Keith Miller on What Dentists Should Ask Before Partnering With a DSO

Speaker A: What has changed in your thinking about how the business should operate from where you started to where you are now?

Speaker B: Because in the early day of the DSOs, the maker of the break were the investors. I think that's right. When I started in 2002, that, yes, I didn't realize what I started, but it was the bad word. And I think 2020 changed everything. Everything got turned upside down from not being able to find dentists, not being able to find hygienists, having staff turnover. And we didn't really experience any of that prior to that. We really build strong the structure on a, uh, very structured model from day one because we were so focused on doing the right things for a model that's going to last through whatever pressures we have.

Speaker A: Welcome back to the Dental Economist Show. I'm your host, Mike Huffaker. If you're getting value from the show, uh, please take a moment to subscribe, like leave a review, um, or share the episode with a colleague. It genuinely helps us keep bringing conversations like this to you. My next guest did not start in dentistry. He started in grocery. Keith Miller spent his early career at Aldi USA and then at a retail startup that opened 22 stores in two years. He eventually found his way into dental, spending 13 years as a principal leader at Dental One Partners, one of the top 10 national DSOs, growing it, uh, from a small footprint to more than 150 locations across 14 states. Then he ran an urgent care platform in North Texas and tripled it in his first year. Then he came back to dentistry. Since 2017, Keith has served as president and COO, uh, of partnerships for dentists, P4D, a DSO built around a simple idea. Doctors stay in control clinically and financially, and a seasoned operations team handles everything else. On average, their affiliated practices see a 30% EBITDA increase in year one. Keith is also one of the more candid executives I've come across. Someone who talks openly about operational missteps, financial pressure, and what failure taught him. That kind of honesty, uh, unfortunately can be rare in this space. I'm looking forward to getting into it. Keith, welcome to the Dental Economist Show.

Speaker B: Well, thanks, Mike. Happy, uh, to be here and excited to, uh, have a conversation with you today.

Speaker A: Yeah, me too. Um, I love talking to people that came from outside of dentistry. There's so many people that, uh, kind of grew up in the space or their dads or parents were. Mom was a dentist. And, um, you know, I came from outside, uh, from retail restaurant hospitality. And you started in grocery and retail operations, uh, before Dental. When you, when you look back at that time, um, what did Aldi and Fleming Foods teach you about running a multi site business that you still think about today?

Speaker B: Well, the Aldi experience, truly, um, they're one of the greatest operators in the world. I think they have the highest margins I know in grocery, they have the highest margins out of all grocery retailers. And it's a German based company and is really based on discipline. And so when I was with Aldi, I was straight out of school, uh, I went right into middle management. So became a district manager straight out of college. Had, uh, had a year's training program. But it was intense, uh, lots of hours. They expected a ton. Uh, matter of fact my first year I lost 30 pounds. Um, it was crazy on how many hours and how many meals I skipped because I was having to work. But it was one of those things that they made this grocery business uh, simple and they really broke it down to, at the store level. They kept track of inventory. So your inventory loss, your productivity, so how many man hours that you used versus your sales and your sales, that's it. And it really um, you know for me coming out of school and I didn't have you know, big company experience, it was a very interesting thing to watch this machine work. And you know it's uh, I started as a district manager probably two and a half years, uh, out of that I became a director of operations. And next thing you know I'm opening up a grocery store a week. And uh, you know, I was responsible for Ohio, Michigan, New York, uh, Pennsylvania. And it was, it was a big undertaking but you had to learn on the fly. Uh, we didn't have an HR department. We, I mean everything fell under operations. So you had to be the legal person, you had to be the administration person, you had to be the operations person. Like you had to do everything. And that was for me just, I mean I'm writing back on eeoc, uh, claims myself. You know, I didn't have a lawyer do it. It was, it was an amazing experience. And you know, once I kind of got through that and I left uh, to open up the startup, like I felt like I had a whole, you know, full bag of tricks that uh, people my age and at that point had not experienced. And I felt like I grew up, um, I didn't have the typical 20s life of going out and partying and doing all those things, working all the time. But it got me to a place where I could uh, really feel confident in taking on new adventures and taking on Big opportunities.

