This week, the Dental Amigos welcome Joe McGonigal, dental industry veteran, sell-side advisor, and Partner at DDSmatch. With over 20 years of experience, Joe specializes in guiding dentists through successful practice transitions across the Mid-Atlantic region.

In this episode, Joe shares his journey from broker newcomer to trusted advisor, and dives into the evolving landscape of dental practice valuations, the impact of DSOs, and the critical role of clean data and strategic guidance in closing high-stakes transitions.

To learn more about Joe McGonigal and DDSmatch, visit ddsmatch.com or reach out to him directly at jmcgonigal@ddsmatch.com.

Listeners who want to reach Paul can do so at Paul@DentalNachos.com and those who want to reach Rob can do so at Rob@RMontgomery-law.com.

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FULL EPISODE TRANSCRIPT

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Bumper  

Welcome to the Dental Amigos podcast with Dr Paul Goodman and attorney Rob Montgomery, taking you behind the scenes of the dental business world, all the things you didn't learn in dental school, but wish you had Rob is not a dentist, and Paul is not a lawyer, but since Rob is a lawyer, we need to tell you that this podcast is for informational purposes only and shouldn't be considered legal advice. Listening to this podcast does not and will not create an attorney client relationship, as is always the case. You should formally consult with legal counsel before proceeding with any legal matter. Learn more about the Dental Amigos at www.thedentalamigos.com. And now here are the Dental Amigos.

Rob Montgomery  

Hello everyone. I'm Rob Montgomery, and I'm joined, as always, by the Head Nacho himself, Dr. Paul Goodman.

Paul Goodman  

Great to be here, Rob.

Rob Montgomery  

It's good to see you, Paul, as always, and welcome everyone to another episode of The Dental Amigos. Now, Paul, as we know, in the world of dental practice brokers, there are good ones, there are okay ones, and there are some not-so-good ones. That is true. Today, we've got a good one—someone who we've both had the pleasure of working with over the years—our good amigo, Joe McGonigal. Joe McGonigal is a partner at DDS Match and a dental industry veteran with over 20 years of experience in the dental industry, doing various things supporting dentists in the dental practice world. And since 2018, Joe has focused exclusively on helping dentists plan and execute successful practice transitions in both doctor-to-doctor and DSO affiliation transactions. As a sell-side advisor, Joe helps clients maximize practice value, identify carefully vetted and qualified buyers, and efficiently manage the transition process. Joe and his partners, Bill Coates and Kevin McGonigal, do an outstanding job for their clients, and their crew covers the Eastern Pennsylvania, New Jersey, Delaware, and Connecticut markets for DDS Match, which is a national consulting and brokerage firm. And now, without further delay, here's Joe McGonigal. Welcome, amigo, and thanks for being on the show.

Joe McGonigal  

Great to be here, Rob and Paul. Appreciate you having me. And I remember—I don't know—probably six, seven years ago, when I was starting my entry into the broker world, it was The Dental Amigos podcast that I learned a lot of the ins and outs of what I was going to need to know to get started with brokering.

Paul Goodman  

We're doing the work of the Lord. G.B. Black—that's a famous dentist.

Rob Montgomery  

I love the plug, Joe. Even if that's not true, I appreciate that you say that.

Joe McGonigal  

It is true. It is true.

Paul Goodman  

So Joe, we start with a hard-hitting question. You know, if we were near where you live, where would you want us to go for nachos, and what is your favorite topping?

Joe McGonigal  

Well, you know, that's a trick question. I am from Philadelphia. You are from Philadelphia—you and Rob—and I've listened to this enough to know there's only one reasonable answer to get out of the gates here and into your good graces, which is El Vez. That is right—with the trick question.

Paul Goodman  

For those of you listening—success—you might be an expert on you, but if I am on nachos, one of the most frustrating parts of nachos is when it's just a big mound of chips. And El Vez serves theirs on a pizza pan, which is just brilliant. So all the toppings are equally distributed, so both the quality and presentation is off-the-charts awesome. So thanks, Joe.

Rob Montgomery  

So Joe has the right answer. Yes, that is the right—not that there's a wrong answer for the nacho gotcha question—but there's certainly...

Paul Goodman

I like all nachos. Those are my favorite. Thanks, Joe.

Rob Montgomery  

Hey Joe, so you know, we're going to cover some issues and items today—things that we all deal with in the practice transition world. Paul, as a dentist and former broker, and obviously, we work together on deals for clients, and I talk to clients on a regular basis. And so one of the sort of holdouts from yesteryear—how we value dental practices and look at purchase prices—especially in dentist-to-dentist or doc-to-doc deals. You know, people really want to focus on: "What percentage of collections should I be selling my practice for?" And I think that that sort of holdover is like—there's a lot of misunderstanding and misconceptions with that—as to what it is, what it isn't, what that number really is, and what kind of bearing that should have in the whole world. So tell us about what that number represents, and how you see it in today's marketplace.

