Acquisitions Anonymous - #1 for business buying, selling and operating - Why is IVF So Expensive? A Deep Dive into Fertility Clinic Economics

Episode Date: July 26, 2024

In this episode, we dive into the world of fertility clinics and the high costs of IVF treatments. We talked about why IVF can cost as much as $25,000 and explored the economics behind these prices. Bill shares his thoughts on the importance of delivering excellent customer service in such a sensitive industry, while Mills and Heather talk about the challenges of expanding geographically and the capital expenses involved. We covered ethical considerations and the potential for high returns on investment in this space. Tune in and enjoy: Listing: This deal is on Axial. You'll have to sign up to check it out! Thanks to this week's sponsor:Have you ever wished that your business's software better fits your needs?IvyWorks can help. They specialize in building custom solutions for SMB’s complex processes.Book a free discovery session, and we’ll make you an actionable project scope document that any software firm can execute—no strings attached.Visit ivy.works to learn more.Get more deals like this every week. Subscribe to our NewsletterSubscribe to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

So, and also, let me just say, I love this industry. This is, I think, an absolute slam dunk for the next couple decades. In this case, I mean, we thankfully, I have four kids and we're incredibly blessed. It took us longer to get pregnant than we anticipated, and it is all consuming. Yes, they'll give the, yeah, especially dentists for some reason. The dentists get the lowest rates. They get approved for like SBA type terms without an SBA guarantee. It's crazy.

Hello, everyone. Welcome back to Acquisitions Anonymous. My name is Bill Dallisandro. I am one of your hosts. And today on Acquisitions Anonymous, we have one of the best deals that I have ever seen. I'm super fired up about it. It is a fertility clinic with $2.2 million in EBITDA. I am fascinated by this industry. It has great tailwinds. The margins are incredible, very in vogue. So it's me and Mills and Heather today. I have a great discussion about the economics behind the scenes. of an IVF and fertility clinic. So I hope you enjoy this episode of Acquisitions Anonymous. Today's episode is brought to you by Ivyworks, a Boston-based software engineering firm dedicated to crafting tailored solutions for SMBs. Are you tired of off-the-shelf software that doesn't quite fit your needs?

IvyWorks understands. Specializing on operations and client-facing software, they guide you from discovery to design, engineering, and beyond. With a track record including projects like AI-powered drones for roof scanning and mobile apps for managing large-guards, operations, IvyWorks is not your average firm. Led by founders Callan and Sam, they prioritize

transparency and personal attention, involving you in every step of the process. Act now and receive a free discovery session complete with systems, architecture, design, and feasibility study. And even if you don't choose IvyWorks, you'll walk away with a comprehensive project scope. Don't settle for generic software solutions, visit IvyWorks today and mention acquisitions anonymous for your free project Discovery Walkthrough. Let's build the software your business truly deserves. Hello, another episode of Acquisitions Anonymous. I'm pumped. Heather and Mills, good to see you. Hey, Bill. Morning.

Hey, Heather. Morning. It's early here, but I'm here. You say that and it reminds me and I'm like, oh, yeah, it's 730. Heather, you look like you're halfway through your day. Like, you look totally away. Yeah, I've already answered a bunch of emails. I've got deals done, you know, now I'm on. Here we go. So is it, that kind of has to be your life as a West coaster, right? Because the whole world starts at 6 a.m. your time. That's right.

I mean, if you slept normal, you would be so panicked when you finally sat down to work that because you're already three hours behind. So, yeah, you have to start early on the West Coast. And there's a benefit that you sort of, your day ends early, but not really because enough people on the West Coast realize that you're on the West Coast and they keep calling you until five or five or six o'clock. And the East Coast people have no mercy. They schedule 9 a.m.

Eastern meetings with you all the time, right? That's right. And they also think that their time zone is the only time zone. So when they ask you for a meeting, they don't specify. It is. Yeah. I mean, it's the default. You shouldn't have to say anything.

