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Episode 133 – Mark Costes, D.D.S. on High-Level Practice Ownership and Philanthropy
Episode 133 – Mark Costes, D.D.S. on High-Level Practice Ownership and Philanthropy
This week, the Dental Amigos welcome Mark Costes, D.D.S., entrepreneur, best-selling author, international key-note speaker, and host of The Dentalpreneur Podcast. During his 21-year clinical career, Mark started and acquired 16 dental practices in California and Arizona. Dr. Costes is also the founder of the Dental Success Institute, the Dental Success Network, and Dental Success Partners. His newest non-profit passion project, Smile Outreach International, brings much needed dental care to people who need it most in developing countries.
In this episode, Dr. Costes offers his strategies for addressing HR challenges as a high-level practice owner. Then, he advises practice owners to learn from DSOs’ advanced pay structures, benefits, and clinical development programs, while maintaining the unique benefits of a single-practice environment. Dr. Costes also highlights the achievements of younger Dental Success Institute members and the success of Smile Outreach International in providing free dentistry with the goal of creating a long-lasting impact.
Dr. Mark Costes can be reached on Instagram @drmarkcostes or via Facebook Messenger. Also check out the various organizations discussed in this episode and The Dentalpreneur Podcast below:
Listeners who want to reach out to Paul can do so at Paul@DentalNachos.com and those who want to reach out to Rob can do so at Rob@RMontgomery-Law.com.
Full Episode Transcript
Bumper
Welcome to the Dental Amigos podcast with Dr. Paul Goodman and attorney Rob Montgomery, taking you behind the scenes of the dental business world. All the things you didn't learn in dental school, but wish you had. Rob is not a dentist, and Paul is not a lawyer, but since Rob is a lawyer, we need to tell you that this podcast is for informational purposes only and shouldn't be considered legal advice. Listening to this podcast does not and will not create an attorney-client relationship. As is always the case, you should formally consult with legal counsel before proceeding with any legal matter. Learn more about the dental amigos at www.thedentalamigos.com. And now, here are the Dental Amigos. Hello
Rob Montgomery
Hello everyone, and welcome to another episode of the Dental Amigos podcast, the only podcast that is hosted by a dentist and a lawyer. I'm Rob Montgomery, and I'm joined, as always, by the Head Nacho himself, Dr. Paul Goodman.
Dr. Paul Goodman
Great to be chatting Rob.
Rob Montgomery
It's good to see you, Paul, and it's always good to chat with you. And as we record this on International Kindness Day. Thank you, amigo, for bringing a tasty lunch for me and for our podcast team.
Dr. Paul Goodman
My pleasure. I aim to deliver Joy.
Rob Montgomery
And you did. You succeeded. We have an awesome guest who is returning to to the show today, our old amigo, Dr. Mark Costes. I guess we have to introduce and do a bio for him. I'm not sure who in the dental world doesn't know.
Dr. Paul Goodman
I just refer to him as there's a Taylor Swift of dentistry. That's what he likes. I know, trying to catch up. You know, I think that you might be selling Mark short on that, in the dental world, I think he's bigger than Taylor Swift in the dental world, maybe even the rest of the world. So for those of you who do not know Mark Costes, let me tell you a little bit about him. Dr. Mark Costes is an entrepreneur, best selling author, international keynote speaker, and the host of the very popular Dentalpreneur podcast, which boasts listenership in 151 countries, with over 10 million downloads and over 2000 episodes, Paul we got a ways to go.
Rob Montgomery
During Mark's 21 year clinical career as a dentist, he started and acquired 16 dental practices in California and in Arizona. He's also the founder of the Dental Success Institute, the Dental Success Network and a rapidly growing DSO, Dental Success Partners. He's also the co-founder of Front Office Academy and Colorado Surgical Institute. And his newest passion project, which we'll ask them about today is Smile Outreach International, which is a nonprofit, 501, c3 organization that brings much needed dental care to people who need it most throughout the Third World. And now, without further ado, welcome amigo and thanks for being on the show.
Dr. Mark Costes
Rob And Paul, thank you guys so much for having me. This is going to be fun and and on International Kindness Day, wow, I'm glad it's not just national Kindness Day. We can be kind to people all over the world.
Dr. Paul Goodman
Well, your podcast all these countries. Mark, so it fits, um, even though, you know, we are such close friends, and you might have answered this before, our first hard hitting question is, if we were in Prescott, Arizona, where would you want to go for nachos, and what is your favorite topping?
Dr. Mark Costes
Oh, okay, all right, so this is, this is a good one. This sounds like an inauthentic Mexican restaurant, but one of the most authentic restaurants in town, and my favorite, is called Spicy Streets. And doesn't that sound very American? Extremely, extremely good. They have street taco size tacos, and they have this, this thing called the Quesa-taco, where they actually it's basically a taco wrapped in a quesadilla, which is incredible. And my favorite Nacho topping, that's tough, but, I mean, I was vegetarian for a long time, vegan for a minute, but definitely guacamole, avocado of some sort has to be on there.
