Welcome to The Dental Wealth Nation Show with your host, Tim McNeely! In this episode, Tim is joined by guest David Kingsdale, the founder of King’s Ransom, an investment and advisory firm specializing in buying and selling companies. Together, they delve into the essential topic of "How to choose the right and most effective advisor when selling your practice."
David Kingsdale shares valuable insights into the challenges of selling smaller dental practices to Dental Service Organizations (DSOs), emphasizing the significance of bigger DSOs in the market. He highlights the need for dentists to find the right advisors to protect their wealth after financial transactions, emphasizing the importance of early planning for dentists, especially those approaching late fifties or early sixties.
The episode illuminates the necessity of a holistic plan for the future when advising entrepreneurs on selling their businesses. Kingsdale and his team have a passion for helping dentists sell their businesses, acknowledging the emotional component involved in selling their first business.
Throughout the conversation, they emphasize the importance of exit planning for dental practices, the common misconception among dentists regarding the true value of their practices, and the significance of protecting staff and the practice's family-like atmosphere during the sale process.
Join Tim McNeely and David Kingsdale in this insightful episode as they uncover the factors dentists should consider when thinking about exiting dentistry, the benefits and downsides of selling to a DSO, and the strategies for increasing practice valuation. With a focus on providing advice to dentists on maximizing net worth and preparing for their financial future, The Dental Wealth Nation Show offers invaluable information and strategies for dentists looking to make informed decisions about selling their practice.
Keywords: Dental Wealth Nation Show, Tim McNeely, David Kingsdale, selling a dental practice, Dental Service Organizations, exit planning, practice valuation, financial planning, advisor selection, entrepreneur advice, wealth protection, DSO transactions, private equity, practice sale strategies.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:04):
As a driven dentist, you see the world differently where some
see scarcity. You see abundance. When others wanna give
up, you keep going. You're building an amazing life
of significance. That means you can't rely on ordinary
advice from ordinary advisers to get to your goals. You want
advice that's going to help Maximize your net worth so you can
(00:26):
take even better care of the people you love, the causes you care
about, and make your dent in the universe.
But the fact is this advice remains hidden because
relatively few professionals are well versed in them, and the extremely
affluent don't care to let to know about them. Join
us as we pull back the curtain to reveal the often
(00:48):
hidden advice and strategies used by today's most
successful vigils, and families. Welcome
to Dental Wealth Nation. Here's your host, Tim
McNealy.
Welcome everyone to another exciting edition of Dental Wealth Nation.
I am so thrilled about the topic today because in your
(01:11):
practice, in your life, You're working towards a goal, and we're all gonna
reach that day one moment when we decide it's time to
exit our practices. I'll reach into my business. You're gonna reach it in yours, And
that's why today is so important. We wanna begin with the
end in mind. And by the time we finish today, you're gonna know why
you might wanna consider selling your practice Even if you're not
(01:33):
considering exiting Dentist. Right? You you heard me right there. You may wanna consider
selling your practice even if you're not ready to get out. You're gonna have a
new way of thinking about your general enterprise, but most importantly of all,
you're gonna feel excited about your future in dentistry.
And I'm so excited to have David Kingsdale today. He's founder of
King's Ransom. And what I love about David is he hasn't just helped
(01:55):
Dentist exit their business. He's also been involved in buying and
selling several of his own businesses, so he practices what he
preaches. David, welcome to the show. Thanks, Tim. Pleasure to be
here. I'm I'm really excited about it. Thank you. Alright. And what an
important topic. Right? Exit planning, right, figuring out what transition
Looks like and we're gonna dive into all that stuff. We're gonna talk about terms
(02:17):
and dive into new ways of thinking about your dental practice, but Give me a
little background on on how you got started, who's King's Ransom, and and
how'd you get involved in this world of dentistry? Yeah. It's,
it's It's actually an interesting story. So King's Ransom, we are an investment
and advisory firm, based both in LA
and, New York. I have 2 partners. 1
(02:39):
comes off of Wall Street, big, round of big hedge fund. The other,
comes from the venture capital world and has operated several businesses.
And, as you mentioned, I've operated and bought and sold my own businesses. I
start off as a corporate lawyer doing m and a. So,
we came together, both, to invest in companies,
but also to assist companies, in
(03:01):
buying and selling, their company or or other companies.
We got into the dentistry world by complete accident.
We have been, as I said, Doing m and a in different sectors,
and we were approached by several dentists here in the LA area who
were looking to sell and were approached by dental service
organizations, and we're looking for some business advice and
(03:25):
weren't comfortable with kind of the, the advice that they were getting.
And so we started advising them, and we got the dental bug
and, started representing dentists who were
interested, And selling their practice and and educating those
that weren't because they really didn't understand why they should, and
ended up puts putting together a big division of our company to do it.
(03:48):
Wow. Oh, how exciting. Now now you mentioned these doctors you were working with,
they weren't really, you know, sure of the advice that they were getting when they
were Looking to exit and and and sell to a a dental service
organization. What kind of advice were they getting, and and and what made them
uncomfortable about it? Yeah. What what we have
found, and it's not all it's not all dentists, of course, but
(04:10):
generally speaking, Many dentists have been giving
have been given poor information about what the true value of their
practice potentially is. And It was really by design
by the Dental service organizations who wanna buy practices as cheap as
possible, of course. So the word on the street for For
all these years has been, hey. We're gonna pay you 0.8 times your
(04:32):
collections or 4 times your profit or EBITDA,
and dentists really started believing that, and so many dentists in the last
10 years have sold their practices at at those kind of valuation
metrics. That's really not how practices are
sold today. That is way under market. And so a
big part of what we need to do is educate the dentist about what the
(04:55):
the real potential value of the practice is, not what they've heard about it
is in the past. Okay. Let let's back up a little and talk a little
bit about valuation because you're right. There's So much confusion around that.
And how do you value a dental practice? It's not some percentage
of collections like we always hear? It really isn't.
In today's world, it's, a multiple of EBITDA or
(05:18):
the the layman's term profit. And, again, that
that multiple of EBITDA is gonna be
varied by geographic region. I'm here in California,
and, The the multiples tend to be a
little bit lower than in other parts of the country, and so it it's
really a function of the part of the country, the type of practice, General
(05:40):
versus specialty. There's a whole lot of levers and elements involved as you can
imagine. Okay. But but that's interesting. So you said, really, the
valuation is based on profit or that EBITDA that we hear so much
about, and I know a lot of doctors don't necessarily understand that term EBITDA.
Could you explain what that actually is for us? Yeah. EBITDA
means earnings before interest, taxes, and amortization. But at the end of the
(06:02):
day, a doctor could really think about it as what is the real profit
of the business, and that is taking the collections here
and, you know, subtracting all of the legitimate business
expenses. And we all know and and understand that, dentists
run a lot of things through their practices, whether it's their automobile or or
whatever else it is. And part of our job is to really kinda figure out
(06:25):
what the real business EBITDA or profit
is so that We could help the Dentist understand what the value
of their practice could be in the marketplace. Okay. Interesting. So it really
is that profit number that that drives the the valuation.
I see we've got some listeners tuning in. If you've got questions, put them down
below. And we've got David here. We're talking about m and a and the the
(06:47):
dental markets. We're Talking about exiting your practice, how to value it. So if you've
got any questions, just put them down below and we'll answer them live for you.
And so, David, can you talk a little bit about some of the key market
trends that you see going on and and what's really influencing
what's going on in dental right now. Yeah. We
think, well, The almighty dollar always kind of
(07:08):
dictates, you know, the m and a market. And and
so most of these DSOs and Virtually all of them
that we work with are institutionally backed by private equity firms,
Tim. So they're most of them are well heeled,
and the market, has been very frothy. Up
until about 18 months ago, we started seeing a shift,
(07:30):
due to the rise in interest rates that we have all been impacted
by. And so the market is still very strong both for
general practices and specialists. But what we are finding
is DSOs are, a little bit more
choosy or picky. They're not just Kind of, you know,
buying everything under the sun. They're very they're very careful,
(07:53):
because of this cost of capital issue has really affected them in in various
ways. How interesting. Now what should a doctor be
thinking about? Right? We we open the show saying, you know, you might wanna think
about exiting even if you're not looking to get out of dentistry. Why
might that be a case for some of the doctors out there?
