Episode #346: Transitions & Insurance: How PPOs Impact the Sale or Merger of Your Dental Practice

Intro: This is the Less Insurance Dependence podcast show with my good friend Gary Takacs and myself, Naren Arulraja.

We appreciate your listenership, your time, and most of all, we appreciate your intention to reduce insurance dependence in your practice. Our goal is to provide information that will help you successfully reduce insurance dependence and convert your practice into a thriving and profitable dental practice that provides you with personal, professional, and financial satisfaction.

Michael Walker: Well, hello everyone. Welcome to the Less Insurance Dependent podcast, your trusted source for insights, strategies, and expert advice to elevate your dental practice and career. I’m Michael Walker, your co-host, and I’m thrilled to bring you another value-packed episode with not just one, but two incredible industry experts. Today I am joined by Kim McCleskey and Kyle Francis from Professional Transition Strategies, who bring deep expertise in dental practice transitions—specifically how insurance participation can significantly impact the sale or merger of your dental practice.

On this podcast, our goal is to equip dental professionals with the tools and knowledge to take control of their practices and careers, whether it’s enhancing patient communication, optimizing a fee-for-service model, or preparing your practice for a successful transition. We’re here to help you navigate the journey beyond insurance dependence.

Before we dive into today’s episode, though, I wanna share an exciting opportunity brought to you by Ekwa Marketing, who is the, uh, sponsor of this podcast.

Michael Walker: Ekwa Marketing is a digital marketing company, and they are offering you a free marketing strategy meeting that is valued at over $900. When you book this meeting, Ekwa will provide expert recommendations to attract high-quality new patients to your practice, rank number one on Google—I really like that—within your local community, and consistently increase the number of new patient calls month after month.

I can tell you this is an incredible opportunity for your practice’s growth. There’s no strings attached, there’s no tricks to this. This is just simply Ekwa Marketing doing their part as they choose to sponsor this and to be part of your industry. So don’t miss out—book your free meeting today at your convenience. All you’ll need to do is go to the website: www.lessinsurancedependence.com/marketing-strategy-meeting to get started.

Now, wherever you’re picking up this podcast, the link will also be there.

Michael Walker: So that’s a long link, so don’t worry too much about getting it here.

So let’s get into today’s episode. As I said, I’m thrilled to welcome Kim McCleskey and Kyle Francis—seasoned experts in dental practice transitions with Professional Transition Strategies. With years of experience guiding dentists through the process of selling, merging, or acquiring practices, they have a unique perspective on how insurance participation, particularly PPO plans, can directly influence the value, buyer interest, and overall success of a transition.

Their qteam has helped hundreds of dental professionals navigate the complexities of practice transitions, and today they’re here to share their insights on how reducing insurance dependence can actually strengthen your position when it comes time to sell or partner.

In today’s episode, we’ll be discussing how a dental practice’s level of insurance participation impacts its valuation and buyer interest, and what buyers—including DSOs—look for in a practice’s insurance mix.

Michael Walker: How transitioning your insurance model can affect your marketability and deal outcomes. Common misconception—uh, pardon me—common misconceptions sellers have about insurance and transitions. And finally, how insurance participation influences deal structure and post-sale terms.

Now, we have both Kim and Kyle. We’re gonna just have a three-way conversation here, but I’m gonna start out with Kyle. Kyle actually is the founder of Professional Transition Strategies. And I wanna just—I always like to kind of get right to the personal side of it, Kyle—and just kind of hear from you.

You know, I was thinking—I said before the podcast—I was thinking of that old commercial. You may be old enough to remember this: the guy from Remington. The commercial came on, he says—holding a Remington razor—he says, "You know, I like this razor so much, I bought the company." In your case, this—uh—you, there must be a passion story behind it. I had this passion for making a difference, and I created this company.

So, Kyle, can you just tell us: what was your passion behind the launch of this company, and how does it play out in today’s marketplace?

Kyle Francis: Yeah. Well, uh, Michael, it’s a pleasure to be with you. Thank you very much. I appreciate that as well. So, um, maybe to give a kind of a quick synopsis, uh, I was born into a family of entrepreneurs. My dad was a serial entrepreneur—started up a whole bunch of different companies growing up. Some of ’em worked, some of ’em didn’t. And so we were kind of on a rollercoaster growing up.

