ROSS BRANNON

Tell us your background and how you got into dental school.

MARK COSTES

When I was 16 years old, I was in my very first varsity baseball game, playing left field. A big kid gets up to the plate and smacks one in my direction. I'm at a new high school because we had moved, and I was used to playing on a much deeper field with a warning track. I'm trying to play the ball off the fence, waiting for my right foot to hit the warning track, which it never does because this field didn’t have one, so I do a face plant into the fence and break my jaw and lose most of my upper front teeth.

That led to 16 months of rehabilitation with general dentists and specialists and plastic surgeons to put my face back together. That’s when dentistry popped up on my radar. I was so impressed with what they did for me.

Then in college I decided to pursue a career as a dentist. It took me three years and 21 attempts to get into dental school because my grades weren’t great. During that time, I was accepted into the executive MBA program at the University of San Diego, and I bought my first business. It was a catering truck, which I called the Roach Coach. That’s when I cut my teeth in entrepreneurship as a business owner.

After graduating from dental school, I had six practices in my first seven years. I did it all wrong. But I learned a lot of very expensive lessons in the trenches of owning multiple practices.

ROSS BRANNON

Eventually you owned 16 practices, and you currently own four, so you might know a thing or two about owning a practice, starting a practice, running a practice.

MARK COSTES

I can't take too much credit because I've done a lot of stuff wrong, but you figure it out. After the 10th time, you'd have to be pretty dense not to figure out a lot of the big lessons.

ROSS BRANNON

What lessons did you learn from starting, owning, and selling so many practices?

MARK COSTES

One of the cool things we have in our corner for dentistry is that we have a sellable asset once we own a dental practice. You've worked with physicians, and you've seen a huge shift from owner-physicians to those whose practice is owned by a hospital or a large group. More than 80% of physicians today are W-2 employees. In dentistry, 85% of dentists actually own their own business. If you do it correctly, it can be a very good positive income stream, especially if you have multiple practices. You will always need to pay attention to the business, but if you have a good organizational chart and good people on your executive team, you can run practices and spend 20 to 25% of profit from each one you own.

When you're done building them and it's time to hand the keys over to the next generation, you will have a good sellable asset. Depending on how much your EBITDA is and how profitable you are, you can get four to eight times that EBITDA number when you sell, which can be to the next generation or a private equity or a DSO, however you want to transition out of the profession. That is the beauty of dentistry. People that take the time to become business savvy and more sophisticated when it comes to being able to track a dollar through the dental practice have a nice tangible asset at the end.

ROSS BRANNON

You almost had to restart your career after you had those first six practices. You had to make some changes in your life and then start over after you sold them. Talk a little about that experience, how you realized where you were a little off kilter, and what changes you had to make.

MARK COSTES

When I was 15 years old, I made a deal with myself. I said, "In 20 years, I'm going to be netting a million dollars. I'm going to have a million dollars in the bank." That meant I could be a millionaire based on income and one based on net worth, and I said I would be both by the time I was 35 years old.

Lo and behold, I accomplished that. When I was 35, I was netting a million dollars a year, and I had more than a million dollars in the bank account. However, to do that, I became the proud owner of six successful dental practices and I was working 80 hours a week. I didn't recognize that it was necessary to build a good organizational chart and have a good executive team that would run the business for me. I dealt with everything. Every single person had direct access to me. If there was a fight over the hygiene schedule, I would get a call. If somebody wanted to take vacation, I would get a call. If there was a remake on a crown and the patient was aggravated, I would get a call.

I was extremely stressed out. I was very near to burnout. My primary relationship was on the rocks. I was never seeing my three young boys. This was no way to live a life.

