"Can I Sell the Business and Keep My IP?" — Transcript

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1. 0:00I provide wellness dentistry to my
2. 0:02patients. We do $4 million revenue.
3. 0:05>> What do you provide your patients?
4. 0:06>> Um wellness dentistry. So, it's a niche
5. 0:08within dentistry, but it's like
6. 0:10biological, holistic, but more medical
7. 0:12related.
8. 0:13>> it called, dentistry?
9. 0:14>> Wellness.
10. 0:14>> Wellness dentistry, got it. Okay, sorry.
11. 0:17>> And um
12. 0:19because of what I'm doing, I'm also have
13. 0:21a educational platform on Kajabi.
14. 0:24>> Okay.
15. 0:24>> And people come and learn from us and
16. 0:27coaching from us and we do about a
17. 0:28million dollars on that, just kind of a
18. 0:30little side track.
19. 0:31>> Yeah.
20. 0:32>> And
21. 0:33>> Start a software company.
22. 0:34>> Yeah.
23. 0:35That's a no.
24. 0:36And um
25. 0:38I actually sitting here yesterday and
26. 0:40thinking with the EBITDA and EBITDA
27. 0:43multiples that we see in dentistry, we
28. 0:45actually can have a $100 million
29. 0:47valuations in about 3 years.
30. 0:49The reason is the coaching clients that
31. 0:52we're helping them
32. 0:53>> Mhm.
33. 0:54>> um if we're doing four at $1 million,
34. 0:58so that's 20 20% EBITDA.
35. 1:00And if we can help them grow and come
36. 1:03together as a DSO dental support group
37. 1:05>> Uh-huh.
38. 1:06>> then we can have a collaborations like
39. 1:09buying powers and also evaluation.
40. 1:12>> Yeah.
41. 1:13>> And we can come to that eval- to that um
42. 1:15evaluation.
43. 1:16>> that does this, so I'm super familiar.
44. 1:18>> [laughter]
45. 1:19>> So, I have a question for you. How do I
46. 1:21approach these practice owner that I've
47. 1:23been working with together for years
48. 1:26to come together or acquire them or work
49. 1:29with them like what you've been doing
50. 1:31with other business that in your
51. 1:32portfolio
52. 1:33>> Uh-huh.
53. 1:33>> because together we get stronger
54. 1:35>> Yeah.
55. 1:35>> and have more leverage.
56. 1:37>> Yeah, I think you should make an offer
57. 1:38so good they'd feel stupid saying no.
58. 1:41Um so, basically, if they were to sell
59. 1:43on their own, their multiple might be
60. 1:44like 4x or something like that. If they
61. 1:46were to sell together, you might be able
62. 1:47to get a 10 or a 12, right? Um and that
63. 1:49means like if you're getting at least
64. 1:51call it $10 million in EBITDA or more,
65. 1:53you'd be able to get 10 or 12 um on it.
66. 1:55>> Mhm.
67. 1:56>> And so, the idea would be
68. 1:58um you're going to get four on your own,
69. 2:00you'll get seven with me, and everything
70. 2:03above seven I keep.
71. 2:04>> Okay.
72. 2:06And it
73. 2:06>> There's a million ways to structure
74. 2:07this, but that's like a like either
75. 2:10either you have to outlay a lot of
76. 2:11capital to do this,
77. 2:13or you have to give up some of the pie.
78. 2:14And I think that for especially for your
79. 2:15first one,
80. 2:17just giving up some of the pie, getting
81. 2:18the first ones in. And like honestly,
82. 2:19you don't even need to do the $100
83. 2:20million except for the first one. Rope
84. 2:22four or five of them together, you'll be
85. 2:23able to get a reasonable exit, proof of
86. 2:25concept, and then you can rope 25
87. 2:26together.
88. 2:28Now, the value of what you have, which
89. 2:30is why I like the business a lot. Um
90. 2:32I put an offer on the business. We got
91. 2:33into a bidding war between us and a
92. 2:34private equity firm and another one.
