Why You Might Regret a DSO Sale – Episode #535

When it comes to a DSO deal and the money that is often involved, it’s hard to be too critical. Unfortunately, many dentists are surprised by trade-offs that leave them wishing they had just turned their back on the sale. On this episode of the Dentist Money Show, Ryan and Matt take a look at the other side of DSO deals and examine why many dentists regret their decision.

 

 

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Podcast Transcript

Ryan Isaac:
Okay, you were just telling me about, was it a webinar or an interview you did? Can you recap a few high level points and then people can find this at denisadvisors .com, right? Is it on there? I don’t know. Yeah, it’s somewhere on there, education library, I’m sure.

Matt Mulcock:
No, so we did a webinar. Is that our website? Yeah. So we do webinars, we do two webinars a month and the first webinar of the month, we do a, what we call a partner webinar. We bring somebody on to educate the dental space. And then the second, third or the fourth Thursday or whatever, the second webinar of the month, we do an internal one. Right. So this was our partner webinar with shout out.

Ryan Isaac:
Yeah. Okay.

Matt Mulcock:
He’s going to text me again because he listens to every episode. He’s the man. Mike Baird with Accelerate Dental. Thank you, Mike. He is, he’s honestly so brilliant and so humble and has so much, so much experience in this industry from all angles, by the way, he’s the former CEO of Henry Shine One. So he’s, he’s, yeah, he’s got, he’s seen some dentistry. he’s got a ton of experience in it and he’s very experienced in the PE space.

Ryan Isaac:
 Good, thank you. Yeah. Thank you, Mike.

Matt Mulcock:
So he’s seen that side of it. So he brought, he brings a very, very like unique angle to all of this. and his, he, what he’s building now is this group practice model. That’s very, very unique, but he came on and did a webinar with us, with me and I just sat there and listened. Cause I was like, just learning from him basically. But yeah, so he, he, the kind of the takeaways from that are kind of some of the stuff we already knew in the sense of he went into such great detail. But when I say some of the stuff we already knew, what I mean is just how nuanced this industry is. And he said, you know, when you see a DSO deal, you only seen one DSO deal. Like they’re not all created the same. And so he did a really great job breaking down. there’s basically three main types of DSOs now, as a high level, there’s the main kind of old school model. Think of like the Heartland model, a hundred percent purchase, right? You become an employee.

Then there’s the DPO think of like MB2, right? This is where they started. Yep. P for partnership where they don’t take a hundred percent of your, equity out of your practice. They started an MB2 again, pioneered this and, where they don’t take all of it. They take majority stake, but they leave you a portion. So it feels more like a partnership at your practice level.

Ryan Isaac:
Okay, the P for partnership.

Matt Mulcock:
And then the third one that’s now starting to kind of come up, which is a group he kind of falls in. He called them, dental entrepreneur groups. And so what this is a very, very unique, model. And this is, he’s the most unique. I’ve never seen anything like this where he actually, his group and the other groups like this, they don’t take a majority stake in your practice. In fact, they are required in this model to take a minority stake. They don’t want to take a majority stake and they’re not looking to sell to a private equity group. They’re actually just trying to build efficiencies and build a group practice to kind of protect dentistry is, is what they’re trying to focus on. So.

Ryan Isaac:
Interesting using kind of yeah using some of the same principles, but doing it to protect The practices in the hands of the owners in perpetuity as long as they want to be there

Matt Mulcock:
Yeah. So one of the key, one of the key things he brought up that I think this alone, if you took nothing from this, I think this is the thing when you’re looking at a group, a DSO of any kind. And that’s just a catchall term of saying a management company that’s coming in to pull together a bunch of practices and hopefully create some efficiencies for you on the business side, whether or not they do that, it’s up to the group. But, the main takeaway, I think the main thing here is, are they, are they growing to sell or are they growing to grow? And that’s huge. And if they’re growing to sell, how fast? I think these are the things you really want to know. There’s a, and he, he had a really great breakdown. I really highly recommend going and checking this out. He had a really great breakdown of like, if they’re going to sell that’s okay. Meaning they’re piling these practices together and they’re eventually the goal from these private equity groups. They’re on a shot clock. They held, they’ve, they’ve gathered. Yeah. A timer, a timer. Yes. Yes. So they’re on a timer. Yeah, exactly. They have a microwave running and the, the taquitos are going to burn if you have, if you don’t move them quick. So they, they have this timer going usually, let’s say three to five years where they’ve, they’ve, they have investors that are in that and they’ve got, they’ve got, I,

Ryan Isaac:
For those of us out of the sports reality, a shot clock is a timer? A timer? Okay, timer. A microwave, okay. My taquitos are almost done. Okay. Okay, okay, okay.

Matt Mulcock:
They’ve got returns to meet. They’ve got certain terms they’ve got to hit. And so they’re moving quick. And he said, you’ve got to understand who’s backing the organization. What is their timeline? Are they growing to sell or are they growing to grow? And if again, if they’re growing to sell, how quickly, what type of investors do they have? There’s just so much to know. If you get equity, okay. Do you have equity at what they call the top code? Do you have equity like with all the original investors?

Do you have most likely not, do you have equity at your practice level still? There’s just so much to know about this, which I think is the main takeaway here is just, I think this is almost an opportunity for us to take, say, let’s take a step back. Let’s like, just take a breath. You don’t have to go out and buy or go get sold. Like you don’t have to right now. I think that’s kind of my main thing right now.

Ryan Isaac:
Yeah, yeah, yeah. I’ll ask you to repeat the statistics. So another favorite of mine in this space is Brandon Moncrief and just really, really smart, educated person. And I like the way that he teaches about this stuff. Doesn’t have like a forceful agenda, in my opinion. He’ll always give stats. Do you remember, he always talks about the number of DSOs that exist right now. Do you know, do you remember what that number is? Like, is it in the threes?

Matt Mulcock:
Yeah, so this is a yeah, it’s funny. So I’ve heard different data on this and I actually brought this up with Mike. I’ve heard Brandon quote that as well. I think Brandon said somewhere between three and four hundred.