I got to see him go through the sale process of quite a few of his companies as well. And so I came out of high school going to college very much thinking that I wanted to get involved in institutional capital, just because that had been quite a few of the sales that I’d been, I guess, adjacent to, or parallel to, along with my dad.

Kyle Francis: So, I very much thought I was gonna come out and go work with an investment banking firm. Going and working with Goldman Sachs was kind of what I was thinking. I had a term sheet to go and work for them. I spent a week-long shadow program with their team up in Dallas, saw the way they lived life, and it just wasn’t quite what I wanted. You know, hundred-hour workweeks, 200 days a year on the road—it just wasn’t quite my style for a family, those kinds of things.

So, there are two ways of getting into that world: one, being in the investment banking side; two, specializing in an industry. And I had no tie to an industry at all.

Kyle Francis: One way is getting involved in the investment banking side. The other way is getting involved in a specialized industry. So I took a couple hundred interviews out of college. Had no tie to dentistry at all, but all these little entrepreneurs out there—some of them knew what they were doing, many of them didn’t—and I was like, well, shoot, I can help ’em, if nothing else.

So I went on board—and I had to learn it first—so I went on board with Sullivan Schein at the time, now Henry Schein, and started to build offices from scratch out in West Texas. I’ve got a baby face; people weren’t taking me very seriously. So I started to contract work: I’d do lease renegotiations, buy-sell agreements, associateship placements—really anything I could get my hands on that people would take me seriously for.

Kyle Francis: By 2007, I was getting more calls for that type of work than anything else, so I started up a company to specialize in transitions and transactions in the dental field. It just so happens that that mirrors the consolidation wave of dentistry. I would love to say that I was prescient—I had no idea that was coming—but it just so happens that somebody with that type of mindset is decently valuable within this field.

So anyway, over the last 17 years, I’ve grown the company to close to 30 folks, and we’ve done sell-side mandates on over 550 transactions. So it’s been fun and interesting, and honestly, a blast to help doctors out.

Michael Walker: That’s a great story. I can totally identify with the entrepreneurial side. I was like your dad—my family’s been through a lot of my creative journeys, that’s for sure—but we ultimately came out together and in a great place. But yeah, when you have an experience like that, you really learn—the word that jumps to mind, and I’m sure you can identify, is resilience.

You have a level of resiliency that’s kind of that “water off a duck’s back” kind of thing. There’s always a storm around the corner, it’s just that you know it’s not gonna take you down.

But thank you for sharing that, Kyle. That just really sets the tone for our conversation.

And I know Kim works with you—she’s one of your team members. And Kim, the first question I’m gonna throw to you is: you know, how does insurance acceptance impact dental practice transitions, and why is this becoming such a critical consideration for dentists landing their next chapter?

Kim McCleskey: Uh, I think, I think, uh, oftentimes it’s underestimated what kind of impact insurance PPOs are making on the bottom line. And, uh, yeah, it makes a huge impact. And having the knowledge on the front end of a transition is really, really important.

I’ll just—just a quick example, and this is one that we, uh, I know Kyle comes across frequently. Just this morning, I did a prospectus review for an orthodontist who is heavily, heavily PPO-contracted, and all of her numbers are impacted by that. You know, all of them—her payroll, her rent—everything is so impacted because she’s writing off so much of the collections, right? Because she’s contracted with these insurance companies.

And at the end of the day, the end of the story here is that a bank is not gonna lend to a buyer based off of her financials and her lack of cash flow. And yeah, it’s just—it can be really devastating.

Kyle Francis: Yeah, I agree, first and foremost. And it’s funny—I would say that, you know, it seems to me like there’s a lot of different ways of skinning the cat within this industry. I’ve seen Medicaid practices work, I’ve seen PPO practices work, I’ve seen high volume and low volume work, and specialty practices and all sorts.

And really, whenever you look at it and you’re coming up with this strategy of, “Hey, this is what I want my life to look like going forward,” it is interesting how few people end up thinking about the insurance side of the business to start with.

