Dentist2Dentist
Join Dr. Mike Miyasaki as he talks dentist to dentist about the trends, products, and clinical applications in dentistry today.
Dentist2Dentist
From Solo Practice To Scalable Legacy: What Dentists Must Know About DSOs, EBITDA, and Real-World Profit
Only a handful of dentists can truly afford to stop working—and the reasons have little to do with clinical skill. We invited Kerry Strain to pull back the curtain on the real levers of profit, the truth behind DSO multiples, and the simple systems that turn production into durable wealth. This is a candid conversation about discipline, not hype: how to allocate cash so lifestyle, taxes, debt, and retirement all get funded; why hygiene capacity is the fastest path to meaningful growth; and how AI, intraoral imaging, and clear standards transform diagnosis, case acceptance, and patient loyalty.
We dig into the market’s shift from quick 5–6x cash deals to partnership structures where owners sell a portion of EBITDA, receive cash plus holding company equity, and keep working under clear performance expectations. Kerry breaks down the three income buckets every owner should build—W‑2 production pay, K‑1 EBITDA distributions, and equity appreciation—and explains why this “legacy strategy” beats chasing an exit. We also get specific on what buyers actually want: $1.5M+ revenue, strong hygiene ratios, predictable systems, and leadership that shows up in reviews, retention, and financial reporting.
If you’re trying to add $600k without adding days, you’ll hear exactly how: reappoint close to 100%, tighten collections at time of service, expand perio maintenance, price with intention, and match capacity to your active base. If you’re considering a DSO or DPO, you’ll learn how to evaluate fit, protect your upside, and avoid the common traps that turn a big check into a slow slide.
Listen, take notes, and choose your path with clarity. If this helped, follow the show, share it with a colleague who needs a playbook, and leave a quick review so more dentists can find these conversations.
Hi, everybody. This is Dr. Michael Miyasaki again, and we're really excited to uh bring another interview to everybody. This is uh Garrett Caldwell, CEO of Core Dental Laboratory and the Pacific Aesthetic Continuum. And our guest today that we're very excited to have is Gary, Kerry Strain. And Kerry, we've uh, you know, you've been in Sacramento where where I am from uh for decades, well known. And today you're kind of known throughout the country. So congratulations on your long-term success. And I think that's a key word. It's long-term. It's not, it's not like you started this and um have had spurts and failures, but you've survived all the decades. So we are very excited to learn from you.
SPEAKER_00:Thank you, Doctor. Yeah, it's a pleasure to be on with you and Garrett. I'm I'm just wrapping up my seventh decade between now and March. And then I'll be moving in my eighth decade, born and raised in Sacramento. So it's uh one of the few.
SPEAKER_01:Wow. That's great. And and real quick, um uh Carrie is the C CEO of Strained Dental Management. And I was looking it up, and you're by Inc., you're ranked as one of the fastest growing privately owned companies. And so congratulations on that too. I mean, it's not not an easy feat today to succeed in business and much less be one of the fastest growing businesses.
SPEAKER_00:Yeah, I think we made the Inc. 5,000, second or third year in a row, and we're I think we're up at around 2,000. So my team keeps working at it. And, you know, there's a there's a big uh runway ahead for the people in the DSO space.
SPEAKER_01:Yeah, no, it's great, great to hear. And that we and that's one of the things that we want to learn more about. So one of the things that I'm just curious about, because we've been in this industry for a while, is from your perspective, how have you seen dentistry change? You know, if you go back, let's say 30 years to where we are today, has it changed from your perspective?
SPEAKER_00:You know, I I got involved in the early 90s, you know, as a as a result of working with several dentists in our accounting firm. And um, I was the accidental dental consultant, truly. And just looking at some basic things, everybody wanted to grow their production and profitability. More I say I should reverse that. People that started wanted to grow their profitability. And gosh, at that time we were in our mid-30s, and they said, by golly, someday we're gonna be 50 and we're gonna need to have a retirement. Well, that certainly is a big change because anybody can't can't afford to retire at 50. But um, I I think the biggest things that should have changed is certainly technology, has certainly allowed for a lot of efficiencies that didn't exist back then. I mean, heavens, we had manual billing records, pegboard billing systems back then. We didn't have an ability to run an accountable aging report in a second, let alone a production by ADA code report or benefit from artificial intelligence and being able to have a computer read the radiographs and give you an opinion to make the day easier for the dentists. We were just talking about AI that before we started the recording. So the world has very much changed. I think, in addition to that, labor costs. I think the cost of doing business today, uh, when it comes to labor has certainly been on the rise over the last four to five years since COVID. Uh, certainly um, I think our vendors that are merchandise related and equipment are doing the best to keep costs down. But when it comes to bringing in local talent and doing, doing, building a team, um, it, it, it really the forefront of employees' minds are uh what am I going to make per hour? And you know, really, I think that's even a more of an impression for them than retirement and culture and et cetera. We see a lot of hopscotching of employees uh around the country, whether it's from within our consulting division, which our company owns, as well as in our DSO in some markets. So, you