Ryan Isaac:
I think that’s like 320 something or that’s what I in my head.

Matt Mulcock:
Yep. Chip from large practice sales, we had an interview with him a while back. He set up to a thousand and then Mike Baird said around 250. So it’s kind of a wide range. That’s exactly what Mike said. So, because I asked Mike that directly, I said, Hey, I’ve heard up close to a thousand. And he said, I told him, I said 250 is lower than I’ve ever heard. He said, it depends on how you define it. He said, some are defining that pretty loosely of like, if you have three practices, you’re a DSO. Yeah. And it’s like, that’s not probably really what he’s talking about.

Ryan Isaac:
And you’re looking for a fourth year of DSO. So the thing that you said from this interview with Mike was that there was a percentage of these that aren’t doing well. You want to repeat that? That was shocking to me. Well, if you’re not, this is a teaser. Did it go back and listen to the webinar?

Matt Mulcock:
So I, and I hope I’m quoting, I hope I’m quoting this correctly and not getting it yelled. I’m going to go back and confirm this. No, but I, this shocked me and, and Mike, if you’re listening, go ahead and shoot me a text and tell me I’m dead wrong. We’ll correct it, but yeah, we will correct it. I’m totally fine to call myself out, but, somewhere in the ballpark of close to 40 % of these DSOs are in trouble, are in receivership or, or are dealing with facing bankruptcy issues.

Ryan Isaac:
We’ll correct it on another episode later. Yeah.

Matt Mulcock:
They’re so debt like their debt loads. Yep. It’s crap.

Ryan Isaac:
that the debt loads during this interest rate run up was it just crushed everybody. We all in DA have multiple clients in one of the bigger ones in the country. It’s a specialty group that is in this position. And that when I first heard about it, it shocked me because of the size and how fast this one grew. Yeah. And the backing they had. And to hear, I mean, the deals that they were giving some of our clients were gigantic. Like you’re retired for generations, you know huge deals, big money, and to hear that they were in trouble in receivership, in bankruptcy talks, in like, you know, who’s gonna buy us out and rescue us was, that was shocking to hear of one that size. I’ve seen small ones fail, but to hear that number, that high of a percentage are around, even around there, even, I would be shocked if you said it was 20%, you know?

Matt Mulcock:
Yeah, no, it’s a significant number. And he’s, and again, it comes back to this idea. This is why I was saying you’ve got to, if you take nothing away from this, it’s understand the strategy of the group that you’re talking to. If you are talking to one, which is what is your strategy moving forward? Meaning he said the analogy he used, or he alluded to this, and it makes sense in my head is, when you talk about like real estate, like, are you flipping homes or are you investing in like long -term commercial real estate? That’s a very different game. And he said, there’s these DSL flippers. There’s, there’s groups out there that are literally just trying to get to 50 practices or a certain EBITDA as quickly as possible to then flip it to a larger P group. And he said, the second sale is where you always get screwed. Like meaning your deal that with the initial buyer might end up being okay. And he’s heard this so many times. Your initial deal might end up being okay. The group actually is executing on what they say or like things are okay. He said that second, if you get with one of these like flipper groups, he said, and they go to flip you to a larger PE firm and they can change whatever they want. All of it. Yep.

Ryan Isaac:
All of it, right? So the way that you get, you’re talking about the way that you get paid that equity chunk, because that’s what’s interesting about these deals is really most DSO deals are, the whole package is like, we’re gonna front load you seven to 10 years worth of your own income. We’ll just do it right now this year. The kicker asterisk on all this is some stock in the parent company, and that’s the one that can make the investment go from like, hey, there’s just seven years of frontloaded income and it’s a return you could get in most other investment classes. Or this is a return on investment you’ll never get anywhere in your entire life. It’s gigantic. And the sum of money you have at stake is so big. You’ll never do this again with them. It feels like a little bit of a gamble, but I guess what’s interesting to your point, people kind of assume like, I’ve got a million dollars of stock in this company, I’ll do my five years and then I’ll get cashed out. But that second purchase, that second roll up is where they can come and be like, well, yeah, but you don’t get it if you don’t resign another five years or you don’t get it all in cash anymore. Now we’re gonna put it in the new company. Like they can redefine everything, change the terms of because they’re the new buyer and then you’re at the total mercy of that thing. And then that takes your payout package from like this astronomical return and investment to like, you just sold your company for seven years of front loaded income and now it’s gone. So in the high percentage of them that are apparently not doing okay, and that doesn’t mean they won’t in the future, but currently they’re not, that’s scary. Man, yeah, that’s just a lot to think about. So I think that kind of sets up the, this will be the easiest episode to title by the way for clicks and marketing.

Matt Mulcock:
Yeah, probably. Or I think we were, I think we, I think, yeah, you’ll never believe number three. I think we had talked about titling it like the other side of the DSO landscape or something.

Ryan Isaac:
Okay, so let’s go there because we’re going to set that up with some interviews coming down the road with some people who have done it and their perspective is really cool. But maybe do you want to start with your and our experience from what we’ve seen with clients who have maybe gone through with it or have declined it, have said no to that? Do you want to take it there or what’s on the top of your mind for like the other side? How would you want to approach that?

Matt Mulcock:
Yeah. Well, so yeah, there’s a lot of different ways we could take this, obviously. I think, and I don’t know if we want to go here, but the first thing that comes to mind for me is just talking about, but based on the experience that we’ve seen, it’s just kind of going through like the, the, the questions to be asking yourself or the things that, that again, because of our experience of things that we’re seeing, like the first question just being like, why it’s maybe an easy question. Like, why would you even want to do this? I think that’s the things, those are the things I’m thinking about.

Ryan Isaac:
Do you ask that question? I’m sure you do actually. You ask the question. What’s the response when you ask this? When you get an offer, someone calls you and says, I got an offer, I’m thinking about it, and you pose that question, how are people responding normally?

