John Demma's Journey into Healthcare and Business Growth

This episode illuminates the fascinating journey of John Demma, currently the COO of Lightwave Dental, who parlayed his childhood lessons from his parents' restaurant into an impressive career. We get to hear about his early days, his rigorous work ethic shaped by his upbringing, and how he managed to maneuver his way from managing a mattress store chain to making waves in the dental industry.

In a world where success is often perceived as linear, John Demma's story is a testament to the power of pushing limits and embracing change. His transition into healthcare offers insights into the consolidation of the veterinary industry, the effects of interest rate hikes on acquisitions, and the current state of the real estate market. He also shares his experiences in growing Lightwave Dental, flipping from 80/20 acquisitions to 20/80 DeNovo's, and the vital role of having the right team to bridge the gap between entrepreneurs and investors.

This episode doesn't only revolve around business growth and market trends. It also takes a peek inside John's appearance on American Ninja Warrior, giving us a glimpse of his competitive side and his approach towards hiring decisions. It's a testament to his perseverance and his willingness to fight for the right person. Furthermore, we delve into John's passion project, Lightweight Dental, and how he managed to make it a success despite being a newcomer in the field. This episode is a rich blend of real-life stories, lessons on resilience, and a peek into the dynamic world of the dental industry. Listen in to gain a unique perspective on business growth, team building, and successfully navigating change.

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Transcript

Speaker 2: 0:04

Trying to find a way to say this, but the owner of the company was hardcore. He was old school New York bit of a bully when it came to the competition. So we would target competitors. I remember when we first came into New England there was a competitor there and they offered to sell the business to the owner for a lot of money call it $10 million and he didn't want to pay that much. And I remember this story is we'll just put three stores around, every single one of yours, put you into bankruptcy and then buy it for pennies on the dollar, and he actually did that. Over the course of the next several years, he put a store across the street from every single one of theirs. By the time the recession hit, the company went into bankruptcy and we bought it out of bankruptcy for $0.10 on the dollar. We ended up buying probably half a dozen competitors out of bankruptcy during the recession.

Speaker 1: 0:50

Hello and welcome back to Helping Healthcare Scale. I'm your host, austin Hare. Our guest is John Demma. He's the chief operating officer of Lightwave Dental. They've got started in 2016 and they're the premier DSO in the Mid-Atlantic with 90 locations. And hey guys, real quick, just for everybody listening. If you're a multi-site healthcare group looking to grow, then we will program especially for you where we help you buy the real estate and select the site to the opposition and the competition. John, thanks for coming on. It's a pleasure to have you. Yeah, thanks for having me Excited to be here. All right, great. And where exactly in the country are you guys headquartered right now?

Speaker 2: 1:24

Yeah, I'm in our headquarters today. We're based in Woodbridge, Virginia, halfway between DC and Richmond. So we've been here since our founding and we've got a great office here. So our offices are concentrated mostly in Virginia and North Carolina, so we're right in the middle of those markets here.

Speaker 1: 1:38

Okay, and whereabouts did you grow up? What was childhood like for you?

Speaker 2: 1:42

Yeah, I'm from Central New York originally. I'm from a small town just outside of Utica, New York, halfway between Syracuse and Albany, and when I was a kid, growing up, I had a very blue collar upbringing blue collar area. My parents were restaurant owners. We had a restaurant that was in our family for 80 years, which is cool. My grandfather and his older brothers started at started it after World War II as like a little hangout and passed it down through the family so I got to grow up in that environment Still in existence today.

Speaker 2: 2:11

No, my parents have since retired. They're got rid of the restaurant, maybe about 10, 15 years ago, because nobody in our generation wanted to work that hard for making money over hard work.

Speaker 1: 2:21

A lot of work, so that's interesting. So yeah, I do hear that a lot about restaurant being hard work. Of course, everything that's worth doing is hard work, but then that's got to be like very influential Seeing your parents run a restaurant. Like what were the hours? How did that shape your childhood? Do you think my view of the restaurant business is.

Speaker 2: 2:38

It's a lifestyle business. If you're going to be an owner or operator, you have to be there. My father really both of my parents, but mostly my father pretty much lived at the restaurant. In fact, in the old days there was an apartment, small apartment, above the restaurant. They would literally live there. My grandfather would serve breakfast, lunch and dinner. He'd go upstairs, sleep for a bit, come back downstairs, start serving breakfast again. A lot of people want to be investors in restaurants, especially doctors or people who get money. They want to be an investor in a cool business and everybody wants to invest in a restaurant because they think it's something you go to. Sometimes hang out at the bar and get free drinks, but it's just not a recipe and it's that status.

Speaker 1: 3:14

Oh, I own a restaurant or I own this restaurant. You need to bring your friends here, I own it.

Speaker 2: 3:17

Yeah, what I learned is hospitality is a passion. It's like something that's in your blood. You have to love hosting people, love making people happy. My parents always used to say it's not a job, it's not a business, it's a lifestyle, and they were successful because of it. It's my dream retirement job. At this point it would be open to open up, maybe like a small restaurant or something like that, and just be a small interoperator. But in the meantime I get my hospitality fixed by hosting people at my house on the weekends.

Speaker 1: 3:46

So did they ever have days off? Was it like a seven day a week type gig?

Speaker 2: 3:50

I think I remember weeks when they worked seven days a week. I remember weeks where the big day off in restaurants is Mondays. That's like industry day. Sometimes you figure out on a Monday night it's industry night. That's when you'd meet other people from the restaurant industry out. Yeah, vacations were rare. They would. It was just my father and my uncle were partners in the business but I think some years they wouldn't take a vacation. Some years they would close Christmas week or close for two weeks, that sort of thing. So it's a grind, but it's when you love what you're doing. It's really like a set up lifestyle.

