Episode 148: Dental Practice Transitions
Jameson Files Episode 148– Carrie Webber and Josh Briebahn discuss Dental Practice Transitions
Below, we’ve compiled the key points discussed in the Jameson Files Episode 148. To enjoy the full episode you can watch on YouTube or listen to our podcast on iTunes, Google Play, or Spotify.
Carrie:
Welcome to the Jameson Files. I’m Carrie Weber. Thank you so much for joining us for another episode. Welcome from ADA’s Smile Con 2022 in Houston, Texas. We are a part of their podcast influencer area here at the meeting, and so we’re so thrilled to be a part of ADA’s meeting and of Smile Con 2022. I’m so excited to have a good friend as a guest with me in this episode, Josh Griebahn, who is the transition sales consultant for Henry Schein Dental Practice Transitions. Josh, we’ve known each other for several years in various roles that you’ve played through the Henry Schein organization. It’s so good to have you. Thank you for being willing to join us today.
Josh Griebahn:
Thank you for inviting me. It’s a pleasure.
The Role Henry Schein Plays in Dental Practice Transitions
Carrie:
Of course. This is so great. And it’s especially great because of the topic we’re going to talk about. It’s such a hot topic. A lot of our Jameson clients are starting to enter into the realm of considering whether it is time to transition out of practicing. We also work with a great deal of younger dentists and associates that are looking for the next chapter in their careers. So we’re going to talk about practice transitions. What does this look like in today’s dental environment? To begin, Josh, can you share a little bit about your role as a transition consultant for Henry Schein? What is your primary role? What do you feel like your role and your goals are in the work you do with your clients?
Josh Griebahn:
Great question. A little quick fact about Henry Schein that most people don’t know is that we’re actually the largest dental practice transition broker in the country. We perform over a thousand practice valuations every year and we help anywhere between 300 to 500 doctors transition or exit their current practice situation throughout the country. So there’s actually 60 to 65 of me in all parts of the country.
We have an amazing team– people that have been established for 20 to 30 years– so that really helps me and our team give guidance from exit strategy planning, to valuating a practice, to giving guidance on how to improve, to letting practices know the options available to them whether that’s now or four to five years out. What does that look like for me? Do I need to add an associate? Do I need to cut my days back? Do I need to add more days? Do I need to improve my office? You know, what do those things look like? Do I need to find a new CPA? Things like that. They’ve been through it. They know how to acquire; they know how to manage a team. Typically, HR is all set up. They have managers or chairside owners that are extremely entrepreneur minded, and they just want you to stay for a little bit, and then they’ll fill in behind you.
Carrie:
Right.
Some Transition Opportunities May Take Years
Josh Griebahn:
A lot of that is culture based, so they’re a little bit more flexible. Then you’ve got number three- the big guys– your TSOs, dental service organizations, your DPOs (dental partnership organizations), your private equity groups– whatever those look like. Those are great options; however, to some they might not be great options. Every single category may or may not be a great option to somebody else. The corporate groups pay a lot of money; they offer partnership opportunities; they’re more reliable. They’re more looking for EBITDA, and location, and number of operatories. Will you stay along and work for three to five years? Will you stay and work for eight years?
Carrie:
So do you think that the larger the group, the more likely there would be in the negotiations an expectation that you will stay for not just weeks or months, but for years?
Josh Griebahn:
Correct. Because there’s the time and money thing. If you want more money, there’s going to be more time. They call it a workback or a contractual obligation in order to either receive the other amount of money or to participate in the equity event down the road.
Solo Dentists and Practice Transitions
Carrie:
Have you been experiencing in this role at this point that of those three groups the amount of solo dentists is shrinking?
Josh Griebahn:
Not necessarily. There’s actually quite a bit of solo buyers out there. The only difference between them and a corporate pool that I see right now is whether or not it makes sense for them to leave their current employment.
Carrie:
Right. Do they have the financial capacity to take on full ownership?
Josh Griebahn:
Correct. And here’s my analogy. Million dollar practices are being sold or being bought. I’m the associate that’s working for someone right now, and I want to buy your practice. I’m making $250,000 right now a year. In order for me to go out and borrow a million dollars with the interest rates where they are right now, it’s going to cost me roughly one hundred to $120,000 a year to cover that loan. And you are netting $350,000. So, automatically, before taxes, I’m going to make around 200 to 225, and I’m going to have to have all this responsibility. Is that worth it to me?
