Tag: DSO

July 5, 2022

3 Things You Should Know Before Affiliating with a DSO

It would be seemingly impossible to begin the process of selling your dental practice without considering joining a dental service organization (DSO). Sure, any good dental practice broker will point out the advantages and disadvantages of selling to a DSO. But even if you are sold on the idea of affiliating with a DSO, there are some considerations you’ll need to take into account during the consolidation wave. Here are the top three.

DSO conundrum

DSOs have earned a bad reputation in the past for being very corporate, but that has changed over the last few years because many DSOs are updating their models to be more receptive to what dentists want and look for in a partner. DSO might also be a good fit when the seller is looking to stay on with the practice but wants to release managerial responsibilities, such as in a retirement situation, anyone who is looking to maintain a work-life balance, or a dentist who wants to focus on the clinical side and patient care without contributing time and money associated with running a business. And lastly, DSOs can pay more for your dental practice than individual buyers because of private equity money, economies of scale, cost structure optimization and loan amount.

DSO structure

Just like entering any proverbial marriage, a DSO can end up being an active participant or silent partner, each providing its own set of values. DSOs can acquire as few as five practices in their group or as many as 45. So, depending on the burdens of the practice you are willing to let go of, there’s a DSO that will pick up those tasks. Say you still want full control of all clinical decisions related to your practice of dentistry but don’t want to deal with payroll — there’s a DSO for that.

Transaction flexibility

Consider your goals. Do you want to retire in two years or 10? You might be able to do both in a DSO environment. It all comes down to timing as you’ll want to sell your dental practice at its peak value. However, because a well-laid plan can take up to five years, you don’t need to (and shouldn’t!) wait until you’re ready to sell to conduct a comprehensive practice appraisal to determine ways to make your practice more valuable and profitable, whether that’s an increase in production, collections or otherwise. Then, compare that with what DSOs look for when purchasing dental practices.

What’s next?

Contact the experts at Professional Transition Strategies to get the selling process started.

June 27, 2022

5 Reasons to Sell Your Dental Practice to a DSO

It would be seemingly impossible to begin the process of selling your dental practice without considering joining a dental service organization (DSO). Sure, any good dental practice broker will point out the advantages and disadvantages of selling to a DSO. But even if you are sold on the idea of affiliating with a DSO, there are some considerations you’ll need to take into account during the consolidation wave. Here are the top three.

DSO conundrum

DSOs have earned a bad reputation in the past for being very corporate, but that has changed over the last few years because many DSOs are updating their models to be more receptive to what dentists want and look for in a partner. DSO might also be a good fit when the seller is looking to stay on with the practice but wants to release managerial responsibilities, such as in a retirement situation, anyone who is looking to maintain a work-life balance, or a dentist who wants to focus on the clinical side and patient care without contributing time and money associated with running a business. And lastly, DSOs can pay more for your dental practice than individual buyers because of private equity money, economies of scale, cost structure optimization and loan amount.

DSO structure

Just like entering any proverbial marriage, a DSO can end up being an active participant or silent partner, each providing its own set of values. DSOs can acquire as few as five practices in their group or as many as 45. So, depending on the burdens of the practice you are willing to let go of, there’s a DSO that will pick up those tasks. Say you still want full control of all clinical decisions related to your practice of dentistry but don’t want to deal with payroll — there’s a DSO for that.

Transaction flexibility

Consider your goals. Do you want to retire in two years or 10? You might be able to do both in a DSO environment. It all comes down to timing as you’ll want to sell your dental practice at its peak value. However, because a well-laid plan can take up to five years, you don’t need to (and shouldn’t!) wait until you’re ready to sell to conduct a comprehensive practice appraisal to determine ways to make your practice more valuable and profitable, whether that’s an increase in production, collections or otherwise. Then, compare that with what DSOs look for when purchasing dental practices.

What’s next?

Contact the experts at Professional Transition Strategies to get the selling process started.