I said, "You know what? I don't care if I'm financially successful. The rest of my life is falling apart." So, I sold four of the practices. They sold immediately. We did well. Now I had a little bit of a cushion, and I went about restructuring everything about my life. The way we teach it now inside our Mastermind group, inside my private coaching group, is called “the 4 Futures.” I didn't have a name for it back then, but I knew I had to master certain aspects of my life. My mindfulness, my ability to handle stress, my meaning, which was my personal relationships and my legacy, my muscle, which was my personal fitness and the fuel that I put into my body, my vibrancy, and my sleep patterns. I intentionally put the money quadrant last, because if you master those other quadrants first, the money stuff comes pretty easy, and with a lot more fulfillment.

ROSS BRANNON

When did the Dental Success Institute come to be?

MARK COSTES

I started that 10 years ago, which was five years into my multiple practice ownership journey. I was being asked to speak on stages. Eventually we created our own coaching company. A year after that, I started the Dentalpreneur Podcast, which opened up countless doors. We’re up to nearly 450 episodes with six million downloads. We've since created another company called the Dental Success Network, which has 1,100 dentists. We have a really vibrant culture within that and the Dental Success Institute, which is my private coaching group of about 200. We work a lot about overhead and just general balance in life.

ROSS BRANNON

What can someone who attends one of your Masterminds expect to learn?

MARK COSTES

How a dollar flows through your practice. It's interesting, as somebody who went through an MBA program, I wasn't great at reading financial reports and I wasn't super savvy when it came to business. That is the case for most dentists out there. They don't know how to read financial reports. They don't know the difference between overhead and profit. They don't know the basics of business, the categorizations when you're looking at variable versus fixed expenses.

First and foremost, we do a lot of baselining to figure out what your knowledge base is, and then we get your knowledge base up to snuff. Once that is done, once we fix the machine, we plug the holes in the bucket, then we worry about decreasing those fixed expenses. The only way to decrease fixed expenses is by increasing production, by potentially attracting more new patients.

This is in different phases. First, it's business knowledge. Then it's ramping up production, which in turn is going to decrease your overhead and increase your profitability. Those are the things we're talking about from a business standpoint. Once you get to that level, which we call black belt level, when you have an overhead less than 50%, you're a strong leader, you have a good culture in your dental practice, you're completely systemized, then we talk about potentially expanding the practice to a larger size, maybe by adding operatories and then potentially scaling to multiple locations. But in that order. If you get out of that order, which is one of the huge mistakes that I've made, that's when bad things happen.

ROSS BRANNON

Talk about the importance of leadership as a practice owner.

MARK COSTES

Leadership is this nebulous thing. It's very difficult to define quickly and concisely. I believe leadership, when it comes to owning a dental practice, is being crystal clear with your expectations, making sure you are very accurate and concise about what your vision for the practice looks like, and holding people accountable for what success looks like in their position and how they can contribute to the overall vision.

ROSS BRANNON

How big of an issue is personal overhead burn rate?

MARK COSTES

It's huge. When we're talking about variable expenses, we're talking about a couple things. We're talking about dental supplies. We're talking about lab. We're talking about office supplies. Just a small handful of things that go into variable expenses. You'd be surprised at how badly people can screw that up. If you're looking at 11% for the two biggest variable expenses of the total revenue, dental supplies and lab work, we see people who have 25, 30% of their total going to these two line items. We have people come to us for consultations that have 115% overhead. They're asking, "Where's all the money? I'm producing all this." I tell them, "Well, you're spending 10% of your total revenue on something that you should be spending 4.5% on."

Once we are able to show people how simple it is to track these expenses, and if you have a way to negotiate and watch your inventory and teach your team who are actually ordering what their parameters are, you can fix things quickly. Our Dental Success Network has 1,100 dentists with a collective revenue of $1.6 billion. We have the ability to go to any vendor and say, "We have 1,100 users here, and we need you to decrease this particular price by 15%." They actually listen to us. Try to do that as a single dental practice owner and you will never even get anybody to pick up the phone.

ROSS BRANNON

So, part of the network is purchasing power. It's almost a buying group.

MARK COSTES

It's one of the legs of our three-legged stool. It's a buying group. It's an online community, which is a very vibrant community. We have continuing education as well. We have a library of continuing education.

