DDSO Strategies Radio

In this episode Dr. Brady Frank catches up with Dr. Hildebrand on his successful execution of MULTIPLE DDSO strategies!

Dr. Hildebrand recently went from 2 to 6 locations in less than 90-days! Can you believe it? Not to mention that he will acquire $3,000,000 in pro-forma equity within just 12-months!

We can’t wait for you to hear this episode.

 

In this episode, Dr. Brady Frank talks about not only the personal benefits of DDSOs and multiple streams of income but also how these will make a significant impact on your taxes. Listen, and also find out what is coming in the next episode!

 

 

Hey folks, super excited about this episode! Why am I excited?

Because you’re likely going to save a whole lot of money on taxes over your career after you truly understand what this chapter is all about in the book

So, if you’re following along, it’s chapter four, “DDSO Dental Cash-flow And Tax Formulas”

So, let’s jump right into it. Do you remember when Mitt Romney was battling Barack Obama in the election? And they made fun of Mitt Romney for his 15% effective tax rate, right? Well, most dentists between state and federal are close to 50%.

So how can someone like Mitt Romney be paying such a low effective tax bracket rate? We’re going to go into that. Let’s hit it. If you understand this stuff – so the first five years of my dental career, I paid way too much in taxes, the last 15 years, I have not paid nearly the effective tax rate as I did in the first five years. That has to do with long-term capital gains rate, short-term capital gains rate, ordinary income, dividend income, and everything in between.

So, let’s take a look here. Pull up a graph if you’re following along in one of the DDSO strategies magazines, this graph is in there too, it’s DDSO cash-flow and tax-advantaged ecosystem.

So, it goes in this direction, right? Clockwise: associateship, solo practitioner, then DDSO owner, and then investor. So, let’s talk in general about this if you have the graph open, okay?

An associate has the least tax advantages, the least equity, right, the least flexibility, all of that good stuff. Most of you watching this hopefully are not an associate anymore and you bought into a DDSO or you bought a practice, or you started a practice. Most of you, or many of you I should say, are solo practitioners hoping to break beyond solo.

What you know, after you’re an associate and you go into a potentially solo opportunity as opposed to a DDSO, here are some advantages: you’ve got better tax advantages over an associate, so your taxation gets a little bit better, right? As a solo practitioner, you have greater income, more control, more stability, but you’ve got high overhead, no passive income, and definitely a heavy clinical and management burden.

So, if you’re watching this right now and you have a solo practice, I feel badly for you because solo practitioners in the U.S. right now are in the most difficult position of anybody, even more, difficult than associates because they truly have all the clinical burden and all the management burden and a relatively high overhead between 60% and 70% on average.

And so, the key is to break beyond solo, to have multi-doctor, multi-location DDSO, so that’s what this is all about right here: DDSO

So, obviously, there are many more tax advantages with a DDSO than solo practice. Fewer clinical hours for the founder. That’s great. So, if you’re watching and you want to have fewer clinical hours, a DDSO is the way to go there to get there. It’s been that way for me and all the folks in our DDSO Alliance.

You know, most of them are working two days a week on average, just because they love dentistry, not because they financially need to.

Less management burden

That’s a big one. Believe it or not, if you expand, you will have less of the five management monkeys on your back because you hire people for that, you delegate that. So, a solo practitioner has way more management issues and clinical issues than a DDSO owner.

Lower overhead

That’s right. The average DDSO has an overhead of 53% to 58% as opposed to a solo practice of 60% to 70% greater income. Most certainly, if you do it right, if you add your doctors correctly, yo

 

In this episode, Dr. Brady Frank finishes discussing chapter three and then talks with his friend Dr. K.J. Sturhahn about his experience using DDSO strategies.

 

 

Hey, welcome to episode seven!

In this episode, I’m going to be interviewing a good friend of mine, K.J. Sturhahn, who went through the DDSO blueprint process. Flew through it – opened a bunch of locations

Unfortunately, he had neck issues, just like I’ve gotten some neck issues. And I’ll tell you what, it allowed him to reach total dental freedom – the DDSO process – to reach total dental freedom and not be worried about his physical ailments in his neck. So, he’s loving life, he’s got a ton of purpose behind the group he’s building, he’s definitely in the top 1% financially, and so can’t wait for you to hear his story.

