The Group Dentistry Now Show: The Voice Of The DSO Industry – Episode 121

Bill Neumann:

Hey, I’d like to welcome everybody back to the Group Dentistry Now Show. I’m Bill Neumann. And as always, thanks for listening in or watching us if you happen to be on YouTube or find us on groupdentistrynow.com. Without an audience, we wouldn’t have great guests like the next guest we have up. So you may know this last name here. You may have seen Andrew at some of the events. It’s Andrew Tralongo. Andrew, thanks for being on the Group Dentistry Now Show. Good to see you.

Bill, thank you for having me. Excited to be part of this.

So Andrew’s company is T Management. They’re based in Atlanta, Georgia. And you’re also in New York as well, right Andrew?

I do about 60-40, 60% of my time in Atlanta and the other 40% of my time in Manhattan.

Okay. Are you in Manhattan or Atlanta right now?

I’m in Atlanta right now. Manhattan’s next week.

Okay. Sounds good. So you kind of switch on and off depending on …. I thought you might follow the weather.

I try. In the summer, I do. That’s for sure.

There you go. Well, so Andrew’s going to talk a little bit …. Well, first off, why don’t we get a little bit of your background. So you’ve been in the industry a while. You’ve been at some other organizations. So if you wouldn’t mind talking about that and then we can talk a little bit about T Management because T Management isn’t just a DSO. You do some other things too.

Yeah. So I started in dental about 10 years ago now. I started at Tralongo LLC, which then transformed into Dental Whale. I was in charge of M&A there, not only helping buy dental offices for some of our clients, but also buying the ancillary companies that we bought from education companies to seminar businesses, to handpiece repair companies, to kind of anything and everything we looked at in the dental space. I worked really closely with the CFO and the chief of staff, Carolyn Bolton.

So we helped not only purchase it but also integrate it into our business. So I understood the dental office from the outside looking in. I never worked in an actual dental office at first, but I worked in every other business that helped the dental office succeed. So I kind of figured out what made a dental office tick from the outside looking in, not actually the inside of the dental office, which gave me a different perspective when we came to buy offices and saying, hey, we could fix these things by using these services or not using these services. And it also gave us a really good insight on saying, hey, some of these things just don’t help with dental office.

Well, that’s great. We’re going to talk a little bit about that later on as far as your perspective from the vendor side of things, which is important. So you’re not just on the inside, but you’ve worked on the outside looking in. So I think that’s pretty cool. So tell us a little bit about T Management. Your practices are all in Georgia, correct? And how many of those do you have right now?

So we own 10, manage two. Our offices are all unique in their own little ways. They’re all within probably an hour drive from our corporate office in Colony Square. And all of our offices have the same kind of insurance bases, PPO, fee-for-service practices. We’re culture people. At the end of the day, we want someone good to work with and people who we care about working with. I have a famous comment that sits on one of the walls in the office. It says, we’re really good at Excel, but we can’t change an asshole. So we try to work with great people. We’re an M&A business too. So when we come to partner with people, it’s not just about the economics of the business. It’s about the tenured staff, the people in the office, and all the people that work with us. So we look at kind of growing an office, not just switching. I mean, we acquire, but we do a good job of taking it from $1 to $2 million to $3 to $4 is kind of our sweet spot.

Okay. So you mentioned that you own 10 and you manage two. So what kind of management services are you providing to those two practices that you don’t own?

Yeah. So we offer HR, accounting, kind of vendor relations, and also just operational support depending on what they need. So the operational support really ranges depending on what the office is doing. Our management clients have been with us for probably eight years now. So they’re more family than clients. So we take good care of them. We probably do more services than their contract says we do, but it’s really kind of on an as-needed basis. And we try to just help the staff and make sure they are given the services they need and require at dental offices.

So those two practices that you don’t own, were these clinicians that just didn’t want deal with the day-to-day and they wanted to focus on dentistry? Is that why they partner with you? What was the reasoning behind it?