93. 2:37Um
94. 2:37They paid more for it than I was willing
95. 2:39to, but
96. 2:41the the magic of it is that you don't
97. 2:43want to get rid of the coaching business
98. 2:44long-term
99. 2:46because it's the goose. You want to sell
100. 2:47the eggs.
101. 2:49Keep the goose. And so, you bring people
102. 2:51in because they want help scaling their
103. 2:52thing. Then you would then give them
104. 2:55your systems, your price points, your
105. 2:57training, your whatever. And so, what
106. 2:58happens is that you end up consolidating
107. 3:00the operations and unifying everything
108. 3:03the same way you would do
109. 3:04post-acquisition
110. 3:06if you were to kind of integrate
111. 3:07everything, which is how roll-ups work,
112. 3:09right? And so, you're actually doing
113. 3:11like three quarters of the work a
114. 3:12roll-up would do, which is why this is
115. 3:14such a magical little combination that
116. 3:16you have right now.
117. 3:18Um
118. 3:18Yeah, the TLDR is
119. 3:21Give me it's more legalese, but you
120. 3:23would basically get an option for 100%
121. 3:25of the business and drag-along rights to
122. 3:27sell it as long as it's over X amount.
123. 3:31And you have to get everyone to agree
124. 3:32>> Okay.
125. 3:33>> ahead of time. And by doing that, you
126. 3:36can um
127. 3:38decrease the likelihood that basically
128. 3:39you can't have like you have to get all
129. 3:41the rights up front. Otherwise, when the
130. 3:42deal gets closed, the person who's most
131. 3:44greedy will hold out the longest and
132. 3:46everyone. I only know this out of
133. 3:48pure experience.
134. 3:49>> Okay. But I'm the one that have all the
135. 3:51IP and the AI portal and all the
136. 3:54support. Basically, the portal call and
137. 3:55the check in the system. And how do we
138. 3:58leverage that in that deal negotiations?
139. 4:01>> Negotiation with whom?
140. 4:02>> Like with these practice owner that we
141. 4:05want to come together and create this
142. 4:06DSO.
143. 4:07>> I think they're just separate
144. 4:08conversations.
145. 4:10>> Can I still keep that as the my my
146. 4:12business?
147. 4:13>> The coaching AI stuff?
148. 4:15>> uh-huh.
149. 4:16>> When you say keep it, you mean post
150. 4:17sale?
151. 4:18>> It's a different different entity.
152. 4:20>> Yeah, but you're saying you say, "Can I
153. 4:22keep that?" Do you mean post exit to an
154. 4:24acquirer or do you like
155. 4:26>> Yeah, so the practice
156. 4:27>> it is my point?
157. 4:28>> The practices, right? We we're going to
158. 4:30sell the for private equity, for
159. 4:32example, the practices together as a
160. 4:35five or 10 locations, but I want to keep
161. 4:37the educational platform and the AIs and
162. 4:40all the IP.
163. 4:40>> Yeah. You would just I mean, it's a
164. 4:42negotiation with the acquirer and you'd
165. 4:44probably
166. 4:45>> Yeah, you give an unlimited license at
167. 4:46no cost to them for X period of time or
168. 4:48for, you know, it's restricted for this
169. 4:50period of time for these territories.
170. 4:51Like, it's just a that's just a
171. 4:52negotiation.
172. 4:53>> Is that something acquisition.com can
173. 4:55help to structure that?
174. 4:56>> Yes.
175. 4:58>> [laughter]
176. 4:58>> I literally wrote this entire deal, so
177. 5:00I'm fairly familiar with it.
178. 5:01>> Okay, thank you.
179. 5:02>> No, you bet. 100%. I can't give you
180. 5:04every single SOP, that would be
181. 5:05ridiculous. It would be like this long.
182. 5:07But, these are the top five SOPs that we
183. 5:08have used to scale [music] that Leila
184. 5:10actually put together for us cuz she's
185. 5:12really been the one who operates the
186. 5:13business. And so, yeah, I don't know
187. 5:15what's inside of it, but um [music] it's
188. 5:16good so you should check it out cuz
189. 5:18Leila made it and she makes good stuff.
190. 5:19It's free.