But before we do that, I wanted to go over a couple of the diagrams to finish out chapter three: “Converting Your Practice Or Group To A DDSO”

So, obviously there are a few case studies in there, but I really want to go over something really important about the trial partner compensation model if you’re following along in the book. Also, if you’re following along in Transition Time, the book, it is in section 5.2 in Transition Time.

There are a lot of real funny numbers out there with structuring partnerships, oftentimes. And there are management fees and, you know, this chunk of profit, that chunk of profit, a salary to the ownership doctor – an owner doctor – all of these different formulas.

The reality is the most simple formulas have proven the test of time and work the best

An example, Comfort Dental, they’ve kept their same, or similar, ownership compensation strategy for decades and decades. And so, I want to show you what we have found to be the very compensation strategy for a multiple doctor, multiple location, group – very simple.

Two buckets of income

So, at the end of each month, half of the revenue, excuse me, half the profit goes to the clinical bucket of profit. The other half of the profit goes to the business bucket. The clinical bucket and split pro-rata based on your individual productivity. The business bucket or ownership bucket is split based on the percentage ownership of that practice. This rewards the clinicians who are in the practice working hard, right? Some docs are part-time, some docs are semi-retired. That bucket does not reward doctors who are in that retirement mode.

The business-ownership bucket does reward doctors for equity. So, if you’re a dentist and you want to cut back, you want to build locations, rather than doing a management fee – which means you’re going to have to put in a lot of effort to prove that fee – you should be receiving your profits because of the equity, because of the blood, sweat, and tears you put into the business overtime just because you own a part of that business, not because of a management fee.

And so anyway, to get all the details on that, just to head to the infographic, which is trial partner compensation model. So that’s in chapter three of DDSO Strategies.

The other graph I want to go over with you real quickly for those of you following along in the book is the advantages of co-ownership versus partnership

Obviously, autonomy is created by each dentist owning a hundred percent of each S. Corp., minimizes joint liability, maximizes an equitable team approach to growth. And the equity is often a manager-managed LLC as the founder maintains manager status.

So you, yes, you, the founder, if you’re listening right now, maintain a hundred percent control of your practice even though you’re selling co-ownership shares. So, most dentists in the DDSO Alliance, they say, I want to do this, but I don’t want to give up any control – you don’t have to. And this goes over that in the DDSO strategy.

So, so anyway, let’s bust right into my interview

 

In this episode, Dr. Brady Frank talks with Dr. Ken Ness about how converting to a DDSO has helped him gain his total dental freedom. They talk in-depth about associate conversion, the benefits of co-ownership and expansion, and they discuss the different exit strategies available for anyone in a similar place as Dr. Ness.

 

 

Hello, hello, hello! On to episode six! We’re going to have an incredible time!

Dr. Ken Ness, DDS from Minnesota will be with us sharing what he has done with his DDSO

When I first met Ken three or four years ago, maybe five years ago now, he had $1.4 million dollars in debt, two locations, two associates, and said, “Brady, I want to achieve total dental freedom, but how can I do that with $1.4 million of debt? I feel like I can’t add more locations. I can’t add doctors. I feel like I have five monkeys on my back. What’s the best route?”

So, we went through the process with him, ended up adding his two associates, doing an associate conversion, they became partners. Ken eliminated $1.4 million a debt within six months. They went from two locations to four locations. His two young docs earn way more than the national average, they’re in the top 1%, they’ve gone on to add other DDS-O’s, or dentist owned organizations.

So, I can’t wait for you to hear about his transformation to total dental freedom. Going from four days a week working, to two days a week, and earning more income and really enjoying the lifestyle that he wanted, has wanted to enjoy for years. So, hear it from himself.

I think one of the points here is to find people that have done it before and model what they’re doing

He has used our team, and so anyway, excited to share this with you. You’re going to love this episode. Let’s roll right with it.

Brady: Hey folks, we’ve got Dr. Ken Ness, DDS with us today. I’ve known Ken for how – long have we known each other Ken?

Ken: 2004, but five years, I guess now.

Brady: Five years. And oddly enough, it was through an implant seminar, even though a lot of the things we talk about are with your private group, your DDSO, right?

Ken: Exactly.