June 13, 2022

What You Need to Know About the DSO Consolidation Trend

It would be seemingly impossible to begin the process of selling your dental practice without considering joining a dental service organization (DSO). Sure, any good dental practice broker will point out the advantages and disadvantages of selling to a DSO. But even if you are sold on the idea of affiliating with a DSO, there are some considerations you’ll need to take into account during the consolidation wave. Here are the top three.

DSO conundrum

DSOs have earned a bad reputation in the past for being very corporate, but that has changed over the last few years because many DSOs are updating their models to be more receptive to what dentists want and look for in a partner. DSO might also be a good fit when the seller is looking to stay on with the practice but wants to release managerial responsibilities, such as in a retirement situation, anyone who is looking to maintain a work-life balance, or a dentist who wants to focus on the clinical side and patient care without contributing time and money associated with running a business. And lastly, DSOs can pay more for your dental practice than individual buyers because of private equity money, economies of scale, cost structure optimization and loan amount.

DSO structure

Just like entering any proverbial marriage, a DSO can end up being an active participant or silent partner, each providing its own set of values. DSOs can acquire as few as five practices in their group or as many as 45. So, depending on the burdens of the practice you are willing to let go of, there’s a DSO that will pick up those tasks. Say you still want full control of all clinical decisions related to your practice of dentistry but don’t want to deal with payroll — there’s a DSO for that.

Transaction flexibility

Consider your goals. Do you want to retire in two years or 10? You might be able to do both in a DSO environment. It all comes down to timing as you’ll want to sell your dental practice at its peak value. However, because a well-laid plan can take up to five years, you don’t need to (and shouldn’t!) wait until you’re ready to sell to conduct a comprehensive practice appraisal to determine ways to make your practice more valuable and profitable, whether that’s an increase in production, collections or otherwise. Then, compare that with what DSOs look for when purchasing dental practices.

What’s next?

Contact the experts at Professional Transition Strategies to get the selling process started.

June 6, 2022

How to Affiliate with a DSO when You’re Not Ready to Retire

It would be seemingly impossible to begin the process of selling your dental practice without considering joining a dental service organization (DSO). Sure, any good dental practice broker will point out the advantages and disadvantages of selling to a DSO. But even if you are sold on the idea of affiliating with a DSO, there are some considerations you’ll need to take into account during the consolidation wave. Here are the top three.

DSO conundrum

DSOs have earned a bad reputation in the past for being very corporate, but that has changed over the last few years because many DSOs are updating their models to be more receptive to what dentists want and look for in a partner. DSO might also be a good fit when the seller is looking to stay on with the practice but wants to release managerial responsibilities, such as in a retirement situation, anyone who is looking to maintain a work-life balance, or a dentist who wants to focus on the clinical side and patient care without contributing time and money associated with running a business. And lastly, DSOs can pay more for your dental practice than individual buyers because of private equity money, economies of scale, cost structure optimization and loan amount.

DSO structure

Just like entering any proverbial marriage, a DSO can end up being an active participant or silent partner, each providing its own set of values. DSOs can acquire as few as five practices in their group or as many as 45. So, depending on the burdens of the practice you are willing to let go of, there’s a DSO that will pick up those tasks. Say you still want full control of all clinical decisions related to your practice of dentistry but don’t want to deal with payroll — there’s a DSO for that.

Transaction flexibility

Consider your goals. Do you want to retire in two years or 10? You might be able to do both in a DSO environment. It all comes down to timing as you’ll want to sell your dental practice at its peak value. However, because a well-laid plan can take up to five years, you don’t need to (and shouldn’t!) wait until you’re ready to sell to conduct a comprehensive practice appraisal to determine ways to make your practice more valuable and profitable, whether that’s an increase in production, collections or otherwise. Then, compare that with what DSOs look for when purchasing dental practices.

What’s next?

Contact the experts at Professional Transition Strategies to get the selling process started.