Speaker A: You got like a whole MBA just by way of experience. Not, not in the classroom, but the, the school of actually being out there day in, day out, having to wear so many different hats across. Across an organization when. When. So now you've been at P4D since 2017. Is that, is that right? Um, so all coming up on 10 years. Um, what's the version of the model today versus what you walked into, if it has changed and what has changed your thinking about how the business changed, in your thinking about how the business should operate from kind of where you started to where you are now?

Speaker B: Well, I think, uh, first of all, I was really blessed, um, by having. I have a lot of people that used to work with me at my old company in the dental business came with me. So, uh, from our leadership, we really believe in servant leadership. And that's culture. From having the culture built and having people around you, they get that already. Uh, that was imperative. Um, and when we started P40, it was really the fact that we had learned so much in our other company. Uh, one thing we knew for sure is we wanted to have a partnership model. Uh, in the old company, we had partial partnerships and partial, uh, employee, so that, you know, some of the practices were branded and some were not, uh, had partnerships, had. Not partnerships. And one thing we knew for sure is we wanted a doctor to have an upside. And we wanted to make sure that it wasn't just investors. Because in the early day of the DSOs, you know, it was the. The maker of the break were the investors, right? They're the ones that made all the money. The doctors, uh, you know, didn't. Didn't really make a lot and a lot of times lost. And they were very early days, you know, the companies that went under, you know, know, they had been bought and, uh, their company had been bought with stock, and then there was no stock. So that's when the DSO industry had a terrible, you know, uh, reputation. And I think that's right when I started in 2002, that, you know, DSOs. I didn't realize it when I started, but it was the bad word, right? Like, dental schools hated DSOs. You know, dentists hated DSOs. And really we had to collectively work, uh, together, you know, which was unique, that dental companies wanted to work together to build the reputation of a dso. So we had the one thing in mind, and that was to do that, uh, we named the company Partnerships for Dentists because really we wanted to have these partnerships for the dentist. We wanted to provide things that they couldn't get other places at that time. And we wanted their, um, equity value to go up. Right? We wanted them to make money. We wanted them to be, uh, parapassu with the other investors. We didn't want them to be left out. And so, you know, that, that was kind of the first blush of what we wanted. And then we built from there and, and I think, you know, 2020 changed everything. Um, the whole. Everything, you know, got turned upside down from not being able to find dentists, not being able to find hygienists, having staff turnover. And, you know, we didn't, we didn't really experience any of that prior to that. So we had to really remake ourselves after that and how to deal with those issues. And, and that's. We, we still have some of those issues now. It's not nearly as was at, uh, that point. But, you know, we, we always believe that culture is so important and that, you know, we always think, you know, we want to make decisions for everyone. And, you know, sometimes it's the greatest good for the greatest amount of people. Not everyone is happy with the decisions.

Speaker A: Right.

Speaker B: But as long as we are taking care of, you know, the, the larger constituency and, and most everyone that, I, I feel like truly a winning formula.

Speaker A: So this might be oversimplified, but the pitch, uh, for a dentist is keep your autonomy, keep your equity, we'll handle the business. Which I think sounds, uh, very clean on paper, but what does it actually take operationally to deliver on that promise and to deliver on that promise across a scale of 40 plus practices?

