Medical Millions: The Private Equity Fast Track Revealed

Welcome to another episode of Making Billions, Im your host Ryan Miller and today I have my dear friend Austin Davis.

Austin is an expert in growing massive wealth for his investors in the medical practice space.  Not only that, he runs a podcast in the top 0.5% called Shared Practices.  He has built his dental group starting in 2022 that now already spans 34 locations in 25 states!

What this means is that Austin understands how to build massive wealth in the private equity medical space and is about to show you how to do the same! Making him a perfect example of another fund that won in its industry in pursuit of Making Billions.

Subscribe on Youtube:
https://www.youtube.com/channel/UCTOe79EXLDsROQ0z3YLnu1QQ

Connect with Ryan Miller:
Linkedin: https://www.linkedin.com/in/rcmiller1/
Instagram: https://www.instagram.com/makingbillionspodcast/
Twitter: https://twitter.com/_MakingBillons
Website: https://making-billions.com/

[THE GUEST]:  Austin is an expert in growing massive wealth for his investors in the medical practice space.  Not only that, he runs a podcast in the top 0.5% called Shared Practices.  He has built his dental group starting in 2022 that now already spans 34 locations in 25 states!

[THE HOST]: Ryan is a Venture Capital & Angel investor in technology and energy. He achieved market-beating placement growth in his first 5 years in the industry.

Transcript

Ryan Miller 0:00 
My name is Ryan Miller and for the past 15 years have helped hundreds of people to raise millions of dollars for their funds, and for their startups. If you're serious about raising money, launching your business or taking your life to the next level, in the show will give you the answers so that you too can enjoy your pursuit of making billions. Let's get into it.

Can we just admit that buying a business is a fast track to build massive wealth in your life? My next guest has mastered just that. He is a pro in the private equity space where he's built a massive Dental Group in only a few years giving him and his family life changing returns. So the question is, are you going to start a business or buy one? All this and more coming right now? Here we go.

Hey, welcome to another episode of making billions. I'm your host, Ryan Miller. And today I have my dear friend Austin Davis. Austin is an expert in growing massive wealth for his investors in the medical practice space. Not only that, he runs a podcast in the top 0.5%, called shared practices, he's built his Dental Group starting in 2022, that now already spans 34 locations in 25 states. So what this means is that Austin understands how to build massive wealth in the private equity, medical space is about to show you how to do the same, making him a perfect example of another funds that won in its industry. So Austin, welcome to the show, man!

Austin Davis  1:21 
Ryan, I'd like to say I'm excited to be here, you know, as a fellow podcaster, and also podcast fan and regular listener, it's exciting to be on the show. Yeah. So thank you for having me.

Ryan Miller  1:31 
It's awesome to have you, man. You know, we've gotten to know each other quite a bit over the last year or so. And man, I am so impressed. And the fact that someone in the podcaster, he has also been a fan. And you're like the top point 5%. This is phenomenal to have you on the show, brother. So it's truly an honor on my side as well. But we're not here to talk about me, we're here to talk about you. So you've done some phenomenal things in the medical space. And you know, I'd love just to address the beginners. And you know, we've been beginners at one time. And some days I feel like I'm still learning with for the first time, I'm wondering if you can share some of your advice on building through private equity through medical practices, what's some advice you can share with our listeners around the world on how to win and how not to lose in the beginning?