May 26, 2022

What EBITDA and SDE Mean for the Sale of Your Dental Practice

Establishing the fair market value of your dental practice is so much more than determining the market price of your home. Sure, a cash buyer with no financial baggage is more attractive when selling your house, but how does the buyer of a dental practice affect its value during a transition? Here, we discuss how this applies to your dental practice.

A dental practice’s value is rooted in how the practice is currently doing rather than its potential, whether the buyer is a dental service organization (DSO) with private equity backing or an individual who needs bank financing. 

Enter earnings before interest, taxes, depreciation and amortization (EBITDA) and seller’s discretionary earnings (SDE). While each is a way to put a value on your dental practice, the bottom line depends on who the buyer is. Here, we break down the difference between EBITDA and SDE and what they mean for the sale of your dental practice. 

What is EBITDA?

Simply put, EBITDA is a company’s current operating profitability. In dentistry, it represents the investment someone would make if someone else does the work. EBITDA reflects a value based on investment and is mostly used when a group is looking to buy the practice. The types of DSOs that focus on this bottom line include joint venture models, sub-DSOs, equity rolls, direct investments with private equity and competition-based models. 

What is SDE?

In short, SDE represents the true take-home pay for a practice owner. It is the total of the owner’s salary, net income, and any tax treatment items or personal expenses paid for by the practice. This valuation method is used for individual buyers who need bank financing as a way for third-party investors to look at a practice.

How EBITDA and SDE impact the sale of your dental practice

Depending on your long- and short-term career or retirement planning objectives, you may need to adjust certain line items relative to the type of buyer you’re trying to attract. In the case of EBITDA, this non-static evaluation is affected by salary and rent, which are subtracted from the profits. For example, raising and lowering a dentist’s salary based on how taxes affect their take-home pay can adjust EBITDA calculations, leading to a “circular reference” that trades off to fit a practice owner’s goals. 

Rent is another circular reference that significantly affects EBITDA when valuing a practice. Whether the practice is paying above or below the rent that is standard in that community, when the rent is adjusted to reflect the true market value, the amount is directly added to or subtracted from EBITDA, making the practice correspondingly more or less attractive to investors.

Why you should work with a professional broker

Answering the question of how much your dental practice is worth isn’t a cut-and-dry calculation, and working with a certified public accountant (CPA) versus a professional broker who specializes in the transition of dental practices can yield different results. In fact, most CPAs will calculate SDE but misidentify it as EBITDA, often meaning the seller won’t be able to make an educated decision due to misinformation. Likewise, adjusted EBITDA takes into account the dentist’s fair compensation and net income of the practice during the valuation process.

What’s more, just as there are different types of transitions for your dental practice, there are also different types of buyers. To ensure you have all the information you need to decide the right strategy for you, your staff and your dental practice, your team of advisors will help you understand the difference in value depending on the buyer, as well as lead you toward an informed decision based on your goal to stay and practice longer or sell and leave the practice. 

It takes industry-specific expertise and skills to accurately determine a practice’s profit margin and potential value, taking into account practice type, patient demographics and so much more. Why leave arguably the largest transaction of your life to chance?

Bottom line

When managing a dental practice, it’s easy to get lost in all the ways to establish worth. As your most valuable asset, your dental practice is worthy of the time and investment to seek an appraisal. By understanding the basics of the valuation process and how EBITDA and SDE play a part, you can have an accurate sense of your career and retirement planning. The sooner you know how much your practice is worth, the earlier you can start enhancing its value in anticipation of a sale.

What’s next?

Contact the experts at Professional Transition Strategies to get all your financial questions answered related to your dental practice.

May 26, 2022

What to Consider Before Selling Your Dental Practice

Deciding to sell your dental practice can arguably be the most challenging step in the transition process. With the right team of advisors in place, it can be a financially and emotionally fulfilling experience. But where do you start, and how is the value of your dental practice determined? Whether you’re ready to begin planning your transition strategy or you want to learn more about your options, it’s important to understand what impacts the sale of your dental practice. Here are the top five considerations before selling your dental practice.