Speaker B: Well, thank you. Boy, that's a loaded question. Um, I would say, you know, the discipline that I learned at Aldi is, is really what I brought here. And, uh, you know, that in 2017, we're competing versus a lot of groups that would say, hey, you know, let us buy your practice. Nothing will change. You don't have to change everything. You know, your software is great. You don't have to do. You don't have to use any labs, you don't have to use any supplies. Everything can stay the same. Now in my heart knowing, you know, had been in the year the industry for 15 years, I know that doesn't work, right? Like, it's some point somebody who wants to buy your business is going to expect. You can grow sales and you can, uh, get the, the bottom line to increase every year. So we really built, you know, the, the, the structure on a very structured model from day one. And, and we put that into our sales presentation to say hey, you know, you're not going to have unlimited choices and we're going to have a supply formulary. It's going to be the very best items. It's going to be the, the items that Gordon Christense or have the very best labs. Um, but there's not going to be a thousand choices. This could be a very minimal choice. You're going to have everything you need. We promise to make sure to take care of the patient and do that well. Um, but if, if we let everyone do what they want to do, there's no way in the end of the scheme that you're going to make the money that you want to make. Right. So we got everyone bought into the model prior to assigning on the bottom line, which is so key because nowadays you're seeing all these companies scrambling. You know, that's number, uh, one, overpaid for their practices. And so they, they got a debt problem and they're not getting the financial returns out of the, the practices that they had hoped or underwritten. But then they're going back and saying, okay, all those things we promised you when we bought you, now we're going to have to change that. And that is so hard because that's, you know, if you have a good relationship with your partners, you won't have to go back on things and say, everything that you joined us for now is changing because financially we have to or the bank's going to own us. And, um, I think in, uh, the last ICOM meeting I went to that, uh, Pat Bauer had said four out of the 10 biggest DSOs are owned by their bank. And I mean, to me it comes back to a lot of disciplinary things that you get to that point and there's not one right or wrong. But it can be a cumulative, you know, thing in operations and how you buy practices that get you to that point. But we decided to stick with it. You know, we couldn't buy 50 a year under that model. You know, we average 5 to 10 a year. We could afford as many as we want, but because we were so focused on doing the right things for a model that's going to last, you know, through whatever pressures we have, um, you know, we ended up growing, you know, smaller. Uh, but our financial results today are the best thing. We had our best year we ever had last year. And I think that all goes back to discipline.

Speaker A: Yeah. So when, when you were talking about initially when you're, when you're seeking to grow and we, we did go through that phase, which was right When I kind of entered dentistry, where at the top of, uh, at the front of every stage, at every conference, somebody was up there proclaiming how they don't make anybody change anything and everything is fine. And like, that's their, their acquisition model, um, which is, I think in some ways just a very low barrier of entry to become a partner with an organization. And even at that time, because of the background that I came from a restaurant, hospitality, I was like, this is crazy talk. Like, no, no business runs this way. Why? What is going on in this industry where people think that this is actually a, um, good idea? Um, did you find it challenging to grow kind of during that era? Because there was that expectation that was in the space. And, and why do you think that there are dentists that would seek to partner or sell a part of their practice or whatever the particular model is and expect that nothing would change? Like, isn't, isn't there a desire to improve, which is kind of the whole reason for going through this process? As long as you're not a retiring dentist, the, the whole reason to go through the process in the first place.

Speaker B: Well, I think, you know, marketing has gotten pretty incredible, right. Like, through all, we have a lot of brokers in the business who, yeah, um, you know, are sending out flyers saying we can get 8 times, 9 times, 10 times for your business. And I think the, uh, focus became why so many people, you know, decided to sell their business is they thought it was kind of a once in a lifetime opportunity to have a multiple that they may never get again. So, um, you know, what better way to sell somebody say, hey, we're going to pay 8x on your EBITDA and not make you do anything different.

Speaker A: Y.

Speaker B: And so, you know, it was, it was a passive path of least resistance. But I mean, if you look at the amount of DSOs that are out there today compared to what was here in 17, like it's, you know, 20 times. Right. The growth has been incredible, but a lot has been fueled by the fact there's been a lot of promises that today, you know, are making people struggle because they can't fulfill those promises. So, uh, yeah, there was absolutely, we were winning one out of every 20 that we were bidding on for sure. But, um, as frustrated as, as my, uh, acquisition guy was, you know, I just said, hey, you know, I, I, I'm old enough to know you can't chase. And if you chase and you overpay and you, you do things that aren't the right thing for our business and for the doctor, in the long run, we're gonna pay for it. And, um, you know, I think we all believe that. It's just, you know, losing sucks. And, you know, when you're losing deals and you're hearing they're going to this, you know, DSO and this dso because they promises all these things. And yeah, as a leader, I gotta step back, say, I understand it sucks to lose, but it's okay. And now, you know, as we talk about things and we talk about where we are financially and how well our partners have done and the amount of irr, uh, they have on their investment since they've been with us, it makes us proud that we didn't, uh, succumb to what everyone else was doing and we stuck to our guns and said, hey, we've been doing this business for a long time and we're not going to change with the wind. We're going to stick with what's right for the business, what's right for the doctor, what's right for the patient, and make sure that's always in alignment and not move away from that.