And the reason being is it really can jumpstart you to start with. You know, you get a whole bunch of patients you might not have seen otherwise, right?

Kyle Francis: You get all of these different, uh, cases and types of people that maybe you wouldn’t have seen otherwise. But I look at that as—it seems to me like the folks that I’ve seen who are very happy with the decisions that they’ve made, they’ve parlayed that, right? And they’ve taken that experience and they’ve been able to specialize, in terms of taking out that marketing effort and just repurposing the marketing effort in way more effective ways, you know?

And, um, so yeah, we do see a huge amount of value differential there. And the reason being is that, you know, if a certain payer is gonna pay you $500 for a certain procedure, well, all of your costs are essentially gonna be the same whether they’re paying you $500 or if you’re charging $600, $700, or $800 for the exact same procedure.

So essentially, it’s a really, really nice way of preserving margin there, as long as you can keep the patient flow up, right? And sometimes we do see the other side of the spectrum as well. But as long as you keep that patient flow up, then it can be a really, really great choice to make from a margin preservation perspective, which impacts the value of the practice directly.

Kim McCleskey: Yeah. You know, can I add on to some?

Michael Walker: You go right ahead, Kim. Sorry.

Kim McCleskey: Michael, oh no, I just wanted to add on to—you know, I think there’s just such misunderstanding about reimbursements just in general. Like, nobody’s analyzing what these reimbursements are. And the industry is telling us that somewhere between 20% and 50% is common. Like, adjusting 50% off of a procedure is not nothing—it’s huge—and it is impacting the bottom line.

So I think just being aware and analyzing what those reimbursements are is critical for somebody who—well, at any point in your career—you should be looking at that. But if you’re looking for an exit, and wanting to make sure that you’re getting as much as you possibly can out of your business, this is something that I think has to be looked at immediately.

Michael Walker: Thanks, Kim. Thank you, Kyle.

I was thinking as you’re talking, Kyle and Kim, and I look at, you know—what if we haven’t had anybody that was just getting into the business online? We probably—we may very well—but it’s more likely people are looking to transition or sell. But I’m thinking, you know, like that’s always about: so what’s your vision? Like, what are you passionate about? What does that look like? What do you want your story to be in 5, 10, 15 years—and reverse engineer that to today?

And insurance has to be part of that story. And if it’s not, then you’re gonna find yourself in that uncomfortable place where you’ve got margins that just don’t balance in the business.

And as you guys are talking, I was thinking—when I think of sales mix, and I think, you know, there’s always things that have lower margins and greater margins. You know, I used to own a chain of flower shops, and we did a lot of funeral flowers.

Michael Walker: That was—they were all wire flowers, all that stuff you do. And it’s a loss cost. It’s just a very expensive business because there’s huge cuts taken off by the time it hits your floor.

Unless you have—but what it also does though—it actually creates a higher-level profile of the business in a larger market that actually builds the other better-margin sales. So we looked at that as a holistic thing. How much do we want to have of that? And can we afford and carry the product to align with that? But how’s it gonna lever the gains we want in the better-margin products?

Does that make any sense in this industry?

Kyle Francis: 100%, yes. And maybe I’ll give an example of a time that I don’t see that very often, right? Which is going to be someone comes out and—I think there’s a difference between utilizing insurance for what it is that you want, and then, on the flip side, being insurance dependent, you know?

Being insurance dependent essentially means that you think all of your patients are coming because they’re looking for you on that list—that you’re one of those small number of providers for that insurance company within that localized area. And when you think about that—insurance dependent—it essentially becomes a crutch, right? Because you’re not doing the other things that you need to do in order to get the types of procedures, the types of patients that you really, really want within the practice.

Kyle Francis: Now, both of them can work together very symbiotically if you go in with a plan—just like you talked about, reverse engineering. We talk about that a lot. Making sure that they do come out with an idea of what they want their life to be operating as on the back end.

And yes, in answer to your question, can you end up utilizing insurance for those types of procedures? 100%. It can work out very, very nicely. However, you just have to be thoughtful about it.

And so I love the idea of beginning with the end in mind, right? Just like coming up with whatever else—whatever you need to do—in order to achieve those goals into the future.