Know the facts

It’s easy to talk in hypotheticals when thinking of selling your dental practice, but there are a lot of considerations to get on your radar sooner rather than later. You’ll want all the information available to make the best decision for your dental practice. 

Before entertaining offers, you’ll need to have a prospectus in place for both an individual buyer and a group to assess the fair market value of your dental practice as this can vary based on a range of factors. A prospectus includes practice and patient demographics, practice location, staff, insurance, facility, equipment, production summary by category, financial analysis, practice valuation and return on investment. 

This will help determine if your practice is healthy enough to bring on a partner, whether you should consider affiliating with a dental service organization (DSO), or if you need to make some drastic changes so your practice is more appealing to potential buyers. The most common transitions include:

  • Buy-out: Purchasers buy a practice within a relatively short time period. On average, this takes about three to six months and is the quickest transition route.
  • Buy-in: A specific buyer purchases a defined portion of the dental practice. This is a longer-term approach that can expand the value of your practice over time.
  • Affiliation: You sell a percentage of your business to another entity, typically a DSO, with the intent to slowly transition out of the practice and give up clinical control to the group. This is an excellent way to maximize the practice’s value.
  • Associate to buy-in: A group of associates will court a potential buyer to purchase over a period of time. This process ensures compatibility and a smooth transition to map out the future of the practice. Division of power is the biggest decision that needs to be made with this method. While this is the longest approach — taking at least five years — it’s also the most flexible.
  • Associateship: Yes, you can sell to associates while maintaining full control, but in this method, not everything is agreed upon upfront, leading to a mere 20% success rate.  
  • Merger: Two existing dental practices combine into one entity, and owners often stay on as equal partners after merging. Mergers offer great benefits, like the net income remaining constant or even increasing because there is no loss of business.
  • Roll-up: You purchase multiple dental practices and combine them under one entity to maximize economies of scale. This can boost the value of your practice when it’s time to sell. A roll-up transition is the most lucrative if you have the time and capital to dedicate to this plan.

Make a plan

No matter the reason for your transition, starting the process as early as five years out will give you ample time to identify and make changes to your dental practice to improve the valuation. A good broker will make suggestions on how to amplify your marketing efforts, increase production, and streamline costs and efficiency, including dental supplies, lab costs and even payroll in an effort to increase profitability. 

Starting the transition process early also gives you the flexibility to be more discerning with the offers you receive. If you’re in a pinch to sell your practice, you may be forced to take one of the first offers and leave money on the table. Being in the driver’s seat of the sale affords you the time to evaluate offers and choose the best one for you, your staff, and your practice, as well as making your practice more attractive to DSOs looking for an affiliation.  

Stay the course

Maintaining your production is one of the best things you can do to obtain the highest valuation possible for your practice because the financials from the most recent years will weigh the heaviest when determining the practice’s value. Slowing down your production can have a massive impact on the price you can get for the practice.

The same holds true for your practice’s specialty. Gearing up for a transition is not the time to focus on a new niche specialty or even make the move toward a multispecialty practice. By opening the practice up to a new specialty — like going from a general practice to a periodontics practice — you decrease the potential buyer pool, which can negatively impact your sale options.

Keep an open mind

Thirty years ago, one of the only transition options was taking on an associate who would hopefully buy your dental practice one day, but today, there are so many more possibilities. Working with a qualified broker will only open your eyes to a dental practice transition you might not have otherwise considered. 

Your options are really only limited by your imagination. Do you want to start the process early so you can affiliate with a DSO before you retire? Or are you ready to get out of the business with a buy-out option so you can move into the next phase of your life? Asking yourself these questions and more will help you narrow down your choices so you can better prepare for the next steps. 

What’s next?

Contact the experts at Professional Transition Strategies to get the ball rolling on the sale of your dental practice.