Speaker A: When you're looking to partner with a new practice, um, what are some of the questions that they should be asking that they often don't ask?

Speaker B: I, and this is probably not a popular one with everyone, but because I think it's the most valuable thing, I think a dentist should always ask for the financials of the dso.

Speaker A: Yeah.

Speaker B: Because everyone gets caught up to say, what am I going to get? What price am I going to get? What multiple is that? You know, um, you know, when is the next equity event? All these questions which, um, you know, doesn't always have a good answer or a real answer. The bottom line is you want to be a partner that's going to be here in five years, you want to be with a partner that's going to be in 10 years. And the only way that you would know that is to see historically, how have their financials been, you know, have they ever had any load covenant problems? You know, do they have any debt problems? You know, what is going on? Do they have no free cash flow? When is their ebitda? What do they do for their partners when they come on? Do they, you know, you mentioned, you know, one of the things we're most proud of is the, uh, the growth of ebitda in year one, you know, is 30%. I don't know anyone that can actually say that. And you can go into our financials and we, we, we look at that every board meeting where it's loud and proud on how we do for our doctor partners. So, you know, that's, for me, I, you know, I think every dentist that's going to join a DSO should, you know, is that DSO financially going to be there?

Speaker A: Yeah, uh, no, I, I agree too. I was having a, uh, dinner in Chicago a couple months ago with some folks that, that run at dso and I kind of got into the same conversation. I was like, are dentist owners, when they're looking to partner, are they asking all of the suitors that are in the market at that point, you know, about financial health, are they getting an understanding about the growth that has taken place, um, with the existing practices or EBITDA increases or things like that. And they were like, it's very rare that those questions are actually asked. It's like, hey, we're sharing our information about, you know, our quality of earnings and like what, what our EBITDA is and like, we want to know what the, the, the multiple max is. And I was just surprised because I would think that it's a short term way of thinking. Unless you're looking to sell an exit that you would want to find, um, a financially stable group, you wouldn't necessarily need to maximize your EBITDA multiple on the front end because your upside is so much greater long term. If you partner with somebody that is growing, that's responsible, that increases your, your EBITDA in year one in the way that you all do. Um, do you think it's an education challenge? Is it a, a broker issue? Like what, where does it come into play that folks aren't pursuing that?

Speaker B: Well, I think it is that the broker relationship, number one. You know, the brokers, the biggest, I think they always try to do the right thing, number one, but they're also trying to get the best amount of money for the doctor. So I don't think in most cases a doctor could understand a company's financials. You know, they're pretty. So you would need that help, ah, from the broker to push that to say, hey, we'll help you compare financials for those, you know, those different companies. Um, so I, I, I think it's a lack of education. Most doctors, you know, a lot of them don't even know their own numbers. Right. So to, to have them diagnose my numbers and, and know if they're good or bad is, is challenging. So they have to have help.

Speaker A: Yeah, let's dive into that 30% number a little bit. What are the levers that, that are pulled? What are the changes that take place, that create, that results in year one for a newly partnered practice to increase their EBITDA in that way.

Speaker B: Well, we try to be, um, I would say non invasive. Two things that have to have are using our lab and supply formula and um, we run about 8% combined for those two numbers. Um, most dental practices are probably close to 12 to 15. So you see a lot of movement there. The three biggest costs, um, in dental practice are lab supplies and labor. Uh, we don't do anything with labor except uh, we typically have better rates on healthcare and you know, that we can help them save on the benefits side. But there are literally things up and down the P and L that we, you know, from malpractice to um, the insurance for the building, you know, there, you know, the different suppliers. If you're using revenue, we use revenue well for our patient communications, you know, we use Jarvis, uh, to be able to aggregate our numbers and you know, up and down that line we can do it a lot less expensive than a dentist can do it for himself. So the, the biggest pull and push is the lab and supplies and then everything else is supplemental. But I mean we, we've had practices that um, we've had big practices that we've bought that had you know like 15, 13% EBITDA, um, and today they're over 30%. And that's really our sweet spot is big practices that have an expense problem, um, that we have found that we can really help them and help them quick to be able to get in high profitability because of our disciplined model and also the savings uh, that we can get from our vendors.