Matt Mulcock:
So I, so it’s funny that I just said why, because what I, how I really ask it, I tend to stay away from the question. Why? Because what the hell? No, because why questions tend to be a bit, defensive creative and like creates defensiveness. It like puts you, yeah, like puts you in a defensive posture just naturally. So I try to change it to a what question, meaning I’ll say something like, Hey, what about this excites you? What about this? Are you like, what about this makes you, again, I just like excited or what about the scares you? What about this? Are you even considering? So again, it kind of, I think that creates more of a open ended discussion rather than like, why, like, why are you doing this? Anyway, that’s a whole side note.

Ryan Isaac:
Totally. That’s a good point. Why? Yeah. I’m just, I’m actually just tabling this in my head for like the next conversation I have with one of my teams so I can sound like not such a jerk. Why? Why did you do that? I mean like, what about taking the car past curfew and sneaking out made you feel like that was a good idea? What about that excited you? What part about lying to me about where you were and then driving somewhere you weren’t supposed to go? What about that?

Matt Mulcock:
Yeah. Made you think that way. Hey, Hey Millie, what about taking that toy and slamming against your brother’s head made you excited or made you think that was going to be received well by dad, you know? Yeah. Yeah.

Ryan Isaac:
I think. What part did you like? Yeah, I don’t have the patience for that with kids, but that’s a really good way to put it. What are some of the response? Like, what are you getting back from people when you ask that? Like, what’s their incentive?

Matt Mulcock:
Yeah, it’s, it’s funny. so I think there’s, I guess, first thing I’ll cover is like the obvious, which is there’s a very big difference depending on career stage. Right. So someone who’s nearing nearing retirement or has already been considering retirement. I think, I think it’s a really easy, like, what about this excites you? It’s like, well, it’s a really easy transition tool. Yeah, exactly. Exactly.

Ryan Isaac:
Much easier. Yeah. It’s twice the money and I’m done anyway. You’re like, okay, all right. Yeah.

Matt Mulcock:
But what we’re seeing so much more, and this is why I think this is such a critical conversation right now, is because we’re seeing so much more of the younger generation now, like 35, 40 year olds with 20 more years and 25 more years in front of them that are now considering this. That’s a very different response that I get. But I will say this, and I don’t know how you feel, Ryan, but this is what my experience has been. The answer is always money. What I hear is talking around that. Like, and it’s almost like making up things, or this is the vibe I get sometimes, like, well, staffing is really tough. I would really love to get some help with that. And again, they bring up some, I think, some legitimate concerns, but they were never considering those things as being legitimate until they saw the offer on their table. Like, then they were like, man, it would be really nice to get like three million bucks in cash right now.

Ryan Isaac:
So let’s stay on that. That’s a pretty like niche part of this, but I think this is a part of the discussion. And a lot of this is probably for the younger crowd, like you said, the probably sub, I don’t know, late 50s crowd. Yeah, like if you’re late 50s and you’re considering this, like you’re so close to being done anyway that, yeah, it feels like a different decision. But let’s stick on that.

Matt Mulcock:
I think as an exit strategy, it’s still very much connect. Like it’s a, it’s a really, really easy exit strategy.

Ryan Isaac:
It seems way easier. Man, I feel like my brain just goes into any tangent. I’ll just say this. I’ve only talked to, I’ve one client who is in that later career stage, gonna sell any, gonna be done anyway. The money is twice what they could get in the private market. And it’s much easier because their practice is so big, it’s hard to sell to just one buyer coming out of school or something. And they’re in a very small town though, and they’re very involved in like the community and they have kind of a charity that’s attached to their practice in the small town.

They were so adamantly against corporate coming in because of the community aspect, but that was like, that was an anomaly. Most other people in that like over 60 crowd looking at this to your point, it seems like a pretty simple basic decision. It’s twice the money for the same sale that you’re gonna do anyway. But the younger crowd, okay, so I do hear this a lot too, like I’m getting tired of the management or the staffing or the HR or the hiring and the firing and the training. I want some help with this. My question is always like do they end up getting that help? You know, like in your experience from watching clients go through this, do they actually get help with managing and staffing and hiring and firing and HR and training and systems and team and leadership and mentoring? If a dentist is like, I just wanna do good dentistry and cash out a little bit, I want someone else to manage this thing. I guess this is where the types of DSOs would come in, you know, but like I feel like people, this is my experience, it’s not general, but I feel like people have been disappointed when they have that expectation that the corporate is gonna come in and take over all management so they can just enjoy the art of dentistry and the relationships, and they’re like disappointed because it doesn’t end up happening. What are you, you’ve probably seen this a lot too, what do you think about that?

Matt Mulcock:
I think that’s one of the top three things we see. If there’s any level of disappointment or frustration after the transaction is done, this is top three, which is I didn’t, it didn’t happen the way I thought. Yeah. I didn’t get the support I thought they just like took control or sort of control, but I’m still like running it. so yeah, this is what we hear a ton. I think like everything it’s understanding the trade -offs. So for example,

Ryan Isaac:
Yeah, it didn’t happen. They’re like, they didn’t. Yeah, it wasn’t a manager.

Matt Mulcock:
You take a group like MB2, right? And I bring this up because Mike mentioned this on the podcast a few times. He has a lot of respect for them. He’s, they’ve done a really great job. They’ve built an incredible organization. They’re like, exactly. They are partner. And I think he said, I want to say, I mean, they’re top 10 for sure. I think they’re like third or fourth largest now in the country, something like that. They’re, they’re big. yeah. So they’ve done a great job, but here’s the thing.

Ryan Isaac:
Well, they’re the DPO partnership model. They are a partner, yeah.

Matt Mulcock:
And this all comes back to like, what are you trying to accomplish? Like asking this question around like, why do I even want to do this? Or what about this excites me? Or what am I looking for out of this deal? If you’re looking for pure support, like you’re saying that’s your top priority and you’re like, a dentist says, I’m just tired of managing my team. I’m tired of doing this. I need, I need help. I don’t want to be the marketer and the HR person and chair side. Like you want support. Well one way to do that, to ensure that would be a group like MB2. They’re not by the way, partners of us. I’m just using them as an example. but they’re paying for this sponsored by MB2. Yeah, exactly. Sarcasm. yeah, it’s not true, but so I would look at a group like that where it’s like, okay, you have a track record of showing that you’re able to support and that’s your business model, but here’s the trade -off. MB2 has already recapped multiple times. So.

