Howard: It's just a huge honor for me today be podcast interviewing Michael Wilgus he's a director of Strategic Relations for the dentist supply company which is a TDSC subsidiary of the California Dental Association which gosh in my mind is absolutely damn near as big as the American Dental Association just huge. As director of strategic relations for the dentist's supply company Michael creates and implement strategic strategies designed to grow and improve the tdsc.com business as a benefit to members of organized dentistry he deploys that TDSC experts and resources needed to empower dentists to gain more control of the cost of instruments and supplies and practice dentistry on their own terms. Michael has spent more than a decade in the dental industry including owning a dental consulting company. His professional experience includes working as a regional development manager at Align Technology, Align you knows who owns Invisalign and iTero as well as serving on its Leadership Council and serving as a specialty Regional Director for Pacific dental services in addition Michael is both pharmaceutical and medical device industry experience and has served on two national advisory panels and the only way this show has been a huge smash success is because we're able to get guys like Michael to come on this show Michael thank you so much today for coming on the show.
Michael: Yeah thanks for having me pleasure.
Howard: You first showed up on my radar I posted it on August of seventeen which is you know almost two years ago I said CDA subsidiary the dentist services company purchased Arnold Dental Supply which offers CDA members negotiated low pricing on 25,000 dental products as a CDA membership. That was two years ago how did that acquisition turn out?
Michael: It's turned out great and it really gave us a strong strategic advantage initially when we formed this company to serve as a member benefit in California we had to partner with six or seven different supply companies in order to provide products through an e-commerce site but with the acquisition of Arnold Dental Supply now we own our own Supply Company which gives us access to a lot of the top brands out there which has been fantastic.
Howard: So this is Dentistry Uncensored so let's just get right to the heavy punches this is a this is a very competitive space I mean it's nobody's secret that Amazon had a booth at the New York at the what's the New York meeting every year the Greater New York meeting which is held after Thanksgiving every year, were you a little scared of going into the supply space when you saw a big ol amazon.com having a booth at the Greater New York meeting three years in a row?
Michael: No not at all and if you think about the dental supply market it really hasn't changed a lot and if you look at dentistry the landscape and dentistry has changed a ton and the lack of competition hasn't been serving dentists very well at all. So I see the competition as a good thing we want doctors out there to have options so that they can figure out what's best to run their own practice so I said I think the more the merrier.
Howard: Well you know I'm in Arizona and I'm only six hours from El Paso which is Texas there was a lawsuit with some dental supply companies because I guess there was an online a guy selling dental supplies online and basically the big guys Patterson, Schine, Benko said hey if you're gonna have that guy have a booth we're not gonna have a booth anyway long story short it turned into a lawsuit were you aware that lawsuit and you have any thoughts on that?
Michael: I'd heard about it a lot of people asked if we were kind of formed in response to some of those activities and the answer is no, I'm not exactly sure when that happened I think it was quite a while ago we were actually formed as a result of our members voting to form TDSC back and I think the end of 2014. So I'm aware of it I know there's people looking into it but right now I'm mostly focused on getting us up and running and what we can do well to serve remember dentists out there.
Howard: There's a lot of people that I always ask how do you save money on Slade well first of all I was saying with the geopolitical first this being a non profit California Dental Association does that upset some of the people that buy boosts at CDA in Anaheim or CDA in New York or Paterson and Schine, Burkhart, Benko are they not in love with you that that you guys are starting a Supply Company or are you because you would have to be in direct competition with these vendors does that disrupt the supply chain channel?
Michael: Yeah I think it's a good question and it's when we get a lot we've been very transparent on what we're doing here in California with those companies because they are vendors and they are partners on a lot of fronts not just coming to our annual show but they help out with our mission of mercy clinics and they're helping out at the component level so they're definitely keeping an eye on us I think there's plenty of room in the sandbox for all of us to play. You know right now we're focused on disposables and small equipment we're not in the large equipment business we're not in the service business we're not into IT and all these other things and when you look at the larger supply companies they really have a lot of adjunctive services that they provide to practices which are critical. A lot of our members that use TDSC are also great customers for those companies as well.
Howard: You know the prices that dentist try to save money I mean there was a lawsuit Shyne Patterson Benko sued for a price-fixing and then there was a I believe somebody let's see who on my notes here court approved that this is January 10th of this year 2019 this is only two months ago court approves eighty million dollar settlement in class action lawsuit against dental product companies accused of violating antitrust laws by fixing prices on dental equipment and supply. So do you I mean I mean you don't write it to somebody for 80 million dollars if you didn't do anything wrong so obviously somebody had to do something wrong to cut a check for 80 million dollars.
Michael: Yeah it certainly appears that way and I think in my mind it just further validates why you know the members in California felt like the playing field wasn't level and they really wanted to form this company to serve as a member benefit and you know one of the things I was curious about you talked about savings and in our marketing materials you'll see we advertise savings but that's against MSRP and people always ask why do you advertise against MSRP nobody pays MSRP for dental supplies.
Howard: What is MSRP for my homies that don't know.