Speaker 1: 4:24

Yeah, definitely that's going to shape your work ethic right Seeing your parents put in that much time.

Speaker 2: 4:28

Yeah, I'm a hard worker today nothing like that. But yeah, growing up in that environment, I thought when I was a kid I would end up in hospitality and I was the first one in my family to go to college and worked in restaurants through college did really well. Restaurant drop is a great job to have in college. You can make pretty good money. You can make good money in tips. You have cash to go out and party with. So work full time throughout college, it was great.

Speaker 2: 4:52

And then, yeah, after school I took a job with the Marriott as a food and beverage manager and thought that would be just a good, logical next step and in my mind I thought it worked my way up in hotels. But yeah, about a year into that I had a guest at the restaurant. I was the restaurant manager at the time and when the guest has a bad experience and the manager comes and smooths things out, that was my job and I had this table at the restaurant and they were very difficult. They asked for a wine decanter. I don't know if you know what a wine decanter is.

Speaker 1: 5:21

Yeah, that big round thing with the skin top.

Speaker 2: 5:25

And you really only need a wine decanter for old, expensive bottles of wine. And the most expensive bottle of wine we had on the menu was Yellowtail Shiraz, which is like a $12 bottle of wine. They asked for a wine decanter and I'm like these people probably don't know what they're talking about, they're just trying to show off in the dining room or something. So I had to go explain. There was no decanter. And then the woman at the table didn't like her fish. It was too dry. So I was like you know what? I'll buy dessert, make everything better for you guys. And then we let you down a couple of times. So I was like I can tell they're from New York. So I'm like we have a great New York cheesecake. I'll go get you a slice and bring it right out.

Speaker 2: 5:58

Of course, I went in the back and we were out of New York style cheesecake, which was another disaster. And then I went all the way in the back of the banquet refrigerator and I found the one lonely piece of cheesecake that was probably left over from a wedding two weeks ago. Throw it on the plate, dress it up with some raspberry sauce, run it out, smooth things over. A few minutes later they call me back to the table. I'm like, oh my God, what's wrong now? And they were like, hey, we really like the way that you handle things. Tonight we work for this mattress retailer called Sleepies. They're like this guy right here is this old guy who works like Santa Claus. He actually owns the company and we're expanding into the area and we want to hire district managers and you can make a lot of money in this Testing you.

Speaker 2: 6:37

I guess, so Maybe I don't know, but anyway they asked for my card and two weeks later recruiter called me and then two weeks after that I was working for this basically upstart mattress retailer. We had 200 stores at the time and that started like the first big chapter in my career. I was there for 10 years. I got promoted a bunch of times. By the time I left we were part of a 3000 store company. I had a 200 store division. So it ended up being this like kind of faithful meeting that really skyrocketed my career from there, all over a piece of overcooked fish and someone who didn't know what a wind decanter was used for. Right place at the right time.

Speaker 1: 7:10

Yeah, it's crazy because you, just you hear about those types of stories. They always say keep your best foot forward because you never know who you're going to meet. It could recruit you. There's a story of the recruiting the waiter is one that is like a fable at this stage, but it actually happened to you, so that's interesting. And then, yeah, I can definitely relate.

Speaker 1: 7:25

I do Airbnb as well. I have a few doors and, yeah, it's just, you get those people. That's just man, nothing can make them happy. Right, they have these unrealistic expectations. That's just like everything's supposed to be completely perfect. It's just crazy because I don't know about you, but I've never really been to a hotel that's actually been perfect, like I've ever stayed in some of the nicest five star hotels ever, and they'll be a hair in the towel. You know what I mean. It just happens. But it's you. Deal with these some people who it's just you're going to be able to please them. And more customers, more problem is like the mantra, just one of the things that you have to put up with. But I guess, a, it does develop thick skin, for sure, but then, b, was there any like hesitation in going to work for them being like these were difficult clients, like these were the most difficult tables. And then are you thinking like, what's it going to be like to go and work for them? Are they going to treat me like that?

Speaker 2: 8:13

No, I remember being excited.

Speaker 2: 8:15

I remember thinking I wasn't qualified. I remember thinking I probably wouldn't get the job. It was a lot more money than I was making. Okay, I also remember going to my interview and walking into this big, beautiful campus. I was working at the Marriott at the time, but it was a small franchise. I went to this big corporate headquarters for an interview. I was very nervous. I had my suit on. I went and had breakfast in the cafeteria and I asked where the president's office was, because I had to go to the beach for an interview and they're like that guy doesn't work here. I was in the wrong building. I went to the Kodiak building or something. I was so nervous. So you make it on time, yeah, but I just put my best foot forward during the interview and did great.

Speaker 2: 8:56

I think the one thing that I would, the one thing I try to tell young people who ask for career advice, is to push yourself. You're capable of more than you think. You are those sorts of opportunities. You have to recognize them and then say yes to them, right? So you have to push through the insecurity and the doubt and give it a shot, when maybe it turns into something or maybe it doesn't, but there's, you have to try. I think a lot of people see things like that and they get overcome by they're never going to hire me or I don't think it'll be the right fit, and so they just don't, they don't go for it. So I think I think you have to push through that and go for it.

Speaker 1: 9:33

I love that. Yeah, just get if you have the opportunity. It can be scary, for sure, and even in investing right, like acquiring a new property or whatever it is, it's like you get this feeling of like oh no, should I do this, whatever? But it's, even if you fail, pushing yourself outside of that comfort zone is going to make you stronger, which is going to have more long-term benefits.