know, again, we we we we we just see that's a high amount of pressure. And the employer, you know, we always tell our clients in our consulting division, which we have hundreds, or our partners in our in our DSO, you know, as leaders, we have all the responsibilities and none of the rights. So as much as we may not like what's happening, it's happening. And we have to face it and accept it. Accept it. And just like being a parent, you know, and when you're running a business, you you're at the top of the org chart, you've got a tremendous amount of responsibilities. And if you don't want to own them, it can be a lonely experience and it can be frustrating. Um, I think that's a big issue. I think the other issue, as we built out our DSO and were getting ready to fund the initial transaction back in 2022, uh, just pre-COVID, I was in Dallas, Texas, with one of the largest investment advisory firms in dentistry. And I and I was meeting with them in Frisco and uh was with our CFO, Jeff Stacer, and we sat down with them and this notable investment advisor, arguably one of the top two in the industry, his group, he asked me, what percentage of your dentists are economically prepared for retirement? And I know that you and Garrett focus on the business of dentistry and kind of help people understand what's going on. And when they asked me that question, what percentage of your clients are economically prepared for retirement? And keep in mind, I got out of the accounting business back in the early 90s and went full-time into dental consulting, but I understand, you know, the general ledger and financial reporting and budgeting, et cetera. And I responded to him and I said, you know, to think about it, approximately 5% of dentists are economically prepared for retirement. To which he replied, that is interesting. We think it's four. And just the other day I was on a phone, on a phone call with one of our consulting clients on the East Coast. And I said, How are you doing? He goes, We're going to push out about 2 million bucks this year in revenue. I said, That's fantastic. And I said, I would imagine your income before taxes and debt service, et cetera, probably around 45, 48%. He goes, Yeah. I said, that's almost a million dollars. And I have a question, how much of that are you saving per year? And he goes, not enough. I said, it's an amazing drug. Money can buy a lot of fun, sometimes fun at the wrong time in the wrong place. But if you're not really managing your cash flow and having a clear understanding of how you have to set aside money for your lifestyle today, so you're working, taking care of your family the way you want, you have to set aside money for debt reduction. You have to set aside money for retirement, you have to set aside money for taxes, as the three of us live in California know. So it's it's uh it's it's not it's not all free capital. And we try to get business owners to understand that if they're spending more than 30% of their net profit, or which is argued arguably may or may not be their net cash flow, um, they're spending too much. Because the government at that rate is going to get 50%. And you've got to start funding the long-term requirement. Because, you know, conservatively, you're looking at four to six percent return on your investment. And at age 60, having$2 million a year, you're not going to be able to replace that$800,000,$900,000 a year budget. So taking a serious look at that is important today. Um, and that is why certain over the last five years, DSOs were popular. Somebody could, you know, somebody could get a certain amount of cash today, yet have to work back and maybe not get the return they were looking to get on some kind of growth in stock. Or maybe that DSO has fallen out of favor and today doesn't have access to capital because the equity firm that banked it isn't confident to advance any more money for acquisitions because they don't understand how it's going to really create same-store sales growth and EBITDA growth, which is what the investor wants. So, you know, there's some just big truths today in the world of budgeting that we we don't have the luxury of avoiding. And we we need to pay attention to them that maybe 30, 40 years ago we still have enough run rate to be able to recover.
SPEAKER_01:No, I I think that is a really good advice. I wish I heard that 30 years ago now.
SPEAKER_00:You can't, doctor, you wouldn't believe how many people say that. I'm sure they they say it when they meet you and Garrett. I wish I would have met you 23 years ago.
SPEAKER_02:Yeah.
SPEAKER_00:I I get that every week. Somebody says, I wish I would have met, and I said, you know, today's that day. You know, there's there's you know, there's there's always a teacher for the student who's willing to learn.
SPEAKER_02:I think that uh the doctors are still uh see the DSO as an exit strategy, 100%. Um and I don't know if that's right or wrong, Carrie. Maybe you can speak about that. But my my docs that are involved with you and involve with other DSOs, the primary reason they're in it is to get rid of some stress, they think they think they're just they're handing off all the management to some third party and they're gonna do dentistry and live on a salary, but have no stress because, like you mentioned earlier in our conversation today, a million dollars supports a lot of debt. You can live at two million dollar practice producing a million in profit if somebody's spending 30 grand a month on a simple, simple interest debt. Cars, boats, planes, trucks, trains, vacations. And I'm sure you understand. I think I understand what you were really going with that. If you don't end up with much, and our docs are saying to me, Garrett, I'm gonna get involved with Carrie Strain and I'm gonna get a Forex and I'm gonna get money up front, and I'm gonna get rid of my responsibility. There's gonna be two events, and I'm gonna get millions of dollars and be done. So that's where that's their that's the simple perspective that I hear.