ROSS BRANNON

People don't know. It takes effort, and some people don't want to get in the weeds on that. They say, "Oh, I'm not wired that way. I'm not an accountant." That doesn’t matter, you’re a business owner and you need to know this.

MARK COSTES

We are physicians of the oral cavity. We're clinicians. We're pragmatic and left-brain thinkers. What we're comfortable doing is clinical dentistry. If we come up with a business problem, we try to solve it with a clinical solution. "There's no money in the bank at the end of the month. I need to produce more and I need to learn how to do $50,000 implant cases." That’s great, but first let's fix the holes in the bucket. If you're going to continue to pour more water into this bucket and the water's going to keep leaking all over the place, it's fruitless. It does not make sense to increase the production before you fix the machine.

ROSS BRANNON

Once the house is in order, then try to get new patients or grow the practice. How many people go straight to throwing money at marketing to try to grow the practice because they think that's the solution versus taking care of the other stuff?

MARK COSTES

Unfortunately, the dental consultant world is filled with people that have never sat in dental school as a clinician and tried to run a practice and tried to be the HR manager and the marketing manager and all of that. A lot of times you'll have a marketer who may have been an assistant or an office manager who has a limited understanding and a limited skillset of what's happening in a dental practice. They'll take their hammer and the whole world is a nail.

To a marketer, the answer to all your practice woes is to learn how to get more new patients. We see this over and over again. These consultants are saying, "I will fix your practice. You need more new patients. You need to triple your revenue in order to justify your overhead." You have to understand the basics of business before you prescribe anything as far as trying to fix a dental practice.

The marketers I love are the ones that tell you, “Here are your actual analytics. For every dollar you spend, we want $3 coming back, and here’s how you’re doing." They give you a report card every month with their bill. Their report card is, "Here's how many clicks you got for this particular keyword. Here is the ROI on this particular ad spend. This media in this particular community is working when this one isn't. These things just take time. You need to spend $16,000 for three more months for us to tell whether or not this ad campaign is actually going to work." Then you look up and your $50,000 in the hole, and you're actually worse off than before working with this consultant or agency.

ROSS BRANNON

There's a place for marketing if you're dealing with the right type of marketers in the right timing of improving your practice.

MARK COSTES

I think we all need help with marketing. We're not marketers either, but we have to do it in the right order and we have to be able to audit. Anything you're doing in your dental practice, you have to be able to track.

ROSS BRANNON

Does the Dental Success Institute do marketing?

MARK COSTES

We don't do marketing. We have lots of great partnerships with awesome marketers that do it the right way, that track ROI, that are totally transparent about the results they are actually getting you, and making sure that your ad spend is coincident with a decent return. What we do is work on people becoming more sophisticated business owners to understand business better, to become more profitable, to be able to decrease overhead without sacrificing the other three quadrants of your life.

ROSS BRANNON

Who is the ideal client or dentist to work with you, and what's the process of becoming a part of that and the steps they go through?

MARK COSTES

Somebody that seeks knowledge. We have people that are struggling to get to their first million dollars in revenue, we have members that own eight practices and are going to peak out at $30 million this year, and we have everybody in between. Anybody that seeks to find their full potential in business and in life is a good fit.

We don’t want the one who never schedules a coaching call, and never submits their numbers for our financial analysts to do their monthly reporting, or they don’t show up to any of our live events. They never meet any of the other people in their community, which is a huge part of what we do that separates us from other consultants. We actually put people in a room together and we leverage the wisdom of the room. It's not just me saying, "Here's what I learned over 16 practices." You put 200 people in there, and you have the ability to answer any question in dentistry, and the accountability to get people to actually take action. So, our ideal member is someone who’s an action taker, is humble, and is trying to find their full potential.

ROSS BRANNON

When you own your own practice, you own a business and you have an incredible opportunity to turn it into a revenue generating machine. But unfortunately, due to the lack of training and the lack of knowledge, many people are stuck in what I call the “owning a job” scenario. On the other hand, you say, "Let's train you. Let's give you a dental MBA, if you will, so you can learn how to be a business owner and you can have work/life balance and make a great income and be present with your family." It's a win-win-win.