Brady: So, it’s, it’s been great knowing you. Both of us like to bow hunt, he’s going bow hunting this coming Sunday for elk out in Colorado. My brother just did that this last week – did well.

And so, we’re just giving you a real brief thing about your unique DDSO and then your two, I don’t want to call them young docs cause they’re not young, but they’re younger than you and I, right.

Ken: True, right!

Brady: So, they’re the newbies who are doing great by the way.

So, I used to give a brief introduction, Ken, then we’d love for you to just kind of share what you guys have been doing the last few years.

Ken: Okay, sure

Brady: And so, when I first met Ken, he had two successful practices. He had acquired about $1.4 million of debt to buy those, was building, growing had two associates at the time.

At the time that he and I met, you were late fifties or sixties, something like that. Ken, is that about right?

Ken: Yeah, mid-fifties, yeah.

Brady: Time flies!

And so, Ken was wondering, “Hey, do I sell to it?”

You know, his options were, do I sell to a DSO? Do I just keep running these practices and slowly crackdown that over time? The two new guys that are with me are doing great, they’re doing implants, they’re enjoying life, they want to be owners.

But of course, mid to late fifties you know, Ken not wanting to retire yet, certainly. And generally, associates, you know, 18 months later they go on to the next opportunity or the next opportunity – which isn’t good for the associate because now they lose all that momentum and those internal referrals from those patients.

Long story short, Ken had them in a brief trial partnership period. They went on to each own equal one-thirds of their group. TheyR

 

In this episode, Dr. Brady Frank discusses the benefits of owning your practice, co-ownership verses hiring dentists as associates, and he talks about how to begin the process and how to map out the next steps in creating your DDSO.

 

 

Hey folks, super excited about episode five here, which is chapter three, if you’re following along in the book.

“Converting Your Practice or Group Into a DDSO”

So, what does that mean? Well, first of all, this means different things based on if you are a solo practitioner or you already own a bunch of locations and it depends on your goals as well. But in general, converting your practice or group to a DDSO basically means…

You’re going to take part in allowing other dentists to have ownership, stake in the practice, meaning you’ll stop going through the associate windmill.

You’re going to start eliminating – reducing first – and then eliminating your debt entirely.

You’re going to grow your practice, your business, your group – without taking on more debt or private equity or all that stuff.

So, you’re going to create sustainable growth without taking on more debt

And you’re going to do it in a way where it is all doctor driven.

So, many dentists as they add more doctors to their practice or even just one doctor, they get busier from a managerial standpoint, from an administrative standpoint. And so, when you form your DDSO, you’re going to start to have more total dental freedom, we call it.

Meaning, the five monkeys that are on our back, with practice management, from HR to marketing to everything that has to do with finance and your P&L, to the clinical side of dentistry, all that stuff is going to slowly be released if you build your DDSO properly.

And that leaves you to do more of the stuff in life that you really love to do, right?

If the business is one part of your life, and family, and your faith side, and all that stuff or other parts of your life, then the DDSO is meant to compliment all of them. And you can only have all those other eggs in your life basket growing and increasing if you, basically, have more time on your hands.

And so when you run a DDSO properly, you get those five monkeys off of your back, you get the debt monkey off of your back, you get the associate monkey off of your back and you basically get the financial freedom monkey off of your back, right? Continually trying to get enough so that you can actually retire, right? You create enough streams of income through your DDSO, and that includes both a D-DSO, your dentist-owned group, and your DDS-O, dentist owned organization, vertical companies. That includes both of those genres.

So, as you grow your DDSO your group practice, you’re naturally going to build multiple streams of income that lead to total dental freedom, which of course is not just finance, right? Not just finance, it’s every other bucket, important bucket in your life. We work as dentists to support the lifestyle that we want to live.

Associate to owner conversion

So, if you have a solo practice right here, your first step might be to add a trial partner and that trial partner ends up becoming an owner at some point in the future, whether that be a 25% owner, or a 33% owner, or 50% owner in that particular location. Let’s say you have a practice and you already have three associates and you’re saying, “Oh, I lost one associate two years ago, I added another and you know, I still have the same amount of debt or I’ve decreased it slightly and I’d like to own three more locations, but I feel like my problems would compound.”

