February 14, 2019
How to Start a Dental Practice Roll-Up
When it comes to dental practice transitions, the end game should always be the most lucrative option your timeframe allows. In a roll-up, multiple dental practices are combined under one entity in a group to maximize the economies of scale. A well-laid roll-up plan will then receive a higher valuation when the practice is purchased. Here’s how to start a dental practice roll-up plan.
Dental practices can be combined by a central group taking over all the business processes while the practices have a management service contract back in the case of a dental service organization (DSO). But smaller roll-ups can also occur by taking underperforming practices, purchasing them at a lower price and putting in best practices. Those practices may then remain in their current location or move to a central location, depending on the owner’s strategy.
Take your time
With a roll-up, it typically takes more than five years for the transition period to occur, including time to centralize services, move practices to a central location, and/or optimize the operations of the practice, as well as find enough practices that fit the roll-up. With enough time and capital, the owner can optimize nearly every expense line item that a dental practice spends money on.
As the practice grows, it’s important to keep tabs on growth from all aspects. Can the practice operate in the original space if large enough, will additional offices need to remain in place or will all practices move to a larger space? What’s more, will the combined practice require additional staff? If so, all can either be fulfilled by normal hiring practices or from the acquired practices, such as associates, partners and/or hygienists.
The most in-vogue way of starting a roll-up is to set up a DSO that will allow for outside investments beyond what a bank can provide. However, a roll-up can be accomplished without a DSO and just be a group practice. This will just limit growth potential, so it’s worth considering both options before starting the dental practice transition process.