Ryan Isaac:
Yeah. Well, they’re paying for this episode. So we got to say it. We have to say it 13 more times. Yeah. Just kidding. That’s not true. They’re not paying for this. And that’s your business model.

Matt Mulcock:
It’s like getting into Nvidia now. It’s like a lot of that growth has been purchased away. So that’s the trade -off that you’re considering. So again, I guess to come back to your main point, yes, you’ve got to consider that. And if you’re, and more times than not, I’ll be honest, if I’m giving a percentage to this, it’s like, I don’t know, 70, 75 % of the time people are coming back and being like, it was not what I was told from that level, from that support level.

Ryan Isaac:
Yeah, they didn’t, yeah. From that support, yeah, I think people want, I mean, it’s what we want as humans. We just wanna like optimize for everything at the same time. I always go back to my like childhood Nintendo days where you get to pick up like a character or a bike. Remember Excitebike? Do you remember Excitebike? You like scroll through and you’re like, all right, which bike do I want? And there’s little bars that say what strengths they have. And there’s like five categories. Unless you have a cheat code, you can’t like unlock full bars on everything. We always.

Matt Mulcock:
All of them. Yep. That’s a great example. I love that.

Ryan Isaac:
We always want that, but yeah, you probably can’t maximize the most amount of compensation package and involvement from corporate because the highest paying person is probably gonna be the most ruthless, capitalistic private equity firm that could care less about the management of your company. And like you said, they’re just trying to sell this thing in three more years and dump it on the next group. So I think there’s just a lot of question asking that has to come in like, do you want the most money or the most help? And those are going to be probably not the same group ever. I wouldn’t think.

Matt Mulcock:
Well, totally. And if let’s go down this road for a second, let’s say, let’s say support is your number one priority. Like you want to, you know, you’re going to make more money than in the private market potentially, but your, your main focus is I need more support and this organization is going to help with that. You can’t just go off of what they’re telling you in those meetings, because all these groups are going to tell you the same thing. You got to remember their incentive is to sell you. Like they want you a part of their group and they’re going to put you together and go sell you and make more money than you do. So you’ve got to consider that. So it’s not like, Hey, it’s not tell me it’s show me it’s show me what you do to give me more support. I want to see the whole plan. I also want to talk to other groups. I got to talk to at least five, probably more like 10 dentists that are in your group. And if they don’t have that many and they’re not willing to share that with you and they’re curating who you can talk to. I would be careful. Like.

Ryan Isaac:
Yeah, let me talk to someone.

Matt Mulcock:
It’s not tell me, it’s show me.

Ryan Isaac:
And as you’re saying this, it’s probably one of the more common maybe points of burnout or complaint that dentists have is just the juggling act that it is, especially nowadays, being a good clinician plus the other 20 jobs you have to do as the entrepreneur owner. So many things that you just there’s no time for them. You’re not like, you know, you didn’t go to school for that stuff. It might not even be in someone’s personality in the first place. It’s just in the on their plate by the nature of owning a practice. But do you, like if someone brings that up and you’re getting the feeling from the client, like maybe this isn’t about money, maybe this isn’t about cashing out, maybe it’s about burnout. Maybe it is about, like you’re doing jobs that suck the life out of you and you would probably love your life and keep doing this for 15 plus years if you just had some help. Maybe selling the whole thing’s not an option. Do you ever see the people go down that road? Like maybe you need a consultant. Maybe you just need to actually sell to the business partner dentist that wants 50 -50, but that person loves business and hates clinical, and you’re the opposite, or maybe you need a couple of associates, or maybe you just need to join a group practice with three offices instead of a DSO. Do you ever push down that road with people? And if so, how has that turned out?

Matt Mulcock:
Another question always is like, what’s the alternative here? It’s like, this isn’t the only option. And to your point, if you’re trying to uncover, what is this really about? Is it just about money? Cause if it’s just about money, I’m sorry, you’re going to regret it. Like you’re like, you’re going to regret it. And I’ve seen this firsthand from so many who took what they thought was, and I guess on paper was life -changing money and almost every one of them regrets it. Almost everyone.

Ryan Isaac:
We’re gonna interview some of these people. We’re talking about like north of $10 million deals. Like the cash portion being north of $10 million and still feeling, you know, probably like not even that long into it, man. I swear it starts to set in like month four to six and they got like three to five years left on the contract and they’re like, I don’t really care about the 12 million on my banking account right now. Which seems like, you know.

Matt Mulcock:
Yep. I mean, there’s a bigger lesson there, by the way. There’s a bigger lesson in life. I think that that speaks to, but, but I hear everything from, I hear everything from it’s a spectrum, right? It’s a spectrum. I hear on the one end, they’re really egregious. Like I wish I would have never done this as they’re sitting on $10 million in cash all the way over to they’re just like, eh, like it’s just not as cool as I thought. Like, but it’s very rarely.

Ryan Isaac:
Yeah, that’s a whole other thing.

Matt Mulcock:
Do I hear like best decision I ever made? It’s pretty rare.

Ryan Isaac:
Yeah, have you heard that? I’m just now racking my brain like.

Matt Mulcock:
You don’t even know if I have to be honest.

Ryan Isaac:
Now again, I think this is different than I can think of like some 60 plus year olds that did this. And it was like, yeah, best decision ever. Like, yeah, no kidding. You just got like three times the amount you’re going to get from that dental student down there. And you’re gone anyway. Yeah, from the younger crowd, like the sub 55 crowd, I don’t know if I’ve ever heard that kind of enthusiasm after. Now again, what’s my sample size? I’m not the whole industry. I don’t know, but like my experience.