Austin Davis  2:15 
Yeah, the the medical, private equity space, especially in rolling up practices has been really hot lately. So I think it's attracting more and more attention. And people are starting to get more and more excited about it. And so it's a fun space to be in really, I'm honestly pretty new to it, you know, I started started my own practices and actually sold them to private equity. So I've experienced from the seller side, and now I'm building my own group of practices as well, like you said, we started in 2022, we're in very, very quickly. So we've learned a lot along the way, a lot of things the good way and the hard way and everything in between. So you know, one of the basic principles of how these groups work. So I'm in dentistry, and we're a Dental Group, but it's very similar in the vet space, also in medical to no dermatology and other medical specialties as well. So really, it's an arbitrage game, it's kind of how this got started. So people saw they could go and they could buy a single individual, say, dental practices, and that dental practice, you know, they might be able to buy it for, say, three to 4x EBITA. And at the time, when it first started, say 10 years ago, that was that was the multiples, they're buying them for three to 4x. And then once they that practice was incorporated into their group, so a Dental Group, they call them a DSO. So we'll use that term as a Dental Group, once they're incorporated into the DSO, all the sudden that EBIT does now worth say, 12 to 14x. And so people saw that, like, wow, there's this huge either space, or I can buy this practice, and all of a sudden, it's worth 3x, once it's incorporated into my group. And so you know, over time, the single site multiples have gone up from that 3x to now, you know, say that five to 7x. But still, there's that big arbitrage between that and you know, the DSA multiple is a 12 to 14x. So that's kind of like a high level overview of how the roll ups work in the medical field.

Ryan Miller  4:00 
I love that so So you come in, you buy a single office for, let's say, three to 6x, somewhere in, you know, the, the that range is under 10. You roll it into an existing practice or you that you already have or you're building that together, and essentially through the roll up, you can increase the Exit Multiple, I think you said to like 10, or 15x. So the nice roll up strategy by itself as a value add for our real estate folks out there, right, same value, add property, you buy it at a certain price, you start doing some wonderful things to it, and you get those economies of scale and your valuation goes up. So that's how the wind right so you look for practices that have that three, four, or five, six, even seven acts, and then you start doing a roll up meaning for those of you who are new, a roll up is just combining a bunch of fragmented practices or businesses in any industry. It's a common private equity strategy where you roll these companies together, form a super cord, and then you're good to go. But it's not enough to get some early points on the board. While that helps, you also got to make sure you don't get knocked out of the game as well. What's some advice that you've found with all of you Your experience. I mean, I know you started in 2022. But the fact that you're in 25 states with I think, was 34 locations. And under in under two years, this is phenomenal. This is the power of sometimes we call inorganic growth, basically buying companies and growing that way, you can have massive growth. So it is a huge strategy to go big, really fast. It is capital intensive. But that's not the full story is it? Sometimes there are pitfalls, I'm wondering if you could address some of the early pitfalls that some people doing roll up strategies might face in your industry?

Austin Davis  5:28 
Yeah, there's definitely pitfalls, when you hear something that sounds that good, right, you can buy something and all of a sudden, it's worth double or more, there's obviously going to be some pitfalls along the way, or else everyone would be doing this, you know, the most common mistake that people make. Now, for a while it did work in the, you know, golden years, when this was just getting started, it pretty much was that easy. Now, you know, as more and more people are coming in to buy up these dental practices, you have to be a lot more careful with what practice you buy, and what multiple you pay, and you know what you're doing. And so one of the biggest risks is groups going in, and they're like, you know, what's better than buying a $1.5 million practice with $500,000 of EBITDA, buying a $5 million practice with a million dollars of EBITDA because this faster. And so the risk would that is if this is a really large practice with like one just superstar, high performing doctor, you know, when that person leaves, all of a sudden, you're at risk for the practice decreasing, and you paying this big premium, because the large practice also comes with a premium. So you might be paying eight or 9x. And then the doctor leaves and so then revenue goes down, EBITDA goes down, and you've paid this huge multiple on it, you have a lot of debt. And you can really get in trouble really quickly, especially with the rising interest rates as of late. And so I think that's one of the biggest risks. The other risk is not focusing on same store growth, you know, the private equity buyers are getting a lot smarter. Now, this since the industry is maturing, as far as these roll ups go, and they're getting a lot smarter. And so you can't just buy a practice bolted on to your little group and then call it a day, you really have to focus on same store growth and improving the practice improving the operations and getting efficiencies and actually showing that you're building a real business and not duct taping, you know, a group of just random practice together to go sell them to some unsuspecting buyer,