Speaker 2: 9:50

Yeah, I've never. I tell you this all the time. I've never interviewed for a job or applied for a promotion that I felt that was ready for ever. That's good. And I've always been nervous. Even when I've gotten jobs or promotions, I've always been nervous that I'm not ready and I feel like a fraud and it's only a matter of time before I get found out right. And everybody feels that way, some people, it's harder to push through that, but you, everybody thinks that way. Once you realize that and once for jobs, promotions, usually the company and the employee come to a good mutual decision at some point. And so if you, if it is the right time, they'll tell you, and if it's not, they'll tell you that too.

Speaker 1: 10:28

But give yourself the opportunity. Yeah, and you were responsible in large part for the site selection here. I know you guys have these grew a ton of locations.

Speaker 2: 10:37

A little bit. I wasn't. I wouldn't say I was responsible, but when I worked for Sleepies it was a DeNovo machine. It was a great company. Most people have never heard of it At this point it's been since been acquired. During my time there we probably opened a thousand DeNovo. At our peak we did over a hundred in a single year, so definitely saw what a real DeNovo machine looked like. We had a system. We had a kind of a central real estate team that worked with brokers and we would. We used some software right and we had just market penetration stats that we wanted to hit right, like per X amount of households. We knew how many stores we wanted to have in certain metro areas and so on.

Speaker 1: 11:14

So we would come in and compare us to the competition. So you'd look for, like, if there's whatever 20,000 people, we want 10 stores, whatever. I don't know what that is, but would you, were you also measuring the competition, or was it just about the population?

Speaker 2: 11:30

Trying to find a way to say this, but the owner of the company was Hardcore. He was old school New York bit of a bully when it came to the competition. So we would target competitors. I remember when we first came into New England there was a competitor there and they offered to sell the business to the owner, harry, for I don't know a lot of money call it $10 million and he didn't want to pay that much, and I remember this. This story is we'll just put three stores around, every single one of yours, put you into bankruptcy and then buy it for pennies on the dollar. And he actually did that. Over the course of the next several years he put a store across the street from every single one of theirs. By the time the recession hit, the company went into bankruptcy and we bought it out of bankruptcy for 10 cents on the dollar. So he was pretty hardcore. So we would target competitors. We ended up buying probably half a dozen competitors out of bankruptcy during the recession.

Speaker 1: 12:22

So I gotta ask, because it's not like it's free to put a location right. There's a cost to that. So was the guy like, was he asking a ridiculous amount? Was that the issue, or was it more like the principle okay, I'll do whatever it takes, like once we got some scale, we were a great option for landlord.

Speaker 2: 12:39

So a mattress story. If you think about it, there's nothing to it. It's just to take what we would call a warm vanilla box and you put a desk and some mattresses.

Speaker 2: 12:48

There's almost no build out cost other than the shell, and we were. We had some scale at that point so we had very high credit with landlords. So we can negotiate short term leases one, two year leases. If it works out, great, if it doesn't, we can leave. It's clean. It's not like we're a fast food restaurant. There's very little parking requirements. Most people joke that they think mattress stores are a drug front because they never see any customers in there. You know, the truth is a good mattress door only needs to see three to five customers a day to make money. Right, that's right. These de novo's were wrote for low risk and you could get margins there's supposed to be great on these mattresses then.

Speaker 2: 13:24

They're okay. It's just like anything else, it's.

Speaker 1: 13:26

I guess just low overhead maybe like once.

Speaker 2: 13:28

your labor costs are very minimal because there's one salesperson in the store at a time. That salesperson is usually making commissions and people think there's some secret high margin thing going on in mattresses, but the fact is, healthcare has been much more profitable than retail ever was.

Speaker 2: 13:42

But yeah, those are very interesting times and I did learn a lot about real estate in those years. I got as a operator. I used to go on real estate tours with the brokers and learned how to pick good locations and have a nose for good real estate and that sort of thing.

Speaker 1: 13:56

So that's really, yeah, that's fascinating. Are they still around this company?

Speaker 2: 13:59

No, we grew to a point, so it was used to be 100% owner owns privately owned, I should say. And then, sometime around 08, I think, we brought on private equity money and then, five years later, we started a sale process and at the 11th hour, the biggest competitor in the space Mattress Firm was publicly traded at the time came in and scooped it up. So we were acquired by Mattress Firm and I stayed on with them for a couple of years. It was a good company too. It was different, and by then we were huge. We were border to border, coast to coast, was the saying, and stayed on for a couple of years, helped with integration, ran a couple hundred stores for them, and then I wanted to do something different. So at that time, mattresses were one of the last things people started to buy online. It wasn't until Casper and Purple came out that buying a mattress online became cool.

Speaker 1: 14:51

But what it?

Speaker 2: 14:52

did. That was like we had we had clear.

Speaker 2: 14:54

we had too many stores and we had some issues. So I wanted to get out of retail and a friend of mine had gone to work for this veterinary company and he called me and he said that they had an opening. So I got an interview and I thought it was crazy. I had no idea why they would even want to interview me. I had never been to a veterinary hospital in my entire life. I've never owned a pet. I don't even like pets, to be honest with you.

Speaker 1: 15:13

But I'm sure you kept that to yourself in the interview, right?

Speaker 2: 15:17

I kept this myself in the interview but slowly made it known over the years, I ended up going to work for this company, national Veterinary Associates. It's one of the greatest roll-up stories of all time. Very successful.

Speaker 1: 15:28

So what point did you start working for them, Like where were they in their journey? I think?

Speaker 2: 15:31

we had 440 offices, something like that. I remember that number and by the time I left, I think we'd probably grown to maybe three times that size. Yeah, and so I learned a lot about DeNovo's in retail. Mba was an acquisition machine. They did over 100 acquisitions a year at their peak when I was there, so that was great. I learned a lot about doing deals, acquiring offices. That was my first healthcare job. So I learned a lot about working with doctors and the differences between healthcare and retail. Perfectly, there's more similarities than differences, but there are some nuances to working with doctors and that sort of thing.