Then there are those buyers out there that are sick and tired of being W2 people or dependent contractors. Those are great. Those types of buyers are out there.
Then you’re also looking at a supply and demand issue. I cover Iowa as well, and the market is completely different there than in Houston, Austin, and San Antonio, which is my demographic. And it’s very different everywhere. So in Austin, you can put a practice on the market that’s a million dollars with five operatories, and it’s gone in a day.
Carrie:
Wow!
Josh Griebahn:
In a small town, it’s going to take a lot longer and your value isn’t going to be as much.
When to Have a Practice Valuation
Carrie:
That was a question that I had in my head. What is your advice for a doctor who is listening right now, that is on the side of their career where they’re just starting to think about what retirement looks like, or maybe they want to do something new? I love what you were saying about vision planning and preparing proactively that you talked about earlier on. Do you have some time frames that you recommend based on whether you are in a more metropolitan or in a more rural area? Maybe you don’t, but based upon how different those two geographical areas may be to find a buyer, when you think proactively, how long do they need? When do they need to start setting things in play to seek out the person to take over the practice?
Josh Griebahn:
Great question. I had a presentation the other night and one of my slides asked the question, “Who should have a practice valuation?” A proper valuation, not a broker opinion, but a proper valuation of assets and goodwill– the intangible assets versus the tangible assets. What does that look like on paper? And it used to say 45 to 75 and I changed it to 35 to 75. In the last 12 months, I’ve had more deaths doing valuations and selling those unexpected passings than ever.
Carrie:
So you do those valuations?
Josh Griebahn:
I do.
Carrie:
That’s a great thing to know because we get asked that question as well, “Where do we go to get a practice valuation?”
Josh Griebahn:
So Henry Schein is start to finish– from exit strategy planning, from valuation to partnership associate agreements, all the way to listing your practice, to finding you a buyer, all the way to closing.
Carrie:
So what you’re saying is, from that valuation standpoint, it’s never too soon.
Josh Griebahn:
It’s never too soon, but it can be too late.
Carrie:
Let’s say I am nowhere near ready to transition, but I have one done now just to be safe, when would I need to have you revisit? How regularly should a practice do that?
Josh Griebahn:
Some will say every 12 months, but we usually will recommend updating it every two to three years. You never know if things change– maybe your hours cut back. But to have that fresh valuation and have a letter of instruction, which we provide complimentary to people that reach out to us, that says who the important people are like the attorney and CPA. I unfortunately had a passing and nobody could find the information. I found the CPA, and they were actually best friends and the CPA didn’t even know. So those are the crazy stories. But my plea is to reach out to anybody because we’re not the only broker in the country. There are some great companies out there that do a great job representing.
Minimizing Your Tax Liability During a Transition
Josh Griebahn:
But whoever you choose, sit down, have a valuation, and look at your tax structure because when you sell, minimizing your tax liability is a really important thing. Just because you sell for a million dollars, doesn’t mean you’re going to keep a million dollars. And if being an LLC, or a sole proprietorship, or even an S corp, doesn’t match your goals in the end, there are so many tax structures that you can do. One thing I speak on, and I’m not an expert on it, but I have partnerships that are, is how to structure appropriately to minimize your liability. You can have a conversation tomorrow with somebody about those things and get that all set up. It has nothing to do with transitioning in terms of the process, but in terms of being prepared, protecting your family, and protecting yourself. I don’t know a whole lot of people that like to overpay in taxes, especially at the time of closing. Those are really important things that you can do now.
So when we talk about exit strategy planning, make sure you have a valuation completed. Preferably use somebody like Henry Schein who’s got a great team that does it. We’re rated extremely ethically in what we do. Of course, we’re very recognizable, so we have our name at stake. If we don’t perform, our name’s on the line. So have a valuation appropriately done. Sit down and think through those questions that I mentioned. Make sure that you know the time frame that is being discussed, whether it’s now or in five years.
Because let’s just say you do want to sell to a corporate group, then you have a certain timeframe to work, and you don’t want to be 67 when you decide to sell, because then you’ll be 72 and having to work.
