DSOPro: How did you get into dentistry and what does XPRT DSO focus on?
I started a commercial finance company in 1990 and was doing healthcare and franchise financing through 2015. During that time, I saw companies like HPSC, Matsco, my company, dentfinance.com, Sky, etc., either acquired by a bank or go out of business. That’s when things really changed for me, and I started doing dental merger and acquisition work in New York. Over the years, I had made acquaintances with some very senior DSO folks, whether they were acquiring offices we were financing, or were selling offices that we were financing.
The toughest thing for emerging dental groups tends to be finding a good lending partner that can grow with them and gives them a good track to run on, so they know what deliverables are necessary to continue to grow. I have been working in the dental community for more than 30 years and have originated and funded more than $800 million in dental practice loans with both group and solo practices. Dental acquisition represented 87.3% of my finance company.
At XPRT DSO, we are working with emerging dental groups and DSOs in various areas—with some representing the sale side and a group identifying practices to acquire. We help clients to scale, find locations, and finance them. We recently did an $11,150,000 refinance of $7 million Senior Debt with $4 million for acquisitions and an $8.2 million loan that was a refinance and acquisitions.
We also do C-suite integration and management and can provide a virtual C-suite to any size group, which is what we are providing one very notable client now. So, we’re staying busy, and it’s diversified. Fortunately, we have the diversity within our group to address each one of those areas with a strong track record of knowledge and success.
I primarily work with the acquisition committee, identifying a model forward. When I got involved, I looked at practices all over the country and found there was no area of concentration of offices. I recommended focusing on area development because it lends itself to synergies within the group, among other things. For example, staffing is a big issue right now. It’s beneficial if your offices are within driving distance of each other so if somebody calls out, you can move someone from one place to another rather than stressing the group or having to cancel patients. As for advertising, you can take advantage of local radio and TV to develop name recognition within a community once it hits a certain density in population. So, there are many reasons to develop those economies of scale, as they say. That growth is what the acquisition committee is focused on.
DSOPro: Tell us more about your company and your team.
I own the company and have seven advisors who work with us full-time based on any particular project. I was able to put together a very accomplished group of people who have three or more decades of experience running successful DSOs. They include a former COO, CEO, CFO, CPA, Analytics, and others with 30-40+ years of experience in the dental and medical space. Some have grown DSOs from double to triple digits. Some took one of the largest DSOs in the country through sale, selling to private equity and then remaining on board as they grew. Everybody on the team has worked with very successful organizations in each of their respective fields.
DSOPro: How do you approach projects?
When you come into a situation as a consultant, you’re the outside person. Everybody is concerned about what’s going on, and regardless of what you say, everyone forms their own opinion.
The first thing we do is try to make everyone feel comfortable. We say, “Listen, we’re not here to downsize you, we’re here to help you expand. If you like what you do and you want to stay in your position, nothing’s going to change. But we will be creating some management-level positions natural to growth as we scale the organization. If you’re interested in those positions and have the qualifications, those opportunities may help you to grow along with the organization.”
I have worked with C-level people who are very inexperienced and had to try not to make waves while figuring out how to help them be more efficient. It’s awkward and uncomfortable. Eventually they feel threatened, and it can become a contentious situation. It doesn’t happen often, but when it does, it’s tough to watch someone not take full advantage of a great opportunity.
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One of the problems with dentistry is it’s very profitable. You can do it all wrong and still make money. It’s hard to explain to someone what they’re leaving on the table when they feel like they are already doing extremely well. If someone feels comfortable making 18% in a general dentistry practice and lacks industry knowledge to know that is very low, what can you tell them? Or situations where adding a specialty would increase that to 30% at least, they may look at it and say, “I have a bunch of offices and money, what can be wrong?” I see that often. We pass on four out of five people who approach us to work with them because if we can’t help them, we don’t want to waste our time or their money. People who want to scale their business sometimes don’t believe it when we do a baseline assessment of their organization and outline for them what the issues are. Sometimes they say they or their staff members just don’t want to make changes.
People must be willing to share and put the best interest of the organization before themselves. Everyone says that it’s the culture that is so important, but there really needs to be a heartbeat in the practice that already either exists or can be developed. You must convince people to leave personal conflict or issues at home. Bringing them into the office is counterproductive to productivity and can negatively influence the attitude of all the people within the organization.