Dr. Paul Goodman
I like that Mark. And also, just so I can weigh in here from Philadelphia, you know, next time you come for one of our events, the Philly taco is an entire Lorenzo's piece of pizza which is the size of your head wrapped around a cheesesteak. So maybe we have to have some sort of, you know, photo op with that. It's not, it's not when you want to eat the entire thing, but it is. It is one of our signatures. Thanks for sharing.
Rob Montgomery
As healthcare professionals and those that support the healthcare profession, I think we, let's make it perfectly clear, we are not endorsing nutritional value. The Philly taco, typically, is only consumed late at night when you've had way too much to drink. That is not that is not sober food.
Dr. Paul Goodman
Yeah, that's true. We
Dr. Mark Costes
We have this place called Devil's Pantry where everything is deep fried. I mean, everything, whatever you could think of is deep fried. Yeah, it opens at 10 o'clock on Friday nights. Oh, 10 o'clock till four o'clock in the morning. I like unique business, specialized late night bar food, for sure.
Rob Montgomery
They know their people, right? I mean, that's it, right? That's their focus. They know they know what their people want, and when they want it.
Dr. Mark Costes
Exactly.
Rob Montgomery
Hey, Mark, so let's just kind of start off with a kind of a very broad topic and question, and because you really touch and get involved with so many different dentists in a very wide geographic area around the world, but really around the country, importantly for our purposes in this podcast, but with high level practice owners, what are some of the biggest challenges that a high level practice owner is facing right now.
Dr. Mark Costes
I mean, I'm really fortunate that, you kind of alluded this to this, Rob, I get the opportunity to speak to lots of dentists every single month in one on one, kind of coaching, consulting sessions and in group sessions as well. Paul has been to lots of them, and they're extremely powerful. But if you were to kind of stand back and try to find some of the most common themes nowadays, I think that HR for sure, human beings, the workforce, retaining people, recruiting good people, is probably number one we have. We have a lot of challenges when it comes to integrating PPO, you know, the payor cycle, and making sure that we get compensated for the dentistry that we're doing. So, you know, revenue cycle management, dealing with PPOs and, human resources, those are probably the three that I've been dealing with most, and seeing most out there as the biggest challenges.
Dr. Paul Goodman
I'm with you Mark. And also, the thing I share a lot is no one really knows this, unless you're a practice owner, if a football team on Sunday didn't have a kicker, no one would say, well, can't just one of the other players go and kick, because they know that that's such a specialized skill set. And when you have, like my practice, a super high level surgical prosthodontist, if their dental assistant is out for a day, it collapses the entire schedule for them. And maybe another business person would say, Oh, just get another assistant. But we all know that the level of sophistication and specialization of some of these people who work in our offices allow us to do amazing things, but we need to replace these people. It can be just crushing to your morale, your production, and that's something that post pandemic, you know, we've just struggled with in a way that's more difficult than the first 15 years of practice ownership. And I'm assuming some of your DSI clients are feeling the same way.
Dr. Mark Costes
Indeed, indeed. It's interesting that you brought up the pandemic, Paul, because I do think that was kind of a turning point for human resources inside the dental profession, I think that tens of thousands of people, I don't even know what the number is anymore, tens of thosands, if not hundreds of thousands, of people actually left healthcare and healthcare related positions, and dentistry specifically was hit really hard with that. Lot of hygienists just retired, a lot of auxiliary assistants, both admin and clinical, just left the profession. So we're kind of still reeling from that transition that happened, you know, four years ago now. The pendulum is still in favor of the employee now and not the employer. I think that eventually the pendulum will begin to shift and swing the other direction, but still now you have to be really, really careful and really aware of what it takes to recruit good people and keep them.
Dr. Paul Goodman
I'm with you 100% I mean, one of the things I share is like, social media allows you, as a dental practice, to do some very cool things and showcasing the fun of your office. And I love when, you know, we're all trying to be find people for our community. It's not a remote job. You can't live in Arizona and work in New Jersey. So we had, like, an ice cream day in our practice. And I love those things, because my hope is people from the community say, Hey, maybe I would want to work at a dental practice. And I think that's our job, is to try to make working in a dental practice seem fun, seem engaging, helping people. Because I am with you that people, there's more people leaving than coming in, and that's leaving practice owners in, you know, a difficult situation when training walks out the door, you know. So I'm with you, yeah.