April 18, 2022

U.S. Dental Specialists: Complete State-by-State Distribution

It would be seemingly impossible to begin the process of selling your dental practice without considering joining a dental service organization (DSO). Sure, any good dental practice broker will point out the advantages and disadvantages of selling to a DSO. But even if you are sold on the idea of affiliating with a DSO, there are some considerations you’ll need to take into account during the consolidation wave. Here are the top three.

DSO conundrum

DSOs have earned a bad reputation in the past for being very corporate, but that has changed over the last few years because many DSOs are updating their models to be more receptive to what dentists want and look for in a partner. DSO might also be a good fit when the seller is looking to stay on with the practice but wants to release managerial responsibilities, such as in a retirement situation, anyone who is looking to maintain a work-life balance, or a dentist who wants to focus on the clinical side and patient care without contributing time and money associated with running a business. And lastly, DSOs can pay more for your dental practice than individual buyers because of private equity money, economies of scale, cost structure optimization and loan amount.

DSO structure

Just like entering any proverbial marriage, a DSO can end up being an active participant or silent partner, each providing its own set of values. DSOs can acquire as few as five practices in their group or as many as 45. So, depending on the burdens of the practice you are willing to let go of, there’s a DSO that will pick up those tasks. Say you still want full control of all clinical decisions related to your practice of dentistry but don’t want to deal with payroll — there’s a DSO for that.

Transaction flexibility

Consider your goals. Do you want to retire in two years or 10? You might be able to do both in a DSO environment. It all comes down to timing as you’ll want to sell your dental practice at its peak value. However, because a well-laid plan can take up to five years, you don’t need to (and shouldn’t!) wait until you’re ready to sell to conduct a comprehensive practice appraisal to determine ways to make your practice more valuable and profitable, whether that’s an increase in production, collections or otherwise. Then, compare that with what DSOs look for when purchasing dental practices.

What’s next?

Contact the experts at Professional Transition Strategies to get the selling process started.

January 30, 2022

2022 Dental Industry Trends to Keep On Your Radar

It would be seemingly impossible to begin the process of selling your dental practice without considering joining a dental service organization (DSO). Sure, any good dental practice broker will point out the advantages and disadvantages of selling to a DSO. But even if you are sold on the idea of affiliating with a DSO, there are some considerations you’ll need to take into account during the consolidation wave. Here are the top three.

DSO conundrum

DSOs have earned a bad reputation in the past for being very corporate, but that has changed over the last few years because many DSOs are updating their models to be more receptive to what dentists want and look for in a partner. DSO might also be a good fit when the seller is looking to stay on with the practice but wants to release managerial responsibilities, such as in a retirement situation, anyone who is looking to maintain a work-life balance, or a dentist who wants to focus on the clinical side and patient care without contributing time and money associated with running a business. And lastly, DSOs can pay more for your dental practice than individual buyers because of private equity money, economies of scale, cost structure optimization and loan amount.

DSO structure

Just like entering any proverbial marriage, a DSO can end up being an active participant or silent partner, each providing its own set of values. DSOs can acquire as few as five practices in their group or as many as 45. So, depending on the burdens of the practice you are willing to let go of, there’s a DSO that will pick up those tasks. Say you still want full control of all clinical decisions related to your practice of dentistry but don’t want to deal with payroll — there’s a DSO for that.

Transaction flexibility

Consider your goals. Do you want to retire in two years or 10? You might be able to do both in a DSO environment. It all comes down to timing as you’ll want to sell your dental practice at its peak value. However, because a well-laid plan can take up to five years, you don’t need to (and shouldn’t!) wait until you’re ready to sell to conduct a comprehensive practice appraisal to determine ways to make your practice more valuable and profitable, whether that’s an increase in production, collections or otherwise. Then, compare that with what DSOs look for when purchasing dental practices.

What’s next?

Contact the experts at Professional Transition Strategies to get the selling process started.

