Dr. Anthony Ponzio: From Private Practice to Partners

Craig Castelli (00:05):

Welcome to The Close M&A Podcast with Caber Hill Advisors. I’m your host, Craig Castelli. Today we have Dr. Anthony Ponzio. He’s surprising, not smirking as I call him, doctor, because he is just Anthony to me. Longtime friend, former client Anthony founded Ponzio Dental in Oak Park, which he then turned into Cornerstone Dental Partners with two good friends and business partners of his Mark Zieba and Jon Gregoire. They subsequently sold the business to P1 Dental Partners of private equity backed DSO. So today we’re here to hear his story. Anthony, welcome to the podcast.

Anthony Ponzio (00:40):

Thank you. Thanks for having me. Good to see you.

Craig Castelli (00:43):

So jumping in 2019, I think it was 2019, you took a calculated risk. You had your own practice at the time and decided to merge it into Cornerstone, which was then a larger group than yours, but still by all means, pretty small. Doctor owned, had a couple offices. Why did you decide to take that calculated risk?

Anthony Ponzio (01:00):

Yeah, so I had been in private practice since I graduated in 2004 and grinding it out, running the business and seeing patients and dealing with staff and all the different headaches that go along with it. I’ve also been in the education world, so I was teaching, so a lot of irons in the fire, and two of my good friends broke away from their previous group, formed a small group, and we had talked about doing something for a while. And so the stars aligned in the sense that I was getting burnt out a little bit from a lot of the management stuff of bashing my head against the wall where I couldn’t go to an insurance company and have any leverage. I couldn’t deal with suppliers and have any leverage. So here I am using all this education, all this high-end materials, doing all this stuff, and then fighting to get reimbursed.

(01:43):

And then groups and other people have a little more leverage and the economy of scale was basically working against me. And then dentistry can be kind of a little bit isolationist. You’re in your four walls, everyone’s got their own little pod. So I wanted to do something a little bigger, work with partners and have a little bit broader scope to what I was doing. And so Mark, Jon and I sat down and talked about, Hey, is there a fit here? They just had gotten a couple practices and gotten things rolling. So I brought my practice over and we said, let’s figure out how this could all work. We brought the group together and then kind of grew it from there.

Craig Castelli (02:19):

And you guys grew it quite a bit over the next couple of years, built it up to 10 practices. What was the key to that phase of your growth?

Anthony Ponzio (02:27):

Yeah, I would say the biggest key is that the three of us were so aligned. There’s a lot of trust. Mark and I went to dental school together. We’ve been friends for over 25 years now, so there was a lot of trust there. He’s practically like family, so it was easy to make decisions. We really had each other’s backs. There was never any finger pointing. If something didn’t go well, we were really believed in the fact that we were all in it together. And if Jon made a decision or I made a decision, or Mark did, and it didn’t quite go as planned. It was never why’d you do that. It was, okay, let’s try something different. So the three of us had a lot of alignment, a lot of trust, and then we each kind of knew our roles and picked up wherever we could. And we were doing a little bit of everything each of us. Jon definitely bore the brunt of it because Mark and I were still seeing patients regularly, but Jon wore about 37 different hats every day. But I would say that’s the biggest thing. We were a team.

Craig Castelli (03:19):

Yeah, I mean, I met you guys, I can’t remember when, 2017, 2018, we helped with the merger of your practice into the group. I remember some strategic angles at the time that really played out to everybody’s favor as well. They had some debt on the business, you didn’t. So if combining your business in all of a sudden it increased the borrowing base, which allowed you guys to grow faster. You traded equity in a single office for equity in a larger organization. So you had some appreciation there. And it’s interesting because you articulated that plan back then, 2018 when we’re putting everything together for the merger. And lo and behold, you guys pulled it off a couple years later, exited to P1 Dental Partners, which we’ll talk about in a sec. But how did you guys know it was the right time to pursue an exit?

Anthony Ponzio (04:07):

Yeah, sure. Actually, it was funny as you were talking, I was just reminded of when we were going through our partnership, I remember you making a comment to me. This is one of the first deals where I’ve seen both sides trying to look out for the other side. I actually remember you mentioned that to me. That’s right. I was like, I told you we trust each other. That’s kind how we went into the business was while we were talking about it. Like, Hey, they’re not getting taken advantage of here. And they would asked the same thing about me. So I thought that was a really good starting base for a partnership.