Michael Walker: Yeah. And I think that’s—so in that case, we’ve got people on the line that are probably thinking, “Well, that’d be fine if I was in that position, but I’m not. I’ve now got this—this is what I’ve got in front of me. How do I sort this out? How do I solve this dilemma? I’m heavily dependent.”

You know, whether somebody’s thinking of a sale that’s in a fairly short cycle is obviously different than somebody longer-term, versus somebody just beginning. But could you guys just speak to—like, if I was going to say, “I need help,” and of course, you guys are experts in that—and we’ll be giving your website in a little bit—but at the end of the day, we’ve already got two experts here who can help solve this. You’re probably gonna need to talk to them.

But can you just give us an overview—what would be the next straight step if I’m going to start making some shift here, making some change? What do I need to do? What does that look like? Is that a fair question?

Kim McCleskey: Yeah, absolutely.

Look, I just feel like it’s very complicated. It’s very complex. There are a lot of different, constantly changing insurance carriers—there are just so many things that are constantly evolving. And I don’t think people who are, you know, just working insurance on the day-to-day basis—or a clinician who is just head-down producing—really has the acumen to understand the negotiations.

One thing is having an idea about reimbursements and what that looks like. I always recommend that people reach out to those who are specializing in PPO contracting. And really having a full analysis of the insurance carriers that you are contracted with so that there can be a deep-dive analysis of exactly where you are.

And then to get the advice about—drop this one, add that one, what have you—based off of your location and the type of procedures you’re doing. All of those things, I think, are really critical. And I’m making those recommendations pretty much weekly.

Kyle Francis: Yeah, it’s funny. I would say—I, Kim, I couldn’t agree more. I think that you probably have three choices if you end up being in a place that you don’t want to be, right?

And your first choice ends up being, “Alright, well, what can I do to change?” And you can choose to change yourself. Sometimes that means: “I need to be able to relate to patients better on a chairside basis.” Sometimes that means: “I need to revamp my marketing in order to get the types of patients that I think I can relate to.”

Sometimes it’s going to be: “I need to go out and get trained to do different types of procedures to stretch myself and be more passionate, and I’m going to be able to show passion to patients better.” All of that has to do with changing yourself, right?

Kyle Francis: The other way is going to be—well, maybe you don’t change what you have. The practice you’ve developed over time ends up being something that can be really good. And what you really need to do is change the metrics within the practice in order to make it work better for you.

Sometimes that’s going to be: “Well, what if I’m overstaffed in these certain areas?” Or, “What if I need to add these other hygiene hours because the type of patient population I have really needs to come during after-hours?” Or, “What if I should bring on a consultant to help me optimize these PPOs?”

And then the final one—which I think is really hard to do, but I think it’s important to understand—is going to be: “What if what I really need to do is change my expectations?”

If your expectations need to change in terms of the type of practice that you have, you can either be okay with those new expectations or go ahead and sell the practice and get to a place where you can do better with them. So I think between those three buckets, if you can have that type of introspection, it can work really, really well for you over time.

Michael Walker: Thanks, Kyle. Thanks, Kim.

You’re talking about specialists, and I’m thinking—you know, I’m not a lawyer. So I need to hire a lawyer for specific tasks and skills. I was fortunate—my company, which I sold just a year into COVID—we actually lost the whole company but repositioned it online, and then an American company purchased it.

But the whole transaction would not have happened as well as it did if I hadn’t paid upfront for the legal support I had in building the deal structure that we had in place, and how we had our share structures, as well as having the accountants and the support for that. And I had a digital team that could actually translate our product from in-person to online and do all those things.

Michael Walker: And, uh, you know, that’s—you need specialists. Doctors, yeah. I always say—you’ll get a kick out of it—I say any medical professional is really an accidental entrepreneur, ’cause they don’t—that’s not their thing. If they took a business course, usually it was by mistake.

And so, it’s not their fault. That’s just their gig—that’s their thing. And so, as I just heard, you know, this is very specialized. And I think that the reaching out part is so critical. But it’s not just reaching out from a standpoint of asset management or protection.