Speaker A: You talked a bit about culture and leadership. Um, I'm probably going to get the statement incorrect, but you said, you know, you make decisions for the benefit of everybody. The most benefit for the, for the most people or the most amount of people that are in the organization. Um, there's always going to be uh, folks that disagree with the decision or that are outliers from what the consensus may be. How do you handle that on a individual practice, dentist owner basis when somebody is really, um, either vocal or upset about a path that has been cited that you all are going to take?

Speaker B: Well, everything is relationship, right? So um, I would just say that I feel like I have a great relationship with all our partners and uh, I think I built up a lot of trust. So number one, I don't have an extraordinarily a lot of that issue. Right. So let me knock the whole, because my email or phone will blow up with It, I could like jinxed it. But um, you know, I, I think we, we typically when we roll something out. So we did Perl AI, right? That was, that was initiative. We did that back in 2021. We tested it in four practices and it didn't work for us. Like, it wasn't something that worked. Um, and my partners, you know, I had some tested and they're like, nope, nope, nope, we are stuck out. And then um, I revisited it back in uh, I guess it was 2025, um, or this late 24 and the technology had gotten so much better and ah, the level of service that they were providing that I wanted to do it again. And so we did it and guess what? Now everyone's bought in and it has been a great initiative for us and we partnered with Pearl, um, and also Cured ont. And we're helping just so many patients now because of that technology. But you know, I stopped the rollout in the first place because of the feedback that I got from our partners. Uh, we'll often do that. Uh, you know, we'll find technologies and we'll do just a small amount of practices. Uh, and then if, if it works in those small amount of practices, I'll double it. You know, we may do four and then we'll do eight and we'll do 16 and you know, we'll just keep going. Like we have um, two, two big initiatives right now that we're using TrueLark to be able to answer our calls. Uh, when the practice is enabled, they do it via text message. And we're um, another technologies we're doing is online scheduling with revenuewell. Um, and we probably have um, three quarters of the practices but not everyone's there yet. Not everyone's ready for it. And we're not shoving down their throat, but we're trying to use influence to try to show them, hey, listen, the world is moving towards automation. Right. There's so many people in the healthcare world that are calling places, they're using their phone, they're using the web. And so we have to keep up with that. Even though it could be a little uncomfortable that you know, not, not everyone wants to switch to that, that we have to be on the forefront and push to make sure that we're getting the services that patients want or if we, we don't stay up like that, they're going to end up finding somebody that will.

Speaker A: Yeah, you know, the online scheduling one's an interesting one because it's dental seems so late to that party in, in many Ways and consumer expectations are you go on a website, you can book an appointment and would depend, no matter what type of service you're looking to get provided, whether it's healthcare or something else. Um, I think for longtime practices were afraid of, like, losing control of their schedules. There was like this notion that if they were allowing people to do online scheduling, but the technology's gone so far at this point where there's so many controls that you get to put into place to ensure that that doesn't happen. What is the kind of largest obstacle or objection that you hear today when you want to implement, uh, an online scheduling functionality for patients to book direct?

Speaker B: I think it is the fact that the practices just don't want to lose that control, right. Like, that they feel we know best, that this is how long the appointment should take, or this is where it should be, or, you know, and this is. I'm dating myself, but back, you know, I used to, you know, put a root canal, you know, on top of, you know, two other major procedures, and then the doctor will be very upset. Um, so I think where we are today, we're really sitting down with the office leader in each practice and walking through their life and not saying, hey, this is not going to be cookie cutter. This is not going to be our block scheduling. This is what you do. This is your block scheduling. And, uh, we recently just finished a practice that does about $7 million and they have 18 operatories. And it is going famously like you would never meet with that amount of patient flow that, um, it would do that well, but it's been just fantastic. So, you know, I think you have to show versus talk, right? Like, show that we can overcome. And it also be vulnerable to say there will be issues, there will be problems, but we promise you we'll work through them. We'll get, we'll get through them together, and we'll get to the other side of that. And I think that patience and that trust is what's really important. We're gonna, we're gonna do what we say. And, you know, what if we can't fix it and it won't work right for the patients, we'll get rid of it. You know, it's. And we have a lot of AI. You know, we've tested a lot of different AI companies and it hasn't worked out and it wasn't good. So, um, you know, uh, that's the thing with being in the technology business, that sometimes things are out there that don't do what they say and, and Then your people get really frustrated, you know, quit giving us stuff that you promised it would do this, but it doesn't and it doesn' and that's where I have to be the gatekeeper to make sure that we're only really going with the right companies that have the proven results.