As the East Coaster, I'm guilty of that. Yeah, yeah. What you guys think nobody else has another time zone. Okay. What I realize I'm actually more guilty of is I'll be like, it's 930. I'll be like, I need to call Heather. And I'll like just call yourself. And the people are like, hello.

Like what? Who's dying? It does happen. It does happen. Yeah, that was the worst, the other side of that when I lived and worked in Colorado, so almost California, time zone wise, it was maddening because by two, 30 or three, you couldn't get anything done. Yeah.

Like everybody, we had an office of the company on the East Coast and the office in Colorado. And like, if you didn't finish the thing you needed, you know, interaction with by 2 p.m., well, you're waiting for tomorrow. Yeah. It is a kind of a panicky feeling. Yeah, exactly to realize like, oh my gosh, wait, their day is almost over. Don't eat lunch.

You don't eat lunch either on the West Coast. Forget it. Fasting. Just work straight through. Well, this deal today is on the West Coast. It is a renowned fertility clinic. And I'm psyched to do this one because I'm really interested in this industry. And this we found on Axial.

Axial, it's kind of true to form. This is a little bit bigger. So it's $5 million in revenue and $2.2. in EBITDA. So that's one of the reasons I like Axial is the deals tend to be a little bit bigger, a little bit more professional. So we found this on there. You guys want me to read it or yeah, or I can read it. You show the screen and I'll read it. Okay. So it's a throw it up for our YouTubers. It's an Axial teaser. It's anonymized. It's a renowned fertility clinic. Summary, the company is a renowned fertility clinic offering a wide range of fertility treatment options with a

team of leading reproductive experts the practice provides state of the art customized analysis and solutions for individuals and couples facing fertility challenges. Key aspects that they highlight recognition multiple awards and industry recognition for outstanding work and success rates. The team, it's an esteemed reproductive endocrinologist and fertility experts specializing in comprehensive fertility treatment options including IVF, which is in vitro, fertilization. Isn't that right, IVF? They list increasing patient volume, steady growth in new patient volume with over 1,000 new patients in 2022. They have diverse payment options, primarily self-pay patients with

acceptance of major third-party insurances, including Blue Cross Blue Shield, United, and Cigna, state-of-the-art facilities, cutting-edge technology, and customized treatment plans to ensure the highest success rates. They list some great. growth opportunities, geographic expansion. You could open new markets in underserved areas, enhance marketing efforts. They say leverage digital marketing and patient outreach programs to attract new patients. How hard could it be? And then insurance partnerships, expand partnerships with additional insurance providers to make services more accessible. We got three years, 2020, 21, and 22. In 2020, they were doing $2.8 million in revenue and half a million

dollars in EBITDA, so about 18% EBITDA margins. In 2021, they grew to 3.3 million in revenue. So double digit growth, top line, and they had 800,000 in EBITDA, 24% EBITDA margin. And then in 2022, 5.2 million in revenue. They grew 58% year over year, and they hit $2.2 million in EBITDA, 42% EBITDA margin. They just list this as an outright sale. change of control. It says it's based in the Pacific US and yeah, that's all the info we got on it. Interesting. Wow. 42% EBITDA margins.

You got to think, like I'm wondering how old this business actually is. I mean, it can't be, it can't be that much older than 2020. I'm thinking maybe two or three years prior to that of kind of the initial startup slog. But then they obviously had. you know, underutilized capacity, but flat, probably flat overhead. It's one office. Maybe they added a practitioner or two or some of these specialists, but most of their fixed costs, it looks like stayed the same.

And they just have utilized a lot more of their capacity, which is why so much of has fallen to the bottom line is it grown. Man. Yeah. I mean, yeah, when you think about it, like doing an IVF treatment, there's not a lot of hard cost in it, right? Like, once you've got the facility and you've got the practitioners, you've, you You just, I mean, it's labor and you got to have the right labor, but, you know, some the pipettes, the reagents, you know, it's lab work, essentially.