Rob Montgomery
It's not just the dental world, the dental business. I mean, we saw it too in ours and I think it's really, it's across all small and medium sized businesses in the country. And frankly, it was just so abrupt, too, that I don't think any of us saw it coming, and certainly none of us were really trained or prepared to to deal with it. And, you know, I guess Mark, I really have two, you know, two questions for you with this, and because you work in so many different areas of the country and regions, you know, is, are these challenges worse or easier in some parts of the country. And then you know, what are you telling your consultant clients and dentists generally like ways to think about the issue with the HR challenges and some tips to try to survive it, for lack of a better word,and to be able to navigate what is, you know, an issue that has just become really is new and challenging to all of us. Yeah,
Dr. Mark Costes
Yeah, I mean, there's definitely regional differences. It's more challenging, of course, in more rural areas. I built my the first six practices in a relatively rural area, so even when human resources wasn't a national kind of issue, it was always challenging. Associates working in more rural areas and hygienists were difficult to to recruit. Even, you know, back before there was a huge hygiene shortage, and then it was difficult also to get people that were qualified and had a fair amount of experience in the clinical aspect and admin aspect of things as well. But I mean, when you're looking at the Human Resources problem that we're having, or the challenge, rather, I think that you have to turn the problem on its head and start looking at things a little bit differently. You know, often people are like, I just I can't find an associate, or I can't find a hygienist, or I can't find a good office manager candidates, and then you look at their ad, and it doesn't look like anything that's differentiated from their from from the competition, right? So you have to look at this as though you are trying to recruit a dental patient. So you have to be radically differentiated from other practices. You have to have an attractive practice, right? So I often say that level 10 employees don't work for level four operators, right? So you have to become a level 10 operator. You have to be an attractive work environment. You have to give, you know, relatively good perks, not necessarily paying them the highest, but when they come to tour the office. You have to treat them as though they are a new patient, as though they are somebody that's valuable to your organization. And I think that a lot of people still look at people that are potentially going to join their practice, as, you know, future employees that are lucky to have a job, but you have to completely change that mindset nowadays.
Dr. Paul Goodman
I couldn't love that more Mark. At Dentist Job Connect, you know, sometimes people give us grief and say, Oh, I'm notgetting the associates I want. I say your ad is, like, pretty boring, and I'm not sure you would apply to your own ad. And, you know, it's what I think is kind of, I love what you said. People love bragging and sharing photos of their children and pets. But you ask a dentist their practice is like a child to them, and you ask them to promote their practice, and they do a terrible job, I mean, and it couldn't, you couldn't be more right about that. And I think what you said about recruiting a dental patient is how they should think about it, because our team members are more important than patients, because without them, we can't see patients. And that's why I think even you know Jeff and I have worked hard on our website, and at this juncture of our career, it's just as much to try to have team members think we're a great office as it is patients.
Dr. Mark Costes
Yeah, yeah, for sure, for sure, and Rob from like, a retention standpoint, I think that communication is huge. I think thatpeople are more interested in working for an owner that is going to provide them with future opportunities, provide them with growth, provide them with avenues to expand their skill set and their knowledge base. I think those things are really, really important and overlooked many times. There's nothing more expensive than turnover, and it's been widely reported that, you know, 60% or greater percentage of people that leave jobs don't leave because they're not getting paid enough. They leave because they feel underappreciated. There's no chance for growth within the organization, or there's just friction in the workplace. Poor culture within the workplace. So if we can really kind of focus in on those sorts of things, I think that people will find that turnover will decrease significantly.
Rob Montgomery
Yeah, and that's what wins Super Bowls. You know, there's a reason why Belichick and Brady were so successful for such a long time. Is, you know, they were not shuffling the deck. Every season, with the failing NFL teams that's the case.
Dr. Paul Goodman
It's almost like the Eagles shouldn't have let go of Andy Reed, because our next podcast, as Mark knows well, loves the Chiefs, Dr. Daren Flescher, one of his coaches, so that plays well. But yes, it's, that's, that's it. They want to stay with organizations, and it fits, whether it's from professional sports to, you know, I'll share Mark, it's not so much about right? But we, one hygienist has left our organization since the pandemic, and three have joined it. So we are plus two, right? So when people are saying everyone's going to leave, if you create an environment that they want to be in, and it's not easy to do, but I think that's just we talk about so many things, Mark, you and I and Rob about what they don't teach you in dental school. And to be fair to dentists, they don't teach any of this stuff in dental school, right? Don't even talk about it, so it's kind of hard to expect dentists to know it by accident. Of course, they should invest in training, hire people for it, but it is one of the things that I even, even though I had my dad was a dentist and ran a practice, the practices of the 70s and 80s were different. Even I didn't really know how much of this was going to be part of practice ownership.
Dr. Mark Costes
Yeah, and just like in corporations, Paul, you know, people, my dad stayed with IBM for 35 years. You know, he never considered working for anybody else, and that's just that's over now. You know, you can't take for granted that somebody's going to plant their flag and stay with you for an entire career, you have to give them reasons, compelling reasons to stay and you have to create an environment that people flourish and and have upward mobility and growth like those things are taken for granted a lot of times.