Craig Castelli (04:32):

They were negotiating on your behalf to give you more than I think was originally promised, which was pretty remarkable.

Anthony Ponzio (04:40):

Yeah, a lot of trust there. But I think your question was how did we decide it was time to move on? Is that right? Yeah. Okay.

Craig Castelli (04:49):

Yeah. Before we get into talking about P1 itself, what was going on in your mind that made you decide, we want to do this? Because you were pursued frequently by larger DSOs. A lot of people were paying attention to you. You also uniquely had some relationships with private equity partners, just friends of yours from college or other aspects of your personal life. So there were a lot of eyes on you from the outside wanting to invest in your group, wanting to buy your group. You turned down some overtures. I remember sitting on my rooftop deck with the three of you having drinks talking about we’re getting this interest. Maybe this is actually the time we pursue something. But how did you know what told you personally or what told the three of you collectively this time we’re going to take these overtures seriously?

Anthony Ponzio (05:41):

So we grew pretty fast. So we grew to 10 practices, 120 plus employees. And the three of us were bouncing around trying to run to different offices, do all these things, and we had essentially fallen out of life balance, right? Jon was just starting getting married, starting his family. Mark and I have young kids, had young kids now mine are getting older. But then you hit COVID, which was about as stressful as dentistry’s ever been. We came through COVID pretty well, all things considered, and the three of us were like, what’s the vision here? What are we going to do? Either we’ve got to start building out a big team to make sure we can support all these individuals. We take it personally. These practices are our babies. So the people who work there are like family. We are very into knowing the people, making sure they’re taken care of. And we were starting to worry, maybe there’s too many people we have to look out for that we can’t do it properly or we’re going to burn out. So we started having discussions as these groups kept coming to us, we’re like, maybe we’re looking at this wrong. Maybe there could be a path forward that is better for us, better for the people who work with us, our teams, all the employees that we bring along with us, and gives us a path to the future of what we want to do in dentistry.

Craig Castelli (06:50):

Yeah. You were right on the precipice of having to make some major investment. It’d be a real J-curve in your earnings just because Jon was one man providing all the support services to 10 offices. Do you feel like you intentionally prepared the business for sale or did you just walk into this because it was the right time? Mentally,

Anthony Ponzio (07:15):

I would say we did not prepare the business for sale. Cause that wasn’t originally on our radar. Jon, to his credit, was very organized, had everything really well aligned. He had everything kind of where it needed to be. We weren’t scattershot. Basically. We knew what was going on with the business. We had a good image of it, but it wasn’t that, Hey, let’s gear up and in 2021 we’re going to do something. It was just, we’ve got this business, it’s going well. We know our blind spots for the most part. And then because these opportunities came up, we had to have the real conversation and say, what do we want to do? What’s the next look of Cornerstone? Where is it going from here? What do we picture the next five, 10 years of our lives being? Do we want it to be that we continue to grow? To your point, do we want to just have to invest and bring a bunch of new people in which adds its own layer of difficulty? Or do we figure out if someone’s already got that part of the business built up that could take the real burdensome parts off of Jon’s plate and off of our plates where maybe they’ve got that structure built in with HR and payroll and that type of stuff. They could take that off our plate, but we can continue to focus on growing good dental practices.

Craig Castelli (08:22):

Yeah, absolutely. And I think that’s where you have found yourself. I’ll let you speak to that, but how did you choose P1? Why were they the right partner?

Anthony Ponzio (08:34):

Yeah, so a couple different angles to it. We talked to a lot of different groups. Obviously we leaned on you just to understand what the opportunities were, the good, the bad, and the ugly. As you know, we did not take the highest offer. That was never our biggest driving force. It was what’s a good fit for us going forward. Selfishly for me, I was adamant that it had to be someone that was going to leave us alone clinically. First and foremost, I’m a clinical dentist. That’s what I do for a living. So for me, some of the groups we met with, you could hear it in their voices that they couldn’t wait to just get our group and tell us how to do dentistry, and that was never going to work as a model for us going forward. And then also,

Craig Castelli (09:12):

And how many of them were dentists that were going to tell you how to do dentistry?

