November 28, 2017

Advantages and Disadvantages of Selling to a DSO

Some of the main components of running a successful dental practice are excellent patient care, a professional environment, and friendly and competent support staff. But, there are a lot of other factors to take into consideration, such as location, insurance acceptance, marketing, human resources, filing and goodwill in the community. But with the main focus being excellent patient care, most dentists don’t have enough time or know how to run the business side of a practice. Sure, staff can help run the day-to-day operations, but the responsibility falls ultimately onto the dentist/owner. This is one of the reasons why dental service organizations (DSOs) have become reliable resources for dentists. Here are the advantages and disadvantages of selling to a DSO.

What is a DSO?

DSOs are independent business support centers that contract with dental practices in the U.S. They provide critical business management and support non-clinical operations. In short, they take care of the business things on the back end of dentistry. All DSOs are different and range in size from four to more than 900 practices.

Advantages and disadvantages of selling to a DSO

If a dentist is near the end of their career, looking to take some of the burdens of their practice but are not ready to retire, selling to a DSO might be right. A good DSO helps make the day-to-day operations easier so you only have to focus on the clinical decisions. They also can be a great resource with collections, supplies at reduced costs, strategic marketing and increasing profitability.

And if a dentist is approaching retirement, DSOs provide several benefits over selling to an individual buyer. Not only are DSOs willing to pay more than private buyers, but they also cash out with a higher evaluation and allow dentists to work the same or reduced schedule after the sale. Not only does this accelerate transition time, but selling to a DSO takes some of the unknown out of the planning.

But, DSOs aren’t just beneficial for retiring doctors. Doctors between the ages of 40 to 60 who plan to practice for another 15 to 20 years can sell to a DSO. For example, we worked with a doctor who was in his late 40s and plans to continue practicing dentistry for another 15 years. He is a great clinician, just not very business savvy. Therefore, he is looking for a DSO to handle the business side of things.

However, there are cons to such situations. Not all DSOs are well managed and operated. Some DSOs have been known to pressure dentists to work more than necessary. And if a DSO isn’t managed properly, the clinics contracted with them will not see lower costs or increased efficiency.

One of the biggest disadvantages of selling to a DSO is autonomy. When you sell, you are no longer the employer — you are the employee. Quite a few dentists dislike being part of a corporation that regulates their hours and workload.

You have options

In addition to selling to a DSO, you also have the option to sell to an independent buyer, simply slow down business, or bring in a partner or associate. While selling to an independent buyer is a great way to ensure you get a good price for your life’s work, it can take time. Slowing business down could cause income to drop. And bringing in a partner or associate is a lot of work and is only successful about 20% of the time. Selling to a DSO is simply another option.

What’s next?

If you are thinking about selling to one of the more than 350 DSOs in the U.S., you need to be sure it’s the right one for your practice. When we have worked with DSOs in the past, they always comment it makes it easier to have an intermediary. Similar to a person-to-person transition, working with a transition company facilitates the process from both sides. Contact us anytime to help navigate the transition process. 

October 20, 2017

Practice Sale Without Retirement: Options for Dentists

If you have thought to yourself, “I want to sell my dental practice, but I’m not ready to retire,” you are not alone. This is a fairly common situation, and as long as clear lines are established, it can be a great situation. Here are some options.

Your transition options

• Buy-in to buy-out
  • This is when you bring in a partner for a period of time and have a plan in place for the partner to eventually buy out the practice in full. Or, if agreed upon, you can bring on another partner or associate when the original doctor is finally ready to retire.
• Become an associate and work for the buying doctor
  • Some doctors love practicing dentistry but don’t necessarily like the managerial responsibilities of owning a practice. In this case, it is best for the selling doctor to stay on as an employee/associate. You have a few options in this scenario: You can work for the new dentist at your original location, sell to a dental service organization (DSO) and continue practicing at your original location, or you can find a new practice (privately or corporately owned) at an existing location and become an associate there.

More considerations

If you sell your practice but want to continue working at another location, it has to be far enough away that you can’t take your patients with you (a non-compete will have to be in place). What’s more, the practice has to be both large and profitable enough to support you and the incoming doctor financially. Either way, clear terms need to be established within the operational agreement. This may limit any potential confusion among both doctors and the staff.

When is the right time to sell?

There really is no “right” time to sell a dental practice, but you should set the sale of your practice as a carefully planned event. If you wait too long, and a personal crisis affects the sale, the sale could become more difficult and less profitable. Here at Professional Transition Strategies (PTS), we recommend selling when the practice is at its peak value.

How long will it take to sell my practice?

There is no set time when selling or transitioning a practice. For a practice in a major metro area, it usually takes six to 12 months. However, if your practice is in a smaller rural community, it could take up to three years.

What can I do to prepare?

The first step you’ll want to take is to have a comprehensive practice appraisal conducted to determine ways to make your practice more valuable and profitable. At PTS, we use the most effective way of calculating your practice’s worth by looking at certain factors and their impact on the business. Some of the factors include:

• The practice’s location
• Growth potential
• Reason for the sale of the practice
• Long-term trends of the practice’s revenue and profit margin

What’s next?

If you still have questions about selling a dental practice, we encourage you to download our complimentary e-book. Then, when you’re ready to make the transition, contact us.