Rob Montgomery
Yeah, hey, so mark. You know, what do DSOs do better than dental practice owners, you know, owner operators. When it comes to HR, attraction, retention, there are things that that some dentists who own practices should be thinking about and looking at DSOs and saying, Hey, look, here's what they're doing, and they're doing it better. Or is it just it's such a different animal that you can't compare the two?
Dr. Mark Costes
Yeah, that's such an awesome question, Rob, and I think there's a lot of different layers to answering that question, because the old DSO model was, you know, you you took basically the rejects, the associates that that couldn't get a job or were fresh out of school, were typically fodder for the generation one DSOs. That gave DSOs, in general, a bad rap. And the same thing went for, you know, support team, admin and clinical. But nowadays, DSOs do a really good job with their pay structure, their benefits, you know, their scale, their ability to decrease price of variable costs allows them to pay a little bit more with the fixed costs like location and payroll. So with the more sophisticated DSOs, the ones that are forward thinking and the ones that are the most successful, frankly, they spent a lot of time with clinical development, with leadership development, they give really nice bonus packages and in a lot of instances, and they have a really solid kind of pipeline full time people that are recruiting, you know, for for their locations all around the United States. So I think those are some of the things that we could emulate to a certain degree. Obviously, we don't have, you know, a bottomless pocket book where we can pay people whatever they think they deserve, even if they're fresh out of school or have no experience at all. But I think that if you can match a good culture fit to some of the things that DSOs are doing, like, you know, formal training and really vibrant onboarding and and figuring out ways that their their teams are incentivized for for good performance. I think that we can learn some something from those DSOs, the good ones.
Rob Montgomery
Yeah. I mean, that's a really interesting and I think that's what Paul's saying. You know, dentists don't do a good job at promoting their practice and their opportunity. And, you know, you use the word recruiter, and then that's exactly it. I mean, they have recruiters. They are recruiting people. And I think that if you are a dentist that owns a practice and you're trying to navigate all this stuff, you have to, at least, you have to be mindful the fact that your competition for an associate is actually recruiting people you know. And while you may not be able to offer the same thing, you may not have the same recruiting background, or be able to task a recruiter, although there are certainly people that are available to do that, but you have to realize that that's that's what you're competing against. So if somebody else is out recruiting and selling their the benefits of their practice to potential employees. You got to be trying to match that in some way. And what you can offer as a dental practice owner who's a dentist, not a DSO, is different in some ways, some ways better, maybe some ways not quite as good. But you know you should have to promote what is good about it, and think about yourself as a recruiter, not just looking at resumes and hiring whoever shows up at your front door.
Dr. Mark Costes
Totally agree. And I think another thing to consider is that not everybody wants to work for Chili's, right? Some people or even eat at a Chili's. Some people want to go to the mom and pop shops, and there's something charming and comforting for a lot of people, to work for a single practice operator, you have to double down on on what that looks like and the benefits of working for a single operator and a small town dentist, perhaps, or kind of the family atmosphere that a lot of people are yearning for nowadays. You don't have to try to be corporate in order to compete with corporations and DSOs. In fact, I think you double down on your differences and make people aware that we don't operate like a DSO, but we're very efficient, and we have all the benefits of the DSO, plus we're going to take care of you like a family.
Dr. Paul Goodman
And with it was when we were on that panel together with Addison at Ben's Caicos event, and people said to me, you know, what do these associates want? I said, it's the 3m. Morale, mentorship and money. And why don't you do this wild thing and ask them what's most important to them? Because if you can't, you might not be able compete on money, but you can compete on mentorship. I mean, there's so many dentists out there that would love to be in the same building as the owner dentist each day, and there's 6000 of them graduating a year. So I totally agree with you ask them what's most important. And you know, Jeff and I have associates that we have high levels of morale and mentorship, medium levels of money, and it fits for them. And you know, I think you know your practice owners that are asking you for these same things too, Mark, because without an associate dentist, you can't scale anything that you do or get free time off. And I think that's the next what do you call it? I don't want to call it challenge, but like a private practice, owners want to continue to stay relevant, they have to think about how they can incorporate some of these newer colleagues into what they do in a way that fits for them, exactly what you said, in their own unique, you know, ways, as opposed to compete with DSOs.
Rob Montgomery
Yeah, I agree. I think it's interesting, too, as Mark said, there's some people just don't want to eat at Applebee's, you know, and that's okay. You shouldn't try to turn your restaurant into an Applebee's, but, you know, do you want to be a Taco Bell or Chipotle or an El Vez? And you really shouldn't try to be all three. And it's kind of the same thing. I think when you're trying to attract dentists and other employees, I would like to tell these people that if they know what you're all about, then you know they're going to come to you. And so the key is to really put the word out what you're about, what you stand for, and then your people seemingly will follow, right?