Exactly. Yeah. So they enjoyed practicing dentistry. They don’t really want to sell their business. They like being the owner and being the entrepreneur. They just didn’t want to deal with the HR needs and the bookkeeping issues that keep coming up. So they outsource it to us, and we take care of those for them. And we have weekly and monthly calls with them just to go through it and keep them in the loop. But at the same point, they still own their business, it’s still their baby, and they still have the entrepreneur spirit that we all appreciate they have.

So the 10 practices that you own, are any of those Denovo, or were they all acquisition?

All acquisitions. We used to own a Denovo business back in the day. And I think I’m getting gray hair from it, so I try to stay away from those. We have tried it. It’s just not really our forte. I think over time we’ve learned that when we focus on things that we’re really good at and that we get passionate, we are much more successful than if we do things that are kind of outside of our purview. So not to say we haven’t scraped our knee before on acquisitions or Denovos, I think we just scraped our knee less on acquisitions in comparison to Denovos.

So that’s a great lead in. So since your area of expertise lies in the M&A side of things, tell us about the current M&A market. How do you see things? And it’s interesting, right? We’ve seen this increase in interest rates. What’s your feeling on 2023 for dental acquisitions and the market in general?

Yeah. We’re excited about it. I think it’s going to be a good market from an M&A perspective. I think some of the selling expectations have decreased over the time, just due to the current stock market transitions. So I think for us, we should see kind of purchase prices come down a little bit, come back to more normal purchase prices. I think a lot of the DSO prices have driven it up for smaller to mid-size groups, which is kind of our sweet spot. I tell everyone we are more of the smaller side. We’re not going to pay a huge multiple, as some DSOs would. We’re really here just to build those relationships and have a good strong business. So I don’t want to ever over lever us or put us in a financial crunch by paying too much for a practice on the front side.

So when you’re looking, what’s an ideal practice look like for you to acquire?

The financials of it are, we’re in the probably $1 to $3 million practice ranges with strong EBITDA margins. But at the end of the day, it really comes down to the people and the doctors involved. We’re not looking for a high turnover doctor transition business. That’s just not our model. We like practices where the doctors have been there for 30 or 40 years and the staff has been there equally as long. Obviously, there’s going to be some transition in the staff just due to the nature of the business, but we do really like to see long-tenured staffs. We’ve had employees that worked for us for 17 or 20 years, so we want to keep that philosophy throughout all of our offices regardless of when we acquire them.

So you touched on culture three or four times already. So talk to me about the importance of that. You want somebody that’s a clinician that’s going to stay around for a while. You don’t want somebody that’s looking to exit in six months. But just talk about your overall thoughts on culture, the importance, and take it from there.

Yeah. For us, I think my philosophy has always been culture drives the business, not the economics of it. Like a crappy culture in a business, the business isn’t going to be successful for the long-term. And we tie culture into how we value practices. We don’t do earnouts in our practice acquisitions just because we think it’s antithesis to our culture. It makes people think short-term, not long-term. So we kind of structure things for the culture to kind of go inside with the economics of the business. We do things a little differently, I would say, than most groups in businesses. When employees start with us, they all fill out a seven-question questionnaire that asks, how do you think, how do you communicate? And my philosophy on that has always been someone’s first day at work is always difficult to begin with. Let’s not make it harder by not understanding how they communicate and how they learn.

I’m a visual learner. I need to see things. Let’s not give me something that I have to watch you do it. It’s not going to work for me. Or communication style, I like to be talked to pretty directly. Some people want to beat around the bush, vice versa, right? So let’s not do that to the person who wants the other thing. So we try to figure that out on the front side to ensure that we kind of eliminate those issues that you would run into on a normal first day. And then we do something that I call a $20 indulgence. So it’s some $20 or less you can’t live without. So all of our employees in their 90 days of employment get that gift regardless of what it is. One lady wanted beer. Some lady wanted liquor. I like french fries. One lady wanted eyelashes. To me, it does not matter. We get you your $20 indulgence.