Matt Mulcock:
I was going to say we got to be fair to the sample size, but we’re going anecdotal. I’m sure there’s some early investors, again, we can come back to this name. We’re not joking, they’re not a sponsor, but the early ones for like MB2, I’m sure that are like, they succeeded, but there’s a little bit of survivorship bias there, right? Because for every MB2, there’s who knows how many dozens of others that didn’t make it or it didn’t turn out to be what they thought. So I’m sure there’s some out there that are saying, there’s probably people, there’s probably people listening right now that are like, you idiots. Of course, this is the best thing ever did. But I would say, but I would guess just based on our experience, that more times than not, like the number I give is usually, it’s like seven or eight out of 10 are pretty bugged or, or annoyed or frustrated or regretful. It’s not what they thought.

Ryan Isaac:
There’s, well, there’s gotta be. Yeah. Yeah. Of course the best thing. So my question for, what would be, you finished your talk. They’re a little let down, little disappointed. I was going to say to you out of the maybe two or three out of 10 that are super stoked on it, it was like best decision. I would wonder what like what was fulfilling for them. And I’ll bet it’s not the money. I’ll bet it has something to do with like a major life change. Like I needed out of this town or I was done in this exact practice or like we had a major life change and it’s just time to move on. Something that doesn’t have to do with the exact practice or the money itself. I’ll bet there’s some circumstances and it gave them freedom to like go in a different direction in life in general that they just couldn’t have received otherwise. And so I’d be, man, I’d love to, if you’re listening to this and you sold to a DSO and you’re under, let’s say what, 50? If you’re under 50 and it was like the best thing of your life, I would, we should interview you. Like, will you reach out to us please?

Matt Mulcock:
We’d love to hear it.

Ryan Isaac:
That’d be cool to hear why that was such a great, why that was like best decision ever. I’d love to hear that actually.

Matt Mulcock:
I guess with that being said, maybe it goes without saying, but we just want to mention that anyway. Like we have no dog in this fight. It’s I mean, it’s truly, it’s not like we’re, we’re, we’re just pro. We say this all the time. Like we’re just pro thoughtful decisions. And, and, and that’s right. Exactly. We just want everyone to be happy. Wouldn’t it, what did Justin say that one time? Wouldn’t it be so chill if everyone was just, or what did they say? Wouldn’t it be so tight if everyone was just chill with each other? Something like that. He’s like, saw, he like saw, yeah, he like saw a picture somewhere. It was like, wouldn’t it be tight if everyone was just chill with each other? it just made me think of that. We just want everyone to totally does. Yeah, exactly. But it just reminded me of that. But yeah, we just want everyone to be happy. We want everyone to go into these things. The eyes wide open. We have no dog in the fight. Truly don’t.

Ryan Isaac:
Sounds like a stoner movie or something like Jonah Hill would say that or something. Well, I mean, actually, you could argue that we have more incentive for people to sell than any other option because it puts more money in their investment accounts, like a huge chunk of money, which is revenue to us. same. Yeah, same.

Matt Mulcock:
I was literally just going to say that, that I have talked more clients out of deals that if I was going off of just like, Hey, you’re going to walk away with multiple seven figures that you’re going to invest with us. And I’m still telling you don’t do this because it’s not, it’s, and I’m not sitting here saying like I’m some, you know, we’re like some, on some moral high ground, but I’m just telling you like, don’t do this. You are far better off. And I’m not saying that across the board, by the way. But, but individual clients we’re working with, when I, we get down to it and we’ve understood what they’re trying to do and why, and what their career trajectory looks like. And I’m thinking of one in particular, I will give very minimal details, but a husband and wife running a killer practice dominating, like their, their practice is incredible. They’re in their forties. They’ve got 20 years of doing this. They love it. They love their practice. They love what they do. There’s minimal stress, they got approached by a group to do some, like to, to like, you know, an offer and they were pretty far down the road and we just, they were going to make some good money. And as we went through all the details, I got down to it. I just said, guys, don’t do this. Like based on everything we’ve talked about, based on your career, based on your life plan, don’t do this. And they, they didn’t, and they would have walked away with multiple millions of dollars that they would have invested with us. And I’m just like, you can’t do this.

Ryan Isaac:
So what strikes me as you say that for you or someone in our position to come to that hardline conclusion, I mean, you’re having a very hardline opinion that’s going to affect generations of a family. So what strikes me with that though is like, Matt, how many hours of knowing that couple did it take you to form that opinion? Years?

Matt Mulcock:
No stress, no pressure, no pressure.

Ryan Isaac:
Yeah, and like an average of, if you added up email, text, phone call, meeting time of an average year for that client, for five years, I guarantee we’re talking at least 70 hours. If we’re gonna include like research, not just talking to them, but like working on something for, we’re talking in 100 plus hours of knowing these people, like everything about them, way outside of just the financial scope.

Matt Mulcock:
I was gonna say like a hundred. Well, you know, it was so cool about this too, just thinking about this particular couple of mine, we got on a phone call, kind of the final, like, what are we going to do here? And we’d gone back and forth multiple times, multiple conversations. And I was pretty candid with them. And I just said, I literally was like, look, I use this from another advisor who’s pretty big in the industry. and I use this when I’m delivering what could sometimes be hard news, or like a hard opinion. And I’ll just say, look, you might fire me for saying this, but you definitely should fire me if I didn’t. And I’m going to tell you this, you should not do this deal. And it’s so funny. They both like took a deep breath and they both like relaxed and they were like, we’ve been thinking the same thing. And it was like this moment of like, okay, I’m so glad you gave me like the permission or like the final say to be like, to push us. And then they have not brought it up one time since and they’ve

Ryan Isaac:
Okay, I am holding like three questions in my head and my ADHD brain is gonna totally forget these. Squirrel. First of all, you’re like, this is like a master class in a secondary lesson here about communication skills. Now I’m like, now I’m thinking my teenage daughter’s, okay, honey, you might hate me for saying this, but you should definitely hate me if I don’t say this. Don’t go out tonight. Man, that’s such a cool approach. Okay, so that was one thing that just kind of stood out to me.

Matt Mulcock:
Write them down on a Post -It.