Michael: Yes its manufactures suggested retail price exactly and it's really the only bar that is out there that we can use to advertise against because supplies vary once they're in the hands of the suppliers and so I was curious to know how that really stacked up in California initially and so I asked some of our members to send me invoices from their current supply companies to see what it looked like in real life and I was pleasantly surprised at the amount of savings that were able to provide we're averaging 23 percent savings for members using the site which would indicate...
Howard: 23 percent savings from the manufacturer's suggested retail price?
Michael: Correct but what we're seeing when we look at you know these invoices from supply companies is we're seeing a range and you know again I think that just validated in my mind why the members were so frustrated and the fact that we could be practicing next door to each other buying the same thing and maybe we're paying two different prices and that's just not putting our private practice owners in a very good position.
Howard: Well it's sad because a lot of it has to do with the American culture where they don't like to haggle when I've lectured in dental conventions around the world you go to some countries like where the dentist and the seller they love to haggle I mean that the first price you say but when you're a dentist in America and your supply lady comes by and she fills your orders it's just not a natural behavior in America to sit there and start haggling and arguing with the prices. So what they think is that well since this lady comes to my office every Monday at 10 o'clock last 10 years and she loves my staff and she loves her everybody, they're giving us the best price and the truth of the matter is they're actually playing you for a sucker because they know you don't haggle they know you don't argue so you're paying the top price but then the DSO across street and I want to remind people the DSOs whenever you say DSO dental service organization people think of the big boys like you know Pacific or Heartland but most DSOs only have about five to ten offices but they got a full time haggling person and they're arguing all the prices they're getting their dental supplies down to four and a half percent whereas the average dentist is probably paying closer to six and a half percent which is a 50% increase in cost. I mean imagine what you collected last year in for your dental office say the average an office does 750 what is 2% of 750. I'm so old and senile off to get my calculator 750 750 thousand times 0.02 that's $15,000 a year I mean that's the family vacation. So do you think DSOs and used to work with specific dental services Steve Thorne do you think your average DSO like Steve Thoren Pacific Dental is paying less for supplies than the average dental office?
Michael: Oh absolutely I think when you look at the way dentistry has changed and landscape has changed you've got DSOs you've got group purchasing organizations you even have managed care organizations like Kaiser crossing over from medicine into dentistry and you're right they have people on their team that are absolutely willing to go out and haggle the price on everything from paper clips to real estate and occupancy costs and it makes good business sense but when you think about dentists and I'm gonna speak very broadly here this is people go into dentistry and this is an industry that's built on trust and relationships right you want your patients to trust what you're saying so that they accept the treatment that you're recommending and that really extends into business for a lot of dentists they want to trust that the people that are there to provide them goods and services or doing the best they can for them sometimes they are sometimes they're not and I've certainly run across members in California that told me you know Michael go ahead do a price comparison for me but I've had my rep for 15 years she's like a member of the family in fact I just went to her daughter's wedding last month and you know we run the comparison and come back with a significant savings and that kind of changes the way they feel a little bit. So I don't fault the companies are throughout to run a successful business I think we've just got to help our dentists do the same thing because they didn't get business classes in dental school by and large and they don't want their patient haggling with them over the price of a crown either so it's just not an edger.
Howard: and that person you described is also the one embezzling from them I mean when I wouldn't dentist when dental consultants go into dental offices and we've podcasts at all the major dental consultants there are they all say about 50% of the time they see theirs and bustling going on and when the dentist talked to me about it and they cry real tears it wasn't the amount of money that she embezzled it was the fact that she was the godmother of their baby at the baptism they were the family friend and that's what people don't realize that when people get really really close to you you're easier to play and when someone's really far away from you. So how long have you had the dentist supply company how old is it from its inception?
Michael: Yeah the inception we CDA started forming this company in 2015 and we went through a series of progressions where we you know built the site we work with some beta groups within the organization and member dentists and we became available to all of the members in CDA towards the end of 2017 so a little over a year and a half ago and then last November we actually rolled this benefit out to States outside of California so we became available to nine states in the western US essentially from Colorado West with the exception of Alaska and Hawaii.
Howard: So you're in Arizona?
Michael: We are available to members of organized dentistry in Arizona.
Howard: That would be me.
Michael: That's a key you've got to be part of organized dentistry to have access to TDSC.
Howard: and that is the generally accepted reason why the American Medical Association fell apart and only has about 10 percent membership unlike the ADA which is like 65 percent is because the AMA didn't insist on you had to be a tripartite member at your local state and federal level and if you became a specialist in dentistry you have to be a member. So that is why dentistry our dentists are so organized well and efficiently and to play this game where the physicians are not because the physicians they lost their Union and so on. So the dentist's supply company is it's what do you say the day was 2015 launch or 2017 launch?
Michael: We launched to the to all of our members at the end of 2017 .
Howard: and now you're in how many states?
Michael: Now we're in ten states including California and in the time that we've been available to all of our members and members in other states we just passed that three point two five million dollars in savings threshold which was pretty significant for us.