Joe McGonigal  

Yeah, no, I think it's a great start. I think one of the things that's happened over the last 12 to 24 months is probably a shift in valuation a little bit on these private sales. And I think the three of us would agree that historically, people use roughly 75% of collections as a thumbnail number. And I don't think there's anything wrong with that number just for that purpose—as a thumbnail. If you're a practice owner and you're trying to assess what's my practice worth, and you want a conservative estimate, you've got a reasonably good practice and a reasonably good demographic area. I think that's a decent number for planning purposes. You know, if you sold your practice for 75% of collections, would that be enough economically for you to retire and/or, you know, sell the practice? I think as a buyer, it's probably similar—you should probably plan on spending in and around that area. But what that doesn't account for is outliers on either side of that 75% number. So what I'm seeing is some people are just stuck on that number. It just should be 75% of collections—that that's what practices sell for. And I think it's more of a guideline. And frankly, in this market, we are seeing private practices transact in doctor-to-doctor sales for upwards of 100% of collections. And I think if you're a practice owner, it's good to know that. It's good to know that there is room above that 75% of collections. I think it's equally important to know that, as a potential buyer of a dental practice, valuations range, and there are a number of factors that can drive valuation or a practice's value up or down. And really, we all would agree, I think, that cash flow is the primary driver of that. And you hear this example all the time—you have $2 million practices across the street from one another. One's operating at 70% overhead, one's operating at 55% overhead. They're not worth—if all else is equal—they're not worth the same value or same price. So I think what's really nice for private practice owners that have good practices—valuations are moving up a little bit. And I think we have the DSOs to thank a little bit for that. You know, they've historically paid a premium for practices. And I think it's also an indication that buyers really want great practices—want to have a chance to acquire great practices and very healthy cash flow. And it seems to me like lenders are acknowledging this as well. We're seeing more and more lenders increase what they're willing to lend on great practices. So I think what I would say is the range has gotten bigger—versus the old 70 to 80% of collections. I think the range is 60 to 100% of collections.

Paul Goodman  

Quick question on this, because I've been involved in this for now—it's coming on eight years in a meaningful way. If you have a practice that's $1.5 million a year, it's really strong profit, it's a great practice—are the banks willing to lend over 100% to a private buyer?

Joe McGonigal  

Yes, depends on the lender. I won't say—I can't say that all are—but absolutely, there are lenders that would go above 100% of collections. And I think that they're underwriting that based on the cash flow, Paul. Which is: okay, if I pay 110% for this practice, after debt service, after everything else, and not all—any other adjustments—how much cash flow is left to the buyer? And if it's enough cash flow, then banks are generally—again, generally speaking—willing to underwrite those deals.

Paul Goodman  

The key is it has to be good cash flow, because a $1.5 million practice where the owner is earning $300K is different than one earning $700K.

Joe McGonigal  

Sure.

Rob Montgomery  

And that's a big change, because historically, the banks were limited to what—like 80% was sort of that for a while, Joe, if I recall—was sort of like the top end of what most lenders were willing to do.

Joe McGonigal  

It was 80. And then, you know, you have some banks that would have an appetite to go to 90. And you know what we've seen over the last 24 months—and Rob, you and I worked on a couple of these—where it does seem, when you get out of the gate and you have an asking price of 100% of collections, it does put buyers and buyer advisors on their heels a little bit, I guess, because it's an outlier. But when you dig in and you see that the cash flow supports that, it's a nice facility and a great demographic and all the other things that go along with a premium valuation. My experience over the last 18 months or so is that banks have an appetite to underwrite those deals.

Rob Montgomery  

Right, right. We've seen that. And look—it makes sense. You know, who wants to buy a practice that's grossing a million dollars, that spends a million dollars? That is, I will submit, worthless. And I think, as you said, Joe, DSOs have really influenced this as well, because they take the more informed approach to valuing practices, which is: if we buy this, how much are we going to make? Nobody cares about the revenue necessarily. How profitable is this practice? And I think banks, it sounds like, are looking at that component and then sort of backing into this percentage of revenue. But what's really driving this is: how profitable is this practice, and is it going to cash flow? And if it does—and at that price—then great, we'll make the loan.

Joe McGonigal  

Absolutely. And to go one thing further, I think what's important is, if there's buyers—young dentists out there—or would-be buyers who are listening to this trying to get their head around the valuation piece, I think it amplifies how critical it is as a buyer to have the right advisor around you. I mean, there are just advisors in the marketplace who feel like nothing should sell for over 75% of collections. They just shouldn't—not for any real reason other than they, quote-unquote, shouldn't. They haven't, so they shouldn't.

Rob Montgomery  

So that's the way it was, always has been. You know, that's the way it always was. Exactly. That's a good reason, right?