Speaker A: Yeah, unfortunately that happens all too often, especially today. It's hard to separate the signal from the noise with a lot of the AI technologies that are coming out to understand whether or not the promise, um, upholds like the reality, upholds what the promise was. And oftentimes that is certainly not the case, at least not yet. I mean, like you even mentioned with your radiographic AI experience, you know, try it one day, wait a couple years, it's going to look completely different. And maybe at that point, you know, it meets the needs. Um, I think it's a great, um, story, uh, about that practice that implemented the online scheduling. If you can navigate online scheduling with a practice that is as complex to operate as one of that size, um, that should be a pretty strong signal that this is something that can be worked out from an operational perspective. Um, for practices of many sizes, I would think.

Speaker B: Well, and even more complexity. That practice has two levels and it sees all cash and PPO on the top level and all. Um, so like we crossed many bridges figuring that one out because it's definitely a different patient base and they behave different. And uh, you know, in a Medicaid environment, unfortunately we see a lot more no shows and cancellations. So there's a bit of over scheduling that happens in those practices. So it was a really good one. I'm really proud of the team that uh, put that together and the staff at the practice to be able to really pull that off and make it work. Because it is one I can point to to say, listen, if they can do it, you know, in your six operatory facility like this should be a breeze.

Speaker A: Yeah, absolutely. Um, when you're thinking about, um, partnering with practices, I think I might have misheard you before, but I think you mentioned that you seek kind of strong practices that are typically maybe larger in size. Uh, would you say like 2 million plus production would be kind of the.

Speaker B: We look at, um, 1.5 million is kind of the floor for us. We find that, um, the practices that are bigger, there's a lot more opportunity to help them with expenses. And you know, a lot of dentists that have really big, strong, profitable, successful practice, they make so much money that they're not really, you know, on their own. Their own like hey, I'm making a million a year. Like, why do I want to go and have to, you know, look at my supplies or look at my lab or look at my labor? And those are the ones that we can really, you know, without a lot of change helped them a lot. And they see, you know, they're. You know, we do distributions, right? So m. I've always believed in, you know, that the two models that are out there are JV models, and then one, when the doctor's getting their equity in the parent company and, you know, with. With the things that we've seen in this industry over the last 25 years, that there's a lot of the parent companies that have gone away, right? That means a lot of doctors have lost every bit of their investment. And I always kept that in the back of my mind. And even though banks don't like doing it, um, that I feel like giving them a distribution, you know, on a quarterly basis. It keeps their head in the game, uh, because they don't have everything tied up in one entity that they don't have control of. So we, um, don't have any, uh, we don't have any parent stock. You know, our parent is Cost Center. It just, you know, it's Cost Center. So the value in our company is essentially, uh, the practice level, even though minus our costs for. For running the company. So we. We do distributions every quarter, and the IRRs on that are just phenomenal. So, you know, all of our doctors don't have to hope and pray that I can pull off, uh, a great equity event someday. Now, you know, when we do recapitalize and, you know, we have a good event on that, that's gonna be great for everyone. But they're getting returns every quarter. And, you know, it's. It's fun because sometimes I'll. I'll go have dinner with a doctor, and we've been working together for eight or nine months, and I'll ask them how they're doing, what. What your thoughts are. And like, you know what? I never thought in the world I'd be making more money as a 30% owner that I made as 100% owner. And today I am making more money than I did on my own. And to me, that's just, like, very cool. Where does that ever happen? That you sell 70% of your business and you have that in your pocket and you have invested that, and then you're still making the same amount of money you're making as 100% owner? So to me, that's a true win. That's a win win. And that's, that's really what we're all about is we want everyone to win in this equation.

Speaker A: Yeah, I think that model makes a lot of sense and I, I don't know. I know of a handful that do distributions like that, but it's not all that common. And it seems like it's a pretty amazing opportunity to create aligned incentives across the entire organization. And like you said to keep, keep the head in the game. I think that's uh, oftentimes where the miss shows up with, with DSO models is post the initial, uh, partnership or the initial sale. Um, doctor hours go down, motivation decreases. There becomes this real challenge in what the, the future path looks like. Um, and you really solve for a lot of that with the way, with the way that you guys are structured well.

