“When a DSO approaches you with a deal, do your homework before taking their offer. They may not always have your best interests in mind,” Professional Transition Strategies Chief Operating Officer Rebecca Kilibarda wrote in a recent article for Dental Economics. To work with a dental service organization (DSO), you must first think like one. Here are some key takeaways to understand and work with a DSO, whether now or in the future.

How a DSO targets your dental practice

“DSOs typically target practices for acquisition via passive and proactive marketing,” Kilibarda wrote. DSOs could send out flyers and postcards, ask for referrals, or make cold calls, as well as call practices after hours to get a dentist’s home phone number or even scan “best of” issues from local and trade publications. Oftentimes, your website will answer questions, such as how many employees your practice has, to then determine your estimated financial position. Once contact has been made, a DSO will want to know what your annual collections are, your PPO/Medicaid/fee-for-service ratios, and how many operatories you have.

What an offer from a DSO looks like

A DSO will typically conduct an in-house valuation of your dental practice before putting together an offer. But just like you wouldn’t accept an offer from a buyer interested in your house, a dollar amount from a DSO will typically come in at a lower amount than your business is actually worth. You should look for the maximum value for your life’s work. Be sure to examine the terms of the deal during the due diligence process and ask what multiples are being used to calculate the offer to determine how they arrived at that figure.

Look for red flags

Ask yourself: Does this offer seem too good to be true? “If so, proceed with caution,” Kilibarda advised. “To fully understand the offer, ask the DSO rep for a list of doctors with whom they’ve completed transactions — ideally 30-, 60-, or 90-days post-transaction — so you can chat with those dentists.” What’s more, you should look at the offer from all angles, including the noncompete clause, the level of equity you’ll receive, and what projections look like, as well as the productivity terms, such as how long you will be required to stay on before exiting the practice. Also, be sure to understand the structure under which you’ll be transitioning ownership, whether that’s a joint venture, equity roll, or straight buy-out.

Maximize your value

“DSOs can typically buy at a lower price than the actual value of the practice because there isn’t competition in most of these deals,” Kilibarda explained. The best way then is to put yourself in a competitive environment by bringing your dental practice to market, and working with an experienced dental practice broker will put your business in front of more potential buyers. “Thankfully, with hundreds of DSOs in the market, it’s not one-size-fits-all anymore,” Kilibarda continued. “But in all cases, look out for your own interests by working with expert partners who have no incentive to sell your practice short but rather a commitment to maximizing the value you receive.”

What’s next?

The best way to get inside the mind of a DSO is to work with a dental practice broker that has experience with the various options available to you. Contact the experts at Professional Transition Strategies to arrive at a comfortable decision that will ensure peace of mind for all parties involved.

“When a DSO approaches you with a deal, do your homework before taking their offer. They may not always have your best interests in mind,” Professional Transition Strategies Chief Operating Officer Rebecca Kilibarda wrote in a recent article for Dental Economics. To work with a dental service organization (DSO), you must first think like one. Here are some key takeaways to understand and work with a DSO, whether now or in the future.

How a DSO targets your dental practice

“DSOs typically target practices for acquisition via passive and proactive marketing,” Kilibarda wrote. DSOs could send out flyers and postcards, ask for referrals, or make cold calls, as well as call practices after hours to get a dentist’s home phone number or even scan “best of” issues from local and trade publications. Oftentimes, your website will answer questions, such as how many employees your practice has, to then determine your estimated financial position. Once contact has been made, a DSO will want to know what your annual collections are, your PPO/Medicaid/fee-for-service ratios, and how many operatories you have.

What an offer from a DSO looks like

A DSO will typically conduct an in-house valuation of your dental practice before putting together an offer. But just like you wouldn’t accept an offer from a buyer interested in your house, a dollar amount from a DSO will typically come in at a lower amount than your business is actually worth. You should look for the maximum value for your life’s work. Be sure to examine the terms of the deal during the due diligence process and ask what multiples are being used to calculate the offer to determine how they arrived at that figure.

