Podcast: Should you consider starting a second – or third – practice?

Hello and welcome to Ascent Dental Radio. A program dedicated to the balance between the clinical aspect of healthcare and the business of healthcare. And now here is your host, Dr. Kevin Coughlin.

Kevin: Welcome to Ascent Radio. My name is Dr. Kevin Coughlin. You’re listening to Ascent-Dental-Solutions, where the focus is on knowledge, training, education and development.

This podcast is brought to you by VOCO Dental Supply, one of the largest and best dental materials company in the United States. Originally from Germany, but have headquarters in South Carolina, and I want to thank them for sponsoring this podcast. I also want to thank Mr. Doug Foresta and his podcast company, Stand Out and Be Heard. Without his expertise and mentoring, this podcast could not be possible. What he’s done for my professional business and my consulting business I cannot say enough about.

Do you want to get your dental career started on the right path? Are you looking to put in place the practices and procedures to make your existing dental business more profitable? Send Dr. Coughlin a quick email today!

With no further ado, I have some questions today about a topic that seems to be getting more and more attention and more interest in the dental community. And that’s corporate dentistry, in particular, MSOs and DSOs. Why don’t we start with the first question?

Doug: Sure. Thank you, Kevin. Great to be here with you. My first question for you is — there was an article recently about how to know if it’s time to create a second practice. If you’re a solo practitioner, when is it time or what are some considerations? So my first question for you is, if I’m a solo practitioner, maybe I’ve been in business for five years or so, what are some of the considerations that I should think about when thinking about the idea of potentially starting a second practice?

Kevin: Since this podcast is only roughly 20 minutes, I will do my best to stimulate your interest. But keep in mind that I have been practicing and still practice dentistry every single day, Monday through Friday. I have 14 offices and I have gone through the trials and tribulations and these questions in my own mind and still do to this day. In summary, my first recommendation would be to think long and hard about what your end gain is.

Are you building additional practices to sell to a DSO or MSO to get the maximum value down the road? Are you growing because your facility is just over utilized and you’re no longer efficient and effective and you’ve decided that you’ve been so successful at one practice you want to continue and grow your business with another location?

Those two general questions would drive my answer when I’m doing consulting to dentists all over the country. And that is, what is it you’re trying to obtain? To cut to the chase, my personal opinion dealing with hundreds, if not, thousands of dentists over the last 35 years is that most are interested, whether they know it or not at the beginning, to get the best return and the biggest return on their investment.

Meaning that if one practice is successful and the second practice is just as successful, the investment and the return on your investment will be significantly better than just selling one solo practice. I’m going to assume that if you’re not aware of it you ultimately will come to the conclusion that the more successful practices, and the better the processes and procedures, the more valuable this entity is to a potential purchaser.

When we talk about potential purchasers, depending on the number of practices you accumulate and run successfully, your value will go up, but the number of individuals interested in that practice will go down. For the average dentist to be able to afford and purchase three, four, five, ten or fifteen practices, I believe there are few and far between potential purchasers.

So in most cases, you will ultimately be leaning towards a DSO or Dental Service Organization, which by definition are run and owned by dentists, or an MSO, Managed Service Organizations. Which no matter what we talk about, not matter what we think, in the real world, they’re run and operated by equity partners, venture capital groups that hold the money, that pull strings and ultimately the decisions for better or worse.

With that being said, my learning curve taught me that you should never expand into another location, unless your first location has excellent processes and procedures. That means infrastructure is in place, you have adequate staff at your front desk, you have adequate chair side assistance, you have adequate dental hygienists and you have adequate, and let me emphasize this, hardware and software controls. The older you are, the greater the likelihood that your return on investment could be much less.

I look at this very much like anything that you do in the market. You can afford to lose almost everything in your 20s and 30s and you still have plenty of time to rebound and be very successful financially, in your 60s and 70s. But when you start this type of aggressive expansion, the money and time effort when you do it in your mid-career to late career, sometimes may prove out to not give you the best return because of the significant amount of money you’re going to have to invest and the significant amount of time.

So for those listening to this podcast in their early 50s or late 50s, make sure you fully understand the financial and the emotional time commitment of opening up additional practices and what you can expect for your return on investment. Unless you’re an incredible superstar and you can get that practice up and running, profitable, with an EBITA of at least $300,000 to $400,000 within 12 to 18 months, you may find that your return on investment may not benefit when you put in the amount of risk and effort.

Doug: And that’s the other piece I was going to ask you. Have you seen dentists who have gone for it, so to say, and it hasn’t worked. What do you do if you try it and either financially it’s not doing the way you thought it would or it’s just not for you, like you decide this is not me, what then? I guess would be the question.

Kevin: You deconstruct. I would say, take the practice that’s the weakest and unload it as quickly as possible to an associate or a dental broker. You may lose a little bit of money in the process, but my opinion is there’s no reason beating a dead horse. Bad is bad and usually, the longer it takes you to make a decision, the more costly it is and the worse it is in the long run. So I would say, cut your losses as soon as possible and unload that practice as quickly as possible and focus in on your initial practice and continue to build it and consider it a learning experience.

Obviously, with proper mentoring and coaching from someone like myself or other experts in the area, what ideally you want to do is avoid the mistakes that people like me have made so that you’re the most effective and most profitable with the least amount of stress. And it’s like anything, reduce your learning curve will increase your chances of success not only emotionally but financially.

Doug: One of the things I was going to ask you as well, Dr. Coughlin, is that is this something that is even talked about at this point in dental school? That’s what I think is so important about what you’re doing. Is this something that’s even discussed, that I would learn if I went to dental school?  

Kevin: I know starting in 2006 I started lecturing at Tufts School of Dental Medicine in Boston Massachusetts. At that time, I was not aware of any of the schools in the Unites States really addressing the business component of medicine and dentistry. I think with the average school debt of about $267,000, the time commitment, the loss or opportunity cost of spending four to six additional years of training and education and with a high debt structure, it is absolutely imperative that these young practitioners get basic business knowledge either from people like myself or I’m happy to say I see that the schools  in order to keep their accreditation are now mandated to offer between 18 and 22 hours of practice management before these students graduate from dental school. So more and more I see this drive to educate and inform these young practitioners so that they can minimize their errors and maximize their potential.

Doug: Thank you, Dr. Coughlin. I really appreciate you taking the time to share your words of wisdom and perspective from someone who, as you said, owns and operates 14 dental practices.

Kevin: Right, and they’re certainly practitioners out there that have more practices than me and have been just as successful or more successful. I’m happy to share my trials and tribulations and I’m pleased to present this on Ascent Radio and I want to thank VOCO Supply Company for sponsoring this podcast and our previous podcasts. And special thanks to Mr. Doug Foresta and his podcast company, Stand Out and Be Heard. Without his expertise and production acumen, we would not be able to present this on a weekly basis.

Thank you so much for listening. This is Dr. Kevin Coughlin. You’ve been listening to Ascent-Dental-Solutions, with a focus on training, education, development and knowledge. Thanks for listening and I look forward to talking to you soon.