It’s easy to think that partnering with a dental service organization (DSO) that acts as a silent partner in your business is a cut-and-dry decision. But because a dental practice tends to take on this joint venture (JV) years ahead of retirement or a transition, it’s important to find a match made for the long haul. Here’s what to take into consideration when looking to partner with a JV.

Duration

The JV model runs the gamut from decades-long ventures that have acquired practices and returned billions to their investors, including the practice owners, to newer DSOs that carry the same goal to buy, build, get big and sell. Whether established or new, DSOs should be thoroughly vetted in the exploration process. The goal of the business owner should be to solicit multiple interested offers.

Long term

A partnership with a DSO is not a one-time transaction. Rather, while the investor will put the decisions about the practice brand and strategy in the hands of the dentist, the partnership will ideally last until retirement or another exit transition is planned for many years in the future. These JVs will continue to provide extensive resources throughout the years while working with the dentist to ensure business continuity throughout the process.

Risks and rewards

As with any transaction, there are risks and rewards to consider before signing on the dotted line. Throughout the process, it’s important to weigh the retained minority equity position and future of the market against a guaranteed exit plan with no uncertainty and long-term gains from retained parent equity through internal practice improvement and acquisitions.

What’s next?

Contact the experts at Professional Transition Strategies to see if a JV model is right for you.

The silent partners of the dental world, joint venture (JV) partnerships are an often-underutilized or lesser-known way to grow a dental practice. When planning for retirement or an exit strategy in the distant future, a JV can increase profitability by investing in dental practices in which the doctor remains as the owner, operating under their brand with their staff and strategy for many years. Here are the methods JVs can use to grow your dental practice.

Practice enhancement

A JV‘s goal is to accelerate internal growth and profitability under the dentist’s leadership and brand. Strategies could involve lower product and team benefit costs, payer negotiation leverage, marketing expertise and partnerships with other local dental practices. A well-managed JV can even increase margins with new patients, something the owner might not have time to do while managing the practice and its staff.

Acquisitions

While some branded dental service organizations (DSOs) grow primarily by starting new offices, most are creating growth through acquisitions. However, investing in already-established practices will pay out come valuation time. A JV partnership should execute both internal practice improvement and acquisitions effectively to increase capital, as long as the transaction is structured properly. With private equity, a transaction should earn a significant value increase for the investors in your JV, as well as the practice owner who takes part of their purchase consideration in equity.

What’s next?

Contact the experts at Professional Transition Strategies to see if a JV partnership is right for you.

Dental service organizations (DSOs) aren’t uncommon these days, but perhaps a newer term is joint ventures (JVs). Much like a silent business partner, a JV invests in dental practices in which the doctor remains as the owner, operating under their brand with their staff and strategy for many years. This option works best when retirement or an exit strategy is in the distant future. Here’s a primer on JV models.

The transaction

In a typical JV transaction, the dentist sells the practice anywhere from 60% to 90% for cash now — as long as 30 years out from officially transitioning — but retains equity ownership of 10% to 40%.  The type of equity retained depends on the dentist’s goals and transaction structure, which varies based on levels of risks and rewards.

The risks

In some cases, the retained minority equity position will be far more valuable in the future if the dentist had kept 100% of the practice. Additionally, it’s impossible to predict when the market will peak so there’s always a chance a better deal could have been on the horizon rather than securing one in advance. The potential for more value in a larger, diversified group varies based on time line, as well.

The rewards

No matter the dentist’s age, when securing a JV partnership, there is a guaranteed exit plan in place when the transaction is structured correctly, eliminating the uncertainty when the time comes to transition. What’s more, the partnership secures the dentist’s financial future with cash at the start of the deal and long-term gains from retained parent equity. The bottom line is to choose a partnership that capitalizes retained equity through internal practice improvement and acquisitions.

What’s next?

Contact the experts at Professional Transition Strategies to see if a JV partnership is right for you.