Dr. Paul Goodman
And I agree. I'll also take this 60 seconds to tell you that we brought Mark to El Vez, and even though he's one of the nicest guys I know, he goes, I don't know how good the food was going to be, but Mark, you did enjoy El Vez, even for Philadelphia. You thought it was quality Mexican.
Dr. Mark Costes
Yeah. I mean, I've always lived in states that border, you know Mexico, you know California and Arizona is known for its Mexican food. I don't typically think of traveling to the northeast to get a good quality Mexican meal, but I was pleasantly surprised, I must say so.
Dr. Paul Goodman
Mark on the other end of it, and I would think there's be really valuable for our audience. I'm sure not a day goes by where someone says, Hey, Mark Costes, what's it like to sell to a DSO? Should I sell to a DSO? Are DSOs ruining dentistry? Or DSOs help me initially? If go to the sell side, even if you just talk in a broad way, what do like a would you see a DSO sale go well for one of whether it's one of your clients or someone you know, what does that look like versus when they don't go so well? Because that's a common question I get asked, and I know you're in this world, so tell us a little bit about that on the sell side.
Dr. Mark Costes
Yeah, it's interesting, as I was interviewing one of the most prominent brokers out there the other day, and he was telling me that there's more than 1000 DSOs out there right now. I don't know what qualifies to be a DSO or how they even came up with that, but that is crazy to me, that there are that many, and there are probably 1000 different types of of business models as well. You know, I do think it's really important for sellers to go in with their eyes wide open, right? There's going to be some compromises in order to, you know, justify a sale. So if you're thinking about, hey, I want to take some chips off the table. I want to have, I want to take some of the equity and maybe redeploy that. I want to, I want to remove some of the operational responsibility from my plate and focus on what I really like to do. And dentistry, it really depends on what it is that you're looking for in order to ensure that you're going to have a successful transition, right? So if you're on the tail end of your career, you're going to be looking at a totally different Transition Plan than if you are in your mid to late 30s, which we're seeing a ton of, and you're looking to take some of the equity, some of the chips off the table, and work back for a good DSO, that's going to allow you clinical autonomy, and is going to allow you, you know, HR control and all that stuff. So I think that some of the things that you need to keep in mind is that, listen, if you have a very profitable dental practice, that profit goes away, that now gets paid to, in large part, to the DSO that purchased you, and you are giving up a significant potentially amount of cash flow. When you sell in return for that, you're getting a lump sum of cash. So you have to figure out, you know, what that lump sum is going to look like after long term capital gains and and what you're going to do, do you have a plan to deploy that, that windfall, that capital in order to make up for some of the distributions that you're going to be missing out on, because now the DSO owns the majority of your dental practice. So I think those things are really important. I think that when you're dealing with some of these more aggressive DSOs that are growing really, really quickly, they have people that go out. They're called business development managers or vice president of business development, and these are a lot like, you know, college recruiters that are recruiting, you know, blue chip high school athletes. They're going to your living room, and they're sitting down knee to knee, and they're telling you what's so great about their DSO, you have to go in, though, with a sophisticated knowledge base to know what it is that they're selling you right? And you have to remind remember also that the people that are in charge of quote, unquote, business development are sales people. They're brokers, and they're getting incentivized on the number of practices that they're able to bring into the DSO, and they're going to be long gone when some of the promises that they made don't come to fruition for you. So you have to do your due diligence. You have to talk to other people that have potentially sold to this DSO, you have to kind of list what's important to you, as far as clinical autonomy, like how, how you're going to be able to retain associates? Are you going to be able to sell them slivers of your retained equity? There's lots of things that you need to consider when you're shopping around for the right purchaser, because a good dental practice is going to have a lot of potential suitors that are willing to pay a premium for your dental practice. The terms are more important than the actual EBIDA multiple and the valuation, I think.
Rob Montgomery
Amen all around. Brother, you know, you're just singing my song Mark. I think that's so powerful for people to understand. And I think we were talking about understanding and having a handle on the difference between cash flow, between being an owner and what's going to be your associate salary. That's something that we see so many people overlook and fail to appreciate. You know, the unsolicited offer from the DSO comes on and it says at the top that we valued your practice at $12 million and people are like, Well, I'm rich, you know, like, and I don't think they even read the rest of the LOI, like, and, and what are, it's so important, you know, to because, as you said, these are, these are sales people. There are professional salespeople on the DSO side. It's so important for people to have a team of good advisors, you know, a good broker, a good CPA, a good lawyer, to help them understand the deal, to vet and field, you know, deals from various DSOs, and then, most importantly, to do the cash flow projections to understand what they're going to get from this transaction and what they're giving up. And the time to do that is before they do the deal, not to find out six months later what was behind door number three, you know, like, and that to me, that's that's a huge mistake. And I think so many people look at that giant number at the top of the LOI and just think that, how could anything possibly be bad or wrong about this? And the reality is here, these are sort of tricky waters to navigate. And you know, we talk about what dentists are qualified to do, and what they learn in dental school and what they don't learning to sell their practice in a an eight figure deal to a private equity backed buyer. Is not, I don't think that's a course in dental school, right?
