Ray Caruso's Journey: From Childhood Ambition to Dental Industry Magnate through Leadership, Strategy, and Passion

Have you ever felt the spark of entrepreneurship ignite from a simple childhood dream? Ray Caruso, CEO of Lone Peak Dental Group, certainly has, and he's here sharing the tale of turning his young longing for a pair of Nikes into steering a leading dental support organization. From flipping burgers to orchestrating a strategic recapitalization with BlackRock Impact Opportunities Fund, Ray's narrative is an invigorating ride through the lessons of leadership and the stamina required to thrive in today's healthcare landscape.

Ray dissects the impact of early work experiences on his professional ethos. This episode isn't just about reminiscing over past jobs; it's about extracting the profound life lessons that shape us. Ray's transition from military life to mastering the dental industry, influenced by family wisdom, underscores the crucial decisions we face in sculpting our careers. It's a masterclass in recognizing opportunity, even when it's disguised as a challenge, and the tenacity needed to seize it.

For all the dental professionals out there, the episode crescendos with Ray's valuable insights on positioning a dental practice for a lucrative sale. Understanding the financial assessment, navigating broker relationships, and the complexities of profit and loss are all under the microscope. Whether you're dreaming of transforming your practice into a Dental Support Organization (DSO) or pondering a sale, Ray offers a treasure trove of advice to ensure your business transition is not just successful, but also satisfying. Join us and unlock the wisdom that could elevate your entrepreneurial journey to its peak.

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Transcript

Speaker 1: 0:00

If you want a premium price, we shouldn't have to go in and eliminate staff or eliminate unnecessary or unreasonable benefits. Know what is normal, and you're not going to know what it is because you're the only normal. So that's where, I hate to say, brokers can help you, but they will know. This is what a P&L should look like.

Speaker 2: 0:25

The goal of this show is to help health care organizations scale by leveraging real estate strategies and interviewing high-level health care executives in order to pull out lessons learned along the way. If you'd like a free site selection analysis from our team, or you'd like to learn more about how we're acquiring real estate through our fund on the blockchain, visit us at wwwreuniversityorg and drop us a line. That's RE as in real estate universityorg.

Speaker 3: 0:51

Hello everybody, welcome back to another episode of Helping Health Care Scale. I'm Austin Hare and I'd love to welcome our guest today, ray Caruso. He is a second time guest and he's the CEO of Lone Peak Dental Group, which has 70 locations under management across 13 states. Now here's the kicker Recently, they just finalized a recapitalization from their previous sponsor to the new sponsor. Some guys that you may or may not have heard of called BlackRock Impact Opportunities Fund, and, for those who don't know, blackrock is the largest money manager in the entire world. So this is a huge deal which we'll talk all about in the show. Ray, thanks for coming on today.

Speaker 1: 1:23

Yeah, thanks for having me, Austin. It's always a pleasure seeing you.

Speaker 3: 1:26

Great. Yeah, we got to connect in person back in at the DEO fall. That was great. And then we got to go really in depth in your story, as probably a couple years ago now. So if anybody is wanting to know the full story of Ray, you can go back through and enlist in that in the previous episodes. But for everybody else, I'd love to get in some context. And it's like you don't wake up and become CEO of a large DSO ran by the largest private money manager fund in the world overnight. So what is it? Was there anything impactful? Let's go back to early childhood. That happened that either A gave you the desire to be like this, or you just maybe even notice like oh hey, I have some entrepreneurial or leadership tendencies and we can go back as early as you can remember.

Speaker 1: 2:06

Yeah, Interestingly, it was a pair of Nikes. Wow, I wanted a pair of Nikes and I was in fourth grade and my parents are like, yeah, no, not happening, we had, I had. There were five of us all together, so I had four siblings and we were. You go to the doctor when you're really sick, like you have to have broken limbs. We didn't go to the dentist, which is strange because now I'm getting kids to go to the dentist, creating healthy habits for them.

Speaker 1: 2:35

So, no, I wanted a pair of Nikes and there was no way else to get them. They cost $19 at the local shoe shop and my brother had a paper route and so I just did everything I could to pick up. Any time that he had Boy Scouts or anything else that he was doing, I'd take over his paper route and within about three months I had my own, at nine years old. That was the way for me to make money and I had the entrepreneurial spirit of walking up and down my block with a lawn mower see if anybody needed their lawn mowed, and you're doing the order. There were sales at nine years.

Speaker 3: 3:09

Oh yeah.

