[EP 251] State of the Market Series: A Dental Industry Spotlight with Carl Burroughs

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iTunes: https://podcasts.apple.com/au/podcast/the-deal-room/id1267098895

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Joanna:
Carl, thank you so much for joining me on The Deal Room Podcast. It’s an absolute pleasure to have you on the show.

Carl:
It’s an absolute pleasure to be here, Joanna. It’s been a while. And I’m very delighted to be involved.

Joanna:
Okay, now, Carl, you and I have worked together, I would say it has been for two decades now I say two decades, because that sounds even longer than 20 years. But I think it’s been two decades since we have worked together. And so there are a million things that I want to talk about in this episode today. Because there’s so much to drill into, in talking about the dental industry. But why don’t we start by perhaps you give us a really quick snapshot of your background in the dental industry because it’s such an interesting background. And and it leads to where you are today, in Ray White in a very interesting meandering course. But give us a quick snapshot.

Carl:
Yes, thank you very much. It’s, it wasn’t by design, to begin with, I sort of fell into dentistry. I purchased a marketing company back in the early 2000s. And we were then concentrating on helping all businesses with marketing, you probably remember, and I got invited to speak at an orthodontic meeting through a very good friend of mine, Derek Mahoney, and I don’t think I could have spelt orthodontic back then. But dentistry and the specializations had just gone through deregulation. And he was intrigued to get somebody to talk about marketing. So I went down. And I was very fortunate to have picked up a couple of clients who became friends at that evening. And that sort of got me into it. And it wasn’t very long before I realized that a I was enjoying working with the profession. And secondly, because really, nobody else was out there to help they needed some help with their marketing. So that’s been doing that now for 22 years, and still do that through a company integrated for marketing. But that has spun me out into other aspects. As I got more involved in the profession, I got involved in running their practices, firstly, through a couple of corporations who asked me to actually manage practices for them. And then more recently, I’ve been buying a few practices for myself. And then I’ve also been involved in the formation of Deadpool corporations, namely, Venture Partners, which today is known as Maven. So yes, it’s a sort of a long and winding road as The Beatles would say. But today, I’m very pleased to be involved in a national Ray White franchise that specializes in the sale of dental practices. And I must say, it’s sort of a combination of what I’ve learned over the last 22 years, I’m able to use now that for the seller to help the seller get the best possible deal.

Joanna:
I just think, you know, I find it a fascinating story because you have so many insights from so many different perspectives on the dental industry as a whole. But I also think it’s such a unique, a unique viewpoint, but a set of skills that you bring to the broking, selling and or assisting dental practice owners to buy dental practices that I really feel hasn’t been there in the market. And I mean, you know because it’s such a unique skill set. And so what are some of what some of the thoughts that you came into this role within your mind as to the changes that you can make within the industry of selling dental practices,

Carl:
I really felt that it was what the offerings out there were very lightweight. And so they were very singular. They were offering this single thing of merging dental practice, almost like an estate agent promotes a house, but with really little more depth than that. And in my work with my own practices, you know, I dig deeper and deeper and deeper and deeper into them to find out all the matrixes that may work. My state drives my staff and nurse, but I ask about everything. And I want to know everything. Because the more knowledge you have on your businesses, the more that you can actually replicate the things that you like. So when it comes to actually selling a practice, there’s just so much more than that on the surface. So for instance, the demographic of the database. You don’t see a lot of information out there about that. Yes. And that makes a huge difference. In my own practices, the practices that I’ve purchased for myself I have targeted practices that the dark Bass has not overly worked. So I picked a beautiful practice seven years ago, a lovely dentist selling it. But he wasn’t into really high-end dentistry. And I knew I had the dentists to provide high-end dentistry. So that database had a latent value to me that only I could see if I actually studied the work that had been done in that practice. And these are the sorts of things and that’s one of literally 100 other things that I feel are important when assessing whether, you know, somebody should buy a practice, but therefore, the opportunity to promote that practice in a certain way that’s going to get the interest of a certain buyer and therefore add value.

Joanna:
I mean, that’s exactly right, isn’t it, that it’s about when you’re selling a business, it’s about the opportunities that you can identify for buyers. And I just think, you know, it’s obvious that you’re in such a unique position to be able to help identify for sellers, things that they may have had no idea, or actually opportunities within their business for a buyer.