SPEAKER_00:Sure. I hear it too. Um, you know, I mean, I I was there when uh I was there, uh Rick Workman hired me in in 1999 when he had 33 locations. So today Heartland Dental's got 1800. And um, we worked together for several years, and uh I can tell you about private equity firms that were there with us. I can tell you about large DSOs, small DSOs, and the work we've had to do. Um, and there has been, there was a window of time of some um irrational exuberance in terms of offers made by DSOs, and they were offering more than 4x cash, they were offering 5x in cash and 6x in cash, and the doctors were walking away. But you know, what they didn't realize is that those DSOs were looking to quickly recap, and they were going to buy at six and be worth 10 to 11, hopefully, and they were getting it because there were so many DSOs with 50, 100, 150, 200 million dollars ready to deploy. There's still hundreds of millions or trillions of dollars on a monthly basis waiting to deploy somewhere. They're doing better in med spas today and maybe veterinarians and their businesses than they are for overall for dentistry. But um, you know, there was a time when there was a bubble and it's since popped because the real offers today, there is, as you said, it's not an exit strategy. It's it's a legacy strategy. That's number one. So it's got to be a long-term legacy strategy. When you look at a dentist doing$2 million plus, how does one doctor find another doctor to buy that practice for very much because they just can't get credit? Uh, they can't get the loan to pay for it. So it doesn't work. So we have these mega practices, eight, twelve. I've got a call later on tonight with one of my consultant clients. He's got 48 operatories in one location. Who can buy that? And then there's a specific way a DSO would want to buy it if they know what they're doing, so that you protect your risk. And so that has to be set up within the organization before we enter with agreements with doctors that are that are more than just an employment agreement. So you've got to you've got to really have a partnership with people that have the responsibility to stay around due to asset purchase and contribution agreements and long-term administrative services agreements where they have some skin in the game. Otherwise, it's just a lot of risk to swallow. But but some of the, you know, like like over the last couple of years, what the doctors are looking for, they want the quick buck today. And let me tell you, the brokers wanted to sell for the quick buck today. But those buyers, those buyers aren't there by now. Um what and I I can't speak to what every one of the DSOs is looking for, but typically when they're offering a lot of cash up front, they're going to market soon thereafter, 18 months later, to try to wrap what we call racking and stacking EBITDA. And they look at what is the EBITDA going to be of the group. And EBITDA obviously stands for earnings before interest taxes, depreciation, and amortization. And you know, um that if they can grow their EBITDA from 25 to 40 million by borrowing 75 million and paying 15 uh 5x on 15 million, then they can go and take that to market and for initially get the capital back. Well, they roll more equity out to that next capital event. So, you know, the think that any seller is going to get much more than 4x today uh EBITDA, that would be around 80% of collections. If they want to sell and walk away, they're gonna talk to one of the local brokers, you know, Shine or you know, you name it up here in the Sacramento area, you know, my friend Tim Giroud or one of those great groups and Western, and they're and they're basically gonna sell that practice for 65 to 85% of collections for the seller that wants to sell and walk away, which is what a lot of a lot of your colleagues want, guys. They don't really want the responsibility of staying on to continue to drive the revenue and profitability that was there when they sold. And that's that's not my seller. I'm not that buyer. That buyer is typically a doctor who wants to come in and he looks at an old guy like me, and I'm doing a million five and says, Well, I'll give you 900,000 for the practice. And and I say, Well, that's good enough. And I have to pay the broker 10%, and I got to pay the attorney$50,000. And I finally get out, and I've got about$750,000 before I have to pay off my taxes and pay off my payables. And now I've got about$300 left over, and I've got about one year's worth of compensation out of the deal when it's all said and done. Maybe two, but I'm gonna live to be, you know, 150 years of age, you know, even the long longevity perspective today. So people are planning to live a lot longer, but they're not forward-thinking enough to really plan to have the cash flow.
SPEAKER_01:I hope you're enjoying this interview with Kerry Strain, like I am, picking up a ton of tips. If you want to learn more about Mr. Strain, go to Strain.com. And if you want to learn more about the PAC, go to the PACPAC.org.
SPEAKER_00:All right, let's get back to the interview. Part we don't expect to sell off the management platform to anybody. There aren't there aren't that many DSO management platforms, teams that know the difference between an adult profile and a Tootsie roll. They don't know why that a period maintenance appointment is every 90 days due to the gestation period of biofilm versus somebody extending those periods between appointments, doc, for from 90 days to 120 to 150 to 180. And that just results in a clinical crisis. And even though the AI is screaming, don't do that, we've got practices still doing that. And if people don't understand that, the standard of care won't be delivered that our doctors want to lead with. The wellness path that our patients want are isn't going to be experienced. And to us, that's absolutely crucial. From a soft tissue all the way to hard tissue, functional, occlusion, symmetry, and all the things you guys talk about and know about that I really don't. But I understand that we we need to create a plan that creates a legacy relationship beyond an exit strategy. Because if it's just an exit strategy, there's really not much goodwill to it.
SPEAKER_02:Right.
SPEAKER_00:There's there's no reason why I would pay more than 60 to 70% of collections. And if I go down the list of practices I hear for sale every day, which populates my inbox like you wouldn't believe, practice is doing$900,000 for sale for$600,000. Practice is doing a million two,$800,000. And until you get into that million five to$200 to$2 million plus range, it doesn't even enter our orbit because there's not any real business leadership present. And I'm not looking to fix a problem. I don't have enough time. So we're looking for well-run practices. So move beyond the sole practitioner who never really spent the time. And, you know, as they get to be my age, Garrett and Mike, they start thinking, well, I'm gonna, I'm gonna negotiate with my employees. Instead of giving them three weeks' vacation, I'm gonna give them six weeks vacation and eight weeks' vacation because I want to take off eight weeks. And they start creating these exceptions to normal operating standards that they think a buyer is gonna stand up and pay for. And the buyers aren't stupid. They don't want to buy that abstract of a model because they need to drive the cash flow to fund overhead, to fund debt service, to fund their school loans, and to fund their taxes and personal living standards. So it really, the practice that's kind of cascading down in productivity over the years is really been neglected. For us, for the doctor that's got a$2 million practice plus, we're excited about that all day long. Somebody's got an eight operatory facility or more, we're very excited about that. But in those cases, it's more than you know, the senior statesman dentists. There's typically an associate there, or two, or three. And those people want to stick around, and they're working on the on the coattails of the senior dentist. And what we see really works best is to give them some equity play in all that's been created, because we can offer cash and stock at close. And the stock is in two different companies. Certainly it's our whole holding company, and that's where the that's where the holy grail is, is in a holding company, because that's where an investor is going to come in and buy. So when I say we're not selling off the business operations or the platform of management, we have no intention to relinquish that to anybody. But we do intend to monetize the value of the company through bringing in an investor to buy out the portion of the stock that exists. But I think in perpetuity, there is room to for the investor, the management platform, and doctors and employees to coexist in the ownership arena. And if the business is truly run well, you don't have$25,$30 million worth of EBITDA without some really good cash flow.