So, if you’re in that particular boat then this is called an associate to owner conversion.

If you already have associates or an associate, you need to convert them to an owner through a trial partnership. And this is an easy thing if you know how to do it. So right now, you’re probably paying that a

 

In this episode, Dr. Brady Frank covers chapter two of DDSO Strategies. Learn the difference between DSOs and DDSOs, and what incorporating DDSO strategies can get you.

 

 

Hey folks, Brady here. Thank you so much for tuning in. If you’re following along in the book DDSO Strategies, we are going over chapter two today, “DDSO Definitions”.

They’re actually two definitions, we get questions from hundreds of dentists around the country on this specific topic.

What is a DDSO or what are the two different definitions?

Well, the first definition is a dentist-owned DSO

Basically, a dentist who wants to scale their growth and grow their practice through making acquisitions and mergers and having their own group of practices, whether that’s only two practices or 10 practices, or – like a few of the folks in our Alliance – 27 or 50 practices. And as you know, I am a really big proponent of, instead of racking up debt, allowing others to buy into your group, share the wealth, right? And therefore, reduce and eliminate your debt. And in essence, instead of just giving away slices of your pie, bake more pies.

So, D-DSO is basically a dentist-owned group. DDS-O, okay, DDS-O is a dentist-owned organization. So, as you know, big dental is trying to take over dentistry, is trying to take over the private practice as well. And so big dental are DSOs, the big supply companies like Henry Schein, Patterson, Darby, right? We’ve got the big implant companies – Nobel, Straumann, BioHorizons – all those. Big dental – Invisalign, Smile Direct Club – Invisalign of course as a public company. So, a DDS-O is a dentist-owned organization, receiving some of the billions and billions of profits that are currently siphoned to non-dentists. Very easy.

So, what type of person would be that which would desire to earn a passive stream of income that would otherwise be made by these big, money-driven corporate organizations in dentistry? Well, certainly us dentists! I started doing this over 20 years ago and built multiple streams of income into my life, created what we call total dental freedom. I’ve done it through both of these different genres.

Let’s talk about D-DSO first

If you’re following along in the book, let me bring you to a graph right here in the book. Evolution of a D-DSO, okay. And that would be a D-DSO.

First of all, if you’re watching this right now, you may be just getting started building your DSO. So early D-DSO trial partner becomes a partner. That’s usually the first stage in building your D-DSO. Sometimes you buy a second location before adding another owner, but early on, that’s usually how it starts. You say, how do I figure this out where I can allow doctors to own rather than doctors be associates? That’s the first stage. Once you start to figure that out, I also talk about that in the book Transition Time, if you haven’t read Transition Time, there’s a free copy at TransitionTimebook.com.

Once you figure that out, then very quickly, a more advanced D-DSO or DDSO adds vertical components and more locations. That’s a more mature, more advanced DDSO. And so, let’s talk in that thread about how you add the DDS-Os.

Okay, so DDS-O, being a dentist-owned organization, what are we looking at for different types of vertical streams of income or what I call purpose-built income

Number one, mentorship JVs

Mentorship JV. What is that? What’s a mentorship JV? Well, one of the very, very important components of building your DDSO has to do with buying wholesale versus retail. When you buy a practice that’s doing $1 million bucks for $800,000, you’re buying retail. But when you find a value-added practice, one that you can significantly increase by just doing five or six things, that is a wholesale investment and you’re adding a great deal of value.

Think about this, hedge fund advisors, or hedge fund managers; do they

 

In this episode, Dr. Brady Frank talks to Dr. Stephan McAnany, DDS about his experience using DDSO strategies. They discuss the importance of implants, switching to a staff-driven practice, how implant funnels work, and the benefits of using Dental Expert Marketing to bring in excited, educated, and genuine patients.

 

 

Brady: Hey folks, this is Brady Frank. We are talking to Steve, Mac, and Annie today. I’ve known Steve for about eight years – I need to give a brief introduction today: I was lecturing for a group, they invited me to Maui, we had a great time. Did a little lecture on implant stuff, at that point, I had placed about 9,000 implants, and immediately Steve and I hit it off.

He ended up coming up to my place in Oregon, doing a two-day course – of course, he already had been placing a lot of implants – we’ve kept up the relationship since then.

