason or a reaction. Not just move for the sake of moving. But you're saying difference there. Now when you're buying a practice, how often will you give them a demographic report? I'm only aware of a couple demographic agencies one is that McDonald out of Utah that we did a podcast was another one was proscribed tried to get a podcast with that guy. Do you do demographic reports?
Blake Ring: We don't currently, we don't do that we do refer to Scott McDonald and different sources out there. But yes we don't provide those.
Howard Farran: Whose your top demographic referral who do you like the most?
Blake Ring: It be Scott McDonald.
Howard Farran: Out of Utah?
Blake Ring: Yeah.
Howard Farran: Yeah, and that's a hell of a, that's another critical, I mean you come out of school $350,000 in debt you can make a lot of dumb mistakes. So if you come out 350,000, you come out of school in 1987 you could've thrown a dark and made it. That a how would so in 2017 and I think the demographics, and the people who say demographic still matter, I'm like okay great thing go set up and Beirut and call me in a year.
Blake Ring: That's a good point I don't think it's utilize nearly enough my background and former background of designing dental offices, selling the capital equipment there Howard. It would surprise me less than five or 10% of the people that would want to do a startup and to know the model what not to demographics, they didn't really even understand the opportunity so it's trying to get these people on board to understand the business aspect of this and you and I both know that dental schools they kind of do them a disservice as far as learning
Howard Farran: [crosstalk 00:40:58] Well you can sum it all up by the American dental Association I mean it's a nonprofit, when your leader is a nonprofit your somewhere between Stevie wonder and Ray Charles, you're somewhere between blind and dead, whereas if you bought a Long John Silver's, or a McDonald's, or Pizza Hut, or a subway, or a Starbucks. The franchisees would have a computer there showing all the locations, all the [inaudible 00:41:24] Like McDonald's doesn't tell you they have 38,000 restaurant, they say we have one restaurant for every 25,000 people, and you won't see three of them on the same damn corner.
So the fact of the American dental Association didn't do that. Or you would think Shine or Patterson or Benco or Burkhardt would do that. Because you would think if they're going to sell the equipment and would be a hell of a lot more likely this would end up in over 30, over 60, over 90 account receivables. If I put this guy in the right spot, because I remember in that's last 2008 crash there's about 80 dental offices in the Valley here in Phoenix that went under and half of them were in North Scottsdale. So if I was in equipment dealer, I wouldn't want to be selling and leasing equipment and North Scottsdale. I would be trying to steer these kids to Eloi, and Maricopa, and Florence where there desperately needed.
Dr. Prokes: Well I think sometimes first of all the young dentist the people that are buying the practices start out the practices there so overwhelmed with everything else, that they're not really a knowledge the terms of demographics. The supply companies they just want to sell quickly, they just want to sell supplies so they don't care if they sell to North Scottsdale someplace else, as long as they sell. Our role in dealing with young dentist, is to make sure that they have the systems and the questions to ask. So again but were tried to do is for try to educate them in terms acting as a consultant. So we get them a checklist of things they should do and think they should be made aware of in order to make a sound business decision rather than just an emotion decision.
Howard Farran: And who's financing these is one bank financing all of these or is it like a car loan where you fax it out to seven different bankers and see who will bite on it?
Dr. Prokes: Well that's one reason we wanted to talk with you. We're thinking of going to the bank of Farran, how is that?
Howard Farran: Well you know I'll give you the number to my ex-wife she's got tons of cash laying around.
Dr. Prokes: We go to both the national lenders as well as the local lenders. Sometimes the national lenders are offering specials and you can get a little bit better deal short-term financing it under 2% right now for a year to three years. But we work with both the national.
Howard Farran: What were the terms on that under 3%?
Dr. Prokes: Currently it is under 2% for one year and then they will go to a fixed rate.
Howard Farran: And what will the fixed-rate be?
Dr. Prokes: Around 4 1/2 currently.
Howard Farran: And by the way I got to tell this to you millennials. You know I bought my first house in 87. I thought I was so lucky, because mine financed at 12 1/2% and the sellers mortgage was at 14%. And he thought he was lucky, because when he bought his, the guy he bought it from was 16%. So my first house was 12%, and there's people screaming about 4 1/2, I mean it's basically free money when you factor out inflation.