Howard: and what is the actual website to buy this applies is it TDSC.com?
Michael: That is correct
Howard: and so can you tell us how many dentists are now members of this?
Michael: I don't have an exact number for you off the top of my head I think one one thing that we're honestly trying to figure out in terms of market penetration when you look at organized dentistry one thing that none of the associations keep track of is who's a practice owner and who's not, so even you could have a hundred and thirty thousand members of organized dentistry in the United States but they're not all gonna be practice owners they're not all going to be making purchasing decisions. So that number is probably oh you know somewhere in the fifteen to twenty percent range of the overall number and what when you look at our normative percent the ones who actually owner their employees that work there and don't own?
Michael: Probably the ones that owned and that's that's a pretty wild guess something that we're trying to hone in on because essentially you can be available to all the members but if you've got associates in a practice that aren't calling the shots on purchasing equipment and supplies you know we may or may not be able to get them onto the site and get them shopping.
Howard: So do you when they're shopping on your site TDSC.com do they have to fill out a profile so that you know this is Howard Farran Phoenix Arizona as opposed to, you do have to do that?
Howard: So then your knowing then so you're starting to build a database of who's organizing.
Howard: and is that you know they always say the number one bias in statistics is all your own thoughts and feelings you project on the marketplace. I've had a dental office 31 years I've never ordered anything for the hygienist because I think that's repulsive I mean you're the hygienist you order the prophy cups and prophy paste I mean I because I don't want her sitting there all day long thinking I can't believe I've to use this stupid paste that Howard buys and he doesn't even do the cleanings are you seeing a lot of hygienists ordering supplies the hygiene department or do you see mostly dentists buying for the whole office or who's buying who typically orders the supplies?
Michael: Yeah the accounts are set up under the doctor so when somebody registers account just like you mentioned they've got to fill out some information to build a profile and one of those items is a license number. My experience and even when we go to annual shows and we get a chance to see our customers in person and our members in person most offices have somebody in the back office that might be in charge of keeping that inventory and kind of owns the ordering process but right now everything's ordered through the doctor's account.
Howard: and yeah that would be Christina in our office she's been doing it for 20 years lover doing all that so I thank you Christina. So when they order the supplies or is TDSC just software and then you kick that out to other distributors to manufacture selling direct or are you actually doing the amazon.com thing where you got a warehouse and you're actually shipping supplies?
Michael: Yeah good question at first we were a pure marketplace similar to an Amazon where we leveraged the suppliers to provide those products and they shipped from their locations. Now that we own a Supply Company we do have a warehouse we're actually expanding that warehouse so that we can serve more members and we have kept one strategic partner and another supply company one to give us access to more products so that we don't have to inventory everything, two it gives us an advantage from a logistic standpoint to have another place to ship products from for our members as well.
Howard: So was that the Arnold Dental Supply, is that the one that you kept to do that or was it another one?
Michael: No it was Arnold Dental Supply up in Lynwood Seattle.
Howard: Oh by gosh that'd be a good one because in Seattle that's where Amazon and Microsoft are I imagine it's a really easy place to hire employees that know how to code software for that type of logistics.
Michael: It is it's a competitive market logistically it is a little bit challenging once you start looking at serving members you know outside of California for our own selfish is at first it was just fine so at some point we'll need to kind of take a look at that as the opportunity grows and see what makes most to continue to support members as we become available.
Howard: So I'm gonna share some historic dinners I've had in the last 30 years where you're sitting there at a dinner and it would be like maybe the CEO of Paterson Pete Forshet back in the day and also the head of the dental for say like 3m our or our Dentsply back in the day and they and it was a weird you could tell it was a weird conversation because like Dentsply like they would have a thousand reps but they would not take orders in sell direct they would sell through Patterson who also had a thousand reps and it was like when you ask them well why don't you just sell Dentsply direct or you sell 3M direct but it's this long dance they've had with Patterson and shine and and it's like so do you see any of the majors 3m espe dense fly Sirona do you see any of them loading up on and going direct which would just be a tectonic earthquake in the dental industry that would show up on the Richter scale of at least 10, do you see that earthquake happening?
Michael: I think anything's possible I think that would probably be a good topic to have another one of those high power dinners that you're talking about with the leaders of those companies because I know they're all looking at the landscape and they're all trying to figure out how to evolve its it costs a lot of money to have all those feet on the street and certainly when you think about how dental practices typically define service it's that person coming right into your office. So it's something that's entrenched in the industry and you know we've got a lot of dentists that have just come out of dental school in the last ten years and those that are still in dental school that quite honestly might have a different idea of what service looks and feels like especially when you look at the business models that are coming into play where dentists have to see maybe more patients than they used to because reimbursements so much lower so they might not have the time to to visit with that person they come into the office and that's a challenge that we're facing right now and it's a good challenge it's we've got this dichotomy and dentists some that like that high touch experience and then we've got some that are coming on board that referred us to do everything online. I don't know what the big companies are gonna do but I'd be surprised if they weren't considering doing something as the market evolves.