Joe McGonigal  

And so if you're a buyer, and your advisor is telling you you shouldn't pay over 75%, I would probably ask, why not? You know, let's run the numbers on this practice, because maybe it's fine to pay 85% of collections if the cash-on-cash and the cash flow is going to be substantial for me, and it's the practice I want, right?

Rob Montgomery  

I mean, look, I'd rather buy a practice for 100% of revenue that makes more money than the practice that I buy for 50% of the revenue. Yeah. Yeah. And, you know, let me say this too—like when we're talking about these numbers, in terms of maybe being able to go up to 100% of collections or over and looking at cash flow somewhat—this is really specific to markets like the market that you cover, Joe. You know, when you're talking about Eastern Pennsylvania, New Jersey, Delaware, and Connecticut—and Paul, I think you can probably weigh in on this maybe better than Joe and I, because you're really dealing with this as well around the country, and we do too, but you're dealing more with the economics of that. You know, if somebody is in a less populated area of the country that's more rural, and they may have a practice that's grossing $2 million that's really profitable too, but it may not trade for that same kind of multiple.

Paul Goodman  

It's very true, because we've—you know, it's really anything in this world. And Joe deals with this too. You know, we recently had an ad on Dentist Job Connect to make $250,000 a year, and it got 27 applicants. And we had the same one somewhere else, and it got two applicants, and it all had to do with location. So it's where dentists want to live. And you know, Joe and I collaborate on these deals. He's a great resource and sponsor of what we do. And there's great practices that dentists are just not willing to move to those areas, even though they could be very successful financially. And I'm assuming—and Joe, the seller just has to be more mentally flexible on what the final price of their practice is going to be. I don't know if that's a good way to put it, Joe?

Joe McGonigal  

No, I think you're right. I mean, Paul, you and I have very recently and specifically worked on one of these. It's a fantastic practice, but the location doesn't command a premium valuation. And in fact, it'll probably transact at a slightly discounted rate from where it was valued—and strictly based on location. Every other factor is there: cash flow, high-quality facility, well-respected practice. But location is going to be the one factor that pulls the valuation—or the ultimate selling price—down a little bit. And I think in the scope of all of this conversation, that's the purpose of these podcasts, right? To educate both practice owners and buyers around factors that drive these things and impact these things—and why rules of thumb are helpful, but you've got to be very careful that you don't get stuck in a rule of thumb and aren't paying attention to the other factors.

Rob Montgomery  

Yeah, and I think this is a good opportunity to kind of circle back on a theme that we've had over the years, Paul, and it just really underscores the importance of, as Joe said, working with the right advisors, the right team. And this is where I say, you absolutely have to be working with a good financial advisor or CPA, helping you with the cash flow projections of these practices to understand the differences between various opportunities and look beyond—peel back the curtain—beyond that 75%, 90% of revenue. What does that mean for this particular practice? What is the projected cash flow? Know that going into it, so that you're not just taking what's behind door number three.

Paul Goodman  

I think it's really important. And Joe made a good point. And I want this to be on the record—I don't know what the record is, Joe—but I always wanted to say that it's on the record, not off the record, right? We're off the record, on the record. I know dentists who are great dentists who are still not practice owners because one of their advisors said, "Don't pay an extra $75,000," and their dreams aren't here yet, right? So you have to know yourself too. You're in control of your own destiny. It's really about what's the practice going to have—what impact is this practice going to have on my life? And price is just one part of that. And the same, I'm sure, goes for sellers too, right? You know, it's funny-ish to me sometimes—and when I was doing brokerage—someone said, "I refuse to sell it for $50,000 less." I go, "Well, your alternative is just keep working here and never retiring. How's that one?" And they go, "I don't like that one either." So I know you deal with these dentists in these biggest decisions of their life, Joe, and they just sometimes can get, I think, too caught up on price when it's just part of the overall picture.

Joe McGonigal  

I think you're right, Paul. And I think, you know, listen, I'm a sell-side advisor, right? So I'm not advising buyers. I'm on the other side, and I work for the seller. So I obviously have a biased opinion and approach to this stuff that I'm acknowledging. But what you just said—I see happen all the time—which is, I see buyers miss out on fantastic opportunities because there's a mental block around a price point. Not an actual economic reason to not move forward—a mental block around what I should and shouldn't be paying, even though the numbers—quote-unquote—"the numbers work."

Rob Montgomery  

Totally. Yeah, and I—you know—we represent more buyers than sellers, and it's a conversation we often have. You know, if you love a practice enough to pay $800,000, but you will walk for $840,000, then you've got a problem. Yeah, you know? And with all these things, and when we talk about numbers and what it's worth, let's just step back—bigger picture. This is not exact science. You know, anybody that says, "This practice is worth $769,424 and not a penny more or penny less," should not be trusted. Okay?