Dr. Prokes: Well no question about it things have changed. It used to be when I was in dental school case would make loans to us dentists based upon character. The fact that we had a dental license with you by pretty much as much as we wanted. But what happened in the early or the late 70's, we had hyper inflation we had the hyperinflation 20, 21% and today these banks had lost a lot of money on bankruptcy so they started making asset-based loans and of course is never enough assets in a dental practice when it's sold to cover the cost of loan, so that's why the banks of Americans, and the Wells Fargo's, and those types of entities evolved over the years because they understand a dental loan is not a asset-based loan.
Howard Farran: Which other big grand banks that no dentistry the most he said Bank of America and Wells Fargo?
Dr. Prokes: Bank of America and Wells Fargo probably the two largest there had been one at East-West but they stop making that the loans here back in August or September 2016.
Howard Farran: Which one was that?
Dr. Prokes: That was East-West Bank out of California.
Howard Farran: So why do you think they got out of dental?
Dr. Prokes: Their market was a little bit different than most of the lenders they like the single dental practices or small group practices. Whereas East-West Bank their markets was larger, maybe 15 to 20 practice groups.
Howard Farran: Corporate?
Dr. Prokes: Evidently the more corporate. So evidently they were taking some losses and that's the main reason I'm sure they went out of business.
Howard Farran: I wanted you to keep talking about that, that's a cute story. When there were three main banks, B of A, Wells Fargo, East-West Bank and East-West Bank there's a lot of venture capital money whether going and doing these roll ups. And what a roll up is kids is that, Orthodontic Centers of America founded in the 80's is that if you had to average three bedroom two bath house you can sell it. But if you have a 15,000 ft.² mansion with a nine car garage because you're a baller for the NBA, and then you break your kneeing go bankrupt. You can't sell the house.
Anybody who's got that much money, so like AutoNation, they sell the same thing. They sell all these auto dealerships with all these old guys, and all these dealerships are worth like $10 million. Will no one in the world with $10 million in cash, would want to go buy a car dealership open seven days a week and TV advertising and all the B2C consumer crap. so they had all these liquid assets, so AutoNation when got $100 million line of credit and started buying up all these guys. That's what [inaudible 00:46:48] did he noticed that back in the day that, If your whole entire practice was selling for 750 you could sell it that year. But if you had a 23 $4 million practice you weren't selling it ever. No kid can come out of school and find that kind of money.
So they were buying up liquid assets. So a lot of these Wall Street people they see the stock market the bond market paying, the bond market paying these low dividends. And then they look at the industry or they see these high profit margins. They've been getting a big lot lines of credit and go buying and rolling up a lot of offices and they taken some serious losses. And now a bank has quit doing it. I think that's a macroeconomic sign that this group practice model, this DSMO model isn't all what it is because you've already had a bank pull out of it. And the ones that are out there. They cutting go public on NASDAQ. What do you think the chance is, that any DSMO and all could go public on NASDAQ this year?
Dr. Prokes: It is very, very unlikely.
Howard Farran: I'd that Ryan's life on it. Brian do you care if I bet your life on it?
Dr. Prokes: Do you got insurance on him?
Howard Farran: Well I got for kids I only wanted three boys but I had for just in case I had to bet one on the macroeconomics and DSMO's. I think this is a major factor a major bank pulls out because of losses. And the private and the corporate sector. No ones keeping their associates. I just don't know what kid will go to school for eight years to work for you. In fact, Ryan remember the discussion last night? We went to dinner last night with three dentist and one of the dentist, daughter is a dentist and she's been working for another dentist for about a year. She's had it, she's like this is crazy, they don't do it right. I'm going to start my own. And they're all giggling, and laughing. But that's just the nature of a dentist.
Dr. Prokes: That's why most of us want to dental school, is to be anatomist.
Howard Farran: Yeah, yeah, exactly. I think East-West capital, so the first year their financing at to you percent in then their locking them in at 4% for how many years?
Dr. Prokes: 10 to 15.