SPEAKER_02:So I mean I know when you get a big fat check. I know that human nature is to kind of you know let your let your breath out.
SPEAKER_00:They take the foot off the gas.
SPEAKER_02:It's pretty easy to back off the productivity.
SPEAKER_00:So we we have a very clear outline of co-responsibilities. We're going to provide cash and stock in our holding company for a portion of the eBay we buy today. Now, what's come to market beginning at about 2023 has been what they call the DPO, the dental partnership organization. And DSOs today typically don't buy 100% of the operating profits. They buy a percentage of it, a majority. But in exchange for cash and stock, they'll buy, say, 60% of it today. The doctor still owns 40%. So you take a young guy like you, Garrett, 48, 49, you've still got, you look great, both of you. You still got your access, access to we we call it, you know, three buckets of money to pull from. Number one, you're gonna have what we call your associate compensation equivalent. You're gonna make 30% of the net production that you generate. That's very typical percentage. It can move up or down slightly, but I'd say overall 98% of it's pretty standard. So if you're producing a million five, there's 450. You're gonna get that as a W-2 employee. No exceptions. Anybody makes an exception, just you're just inviting an IRS audit. So just stay with what's true and follow your CPA firm's advice as we do. Then you own 40% of the EBITDA. You haven't sold that off yet. So now you have through the K1 of the sub-DSO partnership, the partnership between the DSO and the doctor, you have an operating distribution of 40% of the EBITDA. EBITDA goes up, you make more money. EBITDA goes down, you make less money. So, you know, that that's how the doctors today maintain the cash flow and it flow that they need. And alas, they have on based on the initial transaction, where they got some cash and stock for the portion of the EBITDA they sold. Let me just turn that into an equation for you. If somebody gets a 7x total multiple on the on the portion of the EBITDA they sell, and let's say they had a million dollars worth of EBITDA and they sold off 60% of it. So now we're buying$600,000 worth of EBITDA, 60% of the sub-DSO. We'll write you a check for$2.4 million, and you'll get stock for$1.8 million. So you got your associate comp, you got your portion of the EBITDA,$400,000, you still have comedy, and now you have stock in the strain holding company of$1.8 million. And that's what should go up is we're all working in concert with the Administrative Services Agreement and the employment agreements we have in place where you agree to work a certain number of hours a week, you agree to a certain amount of weeks per year vacation, you agree to being the clinical director because we like the way you lay things down. You continue to be the leader to solve on-site business issues and communicate with us. Well, we provide you with the facility that we acquired from you, your personal property and the other uh intangible items that are on your list of assets and also the goodwill that we bought as part of the transaction. And then, of course, we provide all the administrative employees that now work for Strain, so that that creates justification to be able to provide the full management services from the on-site and then the people at our support group. We have close to 30 employees on our University Avenue building in Sacramento that are providing support, whether it's IT, HR, recruiting, social media, uh bookkeeping, uh procurement. It goes on from there, operations, strength consulting, with the full enchilada, if you will. We provide it in ways that I think are really the highest level in the market. And so they're getting the support of that, but there's still specific things we want Dr. Miyasaki, or in the case of Dr. Caldwell, to do. And we want to collaborate with you. And if we have some team members that aren't performing, we want to help create a personal improvement plan for them so they can perform and remain part of the team. So there's a way to make it quite synergistic and still generate income for the partner, the doctor, while leveraging off some of the value in the whole company, if they really believe that the whole company is the best whole company or the best DSO for them to partner with, and if the market continues to perform. A lot of people. Yeah, we we won't explore an opportunity that's doing much less than a million five in revenue and somewhere near 400,000.
SPEAKER_02:That's very different, isn't it, Carrie? That's something that's fairly. I mean, I think the DSOs have changed their perspective. They were buying practices that have lower number practices, but I've also heard that that I don't know the facts, but I've also heard that now they're really seeking higher performing practices now.
SPEAKER_00:You know, as as uh my friend Brian Caleo shared with me years ago, uh, who's the lead attorney in the DSO space for Daikama Law Firm, he said if you've seen one DSO, you've seen one DSO. You know, everything, everybody's got a different set of assumptions. But what we are seeing is many of them don't have access to capital. Many of them have shut down their buying activity on the MA because um, for whatever reason, I could only speculate, but we're not that group. So we're we're still buying, but we're very, we're very selective. And I, you know, ideally we have a lot of candidates that have come through our consulting experience with them. So we know they're dedicated to leading. We know they want to build a great culture, we know they have long-term employees. Um, we like all of those things. You know, we we want to see a minimum of one, two hygienists for every one hour of doctor time. If we have two docs, we want to see four hygienists. We have six docs, we want to see 12. Because we love the fact that they have continuing patient flow and they're not just hunting for the big cases, because right now in this economy, you know, the big cases are more challenged, you know, challenged to get accepted for treatment because people just don't, you know, they're they just are a little more cautious about spending money in today's econom, the economic uncertainty of the times we live in at this time. So that bigger practice is just waiting to find the right partner to partner with that enables the seller, the original founder, to um be properly rewarded for the value they've created. And and two, bring some of the other doctors that have contributed to it along for the ride if they're willing to work back, you know, today typical today, five-year work back, same hours per week, um, 30, you know, uh three weeks to four weeks vacation time a year. All these are pretty common. And the practice needs to continue to grow at some percentage plus CPI. Otherwise, it's not going to outrun the overhead that it's has been going into it.