Well, I think a big part of it is and and what we need to
(08:14):
understand and and Be good listeners with the with the Dental with the
dentist is, what are their goals and objectives? You know?
A 35 year old dentist may have and probably does have Have different
goals and objectives than a 60 year old or 65 year old,
both, from a financial standpoint and a and what we call a
cultural standpoint. So the way we view it with the Dentist is our job is
(08:37):
to figure out what they're looking for from the economics of
a transaction. And then since they're gonna continue to practice,
and and basically run their practice on a day to day, what
kind of organization makes sense for them to continue to be a part of once
these deals close because they're gonna continue to to practice
for however many years going forward. So those are the 2 kinda
(09:00):
elements that we need to really understand what the doctor's looking for, and then our
job is to go find the best fit from a DSO standpoint.
Okay. And are there advantages or disadvantages To to
working and selling to a DSO over finding another private
buyer in the marketplace? We think so.
You know, there's there's always trade offs, that you know, a
(09:23):
DSO that's backed by private equity Typically
is going to be able to, scratch out a much bigger
check to a practice than a private buyer, who
perhaps is a younger dentist usually, or coming out of
school. That dentist may or may not have his own or
her own, level of Student loans or whatever it is. So,
(09:45):
just from a financial strength standpoint, DSOs, you know, you can kind of,
you know, Check that box.
We also think that what DSOs do and and what a lot of
dentists don't understand is they really take a lot of the headaches
Off the day to day life of the dentist. So once you join a
DSO, you're gonna make a lot of money, but your life
(10:08):
changes in a sense not from a clinical level because most DSOs
are not gonna interfere with the way you you practice your your craft.
But it really is they take off they take things off your hands
such as billing, collections, insurance, marketing,
legal, All the things that really can suck up the time of a dental practice
(10:28):
owner, that's now taken off their hands by the DSO.
Thus, the dentist could really focus on their craft and that's what they love doing,
working and helping patients. Wow. Okay. So so those are some of the
advantages is You might get a higher check when you decide to sell
to the DSO. You're probably stepping into an organization that can help
offload some of the responsibilities in day to day management of the
(10:51):
practice. What would be some potential downsides for selling to a
DSO? Yeah. That's a great question. And at the end of the day,
you you know, You do have a new quote, unquote boss. You
know, the dentist signs a long term contract, so they're they're very stable.
They're not going anywhere. And in fact, The DSO wants the Dentist and
their teams to stay as long as possible. They're making a big investment, so they're
(11:13):
not looking to make any changes typically in the
personnel. But at the end of the day, there is someone else
that quote, unquote, owns the practice, and, that is
an emotional thing for a lot of dentists to have To understand and get
over. Wow. Okay. And so, right, once again, kinda
thinking through this, then maybe DSO sale makes
(11:35):
sense for a a younger dentist who's looking to possibly take some money off
the table, so to speak, and really capitalize on what they've worked so hard
for and kinda Derisk, so to speak, some of their their
portfolio because oftentimes, the doctor, their biggest source of wealth is
their practice. Yeah. In fact, we see that,
typically, the biggest source of their wealth is their practice. And the nice thing about
(11:57):
these transactions, if structured properly, and
we feel like we're we're we're we're solid at that and working with the with
the Dentist is they can take cash off the table. But there's also
a lot of upside going forward, because typically,
the dentist is going to acquire or earn stock
in the DSO itself that, itself that, if the
(12:19):
DSO is run properly and continues to grow, at some point, that
stock that the dentist is getting in the DSO Could be
very valuable for the dentist. So we call that kind of the 2nd bite at
the Tim, where they're making a bunch of money today,
And then fast forward, you know, 3, 4, 5 years down the line when they
could hopefully sell that stock that they've got in DSO, they're making
(12:41):
another big chunk of money. Wow. Okay. Now is there and who
buys that stock when they decide to sell it? Yeah.
Great question. So as we mentioned and as you well know, Most
of these DSOs are backed by large private equity
firms who have, entered the DSO in an early
stage to help them grow. And all of these private equity firms
(13:03):
are looking to monetize their investment in the DSO.
So They're looking at, you know, a 3, 4, 5 year cycle to do
that. So the idea is it's called a recapitalization Nation you know, where
the One private equity firm that owns a big part of the DSO
will sell their interest to another private equity firm in a much
higher valuation than what they invested in.
(13:26):
And that's what can create that additional value for the the selling doctor
then. Correct. Gotcha. Alright. So when you're kinda looking at
these things, you know, What role does some preplanning have
or or are there some strategies that you help dentists employ
to to help them actually increase their value To what the
DSO is offering, are there some strategies and tactics you can employ right
(13:48):
now to start increasing that valuation?
Yeah. You know, the first thing is is to really, you
know, try to get the most out of of your
office and and the capabilities. So what we have, we have
several, clients or or dental practices that have an
extra, you know, operator or 2 that is not being used. So often what
(14:10):
they'll do is they'll in preplanning, they'll bring in an associate
for a a certain period of time, you know, to try to build up those
collections and that profitability. So that's one thing. And the
other thing again, that we talked about is really getting the
financials in order. Because a lot of times what we see is
The finances are are not in in in real good shape. So
(14:33):
part of what we need to do is sit down with the dentist and their
Financial representative and start building out a financial model
that the DSOs are used to seeing, and
then Being able to portray the practice in in the best life
possible from a profitability standpoint. Okay. So there there
there's some preplanning that can be done. How far in advance Do you
(14:55):
recommend someone starts the this preplanning? If, you know, if you're thinking, you
know, exiting may be on the horizon somewhere, When is too
soon to start, or is it ever too soon to start? Yeah. I
our attitude, it's never too soon to start. And, again, I think you have to
go back to what we discussed a a few minutes ago and that is, you
know, what is, you know, the age of the dentist? What is their time horizon?
(15:18):
Are they you know, hopefully, they're in good health and they have a lot of
gas in tank and they wanna continue to practice for another
5, 10 years or whatever it is. So, you know, we need to look at
the whole landscape and then we can advise the dentist appropriately,
But getting discussions going early, as opposed to
later, especially for a dentist that's approaching, you know, late
(15:38):
fifties, early sixties, which by no means is old, But DSOs
want dentists that have a lot of energy, that they're gonna have a comfort
level, they're gonna stick around. So you know, the the the
sooner those conversations start happening or the sooner the dentist at least starts
thinking about that it's a possibility If they can do something like this, the
better off they're gonna be. Okay. Now if you are considering this as
(16:02):
a a doctor, how do you recommend you start looking for advisors and
And people to help you because I know if you go on the Internet and
you type in, you know, dental practice brokers, there's a lot of choices
that come up. So So how do you start thinking through this? What are some
questions we should be asking the potential advisers we're we're
considering working with? How do you recommend a doctor really starts
(16:22):
piecing this together so that they're gonna get the right team to help them?
Yeah. So, you know, it really depends on the needs
of the of the doctor. You know,
most of the doctors that that we that we deal with,
really are in need of a soup to nuts adviser. And what I mean by
that is, a traditional broker, no
(16:44):
disrespect to the brokers, of course, It's really good at kind
of what we call in the industry spray and pray. So they're spraying and praying.
They're sending out the financials of the practice. And then, you know, if
someone's interested, they send it over to the dentist and then the dentist has to
figure out what to do from there, and then the broker's like, I'll see you
at the close. We thought given our m and a backgrounds that we
(17:05):
could provide a much higher level of service to the Dentist, and
that is, You know, we're entrepreneurs who've bought and sold
businesses, so we understand that part of it. And we
can we can certainly empathize with With the dentist who's built the business and
maybe looking to exit. And, again, being able to
provide services Where we we help them get
(17:27):
ready for the sale. We put their their sales materials together in the
proper format. We get their financials in a in a In the
state that the DSO is gonna understand very clearly.