Howard Farran: 10 to 15? And I'm hearing from B of A and Wells Fargo that they don't even have a half of a percent default rate.
Dr. Prokes: So we understand we actually had both BOA and Wells Fargo in our training session last week in Indianapolis and both of them gave us the same statistic. Less than one half of 1% default rate. So they feel that and it is true[crosstalk 00:49:19]
Howard Farran: So when you're working, when you're commuting to work right now and you're on your way to go work for some solo practicing guy as their employee for 25% of production or 30% of collection, but you're afraid to buy a practice. A half percent default rate means only one out of 200 people like you who buy a practice it doesn't work. And then when you dig in, to that less than half of a , which would be one out of 200. It is always a personal problem that resulted in their license being taken away. I.e. 80% of the time alcohol. And 20% of the time Vicodin, opioids, or about 15% of the time. And about 5% cocaine. If you don't have a problem drinking, or taking opioids like Prince. Are doing cocaine like Martin was doing earlier on the break. Then what are you afraid of. You're going to make it aren't you?
Dr. Prokes: Well there's no reason for them not to make it. And if you really add you see the doctors come to us often times they're afraid to make that investment because they're going to come out a couple hundred thousand dollars in debt. We'll ask them to spend five, six, seven, $800,000 to buy a practice. Going to put them over $1 million at age 28, 29, 30 years of age. And so it's really again, something that they have to understand. That dentistry is a very, very, it can be a very him a very lucrative occupation.
And we try to educate to that being an associate's kind of like renting an apartment, versus owning a practice is like owning a home. As a employed dentist, as an associate, all I have at the end of the year is a bunch of canceled checks. As a practice owner, they have equity in the practice. And they have a lot of write offs against their income. So as an associate if you make $150,000 a year. You Pay taxes on $150,000 a year. The practice owner if you make $150,000 a year, you don't pay nearly as much taxes.
Howard Farran: I explain it just a little, I agree with you 100% what you said was perfect but they already knew that it wasn't smart to work at McDonald's for 20 years to save up to go to dental school in cash. So they realize that there is good debt, because it would be smarter to borrow $300,000 of other people's money to go to school now, so that now you can pay that back as a doctor making $5200 an hour. Okay you got it. Well when you go a third of a million down the road with other people's money, you have to go all the way down the road so you went a third of a million to go to dental school, and now you had to go all the way to a million. Because once you go to a third of a million, you can't pay that shit off working at Starbucks and McDonald's, or Long John Silver's, and then if they go get a job in corporate, they say, "oh I'm going to make $100,000 a year."
Yeah but if you're a man, you married a woman who quit her job and think she's a rich dentist and starts eating out, you go buy a house. You go buy, so their personal consumption goes up so high. They're not paying down the student loans. The only people I see paying off all their student loans in three years or less they only have one thing in common, they were not born in the United States. Like they will go buy a practice and they don't have a house or a car. And they'll live in that dental office, and they'll see patients, there iPhone is their phone number. You call them at 7 o'clock at night on a Thursday, or Sunday morning at 10, there right there and they'll see you. And they pay off their student loans and their practice and three years.
But if there born in the United States, they're still using other people's money so basically there 65. And a lot of the other people's money for consumption for houses and cars and boats and credit cards, and going to Disneyland and cruises and all that stuff. And I just tell them, look if you borrowed a third of $1 million of other people's money, to get your dental degree. You got to borrow the other two thirds of $1 million and get a dental office to get the income we asked them the economic needs 135 is what they need. But they want to make 300,000 a year.
And if they finance this practice in a 10 to 15 year plan, they need to get on a budget of just paying off the student loans, the office, the whole damn thing, be clean of it within 15 years. And it's hard to do if you're born in America. Because your standard of living is so insanely high but if you're born in Nigeria, Somalia, Indonesia, Vietnam, Cambodia, they live like insanely intelligent people. They just don't spend money but God dang if there born in America the eating out 19 to 30 males though go buy a car they'll finance it on five years. They won't even get into five years and they'll go buy another one and finance that. They're still financing cars when there 60 years old.
