Jonathan Moffat sits down with Steven DeLong, CEO of BlueTree Dental, who shares how they grew to nearly 50 locations while unlocking provider-aligned growth. He breaks down the secrets of scaling a dental organization without losing your culture and staying focused on long-term success over short-term gains. Steve also shares valuable insights on the impact of private equity, how collaborative governance fosters trust within a team, and the importance of aligning clinical and business principles.
Find Jonathan at jonathanmoffat.com
Learn more about Aligned Advisors at alignedadvisors.com
Connect with Steven and BlueTree at bluetreedental.com
Find Jonathan on LinkedIn: https://www.linkedin.com/in/jonathanmoffat1/
Find Steven on LinkedIn: https://www.linkedin.com/in/steven-l-delong-3057449/
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Building Provider-Aligned Growth In Modern Dentistry With Steven DeLong
Welcome to another episode. I have with me the CEO of Bluetree Dental, Steve DeLong. We’ve known each other for several years. We originally first met when you were filling in for someone at Henry Schein Dental Business Institute. I was there. I remember meeting you, and I remember being on a panel with you. I remember being impressed with how authentic you were and how leadership-centric and focused you were. It left a lasting impression on me. I know you’ve worked with several of our clients. Welcome to the show. I’m happy to have you on and learn from you and your expertise.
Thank you. I appreciate you having me. I remember that first interaction. I was in Milwaukee, visiting with my grandsons. The only time I had been to Milwaukee before that was when we met at that Henry Schein leadership meeting.
For me, you’re still in that danger window of going to Milwaukee. It’s still too cold for me, but hopefully, you had some good weather.
We walked to the zoo, and it was a little chilly.
Steven DeLong Of Bluetree Dental
Bluetree Dental was founded in 2011, right?
Yes.
How many practices are you guys at?
We’re supporting almost 70 providers in the high 40s, practice locations, pushing 50.
That’s great. Tell us about Bluetree. I was doing an episode, and we were talking about the big DSOs and the midsize CSOs. Where does Bluetree fit? What have you done as the CEO of Bluetree to stand apart or say, “We’re a special place where if you’re interested in a partner, you should take a serious look at us.”
We’re a multi-specialty group centered mostly in the Western US. Our three primary markets are Northern Nevada, Northern California, and the Portland and Vancouver, Washington area. That is where we concentrate probably 95% of our business. We’re fairly divided between pediatrics, orthodontics, and general dentistry overall.
In terms of differentiation from other organizations, it’s a difficult question when you’ve seen one group. We’re all a little bit different. That’s probably the greatest misnomer for those who are looking to join a group, whether it’s as a provider, a partner, an acquisition, or whatever the case might be. We’ve gone through this phase of people not wanting to join groups, and when they did, they did a little more due diligence on, “If I’m going to do it, who’s it going to be with? Do I feel like our values align?”
I feel like there’s been a shift in the last few years to almost resign, like, “Eventually, I’m going to have to join a group. I need to go with whoever’s offering me the best deal or the greatest amount of money.” That goes from an acquisition M&A perspective, even to a provider perspective. We’re what they would call a mid-size emerging group. I don’t try to label us as a DSO or DPO.
In essence, people are trying to differentiate the same thing. They’re like, “I’m this, but I’d like to differentiate myself as this.” There’s an IDSO, DPO, and DSO. In essence, I don’t care. Even if you don’t have any private equity, if you have multiple offices and you have some kind of services structure, you’ve created a support organization. If your owners are doctors or your owners are private equity, you have investors. They all should be wearing an investor hat, whether they also wear a dental mask during the day. They should be asking the same questions, whether they are inside or outside of the group.
That leads me into what’s a little unique about Bluetree. We didn’t set out to start the group at a time when it was popular. It wasn’t at the time. We didn’t even know what we were doing, and that we were even forming a service organization of any sort, until Mark Cooper said, “You guys are starting an MSO.” We were like, “What’s an MSO?”