Speaker 1: 16:02

Yeah, that was great. It was great company I love great people.

Speaker 2: 16:04

What was your role? I was a director of ops. I got promoted to senior director at one point.

Speaker 1: 16:11

And MBA is still doing well, aren't they? They're still one of the top VCs, you know? Vac consolidators.

Speaker 2: 16:16

Yeah, they're plugging along. I've been going on three years now.

Speaker 1: 16:21

Well, everybody that kind of hit it over marked like a saturation point right, and they've all been struggling since interest rate hikes because it got blown up so fast. So it's like the whole entire industry I know has been like having a lot of challenges, but it seems like they're still doing well comparatively.

Speaker 2: 16:37

Yeah, I think. Yeah, NBA is definitely the premier company in the space. It's really well known. The reason I'm where I am today is because NBA on your resume is just for in private equity health care. It's just. I didn't know this until I left, actually, but it's like having an Amazon or a Google on your resume if you're in tech. But, yeah, really, really great education for me and awesome organization to be a part of. I think veterinary in general is later in consolidation than other health care companies?

Speaker 1: 17:05

Yeah, I guess, just because there's less is what? 30,000 vet offices compared to 90,000 dental locations and then like that.

Speaker 2: 17:11

Yeah, not only that, but the big companies in the vet space are several thousand locations at this point. I think in dentistry there's only one or two that are over a thousand out of a much bigger pool. So dentistry is one of the reasons I left these in much earlier stages of consolidation. I thought there was more white space for acquisitions. But you're right, real estate or not, real estate interest rates have changed the math entirely on acquisitions. I don't know about veterinary, but in dentistry at least, what we could acquire a company for two years ago is we can acquire that same company for far less now.

Speaker 1: 17:44

You have like a percent. If you were on average paying, I don't know what that multiples were. If they were eight, are they down to four or is it more like six? Is it on 25%, 50%, like on average? What do you think?

Speaker 2: 17:54

I think there's a gap still between what smart buyers are willing to sell, or is it willing to accept?

Speaker 2: 18:00

So I don't think that is shaken out yet all the way and it's just like buying a house when mortgage rates go up, what you can afford to pay in your monthly payment changes. So if you could afford a $500,000 home a year ago, maybe now you can only afford a $300,000 home. The problem is are there homes available for $300K? And it's the same thing in the dental space. I think multiples in dentistry were far less than they were in veterinary, which again was one of the reasons to come here, but they were creeping up. And then when interest rates changed, the math changed for buyers, but sellers expectations are still high, because most sellers don't just wake up and decide to sell. It's something they think about for many years. So if you got somebody told you your dental practice was worth 10 million a year ago and now someone's telling you today we can give you five for it.

Speaker 1: 18:48

You're going to be pretty and truly. It seems like if you had a truly great and exceptional business, then you wouldn't need to sell when it's valued at half right. You could continue running it, and so that's the thing that we're seeing in real estate too. Is I'm surprised? I naively thought that the cap rates would increase in direct correlation with the interest rates, meaning as interest rates go up, then the price of real estate would come down, and just hasn't been the case, and so, upon reflection, it could just be because of the fact that if you own a health care piece of real estate, you're not necessarily worried about them defaulting, and so if you can't get your number, you can just hold it, and that kind of seems to be what's keeping the market propped up. Is just like there's not a lot of motivated sellers.

Speaker 2: 19:30

Yeah, that makes sense to me. I think that now there is motivation. It's different with the business.

Speaker 1: 19:36

Yeah, when you hold the piece of real estate it's not completely passive, it's more passive. But business there's a lot to it, I think it's. I don't know if it applies directly to business or not, because you can obviously create the best C-suite in the entire world, but you're never going to be like totally disconnected. So as the owner trying to sell it, you're going to be doing something right, I guess it's. Just I don't know. You would know better than I.

Speaker 2: 19:56

Yeah, I think it's a little different, because the business is either growing or it's dying, and at either end of either of those two extremes there's reasons that an owner would want to sell and we would typically acquire more of the high growth businesses. And what happens is when a dentist reaches a certain level of growth, the business starts to become very complex and hard to manage, and then further growth becomes difficult.

Speaker 1: 20:20

So those are always where they need to bring on a partner like you guys, kind of thing, yeah.

Speaker 2: 20:24

So those have always been great businesses for us to partner with because they're talented entrepreneurs, good local leaders, talented people, and they just need help growing from there. Those work very well with their own system. So I think you still have those sorts of entrepreneurs out there, but they're probably less motivated to sell right now. I think what we're seeing and we're not actively looking for acquisitions, but the stuff that is inbound that we're seeing is more on the distressed side, where people either took on too much debt, had trouble with staffing, paid too much for staff and now I've gotten themselves into a little bit of financial trouble, and then you're more looking for a sale from a bailout standpoint.

Speaker 2: 21:04

We've been had some small groups come through us that are extremely distressed right now. So that's not really our thing, though, we're not really in the turn.

Speaker 1: 21:12

It's too good a deal to pass up on, though.

Speaker 2: 21:15

No, it's just not really. Sometimes you have to look at these things because it seems like a great deal. I don't know, you're in the real estate business. Sometimes a foreclosure seems like a great deal and then you get in there and it's a money pit.

Speaker 1: 21:24

So right right.

Speaker 2: 21:25

Turnarounds are not really our thing. So our strategy has shifted more to DeNovo. So we have a really good track record of doing DeNovo as an organization. We've got at least a dozen or so that we've opened that are doing 2x with the industry averages, and so we're going to like be accelerate that part of our business.

