A+ Dental Care Achieves Growth Goals and Added Efficiency with Smile Brands Partnership
“With Smile Brands, Inc., A+ Dental Care has found a like-minded partner that is helping us realize our growth ambitions. Smile Brands is a great fit for our business and for our culture.” –Tim Herman, D.D.S., A+ Dental Care Founder and Partner
Established in 1974 by Dr. Tim Herman’s former partner, A+ Dental Care now has six locations providing comprehensive general, orthodontic and specialty dental care in Northern California with a staff of 85 members including 12 general practitioners and 3 specialists. Their mission is to create long-term patient relationships by making dental visits convenient, affordable and stress-free.
Growing up in a family of modest means, Tim Herman, D.D.S., and his six siblings, didn’t visit the dentist very often. When Tim’s sister needed urgent dental work, however, their caring family dentist answered the call with donated dentistry that made a big impact on the family. Deeply moved by this act of kindness, Tim set his sights on a career in dentistry.
After graduating from UC San Francisco School of Dentistry in 1988, Tim partnered with a fellow dentist and the two built a successful practice. Although Tim’s initial partner ultimately left A+ Dental Care, four other dentists have since joined the practice as partners.
A+ Dental Care was looking to expand beyond their three locations via acquisition; however, the practice faced two daunting challenges. The first was restricted access to capital. Bank loan funding requirements were too demanding and, while each partner would be one-hundred percent responsible for the loan repayment, individually, each would receive just 20 percent of the benefit. Unwilling to sign over their assets, the doctors decided against bank funding.
The second challenge was the absence of a viable exit strategy for the partners. Tim, the senior member of the group, was the only one with a workable plan: at retirement, he’d sell the practice to the four remaining partners according to a mathematical formula. The others, however, all around the same age, couldn’t predict their retirement dates, let alone other life-changing events, and found it impossible to devise a realistic plan. Adding locations would complicate matters even more.
To resolve these issues, A+ Dental Care explored the possibility of partnering with a dental support organization (“DSO”), however, the firms they initially spoke with were not a good fit. Disappointed, the partners abandoned their expansion plans to focus instead on making the best of their current locations.
A mutual contact arranged for the partners to meet with Smile Brands. They discussed Smile Brands’ unique partnership model with its CEO & CFO, Steve Bilt and Brad Schmidt. The A+ Dental Care team was not only impressed with Smile Brands’ history of success and culture, but were excited about Smile Brands’ partner Gryphon Investors and their joint vision to support smaller group practices achieve their growth goals.
Together with the owners, Smile Brands conducted a due diligence process in which they uncovered numerous areas of opportunity where they could help improve operating efficiency. The process also revealed that the two teams share a common set of values including a commitment to giving back. Dr. Herman was delighted to learn how the Smiles for Everyone Foundation, a nonprofit affiliated with Smile Brands which provides free dental care to underserved communities, could help his team achieve their philanthropy goals.
Convinced Smile Brands would enable them to achieve their expansion plans, A+ Dental Care joined the DSO in March 2016. The new affiliation allowed the partners significant operating autonomy including the ability to retain and expand the A+ Dental Care brand which was a key factor in their decision.
“As a Smile Brands affiliate, we knew we would be free to manage the company as we saw fit, grow our brand and provide the clinical care we deem best for our patients,” Tim explains. “Unlike other DSO partners we explored, Smile Brands appreciates how vested we are in this business and the entire organization is motivated to support us administratively and financially to growth our practice.”
As a Smile Brands affiliate, A+ Dental Care has implemented the following changes:
Added three New Locations: Put off by the stringent borrowing requirements from commercial banks, A+ Dental Care had put aside its plan for further acquisitions. With support from Smile Brands’ private equity funding, the partners reignited their expansion plans, and have since doubled the number of practices.
60% Savings on Lab Costs Through Smile Brands: Besieged by rising costs, A+ Dental Care switched to the Smile Brands purchasing program which is now saving the practice tens of thousands of dollars per month in lab costs alone.
In-House Accounting, Payroll and HR Administration: The partners passed the practice’s labor-intensive accounting, payroll and human resources administration tasks to Smile Brands and reduced personnel costs and headaches.
A New Website and Additional Marketing Support: A+ Dental Care’s website was long overdue for a redesign. As part of their affiliation, Smile Brands will build and maintain a modernized website and will provide other marketing assistance as needed, including signage, in-store merchandising, digital advertising and direct mail.
Recruiting and Personnel Management: Dentistry is a people business and the competition for qualified employees is fierce. The A+ Dental Care team has leveraged Smile Brands to identify and address an underperforming office manager and to source quality providers, hygienists and staff.
Treating the Underserved with the Smiles for Everyone Foundation: Giving back to the community is a priority the A+ Dental Care partners. In conjunction with the Smiles for Everyone Foundation, the team held “A Day of Giving,” where they donated $30,000 in free dental care to over 40 low income individuals in their community.
As a result of joining Smile Brands, A+ Dental Care is now enjoying the following growth and financial benefits:
- Three new offices with plans to acquire several more through Smile Brands’ private equity funding
- 71% profitability increase
- 60% reduction in lab costs
A lot of work has gone into making the partnership successful, and A+ Dental Care is now realizing the benefits in terms of improved margins and administrative support. The team is focused on growing their three newest practices and acquiring two to three more offices next year.
“My advice to any dentist looking to sell their practice to a DSO is to find a partner that cares about your vision and will help you get there,” Tim comments. “Whether you’re looking for a clean exit strategy or want a partner that will help you expand your business, choosing the right DSO to work with is critical. Our practices are our babies, so a transaction like this is not just financial, it’s very personal.”