We had seen some groups. Some friends of mine had started a pediatric group down in Arizona. Two providers owned it. I knew group dentistry was a thing, and then there were opportunities. They did pediatrics. I got associated with 2 pediatric dentists and 2 orthodontists here in Reno. I started to see where there were some opportunities to expand the business and take advantage of some things.
In that process of starting the business, governance became a real focus of our conversation and how we are going to structure the organization so that we are properly balancing clinical and business principles and that we can collaborate with our owner doctors, our future owner doctors, and our associates on establishing those sound principles in the organization.
Whether we’ve been successful or not depends on your perspective. We’ve grown pretty steadily. We’ve had below-average turnover for providers and partners, for sure. Our culture has been strong. Do we have some challenges here and there? Of course. All groups do as economics change. That’s a very transparent collaborative governance structure that has yielded some strong relationships, which have led to a nice social organization.
We talk economics. We talk the business because we’re in a business. I don’t care if you’re a private practice or you’re in a group. It’s a business that delivers dental care. Sometimes, people have a hard time differentiating that. We’ve done a pretty good job of doing that. Also, our outlook is that we’re trying to build a governance that has a long-term outlook. Even then, our governance is changing. The alignment is changing. What was necessary several years ago to align providers and partners is a little different now.
To find long-term alignment, look deep into your organization’s culture and values. Share on XHow Bluetree Structures Their Deals
That’s great. Thanks for giving that. How do you guys typically structure your deals? Has that changed over the years, or has it stayed pretty consistent in how you will typically structure a deal?
It has evolved. We started originally in a joint venture structure. Our first several deals were joint ventures with associates who are buying into individual locations or brands. We did a 100% acquisition early on where they rolled equity into the holdco. We were running parallel a holdco equity model with a very large multi-specialty practice, and then with some joint venture models.
We ran that parallel for a long time. I would say for 5 or 6 years. Some of our largest partnerships were joint venture structures before they were super popular. That’s the way that we did it. Some were out of necessity, and some were out of alignment. We continued down that path. Since we’re very partner-provider-centric, right around that time in 2016 and 2027, we started to get momentum in group dentistry and a lot of events and conversations about value and equity. That trickled down into our group, even though that wasn’t our primary objective. We were trying to fill some needs within our marketplace and take advantage of some opportunities.
That led to a conversation that those who had joint venture equity had a desire to roll that into holdco equity. We started that process because we felt like that’s what our partners wanted. We moved in that direction. Since we were concentrated regionally, we could get that Kumbaya feeling from that. Referrals were moving back and forth, and things like that were important.
That’s the model we followed predominantly up until a couple of years ago. We started to shift the mindset of whether or not that model, as we moved into other markets, was providing the necessary alignment that we wanted, but not just what we wanted, but what some of our partners wanted over time. We had been thinking it through.
Between COVID, the economics, interest rates, and things of that nature, we still did some deals that were still 100% acquisitions with holdco rollover. We have moved to a couple of joint venture structures. Where we’re at is we’re looking for alignment like everyone else’s, and not just short-term alignment for recapitalization, but what’s a long-term alignment.
In order to find long-term alignment, you have to look deep into your organization’s culture and values. You also need to ask a lot of questions of your providers and your partners about what they’re seeing. I’ve gone through that process and got feedback from the vast majority of our provider-partners, like, “What do you see DSO 2.0 looking like in the future? How are we going to not just retain our providers, but how are we going to keep them aligned? How are we going to recruit those?” We’ve been formulating that structure, and it’s going to be a combination.
I’ve also looked at some of the big guys that have been around for a long time. How does Heartland find that alignment?” No organization is perfect, but how do Aspen, PBS, and some of these large organizations do it? What are some of the super-fast-growing ones doing that are purely joint ventures? Is that going to last? We can go into joint ventures and get alignment, but at some point, is that going to run into some challenges in terms of things?