What I’m just hearing Kyle and Kim say—it’s about reaching out to have a different perspective on perhaps who you are, and why you matter, and what you want to do, and how you want to do it. And more of that holistic look.

I always think of it—you guys might appreciate this—if you think of a tray of fruit, and you’ve got pieces of fruit on it, and you’ve got a couple lights shining on it. You, as an owner, can see that fruit—and that’s the way you see it.

Somebody like Kyle or Kim comes along, and they move the lights. They don’t tell you what to do. They just move the lights, and you see it differently—and have different choices. It’s as simple as that.

But it’s so hard to see that from inside, because you don’t know how to move those lights. No one’s ever shown you. And that’s the gift—that’s the skill set—that we bring as coaches, as consultants, to the table.

Kyle Francis: And Kim—so, I definitely agree with you.

So Kim, maybe I can kind of—if I can say one thing and lead you into another one—I think this would be really, really good for your listeners. Which is going to be: look, I think a lot of this is going to come down to analysis and implementation, right?

The first part is—you have to understand what it is that you’re working with. And so, that’s why we recommend that everybody should have an appraisal of their practice. That appraisal of the practice should definitely go inside of a trust or inside of an estate that you end up having set aside for your family—those kinds of things.

It’s a legal document. It’s a really, really important thing to have.

Kyle Francis: I have appraisals done of this company often, right? And the reason being is I want to have a good understanding of—if something does happen to me—I want to make sure that everything is going to be taken care of on the backend. Not just for my family, but also for all of the folks that work with me as well. You know, this is really important stuff.

And then once that analysis is done, I think the second part is going to be—I’m gonna use your “shining the light” analogy, because I really like it. I might actually end up using that in life, by the way. But shining the light a little bit of a different way, which is going to be—sometimes that’s a really hard conversation.

It might be like, “Hey, by the way, this third practice that you developed because you really wanted to kind of create a little mini empire—it’s not working. It hasn’t worked for six years. The chances that it’s going to work going forward are actually pretty slim, and here are the reasons we think it’s going to be slim.”

Sometimes that’s a hard conversation like that.

And sometimes it’s a really great conversation. It’s like, “Hey, you talk to somebody who seems kind of depressed about their situation. You go into it and you’re like, ‘By the way, you’re in the top three percentile of all practices we see in these different metrics. So you’re really working with gas here. If you just tweak these couple of things, you could be in great shape.’”

And then—maybe, Kim—can you talk about kind of our advice on how to tweak those things?

Kim McCleskey: Yeah. I’m not sure if I know where you’re going with that, but I think when I think of tweaking, you know, it’s—sometimes it’s really minimal things. It’s just taking a look at your dental supplies and your labs. Like, look at these key indicators, right? There are expenses that really move the needle.

And we have to have conversations oftentimes about payroll. Are we overstaffed? Because that’s a real thing—especially since post-COVID. We see it a lot because people are nervous. They’re nervous to lose employees because they’re so hard to find, and then they’re overpaying them because they don’t want to lose them. And they will—they’ll leave for 50 more cents an hour down the street, right?

But looking at that, and looking at A/R, for instance—that’s another huge one—where dentists are relying on their staff to collect and manage their receivables, but they don’t know how to really hold them accountable to that.

And making sure that you are collecting 95% at least every month of what you’re producing is really going to impact your bottom line. And also give you—like, if that’s not your goal—we want them to know: this is really important. And here are some things you should perhaps consider, as far as resources or what have you, if they need help with that.

But I think A/R is huge. Payroll is huge.

Yeah—what am I missing, Kyle?

Kyle Francis: No, you’re absolutely right. I mean, it could be any of those things. One of the other brokers on our team uses this term—and I’ve co-opted it—which is: treatment before diagnosis is malpractice, right?

And so, like, if we’re giving you advice, we better understand what the background of it is going to be before you end up getting the advice. Because otherwise, you’re just kind of shooting in the dark, you know?

And I do think that you come into the scenario with many more arrows in your quiver if you actually understand what the bones of the practice are going to be—before you end up getting that advice on the back end.

Michael Walker: Yeah, that’s—yeah. Caveat emptor.

Kyle Francis: Mm-hmm. Very true.