MARK COSTES

You want to be a business owner. That doesn't mean you have to stop spinning the hand piece. That just means the business is structured the right way. You're actually getting what you should be getting for the effort that you're putting into it.

For instance, the average dental practice has an overhead of 68 to 72%. If you add 30% of associate/owner compensation to that, the doctor's wages, you're looking at 98 to 102% of total expense. That means there's zero profitability left for the practice owner. Those are the people that actually own a job, because they're making about as much as they would make as a W-2 employee working for a large DSO, or maybe even less for all of their efforts because their overhead is so out of control. But it doesn't have to be that way. Like you said, there's a difference between owning a business and being a business owner.

ROSS BRANNON

Can you give some success stories from Dental Success Institute members?

MARK COSTES

The way we structure, and another reason we're different, is that all the coaches inside my organization have been members/clients first. So, they all come in saying, "Hey Mark, I really seek to grow my practice. I need to improve my work/life balance. Help me." We put them through a curriculum, and if they do everything according to what our suggestions are, and the other coaches, it spits them out the other side as black belts. A black belt is somebody that has 50% overhead or less and has a really high leadership score. We have ways of measuring all this. It takes a really high cultural assessment score and a really high systemization score. Those are the people that turn around, and if they’re willing, we invite them to become coaches within our organizations.

These people are running multiple seven-figure practices and they still find time for other people in the community, to coach them and to help replicate their success. Every single year we have a transformation contest on stage at my Dental Success Summit. We get between 700 and 1,000 people at that event. We pick four people, and they compete for a prize of $3,000 that they can donate to any of their favorite charities. They have 10 minutes to tell everyone, "Here's where I started. Here's where I've ended up." The audience votes on their favorite, the most inspirational story. This year will be our ninth summit. We have 36 incredible success stories plus our 14 black belt coaches. Those are all huge success stories.

I will tell you about one success story in particular. Her name is Summer Kassmel, from Colorado. She had a practice that was doing just over a million dollars, and she reached out to me because she was concerned that she could no longer practice dentistry because of a medical issue. She was going to need six surgeries. She said, "Mark, what do I do? Do I sell my practice? If I do sell it, what do I do after that? I'll have $700,000, but then what? I have a family to feed." We said, “Here's what we're going to do. We’re going to set your practice up with associates and we're going to really start running this like a true business."

She said, "Okay, I'm in your hands. Let's see what we can do." She managed to acquire three more dental practices and she merged them into two large practices. Her EBITDA is approaching multiple seven figures. Not her revenue, her EBIDTA. It’s been less than four years, and if she wanted to, she could sell her operation for multiple millions. She gets approached by DSOs every single day for an eight times valuation because of how profitable and well-run her practices are. She's one of our most popular black belt coaches. She takes more calls than any of the other coaches because she loves helping people that much. She's a very special person.

ROSS BRANNON

What advice would you give a brand-new dental school graduate?

MARK COSTES

I've spoken at more than half the dental schools in the country, and I love speaking to dental students. I love to welcome them to this profession. But they have an uphill battle. They're going to be saddled with more dental school debt than any previous generation. The upside to that is they have more access to information than any other generation before them. They have podcasts like yours and mine. They have free information on YouTube. They have the ability to go to continuing education events basically for free, if not at a 90% discount.

My number one bit of advice would be to get educated. Get educated about business. Make sure you have a crystal clear vision of what you want your career to look like when it's all over. Don't bounce around and just say, "Okay, I'm getting $125,000 from this DSO. It's going to be the fastest way to start paying my loans back." Really take the time to sit down and strategize what your career is going to look like and reverse engineer that. The first step is knowledge. Knowledge is power when it comes to business ownership. Don't be the misinformed person that thinks that you can fix all of your woes by producing more dentistry.

ROSS BRANNON

That’s good advice. Thank you for sharing that, and all the insights you provided.