Speaker 1: 21:44

Yeah, let's close that loop real quick. So how did you transition from NBA to Lightwave?

Speaker 2: 21:47

Yeah. So I was doing great at NBA, I was not looking for a job at all. And then I got a call from a recruiter for a VP of ops role at some dental company and I was like no, I'm not interested, I was about to get promoted, I was going to get a VP title anyway. So I was like I'm good. And then two weeks later the same recruiter called me back for a chief operating officer job, which of course was the same job, but they just rebranded it. And then I was like oh, yeah, that sounds good because you go.

Speaker 2: 22:14

But yeah, I came in and interviewed and we just I just clicked with the executive team here. Our founder, justin, is a great guy. He's a super hard worker, values based guy. And then our chief dental officer, dr Clifton Cameron, and at the time our CFO. We, we just clicked. We had a chemistry and I liked the business plan, but mostly, like the people, I thought that we could grow this thing together and obviously it was a promotion for me. I was in a much bigger company but at least two or three levels below C-suite and so I felt like an opportunity to accelerate my career.

Speaker 2: 22:45

It was local, so I decided to take a chance, start over to new industry, other industry I don't know anything about never having a client in my life. So I'm not. I've never been a big dental customer myself, never had a cavity, never had a dental.

Speaker 1: 22:58

Never had pets, never went to Dennis, probably never had a mattress either. Yeah, that's right, but yeah, I tell people.

Speaker 2: 23:05

To me, it's never been about the thing. I like people. I like helping people achieve their potential. I like helping companies scale, and this company was on a growth path and was really glad I came here. We've doubled in size since I've been here. What year did you start here? Very end of 2020. So it's almost exactly three years, just at the end of 2020. So in that short time, we've doubled from about maybe 41 or two offices to the 86. Now it's been a good ride. We've added a bunch of team. A lot of people have been able to grow their careers. We've opened some new offices. We've acquired a bunch. We just had a successful change of the guard within our investors. We had our original investors, were a company called Alpine. They were with us from day one. They were terrific, and we just started with a new investment company called Lindsay Goldberg. So we they've been great so far. We're really excited about the partnership that was a big deal.

Speaker 2: 23:52

It's really hard to get those transitions done.

Speaker 1: 23:56

Yeah, when did you guys transition? How recently? It was right around July 1st, wow, yeah, so there's anything. Yeah, because that was like way past. I know a lot of groups that luckily or intelligently time it back. When interest rates were lower. They locked in their cost capital. So July would have been a hard time. In July this would have been a really hard time to do that, I guess. First of all, congrats.

Speaker 2: 24:19

Thanks. We're proud of it. We Is a really good. It was a good outcome. I think we're really happy to get a deal done. For everything we're hearing there's maybe a dozen or so groups like us that went to market and not many are able to get a deal done. So I think it speaks to the quality of our dentists and of the management team that we've built here. So we're really proud of that. You're really proud of that whole first chapter to grow, especially our founder started with. He was the only employee started with six or eight offices in the beginning and inside of seven years to grow. That to the business that we are today is really significant accomplishment and we have really big growth goals for this next chapter. We want to expand quite a bit. We want to open up maybe another hundred offices in the next five years or so.

Speaker 1: 25:05

Open via DeNovo? You mean in addition to acquisitions? Yeah, I think we see if it was 80, 20 acquisitions DeNovo in the past.

Speaker 2: 25:12

We think that'll probably flip and maybe be 20 DeNovo's acquisitions.

Speaker 1: 25:15

So what's the reason for the flip Is it because, just like the acquisitions are still, the multiples are still high and, interest rates being what they are, it like just makes more sense financially for DeNovo.

Speaker 2: 25:27

They're a lot more capital efficient for what we pay to do in acquisition compared to what we pay for DeNovo. It's 5x the cost to do an acquisition. Now you get to start with a successful business on day one when you do that. But we have a few DeNovo entrepreneurs in the business. These are dentists that have built their businesses up to call it 5 to 10 or more offices that are just extremely talented at this and they can scale DeNovo's fast and really to 2x the industry average and call it 3 years. It's just a much smarter way to deploy capital.

Speaker 2: 26:01

I think we've largely done these through the talent and intuition of these DeNovo entrepreneurs within our business. What we want to do going forward is we're bringing on some corporate teams to help systematize and accelerate growth going forward. The other challenge is bridging the gap between a regional entrepreneur who acts mostly off of intuition and experience and very sophisticated investors who want to see built up business plans backed by real estate software and that sort of thing. We are hiring a couple of folks right now. We just made an offer to hire a director of real estate to work with the company full time. We're hiring a DeNovo project manager. We just put somebody into a full time DeNovo finance role. We're building that corporate team to again bridge the gap between these extremely talented entrepreneurs and very sophisticated investors to help get projects approved and opened faster. So we're really excited about that.

Speaker 1: 26:56

With your real estate team. Are you guys looking to buy the real estate as well, or just focused on growing the business and leasing the real estate?

Speaker 2: 27:04

Sometimes, a lot of times, our dentists will buy the real estate, which is we love because it's another great wealth creation opportunity for our dentists. We really want to be the best place for dentists to practice dentistry. We have great programs for all of our dentists. We have a program for associates to become owners in the business. They can buy stock in the parent company, which is really exciting. We've just recently rolled out a joint venture program where DeNovo entrepreneurs can become partners in the business and then, if they can own the real estate also, there's multiple ways that dentists can create wealth here within the company, which we love it does create some challenges having operators and landlords be the same person.

Speaker 2: 27:41

So there's some third party regulations that you have to go through to make sure that the rents are accurate and fair for the market and that sort of thing. But we're happy to do that because it's a great opportunity for the company. But for our dentists it makes sure all of our interest are aligned to everybody's skin in the game and their interest are aligned, and making sure that these businesses are successful.