Dr. Prokes: A lot of cultural differences and we find to that unfortunately a lot of the young dentist not all of them by any means but a lot of young dentist have a sense of entitlement. The fact that they have a dental degree entitles them to these types of things. And they have to kind of pay their dues, and have to work through some of these issues before they're entitled to some.
Howard Farran: But come on this is dentistry uncensored. That's true if there a dentist and America, from America. But if she was born in Laos or Cambodia
Dr. Prokes: A lot of its culture.
Howard Farran: The Americans are entitled off the charts.
Dr. Prokes: Yeah. And it's not only the young dentist. You know as well as I do dentist of all ages, they have a tendency, the majority of dentist, to spend more than they make. So they make 100,000 they spent 120, so they make $350k they spend $375k. And that's one of the reasons why the ADA studies have shown that only 4% of us as dentist can retire and maintain the same income that we did a retirement, or the same quality that we did him a time as we did when we were working.
Howard Farran: Okay I want to switch over I only got you for a few more minutes I can't believe we've already gone 57 minutes. We've been talking a lot about the young kids, buying. What should sellers, I want you to spend the last close on sellers, what should sellers be thinking about? And number one, a lot of them don't even, a lot of them, are just aren't thinking of the exit strategy. They're not thinking about the end of the road. What should they be thinking?
Dr. Prokes: Well what they should be thinking again same thing with the buyers, the sellers need to be thinking about their needs. So there needs are economic. How much longer do they need to work with Mark do they need to work full-time, part-time question what do they need to work one year, five years? So they need to have some conversations with a financial advisor to come up with the numbers they need to make. How important is the equity they develop their practice can be applied to the retirement? Is the sale proceeds in the practice going to be this kind of gravy? Or are they relying upon the sales proceeds to fund a significant part of the retirement?
Which, again is what the ADA studies show. Did the other issues again are emotion related. Are they able to share control? Are they able to give up control by bringing a young doctor in? They have the same thing with spousal input. Does your spouse support you in the transition practice or is your spouse thinking that you still need to continue working another five or six or seven years? So what we try, we tried to get the sellers to sit down several years before they intend to sell a practice, and start thinking about their economic, their emotional, their spousal input needs. And that again, that creates the opportunity that they will have to sell. So we never actually sell them a practice, we understand the opportunities offered. And then try to match those up.
Howard Farran: Can I tell you the most hilarious? You talk about emotional needs of the spouse. Can I to you the most hilarious emotional needs of a spouse dental story? Do you guys remember Bob Ibsen?
Dr. Prokes: Bob who?
Howard Farran: Bob Ibsen, the founder the dentist who is the founder of Rembrandt and Den Mat?
Dr. Prokes: Oh yeah, yeah, sure.
Howard Farran: Do you remember Martin?
Dr. Carrow: I don't remember him.
Howard Farran: Those are the first words Martin said by the way. I just wanted to see if he was still alive.
Dr. Carrow: That's because I haven't been able to get a word and edgewise.
Howard Farran: Well will let you get a word in, but anyways he was the dentist in Southern California and he saw that cosmetic revolution. So he started Den Mat, which was dental materials. And he made bleaching, bonding's, veneers. Then he made the first premium toothpaste, Rembrandt, because all the toothpaste that he thought were commodity, Colegate, Crest, three bucks a tube. So he came out with a hot first high end seven, eight, nine dollars tube of toothpaste and all this stuff. Made millions, I think he sold it to Proctor and Gamble, and then out of nowhere Procter and Gamble was swallowed up by Gillette. So he sold it for gazillion, and then when Gillette bought Johnson, or Procter & Gamble it was like a 40% premium.
And he had more money than any, yet more money in cash liquid than probably any dentist this man alive in his life. And when he did that his wife Marcy, they'd been more married for 50 years. She said now Bob, don't get any ideas. I need my time. You're still going to leave the house Monday through Friday 8 to 5, so I don't care if you go get a lawn chair. So he had too much money. He couldn't have a dental office with liability. So he went and started a shelter, a dental practice, that just did volunteer dentistry on women who lost their teeth in shelters. Because he loved the cosmetic stuff. But he couldn't do regular dentistry for money, because he had too much of it. So he went and did volunteer veneers and bridges. He just did free dentistry on abused women. Monday through Friday 8 to 5 because Marcy wouldn't let him come home. I just thought that was the funniest story in the world.