Howard: Well you know I've seen this rodeo several times being 56 I mean I remember when they came out of the ATM machines I was still in high school and I did my dad I couldn't figure out who in the world wouldn't want to go inside the bank and talk to Shirley and get a sucker and sand out here and mess around with this machine that took forever and now we have them I use open dental software where patients can schedule their own appointment online and a lot of Millennials prefer to do their banking online on their chase app and make a dental appointment online of through our open dental and they don't think it's service haven't you talked to another human because I got a call you, you got to answer the phone, you got to put me on hold they just so a lot of people customer service is not having to deal with a human and they're like I would rather I'd rather go home and Thursday night after a glass of wine just open up my laptop and order my supplies online then have to have Shirley come in the office tomorrow who you know is gonna walk in right in the middle of an emergency or a toothache or a hygiene exam. So when you're when you're dealing with 211,000 licensed dentist you're gonna have a full distribution of what they think as customer service so what if I start buying from you I'm looking at I'm on TDSC on TDSC.com which stands for the dental supply company the dentist supply company TDSC and I look at dental supplies and I see 3M, Kulzer, Ivoclar, Dentsply, Septodont, Kerr. I see all the big boys which I assume you're doing that to a dealer but what if I like to buy some of my stuff from that only sells direct like say Ultradent the can I put in the order for Ultradent and you kick that to someone who sells direct or is TDSC only go by only selling people who only go through distributors?
Michael: Yeah good question right now it's only companies that sell through distributors. You know we're looking at ways to build relationships with those other companies out there so if they ever decide to move on to an e-commerce platform we would love to be able to support that for them but right now it would be limited to companies that deal with distribution companies like us. We have some items that we actually stock in our warehouses we have other items that ship directly from the manufacturers so they would be drop shipping, we would be taking the order and processing it they would physically be the one shipping it.
Howard: Well you're gonna get a birthday present right now the TDSC underscore on twitter TDSC_ dentists you got a hundred followers I'm gonna retweet your last tweet or the 25,000 dentists you follow me @howardfarran on twitter thank you so much for following me on twitter that is a tremendous honor. Your last tweets that ever wonder if the product you're purchasing are from a trusted source TDSC has a strong commitment to ensuring every product sold from our site is from an authorized supplier. Read more about how TDSC ensures trusted product and unparalleled swings. Which brings up another great question a lot of the younger dentists say what does this talk about grey supplies or dark supplies or can what is the going term for on that is it grey supplies?
Michael: Gray market goods
Howard: Gray market goods will you please educate my homies on why they should care about gray market goods, what does that even mean?
Michael: Yeah gray market goods are products that might be being sold by companies that are not authorized distributors for a manufacturer. It can also be that products make their way onto a marketplace for uses for which they're not indicated for and that was one of the things when the members of CDA formed this company they gave us some pretty strict marching orders one of them was to make sure we had no gray market goods on the site and when we were partnering with several supply companies that required us to audit them to make sure that they were in compliance with that now that we own our own Supply Company we have much more control because we have the products coming in directly from the manufacturer and then as I mentioned we still have one strategic partner who is another Dental Supply Company and they've been perfectly transparent. So I think you know it's one thing to get a knockoff purse or a handbag or a sweatshirt and or even a Rolex and maybe you care it's gray market or fake or not but when it comes to health care and you are the healthcare provider you know a lot of people want to make sure that they know exactly where the products come from.
Howard: Do you think it's a problem at does that mean I can see how that would be a huge problem like when you lecture in India or China or Brazil people will tell you all the time they that like pharmaceuticals at even at the pharmacy you have no idea who made them where they're from you know the chance that they're fraudulently marketed if they get the packaging just right well you believe it's that drug but are those types of companies I could see them going after the big btoc drugs like say Viagra or Cialis but are they really going after a bonding agent? I mean do you see fraudulent manufacture of you know like say 3M bonding agent?
Michael: They're definitely out there and you know I don't spend any time looking at the composition and the packing labels on products like that. I can tell you I've during my years at Pacific Dental Services we had a doctor that was just getting started and was purchasing his supplies and instruments online and the first time they went through the autoclave they came out rusty and the packaging looked perfect when when the assistants help unwrap them and built the cassettes and everything and so they're out there I think the key is do you want to think about it and be concerned about it or do you want to be absolutely confident that what you're getting is exactly what you're paying for and you don't want to worry about it/
Howard: Some states I mean you're rolling this out you start in California you're in nine states now or did you say ten states now or nine states plus California equal ten. On your website you said that you wanted to roll it out to all 50 by the end of the year that's a do you think you're on target to hit all 50 states in 2019?
Michael: Yeah we that's a great question so yes I think we are we're working at a very furious pace here to make sure that we are available to support member dentists in all 50 states by the end of this year it's it's we've got a great team we've got people focused on logistics we've got people focused on software and integration and you know we've got a great marketing team and then my team has been helping dentists get on the site for the first time and I've actually been giving States updates almost weekly on our progress so that they know when we'll be available to support members in their state but things are looking very good.