It’s a difficult question to answer, but I would say that we are somewhere in between how we provide that alignment between holdco equity and joint ventures, to even looking at profit sharing models that you’ve seen Heartland enter into, where there’s a percentage of profit over a certain amount. It’s going to take all three of those. What the long-term DSO structure has to be is that we have to address strictly provider alignment, we have to have economics of the practice, whether they are engaged in the P&L, and then overall group economics. You have to address things at all three levels. Are you being competitive on an individual basis, a practice basis, and a group basis?
That’s where we are spending a lot of time thinking and trying to get as much feedback and research as we can. There are a lot of dynamics going on in the marketplace that I don’t think a lot of people are considering at this time. We’re trying to see beyond the next transaction into what life is going to be for these doctors, our doctor partners, and our teams 15 to 20 years down the road.
Creating Alignment Between Teams
What are some of those things that you’re hearing back from your provider-partners that they want to see or have, so that you do have that alignment between the support team, the management team, the provider team, and your doctors?
There’s nothing I would say that in and of itself was earth-shattering, but it was the collection of all the information. I took all this feedback, all of the surveying that I was doing in individual conversations, and crunched it through some AI tools. I said, “Here’s all this feedback I’m getting. What does it come down to? What are they looking for?” For me, it comes down to economics. It comes down to collaboration and patient care.
In my spare time, I started an executive PhD program. Don’t ask me why. It was mainly because that’s what I was planning on doing before I got into dentistry. I’ve taken a fifteen-year side road in dentistry. I almost did it a few years ago, but COVID derailed it. I’m in a program, and I spend about 10 to 12 hours a week, mostly between the hours of about 4:30 in the morning and about 7:00 AM, working and doing research, depending on what’s going on. I’m in the early stages of that.
Organizational Trust As A Differentiator
What I initially set out to study was organizational trust, how organizational trust can be a differentiator, how you develop it, and how you repair it when it’s broken. There’s so much wonderful research. I was going down this path, looking back at experiences in dentistry and other businesses. It started to lead me down where I would read something, and I’m like, “That’s applicable to what I’m experiencing now, what I’m seeing, what I have seen, or what I anticipate happening.”
People are not instruments. There has to be trust there. They have to grow with you. Share on XThere’s all this great research that goes unutilized because it sits in this academic pool somewhere. I started to dig in, and I got deep into professional identities. I started this serving four doctors, not like, “I have this vision of we’re going to do this and we’re going to grow it, and we’re going to recapitalize.” I was like, “What do you guys need? How can I help you?” We talked about their needs. I talked to a friend of mine who started a group. He told me all the challenges he was having managed as a doctor. It came to be truly a service company. It was, “How can I help you? How can I help make your lives a little bit easier?”
As I dug deeper into this professional identity of how individuals align and define themselves within a profession and looked at how that pertains to dentistry has led me to governance as well. I spend a lot of time trying to understand the professional identity and what’s happening in dentistry. There’s not always alignment between governance and preserving professional identity. There’s a disconnect there.
The differentiator in the future is how we’re going to be able to marry those things together. How do we preserve or retain the professional identity of the partners who generate 100% of the income of this organization? I don’t generate $1 directly. How do we make sure that those things are aligned? What I’m hearing from them is those three areas.
You can decide to include this or not, but I was doing all this research on professional identity and healthcare. There’s very little research done in dentistry, so I use healthcare, other professional organizations, and things like that. They talk a lot about autonomy and these things. That was a lot of the feedback I was getting from our providers. It was autonomy, patient-centric, and these high-value things that you would expect.
What you don’t read about in a lot of the research literature is the economic aspect of professional identity. I haven’t quite made the full connection, so don’t quote me on any of this information. What I was realizing is that there is a strong economic component to professional identity that providers went to school, expecting the experience in private practice. When they come into a group setting, there’s a lot of sense-making going on. They were driven to that decision either through emotions, stress, or whatever. They’re like, “How do I make sense of this new world that I’m in?”