Dr. Prokes: We had a similar story. We had a dentist some years ago and he was in a position where he could afford to retire and he worked five days a week and we talked to him and his wife, and they were ready to retire, and his wife said I don't want him to retire because I don't want him around the house. I have a hard enough time with him on the weekend and it took him two heart attacks before his wife would let him sell the practice.
Howard Farran: Well you know they say it's a really bad time in a marriage. It's very psychologically bad when your husband's been overseas at war for a year and you're living alone, and then he comes home. It's a lot of change. It's the same thing with retirement. The stay home mom, she's at her perfect little nest and now there's some man monkey walking around with close on and is very stressful. So Martin, Marty, You have to get some words and otherwise everybody's going to think you were just a stand-in model. Just to sit there and look pretty during the whole podcast.
Dr. Carrow: So I think one of the most important things as an analyst and was more gratifying for me is, is that I get to communicate with these young people that are wanting to buy dental practices, helping them through educating them on what the processes. Because it is a process. A dentist dental career is a process that is not something that last for 5 to 10 years it is a whole lifetime. And if you plan, I talked to the SI you dental students two weeks ago, and that's the point that I was making to them is that, you know this thing? If you play correctly you'll be successful. And I think that is true with the guys that are selling their practices. If they wait until their 65, and decide hey I want to sell my dental practice. They can't. Or if they can it's going to take, a long time to process, it takes time. You know I started my plan, my exit strategy when I was 46 years old. And retired at 60.
Howard Farran: Marty when you're in those schools is there any data or surveys at what percent of the kids are saying while in dental school I never want to own my practice versus someday I really want to own my own practice have you seen any surveys or numbers on that?
Dr. Carrow: I did not. I can tell you one thing, I asked the third-year dental students how many of them had plans when they got out of school, which would be actually 13 months from the time that I talked to them. And only one student raised their hand. That they knew what they were going to be doing.
Howard Farran: That's actually kind of like when I was in school. my class thought I was a joke because during the lab, for freshman sophomore year during these labs I would always call my dentist buddy Kenny Anderson, my next door neighbor, I'd say Kenny, we got a whole trimester course on making a denture. Will I ever have to set up teeth or make a denture? And he'd say hell no. you just take an impression and send it to the lab. I said okay can I just send it to you and you send it to your lab you make the denture? And he'd say sure. And then in my lab, then in my class I had a 6' x 4' map I had all this data I was putting up tens I would chase other 303 since his tracks for Phoenix.
I put a black pen for every dentist, white for endodontist, orange for orthodontist, Green for periodontist, blue for oral surgeon, and I was making these index cards and I was getting the street widening plans, and the kids all thought it was so fascinating. And I was the only guy in UMKC class of 87 planning it. And when I graduated in May 11, my office was open September 21. Took me four months out of school, but before graduation I already had the location, the size, the demographics, you know just everything.
And I moved 1000 miles away from home from Wichita out to south Phoenix to do that. Also when you're talking to these younger kids, when they're buying a practice, do you ever have to deal with kind of a rational exuberance, or a rational expectations? Because some of them are saying I just want to have a practice limited to cosmetics and bleaching and bonding and veneers or I just want to have a spot a dental spa. I just want to do bleaching and bonding. And have someone doing mani pedi's and all that stuff. And I always say dude I think I need to have you pee in a cup. You're on something. You're delusional. Do you have to, you have to deal with many a rational exuberant expectations?
Dr. Carrow: Not really most of them are very frightened about getting out and doing and getting into the real world.
Howard Farran: They're scared?
Dr. Carrow: Yeah they're scared. And I think that's why some of them go to the corporate dentistry level because they're afraid to get out and do it. And
Howard Farran: And where do you think their fear is coming from? Is it because they grew up in a family where there was no free enterprise, they didn't own their farm, didn't own a family restaurant, mom stayed home, dad was an employee on the assembly line?