Paul Goodman  

And I want to share—I think this goes with the Trident thing, and only four out of five dentists recommend Trident. Whatever that fifth dentist... I went to a broker meeting that Rob was at recently, and they do this amazing game where they give someone a deal, and they break up into teams, and then someone says what it's worth. None of the brokers agree at all, right? And at the end, they tell you what it was sold for. And what Rob said is so true. These are transformative decisions in people's professional lives. And, you know, I know we've reinforced this a number of times, but you see it, Joe, on both sides. Don't get too caught up on the price and avoid changing your life in the best way for $25,000.

Joe McGonigal  

Yeah, yeah, no, I agree. And just to kind of pull it back, I think what's interesting in this market is the range where practices trade has expanded. It's not to say that things don't sell for 75%—they do. They sell for 75% of collections all day long. But that range is bigger than 5% or 10% on either side. Now it's 20 to 25% on either side.

Rob Montgomery  

Do you think that's because of a heightened awareness as to what the cash flow is—and more of a focus on cash flow than just revenue—thanks maybe to our party buddies, the—you know—the 300-pound gorilla in the room, the DSO?

Joe McGonigal  

Well, I think part of it—that certainly could be part of it. I think the other part of this is, you know, the impact that DSOs have had on the industry has been well documented in many other places. But since early 2023, we've seen—and I think you guys have as well—you've seen some of the larger DSOs, you know, they wanted to buy anything that was north of a million dollars in revenue. A lot of them have gone upstream a little bit and said, "Listen, we really only now want to acquire assets that have $1.5 million or $2 million in revenue and multiple providers." So they're looking at...

Joe McGonigal  

It's risk and, you know, profitability. It's hard to squeeze 20% of EBITDA out of a million-dollar practice. It's just a raw dollar issue. You know, with a million dollars—after you pay the dentist—there's only so many dollars left over, so it's hard to get to that 18 to 20% margin. And it's hard to have multiple providers in there. So if I'm a DSO and I want to de-risk, you know, I want to mitigate my risk a little bit, I'd rather buy a larger asset with more EBITDA and the likelihood that there's already multiple providers in the practice. So I think that's a big part of it. I think it's just how they're underwriting deals and what they like to buy. And so what happens? Well, I specifically saw it this year—more so than ever. I had more practices with revenue of a million to $1.5 million that would have historically—in 2021, 2022—probably transacted to a DSO, that all went back into the private market. And I'm here to tell you, I think it's fantastic. I think it is great that a lot of practice owners who don't want to head down—or don't want to have to, quote-unquote, "have to" head down—the DSO path have the ability to find a private buyer and sell their practice for more than 75% of collections, and can get upwards of 90%, 95%, 100% of revenue. I think that's great for a practice owner who has built a great asset. And I think it's great for private buyers who—again, in 2021–2022—were kind of relegated to looking at practices that collect $700K–$800K. And there's nothing wrong with those—they just have less cash flow after you service the debt. I mean, Paul, you live in this world. It's hard to make the same compensation you do if you're an associate in a great practice making a great income. It's hard to do that when you buy a $700,000 practice, for sure. You've kind of got to be willing to take a slight step backwards, at least. And again, that's okay to do, as long as it's part of your plan and really what you want. So I think it's fantastic for sellers and owners of these practices—and buyers. And so the last piece of that, Rob, to your point is: so why valuations? Well, because the practice owners know they're worth more than 75% of collections. DSOs have told them that and have paid them that. And I think buyers are realizing, "Hey, if I want to be able to buy a practice that collects $1.1, $1.2, $1.3 million, there's going to be a premium price tag on it if it's a great practice in a great area." So I think it's just a function of multiple factors in the marketplace. And then, you know, banks like lending money—they make money, right? So they don't want to be missing out on these opportunities that for a long time they weren't getting because they were being bought up by DSOs or other consolidators.

Paul Goodman  

Well, Joe, I want to thank you, because tonight I'm going to go and make a big post: "Why private practice buyers should thank DSOs." It's going to break the Nacho Internet. So stay tuned for that one. I agree—I couldn't agree with you more.

Rob Montgomery  

Do you have security lined up for that one?

Paul Goodman  

Yeah. So thanks, Joe.

Rob Montgomery  

That's good. Moving on now with that. So Joe, I know something that you like to talk about, which is the data quality. You know, when you're looking to sell a practice and you're preparing for a practice transition—or if somebody is a buyer—talk about the importance of that reporting, the quality of the data. The transparency, really, I think, is what I would refer to it as, so people really can see what they're getting. How is that important? How does that factor in? And I guess—not to scare people—but how have you seen that work out in a way that is not good for the seller?