It’s not doing the professional identity of our provider justice in all aspects. It’s not easy, and it’s not black and white, but you are seeing some efforts in that area. It’s economics, collaboration, and patient care. If you’re not equally addressing those at each level of the organization, it’s critical. You’re seeing the economics of our business change with interest rates, but also inflation. You’re seeing it with the big squeeze. Our top line can’t increase because of payer contracts, but our costs are going up.
It’s not just costs that are going up and margins that are feeling pressure, you look at that from a provider perspective, who’s coming into the group in whatever direction. If they were an owner of a practice, they were used to a certain level of income on top of their normal compensation. That’s not coming through, perhaps distributions and other mechanisms.
Generally, in a private practice, sometimes, you’re talking $1 million, $2 million, or $3 million deals. After taxes, you’re going, “I’m used to making $300,000, $400,000, $500,000, or $600,000.” All of a sudden, there’s this pressure. What do you do with that pressure? Either there’s pressure to recapitalize, get your money out, and do something different, or try to make that up. It’s hard to make that kind of income.
When you’re coming out of school, the pressure is, “I’m not as productive as the doctors who are seniors. Also, I have a huge amount of debt. Also, I’d like to own a house. I have all these things I’ve created in my mind of what a dentist or a specialist should have.” You’re trying to manage the professional identity that they’ve created and also the psychological contract that they’ve created with you as a group.
They’re expecting you to be able to address these economics, collaboration, and patient care. When you’re not meeting those, then you’re breaching that contract, whether you know you’re doing it or not. It puts you in a position to try to put more controls in place, or you can go the other way. You’re like, “How do I create more trust within the organization?”
Understanding the economics is important, and how it’s perceived by your doctor-partners and associates at the same time. How do we serve them best if we’re a service organization? I talked to my doctor-partners. I said very early on, “I’m never going to ask you to violate a clinical principle. Don’t ask me to violate a business principle.” That allowed us to always have some pretty open dialogue and transparency.
At times, I would say, “You’re treating your team like instruments to perform.” They would say, “What do you mean?” We have a conversation about, “They’re not instruments. They’re people. There has to be trust there. They have to grow with you.” This is how we provide leadership. At times, if the doctors are honest, they could probably say the same thing to the DSO. They’re like, “We’re not instruments that you use to produce.” Whether we understand it or believe it or not, it is a collective bargaining relationship that we don’t think we’ve thought through enough times.
What It Means To Gain Autonomy
It’s interesting. My mind’s racing. I want to come back. You talked about trust and how important that is, especially on the support level where you’re at. You’re running a business, but you have to have a great relationship with your clinical team because they’re producing and driving 100% of the revenue for the business to operate. You talked about having that trust and getting that trust back.
That is a great characteristic of a great leader. I would classify you as a great leader. I’ve always been impressed with you, your honesty, and your transparency. You’re very authentic. The fact that you’re like, “I spend so much time pouring into the psychology around these doctors and how we can form better relationships and support them better,” and the fact that you’re getting a PhD, could you imagine if every CEO or leader of an organization spent that much time pouring into and focusing on, “How can we create a better, more symbiotic relationship with our clinical team?”
I certainly didn’t manage 70, but we had 8 offices, and it was always the conversation, whether it’s from the hygienist, the doctor, or the assistants. It was usually one of the clinical sides where it’s like, “All you guys care about is profit. All you guys care about is revenue.” I always believed in a relationship. We always were very transparent with our financials. We would review the financials on the screen with the entire team, like, “This is what your office is doing. This is what’s happening.” If they’re like, “We want to buy an XYZ equipment,” we’re like, “Great. It costs $60,000. We’re losing $5,000 a month. How does this economy work?” Part of that is trusting. In order to have that transparent relationship, you have to trust your team.
I’ve done a fair amount of speaking. In fact, I said it in a forum. I’m like, “I’m sure a lot of you disagree with me, but I’m a big believer in transparency. We would throw our financials up there.” For me, we had that trust with our team. I was telling them, “I have nothing to hide from you. These are the numbers.” It’s such a great characteristic. I’ve never had any hesitations referring a client over to you guys who I thought would be a good fit because of that. That’s so important.