Yeah. So I agree with your analysis. It's kind of, this is like the perfect operating leverage sort of story, right? You have sort of these fixed costs. And as long as you can get your revenue up, look at your margin, get, you know, bigger and bigger. I think it has a limit, though. And so you would be, as a buyer, kind of interested to know, are they at capacity now in 2020? you know, is there still some unused capacity that they could sort of grow this?

The one thing that stood out to me was the insurance payments. So this is not all private pay. You know, anytime we look at something like this where it's, if it's all private pay, that's great. People are just spending their own money. You don't have that whole layer of risk that we lenders call payer risk. So as soon as we see, you know, you're getting paid by insurance or government or something like that. You have this payer risk scenario where you have to look at the reimbursement rates.

You have to look at the politics behind any kind of, you know, the reimbursement rates. You know, what becomes under pressure suddenly like, you know, the insurance companies are paying too much for this or they shouldn't be covering that. And so there's a lot of risk in terms of kind of just feeling that out. And I think, I think there, that is a concern for me in this industry in IVF. There is a lot of, there is political risk in this kind of treatment. just from the headlines that we've seen in the last year. But there's also just the whole idea of what are the reimbursement rates and will they stay as good as they have been to produce these kinds of numbers

long term if you're a buyer. The thing I like about it, Heather, is it says primarily self-pay on this one. It does say that. Yeah, which I was surprised, though, that they then went on to enumerate all the insurance. Yeah, but maybe that's why I missed that good part. But usually, I mean, knowing a little bit about this industry, it is. So I would be willing to bet, and I'd want to see, I'd be willing to bet this is primarily IVF. And that is not covered by insurance.

It is self-pay and the margins are bananas. I think there are probably other stuff that may be prescribed by a doctor and covered by insurance, but I bet that is kind of ancillary to that. Well, what's interesting with endocrinologist is, you know, reproductive endocrinologists are just one subset, one facet that deal with fertility or infertility. But endocrinologists deal with like sometimes diabetes, hormone imbalance, you know, thyroid issues. And so it could be that you got this guy or gal, one endocrinologist. I just Googled like average comp is around 300 to 350,000 for an endocrinologist.

And they're they're like, yeah, sure. I mean, we can take on some additional scope of work in our fertility clinic. but you just may need something else. Yeah, it's possible. And maybe that's the insurance stuff and the IVF's the bread and butter. Yeah, and maybe they're treating like maybe this other issue may be the cause of your infertility. And they can bill, okay, medical insurance for that. That makes sense.

Okay. So, stand corrected. The IVF part is private pay, which you got to love anything private pay because this is just people spending their own money and usually get paid up front. You don't have to wait. And so the cash conversion cycle is really, really good. You are dependent on your team of endocrinologists and keeping them on staff. And I think any, you know, kind of highly paid, highly skilled position like that, that's probably a challenge because they can go elsewhere.

They can make money all kinds of different ways as an endocrinologist these days. So I'm sure that's a little bit of a challenge here. But otherwise, I really like this is a business. What's not to like? Do you think that the MD is the one who owns it right now? That's the risk. If the MD owns it right now, it's risky because you've got to replace them. Right.

They're, and that's the whole thing. And if you're listening to this right now and you're an endocrinologist, please give me a call. Because I would love to open a fertility clinic. Yeah, let's buy it. Well, okay, so that brings up this whole discussion of medical service organization, MSO. And this is the way in which people sometimes buy medical practices like this who are not a physician. It's really a work around around regulation because the regulation says that if you're going to bill for certain medical procedures, and by the way, these regulations are very state to state. But if you're going to bill for medical procedures, the company that's doing the billing has to be 100% owned by a physician that's licensed to do those treatments, whatever they are.