Carl:
Yeah, and I think that’s, that’s one of the things that’s definitely driving me to your due diligence, very normally sort of focuses on the financial side of the practice. And that’s obviously very important and something that you help people with. And it may pick up a few of the KPIs size of the database. But I’ve even seen, you know, sales go through where that information isn’t, isn’t recorded, you know, the activity of that database, you know, how often patients come back, you know, so there might be a patient base of 500. But are only 1000 of them active? Is that a positive thing? Is that a negative thing? So by drilling down, I feel the the salaries getting better value from us at Ray White, because we’re able to, you know, attract different buyers, and then educate that buyer, and therefore, actually maximize their return on the lifetime of the investment. Because if you know what you’re buying, if you can see there’s more value in there than what’s just on the surface, you walk in. We’ve all got dental chairs, and people can say, well, the value of that dental chair is and the age of it and it may break down. And that might be some part of the due diligence process. But that becomes an irrelevant situation. If they go, this practice isn’t evident orthodontics, I do orthodontics, and therefore, you know, I could be introducing that service to these people and look at the database, there’s, there’s an awful lot of teenage children who probably want some level of the line of therapy coming through the ranks that might be worth hundreds of 1000s potentially millions of dollars over a period of time. So the status of the dental chair to me is almost irrelevant.

Joanna:
Such a good point. I absolutely love that point. And I guess as we’re talking about that, let’s sort of reflect as well on the state of the market. Where we are right now. We have been through so many different periods. In the dental industry, where do you feel that we are at the moment? Is it a good time to sell? Is it a bad time to sell?

Carl:
It’s an interesting time for sure. What I’ve seen is a shift from dentists wanting to do new work after the practices, I mean, pre-COVID You know, younger dentists may actually have to work across three practices to stay busy five days a week, that’s all completely gone as we know. But that same dentist no really doesn’t want to be an employee. So there’s they’re entering the purchasing cycle, probably five or six earlier than years earlier than they were before that COVID period. I don’t think that those two things are actually linked. By the way, it’s just a moment in time. I think it’s more of a demographic change in our society than anything to do with the pandemic. It just I think those two things just coincided, and it would have happened anyway. it same with the shortage of staff. There is certainly a shortage of staff within within the dental sector as there is pretty much in every sector. And I think I was fooled into thinking that was a COVID-related event, you know, we’ve closed down, we’ve sent our staff off, they’ve all gone to work at Woolworths stacking shelves at $45 an hour, which is more than we pay them so now that they’ve taken stock of the of life and maybe you’ve gone off. I think all that’s actually rubbish, you know, that’s that was my thinking, you know, a couple of years ago, and I feel like this shift would have happened. Anyway, if you just look at the demographics of Australia, it would have shifted anyway. So it’s certainly an interesting time. Is it a good time? Well, there’s lots and lots of buyers. So I would say yes, I think it’s as simple as that whenever you want to sell something if you’ve got a high demand, then you’re going to get the very best possible return. You know that I say In that lifetime investment.

Joanna:
Absolutely. And while we’re on that note, then maybe we talk about some tips for sellers of dental practices, what are some of the things that they should be thinking about in terms of preparing themselves for sale and understanding who their potential buyer might be?

Carl:
Well, everybody’s circumstances are very different, of course, and their motivation for sale could be very different as well.

But broadly, if you’ve got the luxury of time, which, you know if it’s just if it’s been instigated through an aging process, then you probably have got the luxury of time, think well in advance well in advance, you know, if you’re gonna hang around and work post sale, are you willing to, then that has a very, very high value at the moment because replacing that dentist is incredibly hard. Now there are still dentists buying a practice who want to have an almost walk-in walk-out environment because they want the patient base, which tends to be for the small practice. So they went may only want the seller to hang around for six months or a year. But that isn’t the bulk of buyers, the bulk of buyers are wanting to either add a second practice or a third practice to their group, or they want to be working in a practice where the seller stays on because then that means there’s actually just physically more dentist.

And then obviously, there’s all the reputational benefit of the seller staying on. So if you’ve got the luxury of time, and in fact that you’re without giving any names, well, I’m working with a client in Melbourne at the moment, who was 57 years old. And he’s determined that he won’t pick up a drill after the age of 16. So we’ve got three years, he’s got three years that he’s happy to stay on. In his situation, I feel his practice isn’t maximized for certain reasons. So I’m advising that he doesn’t put it on the market. But because the Holist Bowl is out to build his practice for 12 months. And then he’s got two years after that, where he can stay on if the incoming buyer would like that. So each person’s circumstances are very different. The other piece of advice, and again, this depends on obviously, who you’re selling to, because who you’re selling to, the size of your practice really determines how the practice is appraised.

And therefore the ultimate sale price, the larger the practice, the larger the revenue and the larger the profits, the more likely you’re going to have the larger buyers and they will probably buys based on a multiple of EBIT da or another matrix, the smaller the practice, it tends to be more opportunity opportunities, even down to a point where it’s a very small practice, it could be really just the value of the fit out and small-cap for Goodwill. So obviously, all of those things vary. But if you can try and remember that broadly speaking if you’re adding extra profits to the bottom line of your business, there’s what’s going to be multiplied. And then in our normal lives, that doesn’t really happen.

