April 17, 2023
3 Types of Dental Practice Sellers Who Should Partner with DSOs
It used to be that dental school graduates only had the option to go into solo practice, associate with a private practice, enlist in military service or start a career in academia. Many dentists have yet to envision becoming a part of a dental service organization (DSO) as part of their career path. But these days, the American Dental Association’s (ADA) Health Policy Institute (HPI) estimates 10% of dentists are affiliated with a DSO, a number that is steadily growing — and for good reason. So who is partnering with DSOs, and why? Here are the types of sellers who are choosing to hand over the managerial responsibilities of dentistry in favor of other employment opportunities.
Dentists looking to relocate
Whether you are relocating your dental practice across the street or across the country, relocating your dental practice is much more than just packing up your boxes and moving. In fact, it can change your patient demographics enough that it’s like starting your dental practice over from scratch. Rather than deal with all the considerations that go into relocating your dental practice, selling to a DSO could make logistical sense so you are joining up with an already-established practice to ensure a successful outcome for both your staff and patients without having to deal with the hassle of negotiating a lease.
Dentists looking to retire
Sure, you don’t need to be ready to retire to sell your dental practice to a DSO. As part of the consolidation trend, you can sell to a DSO and still practice at your original location, as long as clear lines are drawn. While affiliating with a DSO isn’t an option for everyone since each DSO has its own practice profile or requirements (including collections, number of ops, location and type of dentistry), you’ll get a higher valuation and be able to completely retire when the time comes. Specifically, DSOs can pay more than a single practitioner because they are funded by private equity groups, there is more variety of DSOs available from which to choose, and DSOs have the financial ability to compete in the bidding wars without set limits.
Valuating your dental practice before retirement is on the horizon will give you an idea of how much it’s worth and what you need to increase (production, collections or otherwise) in order to pay off your loan, if you have one. Not only will your practice value for more if selling to a DSO, but you also have the option to stay on and earn a salary for that inevitable retirement, unlike with a straight buy-out.
Dentists looking to clear up debt
Although owning your own dental practice is the ultimate dream for most, between dental school and bank loans, you have the potential to be $1 million in debt before seeing your first patient — in fact, it’s no secret dentistry is the number one job in America for debt. Yes, the success rate for dental practices is high, but working for a DSO upon graduation makes sense for a fledgling dentist to get their feet on the ground. Plus, there’s the added benefit of being able to focus on the clinical side of dentistry rather than deal with the managerial responsibilities that come with running a business.
What’s more, this allows you to relocate or move among practices with ease since there is no real commitment on your end. The same is true for established dentists who may be looking to take their practices to the next level and want to know what their business is worth. Either way, you likely added to your debt pile in an effort to hone your clinical skills or made some personal sacrifices to grow your business along the road to profitability, and affiliating with a DSO will help to alleviate your stress while taking care of debt.