Ryan Isaac:
That’s a really cool way to communicate with somebody. But again, it just strikes me about you can’t form that kind of an opinion unless you’re a salesperson and you’re just like forming an opinion based on your incentives, unless you spend so much time with someone. I think that speaks volumes. Number two, what you said strikes me as the number of people who have turned down deals. Again, this is like the sub 50 crowd, even in the face of giant sums of money. I don’t know anyone that’s, they don’t even talk about it ever again. So when you said that I’m like every single person I can think, young person, mid -career, huge deal on the table that declines it, never even mentions, I never even hear about it again. I have a client who is looking at like an eight to $10 million deal, it was huge. Big specialty, multi -location practice. He backed out in the closing phone call. So we went all the way through it. He was on the phone from the closing phone call. He left, he ran down the aisle. He went back down the aisle. And he’s never said anything since. Like, it doesn’t even come up. And when you say that, I’m like, man, I just don’t, I think when people, they just don’t regret that decision. Like, more often than not. And again, if you’re listening and you declined a deal and now you regret it, please reach out and let’s, I would love to interview you and like hear about your wife.

Matt Mulcock:
Yeah. If you’ve pulled over, if you, if you pulled over and you’re so angry, you can’t drive anymore because of us, please let us know. We’re not, I’ve realized we’re like, we’re not trying to, we’re not, yeah. Let me know. I don’t, I mean, I don’t like it either. It’s like, I like people being mad at me. but I’m not meaning to turn this, we’re not meaning to turn this into like anti -DSO episode by the way. But, we want to give the other side of the, just our experience. Yes. And get the other side of it.

Ryan Isaac:
Let Matt know. I don’t like when people are mad at me, so just tell Matt. This is just what we’re experiencing with people. Yeah. Yeah.

Matt Mulcock:
It’s funny you say that because we did an episode a while back about the book Paradox of Choice. Barry Schwartz, fan of the show. Not really. I love saying that, but they’re not. Very rarely. No, he’s definitely not. Very rarely do we quote someone that they’re actual fan of the show. Daniel Crosby might be the only one. Yeah. Daniel Crosby might be the only one. He’s, he’s, he’s awesome. He likes us. We’re going to go to dinner next week, but when he’s in town, but.

Ryan Isaac:
Daniel Crosby. Yeah. Big fan of the show. Actually, I don’t know if he’s a fan of the show. He’s nice to us. But I don’t know if he’s an actual fan of the show. He’s nice. Yeah. Yeah, okay. Probably not.

Matt Mulcock:
I don’t think he’s a fan of the show. Anyway, Barry Schwartz talks about this exact concept. So there’s like psychology behind this. And it’s this idea that. That like making a decision that ends up being wrong or that you regret is far worse when that decision was based on action versus inaction. So meaning like for you to go actually like sell your D you sell your practice. You took action to make that change. The operative or the, the probability of you regretting that is far higher, just psychologist, like psychologically versus making a quote unquote mistake based on inaction. Humans would rather do that. And I think it’s just because part of it is just like our, our desire to not change, to have any change in our life and like the uncertainty of it.

Ryan Isaac:
We would rather sit around, drag our feet, bury our heads in the sand, drag something along, drag it out. We’d rather go through that pain than feeling the pain of actually taking action and maybe it being the wrong decision. Yeah, that’s really interesting. Okay, yeah, good point. Here’s another thing that you were talking about that came up, I was thinking about is the other side of maybe disappointment or regret I think is such a common theme. Again, this is younger people in this scenario. And that’s just the, that realization when it dawns on them after the transaction, when they say yes, and it kind of dawns on them really how much longer they have to work. And for whatever reason they made the decision, they said yes. It’s a whole, you know, it’s very complex for a lot of people.

I think when you’re still in your forties, and some people are taking these in their thirties, which is just feels like that’s so young in a career. but I mean, congratulations to that person for building something so valuable before you’re in 40, that someone wants to buy it from you for millions of dollars. That’s amazing. but I think that realization of how much time there is still left, it kind of hits and it really, that really sinks in. What’s your experience with that? When people just hit that realization, like, man, I,

Matt Mulcock:
Well, man, there’s such a good point. And I think you realize at that point, and it takes you maybe receiving all this money to realize that money was never going to be an issue anyway. So I think that’s the biggest thing is like you, I think a lot of times, again, people take it for the money. And by the way, no judgment. Someone’s sitting check in front of me, four or 5 million bucks. I’m going to think about it.

Ryan Isaac:
It’s like what day of the week did you offer? A Monday or a Friday? Because if you offered me that five million on Friday, I might take my time. If it’s a Monday, I’m like, it’s Sunday night, you know? It’s Sunday night. Do you want to sell? I’m like, yeah, I’m done. I’m done. I’m done. What do you need me to do? One of my kids? I don’t know. You just take it. Yeah, it’s fine.

Matt Mulcock:
It’s like, where do I sign? Where do I sign? Yeah. Yeah. Yeah. Can I hand pick the child? no. So I think, I think, to your point, they realize how much more they have of their career. I think it hits them that, it’s money does not solve anything but money problems. And if you didn’t really have money problems in the first place, which in most cases, if you’re selling to a DSO, you don’t really have money problems, right? Because no matter what path, and I tell this to people all the time, no matter what path you take, you’re going to be fine. You’re going to be fine. Just keep doing what we’re doing. You’re going to be fine. It’s not as sexy down path. A path B might feel sexier because you’re getting a check for three million bucks. But anyway, I think they, I think a lot of times they realize after the fact, like you said, it’s that four or six, maybe nine, 12 months after.

Ryan Isaac:
If you just follow some basic principles long enough, you’re okay. Yeah, you’re okay. Yeah.

Matt Mulcock:
Well, my life’s the same. Like I still have my same problems. I’m still stressed about my family. I’m still stressed about what, whatever it is, like you, whatever it is, because you’re not, the money is cool for a bit. It’s solving maybe some money issues or some stress you may have had, but everything else is still there. And I think that’s part of the realization. And then to your point, it’s like, I’m going to do this for another 20 years regardless because what else am I going to do?