Joe McGonigal  

Yeah, this has certainly become a bit of a soapbox topic for me as of late. You know, we're seeing a little bit more, and I think it dovetails very closely to this valuation idea that we've been talking about. Listen, if you're a practice owner, and you're taking advantage of being a practice owner, and you run some personal expenses through the business and all that stuff—I mean, that's okay. I'm not the IRS. That's why you want to run your business and do that. You're not the only one taking advantage of some of those things. It's part of the benefit of being a practical business owner. At the same time, I think it's actually becoming more and more important that in the two- to three-year run-up before you're ready to transact or sell your practice, I highly advise you to sit with your accountant or your bookkeeper and say, "Let's really take a look at our chart of accounts." I'm going to still run personal items through the business, but get them very well categorized so they're easy to see. We've just had a number of experiences as of late where the practice financials are incredibly difficult to work through. There's personal expense in multiple different categories. There's some in dental supplies, and oh yeah, there's a little bit in lab, and office expense has a bunch of things on my personal credit card. Go in there and it's—you know—we work really hard to pull that out. I mean, we work for the seller. We want the cash flow to look as it should and pull those personal and discretionary items out. But when you hand a P&L to a buyer that has 75 adjustments in 76 different line items, all that does is erode confidence in what you're presenting. It might be entirely accurate, but it doesn't seem like it is.

Paul Goodman  

I just lectured at ODA. I met one of your DDS Match colleagues who was great there, and I talked about case acceptance. Dentists should understand this: a confused buyer tunes out. A confused patient tunes out. So the second you confuse your patient about their big treatment plan to redo their whole mouth—they're out, right? And I, as someone who will kind of stick up for the buying dentists who are making the biggest decision—the biggest decision of their careers—as soon as you become confused and think it's complicated, your mind just says, "I don't want this thing," right? So I think your point is such a good one. Be clear with what you're selling and how the data supports it when you go to sell it. And maybe you have 30 years to do that, right? Why not just spend the last two or three being as clear and, I guess, maybe as clean as possible?

Rob Montgomery  

Well, not to mention, you know, it's just—you talk about credibility, right? There's a word. You know, like, "Don't worry, my tax returns say this, but really, here's how much you can make." Like, yeah, am I supposed to believe that? Like, how do I know? Like, oh, this person fudges their tax returns, but they're being truthful with me—yeah?

Joe McGonigal  

Like, it's not even that, Rob. I mean, the problem becomes the P&L. You know, everybody wants to see your profit and loss—your internal financial statements, your profit and loss—and then they want to tie that to your tax return, right? And if you can't tie the two together, or you have to go through incredible gymnastics to be able to do that in Excel—again, to Paul's point—it just erodes confidence and causes more confusion than anything else. And I have to say, this is a necessary thing for sellers to fix. It's too easy to fix.

Paul Goodman  

And as someone who does this all the time, Joe—especially through Job Connect—when someone's making $327,000 a year as an associate dentist, they want to feel like they're going to make that same or more at the practice. So it's just weird if they say, "Well, this practice brings in a lot of money, but it says I make $200K, barely make $400K," right? And it's—I just think it's something that couldn't be reinforced more, because I don't do this as much as you do anymore, but I've dealt with the same problems. And you're trying to create a relationship between the buyer and the seller, and it's not a good start to the relationship.

Joe McGonigal  

Yeah. And you know, if you've engaged a broker, and they've got to build a treasure map for buyers and buyers' advisors to get through this, it's daunting. And it really can drag out the process. And you've got to realize that the buyer has an advisor too, and that advisor is sitting over there saying, "I have no idea what's going on here, but I gotta tell you, there's a ton of red flags. I know you love the practice, but I don't really know what they're telling you it's worth, because I can't make heads or tails of all these adjustments and add-backs and personal expenses—and how are we even going to sort all this, if it's all valid?"

Rob Montgomery  

And it's not like some hard, fast number of things that cause a deal to get off track, but the more things there are, the greater the likelihood that something will get off track. And once it gets off track, oftentimes it doesn't get back on track. And I think, you know, Joe, this is also—we're not just talking about doctor-to-doctor deals. This also comes up when you're selling a practice to a DSO. Somebody that has really clean financials, that it's easy to see what the practice is doing, has an advantage in the marketplace.

Joe McGonigal  

100%. I mean, if you're going to go through a DSO transaction, and as a practice owner that's either a goal of yours or where you think you're headed just because of the size of your practice, I would highly, highly encourage you to invest the time up front. Because just the due diligence of those deals—and you guys are both aware of this—to do the financial due diligence on the buy side is so much more intense that it can be almost impossible to get through without a clear financial statement.

Rob Montgomery  

Right? Yeah, and you know, with those deals, once you've signed a letter of intent and you've agreed to exclusivity, and you start to invest—as you said—the time spent with the due diligence and the legal documentation, there's a cost associated with those deals dying. So you're really not setting yourself up for success in coming to the market in that fashion.

