"I Reduced My Overhead by 20% Just Like That": Why Private Practices Are Paying 60% More Than DSOs for the Exact Same Supplies
What happens when a dentist who's been talking about becoming a dentist since he was eight years old (literally playing a dentist in a school play) builds a multi-practice portfolio, gets incredible vendor discounts due to economy of scale, then sells off practices one by one and watches those discounts dwindle—and realizes private practices are getting crushed while DSOs thrive on pricing advantages that shouldn't exist? Dr. John Montoya has been practicing dentistry for over 25 years in Boulder, Colorado, and after owning multiple practices throughout his career and experiencing both sides of vendor pricing (the economy-of-scale benefits and the single-practice penalty), he founded Dental Purchasing Partners to level the playing field. His revelation was brutal: single-location practices might think they're doing great with a 5% discount on supplies, but DSOs are getting 10-60% discounts on the exact same products—and the company is still making money at those lower prices. When he scaled down from multiple locations to one practice, his discounts disappeared, and he thought "this is insane—why is the private practice paying the most out of anybody in dentistry?" So he approached his vendors, asked what he needed to do to get those discounts back, built a formulary, and started Dental Purchasing Partners to help doctors stay independent while getting the same pricing as big corporations. In this eye-opening conversation, Dr. Montoya reveals how he reduced his own overhead by 20% with just a couple simple changes (money that immediately hit the bottom line), why practice brokers have to deliver devastating news to dentists producing $1-1.8M with 80% overhead versus 60% (the guy with 60% gets way more value at sale), and why dental schools desperately need to provide MBA-level business education since the lion's share of dentists graduate and open small businesses with zero clue how to run them. He shares how DSOs buy practices producing a lot but then strip out costs (supplies, credit card processing, payroll) to make investors happy by revealing the profit that was always there but hidden, why you could run a successful million-dollar practice with 80% overhead and still take home a paycheck but miss the much bigger paycheck waiting at 60% overhead, and why Michael Jordan and Tiger Woods both have coaches despite being at the top of their game—so why don't you? If you've ever wondered whether there's a better way to negotiate vendor pricing, how much overhead is really too much, or what it takes to compete with DSO buying power without selling your independence, this episode will completely transform how you think about supply costs, profitability, and what it really means to run a lean, profitable practice that's worth more when you retire.
"I Reduced My Overhead by 20% Just Like That": Why Private Practices Are Paying 60% More Than DSOs for the Exact Same Supplies
What happens when a dentist who's been talking about becoming a dentist since he was eight years old (literally playing a dentist in a school play) builds a multi-practice portfolio, gets incredible vendor discounts due to economy of scale, then sells off practices one by one and watches those discounts dwindle—and realizes private practices are getting crushed while DSOs thrive on pricing advantages that shouldn't exist? Dr. John Montoya has been practicing dentistry for over 25 years in Boulder, Colorado, and after owning multiple practices throughout his career and experiencing both sides of vendor pricing (the economy-of-scale benefits and the single-practice penalty), he founded Dental Purchasing Partners to level the playing field. His revelation was brutal: single-location practices might think they're doing great with a 5% discount on supplies, but DSOs are getting 10-60% discounts on the exact same products—and the company is still making money at those lower prices. When he scaled down from multiple locations to one practice, his discounts disappeared, and he thought "this is insane—why is the private practice paying the most out of anybody in dentistry?" So he approached his vendors, asked what he needed to do to get those discounts back, built a formulary, and started Dental Purchasing Partners to help doctors stay independent while getting the same pricing as big corporations. In this eye-opening conversation, Dr. Montoya reveals how he reduced his own overhead by 20% with just a couple simple changes (money that immediately hit the bottom line), why practice brokers have to deliver devastating news to dentists producing $1-1.8M with 80% overhead versus 60% (the guy with 60% gets way more value at sale), and why dental schools desperately need to provide MBA-level business education since the lion's share of dentists graduate and open small businesses with zero clue how to run them. He shares how DSOs buy practices producing a lot but then strip out costs (supplies, credit card processing, payroll) to make investors happy by revealing the profit that was always there but hidden, why you could run a successful million-dollar practice with 80% overhead and still take home a paycheck but miss the much bigger paycheck waiting at 60% overhead, and why Michael Jordan and Tiger Woods both have coaches despite being at the top of their game—so why don't you? If you've ever wondered whether there's a better way to negotiate vendor pricing, how much overhead is really too much, or what it takes to compete with DSO buying power without selling your independence, this episode will completely transform how you think about supply costs, profitability, and what it really means to run a lean, profitable practice that's worth more when you retire.