Speaker 1: 3:10

Rakin leaves. I learned really fast that you need to look at the yard in the look at the backyard before you promise that you can do it all for 10 bucks.

Speaker 3: 3:20

You can only imagine, yeah, nine year old Ray.

Speaker 1: 3:22

Right and back, absolutely. They've got trees that need to be hauled away and cut down. Oh, it was a big yard. I was there until dark. I learned my lesson, though, and they did not give me $1 more.

Speaker 3: 3:36

Wow, yeah, so it sounds like there's a lot of lessons in there. It sounds like you learned, maybe, selling, maybe you learned about rejection. Going door to door they say it's some of the hardest sales because you're just faced with rejection like so much.

Speaker 1: 3:50

Yeah, absolutely, and all the people knew me on the block and a couple blocks over because I was also their paper boy. But yeah, you're right, but even as a paper boy, I had to go door to collect. This is back before people would even mail in their stuff. It was definitely before anybody's automatic payments. So I'd have to go door to door collect, know what time to be there and be nice and personable and then also have to deal with things like you don't put my paper exactly where I want it. Okay, so there's customer service involved and it helped me all through going to fast food, restaurants and the other things that you do when you're in high school and you can start to earn a living.

Speaker 3: 4:30

The fast food restaurants that you work at oh, Burger King was the first one. Okay, I was McDonald's. Oh nice Right. When I turned 14, I hit minimum age to work and started working.

Speaker 1: 4:40

Yeah, that's right, I loved the drive through. That was my favorite. I had so much fun. I went from Burger King to Wendy's. Wendy's didn't last very long, and then parties, which I think is like Orles Jr or whatever they call it here. But yeah, I would work that drive through and I tended to not want to be at home, so the more I could work, the better off I was, and our parties was open 24 hours on Fridays, so I'd work all the way till five o'clock in the morning. The biscuit lady would get there and that's about the time I was leaving.

Speaker 3: 5:12

Wow, that's in high school, so you're up till five a. These are just only on the weekends, or is this on weekdays too?

Speaker 1: 5:17

No, just on the weekends. And then I would go home, I would deliver papers, and then I'd sleep until whatever. And wow, get up and do it again.

Speaker 3: 5:25

Yeah, I think it's interesting because, at the end of the day, success is just a combination of nature and nurture and you just need both. And it sounds like this. These things obviously taught you like hard work ethic, but you also had a drive. That sounds like it was more nature, right? Not every high schooler very few high schoolers will work till five in the morning and then go do a paper route, so do you think that was just something that you were born with? Maybe no.

Speaker 1: 5:47

I wouldn't say that First. Fortunately I had an older brother that had the paper route before me, so that helped me see that and I'd go. I wanted to go with him. You know Sunday mornings, the papers are really heavy back then and he would need help, but I actually wanted to go. I thought it was fun. Plus, we'd always stop at the donut shop on the way back, get ourselves a honeymoon or something like that. I really liked that.

Speaker 1: 6:10

My dad was very much into pushing work ethic. He was like a general manager for a drugstore chain and this is really before Walgreens was big. Super X was probably the biggest drugstore chain in the nation and his small company that he was managing that was owned by a pharmacist, got bought by Super X. And when he was opening up a new store and I was I don't know 10, 11, he'd have us stock the shelves and do all this work and then we'd get to pick out one candy Like here's your pixie sticks for 12 hours of probably yeah. So I had a lot of nurture. I can't say any of it was nature, I think that were maybe it, but the drive and the initiative was always around me.

Speaker 3: 6:58

Yeah, I love that and it's.

Speaker 3: 6:59

I think, too, that A lot of times we think back that these things are like seemingly insignificant, right, whatever, like the grades that we make in middle school seem so irrelevant now as you get older because they didn't have an impact on it.

Speaker 3: 7:11

But I think that the important thing is what they make out of you, right, it's like the character shaping which actually does mean that they're extremely important, and so, unfortunately, not everybody like gets a chance to start early off, like making those entrepreneurial decisions that can reap fruit later on. But I think the beauty of it is that you're never too old to get started, and so that's why talking about these types of things hey, yeah, I didn't have that growing up or I didn't get that right. I didn't get that opportunity or the set of circumstances, but this was the mentality that I had at the time, and I can replicate that you had at the time, and now I can replicate that mentality at this stage of my life. Right now, like nothing is holding back, and so I think there's like a beauty to always being able to reinvent yourself if you choose to, and that's one of the privileges that we have in our modern day society.