Anthony Ponzio (09:14):

Yeah, exactly. That’s exactly right. That’s a great point. And that was one of the biggest turnoffs for us is we’re sitting there in these rooms with people who have never seen a patient in their life and they’re explaining to me and Mark how dentistry’s done. I’m like, that’s not how this goes. So P1 was really intriguing to us. Number one, we had at least a personal connection to private equity group to back to him because Mark knew him from college. And so that was how the first intro happened. And then the group was really new. It was dentist driven. The dentist maintained equity. They were really going to focus on letting the dentists and the teams take care of the patients. They were going to clean up the backend, which is always what we envisioned with Cornerstone. That’s how we always took it as a badge of honor, that every dentist who sold their practice to us stayed on longer than they were required to because they were like, really, you guys have let me just keep doing dentistry and took all the stuff I don’t want to do off my plate?

(10:04):

So we wanted to find a partner that would continue on that path and not interfer in patient care. And as we met with them and we talked to ’em about the vision of that group and where P1 would go, it really made a lot of sense. So as we had multiple meetings, we kind of got that feel where we were down the path with a couple other different groups and it was a hard stop and we’re like, wait a minute. That doesn’t sound right. That sounds like you’re going to come in and interfere. And this group said, no, we want Jon, Mark and Anthony involved, right? Jon was coming. They wanted Jon to be the COO, which he still is. Mark’s on the board of directors. I’m the clinical director. So they really wanted us to help build this group. And so being a newer group, we were able to help drive the vision of it, drive the path of the group, versus just being added on to some other larger process.

Craig Castelli (10:54):

Yeah, one thing we talk about a lot is the match between the stage of your group, your group and your goals and the stage of the group that’s buying you. Because for some a nationwide DSO with two to 300 offices, a fully built out support structure, I’m their third private equity partner is very attractive because it’s like a nice warm hug, or at least it’s presented that way on the surface where you can just bolt on and everything’s simple. For others, being able to come into the ground floor like you did, affords each of you some opportunities personally. And speaking of looking out for each other, I remember a fundamental goal was that Jon has a C-suite position, which he was fully deserving of and still is today, but that wasn’t going to happen at some of these other DSOs. They had their teams built up. Whether Jon was more talented than some of those other executives or not was irrelevant to them. Now, hindsight being 2020, I remember the groups that were really courting you aggressively alongside P1. One of them, unfortunately, is no longer in business today. So you dodge a bullet thankfully right there, but B) just goes to show that everything they’re promising is not always what actually happens post transaction.

Anthony Ponzio (12:12):

Yeah, absolutely. And that was really a big driving force is we said, we’re relatively young, we think we’re younger than we are, but we’re relatively young, so this wasn’t a get out and retire this. What’s the next step? We intend to work and continue to work. We have young kids, all of us, so it’s like I’m not going anywhere. So whatever this next iteration has to be, I have to enjoy doing it. I want to stay there. I mean, my practice has my name on it. I mean, it’s my identity, so I can’t let it then just get trashed by some group that maybe isn’t going to do things the right way. It’s got to keep the character in the vision that my dad started 50 years ago and that I’ve continued. And so that was really important to us to find a group that we would enjoy working with and continuing on into the future, not let’s sell it. Let’s get out. And in two years we’re living on a beach somewhere,

Craig Castelli (13:02):

Right? So three and a half years, not two, but three and a half years later, we’re sitting here having this conversation, has everything gone as planned?

Anthony Ponzio (13:12):

I mean, nothing ever. You can’t say everything goes as planned. I will say the group is what we thought it was. I think the people were who we thought they were. And I say that in a positive way in the sense that they’ve let the dentistry happen. They’ve let the dentist be dentists. They’ve taken things we don’t want to deal with off our plate. We’ve grown responsibly and smart, which is why I think we’re still doing really well as a group. We’re not out there buying every practice. It’s got to be someone who fits our culture that’s got to make sense. They’ve got to be a nice fit for P1. So we’ve really stayed true to that. We’ve really tried to focus on anything clinical comes from great research and science behind it that it’s best for the patients. So I believe that we’ve done a really good job of doing that.