Howard: Now or is it all going to be virtual like when I deal with Amazon not prominent never met a human are you do you plan on rolling out eventually boots in the field or are you gonna try to keep this virtual?
Michael: Yeah I think we're trying to figure out the best of both worlds right now you know dentistry again is a relationship industry and we don't want to have boots on the ground we've try to run a model as lean as possible so we can pass on as much savings back to the dentist as possible but we are creating some things to help offices actually providing them a real person. So we've got real people on our customer service line you're not going to go through an automated phone tree. We've got people in the office that are setting up virtual lunch and learns for practices so they can learn how to log in learn how to navigate the site learn how to save products on a list and then every chance we get whether it's at the component level or CDA presents were hosting workshops and giving presentations to help people. So we're really again we're trying to do the best of both worlds and I don't think that piece is gonna change I actually had something that was given to me for my birthday in addition to your retweet so thank you for that through Amazon and it was the wrong product and I sent it back and I've never seen that credit I've never seen you know the right item and I can't find a phone number on that website to save my life, we definitely don't want to give that experience to our customer so we intend to have real people here available for members and that's the key to where yes for an e-commerce site but we're also a member benefit and members have an expectation.
Howard: I just emailed you the link you're talking about I'm a lunch and learn all this stuff I just sent you a link to Tom Giacobbi's article this month which talks about it Dentaltown Magazine this month he writes in the final months of 2018 something very interesting happen in the world of dental supplies. Do you think it would be more amazon.com news not at this time this news originated just a bit to the south in California the CDA has a subsidiary called the dentist supply company which purchased a supplier on the west coast this is used because other dental associations typically just had business arrangements with discount suppliers to provide an additional benefits to their members imagine if the American Dental Association opened a dental supply company it would work something like this TDSC offers his discounts to members who organize dentistry when this opportunity rolled out in California some dentists we're saving more than enough money to cover their membership dues. Do you think that the ADA is going to reverse engineer what you just did?
Michael: I'm not really sure you know it it's a good question and I can't speak for them do you know that one thing that we're hoping is that this will be an effective maybe recruiting tool for some states to get more members to join organized dentistry and in some states it might be a better retention tool all of which would be benefits to the ADA and organized dentistry. So right now you know the ADA doesn't endorse vendors in this space and we're not looking for an endorsement from them we're really here just to support on a larger level and so you know we're transparent with them just like we're transparent with all the other states as to what we're doing and how we're trying to support.
Howard: Well do I mean but at a gut visceral level do you feel the love from the ADA on this or is it more a competition thing because the the reason I asked a lot of people ask me why I'm a member of the AG D the a da all these things man I want a bunch of people competitively fighting for me I don't want one mothership I don't if you just you know if you just have the ADA I think I'm when the a da start allowing like that you look at all the addresses for these associations have them have an address of 211 North Chicago Avenue and so I want the AGD to fight for me the ADA I want the Arizona's Kevin Earle day the executive director of the Arizona State Dental Association he's been on the show. I want everybody fighting for me I mean the competition is what makes you innovate so yeah I think if you innovate something where you're tripartite dues are a thousand bucks what is the average price to be a member of the tripartite ADA state local a year is it about a grand?
Michael: I think the tripartite nationwide average is about $1,500 I could be wrong on that.
Howard: Okay well $1,500 if you save me 1500 on supplies it's now free and if you bring down the average dentist is paying six and a half and the average DSO is paying four and a half that's 15 grand that's ten times my membership dues. I mean I pay you fifteen hundred eighty days a week to save me three thousand let alone 15,000. So I want to get back to that macro do you believe the macro boys the big DSOs are paying four and a half percent and the average providing dentist is more closer to six and a half do you think that's those are good numbers?
Michael: I think that's accurate on the DSOs, my experience and working with dentists and actually seeing a lot of invoices is it's not uncommon to see private practice doctor spending about 9% of collections on instruments and supplies.
Howard: My poor homies.
Michael: You're exactly right in when you think about what an average practice collects in the US and there's different numbers but it's between seven and eight hundred thousand a year. If they're running a really tight ship at six percent they're spending forty two plus thousand dollars a year they could stand to save eighty five hundred dollars a year leveraging something like TDSC.com that's more than their dues several times over. Who we are partnering with and really trying to empower on that competition front that you're talking about is we want we want to empower the states to go out and compete for the members directly because essentially that's where the membership happens it happens when people join that state association. So a lot of times when you think about the benefits of organized dentistry we're talking about advocacy and that's not necessarily something that our practice owners or dentists in general feel on a daily basis you don't feel advocacy in your practice but you do feel when you save a thousand dollars a month you do save ten thousand dollars a year and it's that to me is the empowering piece of it because we're actually freeing up revenue that already exists in your practice so that you can reinvest it however you see fit and if it's you know retaining top staff or it's technology or it's paying down debt or you mentioned going on a trip that's the empowering piece but we want the states getting excited about this and competing for those members right alongside of us.