SPEAKER_02:To me, a five-year work back seems like a short runway for the DSO.
SPEAKER_00:The Luris Fly was maybe it used to be three, then now it's gone to five, and today I just heard of a model where it it's approaching 10 years, depending on certain equity involvement.
SPEAKER_02:That makes more sense to me.
SPEAKER_00:Well, we want to we want to command it, not demand it. We want people to be excited about working back because it's safe, our values align. Uh our we know how to serve Dennis. I've been serving Dennis through my organization for over 35 years. We've worked with over 5,000 practices, we've done over 15,000 consults. We're embarking on a strategy to be more involved with back in the old ways of doing things again, where we can meet doctors one-on-one onto the phone and find out where they are and where they'd like to go. But again, picking the right DSO and becoming fully informed is a critical, critical step for any owner of a dental practice.
SPEAKER_02:So, Carrie, Mike brought this up earlier when we were talking before we started. Who we know who is a good fit for a DSO or DPO, but who is not a good fit psycho from a psychological point of view and from a from a Mike. Mike doesn't Mike doesn't think he's a good fit. But can you tell us who who financially or from a social point of view?
SPEAKER_00:Sure, assuming they meet the hurdle economically, um it it you you just have to look at what they've accomplished. Employee retention, patient-based retention, quality, you know, they're they're all the ratings on Google. All these things matter.
SPEAKER_02:Right. You're supposed to be involved in one of these darn things. Come on.
SPEAKER_00:Oh, Michael is. He just hasn't he hasn't really mattered.
SPEAKER_02:We were teaching this morning. We were teaching this, uh, we were teaching yesterday this morning. My hand, I've been up for 48 hours. We were teaching yesterday, Sunday. Um, we had a clinic at the at the Pacific Aesthetic Continuum. We put on a clinic for postgraduate dental education, and every one of the instructors except for Dr. Miyasaki was involved in the DSO now.
SPEAKER_00:Very different. Um, you know, um they all have their own reasons. Some wanted to uh get out of debt today, some wanted to take their chips off the table and try to monetize the portion that was the rollover equity into the DSO into something bigger for a bigger home run, typically because they haven't funded their retirement plan the way that probably Michael has. You know, and um you know they everybody's got their own motivation. I I think the big, you know, what's in it for me points are am I what kind of cash am I getting up front? What's the probability and and f of the potential payout? We call those those those projections. You know, that's uh the the Greek word for fiction in many cases. So, you know, who's to know what it's gonna be? And but I but I will tell you some of the leading DSOs, the big ones out there, they're performing well. They understand the business basics that support the clinical purpose. And you know, back back, you know, Michael, will you go back five years ago? We were all hanging out the dental society down, you know, over on Arden Way or wherever that was by CalExpo now, and Kathy Levering moved it over there. And I think she's retired now. She retired, yeah. Gosh, I remember that. She's amazing. I've known her forever. Um my first Sacramento Dental Society meeting was at the Radisson back in the Early 90s. And that was wild. But that being said, uh great experiences. Um I I I think a lot of the sellers are thinking, okay, I'm I'm 60, I'm 55, I've probably got a good five, 10 years more experience or more time left. I'm not feeling too worn out yet. And um I certainly want to be done by the age of X, which is a fallacy. Don't even try to forecast it. Just plan on continuing to work. But they they took a certain amount of cash off the table, and that makes everybody happy. They can fund that college debt they've got. They maybe pay off the cabin up at Tahoe or the place down at Aptus or wherever they are. And buy that plane, they wanted they wanted a twin-engine baron or they wanted to buy shares at NetJets, and they can do that and breathe and kind of go, I won, but it's not enough. So they're running the risk of the investment in the in the DSO, and I hope it pays off for them. And I hope it's a great firm, if not ours. And there's work to be done, you know, whether you're trying to set up your own dental support organization or not. And there are standards that have to be met. But um that that future is untold. But as I was just telling one of my partners in Louisiana earlier today, I said, it's the work you're doing from this point forward that is going to be creating the value, not the work that you did the first three years. I said, You you've got a uh you you've made certain agreements with us to do X in exchange for Y. And let's just keep doing them because that's what an investor is going to want to see to invest and buy a position of our company. A, that's the initial thought of a capital event or sale of part of the stock, but B, to provide us capital to grow from that level on to the next level. Just like you can read about at on online with Heartland. I think they've been very transparent about their journey from the Ontario Teachers Province Retirement Fund to KKR to everything else they've done. And certainly the Reuters and the rest of the media has covered it. And I think it's pretty apparent. Um, you know, they continue to succeed. And the ones that are trying to become the heartland overnight, you can't microwave the development of a good business.
SPEAKER_01:So I have a question. I you know, talking about DSOs, it's all all good to know that with the practices that you go into um consult with, I guess, if they're how do you make them perform better? So if they're at that 900,000 mark and you're trying to, they're trying to work up to the 1.5, or where are some areas where just a practice that may not be involved with the DSO? So they're still trying to do it themselves to push up higher up on that hill. What what do you recommend, or what do you see? Where do where do they have to make improvements? That's a great question.