(13:53):

I think our teams, when we were going through this process, Jon Mark and I were like, we’ve got to find a group that is going to take care of our team. Because those 120 plus people, they were important to us. They grew with us. So as we looked at partnerships, it was, well, who’s going to make sure they’re taken care of? Who’s going to make sure it’s only a positive for them? And I think P1 has done a great job delivering on that. We focused on building a good culture, getting the team atmosphere, but also letting F1 feel in their own practice, Hey, you’re a private practice, your own family in there, and then you’re also part of this larger family. So all in all, I have to say, I have friends who have been in other groups and I hear their horror stories, and that’s not us. Thankfully, we ended up in a really good spot, and I’m excited about where the future’s going.

Craig Castelli (14:38):

Yeah, I think you could say the important things came to fruition as expected. Obviously there’s always going to be some level of bump in the road. Any sort of transition and integration is painful in any acquisition. I don’t care what anybody tells you, but your offices are still there, your doctors are still with you, your team’s still with you. You still hold the roles, the important roles beyond just the day-to-day that were promised to you. And by all appearances, it seems like there’s going to be an exit for the group in the future. So I guess I’ll ask with all that in mind, is there anything you would’ve done differently along the way?

Anthony Ponzio (15:23):

I’ll be honest, I would’ve liked to have joined Mark, Jon and I do what we did sooner, I would say the last couple years of me by myself was really a grind dealing with all this stuff, but they were still tied up with their old group. So it would’ve been nice to have been able to start that a little bit sooner in my career, I would say. But otherwise, I am not one to really look back and I have to say, things have gotten me to a spot where I’m very happy with my office. I’m happy with P1, I’m happy with my team. Things are going how we hoped they would go overall. So I don’t really have a lot of regrets. I would say if I tried to really pin down something differently, I would say it would’ve been nice to have started that path a little earlier. It’d be interesting to see where maybe we would’ve grown our group because right as we were exploding in growth is when COVID hit, and that threw such a grenade in the middle of everything that maybe that sped up us moving on to P1, which probably is a great thing in the long run, but we grew, grew, grew, and then boom, you have the shutdown and we’re like, whoa, what is going on in this world?

Craig Castelli (16:28):

Yeah, I was going to say, had the pandemic not interrupted everything. I mean, you may have built the next group to take on investment directly. You certainly had the capabilities. You showed that you could replicate a model that was working and you solve that doctor retention piece, which is so critical and really plagues so many of these DSOs. It sounds simple, but solving that piece just goes such a long way to building value for groups.

Anthony Ponzio (16:56):

Yeah, I mean, we found it to be, we, simple is maybe the wrong word, but relatively logical. It’s like let them be dentists. Let them enjoy what they went to school to do, what they’ve invested time and money in doing. Go take care of patients and be dentists and stay out of their way. And we don’t need to make clinical decisions from 30,000 feet up in a boardroom. That’s not our job. And we found that when we do that, they tend to say, you know what? This is a good place for me to land and I’m comfortable staying.

Craig Castelli (17:26):

Yeah. It turns out you treat people well and let them do the things they’re really, really good at. It’s probably going to work out for everybody.

Anthony Ponzio (17:32):

Yeah, yeah. Generally speaking. Yeah.

Craig Castelli (17:35):

All right. So last question here. Let’s get a piece of advice. What’s something that you would tell a business owner that they’re not going to hear somewhere else?

Anthony Ponzio (17:44):

Yeah, I think the biggest thing, what I’ve learned over my life is figuring out how to have balance is everything. And if you don’t have balance between family and relaxation and work and everything else, you’re going to be miserable and you’re not going to be as successful. You see these stories, it’s really hard in dentistry because we come out of school with no business training, we get thrown into the fire and all of a sudden we’re a boss and we’ve got to deal with HR and payroll and taxes and all these different things, and all of a sudden you find yourself leaving your office at 6:00 PM eat some food real quick, and then you’re on the computer all night doing business reports and all these things. And so you’re wearing so many different hats that all of a sudden you look up and 10 years have passed, and it’s crazy.