Ryan Miller 7:05 
man perfect. So when you buy something for a premium, and in our case, these are medical practices in the dental space, when you buy them for premium understand what is the driver of that premium. So I'm sanitized and making it very for multiple classes. But in your case, you're seeing well often the reason why it's a premium, it's a larger practice, but probably there's a rockstar, one person. And if that one asset that's driving the premium is gone. You just overpaid. Now, it's really hard to sell. So as the words of Warren Buffett, I actually got to hang out with him for lunch. And one of the things he taught us was he said I make money when I buy, not when I sell. So overpaying is a way to get knocked out, I believe is what we're saying here is just like if you're paying a premium, sometimes it's worth it. But be very clear on those drivers of the premium. And what is the risk of losing that premium? Because if you buy it at a premium, but sell it at a lower rate, obviously we know not a good situation for us to be in. So really been paying attention to the drivers of that premium. Would you think that's a fair summary?

Austin Davis  8:02 
Yeah, that's right. And to relate it to say real estate, something that more people might have knowledge about. It's kind of like when you go and buy, there's two ways to buy real estate right and buy the property, you can buy the tenant and you have to be careful if you go and buy a tenant. As we've seen with Walgreens recently, you know, they just got downgraded to junk status. And so all of a sudden, if you buy the tenant and not the property, you may not be as happy with your investment.

Ryan Miller 8:21 
Oh man, my sweet, sweet Walgreens, I wish you the best of luck when they pull through this one, you know, okay, so that's, that's incredible for the beginners in the private equity space, really just paying attention of don't overpay. But if you do and you're paying a premium, make sure that you can hold on to that premium. And then also just understand the value add properties is kind of the how we get some of those points on in the early days. But approaching these practices is one thing, but it's also the market that we operate in as well. Let's shift gears a little bit and talk about the market. Talk about the economy. Well, how's the market? What's going on at the market? And where do you see what's going?

Austin Davis  8:57 
Yeah, the the DSO space in particular, is really hot right now. And it has been for about a decade. And you know, I mentioned earlier about more sophisticated actors coming into it now. And so you really have to know what you're doing if you're going to be in this space. But you know, the multiples are holding at that 12 to 14x. And even some are going higher. There's been transactions in the past, say 18, 24 months, one I know at 17x and another at 19x. So these are some pretty hot multiples for kind of what some would consider a boring business. Right. And so yeah, it's a great space to be in right now. Right now, it's estimated that approximately 30% of the dental market is consolidated meaning that 30% is in these DSO, Corporate Group Type practices. And 70% is still private. So there's still a lot of meat left on the bone. You know, I think it's going within the next five years to north of 50%. And I think it'll continue from there. So I don't see this slowing down anytime soon.

Ryan Miller 9:49 
Right on. So the way that I see it is hey, we're not quite it's not quite consolidated, it's only 30 to 35%. Right now we're looking in just a few years to be up to 50 So what does that mean? Means secret's out. But it also means now's the time to do it, it's a great time to do it, there's like you said a lot of meat on that bone. There's a long runway where we can really start bringing in private equity folks and partner with doctors, or maybe like you, they are the doctors. And you can just go out and start building your DSL group practice. I love that, with all of that being said, we know the market, we've talked about beginners, I'm wondering through all of your experience, if you could leave behind just two or three things from everything that you've done, and all this wonderful stuff. What are two or three things that you found that you can leave behind? That would give our listeners who are interested in private equity, giving them a competitive edge? What would you tell?

Austin Davis  10:37 
Yeah, I think something that I've learned along the way, and a lesson that really sticks out to me is playing the long game. So when I say that, I mean, don't try to squeeze out every ounce of goodwill, or every dime, or every thing you can possibly get out of every relationship, whether it's a partner, co founder, and employee or even a vendor, you know, your reputation goes a long way. It's something that you've actually taught me. And, you know, if if you try to squeeze out as much as you can out of every single person, you're going to be known for that, and people aren't gonna want to work with you, they're not gonna want to build with you, you know, it's just gonna be really hard and short term greed is the enemy of long term wealth is something that I have really learned and constantly telling myself and I think, I really think is true.