Joe McGonigal  

Yeah, the other thing I would say is, we've focused pretty exclusively on financial data here, but it goes beyond that. I mean, your practice management data—your production by provider report—to make sure that the hygienist is getting the hygiene credit, the doctor is getting the doctor credit. Your production by code reports—that things are being filled out and assigned correctly. You have to realize, as a practice owner, it's a competitive market. There's a lot of 60-plus-year-old dentists, there's a lot of baby boomers, and there's a lot of inventory in the marketplace. So your buyer—potential buyer—is most likely looking at multiple opportunities. And the harder it is to understand yours, the easier it is for buyers to move on to the next opportunity, even if you have a better practice and a better everything. Being able to paint that picture clearly and concisely, I think, is a competitive advantage in this marketplace and absolutely helps maintain or command a premium price versus having value erode over data quality and questions.

Rob Montgomery  

Yeah, like you can kind of analogize it to selling your house. You live in a neighborhood, and all the houses look similar. And your house, though, has peeling paint, it needs a new roof, shrubberies falling down. And, you know, just give somebody else—or somebody—a reason, a buyer, to go someplace else. And in a competitive market, that's...

Paul Goodman  

Forget the brokers. I think—I can't wait to make some of these posts. Joe, thanks. Later. The other thing that DSOs have done is they've provided really amazing associate jobs for people. So I have a feeling that many of the people considering a $1.5 million practice are already doing well as an associate. So sometimes buying a practice is a want, not a need. And if it's not clear to them, they'll just say, "I'm going to keep being an associate." All this being said, you don't find many people who've been associates for over 10 years anywhere. So I'm a fan of practice ownership. Just want to be—I also want that on the record. Okay, big—it's big records on the record. But that's just the key point. The competitive thing is they might just say, "I don't want to deal with the stress of owning this practice. I'm just going to keep being an associate." So private practice sellers should be cognizant as well.

Joe McGonigal  

So Paul, you bring up a good point. And there's a little bit of a tangent I think worthwhile, once we've got a few minutes. Sure. You make a great point. There are plenty of associates making north of $300,000 a year in good associate jobs—be they DSO or corporate or private—that it's irrelevant, right? They're out there making good money in great practices. And so if practice ownership is your goal, and you also have a goal of not going back—taking a step back in terms of compensation—to be at $300,000 post-debt service, you're most likely buying a practice that does $1.2, $1.3, $1.4 million north, right? So a couple tips for buyers looking at those practices. Number one, they generally don't sit on the market very long. They're desirable assets, they're productive, they're profitable. And again, we'll assume that from a facility and location standpoint, they check everybody's box. Those practices move a lot faster, and the process moves a lot faster—not necessarily because the broker's pressing it, but just because there's a lot of demand. We put one of those up on ddsmatch.com—we start getting inquiries immediately for people to come see them. So I think it's important, if you're a buyer at that income level, knowing you're going to be in a competitive situation when it comes to acquiring a practice, have your team of advisors ready, make sure that you already have a couple relationships with some lenders. And you really have to be at a pace—moving through data and visiting the office and seeing the practice. They just move at a different pace. And I definitely see—I don't know why—it just seems like maybe this time of year, things are moving pretty slowly. Rob, I don't know what you're seeing, but buyers sometimes move a little too slow and then get frustrated that we've already accepted.

Paul Goodman  

Everybody's kids have gone back to school, and I now spend all my time reading my kids' school emails. So everyone is just very busy reading emails about the emails. So that is it. No one knows about this crisis, but once your kids go back to school, you get 87 emails a day about them being in school. I'm just joking.

Rob Montgomery  

Yeah, yeah, that's a good point. I mean, I think—and we do see that too, Joe—but I think it's just as you said, it's really important just to have things lined up and be ready to pounce, you know, if you really want to be in a competitive situation. And either if you're a buyer, that's having everybody lined up; if it's a seller, it's coming to market with really putting your best foot forward with your practice and having things organized. And guess what? The people that do that are rewarded on both ends. Yeah. So, you know, here we are talking to a great broker. I think—I don't know if we need to still make the case for why it's important to work with a good dental practice broker and the value that they bring. I think the stuff that Joe's talking about kind of demonstrates that. But let's talk about that. I think that sometimes there's a misconception—certainly in our market here in the Philadelphia, Mid-Atlantic region, Joe—where, you know, "Hey, I can find somebody to buy my practice." You know, like, "Why do I need a broker? And what value does a broker bring?" And what do you say to that?