So this affects, you know, all medical dental practices as well as sometimes med spas, you know, all kinds of other practices as well. And so what's interesting about the MSO situation is it's a workaround. And there are some states that are legislatively or kind of in court cases putting that under pressure. Apparently in New York, there was actually a case where the judge threw it out and said, I don't, this is just getting around the regulation. You can't do this. Now, people are still doing MSOs in New York. So it hasn't really, you know, stopped them.

But there is that sort of legal risk if you're going to go that route. as an MSO. Yeah, so it would depend a lot on what state this is in, and you'd want to understand whether MSOs are allowed, whether you have to be licensed, et cetera. So there's definitely, you wouldn't buy this without a regulatory lawyer taking a look at it. But even if, let's say that all checks out, right, if this is the endocrinologist selling you their practice, you are still up a creek because they're going to take whatever you pay for this business and go to the beach.

and now you don't have an endocrinologist, right? I think that's a, I mean, it's a non-starter for, you know, 99% of buyers. You know, there's probably a very small subset that says, okay, I'm not an endocrinologist or reproductive endocrinologist, but I'm willing to go try and tie this deal together with someone and partner with them and go do it. But you're talking about a very, very, very niche down kind of, you know,

buyer structure. one of the reasons Heather you talk about private pay that you know the like rehab facilities have gotten rolled up so aggressively is that it's private pay you pay up front and there's you know there's not an MD running those there may be some like psychiatric and you know some mental health that happens you know in terms of being brought in and subsidized but it it kind of bypasses I think some of the harder more difficult elements of this and probably similar average order value. I mean, what's the average order value at a place like this? $30,000, $40,000? Yeah, IVF is about $30,000, $25,000 to $30,000 each time. Yeah, and it's a couple of times. Wow.

That's right. Yeah, nobody really, or very few probably just do it once. So lifetime value of the customer is probably in the $75,000 to $100,000. I mean, you hope not if you're the one receiving the IV. Yes. Yeah. So the way it works, so there's, I'm simplifying, apologize. for the people who've gone through this out there if I'm a little ham-fisted.

But there's basically two phases. There is the retrieval where they retrieve the eggs from the woman. Then they fertilize the retrieval from the man, not that difficult. Retrieval from the woman, then they fertilize the eggs in the petri dish. And then you get a certain number of embryos. If you're lucky, you have 10 plus. If you're having fertility challenges and are unlucky, you have single digits. And then they freeze them.

and they grade them. And so you might have three A's, three Bs, three Cs. And then they do implantations. So they'll start. And the retrieval, by the way, is the expensive part. It's expensive to do a retrieval. Then the implantations are not cheap, but they are cheaper. And of course, there's all these shots, months and months of shots to get your hormones

right and the woman's body ready to receive it. Then you do the implantation and you hope it takes. if it doesn't take, you hopefully have more embryos in the freezer and you come back again. So, and then when you run out, you have to do another retrieval and that gets really expensive again. So that's kind of the drip, drip of how a patient comes to you. Is all this done in-house or is any of it like you're having to go to an ambulatory surgery center or something like that? I fortunately have not gone through it, so I'm not sure. I'm pretty sure they do it, though, right there.

Yeah, I think so. Yeah, I think it's all a one contained, you know, practice that does from start to finish everything. Which in terms of medical services is the, I mean, that is the cream of the crop, right? Is you're not having to go pay a facility fee at a hospital to use their OR and their staff and their anesthesiologists. Like, if you can do it in-house, that's why you get more and more of like dental practices and, you know, orthodontists who are doing, they'll spend a huge chunk of money on. on a piece of equipment just to be able to scan your teeth or, you know, now every dentist does x-rays in room. That used to not be the case. But they want to capture as much of that, you know, margin and as much of that price point as they can. And that's why you have the, the fixed cost leverage on this

business, right? To open this up, you got to build out a medical office with all the equipment you need to do IVF. But once you pay for it, huge operating leverage. So, and also, let me just say, I love this industry. This is, I think, an absolute slam dunk for the next couple decades. The reasons behind it are kind of a bummer, but from a business perspective, I mean, holy cow, talk about tailwinds. I mean, people are culturally deferring children for longer, right? When you defer, you're not as fertile, right? You need fertility help.