Michael Walker: It’s so important—due diligence is the word that we talk about. But, you know, it’s interesting—in something like this, and that’s what Kyle was talking about: due diligence.

There’s a business side of it, there’s the numbers side of it, but then there’s the human side of it. You know, what do you really—what do you really want?

Kyle mentioned before he came on, he didn’t want to go to a job that was going to be 100 hours a week because he’s got a family. Well—yeah. What does it look like downstream, and how do you want to live?

And I think that’s one of the things—I mean, sometimes you have to have that hard look. And it’s awfully hard to have that look on yourself. I mean, as a leadership coach, I deal with this all the time.

And I talk about—have you had a look lately at how well your unconditional curiosity is working for you or against you?

Michael Walker: And I do—you know, unconditional curiosity is curiosity without opinion, expectation, and judgment—starting with yourself. And there’s the problem.

And it’s just having a real hard look. That’s the gift of a coach or a consultant: they can take you into an agenda-free space that allows you to look at things in a way that you couldn’t otherwise. And you don’t really have that space anywhere else in the world—even in your marriage. It’s different. It’s just different.

So, I wanna hit a couple of questions that I have here, that I think we—one of them here is: What common misconceptions do sellers have about insurance participation that affects their transition options?

I really like that question, ’cause I have no idea what the answer is.

Kyle Francis: Kim, you’re so good at talking about this.

Kim McCleskey: No, I mean—can you repeat the question? Yeah, I think you cut out. Go ahead.

Michael Walker: What common misconceptions do sellers have about how insurance participation affects their transition options?

Kim McCleskey: Yeah. Well, I think from an operational standpoint, there are just processes and systems that are widely accepted. And again, I think it just goes back to not educating yourself on these reimbursements, right?

At the end of the day, I think they have no idea how much they’re writing off—because nobody’s looking at that on a monthly basis. And I think that’s—in my mind—that is the thing I see most frequently: they really have no idea what they’ve gotten themselves into, what they’ve signed up for.

And until they come to us and we create a prospectus, and we start to review all of this—and now none of it’s adding up—and we have a peer review of every prospectus that we do. We all put eyes on it, and everybody puts their heads together. And, yeah, I think it’s in those moments where we start to see things like that.

Kyle Francis: Yeah. And I think that sometimes it’s hard to see the forest through the trees that you’re in. If you’re working on your own practice, that is your practice, right? And so those are the conceptions you have at that point.

It’s interesting how often we end up talking about how they stack up against other like practices. Like, “Hey, these are different things that are working really well for you. These are the things that it seems like you’re having a hard time with,” that kind of stuff.

And it is often that we hear things like, “Oh man, I had no idea,” or, “This is great,” or, “Oh my gosh, I really need to work on these things going forward.” And I think the misconception often comes down to—maybe what Kim was talking about—which is: understanding what reimbursement actually looks like.

Kyle Francis: Uh, it is pretty darn often that I end up talking to someone who says, “Hey, I’ve spent all of this money on Dawson and all of these different really, really high-end type of programs—and how is somebody else going to be able to come in and do the type of work that I do?”

It’s like—well, there are people that are going to be really, really passionate, just like you are, about the type of dentistry that you produce. And there’s going to be buyers that are out there for that.

The exact opposite, maybe, is going to be: how often can somebody get on roller skates, you know, and end up seeing five prophy patients an hour, along with providing treatment, right? And is that something that someone is going to want to do in the future?

The interesting thing is—we don’t necessarily see an enormous correlation between the value of that asset, one side or the other. It comes down to: who is going to be interested?

So it’s really going to be: who is that buyer, and why might they be interested? It kind of comes down to their investment thesis—what it is they’re wanting out of the practice. And then I think that provides for that type of interest going forward.

Michael Walker: Yeah. Yeah. That’s really good. I think that “Who is the buyer?”—I mean, if it’s just strictly an asset purchase, it’s an asset purchase. There are no people, it’s an asset. You’re buying whatever that looks like.

Is it a brand purchase? Well, that’s got—in today’s world—that’s got digital capitalization for sure, there are things to look at.