Joe McGonigal  

Good question. We do get that question—"Why do I need you?" You know, I think, as a practice owner, it probably starts with just getting clear on what you think you do need help with and what you'd like some help with. I tell clients all the time, if you have a practice on the Main Line, or Montgomery County, or Bucks County—these counties surrounding Philadelphia—you probably don't need a broker's help to find a buyer. But most practice owners that I talk to aren't looking for a buyer. They're looking for the right buyer. They're looking for multiple potential buyers to talk to, so they really have an opportunity to figure out who the best person is for their practice, their patients, their staff, and their legacy. And frankly, if you can bring more buyers to the table, it can create a competitive landscape. So when I talk to practice owners and they say, "What am I going to pay you 10% for—just to find a buyer?" I say, "Well, you're not." So much of what my clients hire me to do is help run a very structured, professional, and competitive process. And yes, that does start with marketing the practice effectively and generating a pool of qualified and vetted candidates. But the other piece is really helping practice owners understand which points are important to negotiate, which ones you can and can't negotiate, and how to really pull together the right deal. So the buyer is one thing, the purchase price is one thing, the asset allocation is another thing, the transition is another thing. And the larger these practices get—and especially if they're DSO transactions—I don't think most practice owners are looking for a "broker," quote-unquote. I think my clients and our DDS Match clients are looking for a professional advisor who has the ability to stay in a role where the best interest of the client is the only interest we're paying attention to. And Rob, listen, this is going to sound self-serving—it's not the intention—but you and I, you've referred plenty of dentists over who will talk to Joe, and that conversation ends up with, "Joe said I shouldn't sell anything." Yeah. I mean, that's what an advisor, I think, does. And I think that practice owners think about the word "broker" one way. I think if you're looking for a professional advisor, there are people that do different things and bring different things to the table to help you get from the planning stage to the execution, into the closing table.

Rob Montgomery  

Yeah, I think it's great. You know, before—because I know Paul, you have very definite opinions on this—but I mean, to me, I think my takeaway is it's really the difference, as you said, Joe, between what I would consider to be an order taker versus an advisor. You may not need an order taker if you are in certain markets. But even if you are in those competitive markets, that might be even more reason why you need an advisor. And there really is a difference. An advisor is doing all this other stuff. Somebody who's merely what I've considered to be—and I say that in a somewhat derogatory way—an order taker is just somebody that says, "Hey, yeah, I found somebody," you know, anybody. "Yeah, found somebody," and just kind of walks away and waits and hopes to collect a commission at the sale. Versus somebody that's really getting involved, advising, helping the seller understand the market, helping the seller prepare their practice for sale, to do all the things we were talking about a few minutes ago—to clean up the financials, what they should be doing to maximize their potential. And I think a good broker should bring more value to the deal than what their commission is. That's a good broker. And look, like everything else—there are good ones, and there are not-so-good ones—and that makes a difference.

Paul Goodman  

I couldn't love this topic more, and I want to share—I'm a recovering thought brokers just drove up in fancy cars, collected big Happy Gilmore checks, and left. So I bought two practices before I became a practice broker, Joe and Rob. So I just thought, "Oh, this is, you know, just like how patients think it took the dentist five minutes to do their filling." It really takes a lot more than that. But I'll say a couple things. One is, you want the most options for the most important decision of your career. I will explain—before this podcast, I got a text message from someone who said they didn't need me for Dentist Job Connect because they had an associate. They said, "Paul, I'm firing my associate. I need you now." And what I wish I had the courage to say to them, Joe and Rob, was, "Before you hire this person, why don't you get some more applicants to make sure this person is the right fit for your practice?" And the same goes for this lecture I was giving, Joe and Rob, where this very nice dentist said, "My cousin's friend's son wants to buy my practice, but I'm not going to give him a deal." And I said, "You know what you should do? You should hire a broker, get as many buyers as possible. And if your cousin's son's friend is the right one, move forward with them. But if they're not the right one, you wouldn't have wasted time." And I will share with both of you—the thing that dentists live in fear of is wasted time, not being done on time, not being finished on time. And to me, Joe—and maybe you can add value to this—the value of a broker, when I did it, was I knew if a buyer was serious in one conversation. I knew if they were going to move forward and had a bank that they could use for funding this very quickly. And too often, without a broker, they don't really have anyone holding the buyer accountable. And I've seen dentists waste a year or more of time and still not sell their practice.

Joe McGonigal  

Oh, I mean, 100%. That's what we're being paid to do, and that's what I alluded to earlier. I feel like my clients hire me to run a structured, professional process. And that's everything from all the early conversations before anything's listed, before any value has been assigned to a practice—around what are your goals? What does ideal look like to you from a transition standpoint? How much longer do you want to work? What's the ideal buyer look like? And taking the time up front all the way through vetting buyers, marketing the practice, helping a practice owner understand, "Here's what's going to show well. Here's some challenges we're going to have to deal with when we get in the marketplace. What's our game plan? How do you want me to present these things? How are you going to address them in meetings and showings?" And all the way through the negotiation process. I mean, we're on every legal call. I don't know if every DDS Match professional does that, but I essentially make an attempt to be on almost every legal call for every one of my clients so that I understand what's happening in the deal—or at every meeting or every showing. And it's funny—I mean, we will get calls from practice owners that say, "Well, I'm talking to you, Joe, and I'm 45 minutes from you, and I'm talking to a broker in Texas. Is the broker in Texas coming to any meetings? Is the broker in Texas going to charge 3% less than you? Is the broker in Texas coming to any meetings?" No. "Is he flying up here? Does the broker in Texas have a local network?" No. "Do you know all the buyers in this market?" No, no, no. "But he's got a website and things like that." So again, not good or bad—the broker in Texas might be the right fit. But I think what dentists and practice owners, again, should spend a little bit more time on is: who do you need on your team? And if you just need someone to find buyers, that person's out there. If you need an advisor that can take you all the way from start to finish, there are other advisors that do that. And there's everything in between, right? So I think it's less about "Who's the right—who should I hire?" and "Who's the best broker?" The only answer is: who's the best broker or advisor for you? And I think that practice owners should spend a little time thinking about, "What do I really need? What support do I need through this process?"