You want everybody to be thinking about one thing: the best patient experience and the best care they can deliver to patients. Focus on every patient becoming your marketing department. Sometimes doctors will try to integrate specialty work with nomadic specialists rather than refer patients out. That will drive revenue, but the things that are free, they often don’t take care of. When a patient walks into the office, tell them how important it is to you that they put their faith and trust in you for their dental care and if there’s ever anything you could do to enhance their experience ask them to please share it because their opinion is valued. The greatest compliment you could get would be for them to refer their family and friends. In one 3-minute conversation while walking somebody back to a dental chair, you can ask for referrals and make them feel good about themselves relative to the relationship that they have with you and your office. That doesn’t cost anything, just a little bit of an investment in time and making conversation.
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DSOPro: What kinds of trends are you seeing?
People are being attracted to DSOs now from other industries and are bringing in experience they’ve managed to accrue outside of dentistry, especially on the IT side. People say that dentistry is always behind the times and we’re just now seeing this very large tech movement and getting into advanced IT and AI.
The integration of medical and dental is also getting very big. The interesting thing is, when wasn’t the mouth part of the body? From a medical and psychology standpoint, I find it very interesting that the oral-systemic connection is becoming a hotter topic. I think that’s going to continue to grow into integrated medical/dental offices.
It’s nice to see the recognition of women in dental, especially in the DSO space. There seems to be a focus or spotlight shining on that area.
Another trend I see is that when groups get to a certain size, someone comes at them with an offer. They’ve developed a model, are making money, doing very well, managing efficiently, then they get an offer, and they sell. Maybe they should have continued doing what they were doing, continued to scale, and looked for same-size merger partners or smaller groups that they could fold in. But sometimes people get into the DSO space and realize that they’re in over their head at two, three, or five locations and feel overwhelmed. For them, finding someone to acquire them is certainly the best-case scenario.
DSOPro: With your experience, you probably have a lot of advice and wisdom to share.
One thing I do is look at where people are in their life cycle. When I meet with a doctor who has small children, I ask if they’re really at the right point in their life to be undertaking a very large commitment of time, energy, resources, and capital to do an expansion. You can become consumed with the work. I can tell you from personal experience, you need to spend time with your children. Those are times you don’t get back. I try to share that perspective with young parents who are also entrepreneurs that they must make sure they vertically integrate the staff to support them so that they’re not consumed with what’s going on in the growth model. A doctor who is having difficulty at home can’t continue on track.
Begin with an end in mind. Things will change as you proceed, but having a focused vision is a great place to start. I try to share with people what they don’t know so they think about it coming into this process. I think that’s what differentiates a quality advisor, being able to say the transaction is far less important than having a sound track to run on and completing the journey we embarked on. Hindsight’s 20/20, right?
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More from the Newsletter
Frank Balkum has been serving the dental community for more than 30 years. During this time, he has been Founder and CEO of a healthcare finance company. Frank has originated and funded more than $800 million in dental practice loans. He has worked with single practice owners purchasing their first office to emerging growth practices in scaling their operations or strategic market exits. He has worked extensively with DSOs of varying size from some of the largest in America to newly formed multi-practice operations looking to scale or sell.
Mr. Balkum has assisted the expansion of these groups as well transitions out of markets. He has worked with Private Equity firms in acquisition and/or sale of multiple practice offices and large group DSOs looking for tuck-ins. Mr. Balkum is a member of the PVSG, a national association of brokers, lenders, and appraisers charged with standardizing dental practice valuations. He serves to leverage his diverse knowledge of capital markets to address the needs of clients across the Group Dentistry spectrum.
XPRT DSO Advisory Group
XPRT DSO Advisory Group is a team of seasoned DSO/MSO professionals, each with more than 30 years of experience in their respective field. XPRT DSO has a team member to cover every area of growth, management, financing, acquisition, and sale of emerging and well-established dental groups. They provide Baseline Assessments to help sharpen the focus and maximize market opportunities as well as point out challenges or deficiencies. They cover all facets of multi-practice growth and management up to and including providing a complete C-suite of operational management. They can be reached at www.XPRTDSO.com.