SPEAKER_00:Um, the number one, they need to come face to face with what their vision and mission is. Why is it, Michael, that I've our team's done over 15,000 practice analysis? And why is it that based on the existing active patient, that only 50% of them ever make it into hygiene? To me, that I look at that as a defect somewhere. When I had my accounting practice with my dad and his dad before him, and I was in business with my brother and my cousin and my uncle and so many others. If we had a thousand tax returns to do, we did them. You know, at the lab, you get a you know, X number of units ordered, you get them X number of units out, right, Gary? I mean, it's just the way it is. Yet in dentistry, I I've we uh we prepared, as I said, thousands and thousands of what we call complementary strain practice analysis. And then that that I was very instrumental in the development of the Henry Schein practice analysis in 2007 and worked with them on presenting that nationwide. And we could look at the data, you could see what somebody has. They have X number of patients, they have Y number of hygiene appointments, there's not a not enough hygiene appointments to meet the demand of the patient base, and even even the demand of the patient base that with practices that have uh that are in network, having more patients getting two free visits a year that they couldn't even accommodate. And I just didn't ever understand that. So when I talk to Dennis about the ways to perform, you got to be clear with me. There's three questions I always ask. What percentage of your patients should reappoint for the next hygiene appointment? Do you want me to tell you the answer I hear every time? Garrett. 100.
SPEAKER_01:100, yeah.
SPEAKER_00:Good. That isn't happening. Next, what percentage of the patient's co-payment should be collected at the time of treatment? Garrett, what percent?
SPEAKER_02:100.
SPEAKER_00:Well, yes, and that's not happening either. Yeah, and what percentage of the patients should be in periomainnance? If you listen to the CDC, it's 74% of 70-year-olds, 53% of 50 year olds, the American Academy of Pereontology, 64%.
SPEAKER_02:Well, I guess it gets under 15%.
SPEAKER_00:Why is it less than 10? There you go. And so wait a minute, I just sit back and I go, these are your opportunities because there's only two ways to increase productivity. A increase patient visits per annum. So if you're currently seeing 2,000 patient visits and you want to grow by 20%, let's go to 2,400 patient visits. Assuming the revenue and the reimbursement rate stays the same, there you go. There's your revenue, and anybody can do it. You want to grow by$600,000 a year, let me give you the secret: add one full-time hygienist. I take a doctor doing$900,000 a year. I guarantee you they have somewhere between$800 and$1,000 patients in hygiene. That's an average of about$1,000 a year per patient hygiene. You can manage 600 patients, you're going to do another 600 grand. And if you add 600 grand to your revenue and you can collect it, that's net production. You're going to pay a hygienist market rate today. You're going to ask him or her to support your standard of care, take the radiographs you want taken, take the intro or photographs you want taken, and to make sure they periochart and track bleeding on probing and post-probing bleeding for up to 40 seconds to look back into the era of probing. And that's not happening. And I can't answer the question, why not? Only a doctor can. And I start with that. And my name's not Dr. Miyasaki. I was on the same side of the table as your father, Dan. Yep. And that was the accountant side of the table. We don't have a seat at the arena of clinical diagnosis. So doctors got to solve that. I can look at those three things. What percent of patients should reappoint, what percent should pay their co-payment entirely, and what percent should be in period. And I don't even define it. I let them choose. I know if 20% of their patients are going to be in period, that's a low percentage. But on an eight-hour day, that's four profies a day and two periodance procedures a day. And the rest of the times for SRP and maybe a child. I mean, I know the statistics. I can even tell you yesterday how many patients the practice saw that were period conversion candidates recommended by AI. And then I look at the 20 that were candidates and they only presented treatment plans on four. I can pinpoint that now and make people aware of the challenges that exist in how they're currently operating. That's where we start. Then we outline the opportunities. If we'll do X, Y, and Z, I'm not asking you to work another day. I'm asking you to commit time to establishing what your philosophies are, the goals for those philosophies. Make sure that what you're giving to the business, you're going to receive in terms of economic reward as well. Don't leave yourself out. There's three components of what a practice owner should expect to have as a return on their investment of time and money. Number one, they should get paid equal to what the associate makes as a percentage of their productivity. Number two, they should get paid to be the owner manager of their business. And number three, if it's worth a million bucks and that's an asset, they can get six percent off of it, they should get a return on their investment. Ultimately, the sum of that is what I call the return on leadership. And if you're not getting it, you have one person to blame.
SPEAKER_01:Yep.
SPEAKER_00:Yep.
SPEAKER_02:So we directly with how we carry, I think it aligns directly with what Mike and I have been talking about over the last year, about blueprinting, um, about how do you create more dollars? You increase pricing, increase productivity, or decrease overhead. Those are the only ways. And you now have actually told us how to do that, which is fantastic.
SPEAKER_00:That's correct. Now, once you do those things, how do you increase revenue per visit? You you really need to use a third party to find out what your fee schedule should be. And then you need to make the decision. If your capacity says I only want to have two hygienists, well, then your capacity is 1200 patients. If you've got 2,000 patients, who's benefiting in that other 800 patient pool that you can't see? So you you need to write them a letter and tell them to go somewhere else or expand your business model to accommodate them. But if you're going to start fine-tuning your patient base, not to less than two full-time hygienists. You'll never have enough patients to keep the doctor busy. But if you're going to start moving out, the thing is to move out of network and/or raise your fees. And if somebody doesn't want to pay their bill and keep their appointment, let them go down the street. There's another dentist down the way. You can only help those that want to help themselves and value you so they want to adhere to your policies. And number one, the policy is following your treatment plan recommendations because you care about their life.