And then once we understand the type of DSO that would be the right
fit, We know who to go to in the marketplace. We
bring them to the dentist. We're able to negotiate the deal on behalf of the
(17:50):
dentist and help them through the entire Due diligence Nation sales
process up until the close. So we're we're a lot of hand
holding. These are these are, you know, Time consuming transactions, and what we
try to do is take a lot of that time commitment off the
dentist's hands and let them continue to focus on their patients. Wow.
Okay. Excellent. Now, you know, you mentioned negotiation. Negotiation
(18:12):
plays a large role in these transactions, doesn't it?
Yeah. It it really does. And, you know, again, I think
because we, you know, we understand the market. We wanna be able to provide that
service to the dentist. The dentist deserves it. You know, because a lot
of dentists that that we end up working with, they've gotten Nation offer, and they
think it's the greatest thing since sliced bread. But The key is
(18:34):
to bring multiple offers to to the dentist
to really kind of drive up this bidding type war for the practice.
And there's not a lot sometimes their regular lawyer who may be doing
their estate planning or their regular CPA may not really
understand how these Transactions could or should be structured. So
(18:54):
whether it's us or or or any other firm out there, we highly
recommend that dentists get the right representation of Someone that understands
how to do these types of transactions. Okay. Now when you talk about
structuring the the deal, right, I know a lot of doctors are just thinking, well,
I Wealth the practice and I work back, or or are there other
things that are involved in the negotiation and structuring the deal? And
(19:16):
and could you give us a couple examples of of some of the options a
doctor may have that they've never even considered.
Yeah. So it's interesting because
Some DSOs are most of the DSOs wanna buy a 100% of the
practice and Nation there's different part elements of the compensation that would be
involved in the dentist. Definitely cash that they're gonna get in their bank
(19:38):
account when the deal closes. That cash never gets taken away from
them. It's great. But there's also things and and,
again, not a new term for you, earn outs, where as long as
the dentist continues to perform, and let's say keep the collections where they've
been, There's more upside. There's more bonuses for cash
bonuses for the dentist. The longer the dentist stays,
(20:00):
they may be able to earn more Stock in the DSO. So there's
financial elements that are really important to understand,
and and again, Sometimes the other professionals that don't have
experience, in this area that have worked with the dentist, they
may or may not, you know, Understand how to structure those. So that's a big
part of our job. Interesting. So right you the right. The total
(20:22):
consideration may be, I don't know, $20,000,000, but out of that
20, it may be 10,000,000 upfront and, you know, a couple
million in terms of of earnouts and then a Couple million on the back end
Nation so they're they they really can be structured very differently then.
Yeah. They really can Nation and also the the amount that and, you know, to
follow them up last There are some DSOs that'll buy less than a 100% of
(20:45):
the practice. So, you know, sometimes for a younger dentist, they wanna
they wanna continue to own a a larger percentage of their
own practice. That is possible in the marketplace. There are players
in the DSO world that, have built their businesses and you know,
under that model. But the older Dentist
gets, what we usually hear is, David, get us get
(21:07):
me the most cash possible at the close,
Please. That's typically what they want. Okay. I and then
kinda going back to that that that preplanning, are there are there tax
Nation strategies or things that can be put in place to to help the
doctor really put more money in their pocket on an after tax basis and do
you get involved in those? We we are involved,
(21:29):
but that's we're we're not experts in it. And so we we tend
to work with, folks like you, Wealth, you
know, wealth managers, very, prolific c CPAs.
A lot of tax planning is done, you know, pre market,
of course, because the taxman driveth much of these
(21:50):
deals. Again, I'm telling you nothing you know,
everything you know already. But if someone doesn't have a tax
professional, we are you know, we we tend to be able to
refer them appropriately because it's it's needed. Okay. And
so, right, even once again, kinda coming back to the the market and and
everything that's going on. Is there an optimal time or
(22:12):
a practice mile stone or something doctors can kinda look
at that that really is a a trigger or something for them to say, hey.
Now's now's a good time to maybe consider what my practice is worth
and What my exit options look like? Yeah. I mean,
again, I think that goes to age of the of the dentist. I think it
goes to size of practice. Selling the smaller practices is
(22:33):
getting, a little trickier. Again, going back to the
environments, become a little bit more challenging. So I think
DSOs for DSOs, bigger is typically better.
We're seeing, you know, DSOs are still buying single, Single
doctor practices, sole practitioners, you know, our
multi multi Dentist and multi office, practices
(22:56):
Stronger in the market? Absolutely. So, again, it's it's
really for the dentist. We we need to look at what the landscape is within
the dental you know, within their own practice. You know, a practice that's, you
know, doing less than $1,000,000 is is you know,
we we typically don't get involved in those, you know, Just for obvious
reasons and and marketplace reasons mostly. But because we wanna be helpful
(23:19):
to dentists. Like, we only take on Project you know, projects
or or or dental practices that we feel really
confident that we could do right by the dentist. I mean, that's my
partners and I are you know, as As you can see, we're we're I'm an
older guy, and part of what we love doing is giving back to
to to these dentists. And we all wanna make a lot of money. We get
(23:40):
We're not diminishing that, but, we've bought and sold businesses, and
we've had, you know, advisers that have helped us. And this is kind of part
of how, You know, we love doing this. This is this is our our
passion to to help other people sell their businesses because we've
had people help us throughout the years. Yeah. Right? And when
you go through that process yourself, you you really bring experience and
(24:02):
knowledge that you can't get from just studying these things. Right?
Being involved. Right? Because, it's not just financial. There's also a
huge emotional component to this also. At least I've found.
Do do you find that too with a lot of these doctors that there there
really is that emotional component that they have to deal with also?
100%, Tim. And and as entrepreneurs, I think you nailed it. It that you
(24:24):
know, for for me, that was one of the hardest things when I sold, you
know, Certainly, my 1st business. And for these dentists, this is their 1st
business and sole business. And sometimes,
you know, even though this This idea of, well, I know I'm gonna make a
lot of money, but it's not gonna be my business anymore. That's that's that's very
Nation, and it's very it's very challenging for the Dentist, and and we
(24:46):
get that. Yeah. Well and I know I have known quite a few
entrepreneurs. They will sell their business, and they'll, you know, have a, you know,
48 month, you know, Work back or whatever it is and it 48
months and one day, they're out. And, you know, but but they're able to
leave with significant capital To actually still continue to to
fund their lifestyle. And and that's one thing I always find myself
(25:07):
advising on is, you know, let's look at these deals and let's make sense Let's
make sure it makes sense for you and where you are so that if you
know what? You Wealth and you hate it, at least you've got enough capital to
still continue to support your lifestyle, Take care of the people you love and and
continue to really make an impact in the world. So so you can do this,
but but make sure that you're doing it, You know, in conjunction with a
(25:29):
holistic plan so that you're looking at everything. Yeah.
No. I think I think that's a great point. And, look, No one's gonna bat
a1000 in terms of, you know, the doctors being happy
as part of their new organization. You know, we
we're hopefully, that is the case, and they the doctors love
working with the DSO, and they feel supported, and they're growing.
(25:51):
And it's it's it's enlightening, and it's challenging, and it's fun.
But to your point, that's not always the case, and I'd be naive to say
that it is. And so it goes back to, Well, let's just make sure the
doctor has made plenty of money, at the close because if
for some reason and we never know what the future holds. For some reason the
doctors are not happy as part of this new Nation, they do wanna step aside,
(26:14):
they're okay, they're more than okay. Yeah. So, you know, in
working with doctors, are there some, you know, common misconceptions that you
come across a lot that, you know, That they come to you and they think
one thing, but it's really something else and because I'd love to address just some
some common misconceptions that are out there. Yeah. I
think, let me touch on it. The the the biggest misconception
(26:36):
is what what the true value of Their
practice that they spent Mhmm. Decades building is
potentially worth. And it's it's really mind boggling when we sit
down with the dentist and, You know, let's say the practice is doing,
you know, $1,000,000 of EBITDA, which is a great big
practice, of course. And and and there's or or Let's just say it's doing 5,000,000
(26:59):
at collections Nation they're telling us, well, I can't sell it for 0.5
times collections even even though the practice is making $1,000,000.