Dr. Paul Goodman
We've seen people do it well, and we've seen people do it not so well. And also, I think Mark, you know, it's two people who've done something different. Then also sitting across from Rob, who can do his lawyering from Utah and Philadelphia. I think there's a bit of envy from dentists, and I've seen it where, like, Hey, your practice can be like a golden anchor. You know, you're making a lot of money, but you gotta stay in this community. And I think to me, I admire some dentist who they may be looking to do other things with their lives. They may be looking to live in other areas of the country. And you. I think that it's just the reality, and some of it creates a lot of unique opportunities for practice owners not to be in the same town forever. Some still want to be but like you said before, some want to go and do other things. You know, we're talking with Darren next after you, and he's gone and done other things. And I think, I think that's a really cool thing, and I think dentists should be proud. They're part of a profession that allows them to work in the same community forever, and then also do some other cool things with their lives.
Dr. Mark Costes
I totally agree. And Rob to your point, to further, kind of, maybe put a bow on top of all of this is there's a couple of different ways that the evaluation can be manipulated. A lot of people get really emotionally attached to the multiple of EBITDA that they're getting, right? So a lot of times, the EBITDA number itself can be manipulated significantly in order to justify a higher multiple, right? So you can walk around all day just like, just like people do at the ADA, and they're pounding in their chest that they produce, you know, $2 million a year, but they don't tell you that their profitability is negative 10% so that's an important part of the story. So you can also walk around the ADA meeting and pound your chest to say, I got a 10x for my practice. But what they're not sharing with you is that the private equity company beat you up on your on your EBITDA, and it should have been $400,000 more than they actually gave you credit for. So they're gonna, they're gonna kind of test you and try to figure out what it is that makes you tick, and the numbers that you're you're paying attention to. So if you anchor yourself to wanting a nine or a 10, they'll get you to a nine or a 10, but they're going to make up for that somewhere else in the deal. It could be terms, it could be work back, it could be percentage of the practice that they're taking. It could be or even a number, but somewhere they have a maximum price, and they're going to make them feel good about what it is they're offering you based on what they've read from your your kind of conversations and your leanings during the negotiation process.
Rob Montgomery
So much to unpack there. Yeah, I absolutely agree. And, and I think that's something that people don't really understand or realize. Mark is, like, unlike revenue, which you could say, like, here it is. It's $2 million we grossed. You grossed it. You collected it, you put it in the bank. That's it. That's a number. That's a fairly objective number. You could figure it out, and you can't really change that that much. But the term EBITDA gets thrown around a lot as though it's in stone, to the same extent. And you know, EBITDA is in the, you know, in the eye of the beholder, the person that calculates it, the CPA or the quality of earnings team. Like, you know, there's certain things that you know you can consider to be part of it or not part of it, and it's not necessarily universal, and that's where, that's where a lot of the action in the negotiation comes in. And again, like, you know, you may find yourself in a situation where you see this awesome multiple in the LOI, and then find out that, you know, as the negotiations go along, the due diligence that that EBITDA number is just being chipped away to the point where you're making a lot less and in that, in that grand scheme of things, know that, as you said, you know, that might be $400,000 less. You know, in EBITDA, or the EBITDA number is reduced by $400,000 if you're multiplying that by 789, 10, that starts to become real money.
Dr. Mark Costes
A real number. Yeah, exactly.
Dr. Paul Goodman
So Mark. We've talked about associates going to DSOs. We talked about selling to DSOs, talk to these challenges. So with all of this, there must not be any new dentist who want to buy private practices and own private practices. And I want to share some of my favorite weekends of the entire year are going to the Dental Success Institute as a member with my brother Jeff. And, you know, a big fan. I'm of that, but you we put these people together. And I walk around Mark and I want to say, I'm proud to be one of the oldest people there, right? I'm proud at my session to be at 47 on the oldest so maybe to give some inspiration to our listeners, who could be GPRS or associateships, you have this amazing group of new practice owners and new dentist part of DSI. I thought they weren't buying practices. Is private practice ownership a thing in the past for new dentists?