You know, if we put, you know, $100,000 in the bank is going to be worth, you know, $107,000 This time, next year, absolute best. But if you hadn’t put $100,000 of profit into your business, because you’ve increased your turnover, then that could be worth four or five or $600,000 more to that business. Now. That’s an incredibly amazing opportunity. So knowing that there is a multiplier factor, which obviously varies practice, I think people with this, start planning early and go, You know what, we haven’t done everything we possibly can, we could do more, we could go hard for a couple of years and add another million dollars to the value of our business. And by the way, in that period of time, they were earning more revenue for themselves as well. So there’s no downside. So yeah, that’s a bit of advice.

Joanna:
I have to throw in there, I think. Absolutely. Right. I think one of the biggest mistakes I see sellers make in this market, but it’s actually across the board in most other industries as well is coming into a sale too late, when they’ve run out of energy, to do what they need to do to make changes in the business. They’ve run out of time to make changes in the business before they want to get out. And Dental is one of those industries where they really are, you know, a massive difference quite often in value and pool of buyers between someone who’s willing to the period of time that that a seller is willing to stay on with the business for it’s just often you know, I find sellers just don’t really seriously think about selling until they’re there emotionally at that point. They just want to act right now. And that’s too late to make the most out of their sale.

Carl:
Absolutely, I suppose it’s been strategic, isn’t it. And, you know, if you think of a real estate analogy, if you’ve got a nice house, the real estate agent comes along and says you need to do your garden.

Now you know that you needed to do your garden for the last 10 years, but you need to landscape the garden, you need to do this, you need to put up some nice furniture and groom it for sale. And if you do, you’re going to get a higher, you know, higher price. In a dental environment, that grooming situation is about making sure that your marketing looks fresh and is up to date.

Your internal systems are, you know, really up to date and working good things that if you’re busy in a dental practice, and it’s working, and you’re making some money, it’s very easy to go put that in the too hard basket you can’t get no and I think you know, actually thinking all of our businesses, Joanna, there’s the metaphoric box, we should have moved in, we still stepping over it. But you know, when when the box is obvious, and the needs to be moved, then thinking about that well in advance, and having the time to implement the systems, the marketing, the fresh legal pains, and knowing what will attract a buyer definitely has a significant value, and it also broadens your market. You know, if the practice is almost depressing, which some practices can be for various reasons, then you’re going to find that it doesn’t inspire the buyer unless they can see the vision of saying, Well, I can turn this around, but then the seller is not getting the maximum return.

Joanna:
Well, look, Carl, this has been hopefully very illuminating for our audience who are listening to it, particularly if they are looking to sell a dental practice or indeed buying one and understand some of the opportunities that they should be looking for an acquisition, I feel we’ve only just scratched the surface, I feel like we need to come back and do part two of the series very soon. And Carl, so how to do our listeners if they looking to sell in practice anytime in the next five to 10 years? How did they get in contact with you?

Carl:
So very easily. And I would strongly recommend, if anybody just wants a chat, just to contact us, we’re incredibly generous with that time. We’re not in any hurry, we want to make sure that people have prepared and then you know, we’ll be around in five years. So you know, 10 years. So if the if somebody wants to have a chat, that’s great, the best way of getting in touch of us is through the website, which is raywhitepracticesales.com. Or feel free to ring me directly, which is 0416-190-000. And there is no cost at all in that process. It’s just our way of getting to know the practice and being able to give you the sort of advice we’ve been talking about today. That’s our gift to our potential clients. And the sooner we get to talk to people, the better it is for us as well join Joanna, you know, it’s there’s nothing worse than getting that phone call and saying when do you want to sell or today, and I need to be out in six months time. It’s it means that we’re not being able to market and get all the buyers we need to get the absolute best value for the client.

Joanna:
Brilliant. Look, it makes complete sense. You know, it’s such an easy thing to work out what the value of your practice might actually be if you’ve got no idea to to get an appraisal. So we’ll put all of those links in the show notes. So if you’re running along the beach or you’re in your commute at the moment, as you’re listening to this podcast, you can easily access Carl and Ray White Practice Sales or click through and get yourself an appraisal organized. But for now, Carl, I just want to say thank you so much for coming on to the show.

Carl:
Very welcome and lovely to see you again.

Joanna:
Well, that’s it for this episode of The Deal Room Podcast. We hope you’re now primed for your next deal with these pointers and have enjoyed these fascinating insights.

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