Speaker 1: 28:00

Yeah, okay, two questions. Number one I know we talked off camera just about how you guys were achieving 10%, same story over your growth and then so just A, how did you guys, how did you achieve that? And B, like, what advice do you have to make people attractive to private equity? I know it's like a loaded question, so we can start with the first one, but what did you guys do to help get that 10%, because that's a hard metric to hit consistently.

Speaker 2: 28:23

Yeah, so we break down our growth. You want to measure same store growth, so same store is term that I've used since retail right, which is like offices that have been in the company at least a year. So that's our standard. We measure apples to apples, year over year growth. In that same store category. We have different. There's different types of offices. So there's ramping to nobos, which grow faster, and that helps pull that number up a little bit. So a denombo that's been open at least a year is still a high growth business. That pulls that number up a little bit, which is good. So to consistently have a pipeline of denombo's that are going into that same store bucket definitely helps. We also, when we do acquisitions, we like to buy offices that have space to expand physically because, again, a lot of times these offices are successful and we can add rooms and expand the business by just expanding the physical capacity of the business. So that's a whole nother category for those we call those growth offices. Those are also high growers. The ones that are a little harder are what we call our mature sites, which maybe don't have room to physically expand. They're not denombo's or they've been open at least three years. Those are ones that take the most effort right. So if you can't grow your capacity right, if you can't, if you've reached the point where you can no longer add providers and expand from a visit standpoint right, or just a number of patients coming through the door standpoint, then you start to have. Then you have to grow on a per patient basis.

Speaker 2: 29:51

One of the things we're most proud of is our clinical team. We have a lot of. We have clinical development pathways. We have every single doctor in the organization gets coaching and mentorship and then training opportunities and the average dentist within our business makes 50% more than the industry average because, given the technology in the offices and then the training to use that technology to optimize patient outcomes and do the advanced procedures that they want to do, whatever their clinical interests are, whether it's implants, hendo, ortho, et cetera we have training pathways for them so that they can do more on a per patient basis.

Speaker 2: 30:26

We also have this really exciting Ortho program. It's called the strategic partners program, the dynamic chief orthodontic officer, dr Jason Gladwell, and he's built this program where in all of our GP offices we can deliver specialist level ortho orthodontics in a GP office, which is very exciting If you can grow the number of patients once you've totally maxed out the physical space, you can add providers, you can add hours, which is very hard to do in dentistry. You have to grow on a per patient basis. So a lot of times that comes on the clinical development and training which we invest a lot in. The last piece is you can also get more from the payers right, so from the insurance companies.

Speaker 1: 31:01

so in dentistry and our it's a big problem right now. Yeah, getting.

Speaker 2: 31:05

It's a big problem. It's cost shot up, obviously, cost shot up over the past few years with inflation. You only get a chance to renegotiate with the payers maybe every other year or every third year. And, of course, insurance companies are not in the business of giving away money, right? My father always said every city you go to the tallest buildings are the insurance companies buildings, right? So that should tell you something. They're in the business of making money, not giving away. In fairness to the payers, they have cost pressures as well. So that's a very, very touchy subject. But we had a newly formed RCM team within the business that's doing an exceptional job right now using our scale to negotiate with the payers. So we've gotten some nice increases lately. So it's another avenue of growth for us, right.

Speaker 1: 31:51

Some of the groups are dropping, like some of the big groups are dropping a lot of these big insurance carriers Recently.

Speaker 2: 31:57

Yeah, that's not without risk, also because you have to think. It might be a smart decision now, but you also have to think forward. If you think there's a recession coming, you may regret dropping a pair. The reason to be a network is the payers will send you patients, right, because you probably have health insurance. When you go to the doctor, you go to your insurance's website and you see who's a network or whatever was the local provider and that's how you find your doctor.

Speaker 2: 32:24

So you could be too aggressive with dropping and then be in a situation where patient demand slips because of economic pressures and then you could regret it and then there's a blackout period. It's not like you can just go back in network the next day. So you have to be smart about these decisions. But it is a strategy, right? If you have an office that's fully bulked out, there's a wait list for patients to come in, then it does make sense to start to go to your lowest paying payers and at least put pressure on them. We found that the payers have been very responsive. They understand the situation, they want to stay in and out with us, and so they've been wanting to work with us, which we're excited about.

Speaker 1: 33:00

Yeah, you can't have an inflationary environment with all your costs going up while getting put the cost of your reimbursements are coming down right. Eventually, there's just going to be nothing left.

Speaker 2: 33:10

You can. Maybe. Maybe, if you were on the payer side, you would say it's not really our problem, and then what's coming out on the other end is of this is the payers. They're having the same cost pressures, they're getting pressure to increase reimbursements, and so where's that? What's the income for them? It's premiums, and so what we're hearing in the marketplace is people's health insurance premiums are starting to skyrocket, right. So it's a vicious cycle. I don't really know how it ends. To be honest with you but it is.

Speaker 1: 33:40

It is crazy. That's obviously what happens when you print a lot of money. Costs of everything goes up way quicker than the wages do. Yeah, it's still shaking itself for the system, yeah, and we've seen.

Speaker 2: 33:50

we've seen some of these negotiations between payers and healthcare systems play out in other ways, where you know some of our employees, for example, like our health insurance is through UnitedHealthcare. And then last year UnitedHealthcare and WakeMed, which is the big hospital system in Raleigh, reached an impasse and WakeMed stopped accepting UnitedHealthcare for a period of time. It ended up being a negotiating tactic. They reached a settlement but there was a six month period there where our employees couldn't go to their preferred doctor because of it, and this stuff is all related, but it's a circular reference. If the healthcare systems need more money, the payers can't give it to them. When they give it, they have to collect it someplace else and it ends up coming from employees employee premiums elsewhere.