Dr. Mark Costes
Oh my gosh, that's such a great question, Paul and you know, sometimes, and I have to remind the membership this, when we all get together, we feed our over the smallest things inside our group, right? So you have somebody that's got 56% overhead, and they might happen to be the person in their small breakout group that has the highest overhead by eight points, right? And they're beating themselves up, like, what am I doing wrong? I'm trying to do everything right. And you know, if you compare that, that particular practice to the average practice in the United States, they're outperforming the average practice in the United States by 12% in profitability, right? So when you get around a group of people that are achievers and really, really focusing on their performance and their analytics and lots of different kind of ways to measure how effective their dental practices are, it's easy to lose yourself in comparison, but I have to say that I'm so fortunate in the fact that it feels as though that people that have been attracted to DSI and have been joining over the last few years now have been younger and hungrier, and they are just defying all previous measurements. So we do have many people in their early to mid 30s that have practices that they've either started or they have acquired, that are settling in the low the low 50s to high 40s when it comes to to overhead EBITDA in the 30% range, multi million dollar practices. And these are operators that have relatively small amount of experience, but they really have just taken to personal development and self education and surrounding themselves with, you know, a knowledgeable, hungry, supportive community, the collaboration, to me, is everything and I never, it never ceases to amaze me how young and successful this new batch of of dentists is becoming.
Dr. Paul Goodman
I think it's so good for people to hear that Mark. You know, since we have this, since we have this dog theme, you talk about your office dogs, and Rob's, you know, Chloe Myrick, I admire her so much. She has a dog mascot for her dog. I mean, these are people who were in dental school four or five years ago, and now we're running, like you said, multi million dollar or, you know, seven figure operations. Well, you know, Rob talks about the owner operator still being in their practice. And I just think it's important for our audience to know that there's just incredibly successful private practice owners enjoying their career, but they have to pay attention and understand that there's influences out there that I'll share that make practice ownership more challenging, from the HR from dental insurance reimbursement, from all the things he needs to do. I mean, you know, I just to make it a funny joke, my dad, during Y2K were old enough to know this. They would say to my dad, his hygiene patients would say, in 1999 is your practice ready for Y2K and he said, we are fully ready because they didn't have one computer in the office. There was not one computer in the office. He said, we're ready for it. And now, yada yada, Jeff and I are constantly being told we don't have enough power to our office. No one talks about this. Mark. There's so much power that you need to run an office now, right? Because we have 19 computer workstations and a CBCT. So I think it's also the end to this. Not the but is practice owners who want to thrive in a private practice have got to pay attention to all the skills you need inside and outside the operatory.
Dr. Mark Costes
I was just going to say another thing to that's interesting about this younger batch is they don't have the good old days to compare it to you, right? They've never operated in a market where hygienists were plentiful. They've never operated an environment where you know, where it's really, really easy to get patients if you accept a certain insurance, or even if you're a fee for service office. And there's a ton of great demographics out there that are just waiting for a decent dentist to walk in and hang up a shingle. They've never operated under those circumstances, yet they're still successful. So I think that they are the people that we need to model, because they don't have these preconceived notions and these bad habits that a lot of us seasoned operators have gone into this new marketplace with.
Rob Montgomery
All the skeletons in the closet. We all that we all have the baggage, you know, but I think it's interesting, like what I see, like, there are certainly a lot of people, you know, younger dentists that we come in contact with, who are not interested in practice ownership, but I feel like the ones that are are just so much more laser focused than they used to be. And I think maybe it's because what you're saying, Mark, they, they have no choice. You know, they're they're trying to to they've never existed in the world where you could kind of trip around and be successful. They, they realize that you're gonna have to be purposeful. You have to do it right, to compete and to thrive. And I just I think that that that breed of of young dentist who is just absolutely focused and entrepreneurial is is exciting for us, and we do see more of that than we did even like a few years ago.
Dr. Mark Costes
For sure, I agree.
Dr. Paul Goodman
As you go on Mark, I want to give you an opportunity, because I think it's so awesome. Tell us about you Smile OutreachProgram and all the awesome work you're doing with it. I've been lucky enough to be at some of these galas. I've had been because of you. I've been at some auctions Mark. They're pretty cool. I know that was my first experience with auctions. Quite, quite exciting. You know, last year someone was Peyton, Bruce Springsteen, on stage or something like that. So you've done some very cool things, but tell our audience about what's going on with this?