Look for red flags

Ask yourself: Does this offer seem too good to be true? “If so, proceed with caution,” Kilibarda advised. “To fully understand the offer, ask the DSO rep for a list of doctors with whom they’ve completed transactions — ideally 30-, 60-, or 90-days post-transaction — so you can chat with those dentists.” What’s more, you should look at the offer from all angles, including the noncompete clause, the level of equity you’ll receive, and what projections look like, as well as the productivity terms, such as how long you will be required to stay on before exiting the practice. Also, be sure to understand the structure under which you’ll be transitioning ownership, whether that’s a joint venture, equity roll, or straight buy-out.

Maximize your value

“DSOs can typically buy at a lower price than the actual value of the practice because there isn’t competition in most of these deals,” Kilibarda explained. The best way then is to put yourself in a competitive environment by bringing your dental practice to market, and working with an experienced dental practice broker will put your business in front of more potential buyers. “Thankfully, with hundreds of DSOs in the market, it’s not one-size-fits-all anymore,” Kilibarda continued. “But in all cases, look out for your own interests by working with expert partners who have no incentive to sell your practice short but rather a commitment to maximizing the value you receive.”

What’s next?

The best way to get inside the mind of a DSO is to work with a dental practice broker that has experience with the various options available to you. Contact the experts at Professional Transition Strategies to arrive at a comfortable decision that will ensure peace of mind for all parties involved.

“When a DSO approaches you with a deal, do your homework before taking their offer. They may not always have your best interests in mind,” Professional Transition Strategies Chief Operating Officer Rebecca Kilibarda wrote in a recent article for Dental Economics. To work with a dental service organization (DSO), you must first think like one. Here are some key takeaways to understand and work with a DSO, whether now or in the future.

How a DSO targets your dental practice

“DSOs typically target practices for acquisition via passive and proactive marketing,” Kilibarda wrote. DSOs could send out flyers and postcards, ask for referrals, or make cold calls, as well as call practices after hours to get a dentist’s home phone number or even scan “best of” issues from local and trade publications. Oftentimes, your website will answer questions, such as how many employees your practice has, to then determine your estimated financial position. Once contact has been made, a DSO will want to know what your annual collections are, your PPO/Medicaid/fee-for-service ratios, and how many operatories you have.

What an offer from a DSO looks like

A DSO will typically conduct an in-house valuation of your dental practice before putting together an offer. But just like you wouldn’t accept an offer from a buyer interested in your house, a dollar amount from a DSO will typically come in at a lower amount than your business is actually worth. You should look for the maximum value for your life’s work. Be sure to examine the terms of the deal during the due diligence process and ask what multiples are being used to calculate the offer to determine how they arrived at that figure.

Look for red flags

Ask yourself: Does this offer seem too good to be true? “If so, proceed with caution,” Kilibarda advised. “To fully understand the offer, ask the DSO rep for a list of doctors with whom they’ve completed transactions — ideally 30-, 60-, or 90-days post-transaction — so you can chat with those dentists.” What’s more, you should look at the offer from all angles, including the noncompete clause, the level of equity you’ll receive, and what projections look like, as well as the productivity terms, such as how long you will be required to stay on before exiting the practice. Also, be sure to understand the structure under which you’ll be transitioning ownership, whether that’s a joint venture, equity roll, or straight buy-out.

Maximize your value

“DSOs can typically buy at a lower price than the actual value of the practice because there isn’t competition in most of these deals,” Kilibarda explained. The best way then is to put yourself in a competitive environment by bringing your dental practice to market, and working with an experienced dental practice broker will put your business in front of more potential buyers. “Thankfully, with hundreds of DSOs in the market, it’s not one-size-fits-all anymore,” Kilibarda continued. “But in all cases, look out for your own interests by working with expert partners who have no incentive to sell your practice short but rather a commitment to maximizing the value you receive.”

What’s next?

The best way to get inside the mind of a DSO is to work with a dental practice broker that has experience with the various options available to you. Contact the experts at Professional Transition Strategies to arrive at a comfortable decision that will ensure peace of mind for all parties involved.