December 7, 2021

Pandemic Impact: How COVID Reshaped DSO Market Position

It would be seemingly impossible to begin the process of selling your dental practice without considering joining a dental service organization (DSO). Sure, any good dental practice broker will point out the advantages and disadvantages of selling to a DSO. But even if you are sold on the idea of affiliating with a DSO, there are some considerations you’ll need to take into account during the consolidation wave. Here are the top three.

DSO conundrum

DSOs have earned a bad reputation in the past for being very corporate, but that has changed over the last few years because many DSOs are updating their models to be more receptive to what dentists want and look for in a partner. DSO might also be a good fit when the seller is looking to stay on with the practice but wants to release managerial responsibilities, such as in a retirement situation, anyone who is looking to maintain a work-life balance, or a dentist who wants to focus on the clinical side and patient care without contributing time and money associated with running a business. And lastly, DSOs can pay more for your dental practice than individual buyers because of private equity money, economies of scale, cost structure optimization and loan amount.

DSO structure

Just like entering any proverbial marriage, a DSO can end up being an active participant or silent partner, each providing its own set of values. DSOs can acquire as few as five practices in their group or as many as 45. So, depending on the burdens of the practice you are willing to let go of, there’s a DSO that will pick up those tasks. Say you still want full control of all clinical decisions related to your practice of dentistry but don’t want to deal with payroll — there’s a DSO for that.

Transaction flexibility

Consider your goals. Do you want to retire in two years or 10? You might be able to do both in a DSO environment. It all comes down to timing as you’ll want to sell your dental practice at its peak value. However, because a well-laid plan can take up to five years, you don’t need to (and shouldn’t!) wait until you’re ready to sell to conduct a comprehensive practice appraisal to determine ways to make your practice more valuable and profitable, whether that’s an increase in production, collections or otherwise. Then, compare that with what DSOs look for when purchasing dental practices.

What’s next?

Contact the experts at Professional Transition Strategies to get the selling process started.

November 9, 2021

Strategic Approaches to Navigating the Dental Hiring Challenge

It would be seemingly impossible to begin the process of selling your dental practice without considering joining a dental service organization (DSO). Sure, any good dental practice broker will point out the advantages and disadvantages of selling to a DSO. But even if you are sold on the idea of affiliating with a DSO, there are some considerations you’ll need to take into account during the consolidation wave. Here are the top three.

DSO conundrum

DSOs have earned a bad reputation in the past for being very corporate, but that has changed over the last few years because many DSOs are updating their models to be more receptive to what dentists want and look for in a partner. DSO might also be a good fit when the seller is looking to stay on with the practice but wants to release managerial responsibilities, such as in a retirement situation, anyone who is looking to maintain a work-life balance, or a dentist who wants to focus on the clinical side and patient care without contributing time and money associated with running a business. And lastly, DSOs can pay more for your dental practice than individual buyers because of private equity money, economies of scale, cost structure optimization and loan amount.

DSO structure

Just like entering any proverbial marriage, a DSO can end up being an active participant or silent partner, each providing its own set of values. DSOs can acquire as few as five practices in their group or as many as 45. So, depending on the burdens of the practice you are willing to let go of, there’s a DSO that will pick up those tasks. Say you still want full control of all clinical decisions related to your practice of dentistry but don’t want to deal with payroll — there’s a DSO for that.

Transaction flexibility

Consider your goals. Do you want to retire in two years or 10? You might be able to do both in a DSO environment. It all comes down to timing as you’ll want to sell your dental practice at its peak value. However, because a well-laid plan can take up to five years, you don’t need to (and shouldn’t!) wait until you’re ready to sell to conduct a comprehensive practice appraisal to determine ways to make your practice more valuable and profitable, whether that’s an increase in production, collections or otherwise. Then, compare that with what DSOs look for when purchasing dental practices.

What’s next?

Contact the experts at Professional Transition Strategies to get the selling process started.