Howard: That is amazing and when you look I want to ask you another macroeconomic things about supply some I don't know I'm sure you've seen it but I don't have you thought about it they the Pattersons and Schines of the world were always at always had a veterinary department they've never had a chiropractor department because only five percent of Americans go to the chiropractor and when you go to the chiropractor they don't use a lot of supplies and sundries but when you go to a vet that's actually use more supplies than a dentist but they're all getting out of that business why do you think dental supply companies are getting out of the veterinary supply business?
Michael: Yeah that I have no idea about I mean I'm aware that they're doing it but I haven't really looked into the reasons why. Profitability would be my first wild guess I mean if it's not profitable or you're not making a margin that's making your shareholders happy then you've got to do something different well I would be hypothesizing on all that.
Howard: but I want to go back to another way to save money like light and you're talking about saving money item by item by price. I mean the only way the only secret to lower price is lower costs the only reason Southwest Airlines is cheaper than American Airlines is because of the hub-and-spoke system they don't have meals I mean if American Airlines just must start matching Southwest Airlines fees they would go bankrupt so you can't lower your price unless you lower your cost and a lot of these dentists don't realize that a lot of their supply costs is because some of their insane bad habits like the dentists into hygienists and they all use three different brands of gloves, the dentist and the associate use different bonding agents. I mean I want you to go over some of the things you've learned about how you save supplies not from your end by disintermediating the middleman and trying to sell more direct faster easier higher quality lower fee but what can the dentist do on their end to actually reduce their supplies from the ordering side.
Michael: Yeah that's a great question you know if officers took sort of a bottom up approach to running their business and we can use dental supplies as an example within the business they would stand to shave off one or two percentage points of overhead and really having a goal in mind is the first key so a lot of practices don't take the time to look back and reflect on what they spent the previous year so they don't understand how much they're spending on any given item and then setting the budget and then if you look at the system you have in place the process you have to run that system and the people that are accountable for running it and you tend to look at things through systems processes in people's you have the idea or the ability to figure out what's working well and what you should continue to do what you should stop doing because it's not working and what you might want to start doing to help you get to that endgame or your goal. A lot of offices don't have a process or a system when it comes to ordering supplies it's kind of you know they go in the cabinet somebody takes a quick inventory they place an order that's why a lot of people need to get something back in the office within 24 hours because they forgot something and it there's a lot of spending going on there that doesn't need to happen like you said three different brands of gloves or they go to a trade show and they see this great deal on PBS impression material so they buy a couple cases of it but but there's no way they're going to use it and so not having systems processes and people clearly identified within the business leads to all kinds of excess spending and poor purchasing habits.
Howard: One of the things that I'm very proud of we did with dentaltown is we started the 20 years ago the the townie Choice Awards where we go to every category we have the dentist vote and what's really neat about that as dentists are extremely brand loyal they the person who took Dentsply public back of the day was what will John miles I'm he had the biggest boat in Chesapeake Bay if you ever around Chesapeake Bay and you saw that huge monster boat with three different outboard engines and that was John's boat and his wife was from a Dominican Republic and he could actually go visit his mother-in-law directly on that boat without getting on airplane right it to the Dominican Republic just this amazing man. He used to always tell me that what he loved the most about dental supplies was that how brand loyal the dentist wore I mean you think a consumer might be loyal to Pepsi versus Coke or McDonald's vers Arby's he said dentist were just off the charts brand loyal. So then you start seeing this rise of associate dentist for the same reason the physicians did as the as you as you came out with MRIs and cat-scans a physician had to go to group practice you can't buy a three million dollar MRI machine for one doctor. So as dentists start buying CAD cams and CBCT s group practice became it puts forces to share the overhead with these machines and then you get two dentists who are both brand loyal to two different bonding agents and they're stuck and and you're out there telling them you guys gotta agree on one and that's been the Townie Choice Awards where every year several thousand dentists vote on each one of the categories so it's not like my ego versus Michael's ego it's like wow several thousand dentists voted on a bonding agent and this is what won first place and we always show the math because sometimes the second place in the first place might have like forty percent of the vote and second place had thirty nine percent of the vote you know but even Gordon Christian loves the Tony Choice Award deals because every time it comes out he says damn it's amazing how when everybody voting is a doctor I mean the winners are really just the winners. So I think if you're in group practice and I'm telling you guys need to narrow the distribution of goods go to the townie choice of just agree with your associate look okay we disagree on gloves bonding agent all this up we're just gonna have the tiebreaker be the townie choice award because I mean when several thousand dentists say this is the best product for this indication they're the damn near always right I mean they're very right. So when you go back so this dentist listen you when he gets to work or she gets to work and she's gonna tell her assistant my Christina what should she tell her the goal should be for dental splice what's doable what's that's too hard of a goal and what's come on we can do this what percent would you tell her of collections?