Ryan Miller  11:19 
Yeah, you remind me of a saying from one of my early professors, his name's Jim Engebretson. So he's a former Wall Street guy, hilarious guy. And this is the same that was saying on Wall Street is bears make money. Bulls make money, but pigs get slaughtered? I don't know if you've ever heard that. So don't be too greedy, right? You can make money in any market. But where you really get yourself in, in trouble, like Austin is saying is don't be too greedy. pigs get slaughtered. And you know, also something that you mentioned that I don't want to let that slide, it was very subtle, but so important. We talked about not trying to squeeze everything out every ounce of goodwill and all of these different things out of every relationship. Well, yes to there's a line, right. So we're there to get some value to run a good business. We have partners, we have investors, and they we owe it to them to have a good deal. But there's a line, I think is what Austin's talking about folks. And that line, I find is straddled very well by a certain kind of leader. And it's a leadership style that I subscribe to, and I'm pretty sure you do too awesome. So keep me honest, we call that servant leadership, or sometimes I call it being a savage servant. Right? So you're a very formidable leader. But you're not a jerk, you're actually a servant. And so often, I'm uh, I'm still recovering executive, I think you're still in the thick of it, you're doing all kinds of stuff, brother. But one of those things is I would just walk around from my team. And often when you have the C, whatever, CFO, CEO, people, people clam up a little bit, their seats, they pucker a little bit, when especially when I was new. And I would just say like, Hey, how are you doing? What are you working on? What do you need to be successful? Do you have everything you need to be successful in helping them understand that servant leadership or being a savage servant, so they know you got the chops, you can get it done, and you can move mountains for them, and you want to. And so when you work in a culture, especially when you're the new, you bought a new company, and now they got to work with you and their work, their use of their old boss, who was their cousin or whatever? And now you go in and say, Hey, do you have everything you need to win? How can I help you? How can I support you, I want to take care of you. And I want to see you when when you start leaning into all of that servant leadership, that alone, I would argue, and Austin, feel free to prove me wrong, that in itself, leadership can add tons of shareholder value, tons of revenue, tons of loyalty, productivity, cost reduction, all from the quality of your leadership. So it's not a management job, where it's trying to get people to do everything you want them to do. It's about getting people to do something they never thought they could. And so bringing that servant leadership and helping people believe in themselves rather than to serve you, My goodness and Austin, you're phenomenal at it. I could just tell that you're a good dude, I'd work for you any day, man. Let me know. So that being said, in all seriousness, so play the long game, I absolutely love that. What else have you found to be helpful with all of your background, all of this experience? What's something else that you found to be supremely helpful when doing these medical roll ups?

Austin Davis  14:00 
Yeah, this one is gonna sound a little unusual. But for me, it has been creating whitespace in my schedule. So if you look at my schedule, you might think I don't do anything, but every single day ends up busy, and I ended up you know, I worked really hard. And so I really like to have plenty of time in my schedule to work on the most important thing. And usually you don't know what the most important thing that day is, until that day comes. And so I really work hard on my schedule, and like I have tons of blocks in my schedule. And it's very strategic. And it's because you know, you can end up with meetings and you know, all kinds of things in your schedule that basically clog your ability to actually work deeply on anything. And so having that whitespace has really allowed me to be more focused on what I'm working on, be more creative and get things done that I couldn't if I had a schedule that was just packed full of meetings or to do lists or other things and so, you know, really just focusing on not having too rigid of a schedule. Anything I'm rigid about is my blocks of like, work time. I'm very rigid about those, but I'm also very rigid about not having them scheduled.