So They they've been given this really poor information about the
value of the practice, and it's it's actually it's it's
surprising, and and kinda sad. And Once
we educate the dentist, that really starts to get them
(27:21):
thinking like, okay. Wow. What I have been doing, Besides helping
all of these patients for all these decades, like, wow, I really have created some
wealth within my own practice beyond the paycheck that I've been getting every Every
month or every quarter or whatever it is. So so once again, that
valuation piece piece is huge, and and I see some listeners tuning in. If
you've got questions, Post them down below. We'll get to them live. We'll have David
(27:43):
answer them for you. We'd love to serve you in any way and help educate
you in any way we can. So take advantage of it. Post your questions down
below right now. So how does your firm approach the
valuation of dental practices?
Yeah. So we you know, it's it's pretty, pretty straightforward.
You know, once we, work with a practice, we get a handful of
(28:04):
items, informational items about the practice. Obviously,
financial information, you know, type of
practice, number of operatories, who does what within the practice, how many
patients, Etcetera, etcetera. And then we run that through a filter.
We do a quick analysis, and we're able to come back to
the to the doctor With some opinions about what we think
(28:26):
the value of the practice will be and, the reception that the practice will
get. Sometimes we have to come back to our practice and say, you know
what? You know, this is what we found, and the practice really
isn't profitable enough for for you to to make hay. You You know,
sometimes that's the case. They're not all they're not all ready to go.
So that's how we look at it. And, you know, once
(28:49):
Once we come up with an understanding of, again, what the dentist is looking
for financially and from a cultural standpoint, With
this fit with the DSO going forward, we're all
guns ablazing in the marketplace. We we hit the market really hard.
We protect the dentist from, you know, having to get on calls that we don't
think are gonna be worthwhile, and Wealth we only have serious, You know,
(29:11):
serious DSOs kinda go to the next step in the process.
Okay. You know what? It it was interesting when you were talking about that. You
mentioned, you know, part of it is is helping the the doctor to really think
about what they're looking for culturally and financially, right, what
kind of fit they want. How often do you start those questions of asking
a doctor, well, What are you looking for culturally or what are you looking in
(29:32):
terms of for in fit? And they kinda stare at you blankly and say,
I have no idea. Is that is that pretty common? Actually,
it's not. And then, you know, because so most
dentists really care and love their teams. And, like, we have we just
sold a practice, here in LA. And they're, you know,
2 dentists, but their their team has been with them, some of them for 25
(29:54):
years. And it's a family, and they don't want their family
messed with By this, you know, by this new big DSO
Nation. And so that plays a much larger role than
you would think. Okay. And are there ways to structure the
deal to to really make sure that that that your staff and the the
family and the Practice is protected, or are those things that can actually be
(30:17):
addressed in the negotiations? Yes. Oftentimes,
we can because a lot of these people are put on contracts And
so that their current comp or if their comp is getting raised, it's
locked in. The benefits are spelled out very
clearly because Once you become part of the DSO, you become part of their
benefits, medical, and other.
(30:39):
And so all of that is part of the process, The sales process
to make sure that that that not only the Dentist, but
their teams are well taken care of. Because the last thing anyone
wants is for a staff member to say, oh, I don't
you know, my my comp my insurance is gonna cost me more now or I'm
not getting as good an Insurance or whatever it is, you you don't want that,
(31:01):
you don't wanna lose your people, you wanna keep your people. Okay.
Excellent. Now, right, with with an m and a adviser, right, is your role Pfizer.
Right? Is your role strictly coming in, you know, helping find
those find the right buyer, finding the right fit, Getting the transaction
done and then stepping away, or is there still an additional role for you to
play after the deal closes? So because there
(31:22):
are, we mentioned this term, earn outs, you know, additional compensation
that the doctor can earn, If they're, you know, based based on
their performance and their team's performance, we tend to keep,
a hand in In it with the DSO and with the
dentist to make sure that what the DSO agreed to do,
they're in fact going to do it. So we stay in touch with our practices.
(31:46):
We, you know, we have they they send us their their financial performance.
We're in touch with the DSOs. It's it's It's an ongoing
relationship, to make sure that the deal that we help
negotiate is being, you know, respected by all
parties. Okay. Excellent. Oh, no. That that's so so helpful.
So I know you've certainly been a a wealth of advice, and, you know, I
(32:10):
I certainly know why you might wanna selling your practice even
if you're not looking to to exit dentistry. Right? Take some money off the table
and and really derisk what's going on in your business. You've given us a new
way to think about dental enterprises, and, I
certainly am always excited about the the future in dentistry.
I think it's one of the best careers out there. And so Before we sign
(32:32):
off, David, how can we get in touch with you? How can we, you know,
get you to help us with looking at our options for exiting the practice?
Yeah, Tim. My partners and I you know, one thing we really enjoy doing are
meeting meeting dentists. And, again, whether they're they're ready to sell or
just Starting to think about it. We we like to develop the
relationships early, and we we really have
(32:54):
we we We like to educate them. I think we're educators first and
foremost at the beginning of a relationship to to have the dentist
understand what the potential is. And then if and when they're
ready, we do believe that we can offer them a a very high level of
service and and really get them what, you know, What they want and what they
deserve in the marketplace. And, you know, we're in it for the we're
(33:17):
we're playing the long game here. So we're developing relationships with dentists
younger and older, I would love to meet as many as we can.
Alright. And how do we get in touch with you? How do we find you?
So we have our my I can Give you my email. It's
david@king'sransomgroup.com. Little long, but
not hard. We also have a website, kingsransomgroup,
(33:40):
.com. Again, you can reach me at both places. I'm also on
LinkedIn. You know, and we, The more
dentists that we we meet, we also put out a newsletter called Ransom
Thoughts, about different topics in terms of selling
to to DSOs, the market, what the post life post
closed life of the Dentist is, you know, a host of articles
(34:03):
that we write just to try to let dentists understand what this really
means. Wow. Okay. Excellent. And, actually, as you were given your email
address, right, King's Ransom. Right? Why the name's King's Ransom? I I I I'm
guessing there's a story behind that. I I wish there was a more
exciting story, Tim. So, obviously, my last name is Kingsdale.
I wish I could say I came up with a name, but an investment banker
(34:24):
buddy of mine that I've known forever, when I started the
company, he said, what are you gonna name it? I said, I don't know. I'm
thinking about it. And he came up with King's Ransom,
and I really loved it, and and some people are like, no. King's ransom,
that's not the best name. But other people are like, yeah. And then I started
thinking, you know, a king's ransom for us, that means,
(34:46):
not just a play on my name, of course, which is is nothing, but
how can we really provide a king's ransom worth of value to all
parties that we touch in these transactions. Mhmm. You know?
And that's our goal. You know? We wanna we wanna work with good
people. We wanna we wanna get them what they deserve,
and we wanna have a good time doing it. No. I I love that. No.
(35:07):
Right? I I think it brings out kinda the the fun, the excitement because, You
know, if you do all this and you reach the end and you're worn out
and exhausted and tired and beat up, I'm gonna argue you did it
wrong. And so yeah. You certainly may be a little
tired. You may be a little exhausted, but you wanna have fun during the process
because That's what life is. And, you know, the great thing about entrepreneurship, at
(35:29):
least that I find, is a lot of entrepreneurs, you don't have to do
this. You really don't have to run your Dental practice. You're doing it because you
want to. You've reached that stage. You've built significant wealth, and and it
changes just like you've mentioned. Right? It becomes about impact. It becomes about
serving and not just about, you know, how do I get a bigger bank account?
So so I love that that that ethos comes through in in what you do.
(35:50):
Yeah. And so any closing thoughts before we sign off here,
David? I just I just wanna thank you, Tim. I think that the
the work that you do and and, you know, the these these things that you
do for the community are are are really great and really add a lot of
a lot of knowledge. And, you know, I wanna thank you for
having Beyond. I would like to, In fact, build a deeper
(36:12):
relationship with you because, you know, once our job is done at King's
Ransom, a whole another, episode or
chapter of the dentist life takes hold now that they have a lot of money.