Michael: Yeah I'm always a little hesitant to set certain goals with the team but I think you've got to employ some open book management with some folks because I need certain information to do their job well. So if you've got somebody in charge of supplies I think letting them know how much you spent the last year is a safe thing to do and then come up with a goal for this year and you know start with 1% but have quarterly check-ins to see how you're progressing towards that. If you blow through it and you're a 1 percent or greater after another after q1 maybe you up it a little bit or maybe you're good with that and you just keep the systems processes and people in place to maintain that. It's different by each practice and the other thing too to be careful with when setting goals is you know I use those percentages as a percentage of collections but if an office is doing a terrible job at collecting well you know you're gonna see a higher supply cost, supply costs might not be an issue in that office they're doing a lot of Dentistry they're just not collecting. So I think you got to look at the health of collections if you're going to give somebody a percentage but you could certainly maybe give them a dollar amount and spend and for some practices that might be keeping it flat year over year and not increasing it even though you're planning on increasing production so it's kind of tricky I think it's it's case-by-case.
Howard: Well I think another thing I want to warn the young dentist coming out of dental kindergarten school is that you'll go to a study club and you'll start hearing these old guys talk about their overhead and I can assure you I can positively prove to you they have no idea what they're talking about like some old man might say well yeah my overheads only 50% yeah well he bought his land and building and he paid it off 10 years ago and he doesn't in accounting there should be a cost of capital you should own that land and building as a real estate property and you should lease rent it to the dental office there's no such thing as a free dental office when Dennis say oh my labor is 20% well are you following it up does labour include FICA matching does that include health insurance 401k uniforms. So when a dentist tells you the numbers remember it's a dentist it's not an accountant. With supplies I see this all the time like people will start using CAD cam and about I think they've sold about 10,000 CAD cam systems in the United States well those blocks are pricey so if I'm buying those blocks and they're in supplies then I don't realize that that's one of the reason my supplies is so high but if you didn't have a CAD cam that bill would be under your crown and bridge labs deals, so your lab costs might have gone down but your supplies go up. So what I wish you would do and I would and I would love you for this and the industry needs to do it but we still don't have a chart of accounts in dentistry where everybody's comparing the same math I have asked the National Association of dental CPAs the American Association of dental CPAs, let's just get one chart of accounts so that everybody is looking at the same math and we don't even have that for supply so my first question to you top dog at this TDSC do CAD cam blocks go under supplies or do they go under laboratory?
Michael: Yeah good question I would put them undersupply but I've seen a lot of different things. I'm laughing because I think to the funniest thing I've ever seen on a on an office P&L; and that was alimony under a business expense so when you say you know having standard list of accounts even if we did that we'd see some creativity on how they were used but for our purposes you know I would shift that under supplies but I would also expect to see lab go down as a result of that.
Howard: Well what I tell dentist who are always posting on dental town these cockamamie IRS tax savings plans I tell them everything is tax deductible until you're audited and then when you're audited you will go in front of an IRS judge and there is no jury you know it's funny how the juries are only for our domestic problems a murder and all these thing of that when you go to the IRS court there's no jury it's you the IRS judge and you're going to lose. So when somebody's telling you your alimony is a business expense you want to believe it so you believe it and you do that and it works just fine until you're audited but what I'm seeing the trend doing is that the as the DSOs get bigger and bigger they're starting to add the supplies and laboratories together so now again when you look at the only publicly traded companies one three hundred dentists in Australia Pacific Q&M out of Singapore they don't even break out it's just lab and supply so what do you think lab should be what do you think supplies should be and what do you think lab and supplies should be? What do you think the average lab and it's and it's hard to give a number because if you're a prosthodontist and you do a hundred units to crown and bridge a month your lab bills a whole lot bigger then if you're a meat-and-potatoes dentist and you do five a month so I know it's right general is it but do you have a number for lab a number for supplies and then a combined number for lab and supplies?
Michael: Yeah assuming collections are healthy and a non-factor you know lab and supply anywhere from 13 to 17 percent just like you said depends on specialty it depends on how the practice is set up within those I would look for supplies to be somewhere in that five to seven six to eight percent range, labs somewhere seven to nine or eight 10% but proportionately those could be skewed based on what you're putting in those buckets. So I think looking at the larger 13 to 17 percent for lab and supplies is a better way to go and that's not to say that if you're outside of that's bad it's only bad if you don't know why you're outside of that it could be very intentional but that's the key is know why you're either way under or way over and not somewhere close to that range.
Howard: I want to say another hidden lab cost is slow set materials I mean we know like like dentist always argue that you know that they wish Delta gave him $1,000 for a crown instead of say 700 I say well thousand is 700 that been a mean thing to me how long does it take you to do a crown there's dentist that make perfect crowns in 30 minutes some 45 some an hour and you dog block off an hour and a half for every crown that comes to your room and one of the reasons he does an hour and a half is because he numbs and then the dentist leaves the room then he comes back puts gloves and a mask on again so he just doubled his supply costs of his mask and gloves and preps the tooth and then leaves to let the assistant pack court so now he's thrown off another pair of gloves in a mask and then he comes out 15 minutes later when you could have stayed and packed the cord in one minute yourself. So I mean there's and then some of these materials like you'll you know you were it takes two minutes to set up well he'll if there's a material that sets up in one minute it costs half as much as the material that's set up in two minutes I mean when you're sitting there waiting for two minutes I mean that sounds like you're waiting I mean it just it's forever in a day. So with supplies I would say the first thing is when you sit down and numb up that patient why do you have to leave the room and I mean just sit down and just do it just knock it out and you know I will sit down and numb the patient for a crown on a six your molar and then without all u-sub to Kane I'll set a timer for 4 minutes while that's setting in 4 minutes I'll take the shade I'll fill out the lab tip when it goes ding I put in the isolate because my assistant can be doing a ton of other things instead of just standing there suctioning have her spend that time putting in the isolate so that why you're doing the prep you got all that light all that suction and Christina can be filling out the chart cleaning the supply you know getting it all set up but when you're using those supplies I mean why use something that takes 33minutes to set when there's something that takes one minute to set you know. So when I'm buying a supplies the set time would be very important for me to see on the website.