But when you bring this whole thing together as a practice—that idea of, “What does the whole practice bring that gets you a great cap rate?”—how do you entertain that thinking? Who is the buyer?

I know, often, I see people take the Heinz 57 approach—just throw it all out there. It’s the spaghetti-on-the-wall strategy, or the shotgun, just spreading it out all over the place, as opposed to really asking, “Who is the market?”

And I think that’s what professionals bring to the table—you can start to narrow that focus and drill down.

But speaking of that—I was thinking, the reason cap rates came up is because I was looking at a question here, and I’m intrigued about this. I’m sure some of our listeners are as well:

How does a practice’s insurance participation impact deal structures and earn-outs, post-sale retention terms—even setting a cap rate?

Kyle Francis: Yep. So maybe just to define terms a little bit—if you think about it, you may talk about cap rate a bunch on this podcast. In terms of investing—within buildings, for example—or with lots and lots of businesses that trade off a cap rate, that’s just an inverse way of thinking about the EBITDA of a practice as the cash flow of the business. And there’s a multiple associated with it.

So if you think about cap rate, it’s just another way of dividing things to get to the same result. One way or the other, it’s kind of a symbiotic way of thinking. But EBITDA is a big term in dentistry, and there are multiples associated with it.

Now, I’ll say that if you look at what’s called provider risk—I’ll start with the negative—provider risk typically shows up more in fee-for-service practices. These are practices often built by someone who’s developed themselves a ton from a training perspective, who’s been coached very well, or who has the innate ability to talk with patients and guide them through a treatment protocol that not only benefits the patient, but is also profitable for the practice.

So, a DSO, for instance, might say: “Hey, you know what? There’s a little more provider risk here, because what are the chances we can find someone else to do this type of work as well as this provider does?”

Kyle Francis: I also think there’s the innate possibility that an individual buyer may look at the doctor the same way and think: “How on earth can I do what this person does after 30 years of training? How can I do it as fast? Will the patients continue with me? I’m just this youngin’. I’ve got the passion—but will the patients be willing to stay with me?”

You said you really like stories, so I’ll give you a story.

My father-in-law’s best friend happens to be a dentist, lives in Colorado Springs, and I sold his practice in 2017. It was he and his partner. The person who bought it was a young guy—two years out of dental school—but he was a goer. He knew what he wanted, and he knew this was going to be a really, really great practice for him.

Kyle Francis: Um, this practice did about $1.1 million a year—and had for quite some time. Completely, totally fee-for-service, by the way. High-end treatment protocols.

However, when you looked at the active patient count, it was actually close to 2,500. And what that meant to a buyer was that these two doctors had really just become friends with their patients, rather than just being clinicians. So, as we evaluated it, this young dentist ended up buying the practice for right around $800,000.

And within a two-year time horizon, he turned it into a $5.4 million practice.

Now, part of that was introducing other types of procedures—so, procedural mix actually changed. Part of it was increasing marketing. The existing practice had not marketed—for years and years.

And part of it was just adequate treatment planning for those patients. So with those three things, he ended up getting what I would consider a steal. And he had the confidence to go in and talk to patients in the way they wanted to be talked to.

Now, that’s not everybody. But at the same time, I think people get worried because of the dollars involved. And if you can take that fear out of the equation—and remind yourself that dental practices are really great investments—even if you buy a “stinker,” it’s still a way of building something powerful.

In fact, it’s kind of interesting: in 2009, when everything was going to heck in a handbasket, the only profitable division of Bank of America was their practice lending division for dentistry.

By the way, 99.7% of all dental practice loans get paid back in full. That’s an incredibly low failure rate.

So if you go in with a fair amount of confidence that you can do those things, it’ll work nicely for you.

Kim, what are your thoughts?

Kim McCleskey: Yeah, I totally agree. I don’t have anything to add—you say it so eloquently, there’s nothing more to add.

Michael Walker: That’s what happens when you have… he’s on a roll today!

Kim McCleskey: He’s on a roll today!

Michael Walker: That’s it—it’s founder passion. That’s what it is. It just comes out of us in a way that looks like that.