And one of the things that we really encourage, and it's not what we do,
is that they get with the right advisors to protect what we've helped
them you know make in these transactions, so I I really
(36:35):
respect what you do and who you do it with, so thank you. No. Thank
you. Yeah. Dentistry is something I'm I'm passionate about. I'm married to a dentist and,
she changed my life, and and I think it's one of the greatest professions around.
I love the people I get to meet and just like you, right, just serving
people and, you know, I find the happiest people are the ones who are solving
other people's problems. So Thank you for being such a great guest, David. I
(36:56):
appreciate it. Thank you, Tim. My pleasure. Appreciate it. Alright. We'll see you all
again here soon on the Dental Wealth Nation Show. Thanks.
You've been listening to Dental Wealth Nation. We hope you've gotten
some useful and practical information from the show. Join us
next time as we pull back the curtain to reveal the often
hidden advice and strategies used by today's Most
(37:18):
successful individuals and families and help maximize your net
worth so you can take even better care of the people you love. Of.
Till next time. Make sure to hit the website at
Nation
As a driven dentist, you see the world differently where some
see scarcity. You see abundance. When others wanna give
up, you keep going. You're building an amazing life
of significance. That means you can't rely on ordinary
advice from ordinary advisers to get to your goals. You want
advice that's going to help Maximize your net worth so you can
(00:26):
take even better care of the people you love, the causes you care
about, and make your dent in the universe.
But the fact is this advice remains hidden because
relatively few professionals are well versed in them, and the extremely
affluent don't care to let to know about them. Join
us as we pull back the curtain to reveal the often
(00:48):
hidden advice and strategies used by today's most
successful vigils, and families. Welcome
to Dental Wealth Nation. Here's your host, Tim
McNealy.
Welcome everyone to another exciting edition of Dental Wealth Nation.
I am so thrilled about the topic today because in your
(01:11):
practice, in your life, You're working towards a goal, and we're all gonna
reach that day one moment when we decide it's time to
exit our practices. I'll reach into my business. You're gonna reach it in yours, And
that's why today is so important. We wanna begin with the
end in mind. And by the time we finish today, you're gonna know why
you might wanna consider selling your practice Even if you're not
(01:33):
considering exiting Dentist. Right? You you heard me right there. You may wanna consider
selling your practice even if you're not ready to get out. You're gonna have a
new way of thinking about your general enterprise, but most importantly of all,
you're gonna feel excited about your future in dentistry.
And I'm so excited to have David Kingsdale today. He's founder of
King's Ransom. And what I love about David is he hasn't just helped
(01:55):
Dentist exit their business. He's also been involved in buying and
selling several of his own businesses, so he practices what he
preaches. David, welcome to the show. Thanks, Tim. Pleasure to be
here. I'm I'm really excited about it. Thank you. Alright. And what an
important topic. Right? Exit planning, right, figuring out what transition
Looks like and we're gonna dive into all that stuff. We're gonna talk about terms
(02:17):
and dive into new ways of thinking about your dental practice, but Give me a
little background on on how you got started, who's King's Ransom, and and
how'd you get involved in this world of dentistry? Yeah. It's,
it's It's actually an interesting story. So King's Ransom, we are an investment
and advisory firm, based both in LA
and, New York. I have 2 partners. 1
(02:39):
comes off of Wall Street, big, round of big hedge fund. The other,
comes from the venture capital world and has operated several businesses.
And, as you mentioned, I've operated and bought and sold my own businesses. I
start off as a corporate lawyer doing m and a. So,
we came together, both, to invest in companies,
but also to assist companies, in
(03:01):
buying and selling, their company or or other companies.
We got into the dentistry world by complete accident.
We have been, as I said, Doing m and a in different sectors,
and we were approached by several dentists here in the LA area who
were looking to sell and were approached by dental service
organizations, and we're looking for some business advice and
(03:25):
weren't comfortable with kind of the, the advice that they were getting.
And so we started advising them, and we got the dental bug
and, started representing dentists who were
interested, And selling their practice and and educating those
that weren't because they really didn't understand why they should, and
ended up puts putting together a big division of our company to do it.
(03:48):
Wow. Oh, how exciting. Now now you mentioned these doctors you were working with,
they weren't really, you know, sure of the advice that they were getting when they
were Looking to exit and and and sell to a a dental service
organization. What kind of advice were they getting, and and and what made them
uncomfortable about it? Yeah. What what we have
found, and it's not all it's not all dentists, of course, but
(04:10):
generally speaking, Many dentists have been giving
have been given poor information about what the true value of their
practice potentially is. And It was really by design
by the Dental service organizations who wanna buy practices as cheap as
possible, of course. So the word on the street for For
all these years has been, hey. We're gonna pay you 0.8 times your
(04:32):
collections or 4 times your profit or EBITDA,
and dentists really started believing that, and so many dentists in the last
10 years have sold their practices at at those kind of valuation
metrics. That's really not how practices are
sold today. That is way under market. And so a
big part of what we need to do is educate the dentist about what the
(04:55):
the real potential value of the practice is, not what they've heard about it
is in the past. Okay. Let let's back up a little and talk a little
bit about valuation because you're right. There's So much confusion around that.
And how do you value a dental practice? It's not some percentage
of collections like we always hear? It really isn't.
In today's world, it's, a multiple of EBITDA or
(05:18):
the the layman's term profit. And, again, that
that multiple of EBITDA is gonna be
varied by geographic region. I'm here in California,
and, The the multiples tend to be a
little bit lower than in other parts of the country, and so it it's
really a function of the part of the country, the type of practice, General
(05:40):
versus specialty. There's a whole lot of levers and elements involved as you can
imagine. Okay. But but that's interesting. So you said, really, the
valuation is based on profit or that EBITDA that we hear so much
about, and I know a lot of doctors don't necessarily understand that term EBITDA.
Could you explain what that actually is for us? Yeah. EBITDA
means earnings before interest, taxes, and amortization. But at the end of the
(06:02):
day, a doctor could really think about it as what is the real profit
of the business, and that is taking the collections here
and, you know, subtracting all of the legitimate business
expenses. And we all know and and understand that, dentists
run a lot of things through their practices, whether it's their automobile or or
whatever else it is. And part of our job is to really kinda figure out
(06:25):
what the real business EBITDA or profit
is so that We could help the Dentist understand what the value
of their practice could be in the marketplace. Okay. Interesting. So it really
is that profit number that that drives the the valuation.
I see we've got some listeners tuning in. If you've got questions, put them down
below. And we've got David here. We're talking about m and a and the the
(06:47):
dental markets. We're Talking about exiting your practice, how to value it. So if you've
got any questions, just put them down below and we'll answer them live for you.
And so, David, can you talk a little bit about some of the key market
trends that you see going on and and what's really influencing
what's going on in dental right now. Yeah. We
think, well, The almighty dollar always kind of
(07:08):
dictates, you know, the m and a market. And and
so most of these DSOs and Virtually all of them
that we work with are institutionally backed by private equity firms,
Tim. So they're most of them are well heeled,
and the market, has been very frothy. Up
until about 18 months ago, we started seeing a shift,
(07:30):
due to the rise in interest rates that we have all been impacted
by. And so the market is still very strong both for
general practices and specialists. But what we are finding
is DSOs are, a little bit more
choosy or picky. They're not just Kind of, you know,
buying everything under the sun. They're very they're very careful,
(07:53):
because of this cost of capital issue has really affected them in in various
ways. How interesting. Now what should a doctor be
thinking about? Right? We we open the show saying, you know, you might wanna think
about exiting even if you're not looking to get out of dentistry. Why
might that be a case for some of the doctors out there?
Well, I think a big part of it is and and what we need to
(08:14):
understand and and Be good listeners with the with the Dental with the
dentist is, what are their goals and objectives? You know?
A 35 year old dentist may have and probably does have Have different
goals and objectives than a 60 year old or 65 year old,
both, from a financial standpoint and a and what we call a
cultural standpoint. So the way we view it with the Dentist is our job is
(08:37):
to figure out what they're looking for from the economics of
a transaction. And then since they're gonna continue to practice,
and and basically run their practice on a day to day, what
kind of organization makes sense for them to continue to be a part of once
these deals close because they're gonna continue to to practice
for however many years going forward. So those are the 2 kinda
(09:00):
elements that we need to really understand what the doctor's looking for, and then our
job is to go find the best fit from a DSO standpoint.
