Dr. Howard Farran has been lecturing to international audiences on the business of dentistry. With his blunt, practical, and often times humorous insights into the industry’s most controversial subjects, he has been captivating audiences since 1990. He was then, and is still now, driven by a genuine passion for helping dentists provide faster, easier, lower cost dentistry of a higher quality to their patients.
Dr Farran is the owner and founder of the hit vlog series “Dentistry Uncensored with Howard Farran”, where he discusses these topics with some of the best Doctors, Dentists, and Dental Practitioners of today. Dr. Jonathan Cook was recently a guest on his show, and has allowed us to share with you their conversation.
Jonathan Cook: So in a way, I was happy because I was like … I was paying $500 a day. I couldn’t justify keeping them on based on what ended up happening with this practice that I was so poised to assume was going to have plenty of patients to go around. So that associate, another associate retired. I loved him, he was amazing. That was the first practice that we rolled into our original practice. He stayed with us for three years, two years more than he was expecting to stay on. But he just loved it and he loved his dental life once he came on because of how things were set up. And honestly, he was actually making more money with us after selling his practice than his did running his own practice literally just by implementing some simple systems. His collection practices weren’t great either, but man, that was a great …
Jonathan Cook: They should all be that way, but unfortunately they’re not. So I’ve seen them go sideways, I’ve dealt with lawsuits. And like I said, I just had a very fast learning curve with that original practice that I bought in Miami, merging two practices into that one. If you want to get into details there, I got plenty of great stories.
Howard Farran: Well, to avoid those issues, what dental law firm do you use for mergers and acquisitions, and do they do any forensic accounting and auditing responsible for those numbers?
Jonathan Cook: Good question. I don’t have a dental law firm that I deal with. I have a law firm that’s down the street from us, an old friend. He’s done plenty of dental mergers and acquisitions over the years. He doesn’t strictly do dental mergers and acquisitions. I had a law firm up in Del Rey for a little bit, but I just felt like there wasn’t a whole lot of knowledge base that came from that. And as far as forensics go, I just don’t feel like anybody would look at it the same way I did. And I really thought that I was doing everything right. And I had a great template to work from. I was able to dig deep into the patient charts, see what kind of pending treatment, look at old X-rays. I mean, I was looking at X-rays on a view finder for crying out loud for some of these offices because they just didn’t have digital dentistry.
Jonathan Cook: So you can imagine how tedious that would be. And I’ve said no to some practices over the years, too. I think some of those … Those are some of my best decisions, where the times in which I said no, it doesn’t make sense for X, Y, Z reasons. But to answer your question, you gotta dig deep into those charts, you gotta ask, if you can ask. Get some sort of inside information with the staff. And I’ve done that over the years. A great way to go about it is to have a dental supply rep. I mean, a lot of these guys know that world better than anybody. And they walk into an office, they know one that’s successful and one that’s not just by the energy when they walk through the door. So we’ve got a guy that we rely heavily on for that.
Jonathan Cook: So you put all those things together and usually it’s a recipe for success.
Howard Farran: What supply company is he with?
Jonathan Cook: Patterson.
Howard Farran: Patterson?
Jonathan Cook: Sorry, he’s with Henry Shine now. He was with Patterson.
Howard Farran: Okay.
Jonathan Cook: He’s now with Henry Shine.
Howard Farran: Yeah, my reps in 31 years has worked for I think three of them, Shine, Benco, Patterson. But kudos to you, you’re looking deep inside these practices numbers. And a lot of my homies listening to you right now that gotta look deep into their soul, listen to what this business guy is saying, how he looks into the numbers. I mean, I hear people working as an associate and it doesn’t matter if they’re a DSO or a private practice, and they’re talking crap about it and all this stuff. And it’s like, “Okay, well, what’s the code for a crown. How many percent …
Howard Farran: They don’t know any numbers. They know no numbers and they just want to go from [inaudible 00:28:17] to Spear, to Panky, to Ross, now all these people. And it’s like, “Okay, you love your art. I love that, but you don’t know any of your numbers.” How do you compare mergers and acquisitions, rolling them into your existing office versus just spending that money on marketing and advertising. How do you know which would be lower cost to get a per capita head into your practice, marketing or mergers and acquisitions?
Jonathan Cook: That’s a really good question. I like the idea of having multiple funnels. What can go wrong? Let’s say you’re ramping up your marketing efforts and you’re seeing good return on your investment. If you buy a new practice, let’s say, and let’s say you’re doing a million dollars a year, and you buy a practice that’s doing $400,000, let’s just say. And you know that you can take that $400,000 to $600,000. Now you’ve got a $1.6 million dollar practice. How can you go wrong by increasing your bottom line, what you’re taking home, and now shuffling that money towards marketing efforts, as well. It’s like a steam roller that just keeps generating steam. So I have to say I feel like on both fronts I’m going to always attack the marketing and I’m also going to always have the feelers out because you never know when that next practice comes up.
Jonathan Cook: So I don’t weight the two against each other, I just know based on history just how profitable they can be. And so most often it’s how comfortable do I feel with the bank account. How much profit have we had over the last six months, over the last year? We purchased two practices in 2016, two in 2017. Once 2017 happened and that last one being the one that we had all those troubles with, you can imagine I was like, “All right, 2018, we’re going to hold up here. We’re going to take a deep breath, get things back into gear, get that negative energy out of the office, and start rolling again. And so we’ve really ramped up our marketing over the last year because we weren’t acquiring practices.
Jonathan Cook: So look, it all depends on what’s on the plate. If there’s a practice that …. If I’ve been courting a dentist for a number of months or years, I got some guys that are online for … I’ve been calling and in touch with them for three, four years. You just never know when that’s going to come. But you speak of 2008 and how everything took a massive blow. A lot of these old timers that were … They were set up to retire. They were like, “Okay, I’m good.” In 2008, 2009, 2010, whatever. Right around that time frame, and then what happened? A lot of them lost massive, massive amounts of wealth in that downturn. And so now there’s guys that were poised to retire in 2008, ’09, ’10, even ’11, ’12, you name it.
Jonathan Cook: Now, not only are they having to scale back and say, “Wait a second, I gotta change what my expectations were of retiring,” but now they’re even more afraid to sell at three, or four, or five years down the line because they’re like, “Well, wait a second, all this money that I’m putting into stocks, or real estate, whatever it might be. What if there’s another downturn?” So you’ve got all these scared turkeys out there that are also way up there in their years. And it’s a recipe for it to have a lot of really good quality offices out there that you can merge into yours because they’re hanging on for dear life. And they should’ve retired back in 2008, ’09, or ’10, but they’re still plugging along because they’re afraid and they lost so much wealth.
Jonathan Cook: So it’s this perfect storm of these guys. I mean, they’re 80 years old, 85, and you’re like, “Why are they still hanging on?” And for a lot of them, that’s the reason.
… Continued in Part 5 …