I would encourage anyone reading this who’s in a leadership capacity to think hard about that. It’s one of those things that trust is earned, not given. It’s one of those things, too, where as hard as it’s earned, it’s easily lost. You’ve got to work back. Your team sees the effort that you put into asking questions and digging into, “How can we better support you? What more can we be doing to be a better support?”
I love that you said you’ve had that agreement with them. You said, “I’m never going to tell you to violate any clinical protocol. You can’t make me violate any business protocol.” Those things are so important to have alignment in those relationships. That’s great. You dropped some real gems of wisdom there at that last part.
I appreciate that. Thinking about things and understanding the psychology sometimes is different than executing and putting the operational processes in place. That’s what requires collaboration with your clinical partners and administrative team. Understand that trust by definition. There’s no trust without vulnerability and without risk. It’s not trust if you haven’t created a situation where there is some risk involved and some vulnerability.
Trustworthiness is defined differently in academics, but from what Stephen Covey would say, it is character and competence. It’s our integrity and our competence. In academics, they would use benevolence. There are these three components, which are integrity, competence, and benevolence. You wouldn’t use benevolence in a normal conversation, but in the end, what does that mean? Do people know that you care about them? Are you patient? Are you caring? Are you helping them to grow?
In the end, it has to be mutual. Trust is that we’re trying to balance this flow. I’m vulnerable to providers. Providers are vulnerable to me. We’re both at risk. Sometimes, we don’t recognize that, and we don’t understand. We have to be able to be transparent. What you did with your practice was amazing. It’s something we strive to do as well, and have an explanation like, “We created this vision statement from all this feedback from our providers and are still drafting it, but this is a great statement.”
We’re missing definitions for these words because we’re not speaking the same word in the same way. What does autonomy mean? I don’t know. What does it mean to you? What does it mean to me? If you’re like, “We want to be a leading multi-specialty group in the Western US,” what does leading mean, and in what categories? What does it mean from economics at an individual level, at a practice level, and at a group level? What does leading mean in patient care or patient experience?
We were a relationship-based organization. To be honest, we didn’t do as well operationally over time because we brought in great partners who were running great practices. I was like, “I don’t need to dig into the operations. There’s a level of trust.” Over time, we didn’t find the right balance and develop the right expertise in some of the operational aspects of the practices. We probably didn’t address some things as quickly as we could because there was so much trust. We were like, “It’ll be fine. They run a great practice. Let’s give them room and give them patience,” and they probably were reciprocal on that.
We’re spending time on defining, “What does it mean to be leading? Can we agree on that? What’s a leading group? If a leading group performs at this level of economics and we want to be in the top 10%, what does that look like?” We then let that flow into the rest of our group. We’re like, “What does that mean at a practice level? What does that mean at an individual level? What does it mean to be provider-centric? What does it mean to have autonomy?”
You are always going to have skeptics in that process. We did that. I shared it with all our doctors, and I got anonymous feedback. One of the feedback was, “Are you saying autonomy because you don’t want to have accountability?” I was like, “I wanted to give you guys more autonomy. I don’t give anybody autonomy. Everybody has it.”
I heard Steve Bilt say one time that accountability equals control and influence. It’s true. I have a lot of control and influence, but I have to be accountable as well to our group. We’re going through this process. We’re putting that in place and providing definitions. In that situation, I was like, “This is your statement. I took all of the comments from every one of our partners. I wasn’t even using the word autonomy. It was collective.” Sometimes, people are asking for something that they don’t even want. It’s like, “I don’t want autonomy. That comes with responsibility.”
They’re like, “I listened to this podcast. They said I should have this.” They don’t know exactly what they’re signing up for.
It has been fun to go through that process. There are some great things I’ve read, and they’re not new ideas. The Speed of Trust is a great book. Some of the academic research behind it is good, which was way before that book was written. There’s a good book that I have read. It’s called Credible. It’s the power of expert leadership. It was done by Amanda Goodall. She’s a professor in England.