Key Moments
* 00:00 - Introduction and sponsor shoutout to Marketing 32's performance guarantee
* 00:30 - Shoutout to Rita Zamora's episode on social media strategy
* 01:00 - Meet Dr. John Montoya: 25+ years in Boulder, founder of Dental Purchasing Partners
* 01:30 - Mission: Help private practices compete with DSOs without sacrificing independence
* 02:00 - Laura Brenner introduction; knowing he wanted to be dentist from early age
* 02:30 - Playing a dentist in school play at age 8
* 03:00 - College journey: Considering medicine vs. dentistry, interning at hospital
* 03:30 - Working at gym, meeting older gentleman who turned out to be dentist
* 04:00 - "What do you do?" "I'm a dentist." "No way!"
* 04:30 - Interning one day a week: Dentist loved his work, staff loved it, patients loved him
* 05:00 - Four days a week in college: Different dental office every day (general, ortho, endo, oral surgery)
* 05:30 - Applied to Creighton University, practiced California 7 years, moved to Colorado
* 06:00 - Origin of DPP: Every practice added = better vendor deals (economy of scale)
* 06:30 - The Costco model: More volume = better pricing
* 07:00 - Sold last practice December 19, 2019—right before COVID
* 07:30 - As he scaled down, discounts dwindled: "Why is private practice paying most?"
* 08:00 - Single practices get 5% discount; DSOs get 10-60% on same products
* 08:30 - Approached vendors: "What do I need to get discounts back?" Built formulary, started DPP
* 09:00 - Selfishly wanted to help himself and friends; grew into business helping doctors stay independent
* 09:30 - Hard part: When had single practice initially, didn't know any different
* 10:00 - Doctors don't realize options exist; margins are astronomically high
* 10:30 - Sales reps: "10% off!" You think it's great; DSO pays 40-60% less
* 11:00 - Many doctors don't know bundling/group rates available
* 11:30 - Stay independent without selling to organization telling you what to do
* 12:00 - Over 80+ vendors with 10-60% average savings
* 12:30 - After COVID: Staff costs up, supply costs up, doctors not making shift
* 13:00 - Even 5% overhead change drops so much profit to bottom line
* 13:30 - Practice brokers' bad news: "Producing $1-1.8M but overhead's 80%"
* 14:00 - "When I made couple simple changes, reduced overhead by 20%—just like that"
* 14:30 - That 20%: Hire staff, give raises, 401k, benefits, buy CBCT with cash (not retail)
* 15:00 - Running lean and mean machine—what DSOs do
* 15:30 - DSOs strip costs: "Profit was there all along—just hidden"
* 16:00 - Why DSOs having such impact: Economies of scale
* 16:30 - Wish dental schools provided MBA: Lion's share of dentists open business with no clue
* 17:00 - "Dentistry: We're successful despite ourselves"
* 17:30 - $1M practice with 80% overhead = paycheck; 60% overhead = much bigger paycheck
* 18:00 - Most don't know how to get from 80% to 60%
* 18:30 - DPP has coaches available; practice consultant evaluations super important
* 19:00 - Michael Jordan had coach, Tiger Woods has coach—dentists should too
* 19:30 - Marketing 32 part of DPP with offers for group
* 20:00 - Golden nugget: Sit down, look at industry average figures
* 20:30 - Where is practice vs. where should it be? What simple changes help?
* 21:00 - Don't have to do one more dime in dentistry to be more profitable
* 21:30 - If someone's not going over numbers with you, maybe not right person in corner
* 22:00 - Need financial advisor and accountant supporting you
* 22:30 - Take time, look at numbers, understand what's going on
* 23:00 - Sometimes CPAs not aware of what marketing takes
* 23:30 - Contact: Visit dentalpurchasingpartners.com to see vendors, schedule call
Episode Summary
Dr. John Montoya knew from an early age he wanted to be a dentist—so early that he played a dentist in a school play when he was eight years old. When he got to college, dentistry was still on his mind along with medicine, so he went the medical track and interned at a hospital. But the physicians he worked with weren't excited—the insurance industry had taken the love out of medicine, and they couldn't practice the way they wanted. While working at a gym (he jokes he was in shape at one point), an older gentleman kept asking about college and his career journey. When the conversation finally turned to "what do you do?", the man revealed he was a dentist. He invited John to intern at his office one day a week, and John discovered the dentist loved what he did, his staff loved it, patients loved him—he was happy. That dentist introduced him to an orthodontist friend, then an endodontist friend, then an oral surgeon. Four days a week during college, John spent each day at a different office, falling more and more in love with dentistry. He applied to dental school, got into Creighton University in Omaha, Nebraska, graduated, practiced in California for seven years, then moved to Colorado to raise a family. He owned multiple practices throughout his career before scaling back to one while building Dental Purchasing Partners.