Speaker B: And you know, and this goes back to my previous experience. Like uh, you have a lot of doctors start questioning you as well. Like oh there's the last five practices you bought are terrible. Now you're going to hurt my value. You know, so.

Speaker A: Right.

Speaker B: Like, you know, then they start looking at all their friends and saying what are you doing? You know, like you're screwing up my, my investment here. And, and I would rather, you know, every doctor drive hard for their practice. Trust us that we're going to make the right decisions, um, on bringing in partners like them. But hey, let's just get your same stores up, uh, sales up. Let's continue to control expenses and keep this growing. And then, then they have the direct beneficiary from that. You know, they're, they're getting the benefits. The benefactor of, you know, my EIDA is going up, my sales are going up. And um, you know, I am a successful businessman and, and I think that's what most of them are driving for.

Speaker A: Do you think that um, DSO consolidation is actually further along than what meets the eye? And what, what I, what I mean by that is um, we, we had the Stental Capital Forum in New York a couple weeks back. It was a lot of DSO CEOs and then private equity deal teams. And one of the presentations that we had come, uh, on and present to us was from Boston, um, vcg, Boston Consulting Group. And he was breaking down the industry by practice size. Like what percentage of practices are doing 2 million plus what are doing 1.5 to 21 to 1.5 million. And at least their data and BCG is known for their data was showing that really at that.2 million plus threshold, it's something like 12ish percent. 12 to 15% of practices nationwide fall within that um, bucket. And now if DSOs are out in the market seeking to partner with larger even if we bring it down to 1.5 million plus. But I think the, the average m. Uh was like a $1.1 million practice which means there's many, many practices that even do less than the 1.1 million. This notion that DSOs will ultimately consolidate or roll up the entire market when a percentage of the market is not really viewed as investable by most groups. Um, when we, when we think of it in those terms, I don't know, it kind of resonated with me where I was like oh, that's kind of interesting. There might be actually a higher percentage of available practices. And maybe the message to those that are in private practice is like you need to grow your business past X point before you're going to be a viable target to partner with a group. Um, but how do you think about that and does it feel like there's. It's now a more competitive marketplace? Um, as a result?

Speaker B: We have that conversation ah, uh, in the boardrooms and we talk about that and I've talked a lot to investment bankers and PE companies like everyone uses the word pretty loosely that this, the industry is consolidating and the industry. But I mean I, and you could probably give me some that I don't know. But in my time in this business I haven't seen too many successful DSOs by DSOs. Like if you think about the lineage and the history and uh, all the DSOs that have actually bought a DSO, where are they today day? And you know how many of them are the ones that are owned by the bank, you know that paying an increased multiple, you know, for something is. You got to really perform to, to pay that back. And then on the opposite side, if you're buying something that's really struggling, the risk profile is huge. And uh, you know that's, that's something that I've never had an appetite for is going buying businesses that are failing. Right. And try to save them. That.

Speaker A: Yeah.

Speaker B: And I've been here long enough and I've seen and witnessed and, and taken on myself challenges of trying to, to save failing dental business. And it's very, very hard. So yeah, I personally don't know what the consolidation is going to look like. Um, because both of those things that I just mentioned haven't been. There's no shining stars in our industry to say that they've made that Work and you know, it's um. Dental is just such a relationship business and you build these relationships and trust and a lot of people trust you. Um, when that changes, you have to have everyone bought in. Right. On both sides of the, the equation. So, um, I wish I had a good answer on what consolidation. Like I often get asked and I, I never have a good answer. I, I don't know unless, until, until some people do it and it's, it's a big success story. Um, I don't think we have any models. And you know, one thing I have noticed, you haven't seen two extremely successful DSOs come together. It's always one successful one's buying, one that's struggling. Right. That has uh, whatever it may be. So I, um, do think there's probably an appetite that you have two very, very good that put together and have synergies out of it that will probably work out. But the uh, big ones gobbling up the ones that are struggling. I still think there's some flawed reality that will come about with that.

