January 5, 2021
The interview below is part of an ongoing effort by McGuireWoods to profile key leaders in the dental industry. To recommend a dental key leader for a future interview, email Bart Walker at email@example.com or Kayla McCann Marty at firstname.lastname@example.org.
Ray Caruso is the CEO of Lone Peak Dental Group, a collection of specialty dental practices throughout the United States. Little did he know when he joined the U.S. Army as a dental assistant in 1991, he was starting a long career in dentistry. After serving his country and graduating college, he joined Heartland Dental, working at the front desk of one of its early offices. Heartland shaped his business acumen and provided the basis for his growth into new operational roles. He later joined DecisionOne Dental in Chicago as its COO, propelling him into new leadership roles in M&A. This new experience in change management and execution prepared him for his move to Lone Peak Dental, where he built the infrastructure necessary to support and grow it into the $90 million company it is today. When he’s not working, he’s cycling or skiing with his wife and daughters in Denver, Colorado.
Question: What attracted you to the dental industry?
Ray Caruso: What attracted me to the dental industry and what keeps me going are two different things. I joined when I was in the Army as a kid and just looking for a job. Now, I’m attracted to it because it’s a field that’s been around for centuries, yet keeps expanding and allowing me to learn.
Q: What is a lesson you have learned concerning what's required for success in the dental industry?
RC: Find something you’re really good at and do it the best you possibly can. To put it simply, stay in your lane. Once you have a model that works, stick with that model. Sure, it’s logical that all dentistry is on the table. Just know when to say no.
Q: Who is an example of someone who inspired you in the dental industry and why?
RC: Donna Weir inspired me. She was the first boss I had who really cared and worked for her direct reports. She understood that you can get to the result a few different ways and allow the road map to have different exits. I never felt pressure from her, but I never wanted to let her down. She also told me to hire people who are better than me so I can be better. She taught me to share my knowledge, because if I don’t, I’ll never grow in the company and always be stuck doing the same role.
RC: What advice would you provide a company interested in seeking a DSO buyer in the next year?
RC: You will create value to a DSO buyer if you prove that the offices you currently hold under your management are better off with the company than without the company. You must be able to prove your ability to select, integrate and provide successful processes for acquisition offices. In contrast, if you’re in a de novo model, you must be able to prove your ability to select great locations, process for buildouts, and successfully meet or exceed pro forma expectations. You must be able to prove success in current offices and have a structure that improves current offices. Buyers want to see that you can do two or three of these successfully and that you have a machine that can purchase or build practices, with a strong leadership team and with proven success.
Q: What do you think is the biggest challenge facing dental businesses today? What advice would you provide to overcome it?
RC: I hear certain questions a lot. What is the right balance between adding human capital and making sure the revenue can support it? When do we bring on HR, marketing, finance, etc.? If I buy/build practices before I have a team, will they suffer? If I build a team before I have practices, what will they do? How quickly will I burn cash? I tell them to invest in processes early, invest in help as you go. I wouldn’t build out a DSO until I, as the leader, can no longer be effective even while wearing multiple hats. This is somewhere between three to five practices. When you do start hiring, ALWAYS, ALWAYS, ALWAYS hire people who are smarter than you. Find people who will challenge you. Hire around your weaknesses. More great advice from Donna Weir.
Q: How has your business been impacted by (and responded to) COVID-19? Are there great differences between geographic areas?
RC: We’re fortunate to have geographic diversity. Before COVID-19, one may have considered that a challenge, but now we see all the benefits. For example, during the initial onset of COVID-19, Idaho was barely affected. We were still getting revenue in that region, while Washington state had to shut down completely for two months. Now, Idaho is experiencing a resurgence, but Washington state is booming! As far as our total company, it’s kind of a wash. We’re running around 97 percent of our pre-COVID-19 forecast.
Q: What do you see as the future of dentistry and DSOs in 2021?
RC: I think we’re going to continue to have highly leveraged companies struggling to hold onto cash and keep expenses down. I think you’re going to have single offices who were not looking to sell, making different considerations. They don’t want to be by themselves anymore. The American Dental Association and the Centers for Disease Control and Prevention provided guidance, but it was hard to follow and make good decisions. I think lean, structured DSOs that have good cashflow are positioned well to grow quickly.
Q: What is the best opportunity for revenue growth in dental right now?
RC: If you ask your patients in all geographic regions what they want, I’m sure the answers would come back the same as our survey responses. Most of us have some dental needs, whether a crown or filling or whatever. If at a hygiene visit, a patient had necessary treatment needs that would take an hour, would the patient want to complete it now or reschedule? Eighty-one percent say now. Sure, you have to come up with solutions to these problems, processes and efficiencies that make it happen. It’s not easy. But when you provide what patients want, revenue flows. I’ve done it in all three DSOs I’ve worked with, creating amazing growth.
Q: Are you looking more seriously at “cross-over” or multispecialty business models that would include orthodontics, periodontics, oral surgery or even other medical services?
RC: Pediatrics is a great business to be in. We can market directly to our patients and have fun while we work! Plus, parents generally take better care of their kiddos than they do themselves. Our “cross-over” strategy starts once we have a strong patient base. We add orthodontics to the practice first. In the beginning, we see margins suffer because of the initial costs, but over a short period of time, we increase revenue and leverage our fixed costs. Then we look at other options. Right now, we are testing oral surgery in a few locations to see what leverage ratios we get. It all comes down to giving consumers what they want. They want convenience and we want them coming through the doors. This way, we all win.
McGuireWoods has published additional thought leadership analyzing how companies across industries can address crucial business and legal issues related to COVID-19.