So our HR department gets a little upset when we bring liquor to the office, but I think it’s part of our culture and it’s part of the things that I think add value to our experience as an employer. And for us, my philosophy has always been, let’s get people to where they want to be in life, regardless of whether that’s with me or someone else. We had an employee who worked for us for years in one of our offices, and the doctor didn’t want her to leave because she was too good at the front desk. The girl wanted to be a hygienist for 10 years. And they were always like, oh, Pixie can’t go because she’s too good, she’s too good. And I was like, we’re doing Pixie a disservice by keeping her here. When Pixie wants to go become a hygienist, now she won’t come work for us because we held her back from her dreams.

So our philosophy has always been, let’s get people to where they want to be. So we sit on a couple hygiene boards here in Georgia, and we help our assistants get to hygiene school. And another quip we have on the wall is like, only get the best bartender in America. Because one of our employees wanted to be a bartender, and I was like, we’re going to get you to be the best bartender you ever had. We try drinks out. We did all these things to help get her to where she wanted to be in life. And it wasn’t being the front desk employee, it was being a bartender. So to me, our job as owners and employees and managers is to get people where they want to go and that’s part of our culture.

I’d love to get your thoughts on this because this ties into culture. As you’re acquiring practices, that integration process can be stressful to some of the new staff, whether it’s changing a practice …. Well, practice management is probably the toughest thing to switch, but just in general knowing that they’re being acquired can be stressful. So can you talk a little bit about integration and how you work through that?

Yeah. To be honest with you, we try not to do much in the first couple months. I don’t know what I don’t know has always been my philosophy, and I’m usually not the smartest person in the room. So they’ve been running this business for 30 or 40 years, these owners. They’ve been clearly doing something right, or we wouldn’t be buying it. So we want to figure out what they’ve been doing right and what they’ve been doing wrong, take our time to understand the dynamics of the team, and let them get to know us, know that we’re not here to take their job or to replace them. So that takes time.

And same with respect and building that relationship, it just takes time. You can’t develop that overnight. So we take a really slow approach to integration. And we take a lot of input from the staff on what they want to change, what they don’t want to change. Obviously, there’re some things we have to change, like HR policies and things like that, but we take a really slow approach to it. I also think it helps that we’re a family business, so when we walk in the door, it’s me, my uncle, and my cousin walking in. There’s three of us. So people have a little bit of comfort knowing that we’re family and that we are run together.

What’s the job market like in the Atlanta area right now? Is it a challenge for you all? Or what does that look like maybe compared to some other markets? Man, it seems like it’s a challenge still everywhere.

It’s a challenge for us. We had really good success. Hygiene’s been the biggest issue, I think, across the board in the dental industry currently. We’ve had really good success by getting into the hygiene schools and getting younger students that work for us. And same with dental assistants as well. We’ve had really good success with that. But we have a great team that helps them, and it mentors them in the process. So we take a really good, really strong approach on mentoring these new employees and especially new providers. I don’t know if a lot of other groups do that, but we do. So that has helped us kind of combat the job market a little bit. And I’ve always been a big, I call it a grapevine because I enjoy drinking wine. So we have an internal referral program. We pay our employees to refer their friends, and that has been a really good success for us across the board for the past couple years.

That’s great. All right. Let’s switch gears here a little bit. Technology, everybody talks about AI now. It seems like that’s been the buzzword for about a year and a half in the industry. What’s your outlook on technology, whether it’s AI or imaging or whatever? It seems like it can make dental practices more efficient, for sure, but I’m just kind of curious what you’re looking at right now, what you’re currently using in your practices, and what gets you excited about the technology you see?

Yeah. Technology’s an interesting thing for us. We give so much autonomy to our doctors. So we probably have different technology in eight of the offices just because everyone has their thing they want to try or do. And I’ve realized that over the years, trying to say we’re going to try this in all 10 never really works out for us. We need the buy-in from the individual practices to see what they need and what they want to do. And that really drives technology in our business. One thing we’ve seen really good success with is the procurement software. We use Method Procurement. We have great pricing so it saves us a little bit of money, but has saved our team dramatic amounts of time and has made our offices much more productive. That is one of my favorite recent implementations we’ve done is that. And I think that has really saved our assistant bandwidth and has increased our doctor productivity dramatically across the board.