The idea for DPP started when John began adding practices to his portfolio. Every time he added a practice, his vendor deals got better due to economy of scale. When he approached vendors asking why pricing was different now, they explained: "You're going to order more." It's the Costco model—the more volume going through, the better the pricing. Originally, John planned to build an army of practices, sell the bundle, and exit dentistry on a white horse. But he changed his business plan and sold practices one by one, selling his last practice December 19, 2019—right before COVID hit (he feels bad for the doctor who bought right before the pandemic). As he scaled down, his discounts started to dwindle, and he had a revelation: "Why is the private practice paying the most out of anybody in dentistry?" DSOs thrive because 5, 10, 50, 100, or 1,000 practices get better deals through economy of scale. Single practices might think they're doing great with a 5% discount, but other places are getting 10-60% discounts on the exact same products—and the companies are still making money at those prices. John wanted his one location to get the same opportunities multi-locations were getting, so he approached vendors asking what he needed to do to get those discounts back. He put a formulary together and started building DPP. Selfishly, he wanted to help himself and several friends, but it grew into a real business with a mission: help doctors stay independent without selling portions or all of their practice to organizations that tell them what to do, while still getting the benefits of being in a huge group.
The hard part for John was that when he had only a single practice initially for ~16 years, he didn't know any different—he was paying higher prices without realizing other options existed. But then he saw the other side (the benefits of multiple locations), had it ripped away, and was back to where he started. The problem is that doctors don't realize other options are available because they're not showcased, and margins are astronomically high. Sales reps say "we'll knock 10% off this $100 widget" and you think you got the bargain of the century, while a DSO office down the street is paying 40-60% less—and the company is still making money selling at that price. Now DPP offers over 80+ vendors giving members discounts, with the suggestion to go through what you're using and price compare. On average, members see 10-60% savings depending on how aggressive they want to get. After COVID changed the industry forever with staff costs and supply costs going up while doctors haven't made the shift to adjust, even a 5% change in overhead drops so much profit to the bottom line. Thinking long-term about retirement, practice brokers often have to deliver bad news: "You're producing $1-1.8M but your overhead's 80%—the guy down the street doing $1M with 60% overhead gets more value when you sell." It's not what you're producing that matters—it's how much you spend. When John made a couple simple changes in his office, he reduced his overhead by 20% just like that, and it immediately hit the bottom line. That 20% means you can hire staff, give raises, provide 401k and benefits they've been asking for, buy that new CBCT with cash (but don't pay retail). You can give yourself a raise or retire early if you want—so much becomes possible when you're not worrying about paying bills every month.
This is what DSOs do: they buy practices producing a lot, then strip out costs (supplies, credit card processing, payroll), getting the same services but cutting expenses, lowering overhead, and making investors super happy because the profit was there all along—it was just hidden. That's why DSOs and private equity are having such impact in the industry. John wishes dental schools provided something like an MBA because while we go to school for four years to be dentists, the lion's share of dentists graduate and open small businesses with no idea how to run one. Dentistry is unique because "we're successful despite ourselves"—you could run a successful $1M practice with 80% overhead and still take home a paycheck, but that same practice with 60% overhead means a much bigger paycheck. Most doctors don't know how to get from 80% to 60%, and that's all business practices, systems, and tracking what you spend. DPP has coaches available for members (hired separately), and John believes having a practice consultant do evaluations is a super important component—it doesn't have to be forever, but it's key. Michael Jordan had a coach, Tiger Woods has a driving coach—athletes at the top of their game have coaches, so why shouldn't dentists? His golden nugget: sit down with your accountant (hopefully a good one) and look at industry average figures. Where is your practice versus where should it be? What simple changes can help you grow? You don't have to do one more dime in dentistry to be more profitable—you could do the same amount tomorrow and beyond and still be profitable with a few key changes. Look at your numbers, identify what's out of line, figure out how to change it. If someone's not going over these numbers with you, maybe they're not the right person in your corner. You need people supporting you, not just watching you go day by day—your financial advisor to plan for retirement, your accountant to handle taxes and position your business where it should be compared to successful practices. Take time, look at your numbers, understand what's going on.