Speaker 1: 7:54

Yeah, and I really wish that I could instill that into my young daughters and continue to push those types of that work ethic. And it's not all about, it's not always about getting a job when you're young, it could also be sports. I just happen to not play sports. When I was a kid I wasn't really into it. My parents weren't into it, so I didn't know much about the whole sporting world.

Speaker 1: 8:17

But one of my daughters is in competitive dance and she has to be at a certain place at a certain time and be ready and be prepared and perform and in some cases outperform, so that she can feel good about her dance. But also she's got to like, whether she's in a duet or a full group, she's got to perform for those folks too and she's got its teamwork. My other daughter now she was on the swim team for a while and now she works at. She decided not to continue sports and so we're like okay, then you got to get a job and she works in an outboard and it's incredible like the amount of business that place has. The drive-through is from.

Speaker 3: 9:00

Vimeo Chick-fil-A just crushing it.

Speaker 1: 9:02

Crazy the amount of business that they have. So there's never downtime, constantly working, and it's a great experience for a young kid to have.

Speaker 3: 9:13

I love that. So how did you get involved in the dental world?

Speaker 1: 9:18

Yeah. So I joined the army when I was 19 years old and when I joined you have, my older brother had joined. My dad was in Air Force when he was younger too. So it just seemed okay, this is what we do. My older brother was reserves and went to college during that and I really thought, hey, I want to do active duty, I want to. It wasn't necessarily about serving my country, it was more about let's see what this experience is going to be. And my older brother called me the night before that I was going to sign up and you pick your job. And he said, ray, it might sound like a lot of fun to drive a tank, but what are you going to do after you get out of the military with tank experience? So, figure out something that's more into the medical field. And then he added plus, you get to go to San Antonio and you'll have a really good time down there. So I thought, okay, that's cool. Never been to San Antonio.

Speaker 1: 10:15

And the medical thing made sense to me. But every time I saw medic, it always had the word field in it. And I was a Boy Scout and that was my least. Favorite part was camping. And I'm like I don't think I want to be out in the field. So dental and I'm like I bet that's inside. And so I picked that, not really knowing it was medical but not really knowing what I was getting into. I'd never been to the dentist ever. That's crazy. At 19 years old I'd never been to the dentist and I was a little nervous the first day that when I first got to my first duty station and now I'm going to be assisting dentists and I've never even had an exam and they gave me a dental exam no cavities. I'm like okay, I guess that worked out.

Speaker 1: 10:59

My parents saved a lot of money.

Speaker 3: 11:00

Yeah, you got lucky. Genetics, at least when it comes to teeth. I had six cavities as a kid. I just I couldn't get over it. It turned out well, okay. So then you're a dental assistant essentially. Is that what you?

Speaker 1: 11:11

said, I was a dental assistant and I won't say that I loved it right off the bat. I enjoyed being around the doctors, I enjoyed learning. But I did have one doctor that was just like oh, don't go be a dentist, you should be a dermatologist. You just pop pimples all day. It's got to be, it's got to be way better than doing this. And that was the only dentist in my entire career that was negative against dentistry and it was the one I ever met. That's crazy. If I would have just listened to him, then I would have stopped or I would have not even determined that this is how did you?

Speaker 3: 11:48

what made you decide not listen to them?

Speaker 1: 11:50

There was other dentists in the clinic.

Speaker 3: 11:52

So just one. That was one data point. I have many.

Speaker 1: 11:55

Yeah, and the orthodontist really was the one who who showed me an appreciation for dentistry, because I did not have these straight, beautiful teeth that I have today. At the time, while I didn't have cavities, I had some pretty good cross bite and pretty crooked smile, and he put braces on me when I was like 20. So then of course I was like I was 14. And it really changed my life because I used to be conscientious of my smile, I used to think about it my, my jaw was my, my facial structure was a little different than it was because my palate was so narrow, and so, by all the work that he did and the oral surgeons that split my palate and opened it all up, changed my life. I smile a lot. I love it.

Speaker 3: 12:40

I have a similar story too is I think I was like 16 when I got braces. My teeth, like, weren't that bad but they weren't that good and I like I was very self conscious about getting braces and like how I look, and I finally just decided to do it because, luckily, everybody, a lot of kids my age, were doing it and man, when those things came off, I was the happiest kid, like my teeth felt so smooth and I was so proud of my smile and so, yeah, I just remember licking them and they were feeling so smooth and smiling in the mirror and I was so happy that I ended up deciding to go ahead and go through with it, because there's a point in time where I, like really was against it.