So culturally, people are pushing kids longer. there are men's testosterone levels are in the toilet compared to one or two generations ago. People are just generally less fertile because of the garbage food we eat, because of all the plastics in our water. The list goes on and on and on. People are just less fertile. And that trend is not going the other way. So sadly, I mean, already so many more people need fertility help than did 20, 30 years ago.

And another 20 or 30 years, this industry is just growing like crazy. it's all private pay, as we mentioned. And I will say, like, the positive part of it is, like, you're helping people have kids, which is freaking awesome, you know? And sometimes it doesn't work. But, like, this is, like, one of the most, like, pro-human businesses you can possibly be in, right? Like, you are helping the human race procreate, which is awesome. So that is why I love his industry so much is I think you can make a ton of money and feel super good about doing it.

I wonder why these don't exist in hospitals. I've never seen one that's part of a hospital. Well, that's what I was just going to get to is where did the, where did the patients get referred from? I do know someone who worked as a consultant for a medical practice where it was like every, she would consult them on any and all possibilities to have a child, you know, IVF, adoption, surrogacy, you name it, everything. and sort of connect the patients to whatever the best choice for them would be. So that would be what I'd be curious about is, are the, where are the referrals coming from? Are they coming from the hospitals?

Are they coming from other medical practices? How are they reaching the customer? And they may, go ahead. I think they come a lot direct. Yeah. I think they come to, like, well, they make note of high success rates. Yeah, right. So I think, I think it has something to do.

marketing there is. Yeah, you've got to be able to have these high success rates and market that. And then, and then you're going to get word of mouth and you're going to get people coming because of your high success rates. And I think it has to do with the, you know, the, the methods that they use. And what I don't know is how, how often that changes. Does technology, is it moving fast in this space just like it isn't everything else? And does that require some CAPEX or some training expenses, you know, maybe? I think like most medical things too, you know, not to oversimplify something that is really complex and kind of multifaceted in its complexity. But my guess is right, there's the intake process looks the same for every single person who comes in.

You're evaluating the same key kind of underlying metrics and saying, hey, you have hormone imbalance. You have maybe, you know, I don't know, some kind of, you know, other health issues. and let us help. Let's help with those, maybe start there, and then we're moving kind of down the scale in terms of intervention. And that process is probably like very personable in order for it to have a good customer experience, but it's probably very formulaic. We're doing the same things day in and day out, and we have different tools in our toolbox, and we're just picking which one's best suit the circumstances of this patient. Yeah, the tough part, I have several friends that have gone through this. And the tough part is the science is not great, even still. There's a lot of

what they label unexplained infertility. And they do all the labs. Everything seems normal. Everything seems normal. And like these people still can't get pregnant, these couples. And it's, of course, sad and maddening, you know, if that's you, going through it. And this kind of gets to another reason I actually love this industry is it is currently a disaster. The customer service in this industry is garbage right now. Everybody that I know that has gone through this feels like they are a number. Like they walk into a clinic, they get treated like a number. This is like one of the most consequential things they are doing in their life. Huge dollars are on the line. They're buying a BMW. And they are treated like a number. Like I have heard of people going in

and going like, I know your cycle is ready for it on Thursday. but we are only doing it on Tuesdays, so you have to wait until next month. I mean, it is abysmal. So I think there is a huge opportunity. And the margins are bananas. So there is no reason that you shouldn't be able to white glove people all the way through this. I think there's a massive opportunity to just be a lot better in the fertility space and take a ton of share. Well, and we've talked about, Bill, like in the past, you know, businesses,

that are adjacent to something that provides like massive tailwinds. You know, if you're, if you're adjacent to a very, very large transaction and you have a small transaction, like, that's great. In this case, I mean, we thankfully, I have four kids and we're incredibly blessed. It took us longer to get pregnant than we anticipated. And it is all consuming. I mean, it, I've kids between 10 and 6. So it's been a little while.