Ryan Isaac:
I think that’s a big one, man. I think whatever the reason is or the environment, people make the decision to say yes and sell. There’s some pressure that gets relieved and then they’re like, man, maybe I don’t hate dentistry like I thought and I’m 40, yeah and I’m 42 and then I’m like, I could do this easily for 15 more years now that I’m thinking about it like this with a different frame of mind. And then they start to…

Matt Mulcock:
I hear that so much.

Ryan Isaac:
Here’s another question, how many highly successful mid -career DSO sales, people who sold, within the next 12 months are like, as soon as my contract is up, I’m just gonna do this all over again. I’m out and I’m gonna go do the private, I’m doing private practice all over again, blueprint, I already know what I’m doing, and then they say this time, I’m just doing like super high production, super high profitability location, lifestyle, couple days a week. I’m just gonna crush it and enjoy life. Like they’re already, see that’s the paradox here is the personality that created a business person who was able to sell for millions of dollars is the personality that is not just gonna play golf permanently every day starting at age 40 for the next 40 years. You’re not gonna, you are just hungry to create and be an entrepreneur. I think it just hits them and they’re just like, yeah, I’m gonna keep going. Yeah.

Matt Mulcock:
Do it again. And to that point, the person who is already running the lifestyle practice with no desire to go build up multi -location to like sell to already. So they’re not the ones selling because they’ve already created the life they want. So it’s a, it’s a great point. That’s a really good point.

Ryan Isaac:
Yeah, they’ve already gotten there. Hmm. Again, if you’re my client and you’d like to sell to a DSO and let me manage $10 million for you, I’ll do that all day long. That’s fine. In fact, if there’s 100 of you listening, if you act now and you just sold to a DSO and you have more than $5 million, I will manage it. I will manage the money for you. There’s 100 spots if you have $5 million or more. I’m happy to do that all day long. The phones.

Matt Mulcock:
Act now! Yeah, only a few spots left. Only a few spots left. They’re flying off the shelf right now. They’re flying. The phones are…

Ryan Isaac:
I’m looking around here, the phone banks are going crazy. Do you remember the 80s when there was like dialathons, callathons? What were those called? Dialathons?

Matt Mulcock:
The telethons. Yeah.

Ryan Isaac:
What were the telethons? Yeah, and there’d be like a platform of people just answering phones with cords on them. Hello? Yes, thank you. Anyway, yeah. Go ahead. I mean, like you said, Matt, I actually have a financial incentive for you to sell and let me manage more money sooner. That’s more revenue for me and my company. Like I have that, you know, but we’re not very good. We’re not capitalists, man, because I just want people to like.

Matt Mulcock:
At the risk of sounding judgmental, because I do this too, we all do this as opposed to the rich life or the building of your wealth. It comes from a place sometimes I think of like status chasing. It’s, I think it’s, it’s people who, I think we all get lost in this, right? It, we talked about this, right? It’s like when you go on a hike or somewhere you’re outside or you’re surfing and you start taking pictures of it. And you’re like in your head, whether you were to say this or not. You know, am I taking these pictures for memories and myself or thinking exactly. And I think people out there know, are you entertaining this deal because, and you’re almost imagining going and telling your friends. I think if that’s the case, if that’s the angle you’re taking, whether you would say that to someone or not, if you know, in your heart of hearts, like I’m doing this to like, have some fodder for the water cooler and to like tell all my friends it’s gonna feel so good. I think you’re on the road to disaster. I think you’re on the road to regret.

Ryan Isaac:
Yeah, and 100 % and also how normal that is to actually feel that way. We live in a show me society. Yeah, we’re in a look at me, show me society. So we’re all look at me. Yeah, we all do it. Yeah.

Matt Mulcock:
So normal. We all do it. Yes. Yes. That’s just human nature. We’re all status chasing hierarchical people that are just looking to like show off to people.

Ryan Isaac:
What do my kids call it now? Pick me. That’s pick me energy. They’ll be like, dad, you’re being so pick me right now. I’m like, I just said that my, I have a headache. You’re like, stop, you’re so pick me. Yeah, that’s such a good point, man. I was gonna recap. I was gonna say, cause again, all we’re trying to express is what we hear from people as financial advisors to people who take and don’t take these deals. So we’re being let down over the lack of actual business support that people are expecting. We’re hearing some regret over how much time people realize they have left in their lives to actually work and that they actually have a desire to work. And actually to your last point, a lot of this gets motivated by fear, Matt. How often do people say that they just feel like they need to do this because they’re scared that they’re gonna, it’s never gonna happen again. And then they made a mistake by not taking more money when they could have, and then it never comes back again. Motivated by fear. Fear and you know, you kind of just want to like show that to people like you did this big thing. So these are just things we hear from people. Is there any other common theme that you hear that like kind of leads to some of this stuff?

Matt Mulcock:
I mean, you’re saying like to the level of regret sometimes. Yeah, just the deal wasn’t what they thought straight up. Like the money, they have a clawback or they had a, some type of provision that they didn’t know about or the equity, the equity did not turn out to be what they thought, either through the actual structure of the equity, because dentists don’t understand how a lot of that works. A lot of times, by the way, a lot of times we don’t, we have to like bring people in. Yeah. Even Mike Baird was like it is so complicated sometimes like you have to really dig in to understand this. So the details of the deal sometimes can lead to a lot of regret where it’s like, cause again, they’re selling you, they’re going to tell you everything you want to hear on the front end. And then again, either whether it be the group you partner with actually was not being upfront or they sell. And that second group gets you. And that’s where it turns out to not be as lucrative as you think. So that would be an invitation for if you are considering something, please, please, please have a very experienced DSO attorney on your team. Make sure your accountant, Sarah Stokes, stocklegal .com, if that’s the website. She’s been on the show, yeah. Yeah, Google it on our website. Google it on our website, how old am I? My kids say search it up. Do you know kids don’t say Google it anymore? They say search it up, search it up.

Ryan Isaac:
I think this is a good recap of what people experience and feel. I don’t know if they’re… Yeah, yeah, what’s something else?