There is no trust without vulnerability and risk. Share on XShe’s been focused on developing clinical leadership in hospitals. She’s done research beyond hospitals. She said that businesses perform better when there’s expert leadership. Whether it’s a bank, the F1 team, or a hospital, statistically, historically, the best-performing ones have the strongest expert leadership. It’s important to think about.
It’s not a book that’s going to make your New York Times bestseller. The reason I looked at it is because I’ve had some communication with her in previous years when I was looking at PhD stuff. I read the book, and I was like, “I’m going to get this for every one of my doctor-partners,” because I want them to understand that my commitment has always been a very parallel structure at every level. It has upped my game.
There’s some information on motivation that’s good out there, like the SCARF model. I don’t know if you’ve heard about that. A guy had done some work. His name’s David Rock. It’s not new. This was back in 2007 or 2006. I can’t even remember. It was brought to my attention. I was looking at the acronym for SCARF and what each one of these things stood for. I started to look at each one of those acronyms. There’s Autonomy, Relatedness, and Fairness, and all these different things that if those don’t exist, you don’t have motivation.
I started to look at that, and I started to compare that to our governance structure or how we’re working as an organization. I was like, “We’re violating 60% of those things,” but at least not purposeful. It wasn’t a priority to make sure that we were focused on certainty. How do you keep people motivated? They want certainty. They want autonomy.
Is it almost autonomy with oversight or autonomy with guardrails? On one hand, you want the doctors and the team members to be free to do what they want to do, but also understand that sometimes, that may or may not be aligned with where the company needs or what is good or better for the whole. Where do you draw that line, or how do you give that feedback of like, “You’ve got autonomy. Go do your own thing, but we finance partners and other partners we have to answer to.” That goes back to those business principles you’re talking about.
That’s a great question and a great point. When I went into my PhD study, I wanted to make sure that I was coming into it from a very unbiased and neutral position. I wasn’t like, “I’m going to go study all these things on how to make these people do more stuff.” I wanted to understand the psychology of things and how I could build the governance structure that elevates the industry and how it elevates the profession of dentistry, with the knowledge that I’m just a kid from Fallon, Nevada. I don’t even know what I’m doing.
To answer your question, I don’t want doctors to be the subject of an experiment. I’m trying to understand the dynamics, not trying to manipulate them in any form. I want to provide that clarification. Here’s what I found to answer your question. I’m not always concise, as you can see. I can’t remember the name of the CEO of Smile Doctors. He had said there’s a framework, but there’s freedom in the framework. I love that statement.
Here’s what I would add to it. As long as the framework is created in collaboration with your clinical partners, it can be very effective. It has been very effective, at least for us, and we continued to elevate it. We didn’t have a formula for twelve years. There was a lot of freedom in the framework. Our framework was wide, and we’ve performed well. We didn’t have to put those things in place.
What I found out is that in a collaborative governance structure where there is a huge amount of trust, your partners, whatever they represent, clinical or administrative, will impose controls on themselves. What’s part of motivation is fairness. They want fairness throughout the organization. If you bring your clinical partners and administrative partners, they will drive controls that you wouldn’t have been able to successfully implement, and then retain them at the same time.
That has been one thing I’ve been interested in finding. There are lots of different ways to look at the governance of organizations. There’s corporate governance. There’s collaborative governance, which generally comes from public administration. They’re starting to apply it to some healthcare. From the organizational behavior side of things, they are more focused on trust-based and control-based governance. They are focused on these broader underlying principles rather than a framework.
The answer is that it’s both. When there’s a high level of trust, controls begin to be put in place organically because people want fairness, but they’re collaborative. They know that as you scale, there has to be some sort of framework. There’s freedom in the framework. If the framework is created in collaboration with your partners, whoever they might be, then your chances of success are higher. That framework addresses future collaboration, how to manage any breaches of trust or the psychological contract, and how to repair those things.