Rob Montgomery  

Totally agree. Yeah. And you know, you somewhat get what you pay for. And if you want to do something on the cheap, I suppose you can hang out at the office on a Tuesday night, showing your practice to multiple potential buyers—some of them may not show up. You can be involved with transmitting financial statements and doing all these other things, if that's really what you want to do. But ultimately, like you said, Paul, it's somebody that understands and has been through these enough to see the red flags and is able to guide somebody correctly—to advise them, like, "This is a legit buyer," or "This one's not going anywhere."

Joe McGonigal  

The one other analogy we use with clients is—because people always ask, "What do you do for your 10%? What are you going to do?"—and one of the things I do say is, at some point we become the WD-40 in the deal, right? Like, we are in this unique spot where we can talk to the buyer, we can talk to the seller, we can talk to the seller's counsel, we can talk to the buyer's counsel, we can talk to the lender, we can talk to all the CPAs we want. Like, we really know no rules. We can call up anybody—anybody on the phone we want to talk to. And I think part of the value in a broker is to take some of the emotion out of what is a high-stakes transaction for both parties, and try to keep things even keel and moving along, and not let the gears get gummed up over what seem like big things at the moment, but really aren't. They're not big in terms of the transaction, they're not big in terms of the economics—it's just emotion. And so the broker does have a chance to sit in the middle and kind of de-escalate that stuff to make sure the good deals still get done, in spite of some of the sticky things that come up mid-deal.

Rob Montgomery  

There you go. And you know, if you find somebody that's a few bucks cheaper, and you can't sell the practice, then you really didn't save any money. 100%. Joe, thanks. This has been great. You know, it's always a pleasure to work with you. It's nice to have you on, sharing your insight. How can people get in touch with you or a DDS Match broker in their market?

Joe McGonigal  

So ddsmatch.com is the best place to go for all things DDS Match. Certainly, that's a good starting point. And then my email directly is just the letter J and my last name—McGonigal: jmcgonigal@ddsmatch.com.

Rob Montgomery  

That's good. And everyone—that'll be up in the show notes too. If you're in your car, you should not stop and write that down. Just go look at the show notes and pull that information off. Or you could always get in touch with Paul or me, and we'd be happy to put you in touch with Joe or one of his colleagues at DDS Match. We do a lot with DDS Match brokers around the country, and I've always had really good experiences with them in all markets—real professionals.

Joe McGonigal

Thanks for having me on, guys. I really appreciate it. Yeah, it's always fun.

Rob Montgomery

Joe, thank you. Thanks, everybody. Well, you know, as with most advisors in the space, Paul, all brokers are not the same. And just because you hired a broker, or you hired a CPA, or hired a lawyer, doesn't mean that you've hired somebody to provide the services that you're really expecting to receive. And there are some brokers that bring value to deals, and there are some that basically just take the orders. And there's a big difference.

Paul Goodman  

You want the advisor too. I mean, one thing I'll just echo is that you want to be done when you want to be done—on your own terms as a dentist. And if you don't have the right people on your side, it might not be about the price. It might be about you not being able to move on to the next phase of your life. So get the right people to help you.

Rob Montgomery  

Yeah, and that's the only way that you know what's normal. And I think a lot of professional practice owners—dentists, lawyers, CPAs—we're all on our own little island. And unless you have somebody saying, "You know, what you're asking for here is not something that anybody is willing to do," and if we're really looking to transition this practice, you may need to back off of that. And if you don't have somebody that you trust to give you that advice—not because they're just trying to get you to closing and collect a commission—but really, truly trying to help you accomplish what you're trying to accomplish in transitioning the practice, then you have no way of knowing. 100%, right? Paul, always a pleasure. Thanks everyone for listening.

Paul Goodman  

Thanks, Rob.

Bumper  

Thanks for listening to another great podcast with the Dental Amigos. And don't forget to tune in next time to have the dental business demystified. If you're looking for more information about today's podcast, you can find it on the dental amigos.com if you're looking for Paul, you can find Paul at drpaulgoodman.com and if you're looking for Rob, you can find him at yourdentallawyer.com This podcast has been sponsored by Orange Line Media Group, helping dentists and other professionals create content people love. Find out how we can help you take your business to the next level at www.orangelinemg.com. Till next time.