So procurement software, something to take a look at, for sure. Okay. Yeah. We had a procurement webinar about a month ago, and that was one of the big topics of conversation. Whatever the platform was, you should get on one that you like and use it, and you’ll see dramatic differences.

Yeah. And we’ve tried AI in a couple of our offices, and some of the doctors just weren’t on board with it, and that’s kind of why it didn’t work. So over the years, I’ve realized you need that buy-in from them to make the implementation much smoother. As much as some of them aren’t involved that much, they still drive the ship.

Sure. Yeah, that makes sense. Any other technologies? Or you think that procurement is really the one that you’re most excited about.

That’s my favorite so far. We’re interested in trying AI in a couple of the offices, but I think we’re struggling from some of our doctors aren’t fully on board. A couple of them are, so we’re going to test on those and see where it takes us.

Sounds good. Talk to me about your partnership models. What does that look like, if you’re a doc that’s looking to come in? And is there a pathway to partnership for somebody that doesn’t own a practice?

Yeah. I tell everyone we’re extremely opportunistic. It’s kind of our approach to business and kind of everything that we do. We find unique opportunities, not only for our associate dentists to partner with us via sharing in the equity pool, is it buying another practice with them? We’ve done that a few times as well. We’re really just flexible on what works for them. At the end of the day, we know life happens and things change. So we want to be flexible with our partners and be there for them on the good days and the bad days. We had a partner of ours, she came on board with us. She is an associate at one of our practices, so we bought an office with her. She got breast cancer like a month after we closed. And for us, there were no issues. We’re like, you still own the practice, we have your back, don’t come in, take care of yourself, and we’ll take care of everything else. And that’s what we did.

And for her and us, that partnership is really strong just because on the bad times we were with her, and the good times we’re going to share in that. So for us, I tell everyone, we’re partners on the good days and the bad days, and we want to be there for you when things aren’t going good and things are going good. We have a good partnership, where we partner with doctors in the individual clinics, and they share in a tag along with us at the end of the day, if we were to ever sell. So from an economic standpoint, we’re all tied to the same business. Regardless of if it’s this practice or that practice, our multiple will help them across the board.

That’s great. So tell me, how did you transition from you were at Dental Whale and now you have T Management? And then did you start with one practice? Tell me a little bit about what that looked like.

Yeah, so Dental Whale, we’re at 100. We owned about …. My math may be a little bit wrong. We own probably about 30 of them, and then we managed the other 70. When we split off, they kept the 24. We took six back, and then we kind of split off that way. It was a little bit of time to unwind everything and break that apart, but we got through it. So for a couple years, we kind of did a lot of unwinding. And then about two years ago, we bought four practices and then we brought on two management clients last year.

Got it. So six of those were originally part of Dental Whale and the other company, and you brought those with you under T Management and then acquired another four and then managed to have these two that you manage as well.

Yeah. And kind of our philosophy, we don’t do M&A. We expand our practices. It’s kind of how we do it. So we’ve kind of got really, I would say, pretty efficient at taking a practice that’s maybe five or six ops and getting it to 10. So before we even buy a business, what we’re looking at is, is there space next door, what’s the capacity issues, how do we get this office to be more efficient and more productive in its four-wall capacity. So when we don’t do M&A, we do that in the meantime.

Yeah. That’s a great point. And what we’re seeing is the cost of acquisition goes up because of interest rates, right, although hopefully, like you said, the pricing will eventually settle down the cost of the acquisition for the practices. You’re kind of looking at maximizing the value of the practices that you already have and how do you do that? So it’s great. You can increase from four or five operatories to 10 or whatever the number is. Do you look at 10 as ideal for what you’re looking to do? I’ve seen some that are as big as 20, some that love to be at five or six. So 10, it seems like that number is the one you hit on. Does that make sense for T Management?

Ten to eight is kind of where our sweet spot is. We’ve had some at 12 or 15. It’s a little harder to manage that. Four or five is just not big enough for us. So about 10 to eight is where we really see good efficiencies. At the end of the day, providers really dictate that. How much room do they need to operate in? Some of our doctors need three or four rooms, some need two, but we find that eight to 10 is where we can put ample doctors in a practice and then not be too claustrophobic for them. And our offices have about two and a half doctors average, usually, sometimes three or four, but two and a half is probably average per office.