“When a DSO approaches you with a deal, do your homework before taking their offer. They may not always have your best interests in mind,” Professional Transition Strategies Chief Operating Officer Rebecca Kilibarda wrote in a recent article for Dental Economics. To work with a dental service organization (DSO), you must first think like one. Here are some key takeaways to understand and work with a DSO, whether now or in the future.

How a DSO targets your dental practice

“DSOs typically target practices for acquisition via passive and proactive marketing,” Kilibarda wrote. DSOs could send out flyers and postcards, ask for referrals, or make cold calls, as well as call practices after hours to get a dentist’s home phone number or even scan “best of” issues from local and trade publications. Oftentimes, your website will answer questions, such as how many employees your practice has, to then determine your estimated financial position. Once contact has been made, a DSO will want to know what your annual collections are, your PPO/Medicaid/fee-for-service ratios, and how many operatories you have.

What an offer from a DSO looks like

A DSO will typically conduct an in-house valuation of your dental practice before putting together an offer. But just like you wouldn’t accept an offer from a buyer interested in your house, a dollar amount from a DSO will typically come in at a lower amount than your business is actually worth. You should look for the maximum value for your life’s work. Be sure to examine the terms of the deal during the due diligence process and ask what multiples are being used to calculate the offer to determine how they arrived at that figure.

Look for red flags

Ask yourself: Does this offer seem too good to be true? “If so, proceed with caution,” Kilibarda advised. “To fully understand the offer, ask the DSO rep for a list of doctors with whom they’ve completed transactions — ideally 30-, 60-, or 90-days post-transaction — so you can chat with those dentists.” What’s more, you should look at the offer from all angles, including the noncompete clause, the level of equity you’ll receive, and what projections look like, as well as the productivity terms, such as how long you will be required to stay on before exiting the practice. Also, be sure to understand the structure under which you’ll be transitioning ownership, whether that’s a joint venture, equity roll, or straight buy-out.

Maximize your value

“DSOs can typically buy at a lower price than the actual value of the practice because there isn’t competition in most of these deals,” Kilibarda explained. The best way then is to put yourself in a competitive environment by bringing your dental practice to market, and working with an experienced dental practice broker will put your business in front of more potential buyers. “Thankfully, with hundreds of DSOs in the market, it’s not one-size-fits-all anymore,” Kilibarda continued. “But in all cases, look out for your own interests by working with expert partners who have no incentive to sell your practice short but rather a commitment to maximizing the value you receive.”

What’s next?

The best way to get inside the mind of a DSO is to work with a dental practice broker that has experience with the various options available to you. Contact the experts at Professional Transition Strategies to arrive at a comfortable decision that will ensure peace of mind for all parties involved.

By Ty Ramsey, principal at Ramsey Consulting, LLC

If there’s one thing I’ve learned in my almost 20 years of working in the industry, it’s not all brokers are created equal when it comes to dental practice transitions. Since becoming an independent consultant, I’ve developed a bit of a niche. Think of me almost like a sports agent for dentists. One client even referred to me as “Jerry Molar Maguire.”

My job is to make my clients look like superstars to both the brokers who represent them and to the various dental service organizations (DSOs) and other groups who want to purchase their practice. As sell-side representation only, my goal is to get my clients the best possible outcome from their practice transition.

I start by evaluating my client’s practice and then matching them with the appropriate broker. Once matched, the brokerage and I co-represent the doctor throughout the transition process.

Why would you need a broker when it’s time to sell your dental practice? Think of it this way. You wouldn’t go into a trial without being represented by a lawyer, and you shouldn’t market your practice without being represented by the proper brokerage. That’s why I work to match you with the appropriate brokerage with one goal in mind: to get you an exponentially better outcome than you could on your own.

Here’s what I prioritize when matching a dental practice broker with any of my clients.

Match with a broker who shares your philosophy  

The broker you are working with should have your long-term interests in mind. My philosophy has and always will be, “serve first, sell later.” Brokers who share this philosophy tend to also work with groups and DSOs that share a similar sentiment.