Ryan Miller 14:59 
All right, so I won't text you around dinnertime anymore, I get it. No, I'm just joking. So, so creating that whitespace. And I remember a long time ago, Austin, so many of you and myself, and maybe 1000s of people around the world might have heard of a guy named Stephen R. Covey. And he was phenomenal. And I remember when I was a young guy just in college just get destroyed by the schedule that they put you through, because it was new for me. And I really wanted to do well in school. And so I remember learning and reading, consuming some of that because I was a fan at the time. Still am. I remember one thing he talked about in focus was you never and this is this is probably pretty rigid for you. But he said, the top limit of what Austin is talking about folks, according to another business management consultant, he says you never want to plan more than at most 60%, but preferably much less than that. And it allows you to be flexible. So he said that often, when you have too rigid of a schedule, it can really lead you to stick to the schedule, rather than shift things to address. As you said, Austin, the most important thing, so just making sure you don't have too rigid of a schedule, I love it. And I look forward to that day, my man. So this is good. We're gonna have to talk offline.

Austin Davis  16:04 
And everyone knows when their most productive time is right, you know, whether it's first thing in the morning or late at night, or whatever it is. But being rigid about keeping that time for yourself to work on, like, your deep stuff are your most important thing. Like that's, that's been a huge change in my life that I could never go back without it.

Ryan Miller  16:20 
I love it. And speaking about working on the most important thing, often where I mean, on this podcast, making billions we're talking about what the most important thing often is getting your money, right, working on deals. But what about the person who's working on deals? I'm curious, from your perspective, maybe this is a third point. But from your perspective, how is it not only building a business but building yourself? What have you found that to be useful in your life as you've built a business, but also held your sanity? I know you've your family, man, like me and right, we have other important things that we're also equally excited about, that are not necessarily pursuit of cash, but they're also the pursuit of joy, and happiness, and satisfaction, and ecstasy, and what all these wonderful things that we feel as human beings, what have you found to help bring balance into your approach as you build your businesses?

Austin Davis  17:06 
Yeah, something that I've noticed with a lot of young entrepreneurs, myself included at a time in my life was is you get so excited about building a business or doing a deal or an investment or whatever, you just end up running from thing to thing, and you don't have a lot of focus, and your whole life just gets consumed by the next deal, or the next business or the next whatever it might be. But as I've kind of gone through my journey, realize how important it is, you know, I've got a one and a three year old and a wife. And you know, that is like you can't build a successful successful business if you don't have a successful home life to taking care of your relationships and your kids and your family. And then also just your your mind and your body to. So taking time out. Every single morning, I go to the gym and getting that in every single morning, something I've been doing for 15 years now. And life with versus without, it is so different. And so really just taking care of all aspects of your life and not putting 100% into business or the next thing you're building as it can be successful if other aspects of your life aren't successful.

Ryan Miller 18:04 
Man, I love that, you know, and this is sharing time I'll share with my most of my most productive time is the morning and I use that time to focus on this. And I'd love to hear your perspective. So I focus on mind, body, and spirit. So I've done this for 20 years, I wake up at 5am. And I will meditate whatever that is some people pray to read Bible or holy book. And it's just connecting with the deeper world. But it also helps for me just to be like, oh, yeah, things are actually pretty good. So you don't get caught up on one thing and extrapolate where you connect to a deeper thing. And, you know, regardless, you have good time, you have high times low times, but either way during that time focusing on your mind and just reflecting on what's going on. So many profound lessons and strategies come from those early mornings at 5am. But I'm not done. And then we go to the gym, we exercise, take care of that really get the blood pumping. And that's great for stress relief if you have that. But also he's just taking care of the temple man. And then finally, with the spirit as well through that meditation, and then you're reading books as well. So educating your mind and using that time, not necessarily Harry Potter, maybe we like that. But I'm using it to actually build skills, right. So often I'm reading back like textbooks from grad school, whatever that might be negotiation, marketing, it doesn't matter. There's an endless supply of books, which is you could see you can also organize and rainbow patterns behind you on your Podcast. But in all seriousness, building that and making sure that not only are you building a business, you're building the person who's building the business. And all of that can come together. And too often in an episode just a couple before you. We had Katie Richardson she often said when building her business in 26 countries, very often you're like you've you've got this bow and three arrows and nine targets. So very often as an entrepreneur, you got way more targets and you have arrows. And so one of the best ways to do it is align multiple targets so that you can shoot one arrow and actually and hit it on two or three targets. And so a lot of how do I build my business in a way that also builds my mind and my body and my spirit. So As you start to combine it all into one impact and achieve it to a common purpose, very often, you're no longer feeling like, well, if I'm gonna build my business, it means I'm gonna get chubby, or I'm gonna lose my marriage or what? Not. Right? That's super common, and it's not acceptable to me anyways, and to you, and anyone listening to making billions probably had some grit, they were looking to get things done, right. These are people that are okay, failing at anything, I get it, I get it, folks, Austin gets it, I get it, we all get it. But if you align yourself and make sure you have that magic morning, or whatever it is, it doesn't matter. But don't ever let your foot off the gas when it comes not just building your business, but building your family built in your soul, your mind, your spirit, everything, you can actually align a lot of these things and just build a life that contributes to overall well being. Would you say that's a fair summary?