Speaker 1: 13:14

Wow, and as a child, for you to even be able to make that decision, and I made it as an adult. My parents weren't anywhere near and the first orthodontist that was in our clinic he wouldn't do it. He was like I only treat the soldiers, kids, I don't. But then whenever he left and the new one came in, I went. I became really good friends with him as fast as I possibly could.

Speaker 3: 13:38

Yeah yeah, smart, smart. It worked out, so yeah how long were you set as army right active duty? How long were you there and before you got out and then were you directing the dental? Or because I remember talking about, like your, the bike shop briefly, oh yeah yeah, that, yeah, I'll get to that.

Speaker 1: 13:55

So I was active duty for six and while I was active, while I was doing active duty, I also went to school. I did as much night school as I could and then I got very fortunate when I went to North Carolina. I worked in the oral surgery clinic at night so I could go to school during the day. So the Army was really flexible in a lot of things and they also sent me to hygiene school in the middle of that six years. So when I got out I was. I was able to go back to college with a whole lot of school under me and I only had to do two more years to get my bachelor's and the goal was to go to dental school. I had my degree is in biology and when I applied to dental school it just didn't go the way that I thought it would go, and so I had. I had now a degree in biology, which wasn't necessarily a great degree to do anything with. I worked in a genetics lab for about three months and I don't even know if I worked that long and I found that waiting tables was more rewarding than working in a genetics lab, and then I ended up applying to an ad that was in my hometown of Springfield, illinois. I was living down in the St Louis area and the ad was so cleverly written that I couldn't tell what I was really applying for. But I knew it was a dental office and it was just a really smart, funny ad and I thought this office is going to be fun to work at it. It's a zookeeper needed. And then it talked about all the crud that goes on in a dental office and I'm like this, like fun. So I applied to it, not knowing the office, not knowing that it was part of a bigger organization, just thinking it was a regular dental office. I was like I can work there and then reapply to dental school and I started working there.

Speaker 1: 15:42

It was a Heartland office At the time. They had 30 practices. This was one of the first ones that they had and I'd had two general dentists and orthodontists and a oral surgeon. I'm like I've done this, this will be fun. And I started working there at the front desk and the same day I started, another person started and we were the only two front desk people, so nobody like. They fired everybody the Friday before we started and we and I'll never forget. Mary and I were really good for each other and we just had to figure it out. I had dental experience and she had worked in a car dealership before, so she had customer experience. But, yeah, so very interesting way to start my career.

Speaker 3: 16:27

Yeah, they'd put your feet to the fire straight away, right away In non clinical dentistry. Okay, so you started out front desk and then how long were you working front desk, like how did you work your way up?

Speaker 1: 16:40

If you will, and I tell this to all of my team members because they're like I, want to be like you. Everybody wants to do this kind of job because it looks glamorous and fun, which it is. I wouldn't say it's glamorous, but it can be fun.

Speaker 1: 16:54

It's a little fun sometimes, yeah, but are you willing to do all the things that I did to get here. That's the hard part. And so even to be selected, you have to be the best at what you do and if you're a front desk person to get into the management side of it, you got to be the best at what you do and you got to put yourself out there. I'll make sure that I tell every single person if you want to grow in this company, there's a spot for you. Be the best at what you do right now and make sure you let people know that you want to grow. Those are the two things that you can do. Yeah, but I did. I was as good as I could possibly be and I think my work ethic just from my childhood, and then the people skills that you gain. And then I learned as much as they taught me that I was so fortunate that this was the first dental office outside of the military that I was in, because they taught the PNL to your front desk, your dental assistants. They taught that. They taught me benchmarking KPIs not just me, everybody. So we would get these benchmarking reports, we'd get the PNL and some people would just they were faxed to us. Some people would just not even look at them throwing the trash, not really care.

Speaker 1: 18:09

I was interested Because I saw this was hey, this isn't in the city of Springfield. If you wanted a job, you could go and get a state job. 50% of all the employees in Springfield were state workers. Wow, and I do remember having conversations with my parents where they're saying things like oh yeah, go be a state worker. You get great benefits and you don't have great benefits, and they don't offer this and they don't offer that. And I'm like I'm not going to have a career with the state, sitting under fluorescent beams and having everybody. That's just about as Melancholy as you can get.

