How BoomCloud Helps Practices Increase Valuation

jordan what i want to do is before i talk about the next passive stream of income uh-huh i want to talk about how boom cloud directly affects valuations or practice could i do that or a subscription plan yeah it's good let's do that okay so okay okay so i'm one stream of income i'm going to talk about leverages off of these older dentists who have not started practicing again after covert okay yeah and so i'm going to talk about creating passive income with that but first

i'm going to talk about how a subscription plan like like boom cloud that of course utilizes a software to manage that how a subscription plan affects your valuation in your practice okay here we go so let's say your practice right now does a million bucks a year okay it does a million bucks a year um the average dental practice is worth about 72 percent of last year's gross revenue right so 720 000 is what your dental practice is worth but dental practice is because of this

dso component today a lot of them are valued at a multiple of ebitda sometimes six times uh ebitda okay uh is basically the profit margin in the practice after the doctor gets a modest salary and so one cool thing about subscription plan revenue every dollar that comes in is counted as ebitda so what's cool about that is your subscription plan revenue is not subject to the traditional way that you value practices subscription plan revenue every dollar that comes in on your savings plan goes directly to

ebitda which is how we've been transitioning into valuing dental practices so so isn't that cool jordan how that works yeah so the first the first one you said the 72 cents uh or the 720 000 uh uh typically a million dollar practice is worth that much that's called the discounted cash flow valuation is yes what i've been told and then the the what you're with the 6x there that's a multiplier evaluation and that's you want to be in the multiplier evaluation with anything that you do

because well it's going to make you more money yes yes and here's one more thing jordan and it ties into our next topic usually as you add another location and maybe another and have three locations you transition from valuing your practices from this uh discounted uh a cash flow methodology yep to a multiple right like heartland and all these big groups sell for multiple so what's cool is is this if you get ahead of the curve and get subscription revenue coming your practice and then you

multiply that in other practices you know if your ebitda number is way higher and you're getting an 8x or a 10x multiplier now you've double whammied it you've taken that subscription revenue and you've got a higher multiple as you grow so so uh it it can mean not just hundreds of millions of dollars but uh hundreds of mil hundreds of thousands of dollars but millions of dollars in the future by starting early yeah right so there's a there's a quote from uh there's a book that

i recommend everyone here read brady it's called the automatic customer it's a it's a building uh recurring revenue uh in any business and it's written by john warlow i can put a i'll find a link here in a minute okay um i highly recommend getting that book because it talks about everything we're talking about here in regards to valuations and what how recurring revenue through a membership plan in in this case um how that increases the value of a business over dental practice i think john

warlow says uh the recurring revenue can be valued between 24 times the monthly recurring revenue up to i think it might be 40 times i do have a slide on that so it's like 24 times the mrr so monthly recurring revenue so if you had like 45 000 monthly recurring revenue it can technically be valued at a little over a million to 2.4 million roughly is is kind of what i've seen according to this book here so automatic custer go automatic customer go grab that book

it's it it's uh if you like what you're hearing now you'll you'll love that book you know you you make a good point jordan not only just from the most empirical sense does recurring revenue increase that but in reality if you're going to value that as a almost a separate asset class which you should right and your accountant should or your valuation expert should absolutely absolutely then you're going nuts right with that right and just just to say it even more simply folks with your dental

practice when you cut that crown you do that crown you're doing it once and it's done right that's that's how we value it either with the discounted cash flow methodology or the multiple but with that recurring revenue right they know it's there every month and so it minimizes their risk right it does it minimizes their risk that's why they pay such a high multiple for that yeah if you and if you think about it any business owner or or if you if a court you know

a dso is buying your your practice let's say they want i mean technically they're buying it so they can make it a multiplier that's why most most corporate you know dental offices buy you know discounted cash flow and offices because they know that they can turn it into a multiplier but if you think about it if you think of real estate you were talking about real estate earlier um the beautiful thing about real estate is you get monthly cash flow coming in so recurring passive income

plus the increase of valuation of that of that building right over time uh typically real estate goes up and at least as long as i've been alive it's just kept going up and up right with some dips every once in a while but it still goes up nonetheless so that's a very good financial model now if you want to do this to your practice you need to build a recurring revenue cycle in the practice so you get that predictable recurring revenue coming in and then that

over time that valuation increasing so it's very similar similar to real real estate once you get that you know i i think what you're saying is huge because when i first made the decision to put boom cloud in my practices and to start a dental savings plan i was just thinking about the monthly money coming in right yeah correct and and and with real estate investment a lot of times we think of yeah the passive income that's great i can live off that sure yeah but

but when it comes time to sell an asset and you get a big check for two million dollars right or more then then that's a that's a that's a huge benefit and then you take that money okay and put that into another asset or two or three that produce more passive income and uh and so i i love it okay so all right let's go to the next topic this one