Speaker 1: 34:32

Yeah, you mentioned recession and then also mentioning massive growth plans. So do you foresee the recession unaffecting the dental industry, or at least your organization?

Speaker 2: 34:43

no-transcript. Listen, first of all, I don't I a lot of people talk about the recession like it's inevitable. I just predict in the future is a very bad business to be in. I almost every macroeconomic prediction I've ever had is it's been wrong. So I think the future is inherent. Most recent one is early 2020, when COVID was first taking off, everybody thought it was going to be a disaster and there was a stock market crash, but then stock market rallied like all the time yeah.

Speaker 1: 35:10

Nobody predicted how fat. Like how much a rising tide would lift all boats right, like how much quantitative easing and low interest rates would just totally wash over everything and then create a new problem, which is acquisition prices, real estate prices and that price of assets were becoming unattainable. And then now it's interest rates are so high and it's all. Man, this sucks. I wish we could go back to 2020, when we only had to deal with high prices. Now I got to go to high prices and interest rates, and then 2020, I wish I could go back to the peak of COVID, wherever the prices were lower. And it's just, there's never an easy time.

Speaker 2: 35:39

It's always something the crowd is usually wrong when it comes to predicting the economy. I think If the crowd all things that are recessions and inevitable, maybe the opposite will happen. But I don't think we think about that too much when we're thinking about opening up to Novos, for example. And one of the reasons to be in dentistry, even from our investor standpoint, is it's generally very recession resistant. The COVID dip aside, this is a special circumstance. The last two recessions, the stats that I saw dentistry held up very well. People will generally keep going to the dentist, especially if you have an issue, if you have a toothache, you're going to the dentist.

Speaker 1: 36:19

You're going to buy a big screen TV that month.

Speaker 2: 36:20

Right, you're going to go to the dentist and get a taken care of. So I think I think we generally think of this as a recession resistant business. I think some of the cosmetic stuff maybe what takes a hit during a recession, but maybe you got to find other ways to grow.

Speaker 1: 36:32

Yeah, yeah, I agree. I first started hearing about a recession back in 2016. People were just saying, oh, it's been six years, seven years time, because historically it was like we have one in 2001, we have one 2008. So people just thought, every seven years you'd have one. And so if you'd have tried to time the market, sit on the sidelines, man, you'd have missed out on the greatest bull run ever. And so my takeaway is just you can't go outside your buy box, but you also can't stop doing deals either. You can't stop doing everything and just try and time it. You got to keep working and got to keep pushing forward. When you overextend yourself, that's when you get in trouble. So, like you got to go true to your metrics or whatever you're, in the case of your LPMs, right, like your whatever is that mandate is.

Speaker 2: 37:12

My memory of the global financial crisis in seven, eight, nine was that the strong company survived and the weak companies didn't. I remember certainly in retail that was the case. We were able to, you know, gobble up a bunch of competitors during that time.

Speaker 2: 37:27

But even in like real estate rate. Everybody wanted to be a mortgage broker in 2005 and six. He could make so much money right, and then 80% of them went out of business. But when the storm cleared, the ones that were left were the best ones and there was a lot less competition around and they did quite well. And I think that's probably the norm for recessions they shake the weak leaves from the trees and what's left are the stronger companies and some of the competitive pressures go away.

Speaker 1: 37:52

It's hard to say what would be good or not good.

Speaker 2: 37:54

I think you just have to take this stuff that's out of your control laws and comes and just focus on what you can control, which is my little trope at this point.

Speaker 1: 38:01

But yeah, I want to get. I know we're getting close to the end of our time, but I want to ask a couple more questions. So number one what was the most unexpected part of growing this business?

Speaker 2: 38:09

Yeah, I think probably two things. Dentistry has been exactly like every other business I've been in, except in in in really two ways. One this is my first time working with insurance companies. That NERI was great, because there's no insurance in that.

Speaker 1: 38:22

NERI.

Speaker 2: 38:23

That is. But even the insurance, the patient or the customer just swipes the card before they go and they deal with it afterwards. Dealing with payers has been, and insurance companies has been definitely surprising for me. The other thing is that been a little bit of surprises from an hours of operation standpoint. That's not really a lever in dentistry. So Friday afternoons and weekends are not really a thing in dentistry.

Speaker 1: 38:47

Some of our doctors do not want to come in at those times.

Speaker 2: 38:51

Yeah, it makes sense to me now. I think dentistry for both a dentist and a hygienist is a physically demanding job. They see a lot of patients in the time that they're there right, and it's fair. A lot of our dentists could have been any kind of doctor that they wanted to be. They chose dentistry because they can have some balance and it could be a good lifestyle business for them. Again, in other businesses, expanding hours was always a lever that you can pull to increase capacity. It's very difficult to do here, mostly because of the employee base, but I think patients are also just not used to that either. So when you do venture into Saturday hours or something, it takes a while for the patients to learn that. So you end up with this problem where, if you don't stick with it long enough, it looks like you're losing money on Saturdays and those sorts of things.

Speaker 2: 39:29

So I think those are two things that have been a little bit of a surprise to me.

Speaker 1: 39:32

But overall I love it.

Speaker 2: 39:34

It's been a fun business to be in. Really good people who are passionate about quality care, taking care of people. These are small businesses. Small businesses also have 20, 30 people in a relatively small space, so they're like part of the community. They go to local community events, they sponsor T-ball teams, they're at the county 5K and that sort of thing Good community, family-based people. So it's been a great business to be in. I really enjoy my time here so far.

Speaker 1: 40:03

Okay, and then what about anything of the biggest failure that maybe turned into a learning experience?