We’re going to be talking about three things today:

Number one, implants and how you can make implants a much bigger part of your practice

Number two, we’re going to be talking about a staff-driven practice versus a doctor driven practice

Meaning, if you’re sick of trying to get your staff to do things, and spending years or hours or months trying to get your staff to, you know, collect what we produce or get patients scheduled, do same-day treatment, get your collections up, get your overhead down, all those things. Steve, in just two short months, has mastered the staff-driven practice.

We’re also going to be going over marketing

When you’ve got a very a flourishing general dentistry practice that’s doing a lot of implants, you also need a steady stream of new patients. We’re going to talk about marketing, and specifically, dental expert marketing like Steve has done, and expert-based marketing, which Steve has done as well during a talk show. Anyway, we’re going to be talking about dental expert marketing!

Well, so Steve, is it true, eight years ago, is that right?

Steve: Yeah, eight years ago! Yeah, it was in Maui and I’m like, who’s this Brady guy? This character, you know, he knew about implants, and that seemed interesting, I wanted to hear what you had to say, and I was amazed immediately about the simplicity of your implant system.

At the time I was using many, I’ve used several other, products before that and I immediately saw the value. Also, you talked a little bit about some of the concepts you have today and it really struck, I was at that point in my life, I’ve been in practice for a while I was looking for a little change, so I immediately signed up to come to Oregon.

We spent some time out there and did the implant course and I started using your implants right away.

And that’s about the time my implant really took off.

I’ve done quite a few, but I started just doing a lot. Some of the things you mentioned during the course plus the implants themselves, I don’t know, I guess all the timing, just all the stars lined up and before I do and I was doing crazy amounts of implanters and then I kind of did my own thing.

Several months ago, I got some email from you, and you’re going to be in Dallas, and I thought, I’ve got to go down there and said, what’s going on? We reunited and visited, and I heard a little about that just find out I wanted to know more

And so, I was on the plane to Tampa like two weeks later.

The Tampa thing was awesome, it was just awesome too, not only be able to hear what you had to say but the other doctors in the room, they had already done learning the principals, so to talk to them individually and hear about their success stories and how they went about it and the difficulties they had as well, it’s good to hear from them, you know.

Well, I came back really on fire and I said, now listen, if I signed on you better be ready cause I go 150 miles an hour and I’ve been bugging you guys, let

 

In this second episode, Dr. Brady Frank does the math and dentists across the country aren’t making the money they should be. Due to lack of guidance, and flaws in the industry, dentists aren’t retiring with what they thought they would be and Dr. Frank talks honestly about what to do about it. By being proactive and using the cash-flow theory instead of the accumulation theory dentists can take their career to new places and regain control over their income.

 

 

All right folks, Brady Frank here, chapter one of DDSO Strategies or if you’re following along on the blog, that’s wonderful. You may not have a book. We’re going to map some of this out.

Accumulation theory vs cash-flow theory

This is a big one, this is kind of where everything starts, this really is your foundation right here, of which everything else is built off of. Stephen Covey says, “Begin with the end in mind.”

Number one purpose is finding what you love to do in dentistry and having extra income from doing that.

Number two is asking, what does that income look like and how does that affect my retirement? Not only my retirement but what I call total dental freedom. That means if you’re here, you most likely just don’t want to retire from dentistry, you just want to have a more financially secure position.

And so, let’s talk about how one can do this and still just really, really enjoy doing dentistry and maybe cut back a little, maybe retire entirely if you’ve got physical issues, or you’ve got other recreational stuff you want to do, whatever it is, let’s talk about it.

If you’re following along in the book, there’s a graph that we’re going to go over right here. Most traditional financial planners in dentistry today say that you’ve got to save up about $3 million dollars in your retirement account and then put it into fixed investments. So, $3 million, okay, bringing in about 3% in fixed investments is going to give you $90,000 a year pre-tax after-tax. That’s about $45,000 with state income tax if you have an income tax in your state.

So, saving up $3 million will give you $90,000 a year in spending money. Not very much, right?

Most dentists feel like, okay, knowing that I need to save a lot more money. Let’s talk about that. How much do you need to save in retirement assuming that you’ve got to pay taxes after it comes out of your retirement account? Oftentimes, the number ends up being around $270,000.