My goal and the goal of the broker I match you with is to find you a clinically agnostic group with which to partner — one that doesn’t tell you how to practice clinically. In addition, I like to focus on groups that will allow for the name of your practice to stay the same, allow for you to continue practicing how you want, and ensure you retain your current staff at their current wages or higher. Ideally, the group you partner with should handle the administrative burden of running a business and allow you to focus on your passion of practicing dentistry.

I find it necessary to open the lines of communication and go at the doctor’s pace rather than pressuring them into a situation they are not ready for or comfortable with. Unfortunately, some brokers are looking to transact at all costs, and this can leave the doctor’s best interest by the wayside. It’s a competitive environment to find partners who align with the doctor’s goals for the practice, and the doctor shouldn’t feel pressured along the way, as they’re the ones living with this decision for years to come.

Find an equitable fee structure

Much like a real estate agent, a dental practice broker shouldn’t get paid until the seller does. One of my favorite partners for sophisticated transactions is Professional Transition Strategies (PTS). PTS employs a team of experienced industry-specific advisors who compile comprehensive information about the doctor’s practice and then create a prospectus.

The best part is they do all the up-front work pro bono, whereas in some cases, it could cost up to $10,000 to get it done by other brokers; fees are only collected if the doctor sells their practice.

Seek out short-term listing agreements

Another thing my clients love about PTS is that they only require a 30-day listing agreement. This basically guarantees performance in the short-term without tying you into a long contract.

Beware of brokerages that lock you into long-term contracts and/or seemingly charge what seems to be a low fee on the surface. Always read the fine print. Some brokerages have their fee structure tied to enterprise value, which is based on a projection of value in the distant future rather than cash in hand. Don’t pay a fee based on a projection.

Use a broker who has a great track record and substantial industry reach

It is advantageous for practices to partner with consultancies that have a great track record of success in the industry. Every time I’ve partnered with PTS, my clients have received multiple offers to choose from. It’s not uncommon to have more than 30 inquiries on a successful practice in the first week after going to market.

From here, we normally pare it down to a short list of four to 10 potential buyers and then conduct interviews. The eventual deliverable is a comparative scorecard that has all the offers listed side-by-side for the doctor to evaluate. That way, they can find the best transition plan based on their needs — which, interestingly enough, isn’t always the highest cash offer. Company culture and work-life balance changes also affect many decisions.

Look for red flags

Some dental practice brokers will all but guarantee financial outcomes before even taking your practice to market. This is also known as quoting multiples. Consider this a red flag, as there is no way to know exactly what the market will bear without bringing your practice to market.

Any type of commitment before preparing a practice evaluation/prospectus and going to market is negligent and not in your best interest. As a dentist, you would say, “prescription before diagnosis is malpractice.” The same rule applies here. You can’t come up with a plan without first figuring out where you want to go and how to get there. My recommendation to clients is to always start with the end in mind.

Another red flag to watch out for is determining if a brokerage that is biased toward a specific group. Sell-side representation yields the best possible outcome as all bias is removed from the equation. Beware of anyone who may have a biased point of view due to their position.

Bottom line

This is an exciting time for doctors exploring the transition options available to them. To get the most out of any dental practice transition, it’s important to find the right broker for your needs by keeping these tips in mind.

Learn more

Ty Ramsey is a dental consultant that has been in the dental industry since 2004. Ty earned a bachelor of Business Administration from the Red McCombs School of Business at the University of Texas. Ty has transacted more than $80,000,000 of dental equipment in his career and is known for maintaining great business relationships with his clients. In early 2022, Ty started his own consulting firm and spends most of his time as a mergers and acquisitions consultant in the dental and medical space. Ty acts as a liaison between private dental practices and thousands of dental investors, including individuals, DSOs, DPOs, private equity funds and many other institutional investment firms. He can be reached via email at  tyramsey@live.com, via text/phone at 469-360-1031, or on his website at www.tyramsey3D.com.