Speaker 2: 40:07

Yeah, I think my general motto at work is a saying I think it's maybe from tech companies or something is go fast and break things and learn along the way. I'm very much an iterative thinker, so I don't think about stuff going wrong as failures. It just happens all the time and we're always. To me, the most painful mistakes in my career have always been people-based either hiring the wrong person or putting the wrong person in the wrong role and then having to undo that. It's very painful, especially having to fire somebody that you hired. It's just always been very difficult for me.

Speaker 2: 40:37

And if I was to look at a common theme for hiring mistakes that I've made over the years when I over selected for experience and under selected for what an old mentor of mine would call attitude and aptitude and all the best hiring, mostly promotion I have a bias towards promoting from within. And if you have a hungry, ambitious person that has the right attitude and aptitude maybe a little bit of a chip on their shoulder, something to prove and if they're smart they'll figure out a job, even if they don't have the experience. And I've had to learn the hard way a few times that the opposite is true. If someone has a very impressive resume, all the right experience, great education, those sorts of things, but isn't really to roll up their sleeves and do the work, especially in a high growth company. You got to wear a lot of hats, you got to be willing to chip in. No amount of experience will overcome that attitude and aptitude gap.

Speaker 1: 41:27

But as a leader you're responsible for that.

Speaker 2: 41:29

You put that person in that role and then when you have to unwind, that's extremely painful because you create a bad experience for that person. So you have to own that. So those have always been the most painful mistakes in my career. And the opposite is true, and as well you can promote someone, and those have been the happiest accomplishments in my career when other people have been able to achieve their goals.

Speaker 1: 41:45

Yeah, I think that's a great distinction between the two and just to put a bow on it, like now, moving forward, how do you differentiate between the two? I can't prevent it.

Speaker 2: 41:54

One piece of advice that I think is very bad is when the stock advice for hiring managers is don't listen to your gut, trust the process. I think that's horrible advice. I think you do need to trust your gut, especially if you have any sort of experience. If you've been hiring people for a long time, your gut is usually right both ways. You can have false positives, false negatives, by not listening to your gut.

Speaker 1: 42:15

Sometimes there's pressure to over select for resume and experience.

Speaker 2: 42:18

You need to impress a certain investor, or somebody sent me a great meme yesterday, which is when a committee makes a decision, it usually makes a bad decision. I think what I've learned over the years as a leader the more experience I've gotten, I've learned to just trust my gut, have confidence in my own decisions, be comfortable going against the group. If you're getting pressure from a hiring committee to over select for experience, you have to be willing to fight and advocate for the right person.

Speaker 1: 42:43

That's great. That's great. Okay, do you want to talk about that? We didn't get a chance to. Before we wrap up.

Speaker 2: 42:49

No, this is cool. Thanks, man. It's good to meet you in person. Tell me about your American Ninja Warrior experience. I never heard that story.

Speaker 1: 42:55

I was on the show twice, my wife actually. So I used to wakeboard professionally and when I retired in 2017, the last thing I wanted to do was another elite sport. But my wife really wanted to do it. She had people telling her she should go try out and do all these things. She dragged me into the gym in 2020. I had a little bit of a break where I was focusing more on my business. I had some gyms at the time and I was like, okay, reluctantly showed up and then after two weeks I was just totally hooked.

Speaker 1: 43:20

So apparently, 60,000 people like apply to be on the show. Then only 600 get selected. So we did not get selected the first year. We did get selected the second year, but she was pregnant, so she couldn't do it. I got to go. It was awesome and I hit a buzzer, so the course went to the city finals, the McNational finals. The next year. We got invited to go, but we weren't backstated and they didn't let us go compete, so she couldn't go. So the third year this year we both actually got to go compete and it was awesome and then I actually did. So I made it to the city finals and then I made it to the national finals, so that was really cool. They aired it in August of this year. We competed in May and I'm 36, 165. The kids here are winning are like 16, 17, 135.

Speaker 2: 43:59

Oh, my God yeah.

Speaker 1: 44:00

And they've been doing this.

Speaker 2: 44:00

That's cool man. Good for you.

Speaker 1: 44:02

Yeah, they've been doing this their whole lives, so it's fun. You know what I mean. We don't have date nights, we go to the gym together and encourage each other. We don't travel for vacations, we're local ninja competitions, and so it's completely taken over the leisure part of our lives. But we're just not idiotic like that.

Speaker 2: 44:18

That's sweet. That's nice that you guys get to do that together. That's cool, man. It's a good story. I saw that in your LinkedIn. I just couldn't forget to ask you about it.

Speaker 1: 44:25

Yeah, no worries. So you look, I'm going to do it as long as my body lets me. Will I be competitive compared to the other kids moving forward? I don't know. But we just have fun, and so, regardless of if I ever get caught back, I just I want to have fun doing it.

Speaker 2: 44:36

Yeah, right on.

Speaker 1: 44:38

Unless you win, like you don't make any money. Yeah, it's not like a career choice for me by any means. Passion project yeah, but is it? Yeah, and if anybody who wants to like get in touch or to learn more, it's a good resource for that.

Speaker 2: 44:50

Oh sure, yeah, Probably. Just check out our company website. I would say lightweightdentalcom. We've got a lot of cool stuff going on there. We're on, obviously, all the major social platforms. If anybody wanted to reach out to me, I'm easy to find on LinkedIn also.

Speaker 1: 45:04

Okay, so yeah, I'll write that down and then finish this job on LinkedIn. That's it. So yeah, man, this has been great, I really enjoyed it, and thanks so much.

Speaker 2: 45:12

Yeah, it was my pleasure to talk soon. Take care, man. Thank you, yeah, yeah, yeah.

Speaker 1: 45:16

Yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah yeah.