Dr. Carrow: Just to talk to a lot of them my niece is a dentist and she just graduated a couple years ago and they did one endodontic procedure in dental school. And they did a molar, most of them do molar and Dell on a manikin they never really do it on a like patient. When I was in dental school we had to do three molars, and as many interiors as we could. So you know I think [inaudible 01:04:24] things, and they do have that debt, and that debt is fear. and I think it's our job as analysts to try and make that fear go way and give them education to where they can, you know.
Howard Farran: [crosstalk 01:04:41]What if you're listening to this right now and you're afraid I want to tell you this, you make a couple good decisions on demographics go rural nonurban, listen to your elders, listen to these podcast, listen to my 30 day dental MBA which is for free on iTunes and YouTube, or my 11 hours virtues of profitable dentistry, which is on iTunes or YouTube. You make a couple good moves it will only be a couple years before you'll net $350,000 in one year.
In one year you can pay all that off. Especially if you got your personal consumption under control. And if you're a male listening to this and you go on a date and they bring a bill is she at that girl doesn't even, say you're going to pay, and she doesn't even try to pay, or even reach for her purse are get our credit card, if she doesn't even try, just what do they call it, dine – question mark just make her pay just dine – just run out of the damn restaurant and then you never be able to see that girl that restaurant again and I see a lot of really, really smart dental students who went and bought a practice in their hometown. And they're living with her mom and dad.
And by the way I want to tell you that when you go around the world. Their 7 billion people, 6 billion people, the whole family grandma grandpa cousins articles all live in the same house. It's only 1 million out of 7 billion, which is the cultural norm in America where we kick all the kids out at 18 and then throw mom and dad in a nursing home when they forget their car keys. When you go to Asia, Africa, and Latin America, mom and dad are still in your house you are not in a nursing home.
And if they had three kids all three kids live in the house. So there's nothing wrong with the family unit. The family unit, so keep your consumption down. Live and your mom's basement. Drive a used car. Here's, try one on for a male dentist, try only dating girls who have a job. How's that for a new concept? Ryan we should do a hold show on teaching male dentist how to only day girls who have a job. So how do they reach you? They always think they have a unique question so they listen on this and they always say well my situations different, so how do they contact you since their situations different?
Blake Ring: Howard if you get on legacypracticetransitions.com, all of our emails cell phones have a variety of different ways you can inquire we got and ask a question piece on our website so they get on www.legacypracticetransitions.com data way to contact us, contact somebody in their local market
Howard Farran: So on the left Dr. Ron Prokes, he's gone as legacytransitions.com Marty is on the far right he's just, he's Marty m-a-r-t-y at legacypracticetransitions.com and like in the middle he's Blake@legacypracticetransitions.com so all your practices are on the classifieds?
Blake Ring: Absolutely.
Howard Farran: And if you're listening to this has it been successful for you guys listing them on the site there?
Blake Ring: Oh absolutely we appreciate that's been a great resource for us we get a lot of inquiries nationwide from your site.
Dr. Prokes: As a matter fact various websites we get more responses from your website than any of the other websites. And our phone number to someone wants to cause us is 800-334-9126. Or you can contact us through the web or they hundred phone number.
Blake Ring: And why should one call Ron versus Blake versus Marty? What would be the difference?
Dr. Prokes: They can contact any one of us Blake and I work more on a national basis, whereas Marty is limited more to Illinois M Missouri for transitions.
Howard Farran: So Marty I got to tell you one of Mike dad said as things out there in Missouri, what was that called? What was the area called that Donny and Marie Osmond?
Dr. Carrow: Branson.
Howard Farran: Branson Missouri. So my dad born and raised in Parsons, Kansas. And of course he moved to the big city of Wichita. And his two brothers Mark and Jerry and a couple school buddies they were trying to get in man they were telling in the Branson was going to be the deal. And they found there was this 40 acre parcel by the highway. And we drove down there two or three times looking at it. And my dad's sitting there thinking, these guys are out of their minds. This is Branson, Missouri. This is not going to be any entertainment you know? blah blah blah and I mean the other one, guys bought it.