Speaker A: Yeah, I mean, I think the only play there is if the uh, struggling ones are at just such an attractive price at that point where at least there's the belief that the value and the multiples can be increased. Because normally I agree with you completely. Completely. If you're buying already a platform that's at scale, you're paying a premium for it and it's going to be really hard to continue to extract more, more value from the multiple side, um, of that. But when you, when you mentioned that, I. It's funny because immediately, maybe five or six examples that align exactly with what you were saying, which I won't name out loud, um, popped into my head. But, um, there are, on the other side, um, Heartland bought American Dental Partners, which was almost 200 practices when they did the acquisition. They most recently bought, I believe it's called Smile Design Dentistry, which is a 58 location group. And then I know they bought True Family Dental and um, uh, in the Midwest, which was a 25 location group. So they've maybe they're the one example where they've been able to kind of pull it off at scale. And they have such scale, I guess, that you're not a 200 location group buying a 60 location group, where now as a percentage to your total practice count, if something goes wrong, you're really, really diminishing your chances of, of success there. But yeah, it's interesting. I don't think I've put probably enough thought into that, but well, uh, you

Speaker B: know, in, at Heartland size, they're the biggest. Right. So they're going to have the best price. They're the Walmart of our world. So they have the best pricing on every line item that, that go on that piano. And so if you have groups that are, you know, they're producing well, they're doing well, they just are not doing well on the cost side, I think that could really work out. Right. Like, yeah, like if somebody bought us like a Heartland size, I'm guarantee even though I think our, our costs are really good, they're going to go down. So, um, you know, as long as you don't have the struggle in the top line and you know that's usually these groups struggle in the top line and bottom line. Right, right. Uh, but if you have groups that are ah, relatively good top line and then if you go apply, uh, you know, get 10 points, let's just say off, off of cost. Yeah, that could be a big one. And, and I, I don't know the groups on their financial status of the ones that they bought. I, I have no idea. So I'm guessing there was a lot of synergy there for.

Speaker A: I would take that on. Yeah, yeah, no, I would agree. Um, what, what makes you bullish on dental still? You know, you've been in the space for a while. When you, when you wake up each day, what are the things that you think about? Like these are opportunities for us still in the space. I mean we talk about headwinds so much, but what are some of the things where it's still very encouraging, uh, to be in the market?

Speaker B: Well, you know, dentistry is not going away so, you know, everyone's going to need dental and, you know, technology continues to get better. I, um, think, you know, DSOs are going to continue to get better and they're going to get stronger. And I think you look at the evolution of what's happening with the dental student that, you know, they're, they're kind of pricing themselves out or even be able to buy practices because the amount of debt they're getting in school. So if you look at, we're always going to need dental, um, most, uh, DSOs can operate a dental practice in a very good way. Uh, they have economies of scale. Um, you're gonna have new dentists coming out all the time. I think all of those things are the same as they were a long time ago. But today the good thing is that the DSO has much better reputation and we're not, uh, fighting that downstream effort in Dental schools and everywhere else dental, uh, societies that it was evil to work with dso, uh, and today I think it's much more acceptable. I think there's been a lot of happy customers that have joined, you know, doctors that have joined DSOs and done extremely well. Uh, it's enhanced their life. So I think that the prognosis there is, you know, with good operators, it's going to be a great alternative than just being a solo dentist, owning your practice and being part of a community and being, being part of a group that can go take care of the stuff that they typically don't like to do and they're not that good at. So I, you know, there, a lot of the reasons why the industry started are still there today. It's just, we faced a lot of different challenges and it's just a challenging environment with the interest rates where they are today. But uh, the whole principle of why we do this and, and why, you know, we can help doctors be successful and, and, and help them be in an environment they can take care of the patients, that hasn't changed. And I don't think it will ever change.

Speaker A: Yeah, well said. Keith, thank you so much for joining the show today. Really enjoyed the conversation.

Speaker B: No, I loved it. I loved it. So thank you for having me on. I appreciate it.

Speaker A: The Dental Economist show is brought to you by Planet dds. To find out more about how cloud based dental software by Planet DDS helps unleash dentists and their staff staff to focus on patient care, visit www.planetdds.com. stay tuned for upcoming episodes by following wherever you listen to podcasts.

Speaker B: Thanks for listening.