And our philosophy on that is we have no PTL policy. So our doctors can take off whenever kind of they want. And my approach to that is, hey, as long as the office is performing at the numbers and where everyone has their hours and things like that, I’m not going to be here to argue with you about taking 14 days or 16 days. There’s no difference to me, as long as the office can do what it’s supposed to do. So having the 10 ops and ample doctors allows us to do that. And for our doctors, it’d be a little bit flexible in their schedules.

Pretty much doing specialty in-house?

Depending on the office. Some of our doctors do it. Some might refer to who they want. Part of our offering to our doctors is, we’re not here to dictate who you refer to. So specialty has been a little bit of a challenge for us just due to the fact that the specialists coming in have to build that relationship. It’s not just given referrals. So it takes a little bit of time to build that up and get comfortability there, but we’ve seen that be a success in some of our practices, not others.

Makes sense. Let’s talk a little bit about things. You touched on it earlier when we first started off. How do you look at vendors? And talk about vendor implementation. We have a lot of vendors, industry partners, that listen to the podcast, and they’re always asking how do we work the best with different DSOs? Or how do we communicate well with them? How do we bring new products or services into a group practice setting? So I’d love to hear your philosophy on working with vendors.

Yeah. We treat vendors like we treat our business partners. To us, they’re business partners regardless of if they own equity or don’t. It’s really just, that’s that relationship we keep. We’ve had vendors with us for 15 years or 10 years. We go to dinners with them. They come to us for not only support in their business but also support in our business. We’re an open ear for all of our vendors. And for me, we treat our vendors like it’s a two-way relationship. No one’s perfect, so we’re always trying to get better. So how do we get better, how do they get better is an open communication line. So sometimes it’s not always, hey, you guys did this. It’s hey, my team didn’t do this well. How can we do this better? So we like to keep that relationship strong and keep that line of communication going so that we know that we can kind of mutually benefit from each other and get better along the way.

And it really depends on having that relationship with vendors that you trust them and you know they’re not going to air your dirty laundry out there or try to nickel-and-dime you on things. Price is important to us, but at the same point, the relationship is more important than the price. So we want to make sure that we keep that strong and that we have that relationship with all of our vendors so that when we do have a problem, it’s not an issue. We know we’re working towards getting better. It’s not a vendetta or any kind of personal issue. It’s just trying to get better. I call it an emotional bank account. We have to keep the emotional bank account full. You don’t want to drain that out. So we try to make sure that that’s always there and that there’s that emotional relationship and that connection so that when there are issues, we can work through it. And the end result, we all know we’re just trying to make each other better, not bring each other down.

So this is a question I always get, so I’m going to have to ask it. If somebody that you don’t work with currently is looking to partner with you, what is the best way, and let’s come at it from a clinical perspective, how do you go through things? So if I wanted to sell a clinical product, what’s the process? Is there a clinical director? How do I bring something to you? And T Management says, yes, we’ll evaluate it. And then what’s that process look like?

So we do it by committee. For clinical things, we take about five of our doctors and I try to age it from rate, age range, and clinical ability sometimes. So some of our extremely older dentists are a little bit slower. Right? Some of our younger dentists are a little more productive or vice versa. We all put them in a kind of committee setting. We give them products and we let them test it out. And we say, hey, come together, what do you guys think? And we take a broad range of that and say, hey, the masses agree. Let’s try this, let’s roll this out. The masses don’t agree. We really don’t have buy-in from them. We can’t do it. And that’s kind of how I always tell vendors is, hey, economically, I’m going to look at this, but at the same point, the doctors need to buy in. And if they don’t buy in, I’ve got no leverage. I can’t do anything about this.

So we try to make sure that the committee has a good amount. And sometimes the committee changes too. It’s not the same people every time. So we have about 32 doctors that work for us. So we kind of rotate to the ones who like doing it and some who don’t, just to make sure that they all feel engaged and wanted. And it seems to work really well for us.