You have definitions to your vision, like, “This is what autonomy means. This is what financial success means.” One of the things is people are going to be like, “We want sustainable growth,” but what does that mean? What that means to a private equity partner and to someone else might be different. We have to define that. Your partners are your PE. They’re your clinical. They’re your executive team. I don’t know if that answers your question.
That’s great.
That’s how you got to do it. Put doctors in the room and say, “Here’s the challenge of the organization. How do you propose we do it?” Do not let everybody go do whatever they want because they’ll be like, “We all need to be doing this,” or, “I’m doing this. Everybody should be doing this.” All of a sudden, organically, some framework and controls get put in place. It doesn’t mean they all 100% agree, but we try to get a super majority, at least. Generally, the super majority are those who are probably at or striving for the top 10% individual-type production, as well as practice production. There is a framework. There are some interesting things there, too.
In a collaborative governance structure with a huge amount of trust, business partners will impose controls on themselves in the pursuit of fairness. Share on XBringing In A Private Equity Partner
In 2023, you guys brought on some private equity. What were the events that led up to you feeling like, “This is the right time to bring in a private equity partner.” How was that experience for you?
In a lot of ways, it was what a lot of people might expect it to be, and in a lot of ways, it wasn’t. For us, we never make a decision on any one thing, so it was an accumulation over time of, “We think that this might be the appropriate time to look for a minority partner.” We didn’t run a process. Pretty much everyone told us not to run a process, and we did it anyway.
I don’t know what I would recommend post-transaction if I were to say, “You should run a process or not.” I would say that if you understand the business and so forth, it’s manageable. In some ways, I felt that we ended up in a good place. From what I understood about the market, the due diligence that I had done, and some of the relationships I’ve had over the years, if you want to run a process purely to maximize the value, I don’t know that that’s the running reason. The benefit to us would’ve been a buffer between us and our future partner.
When you’re negotiating directly, then the next day, you have to be friends, and you have to go try to grow the business. That can potentially provide a future barrier if you’re not careful. I’m not saying that that’s exactly what happened with us, but I would say that for us, it took longer, and it cost more money than we thought and even what was portrayed to us.
In the end, we’re happy with our partnership with Clairvest Group. They’re a great minority investor. They put a significant amount of capital into their investments from the partners. Usually, it’s over 30%, but somewhere in that range where a lot of private equity might put in single digits of their own money. This is the Clairvest team. Those partners are putting money alongside their institutional investors. They’re very engaged. It’s not just them making money for others or losing money for others. It’s their own investment. You feel that in the relationships.
They’ve been great. I’ve met with their CEO and met with several other CEOs. They have an annual meeting. It has been good. The timing was good and bad for the organization coming out of COVID. We had made some acquisitions at the top of the market. Maybe they could potentially feel like they made an acquisition at the top of the market, too. I’m trying to come to that realization with the acquisitions we made with our dental partners. They’re probably trying to come to the realization of that with their investment. It has taken us a little bit of time to get there, but we understand that there was a timing and an economic environment that we’re working through.
Overall, it’s not like we haven’t grown. We hadn’t been growing at 30% as we did for 12 or 13 years in a row, but we’re poised to get back on that track. We have a lot of internal opportunities that we can go after. It has been good. Some of the other motivating factors for us are that we had some aging significant partners who wanted to exit the organization, so we needed to find a mechanism to start that process.
We chose to do a minority, and we searched out some people we knew who did minority deals. Clairvest was one of the few that did it in such a way that their aim wasn’t for you to become a minority partner prior to the transaction. They traditionally had held their same interest throughout the period. They also have an investment in Abra, which is an East Coast dental group that they’ve had for 3 or 4 years before us. It has done very well in pediatrics and orthodontics.
It has been good. The environment has not made it as good as quickly as we hoped it would be. I also chose them because they had a longer outlook and a longer hold period. We feel like we can get back on track. Their growth expectations were the same as ours have been. We grew for 12 or 13 years without anybody, and we grew at a fairly good clip. None of what they wanted to do scared us. It was a good fit.
