Above Photo: MB2 Owners’ Trip—Cancun 2017
MB2 Dental Solutions
Young, progressive, and disruptive
Business View Magazine interviews Dr. Chris Villanueva, Founder & CEO of MB2 Dental Solutions, as part of our focus on best business practices.
MB2 Dental Solutions, headquartered in Carrollton, Texas, is a dental management and practice development company that was founded in 2007, by Dr. Chris Villanueva, as a DPO (Dental Partnership Organization), where dentists can invest in one another both professionally and financially. MB2 Dental Solutions bridges the gap between private practice and traditional DSOs (Dental Support Organizations), attracting highly talented and motivated entrepreneurial dentists by offering clinical autonomy with the opportunity to become owners of their own practices.
“I had worked in a traditional private practice office for about a year and in a more corporately structured office at the same time, and realized there were things I liked about both models,” Villanueva recounts. “In this dichotomy, I wished I could take things I liked about private practice, such as the clinical autonomy and the equity participation as a doctor, and marry that with the things that I liked about group practice, namely the economies of scale and access to capital and talent. That was really the beginning of it all; that was the genesis of my business.”
Villanueva also remembers that getting his business started on the brink of the Great Recession proved to be challenging. “Unfortunately, in 2007, no one was lending money because of the credit crisis,” he recalls. “I asked banks, I asked my family, but to no avail, and so, I figured out that dentists were the only ones who understood what I was trying to achieve and they’re the ones that invested in me and my vision, and that’s how we started our first office.”
Today, MB2 Dental Solutions has grown from just 12 to over 1,350 employees, and partners with 54 doctor owners who manage over 120 practices with 260-plus dentists in several states: Alaska, Texas, Oklahoma, New Mexico, Arkansas, Louisiana, Tennessee, and Colorado, with more to come, according to Villanueva. “We’re a very provider-centric business,” he states, “meaning that we don’t look for a geography and decide to plant our roots there; we look for a doctor partner, first. So, if one lives in Florida, we’re going to Florida; if a doctor we like lives in California, we’re going to California.”
Villanueva adds that finding potential doctor partners is a relatively easy process. “In terms of sourcing, we probably have the largest proprietary deal flow in the industry because of our doctor involvement,” he avers. “Because our doctors are partners, and they’re aligned professionally and financially to grow the organization, we have access to fellow doctors, more so than brokers or headhunters. A lot of our growth comes from word-of-mouth. When a doctor transitions with us and speaks highly of the partnership, normally that begets many more deals and that’s where we are today. Honestly, we have more deals than we can handle many times, so we’re scaling up quickly to be able to go through them.”
In regards to how MB2 Dental Solutions vets potential doctor partners, Villanueva says, “I look at it in two parts: the front end is a math problem, where valuations are valuations; we try to underwrite partnerships unemotionally and we try to be fair. We’ve never not done a deal due to pricing; everyone knows we pay a premium for premium offices. The other half of it, though, is getting to know the partners and what they want. As a dentist myself, I think we’re uniquely positioned to be able to have those conversations with providers: Is your goal to scale? Is your goal to retire? Is your goal to take some of the responsibilities off the table? Really, it’s a conversation between myself, some of the key doctors, and the potential doctor partner. That’s a very big part of the process. There’s no lack of great offices, but I think you have to be very protective of your culture and we want to make sure that it’s working for us and that it continues.”
“On a superficial level, we offer many of the same services that a lot of group practices offer, whether that’s marketing, human resources, IT support, business development – you name it, we have it,” says Villanueva, explaining how the MB2 model works. “We have 150 individuals in-house and that’s all they do; they help with centralized services. When you have 120 offices, you can offer services at a more attractive rate. We can increase performance and profitability by driving down costs, sharing best practices, and sharing operational expertise. That’s why a lot of people would join any group practice.”
“The difference between a traditional group practice and ours,” he continues, “is that we’re a partnership model, where we actually own a piece of equity as an organization. Our model allows doctors to take advantage of their equity at a higher valuation, and that becomes extremely interesting for private practitioners. So if they wanted to monetize some of their equity, they’re not limited to small business valuations; they actually have access to enterprise value. This is something that’s never been done before, not to our scale in our industry. I think that’s, ultimately, why a lot of doctors join us – the growth potential and the arbitrage value between private practice and group practice.”
Villanueva believes that, going forward, the MB2 hybrid model is poised to be the future of dentistry. “We’re the first of our kind, and I do anticipate more and more groups to imitate the structure, which I encourage them to do because I believe it’s the right way to deliver dentistry,” he asserts. “Where the profession is heading and whether or not it’s going to be more analogous to the hospital model where doctors and dentists are employees of a large conglomerate is yet to be determined, but I think there’s still a lot of opportunity for us. Unlike our medical brethren, whose stories have already been told, we’re only about 20 or 30 percent consolidated. So, 70 or 80 percent of all dentists are still independent and there’s a decision to be made by a lot of private practitioners. Are they going to stay as private practitioners? Are they going to be bought out by a large group? Or are they going to join a more progressive platform like ourselves where they maintain their independence yet garnish the benefits of a large group? Obviously, I believe in the latter and that’s the way things are going to go.”
Indeed, Villanueva reports that he has met others who say they are planning to follow his model. “I think it’s flattering and I encourage them to do it,” he avers. “I’ve had many people visit with me and I’ll give them our operations book; I’ll tell them what to do. I think that the more organizations that model after us and allow doctors to run their organizations, the better off my profession is going to be. I believe there’s a place for private practitioners, and there’s a place for doctor that want to be associates. I’m providing a home for doctors who want to be leaders, mentors, and entrepreneurs. What supersedes the competitive nature of the business is our vision model. I fully believe that if we can have doctor led organizations, where they’re making decisions for patient care, I will encourage that, even at the cost of the company’s interest. I believe that this is the right way to provide care for patients.”
In addition to being a successful care model, MB2 Dental Solutions has also proved to be an economically successful one. So successful that, in 2017, the company was recapitalized by Sentinel Capital Partners, a private equity firm that invests in promising companies at the lower end of the middle market and has a well-established record of investing in the dental sector. “This first year, we close to tripled our budget goals. Most likely, by next year, (a year-and-a-half into our partnership with Sentinel Capital), we may be very close to where we projected we’d be in four or five years,” Villanueva enthuses. “So, our growth is astronomical and more than I would have anticipated. The more dentists we reach and the more dentists understand our model, the more they realize there’s really no compromise to it. They get to maintain their independence and have greater value in their equity. We’re surpassing every budget that we put forth, and we beat every traditional budget model out there for a private equity-owned organization.”
Villanueva admits that not all dentists will ultimately be convinced to become an MB2 Dental Solutions partner and that, today, the average doctor owner’s age is under 40. “I think it attracts a certain type of dentist that is very open-minded,” he notes. “We tend to attract doctors that have been around five or ten years. I think some more seasoned doctors, who have been doing things a certain way, have some suspicion about our offer. But, we’re not your dad’s dental office. At the same time, we’re not just a bunch of Millennials running around with inexperience. We are a young, progressive, disruptive company that understands the industry well and the opportunities in it. We have a healthy bravado about who we are as an organization and we’ve accomplished a lot in the short time we’ve had.”
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AT A GLANCE
WHO: MB2 Dental Solutions
WHAT: A dental management and practice development company
WHERE: Carrollton, Texas