Okay. And are there advantages or disadvantages To to
working and selling to a DSO over finding another private
buyer in the marketplace? We think so.
You know, there's there's always trade offs, that you know, a
(09:23):
DSO that's backed by private equity Typically
is going to be able to, scratch out a much bigger
check to a practice than a private buyer, who
perhaps is a younger dentist usually, or coming out of
school. That dentist may or may not have his own or
her own, level of Student loans or whatever it is. So,
(09:45):
just from a financial strength standpoint, DSOs, you know, you can kind of,
you know, Check that box.
We also think that what DSOs do and and what a lot of
dentists don't understand is they really take a lot of the headaches
Off the day to day life of the dentist. So once you join a
DSO, you're gonna make a lot of money, but your life
(10:08):
changes in a sense not from a clinical level because most DSOs
are not gonna interfere with the way you you practice your your craft.
But it really is they take off they take things off your hands
such as billing, collections, insurance, marketing,
legal, All the things that really can suck up the time of a dental practice
(10:28):
owner, that's now taken off their hands by the DSO.
Thus, the dentist could really focus on their craft and that's what they love doing,
working and helping patients. Wow. Okay. So so those are some of the
advantages is You might get a higher check when you decide to sell
to the DSO. You're probably stepping into an organization that can help
offload some of the responsibilities in day to day management of the
(10:51):
practice. What would be some potential downsides for selling to a
DSO? Yeah. That's a great question. And at the end of the day,
you you know, You do have a new quote, unquote boss. You
know, the dentist signs a long term contract, so they're they're very stable.
They're not going anywhere. And in fact, The DSO wants the Dentist and
their teams to stay as long as possible. They're making a big investment, so they're
(11:13):
not looking to make any changes typically in the
personnel. But at the end of the day, there is someone else
that quote, unquote, owns the practice, and, that is
an emotional thing for a lot of dentists to have To understand and get
over. Wow. Okay. And so, right, once again, kinda
thinking through this, then maybe DSO sale makes
(11:35):
sense for a a younger dentist who's looking to possibly take some money off
the table, so to speak, and really capitalize on what they've worked so hard
for and kinda Derisk, so to speak, some of their their
portfolio because oftentimes, the doctor, their biggest source of wealth is
their practice. Yeah. In fact, we see that,
typically, the biggest source of their wealth is their practice. And the nice thing about
(11:57):
these transactions, if structured properly, and
we feel like we're we're we're we're solid at that and working with the with
the Dentist is they can take cash off the table. But there's also
a lot of upside going forward, because typically,
the dentist is going to acquire or earn stock
in the DSO itself that, itself that, if the
(12:19):
DSO is run properly and continues to grow, at some point, that
stock that the dentist is getting in the DSO Could be
very valuable for the dentist. So we call that kind of the 2nd bite at
the Tim, where they're making a bunch of money today,
And then fast forward, you know, 3, 4, 5 years down the line when they
could hopefully sell that stock that they've got in DSO, they're making
(12:41):
another big chunk of money. Wow. Okay. Now is there and who
buys that stock when they decide to sell it? Yeah.
Great question. So as we mentioned and as you well know, Most
of these DSOs are backed by large private equity
firms who have, entered the DSO in an early
stage to help them grow. And all of these private equity firms
(13:03):
are looking to monetize their investment in the DSO.
So They're looking at, you know, a 3, 4, 5 year cycle to do
that. So the idea is it's called a recapitalization Nation you know, where
the One private equity firm that owns a big part of the DSO
will sell their interest to another private equity firm in a much
higher valuation than what they invested in.
(13:26):
And that's what can create that additional value for the the selling doctor
then. Correct. Gotcha. Alright. So when you're kinda looking at
these things, you know, What role does some preplanning have
or or are there some strategies that you help dentists employ
to to help them actually increase their value To what the
DSO is offering, are there some strategies and tactics you can employ right
(13:48):
now to start increasing that valuation?
Yeah. You know, the first thing is is to really, you
know, try to get the most out of of your
office and and the capabilities. So what we have, we have
several, clients or or dental practices that have an
extra, you know, operator or 2 that is not being used. So often what
(14:10):
they'll do is they'll in preplanning, they'll bring in an associate
for a a certain period of time, you know, to try to build up those
collections and that profitability. So that's one thing. And the
other thing again, that we talked about is really getting the
financials in order. Because a lot of times what we see is
The finances are are not in in in real good shape. So
(14:33):
part of what we need to do is sit down with the dentist and their
Financial representative and start building out a financial model
that the DSOs are used to seeing, and
then Being able to portray the practice in in the best life
possible from a profitability standpoint. Okay. So there there
there's some preplanning that can be done. How far in advance Do you
(14:55):
recommend someone starts the this preplanning? If, you know, if you're thinking, you
know, exiting may be on the horizon somewhere, When is too
soon to start, or is it ever too soon to start? Yeah. I
our attitude, it's never too soon to start. And, again, I think you have to
go back to what we discussed a a few minutes ago and that is, you
know, what is, you know, the age of the dentist? What is their time horizon?
(15:18):
Are they you know, hopefully, they're in good health and they have a lot of
gas in tank and they wanna continue to practice for another
5, 10 years or whatever it is. So, you know, we need to look at
the whole landscape and then we can advise the dentist appropriately,
But getting discussions going early, as opposed to
later, especially for a dentist that's approaching, you know, late
(15:38):
fifties, early sixties, which by no means is old, But DSOs
want dentists that have a lot of energy, that they're gonna have a comfort
level, they're gonna stick around. So you know, the the the
sooner those conversations start happening or the sooner the dentist at least starts
thinking about that it's a possibility If they can do something like this, the
better off they're gonna be. Okay. Now if you are considering this as
(16:02):
a a doctor, how do you recommend you start looking for advisors and
And people to help you because I know if you go on the Internet and
you type in, you know, dental practice brokers, there's a lot of choices
that come up. So So how do you start thinking through this? What are some
questions we should be asking the potential advisers we're we're
considering working with? How do you recommend a doctor really starts
(16:22):
piecing this together so that they're gonna get the right team to help them?
Yeah. So, you know, it really depends on the needs
of the of the doctor. You know,
most of the doctors that that we that we deal with,
really are in need of a soup to nuts adviser. And what I mean by
that is, a traditional broker, no
(16:44):
disrespect to the brokers, of course, It's really good at kind
of what we call in the industry spray and pray. So they're spraying and praying.
They're sending out the financials of the practice. And then, you know, if
someone's interested, they send it over to the dentist and then the dentist has to
figure out what to do from there, and then the broker's like, I'll see you
at the close. We thought given our m and a backgrounds that we
(17:05):
could provide a much higher level of service to the Dentist, and
that is, You know, we're entrepreneurs who've bought and sold
businesses, so we understand that part of it. And we
can we can certainly empathize with With the dentist who's built the business and
maybe looking to exit. And, again, being able to
provide services Where we we help them get
(17:27):
ready for the sale. We put their their sales materials together in the
proper format. We get their financials in a in a In the
state that the DSO is gonna understand very clearly.
And then once we understand the type of DSO that would be the right
fit, We know who to go to in the marketplace. We
bring them to the dentist. We're able to negotiate the deal on behalf of the
(17:50):
dentist and help them through the entire Due diligence Nation sales
process up until the close. So we're we're a lot of hand
holding. These are these are, you know, Time consuming transactions, and what we
try to do is take a lot of that time commitment off the
dentist's hands and let them continue to focus on their patients. Wow.
Okay. Excellent. Now, you know, you mentioned negotiation. Negotiation
(18:12):
plays a large role in these transactions, doesn't it?
Yeah. It it really does. And, you know, again, I think
because we, you know, we understand the market. We wanna be able to provide that
service to the dentist. The dentist deserves it. You know, because a lot
of dentists that that we end up working with, they've gotten Nation offer, and they
think it's the greatest thing since sliced bread. But The key is
(18:34):
to bring multiple offers to to the dentist
to really kind of drive up this bidding type war for the practice.