Timing has been a little rough for everybody, but the relationship is good. We are optimistic about the future. It has given us time to make sure we continue to improve and evolve the governance structure of the organization and make sure we have strong future alignment. We’ve re-examined the economics of our group from an alignment point of view in order to make sure that we have more consistency in the organization long-term. It has been good.
What Could Have Been Done Differently
That’s great. Last question here. If you could go back to 2011, what would you do differently, if anything? I don’t want to give you the easy out of anything. What would you do differently?
That’s a difficult question because with the knowledge I had at the time, with that caveat, I’m like, “I don’t know what I could have done differently.”
How about with the knowledge you have now?
With the knowledge I have now, I thought we did a good job on the governance of the organization, even back then, without knowing anything. Now knowing what I do from not just experience, but some of my academic research, I would have been a bit more descriptive in our governance development and operationalized that sooner, so that there was more collaboration and more economic alignment at every level of the organization. That was a huge thing.
People told me that going multi-specialty was the hard way of doing it. In a perfect world, there’s a lot to be said about Heartland’s, Aspen’s, and Pacific Dental’s approach and being very singular in that purpose. It’s not my nature, but I’m not saying that if I could do it all again, I might not be a little bit more focused in terms of where we were acquiring and what we were acquiring and building. I would’ve spent a little bit more time building out some of our spaces.
Our de novo practices ended up being very successful, but then too small. That’s hard because you’re bootstrapping it. You don’t have all the money. If I knew what I knew now and I had more resources than I had, then these are things that I would do. I would focus more on collaborative governance and economic alignment, which I felt could be more long-term.
I would have probably retained joint ventures or some form of that a little bit longer. I’ve asked myself that question a lot. I feel like we made good decisions with the information we had at the time. They all had a purpose and reason. I do think that we got a little extended. We went outside of our areas a little further than a couple of decisions. I would like to have a few transactions back.
A few take-backs. We all have 1 or 2 of those.
I don’t have a lot, but I got a few.
This is not you and I talking for the first time. I always leave with lots of ideas. I love your leadership style. I quote you a lot. One of the first things I heard you say, and I do give you credit, is that there’s always going to be a market for a well-run business. It may not always be the price you want, but there’s always a market. What we’re seeing a little bit in our space is that there are buyers, but it may not be the multiple or the valuation you were hoping for a few years ago. I do love that.
Get In Touch With Steven
I know we talk a lot about providers, but I know you do this with all of your team members. You are making sure that they feel heard and they feel valued. You are making sure that they have that autonomy within the framework. That’s something that I’ve seen, at least, that you’ve done very well. I appreciate you coming on here and sharing your insight and expertise with us. If someone reading this wanted to learn more about you or learn more about Bluerree, where would be a place they could go to do that?
I’m pretty easy to get ahold of. It’s Steve@BluetreeDental.com. I’m pretty good about getting back to people. I’m happy to talk to anybody. We are concentrated in those markets that I’ve talked about. We’re trying to build them out. We are also looking for strong joint venture relationships that may expand a little bit outside of that marketplace as well. We have a lot of internal growth, but we are always looking for good partners. We have to be running good businesses. Good businesses will always be valuable, provided that the risk is low and there’s steady growth. We want to make investments in growth with low risk.
Thanks so much for being here. The next time we talk, I could be calling you Dr. DeLong.
It’ll be longer than I probably thought it was going to take, but we’ll see. I appreciate all the kind words. You’re wonderful. I wish you success. I’m sure we’ll talk soon.
Likewise. Thanks. I appreciate it. Have a good day.
Take care.
Thanks, everyone.
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About Steven DeLong
Steve has been in the dental industry since 2009. He began as an administrator for a pediatric dental group where he focused his time, education, and professional experiences on relieving the owner providers of the stresses associated with managing both the clinical and business operations of the group. It wasn’t long before he and the owners started to see the benefits of professional administrative support and began to explore the creation of a company with the goal of expanding these support services beyond a single practice. In 2011, Bluetree Dental was born.