Austin Davis  20:47 
Yeah, I think that's a perfect summary. And I'm, I'm a huge navall Raava Khan fan. And so he has a quote that I'm sure I'm gonna butcher it. But it's something along the lines of don't go try to fix the world if your family is not right. And so it's like, take care of yourself, take care of your family, take care of your personal life before trying to fix the world or solve the next big problem or build the next big business.

Ryan Miller 21:08 
That's right. I mean, we could talk about that. But I want you all to just pause and listen. And remember what Austin just said, it does, you know, good, as you know, good to get in the world and lose your soul, or your family, or your health, or your mindset, or your happiness. So this is very serious stuff. And I know you could tell we at Austin are good buddies, and we're smiling, and we're joking around. But this is really good stuff. And, and truly, if we can help each one of you listening to make sure that you built yourself as you build your business, you're going to really enjoy this process. So as we wrap things up, awesome. Is there anything else that you would like our fans to know anything at all?

Austin Davis  21:41 
Um, yeah, I mean, I think if you want to listen to more of what I have to say, especially about the dental space, you can check out shared practices.com We have quite a few podcasts on everything from very dental specific, which probably isn't an interest most of this audience. But we do have a podcast where we talk a lot about like inside baseball, behind like the DSO industry. And as we're building our business, it's not ready. They're not specific. It's just us talking about building our business. I'm on there sometimes, but it has more regular co hosts that aren't me. And then if you want to hear me talk about crypto, which is my other passion outside of dentistry, you can listen to me at Doctors of Defi. So yeah, I'm really into podcasts, some that are serious on that are kind of fun. So that's it.

Ryan Miller  22:17 
Awesome, Shared Practices, that's the one that's in the top point 5%. That's all good. A lot of the stuff we talked about today. And then doctors have defi cool name, by the way. So that's why I'm on crypto. So just to summarize everything, learn to play the long game, don't squeeze every little ounce out of the short game, make sure that you dive into that servant or that savage servant leadership. The second thing that Austin really talked about, is make sure that you don't plan such a rigid schedule that you have the ability to flex as your day flexes as it changes. If you have a dynamic business or font or just your life. It's good Austin's like, you can go around 20%, you can go up to 60%. Typically, no more than make sure you have the ability to flex in your schedule so you can be quick to adapt. And then finally, when you're building a business, also make sure that you use this time in your life and in your career, to not just build a business and let everything else fall by the wayside. But really do your execution, right. Do it in a way that builds your mind, your body, your spirit, and of course, your money. You do these things, and you too will be well on your way, your pursuit of making billions.

Wow, what a show. I hope you enjoyed this episode as much as I did. Now if you haven't done so already, be sure to leave a comment and review on new ideas and guests you want me to bring on for future episodes. Plus, why don't you head over to YouTube and see extra takes while you get to know our guests even better. And make sure to come back for our next episode where we dive even deeper into the people the process and the perspectives of both investors and founders. Until then, my friends stay hungry. Focus on your goals and keep grinding towards your dream of making billions!