And there's not a lot sometimes their regular lawyer who may be doing
their estate planning or their regular CPA may not really
understand how these Transactions could or should be structured. So
(18:54):
whether it's us or or or any other firm out there, we highly
recommend that dentists get the right representation of Someone that understands
how to do these types of transactions. Okay. Now when you talk about
structuring the the deal, right, I know a lot of doctors are just thinking, well,
I Wealth the practice and I work back, or or are there other
things that are involved in the negotiation and structuring the deal? And
(19:16):
and could you give us a couple examples of of some of the options a
doctor may have that they've never even considered.
Yeah. So it's interesting because
Some DSOs are most of the DSOs wanna buy a 100% of the
practice and Nation there's different part elements of the compensation that would be
involved in the dentist. Definitely cash that they're gonna get in their bank
(19:38):
account when the deal closes. That cash never gets taken away from
them. It's great. But there's also things and and,
again, not a new term for you, earn outs, where as long as
the dentist continues to perform, and let's say keep the collections where they've
been, There's more upside. There's more bonuses for cash
bonuses for the dentist. The longer the dentist stays,
(20:00):
they may be able to earn more Stock in the DSO. So there's
financial elements that are really important to understand,
and and again, Sometimes the other professionals that don't have
experience, in this area that have worked with the dentist, they
may or may not, you know, Understand how to structure those. So that's a big
part of our job. Interesting. So right you the right. The total
(20:22):
consideration may be, I don't know, $20,000,000, but out of that
20, it may be 10,000,000 upfront and, you know, a couple
million in terms of of earnouts and then a Couple million on the back end
Nation so they're they they really can be structured very differently then.
Yeah. They really can Nation and also the the amount that and, you know, to
follow them up last There are some DSOs that'll buy less than a 100% of
(20:45):
the practice. So, you know, sometimes for a younger dentist, they wanna
they wanna continue to own a a larger percentage of their
own practice. That is possible in the marketplace. There are players
in the DSO world that, have built their businesses and you know,
under that model. But the older Dentist
gets, what we usually hear is, David, get us get
(21:07):
me the most cash possible at the close,
Please. That's typically what they want. Okay. I and then
kinda going back to that that that preplanning, are there are there tax
Nation strategies or things that can be put in place to to help the
doctor really put more money in their pocket on an after tax basis and do
you get involved in those? We we are involved,
(21:29):
but that's we're we're not experts in it. And so we we tend
to work with, folks like you, Wealth, you
know, wealth managers, very, prolific c CPAs.
A lot of tax planning is done, you know, pre market,
of course, because the taxman driveth much of these
(21:50):
deals. Again, I'm telling you nothing you know,
everything you know already. But if someone doesn't have a tax
professional, we are you know, we we tend to be able to
refer them appropriately because it's it's needed. Okay. And
so, right, even once again, kinda coming back to the the market and and
everything that's going on. Is there an optimal time or
(22:12):
a practice mile stone or something doctors can kinda look
at that that really is a a trigger or something for them to say, hey.
Now's now's a good time to maybe consider what my practice is worth
and What my exit options look like? Yeah. I mean,
again, I think that goes to age of the of the dentist. I think it
goes to size of practice. Selling the smaller practices is
(22:33):
getting, a little trickier. Again, going back to the
environments, become a little bit more challenging. So I think
DSOs for DSOs, bigger is typically better.
We're seeing, you know, DSOs are still buying single, Single
doctor practices, sole practitioners, you know, our
multi multi Dentist and multi office, practices
(22:56):
Stronger in the market? Absolutely. So, again, it's it's
really for the dentist. We we need to look at what the landscape is within
the dental you know, within their own practice. You know, a practice that's, you
know, doing less than $1,000,000 is is you know,
we we typically don't get involved in those, you know, Just for obvious
reasons and and marketplace reasons mostly. But because we wanna be helpful
(23:19):
to dentists. Like, we only take on Project you know, projects
or or or dental practices that we feel really
confident that we could do right by the dentist. I mean, that's my
partners and I are you know, as As you can see, we're we're I'm an
older guy, and part of what we love doing is giving back to
to to these dentists. And we all wanna make a lot of money. We get
(23:40):
We're not diminishing that, but, we've bought and sold businesses, and
we've had, you know, advisers that have helped us. And this is kind of part
of how, You know, we love doing this. This is this is our our
passion to to help other people sell their businesses because we've
had people help us throughout the years. Yeah. Right? And when
you go through that process yourself, you you really bring experience and
(24:02):
knowledge that you can't get from just studying these things. Right?
Being involved. Right? Because, it's not just financial. There's also a
huge emotional component to this also. At least I've found.
Do do you find that too with a lot of these doctors that there there
really is that emotional component that they have to deal with also?
100%, Tim. And and as entrepreneurs, I think you nailed it. It that you
(24:24):
know, for for me, that was one of the hardest things when I sold, you
know, Certainly, my 1st business. And for these dentists, this is their 1st
business and sole business. And sometimes,
you know, even though this This idea of, well, I know I'm gonna make a
lot of money, but it's not gonna be my business anymore. That's that's that's very
Nation, and it's very it's very challenging for the Dentist, and and we
(24:46):
get that. Yeah. Well and I know I have known quite a few
entrepreneurs. They will sell their business, and they'll, you know, have a, you know,
48 month, you know, Work back or whatever it is and it 48
months and one day, they're out. And, you know, but but they're able to
leave with significant capital To actually still continue to to
fund their lifestyle. And and that's one thing I always find myself
(25:07):
advising on is, you know, let's look at these deals and let's make sense Let's
make sure it makes sense for you and where you are so that if you
know what? You Wealth and you hate it, at least you've got enough capital to
still continue to support your lifestyle, Take care of the people you love and and
continue to really make an impact in the world. So so you can do this,
but but make sure that you're doing it, You know, in conjunction with a
(25:29):
holistic plan so that you're looking at everything. Yeah.
No. I think I think that's a great point. And, look, No one's gonna bat
a1000 in terms of, you know, the doctors being happy
as part of their new organization. You know, we
we're hopefully, that is the case, and they the doctors love
working with the DSO, and they feel supported, and they're growing.
(25:51):
And it's it's it's enlightening, and it's challenging, and it's fun.
But to your point, that's not always the case, and I'd be naive to say
that it is. And so it goes back to, Well, let's just make sure the
doctor has made plenty of money, at the close because if
for some reason and we never know what the future holds. For some reason the
doctors are not happy as part of this new Nation, they do wanna step aside,
(26:14):
they're okay, they're more than okay. Yeah. So, you know, in
working with doctors, are there some, you know, common misconceptions that you
come across a lot that, you know, That they come to you and they think
one thing, but it's really something else and because I'd love to address just some
some common misconceptions that are out there. Yeah. I
think, let me touch on it. The the the biggest misconception
(26:36):
is what what the true value of Their
practice that they spent Mhmm. Decades building is
potentially worth. And it's it's really mind boggling when we sit
down with the dentist and, You know, let's say the practice is doing,
you know, $1,000,000 of EBITDA, which is a great big
practice, of course. And and and there's or or Let's just say it's doing 5,000,000
(26:59):
at collections Nation they're telling us, well, I can't sell it for 0.5
times collections even even though the practice is making $1,000,000.
So They they've been given this really poor information about the
value of the practice, and it's it's actually it's it's
surprising, and and kinda sad. And Once
we educate the dentist, that really starts to get them
(27:21):
thinking like, okay. Wow. What I have been doing, Besides helping
all of these patients for all these decades, like, wow, I really have created some
wealth within my own practice beyond the paycheck that I've been getting every Every
month or every quarter or whatever it is. So so once again, that
valuation piece piece is huge, and and I see some listeners tuning in. If
you've got questions, Post them down below. We'll get to them live. We'll have David
(27:43):
answer them for you. We'd love to serve you in any way and help educate
you in any way we can. So take advantage of it. Post your questions down
below right now. So how does your firm approach the
valuation of dental practices?
Yeah. So we you know, it's it's pretty, pretty straightforward.
You know, once we, work with a practice, we get a handful of
(28:04):
items, informational items about the practice. Obviously,
financial information, you know, type of
practice, number of operatories, who does what within the practice, how many
patients, Etcetera, etcetera. And then we run that through a filter.