But I still distinctly remember how just all encompassed. It is when you want to have a kid and you can't. And, you know, that's why. I mean, it's not surprising that people are, you know, they go into debt. They, you know, put a second mortgage on their house. You know, they sacrifice anything and everything. You know, and so you're right. There is something about this that is, you know, kind of noble and very like humanitarian.

If you do it the right way or you can be a total jerk off about it. Yeah. Well, to your point, the 42% margin says, you know, maybe you're not doing the most you can for customer service because that's how you get that margin. So that is interesting. Like you could grow the top line and still probably grow your EBITDA with a skinnier margin by delivering better service. Yeah. More endocrinologists, more appointment times, all that. My sense of it is that delivering better service is not expensive. I mean, I'm talking like in the way that like the Ritz Carlton delivers better service than the Marriott. just like treating people like humans like, you know, not treating like a number,

communicating with them the right way, being empathetic to their concerns. Like these are the types of things that like the bar is so low in this space. And I mean, I think the margins are so good. You might go, well, why don't you just charge less, right? Are you ripping people off? Like, this is the market price of this service, right? Like, this is what everybody is charging. And could you take a little bit of share by pricing down a little bit?

maybe, but every fertility clinic I've ever seen is book solid. So like, you know, like this is the price of the service. This is what it is. So my thought would be if you're going to make great margins, at least deliver a great customer experience. I think it is interesting that they talk about geographic expansion because it brings a couple of things to mine. Like, let's say best case scenario, you reach out to this, you know, this broker,

this investment banker. and there is a staff endocrinologist who is not the owner and they are, you know, they have a massive runway, something you feel comfortable, you know, you're basically betting on them as, you know, as the jockey to run this thing. If in this model, similar to dentistry, if you want to grow geographically, what a lot of like dentists or orthodontists do is they open another office and they just split their days, you know, Monday, Wednesday, Friday at this location and Tuesday, Thursday at this location. I wonder how that works here. And if you are able to kind of maybe just take on the additional rent overhead and the initial upfit overhead, but maybe your staff is bouncing back and forth as a means to kind of subsidize that growth. But it seems like it would be very, very difficult to, you know, hire a staff endocrinologist

for each office as you grow because most of these people probably default to doing it themselves because they can capture most of the value. It's like a weird growth model. Yes, yeah, and the catfax. Yeah, there's CAPEX because I think you have to set up the facility again. Yeah. You have to have this whole clinic and kind of surgical facility. Maybe you can bounce your staff, but I think the more expensive part is the facility.

Leasing and setting that up. I've certainly done my share of SBA loans for, you know, building those out. It's, you know, it's not only expensive, but it's really time consuming because of all the regulation and all the specialization of what has to go in. So I feel like the geographic expansion has a lot of cost to it, potentially. But that's your value, right? Like as the investor and the capital, like that's what the endocrinologist doesn't have. Like they can capture, I mean, they'll capture a lot more value in their agreement with you than a carpenter would.

Right. But they need you also. You're going to need each other. So I think hammering out, you know, a good partnership model at which there are probably a lot of industry comps, like how dentists do it, how veterinarians do it. You know, like there are definitely, there's, there's a model out there for how to scale practices that require a professional practitioner. And so I would just look at one of those, look, learn about that and then see if you can stamp it out and hire new endocrinologist. But the top of your funnel is, I need new endocrinologist for every single office. Is there, you know, there are certain businesses that you look at and you go, okay, there's, you know, kind of a moral gray area.