SPEAKER_01:Yeah, it's all really good. So you've taught us in less than an hour how to make$600,000 more. And it's not that hard. It's not.
SPEAKER_00:And then somebody, and and then somebody, Mike, somebody says to me, Oh my God, another eight and eight exams a day. I said, How long are your exams taking you? I mean, number one, you have AI today. So the AI is going to tip you off and say, look, from a carry standpoint, these four patients have carries. This is where we think you ought to look. Go look there. I mean, it's like it's a what do they call the guy? A witcher? Is that what they use to go find water and you know? Yeah. You've got AI. Secondly, I can bring you right into Pearl or Overjet, whoever you want to use, or VIDIA, and we can look at what the computer says is it's kind of interesting. They measure bone loss, they list how which pockets are greater than three millimeters. Okay, that based on the periodontal charting. Why is it that I can see four or five millimeters of measured bone loss and the pocket was never measured greater than three millimeters deep? The doctor's not checking something. I mean, Mike, how many exams have you done in your life? A billion?
SPEAKER_01:Yeah, yeah, at least.
SPEAKER_00:You know, if you touch a uh uh any pocket that that looks bad and all you gotta do is put a probe in it, it's gonna explode. Yet we don't have hygienists using inter-all cameras that you know when you started out were what$20,000? Now you can get it for$250? Yeah, it's a matter of execution, blocking and tackling. Vince Lombardi, this is a football, this is a radiograph, this is a period chart, this is an intraoral camera. If we get the message across, we'll have people wanting to be right taken care of by us. And that that's the kind of doctor we're looking for, the kind you guys work with.
SPEAKER_01:And we were just talking about that this weekend.
SPEAKER_00:The story has that story hasn't changed.
SPEAKER_01:Yeah, yeah. We were talking about tools of communication with the patient, so you don't have to convince the patient, or they don't think you're trying to upsell them, but they can see the problem and they own the problem, and they just ask you to fix it for them. So absolutely.
SPEAKER_00:One of my friends has uh been a he's a dentist out of uh Texas, and he uh he's been in the consulting business for 20 years, Bruce Baer.
SPEAKER_01:Mm-hmm.
SPEAKER_00:Yeah. And Bruce, very good friend of mine, and uh he, you know, we were flying all over Texas back in April uh uh over a period of a week. And um I said, how do you present that treatment plan? He goes, you know, I look at the patient, I go, Carrie, you got about$10,000 worth of damages. How do you want me to go in your mouth? How do you want me to move forward with that? And it was just he goes, it's gotta be a problem they want to solve. And if they do, they do. You can beat yourself up over educating in ways that you know you think you're Johnny Carson educating, and it's not gonna be that way for the average guy. As long as they're getting the message across, as you guys were talking about, they're gonna they're gonna you can make it into Cooperstown with a 300 batting average. We can get a long way down the way by presenting comprehensive treatment plans and giving them a chance to say yes and then work out the financing. If they've got a bad FICO score, go to Sunbit. If they can write a check, they will. There's so many options available to us today.
SPEAKER_02:Gary, I think you know, Stephanie and I do a lot of uh preemptive consulting or interviewing with doctors that are challenged when they have a problem, they raise their hand uh when they don't know the solution or they're in trouble when they're drowning. And uh I think you just hit the nail um, you know, right on the head. I think uh what we see is such a low level of adaptation to good business standards, introducing standards of business practice into their dental practice with their dental business. And what you said, 300 gets you into Cooperstown, which typically what Stephanie and I see is that they're just missing the fundamentals, they're not even at the point where they're not doing the easy things. So I think you know, realigning yourself with the fundamentals could be an increase for most practices, and then they aren't, you know.
SPEAKER_00:What do you hear is why they aren't? You guys have the courses.
SPEAKER_02:Yeah, yeah. So it's it's I think this is just great information you're giving.
SPEAKER_00:I mean, the cost of change is greater than the hope for gain. You know, they've had a person at the front desk for 20, 30 years that they've never uh reconciled any of the work they've done. They have never looked at an account receivable aging report, they haven't looked at the billing activity to see what we're billing out for to make sure we're properly billing and properly getting reimbursed and monitoring the adjustments. These are things we deal with in the revenue cycle management department. They maybe aren't paying the right pay according to the right payroll rules. We do that and comply with that. Our general ledger, our financial statements are audited by a CPA firm. On a monthly basis, I have to report the operations to my lender. And my lender is in one of the two largest banks in the world, and they still get their reports from me. And I have to run a board of directors meeting with my board and report up to various lenders and my shareholders. And you know, we should run our business just like that, whether we're doing$10,000 a month in revenue or millions of dollars a month in revenue. The basic principles never escape a business owner.
SPEAKER_02:No, for sure.
SPEAKER_01:Yeah, and I think that's all great advice. And I think the the other part that we stress during this program is to run your dental practice as a dental business. Just be more aware that you're mentioning what's going on on the business side of the practice. And then number two, you're you're asking, you know, how do you raise your revenues? Well, I think a lot of the clinicians, you're absolutely right. You know, they graduate from dental school, they do fill-ins and crowns, they get out, they feel really comfortable with fill-ins and crowns, and yet they want to grow the practice. Well, I always tell the clinicians, that's the commoditized market, right? And and what you really have to do to make your practice more profitable is do some of those other procedures, whether it be endodonics or implants or aesthetics or whatever airway, you know, there's so many different things we can do in dentistry today. And as we start to do that, that sets the practice apart. One, so that if you do want to go fee for service, it allows you to do that. If you try to go fee for service, I I think, in my opinion, and you're just doing a commoditized services, that's kind of difficult to do. But um, you know, what we try to do at the PAC is just try to show the doctors the different possibilities so they can do the comprehensive treatment planning and that allows the practice to grow too, without, you know, without trying to oversell, but it's it's diagnosing things correctly and then being able to communicate that to the patient, and then the practice seems to grow and the goodwill grows within the practice also.