We do a quick analysis, and we're able to come back to
the to the doctor With some opinions about what we think
(28:26):
the value of the practice will be and, the reception that the practice will
get. Sometimes we have to come back to our practice and say, you know
what? You know, this is what we found, and the practice really
isn't profitable enough for for you to to make hay. You You know,
sometimes that's the case. They're not all they're not all ready to go.
So that's how we look at it. And, you know, once
(28:49):
Once we come up with an understanding of, again, what the dentist is looking
for financially and from a cultural standpoint, With
this fit with the DSO going forward, we're all
guns ablazing in the marketplace. We we hit the market really hard.
We protect the dentist from, you know, having to get on calls that we don't
think are gonna be worthwhile, and Wealth we only have serious, You know,
(29:11):
serious DSOs kinda go to the next step in the process.
Okay. You know what? It it was interesting when you were talking about that. You
mentioned, you know, part of it is is helping the the doctor to really think
about what they're looking for culturally and financially, right, what
kind of fit they want. How often do you start those questions of asking
a doctor, well, What are you looking for culturally or what are you looking in
(29:32):
terms of for in fit? And they kinda stare at you blankly and say,
I have no idea. Is that is that pretty common? Actually,
it's not. And then, you know, because so most
dentists really care and love their teams. And, like, we have we just
sold a practice, here in LA. And they're, you know,
2 dentists, but their their team has been with them, some of them for 25
(29:54):
years. And it's a family, and they don't want their family
messed with By this, you know, by this new big DSO
Nation. And so that plays a much larger role than
you would think. Okay. And are there ways to structure the
deal to to really make sure that that that your staff and the the
family and the Practice is protected, or are those things that can actually be
(30:17):
addressed in the negotiations? Yes. Oftentimes,
we can because a lot of these people are put on contracts And
so that their current comp or if their comp is getting raised, it's
locked in. The benefits are spelled out very
clearly because Once you become part of the DSO, you become part of their
benefits, medical, and other.
(30:39):
And so all of that is part of the process, The sales process
to make sure that that that not only the Dentist, but
their teams are well taken care of. Because the last thing anyone
wants is for a staff member to say, oh, I don't
you know, my my comp my insurance is gonna cost me more now or I'm
not getting as good an Insurance or whatever it is, you you don't want that,
(31:01):
you don't wanna lose your people, you wanna keep your people. Okay.
Excellent. Now, right, with with an m and a adviser, right, is your role Pfizer.
Right? Is your role strictly coming in, you know, helping find
those find the right buyer, finding the right fit, Getting the transaction
done and then stepping away, or is there still an additional role for you to
play after the deal closes? So because there
(31:22):
are, we mentioned this term, earn outs, you know, additional compensation
that the doctor can earn, If they're, you know, based based on
their performance and their team's performance, we tend to keep,
a hand in In it with the DSO and with the
dentist to make sure that what the DSO agreed to do,
they're in fact going to do it. So we stay in touch with our practices.
(31:46):
We, you know, we have they they send us their their financial performance.
We're in touch with the DSOs. It's it's It's an ongoing
relationship, to make sure that the deal that we help
negotiate is being, you know, respected by all
parties. Okay. Excellent. Oh, no. That that's so so helpful.
So I know you've certainly been a a wealth of advice, and, you know, I
(32:10):
I certainly know why you might wanna selling your practice even
if you're not looking to to exit dentistry. Right? Take some money off the table
and and really derisk what's going on in your business. You've given us a new
way to think about dental enterprises, and, I
certainly am always excited about the the future in dentistry.
I think it's one of the best careers out there. And so Before we sign
(32:32):
off, David, how can we get in touch with you? How can we, you know,
get you to help us with looking at our options for exiting the practice?
Yeah, Tim. My partners and I you know, one thing we really enjoy doing are
meeting meeting dentists. And, again, whether they're they're ready to sell or
just Starting to think about it. We we like to develop the
relationships early, and we we really have
(32:54):
we we We like to educate them. I think we're educators first and
foremost at the beginning of a relationship to to have the dentist
understand what the potential is. And then if and when they're
ready, we do believe that we can offer them a a very high level of
service and and really get them what, you know, What they want and what they
deserve in the marketplace. And, you know, we're in it for the we're
(33:17):
we're playing the long game here. So we're developing relationships with dentists
younger and older, I would love to meet as many as we can.
Alright. And how do we get in touch with you? How do we find you?
So we have our my I can Give you my email. It's
david@king'sransomgroup.com. Little long, but
not hard. We also have a website, kingsransomgroup,
(33:40):
.com. Again, you can reach me at both places. I'm also on
LinkedIn. You know, and we, The more
dentists that we we meet, we also put out a newsletter called Ransom
Thoughts, about different topics in terms of selling
to to DSOs, the market, what the post life post
closed life of the Dentist is, you know, a host of articles
(34:03):
that we write just to try to let dentists understand what this really
means. Wow. Okay. Excellent. And, actually, as you were given your email
address, right, King's Ransom. Right? Why the name's King's Ransom? I I I I'm
guessing there's a story behind that. I I wish there was a more
exciting story, Tim. So, obviously, my last name is Kingsdale.
I wish I could say I came up with a name, but an investment banker
(34:24):
buddy of mine that I've known forever, when I started the
company, he said, what are you gonna name it? I said, I don't know. I'm
thinking about it. And he came up with King's Ransom,
and I really loved it, and and some people are like, no. King's ransom,
that's not the best name. But other people are like, yeah. And then I started
thinking, you know, a king's ransom for us, that means,
(34:46):
not just a play on my name, of course, which is is nothing, but
how can we really provide a king's ransom worth of value to all
parties that we touch in these transactions. Mhmm. You know?
And that's our goal. You know? We wanna we wanna work with good
people. We wanna we wanna get them what they deserve,
and we wanna have a good time doing it. No. I I love that. No.
(35:07):
Right? I I think it brings out kinda the the fun, the excitement because, You
know, if you do all this and you reach the end and you're worn out
and exhausted and tired and beat up, I'm gonna argue you did it
wrong. And so yeah. You certainly may be a little
tired. You may be a little exhausted, but you wanna have fun during the process
because That's what life is. And, you know, the great thing about entrepreneurship, at
(35:29):
least that I find, is a lot of entrepreneurs, you don't have to do
this. You really don't have to run your Dental practice. You're doing it because you
want to. You've reached that stage. You've built significant wealth, and and it
changes just like you've mentioned. Right? It becomes about impact. It becomes about
serving and not just about, you know, how do I get a bigger bank account?
So so I love that that that ethos comes through in in what you do.
(35:50):
Yeah. And so any closing thoughts before we sign off here,
David? I just I just wanna thank you, Tim. I think that the
the work that you do and and, you know, the these these things that you
do for the community are are are really great and really add a lot of
a lot of knowledge. And, you know, I wanna thank you for
having Beyond. I would like to, In fact, build a deeper
(36:12):
relationship with you because, you know, once our job is done at King's
Ransom, a whole another, episode or
chapter of the dentist life takes hold now that they have a lot of money.
And one of the things that we really encourage, and it's not what we do,
is that they get with the right advisors to protect what we've helped
them you know make in these transactions, so I I really
(36:35):
respect what you do and who you do it with, so thank you. No. Thank
you. Yeah. Dentistry is something I'm I'm passionate about. I'm married to a dentist and,
she changed my life, and and I think it's one of the greatest professions around.
I love the people I get to meet and just like you, right, just serving
people and, you know, I find the happiest people are the ones who are solving
other people's problems. So Thank you for being such a great guest, David. I
(36:56):
appreciate it. Thank you, Tim. My pleasure. Appreciate it. Alright. We'll see you all
again here soon on the Dental Wealth Nation Show. Thanks.
You've been listening to Dental Wealth Nation. We hope you've gotten
some useful and practical information from the show. Join us
next time as we pull back the curtain to reveal the often
hidden advice and strategies used by today's Most
(37:18):
successful individuals and families and help maximize your net
worth so you can take even better care of the people you love. Of.
Till next time. Make sure to hit the website at
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