Speaker 3: 18:45

Yeah, off character on the worst, the DMV at the was it monsters or whatever, our animals or whatever, like that one animation. Yeah, there's not a lot of passion, not passion for working for the state, and that's for sure.

Speaker 1: 19:00

Yeah, and the way that they put things in front of you. They want you to learn, they want you to grow, and so I've made sure that I do the same thing for my team here.

Speaker 3: 19:09

So how did that get you to lone peak? And what? Where was one peak when you started with them?

Speaker 1: 19:14

Yeah, lots of steps to get here, so I'll leave all of those out. And obviously management, regional management, director roles, vp roles and even with with AJ and and his brother Mike, up at decision one, dental. I was with them for four or five years before coming over here. But here's what happened two founders, two private or pediatric dentist founders, brought 40 offices together and then packaged them up and sold them to, or sold the management part to, private equity. And that sponsor brought me in within the first year and oh was, hey, it looks like you worked with Fartland during the beginning and then you came on to decision one during their beginning. You've either seen it or done it, so why don't you figure out how to do that here? And so I gave them my hundred day plan before they hired me and they thought it made sense and I executed on that plan. He not only took the offices that we currently had and put them on all in the same platforms and worked on same-store growth and doing all those things, but then we had to build out more practices.

Speaker 1: 20:27

Some people might think going from 40 to 70 in a six-year period, that's not a very huge growth Trajectory, but you got to remember it was 40, with zero management, nothing in place. Your first two years is putting it together and yeah, well, those things out. And then, of course, you throw a global pandemic in the middle of it. There's not a lot, and some people really capitalized on it. We were not one of them.

Speaker 3: 20:55

Yeah, yeah, some people did. Some people capitalized on their interest rates. Just try to play the arbitrage play, and that did not work out right. If you're not doing any value at now, a lot of those people are in bankruptcy or in out of the covenants, at least with their banks. And yeah, so it was a risk and paid out for a little bit of people, but not everybody, that's for sure. But let's see what about. Just because I think, like what we're talking about off-camera, you'd essentially come on after they had gotten PE and then you're going through this for the first time with BlackRock. How did it go? What did you learn during this process of recapitalization you might want to share with others?

Speaker 1: 21:31

Yeah, number one I learned more about my company than I ever knew, and and as the leader of the company and the person that came in With 40 offices, you think I'd know every single thing, but I really didn't. There are a lot of things that really were eye-opening, that were Fortunate to learn, because then you can fix those things as you're going to. For example, learning your turnover. We had not really put together turnover reports at the level that we probably could have been, and then once you realize, oh, this isn't just what we think is happening, this is what's actually happening and it's worse. So what are some programs we can be putting in place? Because I don't want to go in front of somebody six months from now when we're doing our management meetings and talk to them about how Bad our turnover is and learning it for the first time, now that I know it, I really want to make a difference now so that we can be showing what, not just so we can show what we're doing, but so we can fix it. That that was pretty incredible.

Speaker 1: 22:34

But also learning things like why do I have turnover in this location or this region and not necessarily in this region, you feel this? Or why do I have turnover and an associate doctors at a much higher level than I do in my owner doctors? The answer is should be obvious. So if that's the case that my owner doctors stick around longer, why is that? Is it because they feel more autonomous? Is because they make more money? Is it because what? And so you start to look at all right, it is those things. Now, how do I make more doctors owners so that I have less turnover in my associates? So it's a lot of things that you learn about your company. That's first and foremost. The second thing is just having all of your stuff Ready, like we had contracts on all of our doctors. We think we have contracts on all of our doctors, we think we have signed contracts on all of our doctors, but we think it's like how do we have 160 doctors and we don't have a great repository where we know every single thing about every doctor? That was also eye opening even leases and how many of them need assignments and all of these things.

Speaker 1: 23:52

So getting all of those things put together. So there's so many technical parts of it, okay. So that's the easy part, right. What's the most difficult part? And I asked Pat Bauer, I asked AJ, I asked a few other people that I know that have gone through it and they will tell you and I'm gonna say the exact same thing. It's running. It's working two full-time jobs at the same. So you still have to make sure that your company is successful, especially through this process. But then you can't take your eye off the ball while you're focusing in on all the management presentations and all the preparation that goes behind the scenes and all the things we have to do with our owner doctors and everything else that's going along. That has to be done for the transaction to be successful and still be a part of doctor recruiting and still be a part of acquisitions and all these other things and try to manage all the practices that we currently have. It is a lot.