Matt Mulcock:
Can I say one thing? We were saying earlier, if it is about money, and by the way, it is okay if it’s about money. It is okay if it’s about money. That it’s not a judgmental thing. It’s why we’re working. Money should be a part of your life because we all know, I think we need to be more open about it being okay about it being about money.

Ryan Isaac:
It’s okay to be about money. Yeah, that’s why we’re working. Yeah, yeah, yeah, yeah. That’s okay. It’s okay. And actually, Matt, to your point, that actually ends up being some people’s driving, actual values is like wealth creation, having nice things, aesthetics, like that’s okay. It’s totally fine. Status is actually okay too. That’s totally, if that’s your aligned value.

Matt Mulcock:
Sure. Yes. That is perfectly fine. Just. Just own it. Yeah. Yeah. Just own it. But what I was going to say is if it’s about money, one thing I can say is I’ve said this a bunch and I think I think I tell this to clients a lot and just Dennis looking at these deals. If it’s about money and you’re not OK with the cash up front. Don’t do the deal. Don’t hang your hat.

Ryan Isaac:
It’s own it, just own it, it’s fine, it’s totally fine.

Matt Mulcock:
We’ve seen some egregious sales presentations from some of these groups that are like, but we’re going to recap four times. And on the fourth recap at 10 X and you’re going to have like run. Yes. Run away as far as you possibly can. If you’re not good with that money on the front end of that doesn’t pencil for you. And that doesn’t make sense for you. Cause all they’re doing is to your point earlier, front loading your profit margin upfront over a five or seven or 10 year period. If you’re not comfortable with that.

Ryan Isaac:
Yeah, four times at 10x. Yeah. $37 million in five years.

Matt Mulcock:
And you don’t feel like that money can be taken and put elsewhere and grow your wealth, you know, in a better situation. If you’re not good with that money upfront and you’re hanging your hat on equity, I wouldn’t, again, you’re on the road to regret.

Ryan Isaac:
Yeah, and your stat from earlier, if that’s the stat that was said and we’re correctly remembering, 40%. Dude, I don’t care if it’s half of that. That’s still a very scary amount. It’s all right.

Matt Mulcock:
For not just making crap up. Yeah No, it’s I’m Yeah, I’m going off of memory I’ll go back and watch it again and or Mike can Michael correct me by the time this episode like the day it comes out He’ll be like, hey man, you’re an idiot. Yeah. There you go, I’ll do that I’ll shoot him a text right now

Ryan Isaac:
Yeah, let’s text him right after this. On the intro of this, we can even correct it. Whatever. But to your point, that’s totally true. And if the sweetest part of all of this is the potential equity rollups in the future buyouts, I think you’re going to be disappointed. Pretty sure you’re going to be disappointed. Do we wanna end this with like Matt, you have to give thumbs up or thumbs down, are you DSO guy or not? Do you wanna do that? Or is that too much? Is that too hard? Because really what we’re gonna be like, no, but it depends. Could you say, do you have an opinion? Yeah, if you do, if you do. Yeah, if you have one, yes, I’m curious.

Matt Mulcock:
No, I’ll give you my I’ll give you an honest answer. I guess how, let me, let me back up a little bit. Are we framing, are we framing this as good for dentistry or bad for dentistry? Or are we framing this like do the deal, don’t do the deal in general? Like how, I guess we can go through that series if we want.

Ryan Isaac:
Say how you feel. Thumbs up, thumbs down to DSO and you can qualify for how you mean.

Matt Mulcock:
Thumb. I’d say if we’re talking overall, how good for dentistry, bad for dentistry, bad down, thumbs down. Yeah. I don’t think it’s good for dentistry.

Ryan Isaac:
Yeah, same, I’m thumbs down. Yeah, I’m thumbs down and this might be my punk rock upbringing. I’m sorry if it is, I was heavily influenced and swayed, but there’s just something about, at some point, the man, the corporate man is just trying to come in and gather up all these, and it’s happening in every, it’s happening in our industry, every industry.

Matt Mulcock:
Our industry is almost lockstep in some ways with what’s happening in dentistry.

Ryan Isaac:
It’s the same thing. I get it, I understand that’s how some businesses, some industries are actually greatly vastly improved by efficiencies and having bigger scale and more money and more reach and more growth, but there’s just a point where I get a little, I’m just like, you know what man, stay out of this. Keep the mom pops around, keep these one shop location, like generational companies around, like leave us alone. Just leave us alone. We’re doing fine, we love our life, and we’re making the world a better place in our little communities. Leave us alone. Wall Street, get out of here. That’s how I feel sometimes. I do.

Matt Mulcock:
Yep. Yeah. Hey, we started this before we jumped on. We’re like, are we going to get in trouble for this? Maybe we will. Here we are. Here we are. Maybe getting in trouble, but you know what?

Ryan Isaac:
We might now, but hey, here’s the invitation though. If you’re listening to this and you’re like, whoa, whoa, whoa, whoa, I have a totally different perspective. Come on, let’s do an interview and let’s hear it because that’s all we’re trying to do is educate.

Matt Mulcock:
Please tell us. Unless you’re a broker or unless you run a DSO, then no. If you’re a dentist, if you’re a dentist with no dog in the fight and you want to come talk to us, we would love to. Yeah.

Ryan Isaac:
We’d love to hear that actually, because we’re gonna interview people who have gone through with it and have some experiences to share. So anyway, anything we didn’t cover, Matt, or was that pretty thorough? Just shy of an hour of DSO talk. I’m just excited for how easily we can click bait the title.

Matt Mulcock:
No, I think we’re going to get a lot of responses on this. I think we’re going to get a lot of responses on this one. We’re pumped about that because we love being sensationalist and causing some drama. That’s like our favorite thing to do.

Ryan Isaac:
Someone just needs to go count the points of regret and then it’s like the six points of regret. And man, this is gonna be like a high performing episode, so. Don’t do it. Down with the man. All right. Thanks, Matt. Appreciate it, man. Thanks everyone for listening. Next time, bye bye.

Matt Mulcock:
Yeah. Thanks Ryan.

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