like, you know, we've talked about things in the past like payday lending or title lending. You know, I had one broker one time tell me. I was like, yeah, I'm not really interested in the, you know, the title lending space or anything like that. And he's like what? I mean, it's not like strip clubs. You know, but it's like there's these kind of vice businesses, ethically gray businesses. We looked at a business one time that was a online breeder, online breeder of puppies. And so it's like, okay, you got all kinds of different, you know, potential.

target that you're putting on your back. Is there anything about fertility and infertility and IVF that is like you like, I don't know, taboo, touchy, like are people going to come after you and say, kind of like the puppy thing that I realize it's like, there's a lot of people who are like, hey, don't, you know, you should adopt instead of, you know, somebody breeding more puppies when there's so many dogs out there that need homes. Is there anything like that in the fertility world or the infertility world related to like adoption. I don't know. So I'm just posing the question. I think there kind of is, but I think it depends on where you are. You know, this is in the West. But I think it shouldn't be, in my opinion, but the whole abortion debate and when does life

begin is kind of coming into this space, which makes no sense because this is people who are trying to have children. But the whole idea of what happens to the embryos and all of that, I think, I think there is, for some people, a gray area there. And I think it, you know, because our country is so divided lately, it really depends on where you are, whether this is an issue. This says the West. So probably it's, it's not a big issue, especially if it's California. Yeah. Yeah.

I mean, there's, I mean, there's definitely, definitely people are going to get upset at you, right? The margins are really good. Not everybody succeeds, but you still collect all their money. There are complaints about kind of the economic gating of fertility, right? Because poor people and rich people are infernal at the same rates. And it's $25,000 to IVF. So there's like moral questions about that. A lot of people have had a lot of very bad experiences.

I mentioned earlier the episode about, you know, bad customer service. Like if you give someone bad customer service, take their $25,000 and they don't have a kid, they are going to be pretty pissed, right? And vocal and, you know. So you're going to deal with that. I mean, that is absolutely there in this industry. But I think, in my opinion, you got to look, it's easy to look at, you know, the heartbreaking, like these people didn't have success. But look how many people you are bringing children to.

And that's pretty cool. Yeah. All right. Let's do thumbs up, thumbs down on this one. I am like three thumbs up. I don't have enough thumbs. I'm very into this. Yeah.

That's up for me. What do you think that this sells for? 10x plus really uh-huh wow assuming it's not endocrinologist's own yeah like assuming you got staff assuming this is actually acquirable yeah 10x plus there's got to be private equity all over this i bet these are getting rolled up already which tells you if that's the case then they are planning to just grow the pants off of this thing uh well or roll them up yeah yeah wow absolutely yeah I bet this sells for a very nice number. And I mean, Heather, at $2.2 million in Evida in 2022, you're, you know, even even if even if Bill is, you know, twice as wrong, you know, even if it sells for 5x, you're way outside of SBA.

Yeah. Yeah. Interesting. So it's, it's very much in a no man's land already. Yeah. I wonder. I wonder what happened, you know, because my guess is based on what we're saying and what we're seeing, I feel sure that this trend. It's old. Yeah, and it could have been an add-on. You know, somebody could have already had one, and this was the add-on at $2.2 million, it would be a good one for private equity. So, but if it was the first platform, $2.2 million is actually a little small to get conventional financing. It's, it is weird. Yeah. All right, then that begs the question. I know we're kind of going long, but that begs the question. Why would somebody not, if you, like, this is a good business. Why would you not start this? Why would you not go to, you know, the med school?

I got to go to medical school first. Why would you not go to the med school and go to the reproductive endocrinology, you know, class and say, hey, I want to back one at you guys. You know, I'm holding open interviews, you know, in the hallway. I'm surprised more physicians don't do that. Yeah. Yeah. Maybe they don't realize.