SPEAKER_00:No, you're exactly right. What you know, whether it's a prosodonic office that's you know, in the old days was doing the fine art of prostodonic work versus today doing all on X's with an oral surgeon coming on the side if they're if they want to share some of the implant work, which they don't, or whether it's a large GP practice with a multi-specialty group, there's a lot of ways to earn a buck in dentistry, but you you can build a tremendous business by being in that general dental practice. You can be in that work, you you can still produce a million, two to million five a year and make four to seven hundred thousand dollars a year. You can there's room for that. Um, there's not a lot of um room for mistakes that you know doing two arches of all on X a week or four a month can help you recover with, or maybe bring in myocranial in or a cosmetic case in, or the endo, like that you mentioned. There's room for that as well for those that have that interest. It's interesting. To me, there's the portion of the dentists that are inclined to continue to pursue the education and grow in that experience of providing the services because they're fulfilled by it. The money comes. And then there's ones that just um are just happy with a bread and butter practice. I think there's still room for both in the landscape of dental practices. Um, but a DSO is gonna build at its core the continuing care focus and then look at how they can clip on the verticals of the specialty alongside of it. We have all in X businesses, we have myocranial, we have some practices that are endodontis, etc. But at the core are, you know, 100,000 active hygiene patients.
SPEAKER_02:Yeah.
SPEAKER_01:No, I I think I think this information that you shared with us during this last hour has been invaluable. I really appreciate it. Um, if people want to get a hold of you, how do they get a hold of you? And and uh what what do they expect if they do?
SPEAKER_00:You know, we have a uh the first step's real easy. Let's just have a conversation and then go to my website, they can go to my LinkedIn page, and they can schedule an appointment right there in the calendar or whatever that program's called that brings them in. Let's spend 20, 30 minutes just talking. It's not invasive. Um, we're not gonna record it. I just want to find out what do you want, where are your pain points, what's keeping you up at night. Tell me a little bit about your practice and how can we help you? For so anybody that wants to get on the phone and have a 20-minute to an hour call, that doorway is wide open. We schedule those all the time just to meet people and hear what they're thinking about. You never know where it's gonna go. And it may not be to come our way. But I want to give them a chance to just have an honest conversation with, you know, based on my experience, which is a little more vast than most people's experience in the industry. And that's the simplest way. They can reach me and my website, which is my last name, strain s t-r-a-in-e.com. They can find me on LinkedIn, they can call me on my mobile number, 916-765-7200. It's been that for over 30 years. That's 7200 was because of my interest in golf.
SPEAKER_02:Are you guys golfers? Are you guys golfers?
SPEAKER_00:I'm a hacker. As long as I'm out having a good time with people that I'm gonna spend two to four hours with, it doesn't matter where I am in the country. But uh, Sacramento is a beautiful place to get out in the evening in the fall. But that being said, you know, we we we have people. I lived on the Monterey Peninsula, we have people that fly in in their groups and want to sit down for a full day. We'll conduct a complete, thorough analysis of what they've got, where they want, if they want that, and then talk about the option options. And if they want to uh uh again explore what's going on in the DSO space, we we don't push it hard on social media. We typically find our candidates through other practice brokers because somebody's gone out to say, I want to sell my business, I want some help, independent representation, and um, or we get meet them through the consulting firm. At any given time, we have 100 million of revenue that we're looking at in our pipeline for acquisition. And it's typically a pool of around 20 million of EBITDA that we're looking at. And you know, we're gonna you know always go through that on a quarterly basis, move through that, and maybe we're a fit for some, and maybe we're not. And I think long after I'm gone, there'll there'll be that portion of the industry that's corporately supported, and there'll be that which is individually supported by the doctor who wants to be uh an owner with um because they really don't necessarily want to have to agree to what a group wants. So whether that group is a large local group, like many of the groups we know in Sacramento, or whether it's a corporately supported group.
SPEAKER_01:Yep. No, I think um I what we were joking before we started, we could probably make this six to ten hours long, but I think we have to end at some point.
SPEAKER_00:It's my pleasure. You guys are legendary, and I'm I'm just very appreciative to be invited.
SPEAKER_01:Oh no, no, you um Carrie, you've done a great job. I really enjoyed this one, and I think you gave us some really solid advice. I'm gonna have to listen to it three or four times and pick up those little nuggets and go back and tell my team, okay, this is what we have to do. But just want to say thank you very much. And I would encourage anybody who might be uh looking to either grow their practice or considering a DSO to reach out to Kerry Strain. And um, you know, you you're a great guy. You've been here for a long time. We've all known each other for a long time, and uh, it's really easy to endorse you because of that. Well, I appreciate that very much, Doctor. Yeah, how about Garrett? Any last words?
SPEAKER_02:Thank you very, very much, Kerry, for your time today. It's been super interesting. Uh, a lot of great information.
SPEAKER_00:As I said, I'm very honored. You two have a tremendous reputation and have known you guys for a very long time and just grateful to be included. And I wish everybody the best on this call. Thank you. Thank you.
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