Hey, we’re kind of getting close to the end of our time together, and I know we need to wrap up. I just wanted to end with one last thought:

What advice would you give to a dentist who’s considering selling in the next few years but is currently relying heavily on insurance? Maybe one or two key points we can throw down for them.

Kim McCleskey: Yeah, I’ll chime in here, because I’m also very passionate about this. Having been in dentistry for 35 years and watching dentists come to the end of their career without a really solid exit—it’s tough.

And there’s more opportunity now than ever in all of dentistry, especially with this wave of consolidation. But starting out by understanding the value of your business is really critical.

Here at PTS, we’ll do a free practice prospectus so that you can have a clear idea of where you stand and what your options are. Like we’ve been talking about here—with all the different aspects to consider regarding insurance—there are so many other pieces of the business that we can take a look at and do a deep dive into.

Whether you’re ready to go to market now—great. But if not, we can point you in the right direction so that your financial, personal, and professional outcomes are aligned with your goals.

I just say: start now. It’s never too early to have a deep understanding of your business.

Yes, anyone can look at practice management reports—we can see where we are with collections, we know when we’re hitting production goals—but many dentists just don’t know what’s happening from a P&L standpoint. Are all my expenses in the right bucket? Are there inefficiencies?

We can help you dial that down. Don’t wait. Don’t just figure it’ll all come out in the wash. If you’re purposeful, your financial outcome can be so much greater—especially in this current season of consolidation.

Kyle, do you have something to add?

Kyle Francis: No, you did that great. I would completely agree—start early and get to work. You know, I find that the ones who have the least satisfying outcomes—even if financially it’s awesome—are going to be the ones that started late.

And having an analysis done does not mean that you’re committing to do a transaction. It just means, “I’m committing to understand what I’ve got.” And I think that’s a really great first step.

Kim McCleskey: Yep.

Michael Walker: Yeah, Kyle, thank you. As you say that, I think of the old saying—if the best time to plant a tree was 20 years ago, the next best time is today.

So—plant a tree. That’s what you’re gonna do. Don’t let your emotions hijack you and rob you of an opportunity to get the best value for something that’s so important to you.

So thank you so much, Kim and Kyle, for joining us today and sharing your invaluable insights on how PPOs impact the sale or merger of your dental practice. Your expertise and your passion for innovation have truly shined through, and we’re so grateful to have had the opportunity to learn from you.

I hope that we’ve encouraged you today. As we always say, this podcast is about taking action, and I hope all of our listeners are making 2025 the year of action.

Michael Walker: The best part—there are simple steps you can take right now to move your practice forward. You’ve already heard a couple of them from our panelists today.

But first, if you’re looking to grow your practice by attracting high-quality new patients, I encourage you to schedule the complimentary marketing strategy meeting I mentioned with Ekwa Marketing. As I said before, in this meeting their experts will show you how to replace dependence on PPO plans with a strong, organic SEO strategy.

Now, if you’re a marketing expert, this is just common language to you and it makes sense. But if you’re not—this could be something really valuable for you.

So, as I said before, you can book your complimentary marketing strategy meeting at:

www.lessinsurancedependence.com/marketing-strategy-meeting

And again, that link will also be on the page where you picked up this podcast.

Michael Walker: So that was first.

Second, if you’re seeking personalized guidance on how to create a thriving insurance-independent practice, I invite you to schedule a complimentary Coaching Strategy Meeting with Gary Takacs. Gary has helped thousands of dentists increase profits, reduce dependence on PPO plans, and grow truly independent practices.

To schedule your Coaching Strategy Meeting, visit:

www.thrivingdentist.com/csm

Both of these are complimentary resources and are designed to help you take meaningful steps toward building the kind of practice—and the kind of life—you truly deserve.

If you found value in today’s episode, please share this podcast with a colleague or friend who could benefit from reducing their insurance dependence. The more we spread these insights, the more we can help fellow dentists take control of their practices.

Thank you to our listeners for spending your time with us today. It is a privilege and an honor to be part of your journey.

On behalf of Kim and Kyle—thank you so much for being here. I look forward to connecting with all of you on the next episode of the Less Insurance Dependence podcast.

And until then—keep moving forward toward a thriving and independent practice.

I’m Mike Walker. Till next time.