Hey, could you live off that if you’re debt-free? Maybe? I hope so. Once you’re debt-free and once you’re not doing dentistry anymore. So that’s where we’ve got to begin. Even though you might continue to do dentistry right, you may become disabled, you may get burned out like a lot of dentists do at a certain age.

What does $9 million in the bank look like?

You’ve saved up in your retirement account, in mutual funds, and now you have put those into fixed investments at, let’s say, 3%. $9 million at 3% interest gives you $270,000 and then you have to pay taxes. Assuming about a 50% state, federal, and then any other little taxes that are there, boom, you’ve got $135,000 a year to live off of.

Does that sound like a lot to live off of? Probably not. You’re probably used to living off of a lot more than that as a dentist. That’s pretty daunting. Who have you have saved up $9 million dollars to have your glorious 135,000 after-tax dollars for total mental freedom? That’s right, the statistics are way less than 1% of dentists have saved up $9 million in their retirement account. Yet most dentists would say they can’t retire on 135,000 and after-tax dollars.

So, what does one do with that information?

Let’s first define what total dental freedom is.

Total dental freedom is not where you just retire from dentistry – it’s where the practice of dentistry is a choi

 

In this episode, Dr. Brady Frank addresses the concerning reality that dentists across the country are making and retiring on far less money than they thought they signed up for. While Dr. Frank loves clinical dentistry, he has discovered other ways of using his passion for the dental industry and now wants to share those with you. Find out the strategies that you can use, as a dentist, to make the most from your career, engage your passion, and increase your earnings as well as prepare for retirement.

 

 

Hey folks, Brady Frank here. I’m so excited to have you today for this 30,000-foot view of DDSO strategies.

We’re going to be talking about a lot of, kind of little-known things about how this got started and some personal things about myself that happened about 20 years ago.

So, you’re going to be enlightened today. You’re going to be kind of amazed by a couple of things and more than anything else, I believe you’re going to find your ideal pathway even as we chat today. And of course, we’re going to layer chapter upon chapter, podcast upon a podcast, blog upon blog, and even seminar upon seminar. More information to go on top of this because this stuff that I’m going to be going over and starting to chat about today has taken me about 20 years for me. The journey started in 1999 so about 20 years ago.

How did it begin? Let me hit right into some personal things right here. That’s going to set the context kind of for what we’re going to talk about next.

I was a junior in dental school and I actually thought I might go into pedo or ortho and I had been having some wrist trouble. One day, while golfing, my wrist popped out of place. I had mid-carpal instability to the point where my bones had shifted out of place and were pressing my nerve and I couldn’t feel three of my fingers on my right-hand side. I went to a wrist surgeon and the wrist surgeon basically said, “You might want to pick a different career as a junior in dental school.”

Scared me to death, right? I’m already up to my eyeballs in dental school debt. And I was like, “What am I going to do if I can’t use my right hand?”

So, I was going into the dental school in the evenings, prepping arches of teeth with my left hand. And I’ll tell you what, if you don’t think your first crown preps with your right hand were pretty, I’ll tell you what, mine with my left hand were not good.

I started to research all the different streams of income that one could do as a dentist with a dental degree without using their two hands.

And I’ll tell you what, the results were pretty grim. I’ll tell you what, about the only thing you can do with a dental degree is teach at dental school, and even that you can’t do very well, or pump gas somewhere, right?

In dental school, they teach you one skill. Without that one skill, you’re useless.

So that year, in 1999, I started my journey on income-producing assets and multiple streams of income to produce what I call total dental freedom.

And we’re going to talk about that in just a second, but basically, it totally changed my entire future. 20 years in dentistry, I probably would have holed up in a dental practice and been there for 30 years, like most dentists. Instead, I knew that potentially at any moment, because of my issue with my wrist, that I wouldn’t be able to practice dentistry. So, I had to figure out other ways in dentistry to provide income for my family.

And what I found was just absolutely amazing.

And so if you have ever been bogged down by staff management issues, if you’ve ever been a little upset by PPO reimbursement, if you’ve ever felt the back of your head like, “wow, these corporate DSLs are expanding, is it always going to be great in dentistry like it is right now? What if it’s not so great?” If you ever had a physical issue like your back or your neck doing