Speaker 3: 24:59

Yeah, I'd went through a similar thing on a much smaller level, but I had some fitness centers in Orlando and I sold those back in 2019, like right before COVID. But I remember during the process of selling them, it was based on your rolling EBITDA, like your rolling profit margins, and so it was like so hard and so stressful to make sure that we were hitting those goals because we had a buyer, we had a price lined up and agreed on, and but it takes forever, and so you've got to maintain those profit margins, like every single month, because if you have one dip in a month that throws off your last 12 months rolling average and then they're gonna renegotiate the price of you or, even worse, back out of the deal altogether. That's the worst thing that could happen. And gosh, like that was some of the most stressful time of my entire life was trying to keep the performance up of all of my locations while also trying to vet and sell to these buyers.

Speaker 1: 25:47

Yeah, first of all, great foresight on the sale time.

Speaker 3: 25:51

Yeah, I wish I could say I planned it, but I just got lucky.

Speaker 1: 25:54

But if you end it, that means you planned COVID and I don't think you'd be super happy with that.

Speaker 1: 26:00

Yeah, so you're absolutely right. And then we're also you're in a kind of a time period where your current sponsor really doesn't want you to do too much for the benefit of the company longterm, but not really investments in things that are going to be a two year investment. A five year investment Meaning like training programs or service model rollouts and things like that, which totally understand it. So then, when the new person's identified, I'm so pent up with excitement on all the things that I've been wanting to do for the last eight months or so. And then they're just like oh, we just bought this thing, man, hang on, All these initiatives like where were you on this six months ago? It's like couldn't. So it's just, it's this pent up excitement, pent up demand of what you want to do and how you can carry the company further, faster, and all the excitement about having a new sponsor with a new goal, a new outlook.

Speaker 3: 27:01

Yeah, that's cool. So again congrats, because I know you guys were one of very few dental groups that had transactions last year. Okay, so let's just talk a little bit then about what a private practice or a small group could do to make themselves appealing to somebody like yourselves if they're looking to sell.

Speaker 1: 27:19

So conventional wisdom would say hey, come to me and I'll talk to you and I'll be your buyer. You don't need to go through a broker. Or you don't need to go through an investment banker or anything like that and not all brokers are created equal but I will tell you that you can do a lot on your own. It would be helpful in some ways to seek out some kind of counsel or some kind of help, and here's why they're gonna tell you that. And when, if you're a private investor or a private practice, you've got one doctor, two doctors, five doctors, whatever it is, that you're all of your documentation right, have all of your financing, but make sure that you've got something that's successful. Austin you just said your trailing 12 months is usually what it goes on, and that's true. We're still gonna look at two years ago and three years ago. We're gonna know that there's some disruptions from global pandemics et cetera, but we're also not gonna look at something that the EBITDA was sitting at 100,000 two years ago and now it's at 400,000.

Speaker 1: 28:26

Like okay there's probably a reason, but those reasons just don't make a lot of sense. The other thing that an outsider can help you with is fixing some things that you need to fix in advance of. You don't wanna go and sell to somebody and then have a whole bunch of things that they need to fix. If you want a premium price for your trailing 12 months or whatever it is, if you want a premium price, we shouldn't have to go in and eliminate staff or eliminate unnecessary or unreasonable benefits. Know what is normal and you're not gonna know what it is because you're the only normal. So that's where, I hate to say, brokers can help you, but they will know.

Speaker 1: 29:18

This is what a P&L should look like. Your revenue, your percentages of revenue for Dr Comp should be this. Your percentage of revenue for Team Comp should be this. Your benefits, your occupancy, all of these things should be here with a 20% margin, and lower than that, you're gonna get less money, and higher than that, you're gonna get big questions. So those are the kind of things that I would recommend for a private seller.

Speaker 3: 29:45

Okay, yeah, so, because the alternative is they're not using a broker, they don't really have a baseline of what's compared to. So they're coming in and they're saying, hey, our doctors are only 10% of our expenses in this category, not knowing, industry standard is 20, like you talked about. And then now you've gotta spend a lot of time figuring out oh, they actually had some corners here or did some accounting here or whatever, and the broker is saving both people some time.