Carrie:
Right. You don’t want to be locked in.
Josh Griebahn:
But those buyers also don’t want to acquire you if you’re at a certain age. Same thing can be held for a solo practitioner that’s looking to buy. If you wait until the end or you decide not to sell until your lease expires. Now you’re looking at what the lender needs to see from a lease agreement.
There’s all these little things that can affect the outcome of your transition plan, your idea in your mind, your white sheet of paper. This is what I want to do. I want to hang up my cleats at this time. I want to keep working until now. So going all the way back to what you can do today– have a valuation, have an exit strategy planning session, meet with the tax advisor that knows how to structure a dental office. I’m assuming you, as a consultant, see this all the time. Why are you working with that CPA? It doesn’t mean that they’re a bad CPA, but maybe just not for dental. Make sure your financial advisor is meshing well with that and have everything written out just in case something happens.
Contacting Henry Schein Dental Practice Transitions
Carrie:
Yes. What I love about everything that you’ve shared is that it is all so proactive and intentional. We always talk a lot about being intentional and proactive, and not reactive. What you see a lot in practice sales is someone decides to quit suddenly, and if you live in rural America you may not be able to find a buyer and just have to close down after years and years of practicing. This is sad. So it’s never too soon to start putting a plan in place. Be proactive, be intentional, be thoughtful. What I’m hearing from you is that your transition and exit strategy is just as much a part of your practicing vision as your vision for the time that you are in the practice.
So Josh, where can people learn a little bit more about Henry Schein practice transitions? If they wanted to reach out, how do they start? How does that process start with you?
Josh Griebahn:
If you go to Henry Schein Dental Practice Transitions, you can put in your information. It’s all confidential, and goes to the person that’s in your area. They will reach out to you typically in 24 to 48 hours, and they’ll ask to schedule a 30-minute complimentary confidential call. Then that will typically lead to an in-person meeting. If not, I’ll give you my number. If you’re in the Houston, Texas area, you can call me. But that’s the best spot to go.
Selling a practice is a very emotional, personal thing. Maybe 5% don’t care, but there is an emotional component to transitioning. It’s been your craft. You’re an artist. You’re managing a business. You have people that count on you every single day, whether they’re wonderful people that you have to manage or maybe it’s a little rough some days. There’s still an emotional tie when you leave. I played sports in college, and it’s the same in the professional world, when you leave or retire, there’s a small type of depression that takes place. You wonder what’s going on. There’s a quarterback that plays for Tampa Bay right now who I think is going through that a couple times. Right?
So those are realistic things. What are you going to do after you sell? Are you going to go play golf? Are you going to go on a trip with your spouse? Is that what you’re going to do all the time? There’s this emotional part that you have to consider, which is why I really ask those three important questions. So you can start now.
Three Questions to Ask on Your Transition Journey
Carrie:
Let’s wrap up with those three questions one more time. Let’s leave that with the listeners and the watchers, because that’s where you start. It’s a part of your vision, and the more thoughtful you are about those things, the better decisions you can make in that journey of transition. So what were those three questions again?
Josh Griebahn:
One, where are you today in your practice, both clinically and professionally? Two, where do you want to be in the next two to five years? Do I want to be a manager? Do I like managing? Do I want to be chairside? Do I not want to be chairside? What do I love and not love that I would not like to be doing in two to five years? And then number three is, What do you think are the potential challenges in a transition or you exiting your practice, either planned or unexpectedly?
Carrie:
Awesome. Such great questions for all of you to consider. The transition, the exit is an inevitable part of your professional career. And so it’s never too soon to start having those conversations with the professionals and the resources that are available. People like Josh are here to help you have the most successful and smooth transition and exit strategy that you can have. So Josh, thank you so much.
Josh Griebahn:
It’s a pleasure. Thank you so much for your time. It’s an honor.
Carrie:
Thank you. And for all of you, thank you so much for watching another episode of The Jameson Files. Be well and we’ll see you next time.
Carrie Webber:
Thank you for joining us on this episode of the Jameson Files. Visit us online. You can subscribe to this podcast on iTunes, Google Play, or Spotify. See you next time.