Michael: Yeah and you know I think a lot of doctors don't ask why they do things a certain way it's just how they were trained and they're not putting that business mind on or even maybe thinking about the patient experience and so you mentioned earlier dentists are extremely brand loyal and you know if they get comfortable with something and it becomes predictable in their hands and they feel confident and the outcomes they can produce they're not gonna change unless there's a real reason to change and so I think we just kind of get into this habit or a lot of practices get into habits and say well this is the way we've always done it so we continue to do things the same way and it's not always in the best interest of the practice or maybe even the patient's time but again we're just kind of in the cycle.
Howard: So here's my overhead here's what I think you can do I'm a dentist with an MBA I think you have 64 percent overhead that's eight percent as a hygienist, six percent is the assistant, six percent is a business admin four total staff salary of 20 percent lab supply is five percent supplies four percent dentist paid 25 percent of collections which is impossible to do with this software so what we do is we pay our dentists 25 percent of productions but our collections equals our collections. So we do not have a collection problem because if you go to McDonald's and order a ham they asked you for the two box if you say I don't have the two bucks can you just bill me they say no we take mastercard Visa American Express so you know you need a crown thousand bucks you're on Delta so now it's it's down to 700 your portion that is 350 you want to pay for that on credit card they said no I don't get paid on Friday great well let's go up front make you an appointment to come in after you get paid on Friday they say no I want to do it right now of course you do that's why you have a credit card there's one and a half trillion dollars on credit cards right now in America so obviously you have a credit card, they'll pay that 350 and when they're portions paid then we go and then we're responsible for the insurance if I told you that Delta is gonna pay you the other half in Delta doesn't that's my problem because if I say well if they don't pay you have to pay now they want to do some insurance predetermination and that slows the flow and again when the only the reason we can do this is because we don't have staff turnover problems my office manager Don's been there 20 years my hygienists my assistant everybody's been there 10 to 15 to 20. So you know when you don't have staff turnover you don't have a lot of problems breaking down your systems. Michael is there anything I wasn't smart enough to ask that you wished I would have asked and we covered that I didn't?
Michael: No, I think we've covered a lot of great ground today I appreciate the opportunity to jump on with you and looking forward to supporting as many member dentists as we possibly can in 2019 and beyond with TDSC.com so thank you again.
Howard: Well you know what I would do if I was you're not asking me for advice I'm firm little dentaltown and you're from the almighty CD California Delta it is I mean anyhow you realize when I was a dentist who had the tallest building in Sacramento did you know it was?
Michael: Yeah that it's we've been eclipsed since then.
Howard: I know but when I started out and you went to Sacramento it was pretty damn cool that the California Dental Association had the tallest building in Sacramento I mean how damn cool is that do you remember those days are you too young for that?
Michael: No no I remember those days yeah and I can appreciate it because I've had the chance to see other buildings in other states and there's a wide variety.
Howard: Well I'm not gonna I'm not gonna give advice to someone who once had the tallest building in Sacramento when I actually live in a van down by the river but what I would do I would make an online CE course of not just how to use your TDSC but just how to set up a supply system in general dentaltown we have 400 online CE courses they've been viewed almost a million times they're all ADA approved FAGD approved and they're all about our people really only want an hour course but they don't even someone should set up a online CE course of the dental supplies how you would set up two ordering how would you set up the system all the little nuances like what if I want to buy something direct from Ultradent but I want to buy something indirect from 3M which has so to deserve but just an all-encompassing course so that this dentist has to wear all these hats I mean not only do you have to do root canals fillings and crowns but I gotta learn payroll and accounting and marketing and website and social media they got too many hats and the reason I can do what I got to do is because Christina has been ordering my supplies since my kids were born and some young dentist setting up needs to have an an hour long online course where she's wearing too many hats she can sit down with her new assistants okay you're gonna be in charge of supplies we're gonna watch this online course together that's gonna talk about supplies in general and we're gonna try to get a system and I think that would be really good but Michael Wilgus director of strategic relations the dentists supply company TDSC.com subsidiary of the California Dental Asosiation. Michael, it was just an honor for you to come on the show today thank you for coming on and talk to my homies.
Michael: Thank you very much I appreciate it.