Speaker 1: 30:11

You know, what we find in those situations is, a lot of times the doctor will not have their associates credentialed with all the payers and they will run that through themselves, which for some states is completely fine. For some payers it's completely fine. So I'm not even going based on the legality of it. I'm just saying it's hard to track what these doctors were actually producing, and so it may look like they're underproducing and have really high income compared to that or that they're overproducing and they've got low income compared to it. It just those are the kind of things that somebody will be able to point to, because for us to go and purchase a practice like that, a, we need indemnities from the previous and, b, we need to know how much is this doctor actually producing and it does their pay line up properly, especially if they're just getting daily guarantees.

Speaker 1: 31:05

And then it becomes a new risk. And how am I gonna solve that risk? Greater hold back? I'm gonna solve that risk with smaller purchase price and maybe a bonus at the end of it if we get a certain EBITDA, which is basically a hold back. Every risk is gonna have its way of resolving, and that one is one of those big risks that you just, you just don't know. Until you credential them which could be three to six months before that's all finished, before you solve for that problem and find out what it really truly is and if they really they still wanna sell, at this point we might not be the buyer. So just those things that somebody else can point out to you when you're in there in early stages, so that you don't get far along with. And that's why I said earlier not all brokers are created equal, because we've gone through that where a broker didn't have that information for us and then we get stuck to a point where we're like I don't know if I wanna keep moving forward.

Speaker 3: 32:08

That's good, all right. And then what about? Let's compare and contrast the process of starting your own DSO versus selling to a DSO. Like, maybe you've got one location and are five or 10 or 13 and you're debating okay, how do I grow, how do I scale, how do I become the next Heartland? Or do I sell at this point, what's? Do you have any advice for that?

Speaker 1: 32:33

Yeah, I do actually. So there's a few things that I would wanna tell. You is number one that not every DSO has to be a Heartland or even a loan peak. We're not the largest by any stretch of the imagination any stretch of the imagination but we are pretty successful in our size. But it's really more about creating having the experience and ensuring that the practices that you have if you've got five, your cash flow as a CEO or the owner of that, your cash flow might be way better than if you have 10.

Speaker 1: 33:10

Because when you have five, you might be that guy or that gal that can manage all of those things with your phone, with your presence and maybe with one other person, like a regional type manager, and you don't have to have a marketing team and you can outsource your IT and you don't necessarily have to have a huge finance. You can still do that through a CPA. But as you grow from five until 10 to 10, you start to recognize the need for a procurement person that's maybe doing that, plus they're doing facilities, plus they're doing so they're wearing some more hats, but you're adding overhead. You may go, okay, now it's time for a CFO, and then you add overhead Now I need a regional manager to manage these five, and a regional manager Now I need to have somebody manage that person. And you just keep adding more and more overhead and your cash flow from 10 offices because it's harder to manage maybe lower than your cash flow from five, and but the value of those 10, maybe more than the value of those five what is it that you're trying to accomplish? If you just want to get a group together to sell then five offices, it really start to look at how much money do I have to have? That's gonna make me feel like I don't have to work ever again. Is that 10 million? Is that 20 million? Is that four? I don't know what that answer is, but you need to know that. And then you need to know what's my value of these. Take away all the debt, how much am I gonna be able to walk away from? Because if you have five and you're doing fine and you can sell those for, let's say, $10 million, you had five more and now you can only sell them for 15 and you got $10 million in debt. It just doesn't necessarily help you by adding all that overhead and costs and everything else associated with it.

Speaker 1: 35:06

Now, if you say I have a model that's really compelling and I have a way to keep doctors and recruit doctors because that's the hardest part Now these two things married together, create a really compelling business plan that a lot of people would like doctors would like, patients would like and investment firms would like, and whether that's five offices, 10 offices, 15, 20, then you're building out a company to support that business plan or that service model that you've developed and that ability to bring on doctors that you've developed. You can do that. Then why stop and just sell to another DSO? Or why stop and 100. Just make. There's so much opportunity out there with only 15, 18% so let's just say 80% fragmentation. You probably know all the numbers for the market cap. I don't know. It's probably 7 billion or something crazy like that. So don't stop.

Speaker 3: 36:20

Yeah, no, that's great advice. I know we're coming to the end of our time, so two questions package in one, maybe. First of all, like what's on the horizon, what's next for you guys Now that you've got this new massive sponsor? And then is there anything that we didn't cover that you'd like to address before we wrap?

Speaker 1: 36:36

Yeah, I'll do what I wanna address with you just because I wanna thank you, austin, when we were together in New York, first of all, it was really fun going to that play. Yeah, back to the future, that was awesome.

Speaker 3: 36:48

That was a good picture.