Yeah. I like the idea of rotating them too, so you get different perspectives all the time too, which is great.

Yeah. And sometimes it also helps public speaking for some of these doctors and getting comfortable. It’s not just talking about that product. They have to go present this to the rest of the other peers, who they don’t know sometimes too. So it helps not only in case acceptance and things like that have seemed to get better with some of our providers who aren’t used to talking in front of people and are little skittish about it. It kind of helps them develop that way too.

Oh, very cool, very cool. So as we start to wind this podcast down, this has been great too. I really appreciate the insights on the vendor side of things. Hopefully, you won’t be inundated with people now trying to sell you stuff.

Oh, no.

If it’s good, right?

Yes.

I’d love to hear your thoughts on the future of T Management, so kind of where you think the organization’s headed in the next coming years. And then overall, where does the industry, where do we go? Do we continue to consolidate? What do you see as opportunities?

Yeah. I think for us, personally, we’re going to continue to be opportunistic here. If that’s one deal a year or 10 deals a year, we just want to do what’s best for the business and best for our employees and our staff. And for us, it could be buying one or buying 10. It really depends. I think we’ll probably buy about five or six next year, but we’ll see. And I’m kind of bullish on the market. I think M&A activity is going to pick up in the next couple years. And I think that a lot of larger groups are going to start buying the smaller groups and being more regionally diverse.

I think that’s a good way to expand and kind of a good way to keep culture and not have that negative connotation that some DSOs get from being overbearing and overreaching from a 1000 miles away. Having that regional approach to things not only helps you with staff development, helps you share employees, it helps that resources wise and makes the offices feel as if we’re here to support them and have that full hands-on touch that helps to drive culture in a business. I think a lot of groups are going to start going after these middle market groups and helping expand that way just because they have a little more touch to the community and a little more insight on the area than they have from California or New York, wherever it may be.

You obviously have a really strong impact on Atlanta and the suburbs. Any thoughts on going outside this market right now? Or are you going to stay pretty much in Atlanta for the foreseeable future?

I like South Carolina, North Carolina, and Virginia is what we’re looking at and Tennessee. Those are the kind of four states we’re eyeing up. I think for us, it really comes down to people and relationships. I just haven’t found the one that we think is best for us. And fully transparent, we’re not everyone’s cup of tea either. It’s a two-way street. I’m from New York, my uncle’s from New York. We’re not everyone’s favorite cup of tea. So we have to find relationships that work both ways. And for us, it’s something we value in a business transaction, so we’re really specific on that.

Last year, we looked at 87 deals. We did none. So we look at a good amount of transactions, and the people really drive that number to yes or no. Not to say that we didn’t like all of them, but sometimes we got outbid or sometimes just the timing didn’t work for us. But we did look at a lot and didn’t do any. So we’re extremely selective in our approach, and we’ve found that the more selective we are, the better success we have with these acquisitions post-transaction and better success we have with the staff and the people and the I call it treble in an office, but it’s not the right term, but the bounce once you buy it. We try to make sure that’s as minimal as possible, and especially when we’re really selective, we’ve seen success with that.

That’s great. I’ll give you a final word here. Did I miss anything? Anything that you want to leave people with?

No, I think we’re good. I think it’s going to be a good year, and I’m excited to see where the year comes and what the future of dentistry holds.

Andrew, if people want to find out more about T Management, can you shout out the website and then also your email address?

Yeah. It’s andrew@tmanagement.net. And our website is tmanagement.net.

Okay. And we’ll make sure that we put Andrew’s email address and then also the URL for T Management in the show notes. Andrew Tralongo, president of T Management DSO in Atlanta, currently in Atlanta and surrounding areas, maybe in some of those other states that he just mentioned. Thanks for being on the Group Dentistry Now Show. This was great, great insight. Love the feedback for vendors. Great to hear your story. A little bit about T Management, where things are headed. And thanks everybody for listening in and watching today. We always appreciate it. Until next time, I am Bill Neumann, and this is the Group Dentistry Now Show.