ETA, you got to get out there to the medical schools, you know, you need these guys as partners. And I'm surprised it doesn't happen more. I do see it a little bit more in my, in my business, people partnering with physicians for stuff. like this. I'm just starting to. I'm surprised I haven't seen more of it before now. And you would think there would be an entire business model, like venture capital seed funding endocrinology clinics or dental clinics or whatever. Like all these people are coming out of school with medical degrees. Some fraction of them are entrepreneurial and going to start their own practice, but they don't have the capital because they're deep in medical school debt and just say,

hey, we're going to fund the cap X, you know, you're going to have a slice of the pie, let's go. And there's some failure rate built in your model and you just spin them up. I think the thing that probably helps buck that trend is, and Heather, correct me if I'm wrong on the SBA side, but banks love lending to doctors. It is unbelievable the terms. Oh, yes. Yes. Especially dentists for some reason. The dentists get the lowest rates.

They get approved for like SBA type terms without an SBA guarantee. It's crazy. Yeah, you're exactly right. Yes, they love lending to dentists and doctors. Absolutely. I did a real estate deal like 18 months ago where I partnered with a couple docs. And it was, so it was owner occupied. We got owner occupied real estate status because they were moving their practice into this building and then we upfitted it. But we got, we got 100% financing on the on the construction, on the outfit. We got 85% loan to value on. the purchase and we got a 15 year fixed rate straight am at 3.25. Oh my gosh. Now, granted, this was right before rates went up, but like docs and and the one kicker was the bank was like the physician practice has to bring their bank, their business banking relationship over.

And that was how they were going to make up for it, which was great. I mean, it was perfect. Yeah. That's a big deal now. Bringing your deposits as a way of bargaining for your rate, if you have good deposit balances to bring is a huge hack because banks are hungry for deposits more than ever, ever since the Silicon Valley Bank debacle. Deposit flows became unstable or much less stable than they ever used to be.

So they're less predictable. Now banks suddenly really care about getting your new deposit relationship, much more than they used to. One of the most valuable, if you were still listening to this podcast, this tip might be worth the price of admission, which was zero. still. This could save you a lot of money. And Heather, I think you taught me this about a year ago, which is that, to Mills, to your point, a bank can say you have to bring your deposits with you for the loan, but they legally cannot contingent you that you have to keep them there. So you can

bring your, you can say, great, bring my deposits, you bring your deposits for closing, and the next day you can wire them all back out and there's nothing they can do. But don't do it the next day. I have to stick up from my banks here. But yes, they cannot legally tie you together that way. So it's really more of a marketing pitch and they hope you bring your deposits there and that you'll be happy and they'll take good care of you, but you are not actually stuck there, which is good.

I will say. But they will make it sound like, are you bringing your deposits? Oh, good. You are bringing deposits and you'll get much better terms if you're bringing deposits. Correct. The carrot that got dangled in front of me to move our deposits was very, compelling it was way better than and i was like shoot i should have negotiated way harder with my incumbent bank you know two years ago um to i'm i missed out on all this yield you know but two years ago

they probably wouldn't have done it really has literally changed the silicon valley bank thing changed everything and now it's it's uh front and center for all of the smaller banks yeah this was a fun one um yeah this this is a really good one uh some the reason by the reason by way, the reason I think this is going to go for 10x is it's multiple arbitrage. It's exactly the same thing that's happening in dental and in vet is that the roll-ups are trading at 14 or 15 times EBITDA. And so you can pay 10x and you've still got multiple arbitrage if your private equity. So that is why I think this is going to go for a big number. Sorry, searchers, going to be tough. Yeah. This is who you're up against. This is who you're up against. Yep. All right, well, this was a good one.

I would love, let me end, if you know about this industry, we would love to learn more. Tweet me on Twitter at Bill DA or find us Acquisites Anonymous on Twitter. I would love to learn more about this industry. I'm fascinated by it. I think the tailwinds are incredible. So it was cool to see a little bit behind the scenes on this episode. Also, if you like this episode and you thought, oh, there's another industry that you're super psyched about. go on our website, ACQU-Anon.com.

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