Speaker 1: 36:49

But the thing that I've listened to now every single week is the all-in podcast Nice. That is so good. When Dave Stacks speaks, I just I don't know. I don't know if it's his voice or his intelligence or the rain man that he is, but it's just.

Speaker 3: 37:06

I love that podcast, you know what? Yeah, I love how much they disagree too, and sometimes like they disagree. It's a little bit awkward for me and I'm like guys just be nice to each other. But I think that's what brings people in and keeps listening, because it's not like anybody's soap boxing maybe it's big, but then they all get to pick it apart, and so you might hear somebody talking like, oh, that's such a good point, like everybody else is an idiot. And then next time we'll go oh no, that's a good point, everybody else is an idiot. And so I find myself constantly leveling up my level of thinking by hearing what they have to say.

Speaker 1: 37:31

Yeah, I thank you for that. Okay, oh, yeah, my pleasure. So that was what we didn't. We probably wouldn't have gotten to, but what was the question that you had?

Speaker 3: 37:40

Yeah, any, or what's on the horizon? What's next for you?

Speaker 1: 37:42

Oh, on the horizon thanks, yeah, so we want to grow. It's an impact opportunities fund and, as most people know, our company, we treat the underserved, so it's kids. It's in markets that people don't want to necessarily be in, whether that's the Medicaid space or even some of our geographies. So, figuring out ways to get doctors into geographies that have a lot of need, there's not a lot of need and there's good need in Denver, but a lot of people want to live here. So if you've got the competition and you are great at treating kids, then this would be a great place for you. But where it gets harder is in in disparate places in, let's say, south Carolina or Georgia.

Speaker 1: 38:26

And Arkansas and then like that, arkansas, yeah. And so we want to be able to capture that, that grouping of children that don't that have to drive two hours to get to a place or drive an hour to get to a location, that we'll see them and with our kids' experience service model, we are there treating. We're not in a clinic based environment, it's a practice based environment. Our doctors are owners, so we know when they come into our practices, our doctors are giving them great quality treatment. Our team members are trained on the kids' experience service model so they're getting a good experience. At the same time, cause we know that it can be challenging in that environment to have a great show rate, so sometimes they all show up at once and sometimes nobody shows and it just can get. It can get.

Speaker 1: 39:16

So you have to be able to still create a good experience with the volume that's coming through the door, and so our goal is to continue not only with what we have and growing those and providing new services like orthodontics, but also to be able to go outside of our current geographies into areas that we know that there's a lot of need, and so the impact opportunities fund is gonna help us do that. But before we can even do that, I can't go into some of these places in rural Tennessee unless I have a hub of places where people wanna live, so like Memphis or Nashville or something where I could group four, five, six offices together and then you can create a hub to where we can go out to some of these other areas.

Speaker 3: 40:03

Are you speaking mainly in terms of DeNovo's in these areas, or mostly acquisitions?

Speaker 1: 40:07

We might have to do DeNovo's. We might have to do acquisitions, but mostly acquisitions to build out our network and then DeNovo's to build out the community service.

Speaker 3: 40:17

That's great, Okay, and anybody who wants to reach out and learn more about what you guys are doing is there what's a good resource for that?

Speaker 1: 40:25

Yeah, I mean just go to our website, lonepeakdentalgroupcom. You guys, most everybody now knows me in the industry, so it's not hard to get my phone number. It's not hard to text me or email me, but you can just reach out directly to my email. It's Ray at lonepeakdentalgroupcom and I speak with the folks with DEO. I do a mastermind group with them. I also do other such events. Aadgp is coming up. I'll be at that event speaking as well. So lots of good things.

Speaker 3: 40:57

But what about AADGP? All right, that's done for everybody.

Speaker 1: 41:01

Yeah, so helpful helped me in my career when I was young and I still feel like I'm young. I still feel like I'm in my 30s, but I love helping people get to the next level and I love chatting with people Any type of anything you're looking for. If I can be a resource, I'm happy to. If I don't know, or if I'm not an expert in that, I'll tell you right away I'm not your guy, but maybe I can push you to the right person.

Speaker 3: 41:29

Yeah, I love that. Hey, Ray, again, congrats and thanks so much for your time today.

Speaker 1: 41:33

Yeah, thanks, austin. I always love hanging out with you. Let me know if you need me again.

Speaker 4: 41:38

If you need help finding the perfect location for your practice or you're ready to invest in commercial real estate, email us podcast at leadersreecom reasinrealestatecom, or go to leadersreecom and fill out our form. See you next time.