(18:25):

You’re in the middle of it. So as much as you can step back and say, Hey, this is something I need to do, this is something I’m better off delegating. I think it’s smart. I have talked to a bunch of young dentists who are like, I don’t want to run a business. That’s not what I went to school for. And that’s okay. I think sometimes young dentists need to hear, that’s okay that you want to just be a dentist and go work in an office for somebody else. And that’s a totally appropriate thing to do, to use your education and go take care of patients and not feel like you want to also be an accountant and an HR director and a landlord, and all these different things. So I think just striving to find that balance in life and say what makes sense in my world so I can also spend time with my family, which is the most important thing or relaxing or traveling and all these different pieces of life that make it worth it.

Craig Castelli (19:14):

Delegation is such a learned skill, and especially when you’re early out in your business ownership journey, I think there’s a part of everybody that thinks, how can I outsource this? Who am I to spend money on outsourcing this task or hiring this additional overhead employee to come in when I’m just building this business? And there are potentially high and better uses of those dollars, but at the end of the day, if that saves you a couple hours throughout the course of a week, whether you spend those hours seeing two more patients and two more crowns brings in more than enough money to pay two hours of that person’s time, or you’re at your kids’ baseball game, not working, actually participate in your family. It is the balance that people need, but to trust others to do that, to get to the willingness to invest in those that you can delegate to definitely takes some time and takes a little bit of trial and error to get there.

Anthony Ponzio (20:14):

Yeah. It’s funny you bring up the kids sports. I used to work six days a week in the practice and Saturdays I’d be at the practice on a Saturday morning in the summer and it’s beautiful out and a bunch of patient, I’d be missing one of my kids’ games, let’s say, and patients would start canceling to go to their kids’ games. And I’m like, wait a minute. So I’m here missing my kids’ things, and then people are canceling, which I understand why I like going to kids’ sports. And so we phased out Saturdays and when people would ask why, I’d tell ’em, all the people that work here have families, they have things to do. They have lives outside of this practice. And if I want them to stay and be happy and if I want to be happy, then I have to also accept that people have lives outside of these four walls.

(20:54):

And that’s a hard thing as a young dentist to do. And every time I’ve made a decision like that, or every time I’ve delegated something to someone else where I’ve invested money into practice, I’ve seen growth. It’s a hard fact because your first thing is you’re used to money in money out. What bills do I have to pay every time I’ve ripped the bandaid off and said, I think this is a smart thing to invest in. It’s like it pauses and then the growth goes to here. So I think that’s an important lesson for anyone that if you take the time and invest and allow yourself to be freed up to do the things that you’re really good at and talented at, the sky’s the limit.

Craig Castelli (21:29):

Yeah. I found the same thing just in building Caber Hill, whether it’s investments in people or other subscriptions and services that we utilize each time, you may not see the payoff the first time you’re writing that check, but typically it only takes a couple months and you realize that you wish you would’ve done it a year earlier.

Anthony Ponzio (21:50):

Yeah, absolutely. Yeah. That’s why I tell one with dental technology, which is my wheelhouse, and I took forever to get involved in technology, and then once I did, I never looked back. And you talk about any regrets or anything, same thing. I wish I would’ve jumped in sooner. I got into technology in 2011, and within about a month, I’m like, why didn’t I do this five years ago? This is the best thing I’ve ever done. And then we saw the growth and you saw the patient reaction, and it’s like, no. And when you invest in these things, that growth happens.

Craig Castelli (22:19):

Yeah. Yeah. That’s a great way to say it. When you invest in these things, growth happens. Well, Anthony, thanks for joining here today. We’ll wrap up if you want to be found. Tell our listeners how they can find you, whether it’s to get you to come out and speak, or if they have potentially have a practice, they may want to sell to P1.

Anthony Ponzio (22:36):

Sure. Yeah. So my practice is Ponzio Dental in Oak Park, Illinois. I can always be reached at PonzioDental@gmail.com. That’s usually the easiest way to get ahold of me. I’m pretty accessible, and I’m happy to help anyone who’s looking for what to do next or get involved.

Craig Castelli (22:53):

That’s great. Well, thanks again for joining.

Anthony Ponzio (22:55):

All right. Thanks so much for having me. Good to see you again, Craig.

Craig Castelli (22:58):

Yep, likewise.