Dr. Mark Costes
Yeah, I got the the missionary dental bug, way back in dental school, and I had gone on a couple international trips. And then, you know, during my summers, I would go and volunteer at a homeless dental clinic in downtown Phoenix, and I just it, it dawned on me that, you know, when I was starting to feel burnt out in the multiple practice game and dealing with, you know, unrealistic expectations with my patient base and and all of the challenges of trying to motivate and wrangle a bunch of humans in multiple practices, that the antidote to the burnout, for me was being able to go out into the field and do dentistry, and I think that people get burnt out on dentistry for good reason. It's an extremely difficult and challenging profession with a lot of a lot of expectations put on our shoulders, from the patient base, from the banks, from from our own staff, from our own families, trying to juggle all of this. But I honestly believe that the quickest way to overcome some of the pressures in dentistry is just to give it away for free. So I always intended to create my own foundation, my own 501c3 and I finally got to the point in my career where things went up and I had enough liquidity where I could invest some time, effort and my personal finances towards creating a real foundation. So that's when Smile Outreach International is born. We are a bona fide 501c3, we are accredited to accept donations in all 50 states, which is quite the process. And our mission for Smile Outreach is to be able to go into a community, not just to do good works for a week and disappear forever because it's a cool place in need, but our mission is to actually find locations where we could put fixed, sustainable clinics that stay forever and are operating year round, to different mission projects, to our own mission project, to have local dentists doing a pre op and post op, and really just never charging any of the patients to be able to utilize these, these fixed facilities. This last year we were able to go to Tanzania. There's a nice fixed facility there. We have a sister organization called the Dental Life Foundation. We have a fixed facility in Tanzania. We have a great existing mission trip that I've gone on for eight years in the Dominican Republic. We are a big funder to that that one now, and we're actually shopping around for a location to put a fixed location in the Dominican Republic, so that we can rotate some of the local doctors through there and local dental students through there, with American doctors and American dental students. We have located a fixed facility in Mexico, and we're actually constructing that in early 2025 just outside of Puerto Vallarta, in this little town called La Cruz that has a ton of need. We we are building on the third floor of a Boys and Girls Club there, and we're going to have a fixed clinic there. We have a fixed clinic that we work out of with a sister organization in Fiji. So these are the things that we're able to do, just because I think it's the right thing to do, and it's the it's just the perfect chapter in my career to be able to pull some of this stuff off. We in this year, in 2024 we produced $1.2 million in free dentistry. That's awesome. We had about three dozen dentists volunteers that rotated through Fiji, the Dominican Republic, and Tanzania, we saw well over 1500 patients. It's just been, it's just been a really, really cool start to what I think is my legacy project. I want this to last long after I'm gone, and long after I have the ability to even pick up the handpiece anymore.
Dr. Rob Montgomery
You're a good man. Mark Costas
Dr. Mark Costes
I appreciate that. Rob, I appreciate that. Thanks.
Rob Montgomery
Thanks for taking the time, amigo, to be on the show. It's always fun and a pleasure to chat with you. If people want to learn more about Smile Outreach International, the Dental Success Institute, or get in touch with you. What's, what's the best way for them to do that?
Dr. Mark Costes
Yeah, I appreciate that. Rob, so I'm really easy to find on socials. I'm @drmarkcostes on Instagram, that's probably the easy, easiest way, if you don't have my cell phone number, to get in touch with me. Just drop me a DM and Instagram. Dr Mark Costas. I. Um, I have the Dentalpreneur podcast anywhere where you find podcasts, you can, you can find the Dentalpreneur podcast. We do 22 episodes a month, and have for the last nine years, never missed a never missed an episode, never missed a week.
Rob Montgomery
That is a feat for listeners. That is not an easy thing to do. Let me say that Mark makes it seem easy. It is not easy.
Dr. Mark Costes
Yeah, it's another, it's another thing that I just love to do. It's my excuse to talk to great people like you and you Rob and Paul. Also, you can go to true dental success to find out anything about DSI. And you can go to smileoutreachinternational.org to volunteer or donate to Smile Outreach.
Rob Montgomery
Great. Thank you. And everybody that will be all those links and contact information will be up in the in the show notes too. It's always great talking to Mark. Thanks for taking the time. Be well.
Dr. Paul Goodman
It's awesome that he showcases both world of the DSOs in private practice, and just kind of shows our listeners that there's multiple paths to success, kind of remembering whether it's from the, you know, the smart International to growing your practices that dentistry provides a lot of cool opportunities for people, right?
Rob Montgomery
And there's no right way today. There's no one way to do it, you know. And Mark has always found interesting and creative ways to practice and to be involved in the in the dental community. And I think it's a great gift for everybody. And if, for some crazy reason, he's not on your radar, he should be. Yeah, check out what he does. Thanks, Paul, always fun. Thanks everybody. Thanks Rob.
Bumper
Thanks for listening to another great podcast with the Dental Amigos. And don't forget to tune in next time to have the dental business demystified. If you're looking for more information about today's podcast, you can find it on thedentalamigos.com if you're looking for Paul, you can find Paul at DrPaulgoodman.com and if you're looking for Rob, you can find him at yourdentallawyer.com This podcast has been sponsored by Orange Line Media Group, helping dentists and other professionals create content people love. Find out how we can help you take your business to the next level at www.orangelinemg.com, until next time.
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